Tuesday, August 09, 2011
US Economist Kenneth Rogoff, 'Some European Countries Are Fundamentally Bankrupt'
Fears of a double-dip recession are growing following turmoil on the stock markets and Standard & Poor's downgrade of the US. In a SPIEGEL interview, Harvard economist Kenneth Rogoff criticizes President Obama for giving in to the Tea Party in the debt-ceiling negotiations and argues that the euro zone has to become a transfer union.
SPIEGEL: With the turmoil on the global stock markets, is the world staring into a new financial abyss?
Rogoff: Mainly, the markets are simply adjusting to the reality of a continuing slow and halting recovery. They realize there will be no boom anytime soon. Wall Street forecasters, and many central banks, had been starting to think that there was going to be a sharp uptick in the recovery. But they have got this wrong again and again because they keep wanting to use normal postwar recessions as a frame of reference. But this is a post-financial-crisis recovery, a rarer and very different animal.
In reality, this was a different kind of downturn, which would have been better termed the "Second Great Contraction," because it involved a prolonged shrinking of overextended global balance sheets and a tightening of the credit system. Right now, the recovery from this needs more monetary stimulus, especially in the US.
Many people even consider moderate inflation heresy. But we are in a perfect storm here. I am not saying we should have hyperinflation or double-digit inflation, but I believe that central banks should accept somewhat elevated core inflation for several years, higher than the normal 2 percent. Whereas I believe monetary stimulus is coming, I am worried that it will not be forceful enough to have any material effect on balance sheets.
SPIEGEL: Does the US also need another stimulus program? Larry Summers, a former top adviser to President Barack Obama, says that cutting back on government spending in the middle of a downturn will kill economic growth and employment.
Rogoff: People asking for a fiscal stimulus are looking at the wrong model. They think this is just a big, but typical, recession.
Rogoff: I just cannot understand how President Obama made so many concessions in the latest negotiations over the debt ceiling. He was holding all the cards and he was still stared down by the Tea Party. He should have said: "I do not negotiate with terrorists. If you want to bring down financial markets, it will be on your head. I am going to behave normally and responsibly." Instead, he got gamed into making giant concessions, and this has weakened the presidency. Perhaps the damage will not be lasting, but then next time the president may have to prove him or herself willing to accept a short technical default rather than give in.
SPIEGEL: Growth is currently slowing in China as well. Where will global growth come from in the near future?
Rogoff: Emerging markets are slowing only mildly for now. But policymakers have to get the idea out of their heads that there is going to be big rebound every time we see an uptick. That will not happen as long as debt levels are so high. We may see moderate growth averaging only 1 or 2 percent in many advanced countries for much of the next three to five years. That is not the end of the world.
an error on evaluating "value at risk", an "ingenuity"
used by a cartel of international criminals to "skim" the little people
public operators treated their bankers and churches as "allied", but was an error
as in fact they are the "enemies" of nations sovereignty
trying to push a subversive agenda, a "financial coup"
in a different view of the function of financial instruments
Europe was still dominated by pre-industrial revolution silent code of mutual respect
where the "predatory capitalism" and the "bigotry alliance of skimmers"
had never shown their "true" face if not in limited circumstances
now that they both have, "everybody" understands who they are dealing with
and they understand "is war", the "surprise element" is over
"banks" can expect the same degree of trust they have in Mexico
"religions" can expect the same level of trust they have in China
and "politicians" can expect the same level of trust they have in Zimbabwe
because more or less they have "proven" "who they really are"
yes, I imagine he could have done more
acting out of presidential orders and bypassing
two chambers of corrupted puppets
but the "historical precedents" of "two" presidential assassinations
and the mud campaign of the wall street big press and big television
seem to indicate that possibly he acted in the need of preserving public order
and avoiding of being the one in charge
under which possibly the US "second" civil war could have started
also, at least from the religion side
he is half part of the same "interests" to preserve the holy status quo
as far as the Euro zone
"possibly" a common percentage of euro debt, shared
could have helped, as one time maneuver
to both favor a light inflation of the Euro
and a better positioning for export
while at the same time would have delayed speculations
and would have made less risky sovereign default
but what is done is done, you can change the future but not the past
there you are
this "is" a "different animal":
95% people in agriculture, EROEI "98"
93% of self employed, hardly a "nothing" national debt, "local" market predominates over global
high fiscal revenue, one "fourth" of population, "strong dollar", low private debt,
"efficient" energy and transport system, energy resources "booming", 60-75% unemployed
3% "officially" employed in agriculture, EROEI "7 or 8" maybe less ?
93% of dependent work, an high national debt to GDP ratio, "global" market
low fiscal revenue, overpopulation, weak dollar, huge private debt
"idiotic" energy system, see suburbia and big freeway gas guzzlers,
energy resources "at the bottom of the barrel", 24% real unemployment,
possibly 35% under-employment, possibly 35% "submerged" "illegal" "fiscal loss" economy
resource wars used for satisfaction of needs
"the first thing missing" is zero cost energy
"possibly" not through holy slavery as the south seems to want
"the second thing missing" is acknowledging the problem
this is "possibly" the problem of all bigotcracies and kleptocracies in history
at this point with a global system in contraction
"reasonable" monetary easing could help avoiding collapse of stagnant circulation
stimulus should be direct micro grants instead than tax credits
to rebuild a network of tribal economy wiped out by the 30 years
of "happy Gilmore" fiscal irresponsibility
and the banks need a restrain
where they are crashing the nation economy to keep their sheets in the green
so a "reasonable" "usury" law should be implemented
nobody twists their arms to lend if they don't like it
"reasonable" inflation is the only way to keep a runaway system
ruled by a cast of psychotic giant egos with "rights not negotiable",
to be in "natural balance" with the "real" and "limited" resources of a close system,
"controlled" inflation, not to end into "hyperinflation"
"but" on the other hands, "monetary" speculation needs to be kept in the gun-sight
if necessary, with "informal" instruments
when it goes touching national security
or it goes attacking markets around the planet
where the "consequences" of the speculation
of a nothing company ran by a couple of brick traders
may drag the country into a world war
or may affect the stability of strategic geopolitics balances
"common sense", not so common indeed
well, we will see
the outcomes most probable models:
-the fourth Reich or October Revolution, or "both" in the US
-the French revolution in the US
-a logistic resource based economy, without currency, nor "interest"
we will see, at the least the beginning
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