December 24, 2011

The Eurozone Crisis

. . . is not about market "discipline," according to Dean Baker:

The people who gave us the eurozone crisis are working around the clock to redefine it in order to profit politically. Their editorials – run as news stories in media outlets everywhere – claim that the euro crisis is a story of profligate governments being reined in by the bond market. This is what is known in economics as a "lie". The eurozone crisis is most definitely not a story of countries with out of control spending getting their comeuppance in the bond market. Prior to the economic collapse in 2008, the only country that had a serious deficit problem was Greece. In the other countries now having trouble financing their debt, the debt to GDP ratio was stable or falling prior; Spain and Ireland were actually running budget surpluses and had debt to GDP ratios that were among the lowest in the OECD. . . . The crisis changed everything. It threw the whole continent into severe recession. This had the effect of causing deficits to explode, since tax revenues plummet when the economy contracts and payments for unemployment benefits and other transfer programmes soar. . . .

* * * * *
People should recognize this process for what it is: class war. The wealthy are using their control of the ECB to dismantle welfare state protections that enjoy enormous public support. This applies not only to government programs like public pensions and healthcare, but also to labour market regulations that protect workers against dismissal without cause. And of course, the longstanding foes of Social Security and Medicare in the US are anxious to twist the facts to use the eurozone crisis to help their class war agenda here. The claim that the countries in Europe are just coming to grips with the reality of modern financial markets is covering up for the class war being waged on workers across the globe. The assertion that this crisis is about market discipline should not appear in a serious newspaper, except on the right side of the opinion page.
More at Al Jazeera. (Dean Baker was among the first observers to identify a US housing bubble in 2002. He was a senior economist at the Economic Policy Institute and worked as a consultant for the World Bank and the Joint Economic Committee of the US Congress, and authored weekly commentaries for the NYT and WaPo.)

UPDATE: Other recent headlines of economic interest:

The Four Companies that Control the 147 Companies that Own Everything (re- the 147 cos., see here).

Iceland is Our Modern Utopia (rejecting a bailout for their banks, the citizens of Iceland took control of their now-resurgent economy).

Germany Builds 2X the Cars & Pays Workers 2X the Wages

Evidence of Market Manipulation in the Financial Crisis

Is Bank of America Holding the US Hostage? (referring to the fact that BoA just moved its derivatives business into its FDIC (i.e. taxpayer) -insured depositary).

Too Big to Stop: Why Big Banks Keep Getting Away with Breaking the Law (the industry has captured the regulators, so the fines are too small to deter).

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