Interview of L. Randall Wray by Dasha Chernyshova, Moscow reporter for the Sputnik News Agency
Q: In simple terms, how is the slowdown in China affecting the Eurozone?
A: I think the impact is overstated. China is still growing relatively rapidly. Her consumers enjoy rising incomes. They want high quality foreign manufactured goods—prestige goods, luxury goods. Over the short run, the Eurozone will still enjoy positive growth of Chinese demand. The bigger impact could be on commodities exporters (Russia, Brazil). China is learning how to economize on use of natural resources in her attempt to move toward sustainable growth.
The Eurozone is an instrument of the globalization process that is setting financial elites over all nations of the world, including the democracies. The situation in Greece exposes the true nature of the Eurozone institutions as a naked fact, beyond spinning, for all to see. They are popular sovereignty-thieves and democracy-killers, with the power necessary to shut democratic governments down.
The architectural flaw in the Maastricht Treaty: that the nations of Europe were giving up their monetary sovereignty, was immediately recognized as fatal by acute economists, and many predicted failure. But, what was not seen clearly were the political implications of giving the ECB, the ability to deny liquidity to the banking systems of nations, and, in so doing to perform, essentially, coups rendering elected governments of democratic nation states powerless to enact policies they were elected to pass. This “theft of democracy” contradicts the EU’s commitment to advance democracy. It steals what was so hard won from the peoples of Europe. Continue reading
KCUR.org feature includes recorded interview with Randy Wray and others regarding the current crisis in the eurozone. Randy explains that some economists predicted the problems with the European Monetary Union with an explanation of sectoral balances.
By William K. Black
Quito: June 25, 2015
The BBC came up with a good “hook” for a story on the troika’s assault on the Greek economy and people. “Yanis Varoufakis, the Greek finance minister, spent his academic career … studying game theory.” Professor Marcus Miller, a UK economist (U. Warwick) wrote an article for the BBC premised on how Varoufakis would apply game theory to Greece’s negotiations with the troika (the IMF, ECB, and the European Commission). Miller is a colleague of the great Robert Skidelsky and has co-authored with him an article explaining the economic illiteracy and self-destructive nature of the troika’s (and UK’s) infliction of austerity in response to the Great Recession.
The BBC, however, is such a great fan of austerity that one rarely reads why the vast majority of economists think that using austerity to respond to a Great Recession is akin to the quackery of bleeding a patient to make him healthier. Miller’s article in the BBC about game theory has the wrong title (recall that the author often does not get to choose the title), the wrong game, the wrong concept, and the wrong payoffs. The title of the article is: “Can game theory explain the Greek debt crisis?” The article does address that issue. It is limited to the issue of the new Greek government’s negotiations with the troika concerning a crisis that they inherited.
By Pavlina Tcherneva
Cross posted from aljazeera.com
Most analysis of the Greek debt crisis ignores an important reality: While Greece may be the villain du jour, every eurozone nation is profoundly short of cash. That’s because of a well-acknowledged, but not fully appreciated, flaw at the heart of eurozone financial architecture that converted a historically unprecedented number of nations from issuers of their own currency to users of a common currency.
Greece is simply the first country to experience the extreme consequences of that loss of monetary sovereignty. With no independent source of funding, no currency of its own, no central bank to guarantee its government liabilities, it has had to ask others for help. And as a condition for securing that help, Greece has until now been forced to consent to radical austerity policies.
By Rob Parenteau
The recent election of an explicitly anti-austerity party in Greece has upset the prevailing policy consensus in the eurozone, and raised a number of issues that have remained ignored or suppressed in policy circles. Expansionary fiscal consolidations have proven largely elusive. The difficulty of achieving GDP growth while reaching primary fiscal surplus targets is very evident in Greece. Avoiding rapidly escalating government debt to GDP ratios has consequently proven very challenging. Even if the arithmetic of avoiding a debt trap can be made to work, the rise of opposition parties in the eurozone suggests there are indeed political limits to fiscal consolidation. The Ponzi like nature of requesting new loans in order to service prior debt obligations, especially while nominal incomes are falling, is a third issue that Syriza has raised, and it is one that informed their opening position of rejecting any extension of the current bailout program.
By William K. Black
Bloomington, MN: January 24, 2015
The New York Times’ coverage of the eurozone crisis remains execrable. Sometimes, however, it is so bad that it achieves brilliant, albeit unintentional self-parody.” The latest example is a column that, for the NYT, is in the top 5% of its efforts on Europe. Even at its best (least worst) the paper cannot help itself.
The January 23, 2015 column is entitled “After an Anxiety-Filled Campaign, Greek Voters Consider a Turn to the Left.” It does admit that Greece’s economic condition is horrific.
“After five years in which the country’s economy has shrunk by 25 percent and the number of jobless has risen far beyond what its creditors ever predicted….”
By William K. Black
Bloomington, MN: January 7, 2015
The troika (the EU Commission, the ECB, and the IMF) are flirting with throwing the entire eurozone back into a third Great Recession and much of the periphery into the continuation of the Troika Depression. For nations like Greece, the current Great Depression is now more severe and longer lasting than the Great Depression of the 1930s. The New York Times and the Wall Street Journal’s journalistic malpractice in covering the troika’s gratuitous infliction of misery upon the people of Europe has been the perfect side dish to complement the troika’s toxic economic malpractice.
By William K. Black
It is often the small things that best illustrate insanity. On October 13, 2014, EU Economic and Monetary Affairs Commissioner Jyrki Katainen spoke to emphasize one message:
“[The EU’s leaders] ‘don’t want the [European Investment Bank] EIB crowding out private investment.’ He said the EIB should be used to leverage money from the private sector, ‘and play a part in big infrastructure projects,’ notably ones that have been delayed.”
It’s helpful to situate this smaller example of economic insanity within the broader context of the insanity of austerity inflicted by those same EU leaders. The general insanity is that the EU politicians are the most economically illiterate and extreme member of the troika. I just wrote a column explaining that they are bitterly attacking Mario Draghi, the head of the European Central Bank (ECB) for (in their warped interpretation) becoming apostate on the subject of austerity. The IMF, at least many of its professional economists, left the one truth faith of the austerians long ago when it began publishing research showing that fiscal stimulus was a great success and even its leadership began to warn against austerity.
By William K. Black
As things go from bad to worse in the eurozone the putative adults have begun to fight openly in front of the kids. The putative adults, of course, have refused to act like adults for six years and instead have lived in a fantasy world in which austerity – bleeding the patient – is the optimal response to a recession. As many of us have been warning for six years, this is a great way to create gratuitous recessions and even the Great Depression levels of unemployment in three nations of the periphery with 100 million citizens.
Italy has been forced by German demands for austerity into a third recession in six years, with France likely to experience the same fate. Even Germany has stagnated and could fall into recession. Instead of the four horsemen of the apocalypse, the three horses that make up a troika consist of the European Central Bank (ECB), the International Monetary Fund (IMF), and the European Commission (EC). The troika combined to force the entire eurozone to inflict austerity in response to the Great Recession.