Posts Tagged ‘The Great Depression’

Is Joseph Stiglitz right calling European austerity a suicide pact?

Sunday, February 26th, 2012

Will Europe's economies collapse due to fiscal austerity? That's the opinion of Nobel Prize winning economist Joseph Stiglitz. Devote one minute to watching what he has to say:

Stiglitz simply cannot understand how Europe can hope to get their economies growing again with austerity, austerity and yet more austerity. Or as he put it "It reminds me of medieval medicine". Blood letting often made the patient even sicker. The response was more blood letting until the patient nearly died. "What's happening in Europe is a mutual suicide pact". 

Austerity is needed when an economy is booming

When economies are waning austerity removes demand from the system as unemployment spikes. "There will not be a restoration of confidence as long as economies keep falling, and that will continue until (the politicians) change economic course. And I don't think that's likely", Stiglitz says. 

Economists debating when and how the Euro will break up 

"Among economists the discussion is not about if but the best way to end the Euro. It could be civilian upset that does it. Youth employment in Spain has been over 40% since 2008. How much longer will they tolerate that? The policies of the new government are more of the same medicine", he says and adds "except worse". 

"The other way it may end is when the European Central Bank refuses to be the lender of last resort for some countries, precipitating a crisis. We can be sure that markets will be highly volatile and the end of the Euro will be a very severe disruption to the global economy", Stiglitz concludes

Do you agree with Joseph Stiglitz that Europe is making the same mistake as Herbert Hoover did that caused The Great Depression? Is the European austerity plan a suicide pact? Does demand in Europe need to be stimulated in order for the economies to start growing again? Will the Euro break up? Or do you believe austerity is the right way forward to make Europe grow and prosper again?

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