We are not in a recession because industry is incapable of producing enough goods, or because there are productivity problems, or cost or quality problems.
One of the most notable phenomena of the past three years has been a 25% increase in exports. You simply can't get that kind of increase if you are producing goods that are inferior in quality or price. Foreign buyers obviously don't have to buy your goods, so if they increase their purchases by 25% in such a short period of time, quality and price aren't the issue, and if you can ramp up export production by 25% in a couple of years, then obviously capacity and productivity aren't the problem either.....So what is the problem? It is that consumers got over-leveraged and took on too much debt while house prices were rising and unemployment was low, pre-2007. Then, when the house bubble burst, and unemployment started to climb, consumers got nervous about debt levels and future employment prospects and started to pay down debt, which means cutting back on consumption.We are not short of productive capacity - we are running well below long-term trend - and we are not production constrained. We are in a recession because of shortage of domestic demand. Incidentally, if you think about it, if we really were production, capacity or productivity constrained, but had eight percent unemployment, that would be very weird indeed. Instead of increasing it's level of debt the Private sector is reducing it (Deleveraging) - This is the result of the bursting of the credit bubble resulting in Falling demand -
If Government attempt to reduce it's own debt at the same time as the private sector it will cause the shrinking economy to contract faster - Deflation will only make the private sector more cautious making it contract further - Austerity was always a dumb idea that is never going to work as long as the private sector debt is contracting.
If Government attempt to reduce it's own debt at the same time as the private sector it will cause the shrinking economy to contract faster - Deflation will only make the private sector more cautious making it contract further - Austerity was always a dumb idea that is never going to work as long as the private sector debt is contracting.
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Athens, 26/08/2012
"Everyone should weigh well the words." He said Chancellor Angela Merkel in an interview with German television Ard on requests for release of Athens euro by the CSU.
"There's a lot at stake when we talk about Greece," said German Chancellor, who invited to ponder the words, after some members of the coalition parties, still have speculated on the output of Athens Euro.
Merkel replied in these terms the statement of the Secretary General of the party Christian Social Union (CDU Bavarian ally) Alexander Dobrindt that, in an interview with Bild am Sonntag, said: "I see Greece out of the eurozone in 2013."
"We have responsibilities towards each other in Europe, which is not only a monetary union but a political union," said the Chancellor. We should keep this in mind very carefully, he added, "knowing how many changes are needed in Greece.
"We expect the Troika. As I said the other day with Prime Minister Antonis Samaras, in Athens there is still much to be done," said Angela Merkel. From now on "every day counts because Athens really increases efforts and realize what has been promised." Angela Merkel, however, said he had the impression that the Prime Minister Antonis greek Samars "you are striving very seriously."
The German Chancellor, Angela Merkel, the ECB does not attack, as it did today, the president of the Bundesbank, Jens Weidmann and indeed argues that the Frankfurt institution is acting within its mandate for price stability, but not critical number one she Buba for his words. "I think it's a good thing that Jens Weidmann to warn politicians - Merkel says in an interview with the TV Ar - Support Weidmann and I think it's good that he, as head of the Bundesbank, the ECB has a lot of influence."
Austrian Chancellor Faymann: favorable to allow more time for Greece
Austrian Chancellor Werner Faymann said he was in favor of granting more time for Greece to repay its debt, "even two or three years," provided that Athens honor the commitments on reforms and spending cuts agreed with the EU European Union.
In an interview published today dall'Osterreicher, Werner said: "I see a good chance that you arrive at an outcome in the case of Greece, for which the Greeks fulfill their agreements with the EU and in return will get more time to repay "their debts. "The most important thing is that the Greeks honor the commitments on reforms and spending cuts taken with us. If this is guaranteed, I support an extension on payments. Could be a delay of two or three years, the experts should decide "he concluded.
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