Abandoning Ship: The Eurozone is Failing at an Accelerating Rate!

• A global economic, financial and monetary collapse is coming! It will start in the PIIGS, spread to the rest of Europe, UK, Japan, Asia … and finally America! (emphasis mine)
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  Abandoning Ship: The Eurozone is failing at an accelerating rate! 
  by Alasdair Macleod, http://www.peakprosperity.com/ 
  It will be no surprise to PeakProsperity.com readers that the news coming out of the Eurozone just gets worse and worse. The reality is that Ireland, Portugal, Spain, Italy, Belgium, Greece, and France (in no particular order) are all in debt traps from which there is no escape. A debt trap is sprung when bankruptcy becomes the only outcome. With corporations, this usually becomes readily apparent and directors are forced by law to stop trading, but countries conceal this reality by printing money. Otherwise there is no difference in the two cases, despite what politicians and neoclassical economists would have us believe. This is why we are painfully aware that the Eurozone is in trouble, since nation states are unable to cover and conceal their obligations by printing money, having surrendered this role to the European Central Bank (ECB).
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  The ECB is meant to be independent of politics and political pressures. But the reality facing any central banker is that s/he cannot stand by and let politicians drown in their own mess. The politicians know this, and it’s what is behind current attempts to move away from austerity towards Keynesian growth. The plea is exactly the same as that of the spendthrift who tells his bank manager that the only chance he has of getting his money back is to increase the overdraft to allow him to trade his way out of difficulty.
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  So the ECB knows, in its role as bank manager, that the argument is flawed. But unlike spendthrift individuals, politicians have real power, and the ECB has an ultimate responsibility not to upset the apple cart. And that is why the election of a new socialist French president is important. President Hollande is leading the charge away from austerity in Europe, and he has powerful allies, including President Obama in his own election year.
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  Unfortunately, the ECB and the politicians lack a proper understanding of their economic condition because they continue to operate within the neoclassical framework that has led them into this mess. The lack of understanding of the relationship between the elements of hard-to-predict future consumer preferences, as well as the entrepreneurial function and the role of time in their calculations, has led to a reliance on sterile economic models. These leave no room for the dynamic and unpredictable creativity of human nature that gives us real economic progress. It is the difference between a proper understanding of the role of free markets, and thinking they can be manipulated to achieve an outcome preferred by the state without adverse consequences. An important consequence has been the creation of credit-induced business cycles leading to escalating levels of debt in both private and public sectors, which is why so many countries have become ensnared in debt traps. This statement of the obvious is not recognised by Keynesians and monetarists who continue to argue that the solution is yet more debt, more stimuli, and the avoidance of deflation at all costs. And it is neoclassical Keynesians and monetarists that populate the central banks and advise politicians.
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  This brings us to an important consideration: Despite what her officials say publicly, austerity has limited support within the ECB itself, because it is run at the top by neoclassical economists. Instead, the real constraint is Germany, whose citizens’ savings are on the line and which faces the prospect of its third currency collapse in a century. So this is where the lines are drawn up: spendthrifts desperate for more money, a conflicted central bank, and Germany.
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  read more!

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