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 Global Crisis Blog

Blame the Fed



 This is an abbreviated version of an editorial that ran in Barron’s, the weekly magazine of the Wall Street Journal, on Dec. 11.


Alan Greenspan, The “Maestro,” won that title because so many people believed he saved America and the world economy when lesser men might have panicked and done rash things, or nothing at all.

On Oct. 19, 1987, just two months after his confirmation as Federal Reserve Chairman, the stock market fell 20%. Greenspan’s 30-word sentence issued at 8:41 a.m. on Oct. 20 promised “a source of liquidity,” which perhaps prevented a global recession.

In 1998, Greenspan and the president of the New York Federal Reserve Bank organized a quasiprivate bailout of Long-Term Capital Management. The hedge fund was registered in the Cayman Islands, beyond the Fed’s legal jurisdiction, but its debts had soared to an estimated trillion dollars and threatened to topple major banks.

Two great accomplishments, but from 2001 to 2005 Greenspan helped create an unsustainable housing bubble through credit expansion and interest-rate cuts that ultimately led to the global crisis of 2008.

He denied this charge in an essay published this year by the Brookings Institution: “I fear that preventing bubbles will in the end turn out to be infeasible. Assuaging their aftermath seems the best we can hope for.”

 The current Fed chairman, Ben Bernanke, took up the theme, saying, “The Fed cannot reliably identify bubbles in asset prices.”

Greenspan and Bernanke are fundamentally wrong on both counts. The Fed can anticipate asset bubbles and excess financial leverage because it bears much responsibility for creating both. And it can forestall them by changing its misguided policies.

Greenspan defines an asset bubble as a “protracted period of falling risk aversion that translates into falling capitalization rates that decline measurably below their long- term trendless averages.” Translation: People incur debt to bid up prices because they expect to be wealthier in the future, and they’re often wrong about that.

Many economists believe the Fed’s radical interest-rate cuts between 2000 and 2003 led people to believe that their risk in borrowing was also low. Greenspan himself has cited a Wall Street Journal survey of Jan. 14, 2010, showing 77% of business economists thought “excessively easy Fed policy in the first half of the decade helped cause a bubble in house prices.”

Greenspan’s Fed slashed short-term federal-funds rates from an average of 6.24% in 2000 to 1.13% in 2003. The Maestro says the Fed saw the 1% rate “as an act of insurance against the falling rate of inflation in 2003 that had characteristics similar to the Japanese deflation of the 1990s.” But he’s trying to have it both ways, justifying active intervention to forestall predicted deflation and claiming the Fed cannot forecast and forestall looming asset bubbles.

Greenspan blames the decline in long-term interest rates on market forces—a “global savings glut.” But there was no such glut. Massive Asian saving fed America’s equally massive borrowing and spending, while American borrowing and spending created a seemingly secure place for Asian producers and savers to put the money they earned from selling stuff to the rest of the world.

Due to low interest rates and easy money, U.S. house prices doubled between 1997 and 2006. Many Americans believed that they needn’t save because their soaring home values were saving for them by creating wealth.

Greenspan said in his Brookings essay that homeowners would have taken large mortgages even if interest rates and terms were much higher and more disciplined. This is clearly false. Home buyers are sensitive to monthly mortgage payments, and they took on more debt to get more house for the same monthly payment.

 [ Brown University Professor Jerome Stein has written a series of closely-argued papers using a tool known as SOC – stochastic optimal control. ]  Applied to economic analysis, stochastic optimal control would read changes in capital gains, interest rates, debt and supply and demand for goods and services, identifying excessive, unsustainable leverage and generating early-warning signals to change monetary policy. It would be a statistical substitute for the Fed’s fine-tuning.

 Stein shows that had SOC been used, it would have sounded alarm bells as early as 2005. The Fed has never used the tool Stein proposes, but surely it is at least worth a try. Quantitative analysts use sophisticated math to create risky instruments; why not use it as well to track risk?

Many economists and politicians — but not Greenspan — now realize that Greenspan’s Fed failed to curb irrational exuberance during the dot-com asset bubble in 1996-2000 and the real-estate asset bubble of 2003-2007. Instead, the Fed waited for the bubble to burst, and then tried to clean up the mess.

This is Bernanke’s policy now. Quantitative easing is a new way to create a bubble. Let the Fed refrain from creating bubbles, and there will be fewer messes to clean up.

There is a Hebrew saying that clever people can extricate themselves from disasters but wise people avoid them.

Greenspan and Bernanke say, in effect, that the Fed can only hope to be clever. It must be wise, or it must stop trying to be so clever. 


Innovation Blog

Make a “Not-Do” List – And Make Time for Creativity

By Shlomo Maital

 In their latest Bloomberg Business Week “Innovation Engine” column,*  Michael Maddock and Raphael Louis Vitón quote Warren Buffet:

   “…the difference between successful people and very successful people is that very successful people say “no” to almost everything!”

   As people “hunker down” worldwide to begin preparing their “to do” list for 2011, the authors recommend that we try a “not-do” list.  Make a “stop-doing” list.  What will you stop doing in 2011, to boost your happiness and your impact on the world?

   I did this myself a decade ago, after a serious illness.  After taking early retirement,  I pursued a policy of only doing things that either I really loved, or had the potential to make a difference to someone, or both.  I gave up using a cell phone.  Since creating a “stop doing” list (stop going to boring pointless lectures and conferences, stop writing pointless academic papers that no-one ever reads, stop teaching students who do not want to learn, stop wasting [negative] energy in battling bureaucrats or venting anger….), I have managed to product a book a year, write a regular column in a magazine, and launch a number of successful projects.   Note that a stop-doing list is not an act of selfishness.  Maybe of the things on my to-do list are aimed at helping other people and changing their lives.  Stop-doing is actually altruistic – it says, our time on earth is limited, if we waste it we will be far less able to change the world.

 “Stop-doing” is not just personal, it is managerial.  Innovation really ought to begin, as Peter Drucker pointed out 50 years ago, not with innovation, but with abandonment.  What should we STOP doing, so that we have energy and resources for new things?  Stop-doing is just another word for laser-sharp focus. 

    The authors conclude:

  “The best leaders have come to understand that the likelihood of market success is closely tied to how well they focus their teams’ attentions. You don’t want your big brains jumping from little challenge to little challenge. You want them laser-focused on the biggest challenges, the biggest opportunities, the most important company issues. When you can make this happen, you fulfill the promise of good leadership to your team. You also reward them with the efficiency and profits that make the business engine hum. You’ll find innovation will come easier. We promise.”

* The Innovation Engine December 7, 2010

Innovation Blog

 Learning is Child’s Play: How a Principal Revived A Moribund School

By Shlomo Maital


  Ein HaYam, Haifa ISRAEL

This is the story of how Baruch Yaakobi, principal of a moribund elementary school in a working class neighborhood of Haifa, used innovation to make his school an “observation center”, where principals from all over Israel come to learn best-practice.

    Yaakobi’s school is in Ein Hayam, overlooking the Mediterranean on the lower slopes of Mt. Carmel.  The neighborhood is aging and enrollment has dwindled, as young people leave for better-off neighborhoods with better schools.  Yaakobi used innovation to save his school.   According to Esti Ahronovitz, writing in the weekly magazine of Haaretz,  at Ein HaYam, children learn by – playing games.  They “play” literature,  “play” Bible, “play” reading and arithmetic, “play” geography and history.  Each day, Ahronovitz reports, children leave classrooms and enter “game playing arenas”, both inside and outside the school building.  There are nearly no frontal lessons.  The children play in order to learn, develop, enjoy themselves and become better people.  In doing so, they implement Plato’s dictum that children learn not by coercion but by play – a principle development psychologists have proven beyond a shadow of a doubt.

    For example:

  • In a small grove at the entrance to the school, Grade One students learn addition and subtraction by collecting pine cones and stones and solving problems in notes attached to trees.
  • Another group plays a memory game, using cards with arithmetic exercises whose solutions are found on a game board painted on the playground.
  • 2nd graders do a treasure hunt, with arithmetic exercises that send kids scurrying from one place to another. 
  • 3rd graders are at the beach, researching the sand.
  • 4th graders are in the gym, playing games with boxes.  Nearby a teacher holds up signs with multiplication problems. Kids who give the right answer get to shoot baskets.
  • 5th graders are in the bomb shelter, converted into a game-production lab (know many countries where children learn in bomb shelters?).  One group prepares a trivia game with questions about Israeli towns and cities, after downloading information from the Internet.  Another group prepares a history game, “feast of the gods”, where pupils dress in white sheets and wear floral wreaths.  And so on….

     Yaakobi says, I did not invent the notion of learning through play.  “A child needs a large variety of play activity in order to develop emotionally, socially and cognitively. Play creates opportunities in which children can solve problems and develop emotional tools to cope with conflicts.  Nowadays, children no longer play at school.  A child who does not play will not develop properly.”

      I believe Yaakobi’s concept is applicable to adults as well.  I recall bringing each of four children to kindergarten, and looking at the warm inviting ambience, with Play-Do, plasteline,  crayons, finger paints and other toys, I secretly wished I could stay – for the whole day.  Later, I thought about creating Kindergartens for Elders – where high-pressure managers could go to unwind and return to childhood. 

     Ein HaYam and Baruch Yaakobi suggest it just might work.

 Innovation Blog

Innovator, Lighten Up! Laughter = Creativity!

By Shlomo Maital

  When I speak to managers in several countries about innovation, I always try hard to make them laugh. Big bureaucratic organizations all apply varies degrees of fear, pressure and stress, then wonder why they are not innovative.   At the risk of appearing ridiculous, I throw nerf balls, ring a Chinese gong, show funny videos, and in general do everything to make the groups laugh.  The reason?  I argue that laughter and fun are the only environments in which creativity thrives.  Fear, pressure, stress, all are mortal enemies of creativity.     

    Now, at last, I have scientific evidence of this claim.   Writing in the Global New York Times (Dec. 6, 2010),  Benedict Carey *  notes:

  “…. researchers at Northwestern University found that people were more likely to solve word puzzles with sudden insight when they were amused, having just seen a short comedy routine.  “What we think is happening,” said Mark Beeman, a neuroscientist who conducted the study with Karuna Subramaniam, a graduate student, “is that the humor, this positive mood, is lowering the brain’s threshold for detecting weaker or more remote connections” to solve puzzles.”

  In other words, when you relax your brain, put it in a light humorous mood, you facilitate significantly the brain’s ability to detect weak “signals” coming from remote areas not directly related to the problem-solving thinking at hand.  This is neuroscience’s version of ‘thinking out of the box’.  The ‘box’, in this case, is the narrow areas the brain calls on, when tackling a problem.  These are the same areas everyone uses.  A truly creative solution will come from far away, from a seemingly unrelated area of the brain.

       Carey goes on to note:   .

  “ … in an authoritative review of the research, the psychologists Jonathan W. Schooler and Joseph Melcher concluded that the abilities most strongly correlated with insight problem-solving “were not significantly correlated” with solving analytical problems.  Either way, creative problem-solving usually requires both analysis and sudden out-of-the-box insight. “The implication is that a positive mood engages a broad, diffuse attentional state that is both perceptual and visual…   You’re not only thinking more broadly, you’re literally seeing more. The two systems are working in parallel.” ”

   Innovator – if you are struggling with a difficult problem, seeking a creative solution – relax.  Watch a Roadrunner cartoon.  Look at a “Calvin & Hobbes” newspaper cartoon.  Look up economist jokes on the Web.   Put yourself in a mellow mood.  Then, return to your problem.  You may be surprised.  Neuroscience does not lie.

* December 6, 2010 “Tracing the Spark of Creative Problem-Solving”

Global Crisis/Innovation Blog

Now is The Time to Rethink Manufacturing in China: Bring Those Plants Home!

By Shlomo Maital

  This is a perfect time to rethink the losing strategy (losing, at least, for middle class factory workers in America and Europe) of producing everything in China.  According to Joe Manget and Pierre Mercier, writing in Bloomberg Business Week,  “The rising cost of manufacturing in China gives multinationals a rare chance to rethink global production plans”.

   The authors note that rising wages are eroding China’s massive competitive edge.   They point to Foxconn (huge Taiwan-owned contract manufacturer in China) and its doubling of wages, following strikes, suicides and worker unrest.

     “Much has been written about the more than doubling of wages at the Shenzhen factory of Foxconn,  the world’s largest electronics contract manufacturer, which produces Apple (AAPL) iPhones and iPads and employs 920,000 people in China alone. ‘One can talk about a world pre- and post-Foxconn,’ says Victor Fung, chairman of Li & Fung, the world’s biggest sourcing company and a supplier of Wal-Mart (WMT). ‘Foxconn is as important as that.’ ”

Wage inflation in China, coupled with soaring minimum wages (20 – 30 per cent increases in most regions) and stagnant productivity, suggest this is a great time to rethink the Made in China strategy.  If wages continue to rise 20 per cent a year, note the authors, added wage costs will total $623 / month in five years. (They cite a BCG Boston Consulting Group study).   Why not anticipate this trend, and bail out now, rather than wait for foreign multinationals’ Chinese plans to become uncompetitive? 

  I fear that again, CEOs of multinationals will again take the easy path and instead of working hard to build competitive plants in America and Europe, they will look for another source of cheap labor.  It’s easy to find – Vietnam.  According to Manget and Mercier,

   “Take one factory in Vietnam, where wages of 80¢ per hour are 31 percent lower than in China. On the face of it, this looks like a good deal—but factor in the differing productivity rates, and the Vietnamese factory’s cost edge drops to 14 percent. Furthermore, it won’t take long for young Vietnamese to demand the same treatment as their Chinese counterparts.”

  It is time for the U.S. to wake up and abolish all the major tax incentives granted under George Bush for companies that produce abroad, and transform those tax incentives by 180 degrees – give them to companies producing in America, rather than companies producing in Asia.   No country can ever maintain a strong prosperous middle class, healthy employment,  modern production technology, and rising productivity, when it produces services almost exclusively.  It is obvious.  Why, then, is it not obvious to political leaders in the West? 

     A golden opportunity presents itself to tackle the pernicious job crisis, with policies that are neither fiscal nor monetary.   Will our leaders again not miss an opportunity, to miss an opportunity?

Global Crisis/Innovation Blog

QE2 Fails – So Let’s Go for QE3 !

By Shlomo Maital

   Ben Bernanke’s bond-buying rampage, known as QE2, or Quantitative Easing #2 (after the smash hit of QE1), has brought a deluge of criticism, global instability, and renewed fears of inflation, with no discernible impact on the US economy. 

     Writing in Bloomberg Business Week, Prof. Scott Shane [Case Western Reserve Univ.] shows that small business – the same small businesses who created nearly all the new jobs in America in the past decade, while big businesses were firing and laying off workers – will not benefit, while big business (yes, the ones firing and laying off) will.  Even if QE2 does lower interest rates,  it will not help small businesses, who have trouble getting loans at any rate, and who, moreover, refrain from borrowing because of weak demand for their products.    

     Prof. Shane notes what is completely obvious to everyone: The banks will continue to use the liquidity created by QE2 to shore up ravaged balance sheets (which continue to record losses, as banks ‘mark to market’ and write down their assets) by keeping every dollar the Fed pumps in, rather than lend it. 

“QE2 is unlikely to get banks to lend. Banks have weakened balance sheets as a result of the financial crisis and are more likely to use the money created by the Fed’s asset purchases to shore up their reserves than to lend more.”

  Faced with overwhelming evidence against QE2, and widespread protest from business economists (those who really know what is going on), Bernanke has thought carefully and deeply, and apparently – decided to try a third round of quantitative easing, QE3.  And, doubtless, a fourth and a fifth, until the dollar collapses and inflation recurs. 

     The Obama Administration is clearly desperate.  It cannot use fiscal policy, because capital markets now seem to demand a cut in budget deficits rather than an increase. So its message to the Fed is, don’t just stand there, do something!   With monetary policy also having shot its wad, the right message to the Fed should be:  Don’t just do something, anything, stand there!   Hasty ill-advised policy will prolong Americans’ travails, rather than cure them.  And that is precisely what is happening. 

Innovation Blog

Maldives Islands Underwater? Does Anyone Care?

By Shlomo Maital



Underwater cabinet meeting


The President of the Maldives Islands, a small island nation in the Indian Ocean, is Mohamed Nasheed, a former political prisoner turned leader.  His tiny island is basically at sea level, and global warming and rising sea levels threatens to put his whole country under water by the end of this century.  He is desperate to get the world’s attention to his small country’s plight.  But how?

   Try this for innovation:

Mohamed Nasheed has organised an underwater cabinet meeting and told all his ministers to get in training for the sub-aqua session. Six metres beneath the surface, the ministers will ratify a treaty calling on other countries to cut greenhouse emissions.   Ahead of the meeting, scheduled for 17 October, cabinet members have been squeezing into wet-suits and practising their underwater skills. The President was not present at the first session, held over the weekend, because he is already a qualified diver.

 Maldives is comprised of some 1,200 coral atolls.  It has only some 300,000 people, and its highest point is the lowest of any country in the world – 2.3 meters (about 7 feet). 

  Did President Nasheed’s underwater cabinet meeting attract huge attention? I’m afraid not.   When it comes to concerted consensus action on global warming, the entire world is under water.   I’m waiting for his next innovation to attract attention.  Mohamed, keep trying. Don’t give up!  Here are a few suggestions –

     Do a ‘sand box’ simulated model of land masses in North America Europe and Asia.  Show the impact of global warming on sea levels, by 2150 and 2200,  including Rotterdam, New York, Boston, and other port cities under water.  Sell “Maldive snorkels” to green activists around the world, to fund your public relations activities.  Create fake gills to place next to people’s ears – showing how we will have to breath in future, like fish, if action is not taken. Stage a trial – put the leaders of the US and China, huge foot-draggers, on trial for putting the world under water.  Recreate Atlantis, the under-water world, as a tourist attraction.

    Just trying to help, Mohamed.  Why not mount a web-based contest, worldwide, for possible solutions to your little country’s problem?  My suggestion:  Tow your 1,200 atolls across the Pacific and park them in San Francisco Bay.  Declare war on America, lose it, and then accept massive munificent American foreign aid, which America always bestows on those it defeats.      


Global Crisis/Innovation Blog

Micro-Finance: the “Atomic Energy” Syndrome Returns

By Shlomo Maital

        A BBC report notes that India’s huge microfinance industry faces collapse, as the borrowers in an entire large state, Andrha Pradesh, struggle to repay their loans. In Bangla Desh, where micdrofinance was first invented by Mohammed Yunus,  the government has slapped a ceiling on interest rates for microloans: 27 %.   Ceilings (maximum rates) tend to become also minimum rates. And how many strong businesses, like Microsoft, could afford to pay 27 per cent on their debt?  

  What went wrong?

    It is the atomic energy syndrome.  Splitting the atom made possible an enormous source of energy for peacetime purposes.  Heat from nuclear fission (and one day, from nuclear fusion) makes steam, that turns turbines, that generates electricity.  But splitting the atom also makes it possible to create nuclear weapons,  thousands of them, that threaten humanity.  Like almost all technologies, splitting the atom is both a fantastic boon and an enormous evil.  It all depends on how we use it.

  Microfinance has been, expectedly, misused. By allowing the private sector to run amok in this area, with the aim of making profit, it has made microfinance into a micro-example of what the village lenders did earlier – charge usorious exorbitant interest rates that the poor cannot repay, then take away all their possessions when they fail to pay it – at times, leading to suicide. 

     Some industries are simply not suited to for-profit rapacious capitalism. Health care is one.  Microfinance is another.  Why do free-market advocates repeatedly grab control of industries that need to be provided as public goods, and turn them into private bads? 

     Dr. Kazi Akhmed, a Bangla Deshi expert, notes that microfinance loans have to be repaid starting one week from receipt of the loan, in weekly installments. How many businesses can make profit within one week, in order to repay the loan?  Even philanthropic microfinance companies charge 12-15 percent interest – the rate of interest that the government of Ireland is struggling to pay.  How many poor people taking microfinance loans have the business expertise to know how to run businesses, especially in hard times, during the global crisis?  Lending the poor money is not enough; they need to learn about basic rules of business as well. Why is this not provided together with the money? 

     Collapse of microfinance will mirror the collapse of investment banks – only it will be the poor who pay the price, not the rich.  It could, and should, be prevented.   


Global Crisis Blog

Will America Bounce Back? And How Will We Know?

By Shlomo Maital

   America is still the world’s largest economy, more than twice as big as #2, China. But America no longer can play its traditional role – providing huge amounts of demand for other countries, to pull the world out of global recession.  America’s wagon itself is stuck in the mud and badly needs help. 

   President Obama’s former Council of Economic Advisors Chair Christina Romer,  writing in the Global New York Times (Int. Herald Tribune), gives us a clue to the vital question: Can America bounce back (again)?  How will we know when the ‘bounce’ begins?

   “In a paper I wrote many years ago,” she notes, “I found that …the stock market crash in 1929 did not destroy a particularly large amount of wealth or make people highly pessimistic.  Rather, it made companies and consumers very unsure about future income, and so led them to stop spending as they waited for more information.” 

   This is a perfect description of Japan, 1990-2010, where for two decades uncertainty shrouds everyone, extinguishing both consumer demand and business investment. Much of the uncertainty comes from incompetent, unstable political leadership and leaders who have no vision whatsoever, nor provide any hope to ordinary people.

    And it is a perfect description of the U.S., 2008-2010, where political deadlock between Republicans and Democrats, vengeance-driven Republicans who would rather sink the U.S. economy to defeat Obama in 2012 than help the economy and, heaven forbid, re-elect him (viz. Senator Mitch McConnell), and a weak and weakened Obama who has been unable to get control of the old-boy-club in Washington, have conspired to mount an enormous question mark over the lives of ordinary Americans.

    America will bounce back. Out of this chaos will emerge a leader, doubtless a rather unlikely one, who speaks words ordinary people understand and who shows them the way forward, involving present sacrifice for future gain.  Don’t rely on economists or number-crunching to guide you. This crisis is NOT about numbers.  It is not about interest-rate basis points or GDP growth points, it is about hope. People work hard, start businesses, invest, even spend, when they have hope. 

    In Franklin Delano Roosevelt’s First Inaugural Address, in Jan. 1933, the new U.S. President, who inherited a mess far worse than that Obama did, said, “the only thing we have to fear is fear itself.”   That captures the problem in a nutshell.  Once ordinary Americans overcome their fear of the future, and are given good reasons to overcome it, once their fear turns into hope, the crisis will be over and America will bounce back, even though the road will be long and hard.     

Global Crisis Blog

Martin Wolf Lifts the Fog:    What in the World is Going On in Europe


Martin Wolf

By Shlomo Maital

    Among the columnists I follow closely is FT columnist Martin Wolf.  Born in 1946, Wolf had a career with the World Bank before joining a research institute, then the Financial Times. He is regarded as a leading business columnist, whose analysis is as deep as it is clear. On Nov. 30, his article “Why the Irish crisis is such a huge test for the Eurozone” is worth careful reading.  Let’s go through it step by step together.

1. “A currency union (i.e. the euro) causes crises”.  Some countries (Germany) in the union control wages, others (Portugal, Ireland, Spain) do not.  So they become less competitive, and their economies weaken.  Governments then engage in deficit spending to sustain employment, when other countries use exports.  This creates confidence crises in their bonds, a la Greece.

2.  “A currency union has a common interest rate”.  Interest rates are everywhere the same. But different countries have different risks.  So in some countries, the common interest rate will seem excessively low, leading to credit booms and asset bubbles.  The result is a huge credit crisis.  If exchange rates could change,  the Irish punt and the Greek drachma could fall, stimulating exports. But they no longer exist. So a currency crisis becomes, instead, a credit crisis, as lenders stop buying sovereign bonds.  If Ireland, for instance, still had its pound linked to the British pound, it would have fallen, helping Ireland’s economy.  That is no longer the case.

3.  Facing the crisis, governments offer such high interest rates on their bonds (they have to, all governments need to roll over their debt), that they destroy their credibility, rather than strengthen it. (A high and rising risk premium on Irish bonds drives investors away).   Ireland erred. Instead of letting Allied Irish Bank creditors take a ‘hit’, wiping out part of the debt, the Irish government assumed that debt, saddling Irish people with billions of euros in debt for a whole future generation. 

4.  Will the euro zone survive?  Possibly not.  German reluctance to continue to bail out irresponsible deadbeat countries may force peripheral weak countries to return to their own currencies. This too is not viable. When Ireland re-adopts its punt, money will flee and Irish government debts will soar disastrously.  The key issue is Spain. Spain has to roll over some 250 billion euros in debt alone this year, and its PM Zapatero, a Socialist, blames everyone but his own government’s mismanagement. 

5.  Survival of the euro zone is a political, not economic, issue.  Countries in Europe, including Italy, used to have currency crises.  Today, in the euro, they have credit crises.  These crises have forced them to swallow enormous debts created by private-sector banks and impose austerity that increases unemployment and reduces welfare spending.  Countries will make the following calculation:  which is worse, a currency crisis or a credit crisis, in which the EU itself does not come to their aid?  If the answer is ‘currency crisis’ – bye bye Euro.    

Blog entries written by Prof. Shlomo Maital

Shlomo Maital
December 2010
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