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May 10, 2010
In the Introduction to their 13 Bankers: the Wall Street Takeover and the Next Financial Meltdown Simon Johnson and James Kwak say:
If the basic conditions of the financial system are the same, then the outcome will be the same, even if the details differ. The conditions that created the financial crisis and global recession of 2007–2009 will bring about another crisis, sooner or later. Like the last crisis, the next one will cause millions of people to lose their jobs, houses, or educational opportunities; it will require a large transfer of wealth from taxpayers to the financial sector; and it will increase government debt, requiring higher taxes in the future. The effects of the next meltdown could be milder than the last one; but with a banking system that is even more highly concentrated and that has a rock-solid government guarantee in place, they could also be worse.
This does appear to be a description of what is likely to happen in the UK:
Kal
There is a economic crisis happening now in Europe.
Greece's debt crisis threatens to spread to other European nations (such as Portugal, Spain and Italy ) and threatens the euro. Greece has run out of options. It has to be bailed out. Germany dragged its feet.
Because Greece, as a member of the EU, cannot devalue its currency without leaving the eurozone, the only remedy available to Greece is loans whose conditions require prolonged and savage deflation, pay and pension freezes, the tax increases and the public spending cuts.
Meanwhile as the markets test and probe the credit-worthiness of each member, the euro itself is at risk because there has been no way of passing around the hat to protect the eurozone's weakest links. Now they are talking in terms of €500 billion emergency support mechanisms: a troubled country will have to explain its plight to the European Central Bank and the European Commission, then ministers of the 16 eurozone countries will have to approve the help unanimously.
Fiscal tightening reduces domestic demand---- Spain is tightening at the same time as Greece, Ireland and Portugal, with Germany following suit (plans for a tax cut have been abandoned after Sunday's regional elections). So the EU will be looking to gain global market share, an incentive to let the euro slide further to make exports cheaper.
Will this stablize markets? Will some of the Eurozone banks go down? Are we seeing the politics of a nasty recession across Europe, including Britain, in which ordinary taxpayers and workers have been asked to foot the bill for bank bailouts, austerity plans and the like: ie, to pay the price for the proceeding economic bubble in so many parts of the west.
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A convulsed Europe's new politics are the politics of austerity: fiscal discipline . The debt- and deficit-laden European welfare states, including Greece, Italy, Portugal, Spain and also Britain – post-Brown Britain – need to rescue their public finances and reform their social market economies.They--and that includes Germany cannot get through the crisis without making cuts
The choice is between reform or decline.