Way Out

The way out of the present Great Depression should have three axes:

1) a higher inflation target, around 4%. The European Central Bank targeted 1%, which is 1% removed from deflation, which is a trap with no exit.

2) government organized stimulus, New Deal style. It worked in the 1930s, in the USA and Germany.

3) national banks investing in the real economy (an old European trick now used by China and India)


Let's notice that Japan would be in depression, if not for massive government spending. Now, of course Japan has a total debt of 200% of GDP, nearly twice the one of Greece.

The American plutocrats' obsession about Greece not be ready for the euro is neither here nor there.

The drachma was converted at the wrong rate.

Moreover, the present crisis is made to bring the euro down to parity with the dollar quickly. Europe is punishing China and the USA for atrocious behavior at the Copenhagen climate conference. The euro is still more than 20% overvalued right now (mid May 2010).

American economists may have to enjoy the future double dip, if they do not mind USA plutocracy more than they do the European Union.


http://patriceayme.wordpress.com/