A year back George Soros gave a speech on the Euro Crisis, Could be one of the best speech have heard in the financial domain. After 1 year Euro remains Status quo with some positive signs. Here is the complete speech
He Started with the Crash of 2008 that has been a widespread recognition, both among economists and the general public, that economic theory has failed. But there is no consensus on the causes and the extent of that failure.
He differentiate economics that is a social science and there is a fundamental difference between the natural and social sciences.
Putting the radically approachinspired by Karl Popper who taught him that people’s interpretation of reality never quite corresponds to reality itself. This led him to study the relationship between the two. There is a two-way connection between the participants’ thinking and the situations in which they participate. On the one hand people seek to understand the situation; that is the cognitive function. On the other, they seek to make an impact on the situation; he termed that the causative or manipulative function. Continue reading
From the financial theory to practice Raghuram Rajan the chief economic adviser of India. Soon be head the Reserve Bank of India. Mr Rajan is even more of a free-market man than Mr Basu. Fault Lines attacks state subsidies of housing finance as well as Wall Street. He has been vocal about India’s troubles.
He takes the central bank reins as India faces testing economic times — hit by a capital flight with investors worried about slow growth, a massive deficit, stalled economic reforms and a slew of graft scandals that have paralyzed the political process
Rajan, who favors financial deregulation, is expected to bring new ideas to the RBI which the finance ministry believes to be too conservative.
Here is a short extract of his famous book “Fault lines” Continue reading
Recently Jörg Bibow was interviewed have tried to put the points in English stating that Mario Draghi’s announcement promise of ECB support for government bond markets seems to have calmed fears of an imminent euro breakup, at least for the time being. That does not mean the euro crisis is over though. Not at all, as the underlying problems remain largely unresolved. Liquidity can buy time but it cannot solve the imbalances inside the euro area and related debt overhangs that are the deeper cause behind the euro crisis. It is important in this context that the ECB promise is for conditional support. As liquidity support comes along with mindless austerity and asymmetric adjustment pressures imposed on debtor countries, debt problems are bound to get worse rather than better. Markets are currently in complacency mode about these prospects. The crisis may resurface at any time.
He pointed out Germany as the main culprit behind the euro crisis. Being the largest economy in Europe, Germany’s performance and policies inevitably impact Europe. In the currency sphere Germany is also Europe’s traditional anchor of stability. As a result, the policy regime of Economic and Monetary Union agreed at Maastricht is largely of German design, based on the Bundesbank success story and deutschmark stability. It was not understood that the pre-EMU success of the German model of export-led growth required that other countries behaved different from Germany. Continue reading
Going back to the famous Maastricht Treaty.It connected a subset of EU states through a common monetary policy (EMU) and made no treaty provision for fiscal coordination.Well It was prepared the Stability and Growth pact (http://bit.ly/199QLRy), which took its legal authority from the Treaty on the Functioning of the European Union (TFEU).
So when Last July Mario Draghi, president of the European Central Bank, spoke of the ECB’s intent to do “whatever it takes” to hold the euro area together. In the months after his comment, the ECB unveiled its Outright Monetary Transactions programme, in which it pledged to make unlimited purchases of troubled government bonds under certain conditions. No policy has been as important in bringing down government borrowing costs around the periphery. Continue reading
Many have said that not all is not solved in the Euro-Zone. In fact, despite the ongoing rhetoric from the ECB that they stand ready to “do anything,” in reality they have done little to this point other than just talk the markets higher. While that has worked to a large degree to suppress rising interest rates on debt burdened Euro-Zone countries there has been no progress on the“unification” of the Euro-Zone or a resolution to its mounting debt problems.
Three Problems That Still Exist
There are still three major problems with the Euro-zone that, without fixing, will lead to the next chapter in the ongoing Euro-zone saga. Continue reading