I’m no economist, but it seems to me that there are some potentially serious consequences if the US expands its deficit to fight the recession but Europe does not. Will this cause the dollar to plummet against the Euro? Is that what Europe (quietly) wants? Given China’s nervousness about the dollar, is Europe trying to make a play to have the Euro replace the dollar as the world’s reserve currency of choice? (Greenspan foresaw this as a possibility a couple of years ago.) And if this happens, could it potentially lead to hyperinflation in the US as nations dump their dollars in favor of Euros and dollars flood the market?
Or, to be fair, is Europe simply trying to strongarm the US into regulating its own economy more closely, the better to forestall future collapses?
Again, I am no enconomist, so I welcome correction or illumination. Thoughts on what’s going on with the G20, and where we’re headed? What issues and concerns (and agendas) are in play here?
I think its much more likely that they realize the world economy goes as the US economy goes. In that sense, the G20 spending more stimulus is irrelevant. They can simply wait for the US to recover, rather than incurring a huge amount of debt due to stimulus spending.
To help their ally avoid hyper-inflation? If all countries are spending, it seems to me an equilibrium among currencies will be maintained, and no one’s currency gets seriously devalued.
And then there’s basic fairness: Why should Europe get to coast along behind the US, enjoying the benefits of US stimulus spending without any associated costs?
It’s not Europe’s obligation to engage in bad financial practices just because the United States is. If the US wants to ruin its economy by passing the stimulus, is Europe then obligated to ruin their economies by doing the same thing? That hardly seems fair.
We aren’t all in the same hole. The US isn’t passing the stimulus in the hope that it’ll improve the economies of Europe…they’re passing the stimulus in the hope that it’ll improve the US economy. The countries of Europe have to engage in the practices that they hope will improve their economies.
I don’t know anywhere near enough to say which way is the actual correct way to go or even if a true depression in inevitable no matter what is done.
That said they seem to be making the call in their own interest. If you think the US wouldn’t do the same in their position you’re living in The Land of Nod.
Obama isn’t making these calls to save anywhere else but the US. That’s his job. It is the EU’s leaders job to look after their countries interests. That’s not very likely going to change, and if the world’s way of working changes that much it will be after another World War. People don’t do “fair” when it comes to these things.
I don’t presume to know much about the issues, but I can tell that the situation here in the Netherlands isn’t as bad (yet) as it is in the US or the UK. International politics is as far as I can see about the closest thing to “each man for himself” capitalism as you can find nowadays. If it’s not in our interest to “bail out” the US or the UK, then we shouldn’t; especially when our own situation seems to be getting worse.
Letting the whole international system go to hell should be prevented - we’ll probably be going down with it. But the US economy is first and foremost the responsibility of the US. If the US can get its economy up by itself, that still leaves the rest of the world to deal with the rest. In fact, I seriously doubt that even all of Europe combined could make enough of a dent to stop just the US economy from falling down even further.
As for the money (about 30% of “Collateral Postings”), flowing from AIG to Deutsche Bank and other foreign institutions, I can’t find any explanation for why it’s going there, so I can’t comment on whether that is just or not.
I see what you’re saying, but I wonder if leaders of Europe may not recognize how helping the US serves their own self-interest. Europeans are fooling themselves if they think they can stand by and gleefully watch the US economy crash (indulging some idea of karmic retribution) with no consequences to themselves. The world could become a very unpleasant place if the US economy disintegrates.
You should have let it go bankrupt. But incidentally Europe has lost hundreds of millions of dollars in the US melt down.
Many European countries think the US is on a mad suicidal deficit spending spree. Loans was what got us in the mess to begin with. Obama’s astronomic loan financiered stimulus packages are more likely to wreck the economy beyond repair that fix it. The only draft we’d be sailing behind by following your example would be the one straight to hell. If that is where you want to sail, suit yourself. But I hardly see why we should follow, just for the sake of solidarity in misery.
Europe isn’t waiting for the US economy to crash, everybody with a couple of brain cells can see that that would hurt us too. But Europe is a complicated place. Especially under these conditions. We certainly don’t have one president who can more or less push a single plan through to save the world. Also, some of us are pretty stupid.
I’m not sure if anyone can tell if the US is doing the right thing at the moment. But that’s at least part of the problem: as far as I can tell, nobody knows what will work and what won’t.
I find the idea that “it isn’t inflation if everyone’s doing it” amusing, but unpersuasive. If it takes $200 to buy a sandwich, there’s little comfort in the notion that the same meal costs 180 Euro.
