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Sunday, September 25, 2016

A Message To World Leaders: Ignore The Financial Markets

A Message To World Leaders: Ignore The Financial Markets

A solution for the eurozone? Listen to the people, not to the markets.

For 40 years, there has been a tug of war between government in democracies and what we may call “the other government.” By the latter I mean, of course, the financial markets. James Carville highlighted his concerns when he announced that in the next life he would want to be a bond trader. Alan Greenspan followed the bond markets religiously for signs of increased or reduced inflationary expectations.

Now Europe faces the threat of a financial market rebellion. Democracy has spoken loudly in this weekend’s elections on the Continent and in England. Voters said, “We have had all the austerity economics we can take.” They threw over Sarkozy in France and many Conservative and Liberal candidates in England. In Greece they ran for the extremes. The moderate liberal Pasok party won the least votes in memory, but it may yet form a coalition to run a new government. Italian election results will be in soon.

And democracy is working! The instinct among those in the financial markets is that democracy usually reflects the weak-willed demands of the public. But the public is generally right this time, and it has been many times before. Austerity economics is self-destructive when economies are so weak.

Yet of course the financial markets’ initial reaction to the European elections was to sell, as if austerity economics was actually working to make nations’ bond payments easier to handle. It was not! But the markets fear that a new strategy will make matters worse.

Political leaders should ignore the financial markets in the short run, pure and simple. This may drive up financing costs for a while, but the eurozone should absorb those and adjust policies. The European Central Bank (ECB) ought to accommodate its needs. The right policies are stimulus from the current account countries and the end of extreme austerity in the periphery. Wages should rise in the eurozone core and stabilize in the periphery; they can even rise from their current lows in places like Greece. The 17-nation Eurozone or the 27-nation EU should issue jointly backed bonds to provide social safety net support to the financially weak nations, to raise demand for them and get their economies going, while reducing the extreme financial pain and sacrifice that now jeopardize social stability. As examples, the Greeks voted for extremist parties, the Le Pen party did well in France, and the Tea Party runs amok in the U.S. Austerity fever even grips Washington, which makes the November election especially important.

  • SaneJane

    Democracy at work.

    • ObozoMustGo

      Hey… it’s InsaneJane! What up you crazy be-atch? Good to see you again! 🙂

      Have a nice day!

  • Itsjustmeagain1

    I agree SaneJane.
    Let’s hope the new leadership looks at both sides of the ledger, and end the pampering of the wealthy and make them pay their part in taxes.

    • ObozoMustGo

      Hey justme… what exactly is “pampering of the wealthy”? What exactly is “pay their part in taxes”? I assume you’re one of those “fair share” drones, so tell me, what exactly is their “fair share”? Gimme a number, please.

      Have a nice day!

  • VITALIZING MOTIVATION in the economic sense occurs when there is a scenario of well-founded HOPE in the absence of widespread sense of ENTITLEMENT. It is in this unique set of conditions that people are most inclined to do something intelligent about their lives, and adhere to their plans.

  • ObozoMustGo

    Yeah… that whole “fiscally responsible” thing is highly overrated. Dont people know that you can continue to pile on debt forever and ever and ever and there are NO consequences? Don’t those stupid people know that governments NEVER go under because of excessive spending and the rest of the world will always be there to bail them out? Why don’t those dummies realize that you actually DON’T have to work and provide for yourself when the government can take care of you cradle to grave? Just keep the government spending spigot wide open forever. That’ll do the trick!

    Yeah! OK! Sure, sure. Only in leftist nutjob world does a useful idiot actually believe that the solution to government debts and deficits IS MORE OF THE SAME. Jeff Madrick, YOU are a useful idiot! Keynes was dead wrong and you leftist nutjobs just cant accept it.

    Have a nice day!

  • ObozoMustGo

    Rachel Maddow is one ugly dude! Wish they’d take down those MSLSD adverts…

    Have a nice day!

    • What’s the matter “ObozoMustGo”? Can’t compete with Rachel’s intelligence? Your a paid hack who does not matter. Yes, that’s right, your an insignificant little troll who influences no one and impacts nothing. Crawl back to your keepers; enjoy the few crumbs they toss you.

      • ObozoMustGo

        Only to a brain dead leftist nutjob like you, james, is Madcow considered “intelligent”. It’s a matter of degree, I suppose, that when you’re so low on the IQ pole, anyone above you seems “intelligent”. From your perspective, you must see the whole world as “super smart”….. just sayin

        Have a nice day!