Krugman: Profligate Zombies

Dean Baker has a series of posts about bad reporting on the euro crisis; he is evidently, and with good reason, upset at the way just about every report states as a fact that excessive borrowing caused the crisis.

This is another one of those zombie ideas that permeate our discourse; it’s part of the narrative, and no amount of evidence can kill it or even stop reporters/editors from stating it as a fact.

So, one more time, here are some data…  >continue<

Euro Zone Considers Solution of Last Resort

Der Spiegel

…Can the “big bazooka” that US politicians, in particular, like to invoke actually save the euro? Many economists are skeptical, because it is primarily economic imbalances that are creating ever-widening rifts between countries in the European currency area. The economic divide between the north, with its strong export economies, and the south, with its high consumption, has grown even further. At the same time, citizens are losing confidence in Europe’s ability to manage the crisis.

“Run for your lives” is the new motto in Europe, and not just among banks and insurance companies, which are selling off southern European bonds as quickly as they can, but also among ordinary holders of savings accounts. Banks and regulatory agencies are noticing that anxious citizens throughout Europe are trying to bring their money to safety. The flight of capital from Italy, Spain and Greece is in full swing.

…At the airport in Athens, passengers are often caught leaving the country with upwards of €100,000 in cash, well in excess of the €10,000 limit. This capital flight has triggered a boom in the European real estate market, especially in Berlin and London, where wealthy Greeks are buying second homes.  >continue<

Eurozone crisis: Greek PM George Papandreou to resign

George Papandreou, under intense pressure to end the political uncertainty engulfing Greece, is expected to formally resign immediately as prime minister after convening an emergency cabinet meeting.

Sunday’s extraordinary cabinet session would be the crisis-hit leader’s last as prime minister, a government spokesman confirmed as cross-party talks to form a national unity government continued…

Debt-stricken Greece received a €110bn (£95bn) bailout in May 2010 with a further €130bn expected to be injected into its economy under the latest loan agreement agreed by EU leaders at an emergency summit on October 26.

The hard-won accord, which will also involve banks accepting a 50% “haircut” on their holdings of Greek debt, had been met with widespread fury in Greece where many in a population already hit by successive waves of belt tightening fear it will mean further austerity.  >continue<

Swiss National Bank 'shocks markets'

Swiss draw line in the sand to cap runaway franc

“That was the single largest foreign exchange move I have ever seen,” said World First chief economist Jeremy Cook. “This dwarfs moves seen post Lehman Brothers, 7/7, and other major geopolitical events in the past decade.”  >continue<

View from Berlin: The US is Holding the Whole World Hostage

The World from Berlin:

“The Republicans are playing with fire. Nobody can imagine what the repercussions might be if the unthinkable happens and the US is suddenly no longer a safe haven for investors. Anything is possible, from a small, barely perceptible amount of turbulence in the financial markets to a global panic. Congress should think carefully about what it is doing.” - Süddeutsche Zeitung

“Democrats and Republicans are so hopelessly embroiled in a religious war that compromise and pragmatism are just dreams from a far-off era of reason. … The influence of the Tea Party movement … can not be overestimated. … The movement sees traditional politics as corrupt and regards Washington as a den of iniquity. … They see the other side as their enemy. Negotiations with the Democrats, whether it’s about appointing a judge or the insolvency of the United States, are only successful if the enemy is defeated. Compromise, they feel, is a sign of weakness and cowardice.” - Die Welt

“If it continues like this, the US will be bankrupt within a few days. It would cause a global shockwave like the one which followed the Lehman bankruptcy in 2008, which triggered the worst economic crisis since the war. Except it would be much worse than the Lehman bankruptcy. The political climate in the US has been poisoned to a degree that is hard for us (Germans) to imagine. But we should all fear the consequences.” - Bild

The young are absorbed in devices, distractions, wizards and Angry Birds. The old are floating in a sentimental syrup of nationalist mythology, pathologically poised in the pure disjunction of principles from all reality. Some join the latter with the former for a posturing upsurge in Libertarian resignation. A creeping viscosity snares and freezes us all in amber. As Socrates said of Thrasymachus’ strong man, the master nation, caught in an infinity of desire, will become the weakest - will become a slave.