Toronto Star: Baleful Greek chorus heralds economic doom

[marmar]

Baleful Greek chorus heralds economic doom
Everyone is waiting for who will flinch first in worldwide game of financial chicken

Published On Fri Mar 5 2010

Immanuel Wallerstein


Everyone is discussing what Fortune magazine is calling the "Greek maelstrom" and everyone is pointing the finger at someone else. Whose fault is it? The Greek government is accused of cheating and allowing Greeks to live beyond their means. The European Union is accused of having created an impossible structure for the euro.

Or is the fault with Goldman Sachs? It is accused of having enabled the Greek government to falsify its accounts when it sought to join the euro monetary system. It is accused today of engaging in "credit-default swaps" that make the situation of the Greek government even more vulnerable, but to the bank's profit. The head of credit strategy at UniCredit in Munich says this is like "buying insurance on your neighbour's house – you create an incentive to burn down the house." Chancellor Angela Merkel of Germany calls Goldman Sachs' actions in 2002 "scandalous" and Christian Lagarde, France's finance minister, calls now for greater regulation of credit-default swaps.

Economic historian Niall Ferguson says that "a Greek crisis is coming to America." He calls this "a fiscal crisis of the Western world." Ferguson is preaching the evils of public debt and of the concept of a "Keynesian free lunch," which in the end is a "drag on growth." Nobel-Prize-winning economist and New York Times columnist Paul Krugman says it's a "Euromess" because Europe should not have adopted a single currency before it was ready to have political union. But now the euro can't be allowed to break up since it would trigger a worldwide financial collapse.

Meanwhile, it seems everyone is pressuring the Greek government to reduce its public debt as a percentage of GNP from over 12 per cent to, say, 4 per cent in, say, four years. Can it do this? Should it do this? The Greek government says it will do something. This "something" has been enough to bring about massive strikes of farmers, hospital workers, air traffic controllers, customs officials, and all those who are being asked to reduce their income in the middle of an economic crisis and increased unemployment. ..........(more)

The complete piece is at: http://www.thestar.com/opinion/article/775221--baleful-greek-chorus-heralds-economic-doom

[roamer65]

1. I think the UK will be the "trigger" for a worldwide currency crisis.

They are the "major crisis" hiding just behind the Greek one AND the British are up to their old competitive currency devaluation games again, just like the late 1920's and 1930's.

A Sterling crisis will bring the whole system down.

[HeresyLives]

2. Soros says the system is in ruins.

George Soros, billionaire hedge fund philanthropist, has lived under both systems and has written a gem of a book called The Soros Lectures offering some ideas to help rebuild a sustainable world economy. He also expanded on these ideas at the World Economic Forum recently in Davos, which I attended.

His thesis is that the world is at the same point in history as it was after the Second World War -- the system is in ruins and must be rebuilt from scratch. He is a strong proponent of forging a Bretton Woods II, or a new currency/financial architecture to replace the current laissez-faire version that went bust.

"Two forms of economic organization -- state capitalism and international capitalism -- are in competition with each other and neither is attractive," he writes. "International capitalism is inherently unstable because it lacks adequate regulation. It is also highly unjust favouring the haves over the have-nots. State capitalism will lead to conflicts."

By state capitalism, Soros is talking about the Russian, Chinese or Venezuelan models, where governments are players/combatants not referees.



Read more: http://www.nationalpost.com/opinion/columnists/story.html?id=3f306c01-c266-4f0e-8282-2da4a7f86075#ixzz0hQ5SpBnZ
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