Wall Street thanks you for your service, Tim Geithner

First the treasury secretary propped up the big banks with public spending. Then he backed their agenda: cuts to public spending

• 
• • Dean Baker
  • guardian.co.uk, Friday 11 January 2013 20.08 GMT

Departing Treasury Secretary Timothy Geithner is congratulated by President Barack Obama and his next nominee, Jack Lew. Photograph: Mark Wilson/Getty Images

Treasury Secretary Timothy Geithner's departure from the Obama administration invites comparisons with Klemens von Metternich. Metternich was the foreign minister of the Austrian empire who engineered the restoration of the old order and the suppression of democracy across Europe after the defeat of Napoleon.

This was an impressive diplomatic feat – given the widespread popular contempt for Europe's monarchical regimes. In the same vein, protecting Wall Street from the financial and economic havoc they brought upon themselves and the country was an enormous accomplishment.

During his tenure as head of the New York Fed and then as treasury secretary, most, if not all, of the major Wall Street banks would have collapsed if the government had not intervened to save them. This process began with the collapse of Bear Stearns, which was bought up by JP Morgan in a deal involving huge subsidies from the Fed.

The collapse of Lehman Brothers, a second major investment bank, started a run on the three remaining investment banks that would have led to the collapse of Merrill Lynch, Morgan Stanley, and Goldman Sachs if the Fed, FDIC, and treasury had not taken extraordinary measures to save them. Citigroup and Bank of America both needed emergency facilities established by the Fed and treasury explicitly for their support, in addition to all the below market-rate loans they received from the government at the time. Without this massive government support, there can be no doubt that both of them would currently be operating under the supervision of a bankruptcy judge.

Of the six banks that dominate the US banking system, only Wells Fargo and JP Morgan could conceivably have survived without hoards of cash rained down on them by the federal government. Even these two are questionmarks, since both helped themselves to trillions of dollars of below market-rate loans, in addition to indirectly benefiting from the bailout of the other banks that protected many of their assets.

Had it not been for Geithner and his sidekicks, therefore, we would have been permanently rid of an incredibly bloated financial sector that haunts the economy like a horrible albatross.

Along with the salvation of the Wall Street banks, Geithner also managed to restore their agenda of deficit reduction. Even though the economy is still down more than 9 million jobs from its full employment level, none of the important people in Washington is talking about measures that would hasten job creation.

Instead, the focus is exclusively on deficit reduction, a process that is already slowing growth and putting even more people out of work. While lives are being ruined today by the weak economy, Geithner helped create a policy agenda where the focus of debate is the budget projections for 2022.
These projections are hugely inaccurate. Furthermore, the actual budget for 2022 is largely out of the control of any politicians currently in power, since the Congresses elected in 2016, 2016, 2018, and 2022, along with the presidents elected in 2016 and 2020, may have some different ideas.
Nonetheless, the path laid out by Geithner's team virtually ensures that these distant budget targets will serve as a distraction from doing anything to help the economy now.

There are two important points that should be quashed quickly in order to destroy any possible defense of Timothy Geithner.

It is often asserted that we were lucky to escape a second Great Depression. This is nonsense.
The first Great Depression was not simply the result of bad decisions made in the initial financial crisis. It was the result of ten years of failed policy. There is zero, nothing, nada that would have prevented the sort of massive stimulus that was eventually provided by the second world war from occurring in 1931, instead of 1941. We know how to recover from a financial collapse: the issue of whether we do so simply boils down to political will.

This is demonstrated clearly by the case of Argentina, which had a full-fledged collapse in December of 2001. After three months of freefall, its economy stabilized in the second quarter of 2002. It came roaring back in the second half of the year and had made up all of the lost ground by the middle of 2003. Its economy continued to grow strongly until the 2009, when the world economic crisis brought it to a standstill. There is no reason to believe that our policymakers are less competent than those in Argentina: the threat of a second Great Depression was nonsense.

Finally, the claim that we made money on the bailouts is equally absurd. We lent money at interest rates that were far below what the market would have demanded. Most of this money, plus interest, was paid back. But claiming that we thus made a profit would be like saying the government could make a profit by issuing 30-year mortgages at 1% interest. Sure, most of the loans would be repaid, with interest, but everyone would understand that this was an enormous subsidy to homeowners.

In short, the Geithner agenda was to allow the Wall Street banks to feed at the public trough until they were returned to their prior strength. Like Metternich, he largely succeeded.

Of course, democracy did eventually triumph in Europe. Let's hope that it doesn't take quite as long for that to happen here.

For Indian women in America, a sea of broken dreams

By Narayan Lakshman in the Hindu

When Pavitra’s Delta Air Lines flight flew into Atlanta’s Hartsfield-Jackson International Airport on a crisp blue July morning back in 2008, her heart pounded with excitement. Though it was a dangerous time economically and few companies were hiring, her husband landed a good job with a major IT firm and was assigned to projects across the U.S.

Pavitra, who had a bachelor’s degree from India and some work experience, had made a careful plan to embark on a course of higher studies — permitted under her current H-4 visa — and then seek employment. It was all coming together for her, it seemed. But she was in for a rude shock.

Within months of her settling down in a strange new land, she found out that not only were higher studies a financially draining option, given the lack of funding for spouses of H1-B visa-holders, she was also unable to pursue a graduate programme because with her three-year Indian undergraduate degree she was not considered eligible for graduate enrolment in the U.S.

With a paucity of viable alternatives, she turned her attention to the job market, an effort that proved even more futile. “I tried applying for a job but as soon as the recruiters came to know of my H-4 visa status, they would say they do not sponsor H1-B,” Pavitra said.

Matters then took a turn for the worse. Trapped in a labyrinth of visa-related restrictions, she began to feel she had no purpose in life. “I started going through depression, loss of enthusiasm and self-esteem. I started having chronic migraines every day,” she said. As migraine attacks went, hers were so severe that she could not even open her eyes, often threw up, and had chills.

“I had to call my husband every day at work, saying I am ill and he used to come home running. Life for him was very difficult, juggling between work commitments and my doctor visits,” she said. He was unable to look for better work opportunities since he was worried and wanted to look after her.

Now in the midst of a mind-numbing routine of hobbies, she asks herself: “Where am I in my life today? Still a dependent, still need to start my career fresh at this age.” And her future looks cloudy too, as it is a shaky prospect to start and raise a family on a single income, and whenever she tries to get back in the job market, “getting back my self-confidence, independence, self-esteem... [is] going to be a struggle for me.”

If Pavitra’s situation were an idiosyncratic case of misery in the wilderness of American suburbia, it may not be a collective concern. Yet that is not the case and, to be specific, 1,00,000 to 1,50,000 people, mostly women, from India, other parts of Asia and the rest of the world are stuck in this deadening reality of joblessness and social isolation, rapid erosion of self-esteem, and attendant toxic malfunctions in their personal lives.

Let’s step back and consider the facts and numbers in question.

The issue of H-4’s debilitating impact on its holders is not a new one. In fact, writing on cases of abuse of H-4 women by their H1-B husbands in The Hindu in 2008, Shivali Shah, a New York-based lawyer, explained that the U.S. Customs and Immigration Service does not provide H-4 spouses with work authorisation until well into the green card process.

There is no prospect of working on the H-4 visa per se. The State Department’s guidance on a range of non-immigrant visas notes: “A person who has received a visa as the spouse or child of a temporary worker may not accept employment in the U.S. with the exception of spouses of L-1 visa-holders.”

“Therefore, these women are financially dependent on their husbands for anywhere from two to nine years,” Ms. Shah pointed out, adding “H-4 women are middle-class and have status in the U.S., but immigration laws can make them indigent and undocumented at the whims of their husbands.”

So how many individuals are affected by this law? Since around 2004, the USCIS has set the annual cap for H1 visas issued at approximately 65,000. Even if one were to conservatively assume that 50 per cent of these visa-holders were married, it suggests close to 32,500 spouses or partners on H-4 visas a year.

Given that the H-4 visa is often of six-year validity, it would not be far off the mark to assume that there are well over 1,00,000 individuals stuck with this visa, possibly over 1,50,000. Further, the most recent USCIS data quoted in a study by the Brookings Institution suggest that 58 per cent of the H-1B visas are granted to Indians. This means that well over 50,000 Indians are in this position.

This includes only H-1 spouses. There is a host of other visa-types, for example, I-visas for journalists, all of which are subject to the USCIS work ban for their spouses — except L-1s, usually issued for senior executives who are on intra-company transfers from other nations. If the spouses of visa-holders in these categories were also counted, the number of frustrated, but often talented, individuals unable to work would perhaps grow exponentially.

To truly come to grips with the intensity of the problem faced by individuals trapped in the H-4 visa quagmire, a glimpse into the corrosive nature of the visa’s work restrictions is useful.

Rashi Bhatnagar, a H-4 visa-holder in the U.S. who was willing to have her real name used in this story — all others have been changed to respect privacy concerns — set up a Facebook group called ‘H-4 visa, a curse,’ after facing the deadening reality of joblessness, having enjoyed years of a successful career in India. Though she had a master’s degree from India, she had numerous doors of opportunity slammed on her in the U.S. after she had to relocate to this country to join her IT-worker husband.

However, Rashi counts herself among the fortunate few, whose spouses have a senior role, some leverage with their employer and hence some hope for flexibility, such as an early or expedited green card application. For most other “H-4s,” the mathematics of the waiting time for the right to work is debilitating, killing off their most productive work years from their late twenties to late thirties.

In the EB2 category of temporary, non-immigrant workers, a H-4 visa spouse would typically wait for six years before a green card application is made and then potentially another six years for the issuance of the green card. This makes a total of around 12 years, time spent languishing in the aisles of Walmart, making small-talk with vendors on street corners, engaged in the soul-destroying household chores and the limited joys of child-rearing.

In the EB3 category, the six-year wait for the green card process initiation is compounded by an even longer eight-12 year wait for the green card itself, requiring the H-4 visa-holders to hold their life in suspended animation for a staggering 14-18 years. Over the passage of such a length of time, all hope of resuscitating one’s passion to pursue a meaningful career is likely to be extinguished, with only a sense of lonely desperation left in its wake.

Part 2

To better understand the impact of the U.S.’ H-4 visa, the non-working visa given to the spouse of a work-authorised H-1B visa holder, The Hindu conducted a limited survey via a Facebook page that is a portal for H-4 visa holders. Along with the administrator of that page, Rashi Bhatnagar, who is herself on an H-4 visa, respondents were asked about the circumstances they found themselves in after they arrived in the U.S.

The responses not only hinted at a wide range of personal and health setbacks for female Indian H-4 visa holders but also testified to this visa’s impact on those from other nations, grown children of H-4 visa holders and, in some rare cases, male H-4 visa holders.

Take the case of Kathy, who used to be Senior Principal at a firm in the United Kingdom. After she and her children moved to the U.S. to join her husband, they had to put their oldest daughter through college with absolutely no access to financial aid because they were not permanent citizens of the U.S.

To make matters worse, when her daughter finished college she found herself, like her mother, stuck at home and unable to earn a living using the skills acquired at university. “She sits in her room all day, on her own,” Kathy worried, adding that her daughter had few friends and got very depressed.

Kathy herself fared poorly and it took a drastic toll on her health. Initially she and her daughters had private health insurance, but after she was diagnosed with a pineocytoma, or non-malignant brain tumour, she was dropped from her insurance. Apart from the compelling case that such instances make for reform of the H-4 visa restrictions, they underscore the need for the sort of health insurance reform that President Barack Obama has pushed through. As for Kathy, she and her daughter have no health insurance, no prospect of working and face a daily routine of social isolation and despondence.

Another striking case that the survey revealed was of Rahul, a male H-4 visa holder who followed his IT-professional wife to the U.S. For him, too, the stark reality of U.S. employers’ unwillingness to sponsor an H-1B struck home after many months of a frustrating job search. Cut off from friends and family and no longer the sociable, buoyant person he used to be, Rahul turned to alcohol — at a heavy cost. Caught in a downward spiral of depression, he attempted suicide several times. “I hurt myself very badly during one of these attempts and had to be hospitalised after calling 911,” he said. However, he showed resilience and tried to bounce back from that low point. He returned to India to change his field from sales and marketing and gain a greater IT focus. He even found work in a U.S. firm’s India office in the hope that the firm would apply for a work visa for him.

“Unfortunately the recession hit in 2008 and the company did not do well,” said Rahul. He had to resign himself to the prospect of staying on in India and battling the spectre of alcoholism that had arisen once again, not to mention thoughts of depression and suicide. Meanwhile, his wife and three-year-old child live out their lives in the U.S. without him.

Among most respondents to the Facebook survey, health issues arising from depression and a sense of hopelessness appeared to be common. One respondent, Joyita, said she was constantly visiting neurologists and physical therapists for treatments related to psychological turmoil “which have their roots in H-4 visa’s work restrictions”.

Even where physical symptoms were absent a sense of utter despair replaced the initial optimism that these spouses of H-1B workers had felt. Shauravi, for example, felt that she could not afford an MBA or other professional degree given the lack of funding opportunities. But the alternative, to “be at home for whole day without working and be very dependent to my husband ... has made me very weak just thinking about it”.

Another respondent, Ketaki, worried that the only degree she could afford was of no interest to her and lack of friends and complete dependence on her husband in a new environment had made her lose her self-confidence. Similarly Lavanya, who left a senior post in the Indian government, found herself struggling to keep up her self-esteem when she could not find any job, not even one that required far lower skill levels than those she possessed.

For several survey respondents their vulnerability had led to abuse within the marriage, in some cases resulting in complete familial breakdown. Priya told The Hindu that after suffering numerous beatings by her husband, she managed to file a police complaint and had him arrested. However, because as an H-4 spouse she had no access to bank accounts and other paperwork — all of which were controlled by her husband — she was unable to afford an attorney to fight the case. She was left praying for a denial of visa renewal for her husband for she had no other means to reach out to her family back in India.

A similar case was Poorvi who, despite overcoming financial hurdles and completing a U.S. academic degree, faced marital trouble, loneliness and spousal abuse that ultimately led to divorce.

The severity of personal problems faced by individuals in this position begs the question of why the spouses of H-1B, I, and a range of other visa holders have been denied the right to work, while L-1 visa holders’ spouses were granted the right some time ago,

Sheela Murthy, an expert on immigration law, told The Hindu that there had occasionally been talk in official circles about granting H-4 visa holders the right to work, but “that was before the economy tanked”. Apart from the sheer political pressure that any government would face if it tries to push through such a reform, it could also lead to some uncomfortable questions as to why the spouses of other visa holders — including the A, B, C, D, G, and F visas — could not similarly be given the right to work .

The H-4 case may be a “strong but not a winning argument”, said Ms. Murthy, noting that another fact pertinent to this case was that India ranks among the top 10 nationalities of illegal immigrants in the U.S.

On lobbying the White House and Capitol Hill for relaxing the work restrictions, she said: “I do not think we have been able to make the case clearly and strongly, with statistics and numbers, and have a very limited and strong message, to take up the drumbeat that gets both Houses of Congress on board.” There was still something missing in the strategy and articulation, she suggested.

In the end there is a complex argument to be made that must consider all of the difficult questions relating to the politics of post-recession unemployment, the plight of spouses of other visa holders, and the broader context of comprehensive immigration reform and illegal immigration.

Yet even as the weight of these unanswered questions stalls progress on H-4 visa reform, thousands of individuals in this category will continue to live with their broken dreams.

(Concluded)

The vultures are circling after Hurricane Sandy!

Hurricane Sandy: Beware of America's disaster capitalists

The aftermath of the storm offers a chance to rebuild a fairer society. How can we seize it?

• 
• • Naomi Klein
  • The Guardian, Tuesday 6 November 2012 18.22 GMT

Destruction caused by Hurricane Sandy in Breezy Point, New York. Photograph: Julie Hau/Demotix/Corbis

Less than three days after Sandy made landfall on the east coast of the United States, Iain Murray of the Competitive Enterprise Institute blamed New Yorkers' resistance to Big Box stores for the misery they were about to endure. Writing on Forbes.com, he explained that the city's refusal to embrace Walmart will likely make the recovery much harder: "Mom-and-pop stores simply can't do what big stores can in these circumstances," he wrote. He also warned that if the pace of reconstruction turned out to be sluggish (as it so often is) then "pro-union rules such as the Davis-Bacon Act" would be to blame, a reference to the statute that requires workers on public works projects to be paid not the minimum wage, but the prevailing wage in the region.

The same day, Frank Rapoport, a lawyer representing several billion-dollar construction and real estate contractors, jumped in to suggest that many of those public works projects shouldn't be public at all. Instead, cash-strapped governments should turn to public private partnerships, known as "P3s" in the US. That means roads, bridges and tunnels being rebuilt by private companies, which, for instance, could install tolls and keep the profits. These deals aren't legal in New York or New Jersey, but Rapoport believes that can change. "There were some bridges that were washed out in New Jersey that need structural replacement, and it's going to be very expensive," he told the Nation. "And so the government may well not have the money to build it the right way. And that's when you turn to a P3."

The prize for shameless disaster capitalism, however, surely goes to rightwing economist Russell S Sobel, writing in a New York Times online forum. Sobel suggested that, in hard-hit areas, Federal Emergency Management Agency (Fema) should create "free-trade zones – in which all normal regulations, licensing and taxes [are] suspended". This corporate free-for-all would, apparently, "better provide the goods and services victims need".

Yes, that's right: this catastrophe, very likely created by climate change – a crisis born of the colossal regulatory failure to prevent corporations from treating the atmosphere as their open sewer – is just one more opportunity for further deregulation. And the fact that this storm has demonstrated that poor and working-class people are far more vulnerable to the climate crisis shows that this is clearly the right moment to strip those people of what few labour protections they have left, as well as to privatise the meagre public services available to them. Most of all, when faced with an extraordinarily costly crisis born of corporate greed, hand out tax holidays to corporations.

The flurry of attempts to use Sandy's destructive power as a cash grab is just the latest chapter in the very long story I have called the The Shock Doctrine. And it is but the tiniest glimpse into the ways large corporations are seeking to reap enormous profits from climate chaos.

One example: between 2008 and 2010, at least 261 patents were filed or issued relating to "climate-ready" crops – seeds supposedly able to withstand extreme conditions such as droughts and floods; of these patents close to 80% were controlled by just six agribusiness giants, including Monsanto and Syngenta. With history as our teacher, we know that small farmers will go into debt trying to buy these new miracle seeds, and that many will lose their land.

In November 2010, the Economist ran a climate change cover story that provides a useful (if harrowing) blueprint for how climate change could serve as the pretext for the last great land grab, a final colonial clearing of the forests, farms and coastlines by a handful of multinationals. The editors explain that droughts and heat stress are such a threat to farmers that only big players can survive the turmoil, and that "abandoning the farm may be the way many farmers choose to adapt". They had the same message for fisherfolk occupying valuable ocean-front lands: wouldn't it be so much safer, given rising seas and all, if they joined their fellow farmers in the urban slums? "Protecting a single port city from floods is easier than protecting a similar population spread out along a coastline of fishing villages."

But, you might wonder, isn't there a joblessness problem in most of these cities? Nothing a little "reform of labour markets" and free trade can't fix. Besides, cities, they explain, have "social strategies, formal or informal". I'm pretty sure that means people whose "social strategies" used to involve growing and catching their own food can now cling to life by selling broken pens at intersections, or perhaps by dealing drugs. What the informal social strategy should be when superstorm winds howl through those precarious slums remains unspoken.

For a long time, climate change was treated by environmentalists as a great equaliser, the one issue that affected everyone, rich or poor. They failed to account for the myriad ways by which the super rich would protect themselves from the less savory effects of the economic model that made them so wealthy. In the past six years, we have seen in the US the emergence of private fire fighters, hired by insurance companies to offer a "concierge" service to their wealthier clients, as well as the short-lived "HelpJet" – a charter airline in Florida that offered five-star evacuation services from hurricane zones. Now, post-Sandy, upmarket real estate agents are predicting that back-up power generators will be the new status symbol with the penthouse and mansion set.

For some, it seems, climate change is imagined less as a clear and present danger than as a kind of spa vacation; nothing that the right combination of bespoke services and well-curated accessories can't overcome. That, at least, was the impression left by the Barneys New York's pre-Sandy sale – which offered deals on sencha green tea, backgammon sets and $500 throw blankets so its high-end customers could "settle in with style". 

So we know how the shock doctors are readying to exploit the climate crisis, and we know from the past how that story ends. But here is the real question: could this crisis present a different kind of opportunity, one that disperses power into the hands of the many rather than consolidating it the hands of the few; one that radically expands the commons, rather than auctions it off in pieces? In short, could Sandy be the beginning of A People's Shock?

I think it can. As I outlined last year, there are changes we can make that actually have a chance of getting our emissions down to the level science demands. These include re-localising our economies (so we are going to need those farmers where they are); vastly expanding and reimagining the public sphere to not just hold back the next storm but to prevent even worse disruptions in the future; regulating the hell out of corporations and reducing their poisonous political power; and reinventing economics so it no longer defines success as the endless expansion of consumption.  

Just as the Great Depression and the second world war launched movements that claimed as their proud legacies social safety nets across the industrialised world, so climate change can be a historic occasion to usher in the next great wave of progressive change. Moreover, none of the anti-democratic trickery I described in The Shock Doctrine is necessary to advance this agenda. Far from seizing on the climate crisis to push through unpopular policies, our task is to seize upon it to demand a truly populist agenda.

The reconstruction from Sandy is a great place to start road testing these ideas. Unlike the disaster capitalists who use crisis to end-run democracy, a People's Recovery (as many from the Occupy movement are already demanding) would call for new democratic processes, including neighbourhood assemblies, to decide how hard-hit communities should be rebuilt. The overriding principle must be addressing the twin crises of inequality and climate change at the same time. For starters, that means reconstruction that doesn't just create jobs but jobs that pay a living wage. It means not just more public transit, but energy-efficient, affordable housing along those transit lines. It also means not just more renewable power, but democratic community control over those projects.

But at the same time as we ramp up alternatives, we need to step up the fight against the forces actively making the climate crisis worse. That means standing firm against the continued expansion of the fossil fuel sector into new and high-risk territories, whether through tar sands, fracking, coal exports to China or Arctic drilling. It also means recognising the limits of political pressure and going after the fossil fuel companies directly, as we are doing at 350.org with our "Do The Math" tour. These companies have shown that they are willing to burn five times as much carbon as the most conservative estimates say is compatible with a liveable planet. We've done the maths, and we simply can't let them.

Either this crisis will become an opportunity for an evolutionary leap, a holistic readjustment of our relationship with the natural world. Or it will become an opportunity for the biggest disaster capitalism free-for-all in human history, leaving the world even more brutally cleaved between winners and losers.

When I wrote The Shock Doctrine, I was documenting crimes of the past. The good news is that this is a crime in progress; it is still within our power to stop it. Let's make sure that, this time, the good guys win.

Euro exit and depreciation would bring economic gains

In an exclusive extract from his updated book, Roger Bootle explains why allowing a country such as Greece to leave the euro is not as hard as critics think.

Austerity has provoked protests in Greece Photo: AP

By Roger Bootle

10:00PM BST 21 Jul 2012

'Many of the issues bedevilling the world economy have coalesced into a new and extremely serious problem – the crisis of the euro. This threatens to shake the world to its foundations.

How it pans out will be the critical determinant of whether the world manages to stage a reasonable economic recovery or plays out an extended rerun of the Great Depression.

The eurozone’s predicament is both financial and economic. The financial element centres on debt. Several countries have public debt burdens that are unsustainable. In some cases, private debt is also overwhelming. Meanwhile, this excessive debt in the public and/or private sectors, which can barely be serviced never mind repaid, threatens the stability of the banking system, which owns large amounts of it.

The economic problem concerns cost and prices. Monetary union was supposed to bring convergence between member countries with regard to costs, prices and, indeed, just about everything else. In fact, after the monetary union was formed, in the now troubled peripheral countries of the eurozone – Portugal, Italy, Ireland, Greece and Spain – costs and prices continued to rise rapidly relative to other members of the union. This caused a loss of competitiveness vis-à-vis the German-led core of between 20pc and 40pc, resulting in large current account deficits (i.e. an excess of imports over exports) and the build-up of substantial net international indebtedness.

To return to prosperity, these countries clearly need a depreciation of what economists call the real exchange rate; that is, the level of their prices and costs compared to other countries’, as translated through the exchange rate ruling between their currencies. Clearly, the financial and economic aspects of the crisis are closely intertwined.

For countries afflicted by the twin problems of excessive debt and uncompetitiveness, leaving the euro and letting their new currency fall potentially offers not just a feasible but even an attractive way out. If successful, it would help support an economic recovery through increased net exports, while not increasing the burden of debt as a share of GDP through domestic deflation.

Indeed, the higher inflation unleashed by devaluation would reduce real interest rates and thereby tend to boost spending. Moreover, outside the euro there would be some scope to operate a policy of quantitative easing. This might also help to boost domestic demand. If the troubled peripheral eurozone economies were able successfully to deploy this adjustment mechanism, then they would not only improve their own GDP outlook, but also help to allay concerns about the long-term sustainability of their debt situation and, thus, bolster the long-term stability of the “core” countries, too.

From a purely economic standpoint, the optimal reconfiguration of the eurozone would probably be the retention of a core northern eurozone centred on Germany, in which it seems clear that Austria, the Netherlands, and Luxembourg could remain. Finland and Belgium could also fit in tolerably well.

Perhaps the most intriguing issue is the potential position of France. It has been Germany’s close economic ally and partner, but France’s recent economic and fiscal performance has in some ways more closely resembled that of the peripheral economies. It has a current account deficit as opposed to Germany’s surplus and its primary budget deficit is close to that of Greece. It also has strong banking and financial links to Greece and the other peripheral economies.

Given these points, there would be a strong economic case for France to stay out of a northern euro. Indeed, there would be attractions for it in joining – and indeed leading – a southern euro, if one existed, or, more informally, a grouping of former euro members. A French-led bloc of former euro members would split the eurozone into two roughly equal parts, with the southern bloc slightly larger. Yet this would amount to a complete overturning of post-war French economic and political strategy. I suspect the French establishment would choose to stick with Germany without even thinking about it. If so, France could end up paying a heavy price.

The question is, could a break- up of the euro be achieved? There does not appear to be any insurmountable legal barrier to a country leaving the euro and remaining within the EU, even without the prior agreement of other member states.

A bigger issue is the legal status of any new currency and its impact on contracts specified in euros. While this threatens to be a legal nightmare, there is a way forward. In what follows, to keep matters simple, I assume that Greece is the first to leave, and that its new currency is called the drachma. But when I refer to Greece this should be taken as shorthand for any, or all, of the peripheral countries.

The principle of “Lex Monetae” states that everything that governs the currency of a country can legally be determined by the national government concerned. Major legal problems arise, however, because the euro is both the national currency of Greece, for now at least, and the common international currency of the EU as a whole. Hence, there may be uncertainty whether any reference to the euro in a contract should be interpreted as the national currency of Greece at the time payment is due, and hence the new drachma, or the common international currency of the EU as a whole, in which case it would remain the euro.

As it happens, most sovereign debt is issued under local laws. In this case, an exiting government could simply redenominate its debt into the new currency at the official conversion rate, applying Lex Monetae.

At the point of departure, the Greek government would need to declare a conversion rate from euros into drachmas. What should it be? I suggest the new currency should be introduced at parity with the euro. Where an item used to sell at €1.35, it would now simply sell at 1.35 drachmas. This would promote acceptance and understanding throughout the economy.

In the run-up to exit, controls would be required to prevent capital flight and a banking collapse in Greece – this is not some hypothetical problem. Greece and Ireland are already seeing huge contractions in their money supply as a result of deposit withdrawals. Accordingly – and in particular, from the announcement of the redenomination until banks were able to distinguish between euro and drachma withdrawals – banks and cash machines would need to be shut down.

Because euro exit and depreciation would bring considerable economic gains, which would both reduce deficits (and therefore the rate of growth of debt) and increase GDP, the scale of any implicit and explicit default following a euro exit is likely to be smaller than if the country had stayed in the euro.

After leaving the eurozone, it is inevitable, and necessary, that the new currency fall sharply to restore the competitiveness that has been lost over the past decade or more. Greece and Portugal require a depreciation of their real exchange rate of about 40pc, Italy and Spain about 30pc and Ireland about 15pc.

It is likely that the exchange rate depreciation would raise the price level by about 15pc in Portugal, 13pc in Greece, and 10pc in Italy, Spain, and Ireland.

Assuming that this adjustment takes place over a two-year period, the effect would be to raise the annual inflation rate by about 7pc per year in Greece, about 6pc in Portugal, and 5pc in Italy, Spain, and Ireland. The historical experience from Argentina in 2002 and Iceland in 2008 is that inflation is then likely to fall back sharply. Of course it needs to, if any real depreciation is to be secured from the large nominal depreciations.

A key determinant of the degree of impact of a eurozone exit on those countries remaining within the currency union would be the extent of “contagion effects”. These might result from the direct adverse economic and financial effects of an exit, but also from the increased perception that other countries might leave the euro. Accordingly, decisive measures to limit such effects would be vital.

The first and most immediate would probably be substantial measures to support the banks of the remaining members, to prevent bank runs in the potentially exiting countries. This would probably involve large injections of liquidity by the ECB. There would also need to be a substantial increase in the firepower of the bail-out funds, probably supplemented by additional support from international organisations such as the IMF.

It seems likely that the remainder of the eurozone would need to take much more decisive steps toward some form of economic and political union. This might involve the implementation of commonly issued eurozone-wide bonds – “eurobonds” – which would effectively allow the troubled peripheral economies to borrow at something close to the eurozone’s average interest rate. However, more direct forms of fiscal transfers from the core economies to the periphery might also be needed.

Suppose that Greece made a success of its euro exit, with growth surging and unemployment falling. It would then surely be impossible for politicians in the peripheral countries to argue that there was no alternative to never-ending austerity within the euro. Parties advocating euro exit would gain in popularity and the market would react by pushing up peripheral countries’ bond yields. At that point, contagion from Greece’s exit could well prompt the departure of other countries.

If any country leaves the euro there are bound to be winners and losers. For Greece, devaluation and default would produce two sorts of loser: those whose capital is reduced by redenomination or default, and those whose real incomes are reduced by the higher inflation unleashed by the devaluation. The most important beneficiaries of all would be currently unemployed Greek workers. Their gains consist of the prospect of future income, in contrast to a presumed near-zero income if the present path continues.

The break-up of the euro would be an event of such political and economic import that everyone, including financial markets, should be awed by it. And the immediate results could be truly awful, involving banking collapses and heaven knows what. However, I suspect that both businesses and the authorities are much better prepared for the euro’s demise than they were for the Lehmans crisis. Indeed, future historians may come to regard the latter as a lucky break, because it alerted people to the dangers of financial instability and encouraged them to put in place arrangements to deal with the really big crisis that was yet to come.

Moreover, the resolution of the euro crisis promises relief from some of our acute economic pressures. I have highlighted the contrast between deficit and surplus countries. The attitude of the latter seems to have been: “Thank goodness the leak isn’t in our part of the boat.” Yet getting out of the current depression will require the surplus countries to spend more.

The euro has enabled Germany to continue its oversaving, in a way that could never have happened with the deutschmark, which would have risen strongly on the exchanges and thereby counteracted the effects of Germany’s slow growth of costs. The demise of the euro would release us from this straitjacket. The peripheral countries – whose economies are collectively slightly larger than Germany’s – would be able to grow again, and in Germany and the other northern core countries the pressure would be on to boost domestic demand to offset loss of demand caused by lower net exports. In short, the demise of the euro is part of the solution.

The crisis happened as a result of the phenomenal arrogance and incompetence of the European political elites. It is more a failure of government than of markets. However, the mechanism that brought the system to its nemesis was fully in line with the market defects that I analyse in my book. What undermined Spain and Ireland was a purely speculative boom centred on real estate that came straight out of the textbook of financial bubbles; bubbles that modern markets, central banks, regulators, and economists confidently believed no longer existed.

It is the expression of the belief that sheer political will can overcome market forces – and the living proof that it cannot.

So the euro crisis is really another expression of the forces that brought us so close to financial and economic disaster in 2008-09. It is the second shoe to drop. Having played a major role in getting us into this mess, once exchange rates are unshackled and are allowed to do their work, markets can also play a major role in getting us out of it.”

Britain can’t afford to fall for the charms of the false economics Messiah Paul Krugman Superstar economist Paul Krugman wants us to change course, but his solutions are simplistic.

Jeremy Warner in the Telegraph

What does the future hold as Europe slides, ever more hopelessly, towards the abyss? As David Cameron has pointed out, there have been 18 EU summits since he became Prime Minister little more than two years ago, and none of them has produced anything remotely resembling a solution.

The stand-off got a whole lot worse this week. France and Germany are now in open conflict over the way forward, if indeed there is one. For the UK, already bleeding badly from the after-effects of the financial crisis, the situation could scarcely look more threatening.

The fiscal consolidation chosen by the Coalition was always likely to have a negative impact on output, at least in the short term. To make it work, the Government needed the following wind of decent growth elsewhere in the world economy. Instead, it’s facing a hurricane. We look set to be broken by the storm.

But fear not – salvation is at hand. Next week, there comes to these shores a Messiah, a prophet of great wisdom and understanding whose teachings promise to vanquish despair and “end this depression”. He is Prof Paul Krugman, a superstar polemicist who has been described by The Economist as “the most celebrated economist of his generation”. Actually, “celebrated” is not exactly the right word, for Krugman divides opinion like no other. To his followers, he’s a saint; to his detractors, he’s a false prophet with satanic intent.

I’ve been a little misleading here. He’s not really coming to Britain to save us, but rather to promote his latest book, End This Depression Now! Krugman is an economist with attitude, and he thinks Britain is in the midst of a “massive blunder” in economic policy. The UK is the very worst example of austerity economics, he believes, for unlike the poor beleaguered nations of the eurozone periphery, we’ve not had this misery forced on us by the ghastly euro, but have opted for it as an unnecessary penance for the sins of the boom. If only we could be persuaded to forsake “Osbornomics” and tread the path originally set out by our dearly beloved former leader, Gordon Brown – that of spending our way back to growth – then all would be well again.

Put like that, of course, it sounds ridiculous, but the fact that Krugman is a Nobel prize-winning economist gives Labour’s calls for a U-turn on the economy an intellectual credibility they would otherwise struggle to attain.

All the great economists – from Adam Smith to John Maynard Keynes – were as much moral philosophers as dispassionate analysts of events, and Krugman is no exception, preaching his message with all the passion of the religious zealot. He feels our pain and begs us to let him help. “The road out of depression and back to full employment is still wide open,” he insists. “We don’t have to suffer like this.”

Krugman may appear loud and radical, but he follows a fairly standard Keynesian text. By his own admission, the social cost of the present downturn doesn’t come anywhere close to the Great Depression of the interwar years, or not yet. None the less, there are parallels, and we already meet Keynes’s classic definition of a depression as a “chronic condition of subnormal activity for a considerable period without any marked tendency either towards recovery or towards complete collapse”.

In such circumstances, monetary policy can help, but only up to a point. In a depression, even those with the balance sheet strength to spend and invest won’t do so, whatever the encouragement offered through ultra-low interest rates. It follows that governments should step into the breach and do the job instead, as a kind of spender of last resort. They can worry about the accumulated debt later, once output has picked up again.

To Krugman, it’s understandable that policymakers screwed up so monumentally in the Great Depression; they didn’t understand what was going on and there was no template for the circumstances they found themselves in. To his mind, there is no excuse this time around; it’s textbook stuff, which is being wilfully ignored.

But haven’t we already tried borrowing to stimulate? And what did it deliver other than fiscal ruin, which in the eurozone periphery is so serious that markets have stopped lending altogether? Krugman has an answer for these questions, too. It’s not the policy that was wrong, merely that the stimulus wasn’t big and sustained enough. As for the eurozone, again, it wasn’t the policy, but the euro. Countries with their own currencies and central banks won’t run into this kind of problem. In extremis, they can always print the money.

Easy peasy, then. What’s not to like? Well, I’m sorry, but I just don’t buy it. It may or may not be possible for a vast, largely internalised economy such as the US, with its reserve currency status, to run double-digit deficits into the indefinite future without adverse consequences, but for the UK it is a much more questionable policy.

True, Britain has lived with much higher debts relative to GDP in the past, but this has nearly always coincided with major wars. With demilitarisation, much of this borrowing to spend falls away and domestic consumption comes roaring back. No such get-out-of-jail-free card exists this time around. Further, the demographic is completely different from that of the post-war baby boom generation, where growth and therefore debt erosion were more or less guaranteed. Today, the unfunded liabilities of an ageing population stretch menacingly into the long-term future.

As it is, government spending in the UK is already approaching 50 per cent of GDP. Just how high does Prof Krugman propose it should go? It’s all very well to say “jobs first” and worry about the deficit later, but once government spending becomes entrenched, it’s very difficult to get rid of it. Even Reagan and Thatcher struggled to make significant inroads.

In any case, the picture Krugman presents of wrong-headed British austerity is a caricature of the reality, though one admittedly encouraged by the Coalition’s rhetoric. Yesterday’s revised GDP figures, showing that the country is even deeper in recession than we thought, would appear to support the mocking tone in which Krugman condemns the idea of “expansionary austerity”. But where is this austerity? In fact, one of the few positive contributors to output in the last quarter was government spending, which grew by 1.6 per cent. Krugman seems to have forgotten the automatic stabilisers, which because of our welfare state are considerably bigger than in the US. In America, much current UK spending would count as a discretionary fiscal stimulus of the sort End This Depression Now! advocates.

As Raghuram Rajan, a former IMF chief economist, has argued, today’s troubles are not simply the result of inadequate demand, but of major changes in the world economy brought about by globalisation. The old monopoly of knowledge and expertise once enjoyed by advanced economies has been swept away. For decades, we compensated for the jobs and income lost to technology and cheaper foreign competition with unaffordable government spending and easy credit. Much of the growth enjoyed in these pre-crisis years was simply unsustainable.

Paul Krugman’s message is seductive, but it’s also unrealistic. If only the solutions to our plight were as simple as he thinks.

The callous cruelty of the EU is destroying Greece

Peter Oborne in The Telegraph

For all of my adult life, support for the European Union has been seen as the mark of a civilised, reasonable and above all compassionate politician. It has guaranteed him or her access to leader columns, TV studios, lavish expense accounts and overseas trips.

The reason for this special treatment is that the British establishment has tended to view the EU as perhaps a little incompetent and corrupt, but certainly benign and generally a force for good in a troubled world. This attitude is becoming harder and harder to sustain, as this partnership of nations is suddenly starting to look very nasty indeed: a brutal oppressor that is scornful of democracy, national identity and the livelihoods of ordinary people.

The turning point may have come this week with the latest intervention by Brussels: bureaucrats are threatening to bankrupt an entire country unless opposition parties promise to support the EU-backed austerity plan.

Let’s put the Greek problem in its proper perspective. Britain’s Great Depression in the Thirties has become part of our national myth. It was the era of soup kitchens, mass unemployment and the Jarrow March, immortalised in George Orwell’s wonderful novels and still remembered in Labour Party rhetoric.

Yet the fall in national output during the Depression – from peak to trough – was never more than 10 per cent. In Greece, gross domestic product is already down about 13 per cent since 2008, and according to experts is likely to fall a further 7 per cent by the end of this year. In other words, by this Christmas, Greece’s depression will have been twice as deep as the infamous economic catastrophe that struck Britain 80 years ago.

Yet all the evidence suggests that the European elite could not give a damn. Earlier this week Olli Rehn, the EU’s top economist, warned of “devastating consequences” if Greece defaults. The context of his comments suggests, however, that he was thinking just as much of the devastating consequences that would flow for the rest of Europe, rather than for the Greeks themselves.

Another official was quoted in the Financial Times as saying that Germany, Finland and the Netherlands are “losing patience” with Greece, with apparently not even a passing thought for the real victims of this increasingly horrific saga. Though the euro-elite seems not to care, life in Greece, the home of European civilisation, has become unbearable.

Perhaps 100,000 businesses have folded, and many more are collapsing. Suicides are sharply up, homicides have reportedly doubled, with tens of thousands being made homeless. Life in the rural areas, which are returning to barter, is bearable. In the towns it is harsh and for minorities – above all the Albanians, who have no rights and have long taken the jobs Greeks did not want – it is terrifying.

This is only the start, however. Matters will get much worse over the coming months, and this social and moral disaster has already started to spread to other southern European countries such as Italy, Portugal and Spain. It is not just families that are suffering – Greek institutions are being torn to shreds. Unlike Britain amid the economic devastation of the Thirties, Greece cannot look back towards centuries of more or less stable parliamentary democracy. It is scarcely a generation since the country emerged from a military dictatorship and, with parts of the country now lawless, sinister forces are once again on the rise. Only last autumn, extremist parties accounted for about 30 per cent of the popular vote. Now the hard Left and hard Right stand at about 50 per cent and surging. It must be said that this disenchantment with democracy has been fanned by the EU’s own meddling, and in particular its imposition of Lucas Papademos as a puppet prime minister.

Late last year I was sharply criticised, and indeed removed from a Newsnight studio by a very chilly producer, after I called Amadeu Altafaj-Tardio, a European Union spokesman, “that idiot from Brussels”. Well-intentioned intermediaries have since gone out of their way to assure me that Mr Altafaj-Tardio is an intelligent and also a charming man. I have no powerful reason to doubt this, and it should furthermore be borne in mind that he is simply the mouthpiece and paid hireling for Mr Rehn, the Economic and Monetary Affairs Commissioner I mentioned earlier.

But looking back at that Newsnight appearance, it is clear that my remarks were far too generous, and I would like to explain myself more fully, and with greater force. Idiocy is, of course, an important part of the problem in Brussels, explaining many of the errors of judgment and basic competence over the past few years. But what is more striking by far is the sheer callousness and inhumanity of EU commissioners such as Mr Rehn, as they preside over a Brussels regime that is in the course of destroying what used to be a proud, famous and reasonably well-functioning country.

In these terrible circumstances, how can the British liberal Left, which claims to place such value on compassion and decency, continue to support the EU? I am old enough to recall their rhetoric when Margaret Thatcher was driving through her monetarist policies as a response to the recession of the early Eighties. Many of the attacks were incredibly personal and vicious. The British prime minister (who, of course, was later to warn so presciently against monetary union) was accused of lacking any kind of compassion or humanity. Yet the loss of economic output during the 1979-82 recession was scarcely 6 per cent, less than a third of the scale of the depression now being suffered by the unfortunate Greeks. Unemployment peaked at 10.8 per cent, just over half of where Greece is now.

The reality is that Margaret Thatcher was an infinitely more compassionate and pragmatic figure than Amadeu Altafaj-Tardio’s boss Olli Rehn and his appalling associates. She would never have destroyed an entire nation on the back of an economic dogma.

One of the basic truths of politics is that the Left is far more oblivious to human suffering than the Right. The Left always speaks the language of compassion, but rarely means it. It favours ends over means. The crushing of Greece, and the bankruptcy of her citizens, is of little consequence if it serves the greater good of monetary union.

Nevertheless, for more than a generation, politicians such as Tony Blair, Peter Mandelson, Nick Clegg and David Miliband have used their sympathy for the aims and aspirations of the European Union as a badge of decency. Now it ties them to a bankruptcy machine that is wiping out jobs, wealth and – potentially – democracy itself.

The presence of the Lib Dems, fervent euro supporters, as part of the Coalition, has become a problem. It can no longer be morally right for Britain to support the European single currency, a catastrophic experiment that is inflicting human devastation on such a scale. Britain has historically stood up for the underdog, but shamefully, George Osborne has steadily lent his support to the eurozone.

Thus far only one British political leader, Ukip’s Nigel Farrage, has had the clarity of purpose to state the obvious – that Greece must be allowed to default and devalue. Leaving all other considerations to one side, humanity alone should press David Cameron into splitting with Brussels and belatedly coming to the rescue of Greece.

How Quantitative Easing will not solve the problem - An alternative viewpoint

Professor Steve Keen was one of the few economists to predict the financial crisis. According to him, the “debt-deflationary forces” unleashed today “are far larger than those that caused the Great Depression.”

George Monbiot

I stumbled out into the autumn sunshine, figures ricocheting around in my head, still trying to absorb what I had heard. I felt as if I had just attended a funeral: a funeral at which all of us got buried. I cannot claim to have understood everything in the lecture: Sonnenschein-Mantel-Debreu Theory and the 41-line differential equation were approximately 15.8 metres over my head(1). But the points I grasped were clear enough. We’re stuffed: stuffed to a degree that scarcely anyone yet appreciates.

Professor Steve Keen was one of the few economists to predict the financial crisis. While the OECD and the US Federal Reserve foresaw a “great moderation”, unprecedented stability and steadily rising wealth(2,3), he warned that a crash was bound to happen. Now he warns that the same factors which caused the crash show that what we’ve heard so far is merely the first rumble of the storm. Without a radical change of policy, another Great Depression is all but inevitable.

The problem is spelt out at greater length in the new edition of his book Debunking Economics (4). Like his lecture, it is marred by some unattractive boasting and jostling. But the graphs and figures it contains provide a more persuasive account of the causes of the crash and of its likely evolution than anything which has yet emerged from Constitution Avenue or Threadneedle Street. This is complicated, but it’s in your interests to understand it. So please bear with me while I do my best to explain.

The official view, as articulated by Ben Bernanke, chairman of the Federal Reserve, is that both the first Great Depression and the current crisis were caused by a lack of base money. Base money, or M0, is money that the central bank creates. It forms the reserves held by private banks, on the strength of which they issue loans to their clients. This practice is called fractional reserve banking: by issuing amounts of debt several times greater than their reserves, the private banks create money that didn’t exist before. Conventional economic theory predicts that when the central bank raises M0, this triggers a “money multiplier”: private banks generate more credit money (M1, M2 and M3), boosting economic growth and employment.

Bernanke, echoing claims by Milton Friedman, believed that the first Great Depression in the US was propelled by a fall in the supply of M0, which, he said, “reinforced … declines in the money multiplier.”(5) But, Keen shows, there is a weak association between M0 money supply and depression. There were six occasions after World War Two when M0 money supply fell faster than it did in 1928 and 1929. On five of these occasions there was a recession, but nothing resembling the scale of what happened at the end of the 1920s(6). In some cases unemployment rose when the rate of M0 growth was high and fell when it was low: results which defy Bernanke’s explanation. Steve Keen argues that it’s not changes in M0 which drive unemployment, but unemployment which triggers changes in M0: governments issue more cash when the economy runs into trouble.

He proposes an entirely different explanation for the Great Depression and the current crisis. Both events, he says, were triggered by a collapse in debt-financed demand(7). Aggregate demand in an economy like ours is composed of GDP plus the change in the level of debt. It is the sudden and extreme change in debt levels that makes demand so volatile and triggers recessions. The higher the level of private debt, relative to GDP, the more unstable the system becomes. And the more of this debt that takes the form of Ponzi finance – borrowing money to fund financial speculation – the worse the impact will be.

Keen shows how, from the late 1960s onwards, private sector debt in the US began to exceed GDP. It built up to wildly unstable levels from the late 1990s, peaking in 2008. The inevitable collapse in this rate of lending pulled down aggregate demand by 14%, triggering recession(8).

This should be easy enough to see with the benefit of hindsight, but what lends weight to Keen’s analysis is that he saw it with the benefit of foresight. In December 2005, while drafting an expert witness report for a court case, he looked up the ratio of private debt to GDP in his native Australia, to see how it had changed since the 1960s. He was astonished to discover that it had risen exponentially. He then did the same for the United States, with similar results(9). He immediately raised the alarm: here, he warned, were the conditions for an economic crisis far greater than those of the mid-1970s and early 1990s. A massive speculative bubble was close to bursting point. Needless to say, he was ignored by policy-makers.

Now, he tells us, a failure to address these problems will ensure that this crisis will run and run. The “debt-deflationary forces” unleashed today “are far larger than those that caused the Great Depression.”(10) In the 1920s, private debt rose by 50%. Between 1999 and 2009, it rose by 140%. The debt-to-GDP ratio in the US is still much higher than it was when the Great Depression began(11).

If Keen is right, the crippling sums spent on both sides of the Atlantic on refinancing the banks are a complete waste of money. They have not and they will not kickstart the economy, because M0 money supply is not the determining factor.

President Obama justified the bailout of the banks on the grounds that “a dollar of capital in a bank can actually result in $8 or $10 of loans to families and businesses. So that’s a multiplier effect”(12). But the money multiplier didn’t happen. The $1.3tn that Bernanke injected scarcely raised the amount of money in circulation: the 110% increase in M0 money led not to the 800 or 1000% increase in M1 money that Obama predicted, but a rise of just 20%(13). The bail-outs failed because M0 was not the cause of the crisis. The money would have achieved far more had it simply been given to the public. But, as Angela Merkel and Nicholas Sarkozy demonstrated over the weekend(14), governments have learnt nothing from this failure, and seek only to repeat it.

Instead, Keen says, the key to averting or curtailing a second Great Depression is to reduce the levels of private debt, through a unilateral write-off, or jubilee. The irresponsible loans the banks made should not be honoured. This will mean taking many banks into receivership(15). Otherwise private debt will sort itself out by traditional means: mass bankruptcy, which will generate an even greater crisis.

These are short-term measures. I would like to see them leading to a radical reappraisal of our economic aims and moves to develop a steady-state economy, of the kind proposed by Herman Daly and Tim Jackson(16). Governments and central bankers now have an unprecedented opportunity to learn from the catastrophic mistakes they’ve made. It is an opportunity they seem determined not to take.

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www.monbiot.com

References:
1. Professor Steve Keen, 6th October 2011. Alternative theories of macroeconomic behaviour: a critique of neoclassical macroeconomics and an outline of the alternative Monetary Circuit Theory approach. Nuffield College, Oxford.
2. Ben Bernanke, 20th February 2004. The Great Moderation. http://www.360doc.com/content/11/0402/23/67028_106822017.shtml
3. Jean-Philippe Cotis, May 2007. Achieving further rebalancing. OECD Economic Outlook. http://findarticles.com/p/articles/mi_m4456/is_81/ai_n27271380/
4. Steve Keen, 2011. Debunking Economics: revised and expanded edition. Zed Books, London.
5. Ben Bernanke, 2000. Essays on the Great Depression, page 153. Princeton University Press. Quoted by Steve Keen, as above.
6. Steve Keen, page 302.
7. Page 300.
8. Page 341.
9. Page 336-337.
10. Page 349.
11. Page 348.
12. Barack Obama, 14th April 2009. Remarks on the economy. http://www.whitehouse.gov/the-press-office/remarks-president-economy-georgetown-university
13. Page 306.
14. http://www.guardian.co.uk/business/2011/oct/09/france-germany-agree-plan-banks
15. Page 355.
16. http://www.monbiot.com/2011/08/22/out-of-the-ashes/