From the Failure of Europe to Possible Growth in the Real Economy Sergio Cesaratto and Lanfranco Turci

The initial enthusiasm of the financial markets over the last European summit was short lived as the new ''kick down the can, grand plan'' to solve the crisis was agreed upon. To bolster the market, the remnants of the famous EFSF 440 billions Euros - which, never forget, was also provided by the periphery countries it was supposed ''to save'' - should be used to leverage new instruments aimed at forming a potential of, say, 1 trillion euros. The idea is to insure 20% of the newly issued sovereign debt of risk countries and to create special purpose vehicles (SPVs)…

Protest in the Age of Crises C.P. Chandrasekhar

A display of anger at the unjust American economic system, which began in mid-September in Zuccotti Park, in New York, has turned into an international protest movement. The protest has named itself “Occupy Wall Street”, which speaks of what it plans to do and not what it represents. Though termed a movement by many, the protest is amorphous in nature, with no well-defined objections, no formal membership, and no leadership. In sum, it is a spontaneous display of anger for diverse economic reasons reflected in its slogans—“banker” fraud that blights economies, immoral bailouts that restore Wall Street to profit but…

Sinking Ship Jayati Ghosh

Talk about re-arranging deck chairs on the Titanic. The economic news from Europe is alarming, no doubt, but it is also ludicrous. At a time of the most severe economic and financial crisis that has affected the region since the early 1930s, politicians from the major countries involved rush around to meeting where they agree, once again, to disagree, and to put forward more of the same policies that are manifestly failing. There is now almost no doubt that the collapse is imminent, of the economic and monetary union that took over half a century to evolve. At least, the…

Shadow Banking in China C P Chandrasekhar and Jayati Ghosh

On October 10, the Chinese government announced that it will increase its stakes in the four largest commercial banks, which are already largely public-owned. The move is designed to ''support the healthy operations and development of key state-owned financial institutions and stabilise the share prices of state-owned commercial banks''. But why was this move considered necessary at all? In the period just before this, investors were dumping Chinese bank shares, anticipating a slowing down not just of the economy as a whole, but in particular the property market, which had experienced a bubble of massive proportions. But the underlying concern…

The Dragon’s Shadow Jayati Ghosh

On October 10, the Chinese government announced that it will increase its stakes in the four largest commercial banks, which are already largely public-owned. The move is designed to ''support the healthy operations and development of key state-owned financial institutions and stabilise the share prices of state-owned commercial banks''. But why was this move considered necessary at all? Recently, investors have been dumping Chinese bank shares, anticipating a slowing down not just of the economy as a whole, but in particular the property market, which had experienced a bubble of massive proportions. But the underlying concern about the health of…

What World Leaders Need to Do Urgently (but are not) Jayati Ghosh

During the height of the Global Financial Crisis in 2008, President Nicolas Sarkozy of France was seen carrying around a copy of ''Capital'' by Karl Marx. Maybe he should now pick up a copy of another book (''Anti-Duhring'') by Marx's collaborator Friedrich Engels. In this book Engels made a persuasive argument about the anarchic nature of capitalism. ''Anarchy reigns in socialised production. But the production of commodities, like every other form of production, has its peculiar, inherent laws inseparable from it; and these laws work, despite anarchy, in and through anarchy. They reveal themselves in the only persistent form of…

Shifting Havens for Capital C.P. Chandrasekhar

The US is by no means the world's most competitive or strongest economy, though the dollar remains its reserve currency. This intuitively contradictory feature in contemporary capitalism was seen as likely to sap the dollar's strength, even if there was no clear alternative to it as a reserve currency. The threat to the dollar intensified with the onset of the 2008 crisis and the Federal Reserve's response to that crisis in the form of an injection of huge volumes of cheap liquidity into the system. With the system awash with dollars, the currency was expected to slide. The evidence too…

Game Over for the Euro? Sergio Cesaratto

The author talks in detail about the crisis in Europe, with special reference to the problems of Italy. The problem of public debt in Italy has been a long standing one, the origin of which lies in the series of economic developments that took place in the country over few decades. He also argues that the present crisis cannot be resolved unless bigger countries like Germany do not shift from their dogmatic position. Game_over_Euro (Download the full text in PDF format)  

Instability in the US: It is not debt but the lack of it Alex Izurieta

The true problems of the US economy, to which the rating agencies have turned a blind eye, persist to this day. Standard & Poor's states that a very large government debt poses a systemic risk and calls for more stringent fiscal austerity. The present analysis points to the conclusion that public sector debt in the US is potentially destabilising, not because it is too large but rather too small for the task at hand. Instability_US  (Download the full text in PDF format) (This article was originally published in Economic and Political Weekly, VOL 46 No. 34 August 20 - August…

Is China next? C.P. Chandrasekhar

Though different, the Greek and the US public debt crises threaten a return to the Great Recession of 2008. The world is therefore savouring the reprieve provided by their temporary resolution. But before that ephemeral benefit could be enjoyed comes news of a potential new global economic threat from an unsuspected source: China. Its source lies in the boom in China's property market over the last few years, which gathered substantial momentum in the wake of the huge post-crisis stimulus provided by the government to the economy. With a significant share of that stimulus diverted to projects that increased demand…