From the SA Times Live web site – top academic warns of economic collapse in Europe. (H/T Mary)
Dennis Lachman, a professor in economics at Georgetown University and a resident fellow at the American Enterprise Institute for Public Policy Research, said at a conference on monetary policy and financial stability at the Reserve Bank on Thursday he has little doubt about this.
“The only question is how long the governments in the northern part of Europe can keep kicking the can forward by financing a trillion dollars here and a trillion dollars there to keep the party going for a little bit longer.
“We are talking about a currency arrangement that was flawed from the start.”
Lachman said the default of Greece or Ireland by the end of next year was another certainty.
“The important thing is that we are not talking about problems only in Europe’s periphery; we are talking about problems in the European banking system.
“Their inter-linkages with the European banking system makes this of concern. It is not only for the European economy, but what we have learned from the Lehman (Brothers) debacle and the sub-prime debacle is that these kinds of crises have a habit of being global in scope.”
Lachman said at the end of 2009 the exposure of French banks to the so-called PIIGS countries (Portugal, Ireland, Italy, Greece and Spain,) was around 37% of France’s gross domestic product. For Germany the exposure is 21% of GDP.
A write down of the debt of these countries would thus result in a shock for economies that haven’t fully adjusted to the Lehman shock, he said.
A euro crisis would coincide with the US economy either double-dipping or flirting with a double-dip, Lachman said.
I found two related videos on Verum Serum.
Rioting in Ireland:
The good news is that Americans have voted to avoid this dismal fate by electing Republicans. But we’re not out of the woods yet. But it’s definitely a good time to reduce your spending and start saving for a rainy day, and making a plan.
I’m struggling right now, because this is all happening too fast and my plan requires at least 3 years to execute… GAH! I didn’t expect this would happen so fast. I hope the House Republicans can put the brakes on the spending.