Monday, June 29, 2015

Greek Default!

The Greek government will almost surely default tomorrow, Tuesday 30 June 2015. Today, the government closed the banks in Greece, imposed capital controls so that money cannot leave the system and closed the stockmarket in Athens. In short, Greece is a mess and threatens to impose a Lehman type financial crisis on the global economy, if not worse.

It is very difficult to say how great of a financial shock this will be to the global economy. But, billions and billions in market value has been lost just in the few short hours since the crisis exploded into its current phase. Eurozone banks lost $56 billion in just one trading day.  Those billions in lost wealth could have given Greece a real lifeline to economic growth.

The current approach to the Greek debt crisis is therefore a deeply negative sum game. The losses to the global economy dwarf the costs to fix Greece and the Eurozone in general. The Eurozone should have pursued powerful fiscal and monetary stimulus to repair the Eurozone, not austerity which we now know predictably led to unnecessary pain and misery for the Greek people and the entire global economy.

The IMF, ECB and Eurozone will be responsible for the greatest financial miscalculation in history if they do not act now to reverse their inexplicable and indefensible approach to excessive debt in the Eurozone periphery. They need to give Greece time to determine if there is a potential deal that can be implemented and they need to get serious about growth. Anti-growth austerity must end now. This must occur immediately.

These financial sleepwalkers risk throwing the entire global economy into chaos in a major blunder akin to World War I.

Sunday, June 28, 2015

Slavery's Long Shadow

Paul Krugman
Nobel winning economist Paul Krugman provides thoughtful commentary on economic inequality in the United States and our willingness to continue to tolerate it.  In the New York Times, Krugman recently published "Slavery's Long Shadow" and argues that race plays the preeminent role in our nation's welfare policies and attitudes:

"Yet racial hatred is still a potent force in our society, as we’ve just been reminded to our horror. And I’m sorry to say this, but the racial divide is still a defining feature of our political economy, the reason America is unique among advanced nations in its harsh treatment of the less fortunate and its willingness to tolerate unnecessary suffering among its citizens."

Krugman continues by analyzing Nixon and Reagan's "Southern strategy" in dividing the South based on cultural and racial issues and notes that of the 22 states that have refused Obamacare for its citizens since 2012, 80% are former slave states.  Why?  The answer per Krugman lies in the racialization of poverty and welfare in the U.S., as exacerbated by Nixon/Reagan/Bush racial coding.