Thursday, November 27, 2014

The End of the World as We Know It

CAMBRIDGE – Consider the following scenario. After a victory by the left-wing Syriza party, Greece’s new government announces that it wants to renegotiate the terms of its agreement with the International Monetary Fund and the European Union. German Chancellor Angela Merkel sticks to her guns and says that Greece must abide by the existing conditions.

Fearing that a financial collapse is imminent, Greek depositors rush for the exit. This time, the European Central Bank refuses to come to the rescue and Greek banks are starved of cash. The Greek government institutes capital controls and is ultimately forced to issue drachmas in order to supply domestic liquidity.

With Greece out of the eurozone, all eyes turn to Spain. Germany and others are at first adamant that they will do whatever it takes to prevent a similar bank run there. The Spanish government announces additional fiscal cuts and structural reforms. Bolstered by funds from the European Stability Mechanism, Spain remains financially afloat for several months.

But the Spanish economy continues to deteriorate and unemployment heads towards 30%.  Violent protests against Prime Minister Mariano Rajoy’s austerity measures lead him to call for a referendum. His government fails to get the necessary support from voters and resigns, throwing the country into full-blown political chaos. Merkel cuts off further support for Spain, saying that hard-working German taxpayers have already done enough. A Spanish bank run, financial crash, and euro exit follow in short order.

In a hastily arranged mini-summit, Germany, Finland, Austria, and the Netherlands announce that they will not renounce the euro as their joint currency. This only increases financial pressure on France, Italy, and the other members. As the reality of the partial dissolution of the eurozone sinks in, the financial meltdown spreads from Europe to the United States and Asia.

Our scenario continues in China, where the leadership faces a crisis of its own. The economy’s slowdown has already exacerbated social conflict, and recent developments in Europe have added fuel to the fire. With European export orders canceled en masse, Chinese factories are faced with the prospect of massive layoffs. Demonstrations begin in major cities, calling for an end to corruption among party officials.

China’s government decides that it cannot risk further strife and announces a package of measures to boost economic growth and prevent layoffs, including direct financial support for exporters and intervention in the currency markets to weaken the renminbi.

In the US, President Mitt Romney has just taken office, following a hard-fought campaign in which he derided Barack Obama for being too soft on China’s economic policies. The combination of financial contagion from Europe, which has already led to a severe credit crunch, and a sudden flood of low-priced imports from China leaves the Romney administration in a bind. Against the advice of his economic advisers, he announces across-the-board import duties on Chinese exports. His Tea Party backers, who were critical in mobilizing electoral support for him, urge him to go further and withdraw from the World Trade Organization.

Over the next few years, the world economy slumps into what future historians will call the Second Great Depression. Unemployment rises to record-high levels. Governments without fiscal resources are left with little option but to respond in ways that will only exacerbate problems for other countries: trade protection and competitive exchange-rate depreciation. As countries sink into economic autarky, repeated global economic summits yield few results beyond empty promises of cooperation.

Few countries are spared the economic carnage. Those that do relatively well share three characteristics: low levels of public debt, limited dependence on exports or capital flows, and robust democratic institutions. So Brazil and India are relative havens, even though their growth prospects are severely diminished as well.

As in the Great Depression, the political consequences are more serious and hold longer-term significance. The eurozone’s collapse (and, for all practical purposes, that of the EU itself) forces a major realignment of European politics. France and Germany compete openly as alternative centers of influence vis-à-vis the smaller European states. Centrist parties pay the price for their support of the European integration project, and are repudiated in the polls by parties of the extreme right or extreme left. Nativist governments begin to kick out immigrants.

For nearby countries, Europe no longer shines as a beacon of democracy. The Arab Middle East takes a decisive turn towards authoritarian Islamic states. In Asia, economic strife between the US and China spills over into military conflict, with increasingly frequent naval clashes in the South China Sea threatening to erupt into a full-scale war.

Many years later, Merkel, who has withdrawn from politics and become a recluse, is asked whether she thinks that she should have done anything differently during the euro crisis.  Unfortunately, her answer comes too late to change the course of history.

A remote scenario? Perhaps, but not remote enough.

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    1. CommentedJoão Tiago Barriga Negra Ascensão

      Later in 2013, german tax payers, sick of Merkel's softness towards the lazy, unproductive and patologically indebted small European states of the south, use the electoral pressure to force their way out of the euro (currency and UE) and pursue a (even more) germancentric agenda regarding the increasingly global crisis.

      That would be a terrible cenario. However, I still believe in Europe's democratic foundations. Somehow, good sense will emerge. Let's hope it comes in a timely manner.

    2. CommentedJörg Krauter

      May be we find an answer for greek here:

    3. CommentedWilliam Hampton

      Here is how I see the world economic situation. Just like in the USA, manufacturing is moving to where the cheapest labor is. This creates world labor competition. When the laborers in countries are losing their jobs to the cheap labor of the world, the country starts losing its tax base. The country also spends money trying to help the unemployed. With the amount of laborers in the world far out numbering the jobs, what do you think is going to happen? Ross Perot warned the Americans of this when he was running for president. Lot of people were laughing. Who is crying now? All of this would not be so bad if the new rich in places like China caused manufacturing competition. Isn't competition suppose to work both ways? My bet is that like always the rich of the world will stick together and not allow competition among themselves, and continue to see to it that the poor stay competitive by busting unions. Ask yourself this, how many rich do you see that are in a recession?

    4. CommentedCiril Bosch

      Greece should have left to default in 2010, when its impact would have been limited.
      We all knew that a bailout would only postpone this tragedy and make it worse on the rest of us. We needed no Kasandra to foresee it.

      Now we have a bleak future ahead of us, and it is mostly due to Spain and its extremely poor political class. If the US and Germany want to prevent an economic meltdown they better forget about large cash wires and start thinking about sending best political PR experts to Spain. This is a situation that demands a leader that transmits confidence and maybe even some arrogance, and Rajoy is definitely not that kind of person.

      Not only would sending PR experts be much would also be effective (unlike transferring 100 billion).

    5. CommentedDave O'Carroll

      That is exactly what needs to happen Otto to allow the bloatedness in other European countries to be cut away.

      Greece is sacrificial lamb to the God's of Debt.

      When its devotees see the reality of worshipping such an idol, their own pain will be understood and they will be grateful that they're not Greek and having to endure their pain!

      America too should learn the lesson, it won't of course suckled by the knowledge it is a superpower, forgetting that the UK was the previous one and before them etc etc.

      Repent at leisure rings a familiar bell, shame its because there is fvck all else to do to occupy the time.

    6. CommentedGary Marshall

      Hello Mr. Rodrik,

      Here is a solution to the Greek problem. If anyone can find the flaw, I shall be more than happy to give him or her $50,000. I am just tired of doing this.


      The costs of borrowing for a nation to fund public expenditures, if it borrows solely from its resident citizens and in the nation's currency, is nil.

      Why? Because if, in adding a financial debt to a community, one adds an equivalent financial asset, the aggregate finances of the community will not in any way be altered. This is simple reasoning confirmed by simple arithmetic.

      The community is the source of the government's funds. The government taxes the community to pay for public services provided by the government.

      Cost of public services is $10 million.

      Scenario 1: The government taxes $10 million.

      Community finances: minus $10 million from community bank accounts for government expenditures.
      No community government debt, no community government IOU.

      Scenario 2: The government borrows $10 million from solely community lenders at a certain interest rate.

      Community finances: minus $10 million from community bank accounts for government expenditures.
      Community government debt: $10 million;
      Community government bond: $10 million.

      At x years in the future: the asset held by the community (lenders) will be $10 million + y interest. The deferred liability claimed against the community (taxpayers) will be $10 million + y interest.

      The value of all community government debts when combined with all community government IOUs or bonds is zero for the community. It is the same $0 combined worth whether the community pays its taxes immediately or never pays them at all.

      So if a community borrows from its own citizens to fund worthy public expenditures rather than taxes those citizens, it will not alter the aggregate finances of the community or the wealth of the community any more than taxation would have. Adding a financial debt and an equivalent financial asset to a community will cause the elimination of both when summed.

      Whatever financial benefit taxation possesses is nullified by the fact that borrowing instead of taxation places no greater financial burden on the community.

      However, the costs of Taxation are immense. By ridding the nation of Taxation and instituting borrowing to fund public expenditures, the nation will shed all those costs of Taxation for the negligible fee of borrowing in the financial markets and the administration of public debt.

      Gary Marshall

    7. CommentedGerardo Canto

      To again further fiddle with refutability in this re-speculative exercise, I diverge at Spain's turn. After Greece leaves the Euro and subsequently no longer receives capital injections from the central banks, leaving their economy in what seems like a state of unavoidable destitution, the central banks will lose billions of Euros in the short-term and become hard-pressed to assuredly avert a similar meltdown in Spain or Italy. If those second or even third dismemberments occurred they themselves would become insolvent causing inevitable runs across more European nations and severe inflation with the printing of currency.

      The central bank would never let this happen because it would flood the national economies with Euros in order to avert the snowball of catastrophe. By injecting this quantity of capital a bank run could be pacified. Greece leaving the Euro thus warranting the first line of deleveraging would be one probably manageable endeavor of debt collection. Any further dissolution would much deeper embed dysfunction and insolvency that would permeate throughout the rated ranks of interest longer into the future.

    8. CommentedGerardo Canto

      Though it does seem fairly distant a scenario where the Chinese and United States escalate their interdependent tension already tantalizing sovereign politics to full-scale occupations or repossessions, it does seem futuristically plausible that debt could spark fervent nationalism from both sides.
      China may become precarious as their centralized authority faces wind from the Arab Spring. Though clearly a farce over-sea aura with that claim, the revolutionary atmosphere has recently shaped international discussions on intervention for democratic principles: what if that furthers the excuse to uptake scaled measures toward the authoritarian regime?
      Then, the potential dissolution of the United Nations Security Council and a disillusioned Chinese public, possibly on the back end of their economic liberalization and urban prosperity, sets the stage for a demanding state and public. As the government unravels its balance sheet upholstered with American debt which they attained through surplus export markets, we may not open the knocking door.

    9. CommentedBrady Westwater

      After following a link here and reading your post, I went to your bio to see which country in Europe you were writing from because of your clearly second knowledge of US politics. And I was stunned you were from this country.

      To begin, I will forgo any discussion - however much you appear to prove it - about Harvard's detachment from the majority of the country. Instead, I will deal with specifics of your claims.

      Your statement that Romney will do an across the board increase on import duties on all goods from China is simply not supported by his past history or beliefs. It also ignores the underpinnings of his campaign talk earlier this year about challenging China as a currency manipulator.

      Now part of his rhetoric was, of course, to win support from blue collar workers in the primaries, but it was also meant as a signal to the Chinese that they would need to reform the manipulation of their currency to artificially low levels against the dollar. And without his posting a credible threat, he knew no currency reform would ever take place.

      Since then the Yuan started to strengthen slightly and it reached a new high in early May just before China started to slip towards recession and the dollar continued to increase in value against all other world currencies.

      And as Europe crumbles, the US dollar will become more and more of a safe haven, raising it further against most other world currencies. China's manipulation of the Yuan
      will just be one of many issues and even if it does result in increased imports, the time lag on that will push any directly felt impact well into the future.

      And nothing in Romney's character or background even hints at him taken such a rash action in a time when no one is going to be able to control the currency markets.

      But your real disconnect from reality is your statement that Romney will take these actions to satisfy his Tea Party backers who were 'critical' in getting him elected.

      However, the reality is that not only did Romney get the nomination without any support from the Tea Party - but if he does win, it can only happen if he gets the majority of the independent vote, a sizable number of blue collar Democrats and other increasingly disaffected Democratic voting groups such as women and Jewish voters.

      Romney may have had to appeal to the right to get the nomination, but he will need to return to his own moderate roots to reach out to the groups he needs to win the presidency. And they far exceed the numbers of Tea Party supporters who might be willing to sit out the election

      As for the rest of your scenario - I can unfortunately see many parts of that playing out -if not even almost all of them, though I do disagree with the military action against China.

      And I do fully agree with your assessment that we are headed into a very dangerous period of history and that it is gong to take real leadership to meet those challenges.

    10. CommentedEyOM k

      I think you're making Seer or Nostradamus, and most likely mistake by ignoring the internal reality of each country. Reality are not only quantitative numbers.
      The future-present, can be very different from what you imagine in this post.

    11. CommentedLinda Cicerchi

      A run on Greek Banks? There is already a jog on their banks. I am sure it is happening in Spain as well.
      I wonder if historians will call the austerity measures enacted to "save the banks" by bankrupting their respective governments with loans under conditions that they will never be able to repay, and creating mass misery as the "Financial Treaty of Versailles.

    12. CommentedPeter P

      One quibble, if a government uses its own currency (like US, UK or Japan) it cannot possibly be "without fiscal resources".

      Government money are tax credits, issued ex nihilo. Before economists start differentiating between USERS of currency (households, corporations and countries on Euro or pegs) and CREATORS of currency, that create money at zero cost, we will never see the end of problems.

    13. CommentedHal Horvath

      Dani, the only part you probably got wrong:

      "Many years later, Merkel, who has withdrawn from politics and become a recluse, is asked whether she thinks that she should have done anything differently during the euro crisis. Unfortunately, her answer comes too late to change the course of history."

      Instead, Merkel rationalizes and justifies her actions, insisting that events were beyond her influence, and nothing she could have done would have mattered, etc., in direct contradiction to reality.

      My own version of this story from last year:

    14. CommentedDavid Trahan

      Or we all sign a global "Debt Forgiveness Act" as a last resort.

        CommentedMark Robertson

        Solon of Athens tore up Greek debts in the past, and it led to Athens as the main dominant power in the Classical World.

    15. CommentedDavid Trahan

      Mitt Romney will not be elected, and when we start barreling towards a second Great Depression, President Obama will either A) Work with other world leaders to create a unified global currency or B) Create a unified currency among the leading European nations, England, and the U.S. to create a new "unbeatable" currency that will give us leverage over China's depreciated currency.

    16. Commentedsteve mackay

      The Tea Party wants out of free trade? Ummm, no, that would be the crazies on the left...the Occupy anarchists.

    17. Commentedotto ruthenberg

      I disagree Mr Rodrick, the Euro exit of Greece is necessary for others to learn from it. The greek political system is dysfunctional and apparently cannot be mended while subsidies flow. Greece will have the chance to reset its governance and - if well done - then lead the path for others. Nobody wants a political union among dysfunctional states? Yes, there will be contagion in Spain, Italy and the US but only to flush out those imbalances that pose unbearable burdens on the future. Yes, states will break promises when outlooks suggest unending doom - and rightly so. Financial markets will not spiral into unending doom, they will act pragmatic, give new credit to solid contexts, write off their losses to past errors and move on to profit by bulding new imbalances....

    18. CommentedT.W. G

      How any group of governments (The EU), how any group of well adjusted individuals ( The PMs, the Premiers, The Chancellors etc,) could have possibly or even remotely thought that financial union was possible without considering the impossibility of political union is way beyond me!

    19. CommentedT.W. G

      Essentially, every problem facing mankind today, and many over the millenniums, can be chalked up to ----- Over Population !

      In the year 500 AD the world's population stood at approx 250 million.

      Today we are, exponentially, at 7 to 9 billion!

      Tomorrow ??

      World population curves at:

      No other animal on earth kills each other off like man does!

      Simplified? - Maybe.

      Pessimistic? - Maybe.

      Realistic? You bet!

    20. CommentedJay Schiavone

      All of the mayhem you project is predicated on a Syriza victory. Do you mean to suggest that if another party prevails we will be spared global economic catastrophe? There's a campaign slogan in there, I think.

    21. CommentedDan Bednarz

      The age of growth is ending due to increasing shortages of natural resource and the pollution generated by extracting and processing them into goods and services. No growth = an inability to pay off debt. The public policy question going forward is: How to distribute resources equitably in a contracting economy?

    22. Commentedsrinivasan gopalan

      Undoubtedly, the alarmist portrait of the state of play in the global economy by Prof.Rodrik might upset many a pacifist and level-headed person. But the reality is too apparent to be brushed under the carpet. Neither austerity with all its harshness imposed on people without means nor stimulus measures from borrowed money could solve the problems plaguing the peripheral economies of the euro zone. Instead of blaming German Chancellor Merekel for her obduracy, the global community should gather the gumption to see that a way is found to ensure return to normalcy in the southern European members in an orderly fashion so that the rest of the world could breathe easy. The price of inaction on this score is too costly even to contemplate and let there be statesmen in our midst who see the writing on the wall and help contribute their mite to the resolution of the long-simmering troubles in the euro zone. One has to pay court to Prof. Rodrik for having brought the patent results of failure to act now in such a brilliant analysis. Ultimately the answer to all our troubles lay in coordinated approach to responding to ills in any part of the world as if the whole world is a tabernacle and any sore point in any part needs to be addressed and redressed before it became too late to cure. G.Srinivasan

    23. CommentedRay DAMANI

      " Unfortunately, her [Merkel's] answer comes too late to change the course of history."

      Bernanke thinks that if he had been around before the great depression, and there had been helicopters, he would have dropped dollars and altered the course of history.

      That was only a movie in his mind.

      Today, we have helicopters and dollars not backed by gold. He has already altered the course of history for the better based on the movie in his mind.

      The reality that America will live through will be the same - great depression two, or America becoming a new avatar of a Third World country!

    24. CommentedRoger Strassburg

      In saying that Merkel's answer will be to late to change the course of history, you apparently believe she would realize that her policies were a mistake. That's not likely to happen, any more than Heinrich Brüning realized that his policies were a mistake. No matter what happens, it will be somebody else's fault.

    25. CommentedDavid Doney

      Well thought out, thank you. I wonder what it takes to convince folks to write down debt and print money to offset the hit to the banks rather than delay this drama further.

      We have a debt crisis...ok, write down the debt!

      For example, if government bonds are written down in the struggling countries by say 30-60%, and the ECB prints the money necessary to shore up the banks by allowing them to borrow at nearly 0% or by outright paying off some of their obligations, then why does this have to become a huge crisis?

      Sure, the Euro will be devalued, but these countries are insolvent. Their people (in the case of private debt bubbles later transferred to sovereign debt) or their leaders (in the case of Greece) wrote checks their economies couldn't cash.

      Plus, let's get everyone on a minimum retirement age of 67 and go from there. For those say under 40, a Social Security-like system across the entire Eurozone should be established in place of public pensions.

    26. CommentedRonald Calitri

      Instead of exiting the Euro, Greece could try issuing a low denomination bond, zero coupon in say 7 years, as acceptable as the Euro in domestic circulation. Put it on plastic, to socalize the minimum wage, and encourage the tourists to buy it for a slight premium at the border, so long as every little bar and beach umbrella has a reader. Source Alexander the Numismatist, Roman Imperial municipalities issuing copper tokens for local markets. They had to be purchased for RE gold or silver at municipal banks

    27. CommentedM.C. Adams

      We have been subject to a form of globalization which has undermined democracy. It is hard to mourn the order we have today because it has been based on avoiding the rule of law and denying workers a fair share of profit, through global labor arbitrage.

        CommentedDavid Doney

        Well said. It is amazing that every struggling country in this crisis has a huge trade deficit.

    28. CommentedStephen Kriz

      You forgot the part where Spent Fuel Pool #4 at the Daichi Fukishima nuclear plant goes critical, catches fire and causes the extinction of the human race - at least in the Northern Hemisphere. Things aren't looking too rosy, are they???

    29. CommentedPatrice Ayme

      California issued IOUs ("I OWE YOU") several times in the past, because it was broke. However it did not leave the Union, and still uses the same currency as the rest of the Union.
      Greece can do exactly the same. stay in the Eurozone for outside trade, use IOUs inside, while Merkel makes her mind up.
      The Euro crisis can be stopped by endowing the European Central Bank with the same powers as all other central banks, including that of Fiat Money. True the Bundesbank is blocking things.

      However, this is not 1939. Then Germany had twice the number of young people France had. Now France has 35% more young people than Germany. So all depends upon the French legislative elections, Sunday 17 June. If France really wants things done, Germany will have no choice, but follow suit . . .

    30. CommentedMATTHEW M

      For that matter missed the Arab States disintegration, China's illusory growth built on coming provincial and real estate debt bubble implosions, the rise of nationalism and radical fringe parties in EU, Russia and elsewhere: but most of all the rise of the new fascism (big finance and global corporations), the rise of para military states everywhere, erosion of civil rights: to keep by force.

      But I agree most with Ron Mayer on global warming and climate change. Already reducing food supplies for an excellent article on the failure of globalization see

      ... and the coming climate catastrophes (garbage in, garbage out)

      why are prisons and detention centers being built all around the world?

      To house all the climate and economic refugees ... welcome to mankind's demise.

    31. Commentedron mayer

      You missed the shrinking global supply of oil, and global warming providing increasing desertification, less reliable weather patterns resulting in a shrinking food supply. Mass migration of economic refugees trying to get into Europe, which more than ever doesn't want them.

    32. CommentedMATTHEW M

      Three cheers for Frank O' Callaghan's comments that echo mine on Ken Rogoff's article on "A Centerless Euro" - start the debits and credits: affix the loss to those that took the risks.

      Do this to restore underlying free market economics and accounting and most of the gross illusory synthetics market will dry up (CDO/swaps). Banks will return to a more traditional nation based operation since the world's taxpayers will not be there to bail them out.

    33. Portrait of Asgeir B. Torfason

      CommentedAsgeir B. Torfason

      The finance ministers in Sweden during 1990s learned some lessons in the financial crisis at that time. One of them became governor of the Swedish National Debt office and during the autumn 2008 he flushed the markets with treasury bills. Exceeding his legal authority to do so. Probably saving the Swedish bank system from big collaps. Asked afterwards, he said he had no problem driving faster than the speed limit - if it was to avoid a crash. Germany seems to prefer following the rules strictly. And Europe seems to lack bureaucrats (with ministerial background or experience from crisis times) that are able to come to rescue.

    34. CommentedMarty Heyman

      The US, among many others, built its economy behind trade protection and capital controls. The globalization project has weakened that construct, not strengthened it. One might argue that the global summits have yielded few positive results for the US economy ever.

        CommentedDavid Doney

        Free trade is great for the low-wage partner but lousy for the high wage partner, which sees its jobs go overseas and wages stagnate.

        China and others should be paying quite a bit of money to the U.S. for fueling their economic growth with our imports.

        How long can a country sustain a $650 billion goods trade deficit like the U.S. has? It is no coincidence that the trade deficit peaked relative to GDP around the same time as the housing bubble, as Paul Krugman explained here:

    35. CommentedMarty Heyman

      No matter how unattractive or how strongly argued against by "classical economists", some of this is probably inevitable. Resolving "the excesses" and re-aligning national economies with twenty-first century realities is going to take some significant and threatening changes. Those threats may, in the end, be over-blown and manageable. We well may end up addressing root issues and improving our lot overall ... that too is a possibility, if a challenging one.

    36. CommentedDavid Nowakowski

      @Daan Diederiks -- "responsible advice of learned men and women" is what got us into this situation, while realistic warnings were dismissed by politicians who time and again have refused to admit mistakes and make difficult choices, and now make expedient but *wrong* decisions. You exhibit a touching faith in the better angels of our nature, though.

      More broadly, historical experience shows that Prof. Rodrik is being far too dire. Most likely, dogmatic and stubborn Europe will lurch from crisis to crisis and stagnate if it sticks with the euro, a misconstructed currency and monetary union.

      Dismantling it should be priority #1, as soon as possible, as Nouriel Roubini has advocated on this site. The costs will be large and involve some instability, but would the CIS be better if they still had the Soviet ruble? The UK and Sweden if they had stuck fast with ERM at any cost? SE Asia and Korea if they still had their overvalued dollar pegs? I could go on, but Europe going back to freely traded currencies seems a much more positive outcome than keeping the failed EMU, let alone Rodrik's apocalyptic musings.

    37. CommentedAshikur Rahman

      When economic doctrines evolve into dogmas, the problem is magnified. 'Austerity Doctrine' is facing a similar problem.

    38. CommentedDaan Diederiks

      So suppose the following horror scenario to euro- sceptics.

      Angela Merkel and French President Hollande push together in the June summit for more European cooperation. In the first instance on banking regulations by installing a Banking Union. The markets are eased, the UK prime- minister and US President applaud the move.

      In the years following, everybody gets to work again and starts producing and caring for an environmental sound economic output. Responsible growth starts coming and the EU transforms into a full blown democracy with a chosen president and all.

      There is fierce debate how to implement all this, but slowly it is all happening. Year by year and crisis after crisis a system is built to house the growing world population in a increasing environmental hostile world.

      Some wars are fought in peripheral countries that have repercussions for internal political debates and relations in democratic countries.

      There are a growing number of strong economic blocs, of which the European Union is one which propagates its soft power in the world and progressive politics (to US standards anyhow).

      Because the world economic system has grown to an very complicated integrated and interdependent system. Crisis in one factor or element constantly threatens the stability of the system.

      But the knowledge gained in academia of the system is immense and together with the responsible advise of learned men and women major crisis are in the end are always averted.

      Asked to the ageing miss Merkel what accounted for the development of the world, she answers; the ability of politicians to take the right decisions when it is really needed, after weighing sensible advice in the political context of the moment.
      Daan Diederiks -

    39. CommentedFrank O'Callaghan

      Consider the following scenario. Somewhere in the mass media an idea escapes! It is hunted down to no avail because it has already reproduced.

      The description of the idea is simple. It suggests that the way out of our crisis its to change the behaviour that got us here. A clear statement to stop digging when the problem is the hole.

      So what was the digging that got us into the hole?

      Was it low taxes on the very wealthy? Bank deregulation? Economically illiterate Governments? Corruption? Trade imbalances within a currency? A Democratic deficit? A refusal to allow bondholders to take the consequences of their risks? Stupidity on a grand scale? All of the above? And more.

      This idea of asking how we got into the mess is a dangerous one because it demands to be supported with facts. Analysis is also helpful. The 'Apocalypse' or 'End-of-the-world' scenario is entertaining but it does not add to our understanding. Nor does it aid our decisions.

      Consider the following scenario. This crisis is fabricated. It can be solved by accountancy. The world is not less wealthy now than it was before the crisis.

    40. CommentedZsolt Hermann

      One one hand it is important that we already imagine such scenarios to sound the alarm.
      On the other hand we still hope in some kind of Hollywood "Happy ending", talking about "possible scenarios", when in fact everything that is in this article is already in motion and is going to play out in the forthcoming months.
      For some curious reason the article at the end finds Ms. Merkel as the lynchpin who could have stopped the process, when in fact as any other politician or leader she is also simply a player, or actor in the grand theatre we live in without any free choice.
      Driven by our inherently self centered, and greedy desire for fulfillment at any cost we, the whole of humanity evolved into this dead end together.
      The constant quantitative growth, profit accumulating socio-economic system based on this desire, which was always an illusion since it was built on false foundations, and exploitation of the masses and the environment has exhausted itself, and now turned destructive.
      We also evolved into a totally interconnected and interdependent global human network, so we are chained together, sitting on the same sinking boat.
      So the question is the following: are we continuing simply watching this movie, where the very sad and volatile ending is easily predictable without any special prophetic talent, letting our basic desire and selfish instincts make the decisions for us, or we are willing to look into the mirror, truly get to know ourselves and the system we exist in and start working out a different scenario, actively working together, against our basic instincts, above all our differences, rejection and hatred?
      Our immediate future and survival depends on the answer.