Commentary on Political Economy

Monday 1 August 2011

Blundering Toward Incompetence

This extraordinary piece from the otherwise often useful Willem Buiter is the perfect example of how "technical" ability is an almost certain guarantee of political incompetence.

Buiter suggests ("opines" would be more appropriate) that the European Union can stumble or "blunder on" without effective fiscal union simply by applying tourniquets to the "member" that happens to be bleeding most toward "default" and economic ruin!

What Buiter neglects is that such a "blundering" or "kicking the can down the road" approach cannot work - for the simple reason that EU member states in financial trouble - which will be nearly all of them soon, including France and Germany, if the US Fed starts a fresh round of QE (which it will have to do, very soon) - will have no choice but to opt out of the common currency if Buiter's prognosis got even close to realisation! And of course, the most to suffer would be German capitalists who would, for a start, face a ferocious banking crisis that would see their banks end up in the hands of American counterparts (well cashed up by the Fed!), and then by their "exporters" who would have absolutely nobody to export to, and then would have to suffer the indignity of.... importing inflation from the other EU countries! (As it did before the euro, which is why German leaders agreed to it in the first place!)

The likely outcome is instead that "peripheral countries" will agree to relinquishing soem parts of their (fake, anyhow) "sovereignty" for the sake of ensuring the survival of European capitalism - of the bourgeoisie, that is. - Which is the opposite of what Buiter is saying,... and why you ought to be wary of "academic economists"....

No comments:

Post a Comment