Posted on 10/02/2010 10:30:47 PM PDT by DeaconBenjamin
The former chief economist of the World Bank and Nobel prize winner predicted that short-term speculators in the market could soon start putting pressure on Spain, which is struggling with a large deficit and high unemployment. Last week, Moody's cut the country's credit rating from AAA to Aa1.
The banking sector has gone back to "business as usual" too quickly and that there are still risks of another financial crisis despite some improvements in regulation.
"The worry is that there is a wave of austerity building throughout Europe and even hitting America's shores," Mr Stiglitz said. "As so many countries cut back on spending prematurely, global aggregate demand will be lowered and growth will slow – even perhaps leading to a double-dip recession.
"Under the rules of the game, Spain must now cut its spending, which will almost surely increase its unemployment rate still further," he said. "As its economy slows, the improvement in its fiscal position may be minimal. Spain may be entering the kind of death spiral that afflicted Argentina just a decade ago. It was only when Argentina broke its currency peg with the dollar that it started to grow and its deficit came down."
The different needs of countries with high trade surpluses, particularly Germany, and those running deficits such as Ireland, Portugal and Greece, mean that the single currency is under intense pressure and may not survive. He suggests that one way to save the euro would be for Germany to leave the eurozone, allowing the currency to devalue and help struggling countries with exports.
(Excerpt) Read more at telegraph.co.uk ...
Ping.
“Artificial” monetary systems developed to satisfy a wildly diverse and isolated cultures never work. Of course you can’t tell that to a European Liberal.
Economic stability is necessary and when you have independent and scattered political systems you can not expect all members to sacrifice voluntarily when their economy is doing well and another is in deep or even moderate problems.
When one country has problem they can pull together because their government has to do what THEIR people need but it does not feel the same way when someone else in another political system has problems.
It goes something like this - If I help you can you guarantee that you will pay us back when you get your act together and can we expect you to help us when “We” have a problem in the future.
Joseph Stiglitz: who cares?
This dip$hit thinks that reduced spending of taxpayer dollars is a BAD thing!!
What an A-hole!
Ah, Keynes Stiglitz and Obummer... a pair of Nobel Socialists.
yitbos
Is China’s buying Greek debt to drive up the value of the Euro before selling it and crashing the Euro? Sounds like an old Soros trick!
The theory is government has to be the spender/borrower of last resort to keep the economy going. Everbody else is broke or paying down debt.
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