Stiglitz- About That Euro

Yes, I know I talked about him yesterday but that was more focused on his anti-TPP positions. He also did a couple of interviews, one with Salon and one with Yahoo Finance Canada, discussing his view that the Euro as we know it is doomed.

I told you I agreed with him a lot.

Now my position is a little more militant than Stiglitz. I think without more democratization the European Union is doomed and justifiably so because right now it’s just an oppressive Neoliberal bureaurocracy, a festering boil of corruption and deceit run by incompetent idiots with aristocratic pretensions.

Stiglitz on the other hand concentrates mostly on the economic aspects and seems to think that splitting the Euro North and South will salvage it, somehow. Personally I feel this is half measures at best, without changing the attitudes of the Mega-Corporations, Billionaires, and Banksters the Southern Euro will be exactly the same as the Northern one. These groups who are calling the shots are not suffering under the present system, they’re benefiting from it and the grinding poverty and soaring unemployment (20% in Spain for instance) simply makes it easier for them to extort Public Assets from the people.

Stiglitz: The days of the euro are numbered
by Justine Underhill, Yahoo Finance Canada
Tue, 23 Aug, 2016 6:32 AM EDT

Nearly a decade after the financial crisis, the eurozone’s jobless rate still hovers around 10%, almost double that of the US.

But aggregates of the eurozone don’t tell the whole story. Austria’s unemployment sits below 6% while Spain’s has topped 20%. Between 2008-2014, Greek household disposable income fell by 24% while German households gained 15%, according to EU data.
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While the reforms he (Stiglitz) proposes, including common deposit insurance, eurobonds and a move away from austerity policies, are relatively straightforward, the political climate needed to institute the change is not. The longer it takes to make reforms, the more fractured countries will become– a cycle which could eventually diminish political will to save the eurozone.
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(Stiglitz:) To make a successful single currency, you had to realize that you were taking away, too, the most important instruments for adjusting when you had an economic shock, like the recession of 2008. So you took away the interest rate. You took away the currency adjustment mechanism, but they didn’t put anything in the place.

And instead, they made things even worse. Because they tied the hands of the countries of Europe by saying you have to limit the deficits and the debt. And then they said to the central bank, focus just on inflation. Don’t pay any attention to employment, jobs, financial stability. They believed, somehow, that all this would work out, that politically it would work out, that eventually, they would create the necessary institutions.

Economically, they thought markets would make sure things would work out, because if you maintain deficits and debt low and low inflation, automatically you’d be brought to full employment and rapid growth. Well, it hasn’t worked out. And theory said it wouldn’t work out.

Yahoo: As economic stagnation continues, there’s a lot more anti-EU rhetoric and populism. Do you see there being a tipping point at which the euro or the EU can’t be saved?

(Stiglitz:) Very much so. And in fact, you almost see a beginning of that with Brexit. Now, remember, the UK was not in the eurozone. But when they looked across the English Channel at what was going on inside the eurozone, one of the things they saw was rigid bureaucrats. They saw a system that was not able to adapt to the differences in circumstances. It was imposing the same rules everywhere, rules that might make sense in Germany, but didn’t make sense in other countries. They saw a dysfunctional eurozone. And their trading partners in Europe were not doing very well. And so they said, do we want to be a member of that club?

Now, what’s going to happen, I think– and what is happening already– is that the parties in the center– the center-left, the center-right– that have been supporting the concept of the euro are losing support. You see that in poll after poll. And people are moving to the extreme parties. And that’s a danger.

Because eventually, unless they make the reforms that I describe in the book– unless they make the institutions that will make the euro actually work for most of the citizens– unless they do that, the discontent will grow. And eventually, there will be vote of a country within the euro that says– a party will get elected, one of the extreme parties, a coalition, that will say we’ve had it. And they will call for a referendum like the Brexit. And there’s a good chance– and I think it’s almost inevitable, eventually, unless the reforms occur– that there will be an exit. Whether it’s Italy or Spain or Greece, it’s hard to tell. But it’s hard to see it not happening.
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Unfortunately, some of the response to Brexit was suggesting that rather than doing that, they were going to move in the other direction, a hard line attitude. Juncker, who’s the head of the European Commission, said we are not going to give UK a good deal. We’re going to treat it harshly, because we want to make sure that other countries won’t leave.

When you think about that for a minute, what he was saying– this is the head of the European Commission– was saying the benefits to the citizens of Europe were so low that the only way to keep them supporting the euro was to threaten them with disaster if they leave. Now, that’s not the way to create a partnership.

Yahoo: You’ve suggested the idea of a northern and a southern euro. How exactly would that work?
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(Stiglitz:) (T)here’s a closer similarity– not perfect, but closer similarity– among the countries of the south, not only in economics, but in political philosophy, and so too for the countries of north. So the prospects of two or three currency areas working are far greater than the prospect of a single currency working for the whole world.

If you ask the question could America join with a currency area of Latin America and the United States, we would say, oh no. When we talked about NAFTA, nobody said we need to have a single currency, because they knew it would not work. We could have a free trade area, but making a single currency work with countries as different as Mexico, Canada and the United States was not going to work.

In fact, even Canada and the United States have different currencies. We get along well. We have lots of economic relationship. It’s beneficial to both of us. But there’s not a single currency. So that’s the key idea.

Now, once you recognize that, there’s not a flood of money to the United States or to Canada. The money allocates itself on the basis of where the returns are highest. And the exchange rates are just to equilibrate the returns. So that’s the whole point.

If you have flexible exchange rates, you don’t get the rush of money going from one place to another, because you get the exchange rate to make the adjustment. So everybody says the returns are reasonably the same in the different parts.

Economist Joseph Stiglitz on the future of the Euro and U.S. defense spending
by Michael Garofalo, Salon
Wednesday, Aug 24, 2016 10:51 AM EST

In the clip above (which will not embed), Stiglitz discusses his ideas for solving Europe’s debt and currency crises, which he details in his new book “The Euro: How a Common Currency Threatens the Future of Europe.” In Stiglitz’s view, Europe’s economic integration outpaced its political integration, and taking a few steps away from the Euro as we now know it — without abandoning the idea altogether — might help the continent to one day move toward a sustainable common currency. “There are a lot of people who are absolutely committed to the idea of eventually having a single currency,” Stiglitz said. “The don’t want to go back on the progress we’ve made.

Stiglitz explained his “flexible Euro” plan: “It has the flexibility of saying, let’s start creating these institutions and get these countries’ currencies to move closer and closer together, and then eventually, once you got them really working cooperatively and you have creative institutions that are able to adjust in the face of a shock, then you say, OK, now we’re ready for a single currency.”