Economics

Debt Reckoning for Europe

Apr 12, 2012 Amar Bhidé

Saving the euro, say the sages of the global economy, requires radical steps. But, rather than binding treaties, fiscal union, or homogeneity of membership, what is needed are mechanisms that recognize and accommodate differences, rather than attempt to impose uniformity from above.

BOSTON – Saving the euro, say the sages of the global economy, requires radical steps.& The OECD recently called for a large European firewall – a mega-bailout fund for troubled governments and banks. Others argue for integrating taxes and borrowing in the eurozone and shedding weak members, like Greece, that struggle with a strong currency.&

But tall firewalls, fiscal union, or homogeneity of membership are neither necessary nor desirable.& What is needed are mechanisms that recognize and accommodate differences, rather than new top-down efforts to impose uniformity.

All governments, even Germany’s, tend to spend more than they tax, and to hide shortfalls using accounting sleight-of-hand. Treaties alone do not induce fiscal virtue. The expectation that all eurozone countries would obey rules aimed at capping their budget deficits was the common currency’s foundational fantasy.

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Jonathan Lam Apr 21, 2012

Gamesmith94134: debt reckoning for Europe

“The “more integration” camp wants European governments to guarantee each other’s debts explicitly. Such schemes could eliminate risk and interest-rate differentials; however, while some governments, like Germany, are in relatively good shape, their resources are not infinite.

According to French President Nikolas Sarkozy, “There cannot be a single currency without economic convergence.””

Perhaps, we must examine the present “twist” and “inflationary control” that interact with other nations and currencies. There is a reasonable fear of the sub-prime funds that supposed to circuit the central banks and some bank recipients to those 1% loans could be loaned to the commercial banks triggers inflation to EU or globally. As much of the present international trade and stock exchanges made a roar in the upbeat trades, and some emerging nations are setting state enterprising businesses to fend off the suspicious funds or cash flow taking advantages of the exchange variables and interest differentials to the local aggregated funds. It can be contagious if the situation continues; an even plausible in polarize the developed nations and emerging nations. Eventually, we must assume global financials should have the probing firewalls that stalwartly distinguish how the debts and cash be separated in the exchange rates and international trade with much of the cash funds are being hoarded to yield in the short term basis and long term basis that the sovereignty debts comes with lower interest rate through these firewalls with each sovereignties.
Perhaps, I like it better if the sovereignty debt and private investment should not be classified as same in enjoying the low interest rate, that sovereignty debt should be handled separately by the Central Banks and World Bank or the Development Banks instead of depending of the international banking system. If it does affect the exchange rate when the cash fund and credit/debit sovereignty accountable should be evaluated by IMF through the bi-system of controls and interest rate differential. Perhaps, it is time the central bank and World Bank or Development Bank should work out the distinction of sovereignty debts and commercial debts in tem of the sub-prime rate and low rates; then the firewall with each sovereignty may eradicate the doubts of fiat money or hot fund from cashing in its short-term investment. Then, the stock or commodity market can be less volatile as can be, and each may not turn its fair trade to protectionism.

In creating liquidity to the EU and US banking, many could lend off with 3-5% and emerging nations with 7-11% percent inflation must cut its rates to aggregate funds in fending off the foreigners’ investment or hoarding it funds for a short ride that trigger more liquidity and labor cost; eventually inflation would becoming structural that ripples through the core of inflation to the developed nations. Many central banks see the core is about 2% but the austerity program cut it growth; soon, all will suffer inflation or stagflation in a way of the 80s’ in US and the line of twist would be broken.

In much of the contribution of a trillion dollars to the IMF, I am certain Ms Largard would make her promise to recalculate the exchange rate in reestablishing the fair and equal treatments and weights to these sovereignty funds, and restructuring the votes to her administration. As much of ‘beggar thy neighbor’, when its floating rate exchange with the ‘twist’ and the interest rate differentials turns investments into negativity for being invested; and its formula should include credit/debit of these sovereignty accountable. Shouldn't there be a fixed rate available if the twist have already fixed in its longer term to cut the invasion of hot cashes? so, why is it floating now?

“The least awful solution requires an honest reckoning: writing down debts that cannot be repaid and recapitalizing insolvent banks. Country-by-country and bank-by-bank, the good must be disentangled from the bad.”

The last solution may not come off from the rich nations or Islamic nations, just because of their wealth. Perhaps, there is a trade off in some sort available when the bargain begins. Nonetheless, if everyone imbues with uncertainty of its financial, how can they writing down debts if he is sure what he can get in return?

May the Buddha bless you?
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Zsolt Hermann Apr 16, 2012

It is understandable that economists, financial experts only see their part of the puzzle. For a baker for example everything he sees in life leads to baking a cake. What we are missing is people who can observe the whole system in its totality, all of its connections, details, fine little cracks and thus make adjustments so the system works in harmony.
Today we do not have such observers, as everybody is caught up in their own little subjective bubbles, the banks trying to save themselves, economists trying to prove their theory is the right one, politicians fighting for positions, re-election, legacy, and so on.
Underneath all this self calculating jungle we lose sight, or more precisely we never even revealed the main problem.
Why do we need all that debt, why are we borrowing all the time, what is all this money for?
We do it in order to fuel a totally unnecessary, unnatural, excessive overproduction/over consumption economic model in order to accumulate profit in the hands of a few, who in return exploit all the others, but none of the sides are happy, the top layers with coffers full of money are unhappier than anybody else feeling even emptier than when they did not have the billions, turning to drugs, prostitution, crime, depression, more and more twisted pleasures, while the 99% is suffering from the slavery of being tricked into working hard and buying products they do not need, and are directly harmful, for money they do not have.
We have reached the inevitable breaking point going beyond where we could turn back and the system is collapsing underneath the global crisis. The temporary relief we see is artificial after the virtual money injections, weakening our actual resources even further, and the reality TV spectacle of the election campaigns all over the world, although we already got a taste of the deadlocks in decision making at the end of last year, and we also got a taste of the growing public dissatisfaction and anger.
We need visionary people now who are capable of seeing the whole global, integral system in full and who can influence the public through honest, transparent and factual information, explaining them the nature of the system we exist in, the problems leading us to our present failure, and the mutual, considerate measures with which we can start building a better human system adapted to the reality of the 21st century.
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