Saturday, 29 December 2018

'The Euro is a suicide pact' Economist Prof. Steve Keen on Brexit and the European Central Bank

Private debt is weighing down the economy
Steve Keen is a professor of economics at Kingston University, London.

The EU’s policymakers like to obsess about government debt, but the 2008 crisis was caused by something they ignore: private debt.

Credit of as much as 40 percent of GDP per year fueled Spain’s housing bubble, for example, and drove private debt to 260 percent of GDP, more than four times the Maastricht Treaty limit on government debt. Spain’s private debt is still 200 percent of GDP, and is a millstone around any recovery.

France and Italy carry similar burdens. EU attempts to reduce government debt could trigger a return to private sector de-leveraging and cause another slump: not as bad as 2008, but still debilitating.

Europe has “turned Japanese” and doesn’t know it.

[Posted at the SpookyWeather blog, December 29th, 2018.]

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