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"...public opinion deserves to be respected as well as despised" G.W.F. Hegel, 'Philosophy of Right'

loving the punting? « Previous | |Next »
August 8, 2011

Europe would appear to be the epicentre of the global financial and economic crisis. The undercurrents has forced the European Central Bank (ECB) to buy government bonds from Italy and Spain. Up to now the ECB has insisted that the main responsibility for acting has lain with the national governments in the European Union. The ECB has stood in the wings.

SchrankPWorldEconomy.jpg Peter Shrank

Up to now Europe has attempted to run a common monetary policy without a common treasury. This has failed. So Europe needs to shift to a eurobond: all eurozone countries could finance debt by issuing bonds which would be jointly guaranteed by all member-states. Since this is not politically possible the next step would be for a new, independent fiscal body to establish borrowing targets for each member-state and for a European debt agency to issue eurobonds.

That still leaves the wild and out of control wild and out of control financial capital footless and fancy free to engage in speculative trading that has not been covered by the capital maintained by them. No doubt there is hot money betting on the probabilities of default of sovereign nations.

This is something avoided by right wing columnists such as Janet Daley in the UK who say the core issue is: is it possible for a free market economy to support a democratic socialist society? She is referring to national welfare system with comprehensive entitlements, which is paid for by the wealth created through capitalist endeavour.

No doubt it will be echoed in Australia where the domestic economy is showing marked signs of weakness with the Coalition pounding away with their anti-debt and anti-spending sound bites and its "end the waste" and "pay back the debt" slogans . What is the Coalition going to cut public expenditure to fund its promises--eg the Coalition's direct action plan; the tax cuts; childcare; closing down the coal-fired power generators in the Latrobe Valley; its national broadband--without increasing taxes and without the money from the carbon and mining tax.

| Posted by Gary Sauer-Thompson at 9:29 AM | | Comments (1)


When companies go bankrupt, creditors also have to take a hit – by providing debt standstill, writing off some debts, extending their maturities, or reducing the interest rates charged.

Why not introduce the same principle to deal with sovereign bankruptcy. It has been around at least since the days of the 1997 Asian financial crisis.

The governments of the rich developed countries (US, Germany, France etc) under the influence of their financial lobbies, will not have it.