Tuesday, December 06, 2011
Debt thoughts"Debts that can't be paid, won't be." (Michael Hudson, Debt and Democracy: Has the Link been Broken? Credit Writedowns 12/06/2011)
"Well, the strong do what they can, the weak what they must." (Joseph Cotterill, I am altering the PSI. Pray I do not alter it any further FT Alphaville 12/06/2011)
Cotterill gives a somewhat wonky explanation of how the policies pursued by German Chancellor Angela Merkel and French President Nicolas Sarkozy on the writedowns of bad sovereign debt have made the current crisis far less manageable. Their October plan for "voluntary" writedowns of credit held by private investors while not requiring such writedowns on the same debt held by public agencies may have set off processes that the Mighty Merkel will no longer be able to bring under control in time to save the euro and the EU.
With particular reference to the bankers-collection-agent governments of Greece and Italy imposed on them by Germany and France via the EU, Hudson writes about the destructive cycle brought on by austerity economics:
This is being dictated by financial proxies euphemized as technocrats. Designated by creditor lobbyists, their role is to calculate just how much unemployment and depression is needed to squeeze out a surplus to pay creditors for debts now on the books. What makes this calculation self-defeating is the fact that economic shrinkage – debt deflation – makes the debt burden even more unpayable. [my emphasis]And he continues with observations that apply more generally to all countries whose political elites have embraced Herbert Hoover austerity economics:
Neither banks nor public authorities (or mainstream academics, for that matter) calculated the economy’s realistic ability to pay – that is, to pay without shrinking the economy. Through their media and think tanks, they have convinced populations that the way to get rich most rapidly is to borrow money to buy real estate, stocks and bonds rising in price – being inflated by bank credit – and to reverse the past century’s progressive taxation of wealth.Tags: eu, euro, european union
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No subject for immortal verse
That we who lived by honest dreams
Defend the bad against the worse."
-- Cecil Day-Lewis from Where Are The War Poets?
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