A quote of the day:
"A recent study by Federal Reserve economists concluded that America’s protracted high unemployment will have serious adverse effects on GDP growth for years to come. If that is true in the United States, where unemployment is 40% lower than in Europe, the prospects for European growth appear bleak indeed." Joseph Stiglitz
Via http://www.project-syndicate.org/commentary/joseph-e--stiglitz-says-that-the-europe-will-not-recover-unless-and-until-the-eurozone-is-fundamentally-reformed#vc6wVyQBWlqbgj7F.99
Agree or disagree with (as I do with some of) his prescriptions, but the above quote is a key to understanding why Euro area's economy is a brick that hit the water.
There is the school of thought that will conclude that in 2008 and in the period afterwards, that many of the large American financial institutions did perhaps come clean, and admit that they were in trouble.
ReplyDeleteAnd this school of thought would also conclude, that in Europe, where financial institutions were equally as bad, under water and out of control, they lied about it all. They lied and said, there are no problems here. Things are secure, things are stable etc.
Perhaps it has a lot to do with the political makeup of America versus Europe too. In that Europe, un-folded as a series of crises in which one small member of the union, threatened to explode after the other.
The status quo in Europe did not seem to mind terribly, as long as it was smaller members that were exploding and going under the water. In fact, better if those members do, because those members will then have to 'bail out' the larger ones so to speak.
We did not see this happen, in the more homogeneous United States of America. There was much abuse that occurred in the United States, and very little accountability or culpability. But what did you did see in the United States, which we never saw at all hardly in Europe, were financial institutions which admitted to being in trouble.
Such was the paranoia that existed in Europe that any sort of contagion or associative guilt might be spread on to larger financial institutions in larger members of the Union, that we here in Ireland were forced to go through the process of bailing out an entire mess of an institution such as Anglo or AIB, at our own expense.
This is the essential difference as we look at America or Europe in 2013. One region still has vestiges of 'old capitalism' left, or sufficiently so, that openness and truthfulness about financial conditions still exists to some degree.
Here in Europe, what we witness is the blend of pro-socialist and pro-capitalist, a kind of 'take your pick' as it suits you approach. What we find is a toxic blend of the un-truthfulness from the old socialist make-believe, and all of the worst predatory instincts present in government and large financial institutions, combined into one abomination.