News & Analysis
EU Fizzling
Stiglitz Says Europe Made Wrong Bet With Austerity ... Nobel Prize-winning economist Joseph Stiglitz (left) said, "The belief that markets will get new confidence has been shown wrong" by Ireland's austerity drive. European governments made a "wrong bet" by pushing for austerity after the global recession, resulting in slower economic growth for the region and the U.S., Nobel Prize-winning economist Joseph Stiglitz said ... in Budapest. If Germany, the U.K. and France remain committed to budget cutting, "that will have systemic consequences for the entire Europe." Europe's economy is at risk of sliding back into recession as governments reduce spending to rein in budget deficits, Stiglitz, a former chief economist at the World Bank and now a professor of economics at Columbia University in New York, said in an interview with Dublin-based RTE Radio on Aug. 24. "A weaker Europe means the United States will be able to export less and the likelihood of an export-led U.S. recovery becomes less," Stiglitz said today. – Bloomberg
Dominant Social Theme: It is time to think again about how to save Europe for the EU.
Free-Market Analysis: We have mentioned many times before that "austerity" was the wrong prescription for Europe. But the idea many have is that lazy European socialists deserve what they get. This is in fact, part of a dominant social theme, "The socialists have ruined Europe for Europeans and common sense needs to return."
Looked at from a larger perspective, however, it was not socialism that ruined the economies of European countries but deliberate policies of the powers-that-be. From Karl Marx's creation of communism, to the installation of a version of his vision in Russia, to Europe's socialist leanings in the mid-to-late 1900s, to the current green communitarianism, we think we detect the hand of a shadowy power elite.
Why would a power elite interested in wealth and eventually world government, encourage various forms of leveling? Because "isms" always involve state interference. When one postulates this, that or the other social goal, government inevitably becomes a corollary. The power elite itself, as we have long pointed out, works within a mercantilist strategy. The stronger and more invasive the government, the more the power elite benefits, as its great wealth and influence provide it with the wherewithal to pull the levers of public policy for private gain.
And so, with power elite help as we see it, Russia "fell" to communism and Europe was overtaken by socialism. The Western elite didn't benefit directly from communism but did so indirectly as the "threat" of communism allowed further militarization of Western countries and generated a gargantuan military-industrial-intelligence complex. It turns out communism ultimately degraded Western freedoms; meanwhile home-grown socialism provided the elite further ways of expanding the state.
This spread of socialism in the West was accomplished through central banking. We have long referred to this as Dreamtime, because the hot money flows of central bank money creation can make societies seem tremendously exciting and progressive. People are tricked into believing that the lucrative jobs and expensive houses they acquire are due to their industry and talent when in fact they are the result of an over-printing of money.
When the hot money cools off, the damage is uncovered, the jobs are revealed as unnecessary and the houses are unaffordable. Sometimes, central bankers can restimulate, and thus these intervals of misery have come to be known as recessions. But ultimately, the damage that is done to society and the economy is cumulative. Over decades, whole industrial swaths become dysfunctional. Entire industries rise up producing items that would not be necessary or would not find a foothold in a real economy.
One of the biggest distortions – or bubbles – in a central banking economy is inevitably the financial sector itself. A central banking economy protects the banking sector through good times and bad because the banking sector especially is the distribution arm of the hot money that central bankers print. Actually, bankers could distribute the money in any manner. They could drop it from helicopters and it would have the same effect, and more efficiently and quickly. But central bankers will NEVER distribute new money through distribution channels other than banks because then control would be lost and the essential phoniness of the system would become clarified.
And so it has gone for at least 60 years – and America has been no less of a victim than Europe. In Europe, central banking was a way of palliating citizens, as it allowed the erection of vast socialized states with equally vast social privileges. People accepted the intrusiveness of state control because so many goodies were being given away. The European Union was built on the back of central banking. America itself has gradually lost most of its "exceptionalism" as a result of the corroding influence of central banking.
Eventually, Dreamtime subsidies. It did so in America and it did so in Europe. Economies, like badly damaged heart patients, can take only a certain amount of monetary defillibration and then they cease to respond. They flatline. This is what has happened in America and Europe. Economies are not reviving because the distortions have simply become too great.
The financial centers remain in massive bubbles while industry itself, tremendously distorted, has not been allowed to collapse. The entire social infrastructure meanwhile, retirement at 55 and 60, full health care coverage, public schooling, public housing, massive government employment, bloated police and military services, all of these are seen suddenly as oppressively unrealistic. And there are many reasons why: Public unions are out of control, People in southern climes are lazy, Mediterranean cultures are naturally corrupt, etc.
And so the boot comes down. In Greece and Ireland, especially, "austerity" has been the rule of the day. The local elites who pocketed the money for years and years, promoting the vast authoritarian Ponzi scheme of the EU, have retained their ill-gotten wealth but the citizens themselves, sold on the idea of a "greater union" and a more profitable posterity, have reaped the bitter fruit of this illegitimate union. Retirement ages have begun to rise, government jobs are being pruned, workdays and workweeks are lengthening and jobs, generally, are disappearing.
As the tide recedes, what is left behind is the detritus of the authoritarian state. The EU continues to legislate an endless barrage of petty, intrusive regulations. Bureaucrats continue to dream about an ever-closer union that includes an anthem, a flag and an active military. Jurisprudence is focused on the Napoleonic code where all are guilty until proven innocent and tax collection in particular is ever-more efficiently enforced.
Stiglizt, a socialist at heart, is right to perceive that austerity is not in the best interest of the European Union. Who knows what his real motives are? Perhaps he is just completing a necessary Hegelian dialectic – presenting another side of the debate. Maybe it is now perceived that the powers-that-be have made a further miscalculation and must move toward the center.
It IS a miscalculation, in our view. Germany remains disconsolate; there is talk of a Greek civil war and Irish bonds were just downgraded once again. Italy has yet to be heard from, but Spain and France are striking, and generally discontent is rising across Europe from what we can tell. The tribes, as we have long predicted, have risen from their slumber. It seems the only government programs expanding these days in Europe have to do with increased taxation and "efficient" enforcement. Greece, as we have reported, is now using Google earth to find undeclared swimmings pools.
What did the power elite expect? It was easy enough to trick people into trading freedom for the comfortable confines of state authority when times were good. But did the elite really believe that people would honor the terms of a legislative contract that doomed them and their children to a kind of perpetual poverty? Did they elite believe that in exchange for trinkets handed out in the 20th century that people would accept penury in the 21st?
The tribes of Europe will grow increasingly restless, we predict – as we have before. These cultures go back millennia and they are as stiff-necked in their own as the Pashtuns in Afghanstan. Tribal culture is the single thing that the power elite (itself tribal) has set itself to stamping out in the past several decades and centuries. But tribes are stubborn things.
Stiglizt is correct. Perhaps the big European and American banks that are owed money could take haircuts, and sizeable ones. But, you know, we do not think that was the plan. The elite, in its arrogance, expected that people once entrapped would remain so and would accept their fates as Dreamtime dupes. But no one likes to feel a sucker; these days the Internet can reveal such machinations clearly. So we will be very surprised if austerity stands, in its current incarnation anyway. The more the elite insists on the concept, the more it jeopardizes not only the strategy but the EU itself.
As a free-market oriented publication, we have no great sympathy for public unions and state graft. But that is not what has occurred here. From our point of view, the elite set out to deliberately trick the millions in Europe into handing over wealth and control to state institutions run from behind the scenes by a massively powerful, intergenerational, familiar conspiracy.
Conclusion: Yes, central-banking Dreamtime was a strategy to consolidate power in both the US and Europe. But perhaps the elite did not count on the truth-telling of the Internet. And perhaps the downturn – the Great Recession – was worse than expected. And now the austerity that was supposed to crush generations of Europeans – and remold them into evermore submissive citizens of a superstate – is itself in jeopardy. The project itself becomes harder than was once expected.
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Posted by Bionic Mosquito on 09/11/10 10:23 AM
I found a few interesting things in the article:
1) How does a seemingly insignificant group of monks pull off a EUR 2 billion transfer of wealth in no time?
2) I often think about where is the wealth? Even a casual traveller can see the billions / trillions in monastaries, castles, churches of Europe. Do we really know who is the owner? How many 500 hundred year old title deeds are there, just like this monastary had to the lake?
3) What was a certain prince of an Anglo country doing visiting THIS particular monastary? Three times, apparently.
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Posted by Bionic Mosquito on 09/11/10 09:24 AM
DB
You may find this article worthwhile, if you haven't yet seen it.
Click to view link
Reply from The Daily Bell
Thanks for the link. Terrible article, though. He hopes the Greeks can recreate "civic society?" What does that mean - within the context of the EU and the Napoleonic code? Typical Michael Lewis.
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Posted by Ryan L on 09/09/10 02:17 PM
I pray for civil war.
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Posted by Alan on 09/09/10 08:07 AM
@Mike at 7.38
Concerning boycotts. I quite agree. I have not been to see a Hollywood movie for over 10 years and threw my TV out five years ago. Have also long stopped attending professional football (soccer) matches. Look who owns the clubs these days? In England it is mainly the banks through debt.
"The economy we have is the economy we support with our spending power and also with our labour." If we want a different economy we need to spend differently and be more choosey who we work for. Imagine if nobody watched the TV news or bought newspapers anymore? What would happen if a large number of people started to seek alternative ways of recovering from disease and lived more like the Hunza than the Huns? Big Pharma would quickly become little pharma, hospitals would close, doctors would become unemployed, health insurance would fall dramatically for many people, and so on.
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Posted by SmartAZ on 09/09/10 07:40 AM
Well, there comes a time when your philosophies just don't matter any more. They may be right; I would initially assume they are. But they don't matter because the various banker groups, politician groups, labor union groups, and other groups have stolen all there is to steal. Oh, I know they think they are absolutely honest, but that is only because they keep the arithmetic straight no matter what, and they are always careful to pass a law that say its ok for them to steal what they want. But reality is not fooled: just because something is legal doesn't make it right, and reality always wins in that game.
I doubt if the various groups would understand this comment, or even care about it. They don't care if the whole world crashes to the ground as long as they are in charge all the way down.
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Posted by John Edwards on 09/09/10 07:18 AM
@ JDHoward
Well said.
You gotta' keep kicking against the pricks.
As for 'Austerity', as usual the slide into abject poverty by the many will never be felt by the few, so as far as it goes we may as well go into hyperinflation and be done with trying to resuscitate a system that has deprived us of so much in the name of 'Regulatory, Representative, Democracy'.
I mean, we all know that the value of fiat-money is abstracted to such a ridiculous degree by all the financial instruments of mass destruction as to make it a tool of enslavement, not liberation. So let's print and create digits in banks until we no longer associate fiat-money with effective commerce.
Just let it become a 'lubricant', by sloshing loads of it around to sweeten real deals concerning the exchange of goods and services between consenting, informed, free to choose individuals/groups.
You build me a house, I'll mow your lawn.
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Posted by Weeble on 09/09/10 06:48 AM
@ William
Your post seemed to be a little off-topic:
From Click to view link
"Irony a subtly humorous perception of inconsistency, in which an apparently straightforward statement or event is undermined by its context so as to give it a very different significance."
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Posted by William on 09/09/10 03:44 AM
May I suggest a little feedback discipline here. This feedback space has devolved into arguments between a few responders rather than comments on the subject at hand. I wouldn't mind except that the offenders involved don't seem to have much to add except their huge raging egos and shoot from the hip advice.
I suggest more than one entry per article be banned unless specifically called for by the article writer or whoever is in charge of representing the Bell.
Additionally, I recommend banning inclusions of one's own link, which I suspect is part of what's driving this assault on this feedback space.
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Posted by Luis on 09/09/10 01:23 AM
How conceited of me! please forgive me, but I thought you would comment on this (below), at least telling us what you thought of C. Wright Mills, but really and truly a bit more: weren't you a bit confusing in your comments about Stiglitz?
Posted by Luis on 9/9/2010 12:31:45 AM
Interesting spirited discussion aroused by DB's take on false Nobel prizes. They are fake indeed. Optimistic and naive take from DB on krugmanite recommendations, difficult to believe; well they attribute it to the Power Elite; how confusing you have been this time my DB friends, please admit it. Nevertheless you created quite a mental storm here. On the other side we have the pessimists or realists, have it your way, but they are right this time, there is no way to avoid a power elite of sorts, ever. I finish my ramble: you are all certainly aware of C. Wright Mills book "The Power Elite" written in 1956; I read it at that time thereabouts, he complains that America has become too materialistic and lost its idealism, as I remember he comes down on the disgusting phrase "if you are so smart why aint you rich?", yes coming to the US from a third world country as young one in that decade I was struck by that crude phrase. On and on we go, round and round, now I bet young ones believe the fifties were a more idealistic time. Wake up all of you, that includes you my friends at DB. What a farce it all seems at times. How depressing. Still, thanks DB for allowing this meeting of minds! Do keep it up! the PE be damned, off to the mountains...
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Posted by Weeble on 09/09/10 12:51 AM
@ Bluebird
I learned a lot from Myron Fagan. It is so easy to give the wrong impression when writing. We all do it. Once you fully grasp how screwed up this world is, you will be better able to handle crises. I got very low before I climbed back up. I just had a painful death in the family, and am choosing to ease up on heavy posting, while I return to another new normal. DB is probably breathing a sigh of relief... Eventually, you will get right inside the PE head. It is not pretty. But it makes regular people look like saints, because they have absolutely no idea...
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Posted by Luis on 09/09/10 12:31 AM
Interesting spirited discussion aroused by DB's take on false Nobel prizes. They are fake indeed. Optimistic and naive take from DB on krugmanite recommendations, difficult to believe; well they attribute it to the Power Elite; how confusing you have been this time my DB friends, please admit it. Nevertheless you created quite a mental storm here. On the other side we have the pessimists or realists, have it your way, but they are right this time, there is no way to avoid a power elite of sorts, ever. I finish my ramble: you are all certainly aware of C. Wright Mills book "The Power Elite" written in 1956; I read it at that time thereabouts, he complains that America has become too materialistic and lost its idealism, as I remember he comes down on the disgusting phrase "if you are so smart why aint you rich?", yes coming to the US from a third world country as young one in that decade I was struck by that crude phrase. On and on we go, round and round, now I bet young ones believe the fifties were a more idealistic time. Wake up all of you, that includes you my friends at DB. What a farce it all seems at times. How depressing. Still, thanks DB for allowing this meeting of minds! Do keep it up! the PE be damned, off to the mountains...
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Posted by Mark V on 09/08/10 11:39 PM
@GaryT: The Value of Silver as Money
My Dad was born in 1919, and we often talk of the coming collapse. Since he lived through the (first) Depression, he can give me first hand knowledge of the purchasing power of silver money.
His first job was as an usher at a silent movie theater, with wages of $0.15 per hour, or $8.10 for a full work week (six 9 hour days). No bennies of course, but also no taxes taken out either. I expect that the same job today costs the theater management perhaps $15 per hour, including SS taxes and medical insurance et cetera. Other price points: Full Christmas dinner in 1932 (excluding alcoholic beverage): $0.29. Current price for such a dinner: $29. Price of a new Ford sedan on the showroom floor: $200. Current price: $20,000. Price of a new 3 bedroom, 2 bath bungalow, single family detached home in north Hollywood: $3,500. Current realistic price (after the real estate market comes back to Earth): $350,000. You can see that nominal prices, including wages, have gone up about 100 fold since 1932. However, the price of silver has only risen from $1.29 to $20, a 15.5 fold increase. So you can expect that the dollar price of silver should increase at least 6.5 times to bring its purchasing power back into line with its value in 1932. This would put the market equilibrium price at about $130 per ounce.
A fellow usher at the theater, also earning $8.10 per week (in silver 1932 dollars) was supporting himself, his wife, and one child on those wages, which works out to about 1 ounce of silver per day. So when silver is again used as currency, you should be able to live modestly on no more than one once per day. Of course, in the depths of a currency crisis, the value of silver may be several times this, so that perhaps for a while, you could live on 1 ounce per week.
Think of that: You could live modestly for a year, rent, food, clothing and the rest, on about 50 ounces of silver.
If anybody knows what silver could buy in historical times, this would be interesting to know.
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Posted by Bluebird on 09/08/10 11:04 PM
If I may make one last post, I clicked on your link, Weeble. I read a good portion of Part 1. Had to quit. I have heard of the things mentioned there. But it is too upsetting for me to read right now. It is almost like looking upon Lucifer himself. While I am not necessarily a wimp, I am in a fragile state right now with a series of multiple family crisis. It made me begin to tremble. Brrr. Thank you for the link, though. I really am with those on this site, just not as good with words. :-)
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Posted by Bluebird on 09/08/10 10:23 PM
I don't watch any newscasts, Weeble. And I don't listen to any commentators, or "talking heads" as I call them. (I have not watched TV for over 20 years.) But I do check out various news websites just to know what is going on in the world. I read but pass on the videos and opinion pieces. I only saw that article there and felt it was important. I sometimes wonder if we will even be having an election. I agree on the quote about the U.N. This article basically says they are trying to get rid of nations' sovereignty and also that "climate change" is for redistributing the wealth of the world. While this is not news, admitting it is, I felt.
I feel very fortunate to have found the Daily Bell. But I need to know about world news also. If there is a good source for world news, please advise. I cannot stand one that is either left or right leaning. I only want facts, not opinions or rhetoric. (Have we entered another war, etc?) I may only read one article from a news site, most usually I just read the headlines. Fox often has alien articles I find amusing, though. I always read those.
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Posted by Lolly! on 09/08/10 10:17 PM
It looks like they're handing out Nobel Prizes in Economics free with an oil change. They don't seem to be worth very much. I suppose Stiglitz believes Japan has been following the proper policy for the past 20 years.
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Posted by Weeble on 09/08/10 09:39 PM
@ Bluebird
You sure are a mystery to me. Why would you bring up FOX? The first part sounded so mellow and synchronous. Then you laid down the FOX card. I have not tuned into that mess for a few years now. All it does is make me shake my head. I don't even watch the BS clips. I have to google the names to attach to the grimacing faces whenever they are mentioned. Why do you watch it? Is this some sort of reel 'em in and yank the hook manoeuvre?
As Myron Fagan once said: "take the US out of the UN, and take the UN out of the US."
Click to view link (text version)
Click to view link (mp3 version)
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Posted by USA_comment on 09/08/10 09:20 PM
Joseph Stiglitz is yet another winner of Swedish foolishness.
So as there is no lack of clarity.... Swedes. I am calling you out on your misguided penchant of awards to current day liberal sophist.
You have squandered any built up good will that composed Noble prizes. All for political reasons as far as I can ascertain.
Nevertheless..... it's OVER. Finished!
Joseph Stiglitz, Paul Krugman, Obama.....what the F... were you thinking. Didn't you ever consider that it would take its toll on your objectiveness and creditability? Well it has...... Done deal now. Sweden, you have lost credibility.
Reply from The Daily Bell
The Nobel Prize in Economics is not even the "real" Nobel as we understand it.
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Posted by Bluebird on 09/08/10 08:50 PM
I so much enjoy those of the Daily Bell. Such wise and peaceable people. Oh, that the world was full of this type of people! I grow so weary and get so cynical. I come here and am refreshed. Thank you, once again. This is a good article and I did not intend to comment, but I was wondering if your staff had seen the report on Fox about the U.N. taking over. I am sure you don't miss much, but be sure and check it out.
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Posted by Jeanna on 09/08/10 06:01 PM
Austerity = weaning the public off welfare payments preventing them from buying necessities. Hyperinflation = undercutting the stability of money, and destroying consumer prices before the public can buy necessities. End result is the same. The only countries that have successfully short cut the punishing consequences are those that cut the tax rates drastically, while at the same time floated the money supply. I don't think our current elite have any desire to glide us safely through.
But, the problems still stem from a demand / desire of the people to want governments to do something for them. There was a time when people in America would spit on anyone who asked the government for anything. Today, three or four generations have grown so used to welfare living, they cannot conceive of standing on their own. The result is fear, resulting in a circular system of ever more dependence upon their masters.
The only way to break that cycle is through education, and it has to be an education outside of the government schools. More power to the internet.
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Posted by Zippythepinhead on 09/08/10 01:55 PM
Stiglitz is European Krugmanite, serving two masters, he like his American counterparty is a complete waste of time, whether it be to read or decipher the dribble that imparts from his lips. The jig is up. The system is fraud. Real money has gold at $1256, silver near $20. The people will not, cannot play the game anymore. Blood from a turnip. Blood from a stone. Debtors prisons? Good luck. Work camps? Nothing suprises me. WW3 is the biggest bet.
"First they ignore you, then they ridicule you, then they fight you, then you win." - Mahatma Gandhi
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