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20 responses to “A crisis of political economy”

  1. wizofaus

    Brian, just a point, it makes for somewhat difficult reading when you have sentences like “For the record, this is what was decided” that only make sense once you follow the link in question. As it is, there’s not much of a clue as to whether the link is worth following. It seems like you then describe at the end what ‘this’ meant, but I’m not entirely sure…good article otherwise, though.

  2. Wantok

    I had understood that the new tax agreed by Angela and Nicolas was a financial transactions tax not a financial services tax; as an FTA it will need to be consistently applied throughout Europe and, arguably, the rest of the world applying to all financial transcations within stock and money markets. This may, in turn, cool some of the irrational exuberance we have witnessed in recent weeks.

  3. David Irving (no relation)

    We seem to be in for interesting times. We have (or are about to) hit peak everything, and the global financial system is in trouble.

    Steve Keene was being depressing on the radio this morning, and I recently heard Nial Ferguson quoted as claiming that Planet Finance had around ten times the “value” of Planet Earth. (So, maybe we have Peak Money as well as everything else.)

  4. Occam's Blunt Razor

    It is not a crisis of political economy. It is a crisis of stupid decisions by US and European Governments since WWII. If they had shown fiscal discipline then they wouldn’t be in the pickle they are in. The US should not have bailed out the banks or the car makers nor incurred so much debt before doing so. For the EU the decision to form a single currency without political union is just sheer bloody stupidity. The decision to then allow EU member nations to blatantly ignore the requirements of the Maastricht treaty just reinforced the stupidity.

    The political deadlocks of the US system are a result of the design of the system – if they don’t like it then they should move to change the system.

  5. Russell

    “If they had shown fiscal discipline then they wouldn’t be in the pickle they are in.”

    They might have better regulated their financial sector, too, instead of foolishly de-regulating it.

  6. derrida derider

    Why would the Brits wear this proposed tax? They have the City of London. Avoiding risks to the City’s status is the sole good reason for their austerity program, for instance – they are currently imposing heavy costs on the rest of the kingdom to keep London safe for bankers. The Brits will say, rightly, that an FTA may be a Good Thing if applied worldwide but doing it for Europe alone creates disproportionate costs for them because they’re not competing with Frankfurt or Paris but with Hong Kong, New York and Chicago.

    This is all of a piece with other effects of the EU’s democratic deficit. The disastrous Euro itself, of course, would never have happened without that deficit.

  7. Wantok

    On the subject of the finacial transactions tax (Robin Hood Tax) an interesting aside from Bill Nighey as a banker:
    http://robinhoodtax.org

  8. FDB

    *Sarkozy*

  9. Grigory M

    “Nighy”

  10. Katz

    Rumour has it that Europen banks are unable to source funds for their operations. Hence, they are digging into their reserves. And just announced on the radio that an unnamed Euro bank has gone cap in hand to the ECB for some emergency funds.

    Looks like German taxpayers will be asked to underwrite the world financial system.

    The US taxpayers were tapped out by Bush and Paulson. German taxpayers are nowhere near wealthy enough to hold up the world.

    Strap in. We’re in for a bumpy ride.

  11. Joe

    http://www.spiegel.de/international/spiegel/0,1518,781622,00.html

    SPIEGEL: Minister, an increasing number of voices in the EU are calling for euro bonds to be used to end the crisis in the euro zone. Are you among these advocates?

    De Jager: No, absolutely not. Euro bonds are not the solution. You cannot end a debt crisis by introducing a new form of debt. Instead, the countries concerned have to tighten up their budgets and introduce reforms to get their economies back on track. Euro bonds are no alternative — on the contrary, they would have a perverse effect.

    SPIEGEL: How so?

    De Jager: Euro bonds remove every incentive for ailing countries to return to sensible fiscal and economic policies. Since they offer lower interest rates than their previous government bonds, they induce governments to run up more debt instead of saving. I call that perverse.

    SPIEGEL: Even billionaire investor George Soros is calling for euro bonds. Are you saying he doesn’t know what he’s talking about?

    De Jager: He is at least not considering the long-term repercussions of his proposal. Over the short term, euro bonds might calm the markets. But if we don’t change the general conditions, five years from now we will have the next crisis, which could be even worse than the present one because even healthy countries like Germany and the Netherlands would be much more in debt.

    SPIEGEL: The German government also opposes euro bonds. How long do you think it will be able to maintain this position?

    De Jager: I expect the German government to stick to this position. Euro bonds may be an option over the long term, but only if all member countries of the monetary union pursue the same financial policies. We still have a long way to go before we achieve that.