Growth without savings and capital investment? The tobacco haze of late, degenerate capitalism is dense and thick. Dark pools form as marauders take people's money and gamble with it. Politicised credit rating agencies engage in fraud. Counterfeiting is renamed quantitative easing.
How did it come to this? Professor Mitchell and I seemed to agree that the explanation starts with neoliberal economic philosophies. Their essence being, according to Professor Mitchell:
The neoliberalism era of self-regulation of markets unfettered by the destructive powers of government would maximise wealth and we'd all be better off.
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C'est la vérité, c'est la vie.
The euro was established in 1992 with the Maastricht Treaty. To participate in the currency, member states are supposed to meet strict criteria: a budget deficit of less than 3 per cent of their GDP, a debt ratio of less than 60 per cent of GDP, low inflation, and interest rates close to the EU average.
But eurozone countries are at the mercy of the bond markets, or so they think, because they can't print money: only the European Central Bank (ECB) can print euros.
With the push to European economic unity, banksters descended on European capitals offering derivatives "solutions" as an attractive proposition for countries seeking to join the eurozone. According to the PBS documentary 'Money, Power and Wall Street', the first known case of a country using a derivative to window dress its accounts was Italy. In 2003, Nick Dunbar revealed details of a similar deal between Goldman Sachs and Greece. Goldman Sachs sold Greece several giant swaps to help Greece "meet its targets".
Money flowed into those countries and, surprise, surprise, the availability of cheap credit created consumption bubbles. As the PBS documentary points out:
By 2009 the deficit was twice as big as thought and six times as big as originally planned, so bond holders from New York to London started dumping Greek sovereign bonds. The very same institutions who had happily fuelled the euro spending spree pulled back. Other euro countries had no plan in place to deal with the situation. In 2010 the value of the euro dropped. Ireland, Portugal and Italy were in a downward spiral...
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Professor Bill Mitchell raises this important point:
The so-called period of stability in the eurozone - this was the period leading up to the crisis - there's an aggressive element in the euro debate that Germany is the model for every European country to follow. That if every country behaved like Germany then there would be no problem. That's the greatest nonsense you could ever imagine. Before the eurozone was created the German Central Bank played a very important role. It managed the exchange rate through buying and selling foreign currencies to ensure that the Deutschmark was as low as possible, to make sure that their manufacturing sector was as internationally competitive as possible. And they did that as a matter of daily practice. They pegged the exchange rate as low as possible to make them as competitive as possible because manufacturing was its economic strength. Once they entered the European monetary system they gave up their flexible exchange rate and so the way they then devised, a series of deregulation which were known as the Hartz reforms... [They] set about undermining the capacity of the workers to gain minimum wages. So real wages in Germany hardly grew at all. Virtually zero. Why was that important? Because that was the way they kept their export sector competitive by not allowing the exchange rate to be kept down by reducing domestic costs.
He adds:
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