– Washington Post: Europe Is Stuck In a “Greater Depression” (Washington’s Blog, Aug 15, 2014):
“It’s a Little Misleading to JUST Call This a Depression. It’s WORSE than That”
The Washington Post’s Wonkblog reports:
Europe hasn’t recovered, because it hasn’t let itself. Too much fiscal austerity and too little monetary stimulus have, instead, put it more than halfway to a lost decade that’s already worse than the 1930s.
It’s a greater depression.
And as the latest GDP numbers show, it’s not getting any less so. Indeed, the eurozone as a whole didn’t grow at all in the second quarter. Neither did France, whose economy has actually been flat for a year now. Germany’s economy fell 0.2 percent from the previous quarter—and that after revisions revealed it had quietly gone through a double-dip recession in early 2013. Though that’s still much better than Italy: Its GDP also fell 0.2 percent, but its triple-dip recession has now wiped out all growth since 2000. The closest thing approximating good news was that Spain’s dead-cat bounce recovery continued with 0.6 percent growth. But it still has 24.5 percent unemployment.
But it’s a little misleading to just call this a depression. It’s worse than that. Europe is turning Japanese. The combination of zombie banks, a rapidly aging population and, most importantly, too-tight money have pushed it into a “lowflationary” trap that makes it hard to grow, and is even harder to escape from.
We agree with the diagnosis, but not the cure …
Diagnosis-wise, we noted last year that the British economy is worse than during the Great Depression.
But the “austerity” versus “stimulus” debate is a false dichotomy. If a patient is bleeding out, doctors have to suture the wounds before they decide whether to give more blood or to taper off the amount of transfusions.
But Europe has never treated the wounds … As we noted in 2011, failing to prosecute financial fraud – on either side of the Atlantic – is extending the economic crisis.
In 2012, we pointed out that European (and American) governments were encouraging bank manipulation and fraud to cover up insolvency … trying to put lipstick on a pig.
- Fraud was one of the main causes of the Great Depression, but nothing has been done to rein in fraud today. Iceland is the only European country that did it right
- Quantitative easing hurts the economy. Even the Bank of England and the creators of QE admit that it is “pushing on a string“. But the UK did tons of QE instead of actually fixing the economy
- An economics professor says we’ll have “a never-ending depression unless we repudiate the debt, which never should have been extended in the first place”
- Europe’s sanctions against Russia are backfiring, wounding Europe’s already-struggling economy more than Russia’s
- Authoritarian actions by the government interfere with the free market, and thus harm prosperity. Personal freedom and liberty – and freedom from the arbitrary exercise of government power – are strongly correlated with a healthy economy. A strong rule of law is the main determinant of GDP growth. Trust is essential for a healthy economy. But the EU has usurped the sovereign power of European countries … and many commentators believe that Europeans are losing freedom, liberty and the rule of law
Heck of a job, guys …