"The world is in a depression" says Professor Robert Mundell - Godfather of the Euro

Professor Mundell, euro, and 'pessimal currency areas'

“We’re in very serious danger. The world is in a depression in the Big Three of America, Europe and Japan, a mini-depression that we have not seen since the 1930s,” he said, speaking at the Lindau conference, where half the world’s Nobel economist are gathered on one tiny island with cobbled streets looking across Lake Constance to the Alps....

His prescription for America’s ill today is to slash corporation tax to 20pc (from an effective rate of 52pc, he says), and kill the entitlement behemoth. By the way, he blames the Fed for triggering the Lehman crisis by keeping money too tight in mid to late 2008. There is very little inflation risk now from QE because M1 money velocity has collapsed “by half” and is likely to stay there....

“We’re in the midst of a very big crisis because nothing has been done yet to convince the markets that there has been a fundamental change. To save Europe there has to be a move in the direction of shared government.”

“There is a tremendous problem in five or six countries of the eurozone. But the solution is not the end of the euro, because that creates more problems than it solves. There would be a tremendous run on the banking system, and countries that left would still have to deal with all their debts.”

The article goes on to discuss the problems underlying the Eurozone, with the author's opinion differing from Mundell on the issue of the currency, Mundell arguing there is nothing wrong with it and that it is the problem with a couple of countries expenditure on entitlements, while the author argues structural flaws with the monetary union due to the make up of countries in it and suggests a breakup.

Point being, the Eurozone is screwed. I guess it's only a matter of time and bailouts from central banks, the Fed, private investors or whoever else to keep it going. Perhaps the war on Libya might help with raising revenues with oil, reported to be high grade oil, for cheap Euro consumption? This too might help buy some time to keep the union kicking.

Now with global growth slowing, perhaps there is a real risk of global depression. Mundell suggests shared government across Europe. Well perhaps regional government may be surpassed for global government should the contagion, depression and ultimate collapse be global.

reply to post by surrealist


The entire problem is an illusion. Yes we are in a depression, counted plus uncounted unemployment rolls appear to show greater than a 20% unemployment rate (search ATS and Google if you need corroboration). From the article above, these "economists" aren't too bright and are actually part of the problem, not part of the solution. We simply need world-wide debt forgiveness. The big companies have made enough, the government has been played enough and the average person has been financially raped enough. Enough is enough.

Debt forgiveness between countries, colonies, businesses and people equalizes the playing field and allows everyone to get back on track, thereby stimulating those economies. These economists are obviously shills and mouthpieces for the bankers who developed the ponzi scheme in the first place.

Cheers - Dave

reply to post by bobs_uruncle


Yep I agree. The debt has become a massive burden on people, their communities and entire countries.

Will be interesting to see what the NFP employment figures are next week in the world's largest economy.

And news just in:

Global growth forecasts slashed ahead of key US meeting

Leading economists have slashed their forecasts for global growth ahead of a key meeting on Friday of the world's central bankers and policymakers.

UBS and Citi followed Morgan Stanley in lowering their outlook this year to 3.3pc and 3.2pc from 3.8pc and 3.7pc respectively. The world economy had been expected to grow at around 4pc just a few weeks ago.

The downgrades came as markets dipped on dwindling hopes that Ben Bernanke, chairman of the US Federal Reserve, would signal more stimulus in his speech on Friday at Jackson Hole, Wyoming.

The article takes a more positive spin from here stating that even though there is increasing unemployment, there is no need for QE3 due to increasing inflation and that the economy (I assume US economy) is still growing. Will be interesting to see what GDP figures are later on.