Euro Crisis: Lorenzo Bini Smaghi

Lorenzo Bini Smagi,  former Member of the Executive Board of the European Central Bank, nails it,

You call it austerity, i would call it putting your house in order. You can’t grow especially if you have a deficit which is so high if you spend more than you earn at the government level.  You cannot grow and the markets have understood this.  So you have to make these adjustments and it will take time. The problem is that markets are impatient…

Europe’s Ricardian Equivalence vs America’s Keynesianism.

The American markets just don’t understand it quite yet, that “…you can’t grow especially if you have a deficit which is so high” — and as the Congress and Administration dither they’ll be craving the Fed crack as soon as Operation Twist ends next month.

Furthermore, the Fed’s zero interest rate policy and quanto easing has reduced the the Congress and Administration’s incentive to take decisive action to address the country’s structural deficit and debt problem.  At some point, the markets will.

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This entry was posted in Black Swan Watch, Budget Deficit, Eurozone Sovereign Spreads, Fiscal Policy, PIIGS, Sovereign Debt and tagged , , , , , . Bookmark the permalink.

2 Responses to Euro Crisis: Lorenzo Bini Smaghi

  1. Kuldip Singh says:

    Sorry, I have to disagree .Before the first Greek bailout ,I was surprised to hear Mohamed El-Erian state on television, that Greece was not a liquidity problem, Greece was a solvency problem. I am sure that there would have been many more people who were of the same view.
    Hence, I very strongly feel that the political leadership in the Euro zone made a disastrous decision in maintaining the unity of the Euro zone as their priority.
    On March 4, this year I posted a review of the book, Say “ Yes, And!” on the Amazon site. The objective of posting the review here is to show that there was an alternate path to the problem.
    I was also informed by the author Avish Parasar that this same message was contained in a book. I will get the name of the author and this book. When I get this information, it will be posted on this site.
    Say “Yes, And!”……..Help the Greek economy to Grow,
    March 4, 2012

    By mankul65
    Amazon Verified Purchase
    This review is from: Say “Yes, And!”: 2 Little Words That Will Transform Your Career, Organization, and Life! (Paperback)
    When Avish Prasar asked me to do a review of his book, “Say ‘Yes, And!” I was quite apprehensive, since I had never done a book review before. However, in life, there is always a first time.
    By the time I got to page 4, of his book, the following sequence of thoughts came to mind.
    Can we help the Greek economy to grow? The mind answered:
    Yes… and the mainstay of the Greek economy is Tourism,
    Yes… and the summer season is almost upon us,
    Yes… and let us reach out to all those who can afford to have a vacation this summer
    Yes… and please consider Greece as your destination of choice.
    Yes… and appeal to the citizens of Greece, if you must protest, do it non violently.
    Yes… and appeal to the Greek Government to change archaic laws. See the Business Insider article- Greek Business In Action: The Athens Bookstore And Cafe That Can’t Serve Coffee Or Sell Books
    Yes… and request Greek entrepreneurs to lobby their Government. Again, see the Business Insider article A Message From A Greek Entrepreneur by Alex Christoforou.
    Greece is the cradle of western civilization. Greece gave us great philosophers who enriched our thought processes. Hence to read
    That hospitals in Greece have run out of aspirin,
    A Geek mother, running from pharmaceutical store to store, looking for diabetes medicine for her son,
    And most heart wrenching of all- Greek mothers abandoning their children because they are unable to afford looking after them.
    As Ted Roosevelt said,
    “Far better is it to dare mighty things, to win glorious triumphs, though checkered by failure, than to rank with those poor souls who neither enjoy, nor suffer, for they live in that gray twilight that knows neither victory nor defeat.”

    As for the members of the Troika, who asked the question-
    Can we help the Greek economy to grow and answered-
    Yes… but there would have to be severe austerity measures,
    I again quote Ted Roosevelt, who said,

    “Appraisals are where you get together with your team leader and agree what an outstanding member of the team you are, how much your contribution has been valued, what massive potential you have and, in recognition of all this, would you mind having your salary halved.”

    For both the quotes by Ted Roosevelt, hat tip to Ron Swanson.

    In this current difficult economic times, those who succeed will be those with the attitude, “Say ‘Yes, And!”

    If the above concept takes off, this would have been a great book review.
    Forgive me my humility

  2. Kuldip Singh says:

    As promised in my comment posted earlier,the book is “Boomerang” by Micahel Lewis. The Yes And part is on page 69, in Chapter 2.

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