485女诚意征婚# Piebridge - 鹊桥
k*8
1 楼
Stephen King: Euro meltdown would pave the way for another Great Depression
Outlook: Imagine that Europe is unable to agree on a convincing solution.
What sort of system would we be left with?
Monday, 17 October 2011
The euro's future is all our futures. Whether or not you like the single
currency, the world economy's health depends on its survival. Should the
euro collapse, we will find ourselves heading into another Great Depression.
Its establishment removed the currency risk which had inhibited investment
across the eurozone. Suddenly, a single European capital market became a
reality. Germans could invest in Italy, Spaniards could invest in France and
Belgians could invest in Portugal. National borders which had so limited
economic opportunity simply dissolved.
Its arrival led, within Europe, to a turbocharged version of globalisation.
But it was an unstable version: the abolition of multiple currencies also
led to the emergence of massive imbalances.
German exports went through the roof. Partly this was luck: Germany happened
to make a lot of capital goods, precisely the kinds of things in demand in
China and elsewhere. German exports also did well because its companies
maintained strict control over their labour costs even though they no longer
had to face the tyranny of Deutsche Mark appreciation.
The rise in exports could have persuaded Germans to live the good life. They
might have spent the benefits of their new-found competitiveness on
consumer goods, sucking in more imports and keeping their balance of
payments position in check. They decided, instead, to save the income and
their trade surplus soared.
For Germans, a big trade surplus is a sign of success, so much so that many
in Berlin think others should follow their example. While it's a familiar
lament, it is also economically illiterate. For every German trade surplus,
there has to be an offsetting deficit elsewhere in the world. Everyone
cannot follow the German model. Indeed, the bigger the German surplus, the
more other countries will have to head in the opposite direction.
Although we tend to think about trade surpluses and deficits in terms of
competitiveness, this is mostly the wrong approach. A country that manages
to sell more exports may be more competitive than it was previously, but
that in no way implies that it should refuse to buy more imports. Indeed, it
may be that two countries both become more competitive simultaneously,
allowing them to export more to each other with no impact on their balance
of payments position.
In truth, surpluses and deficits are much more about the balance between
domestic savings and investment. If Germans want to save more than they
invest, they may end up with a balance of payments current account surplus
regardless of their competitiveness. The surplus savings may leak abroad and
end up funding someone else's current account deficit.
Over time, Germany has lent more while countries like Italy have borrowed
more. But to know what's caused what, we need to look at the capital markets
. If lenders chose to increase lending and had to persuade borrowers to
borrow more, interest rates would have to fall. If, instead, borrowers chose
to increase their borrowing and had to persuade lenders to lend more,
interest rates would have to go up.
For much of the euro's life, the story has been much more about the
generosity of lenders than the desperation of borrowers. Until the 2008
crisis, interest rates on peripheral debt fell lower and lower. In effect,
Germany's export success was generating higher surplus savings which had to
find a home. With the end of currency risk, these savings went south,
forcing interest rates in Italy, Spain and elsewhere downwards. As rates
fell, so southern European nations borrowed more.
Unfortunately, the crisis then intervened. Incomes ended up lower than
expected and the ability of southern debtors to repay their northern
creditors was seriously impaired. The creditors chose to blame those in the
south for having borrowed too much. Yet, it was at least as much a story
about the creditors having lent too much. Demanding austerity from the south
was all very well but it was hardly the fairest way of sharing the burden.
Moreover, it hasn't worked. Many investors now believe that, in the absence
of common cause between north and south, the euro will be torn apart. And
they're making their own contribution to the process. They sell Italian
bonds while buying their German counterparts, figuring that, in a post-euro
world, a new Italian currency would fall against a new German currency. And
they sell the institutions that own Italian bonds. In the absence of
political unity, we end up with financial mayhem.
Imagine that Europe is unable to agree on a convincing solution. Imagine
that the anti-euro bets increase and that the single currency crumbles. What
sort of financial system would we be left with?
With the reintroduction of currency risk, financial institutions would have
to unwind a huge chunk of their cross-border holdings. There would be no
point investing French pensions in Italian lira assets if a newly-introduced
lira were to find itself constantly falling against the currencies of
northern Europe. It would leave French pensioners seriously short of French
franc savings. There would also be massive legal uncertainty. If the euro
disappeared, how would an Italian bond issued in euros and owned by a French
institution be valued?
The rush to unwind would create massive doubts over the health of individual
institutions, leading to a drying-up of credit. Lending would collapse,
bankruptcies would soar and co-ordination among European policymakers would
be nigh-on impossible to achieve. We would face financial anarchy on a scale
big enough to throw Europe – and much of the rest of the world – into
another Great Depression.
So we need a solution. And it's a solution that must accept collective
responsibility. The north may want to blame the south but that is the wrong
strategy. In the event of a euro meltdown, the northern creditors would
suffer as much as anyone else. Berlin and Paris will now have to take
political risks to come up with a solution. But it's better to take
political risks – including a sharing of the burden between creditors and
debtors – than to face monumental economic failure.
Stephen King is the global chief economist at HSBC
http://www.independent.co.uk/news/business/comment/stephen-king
Outlook: Imagine that Europe is unable to agree on a convincing solution.
What sort of system would we be left with?
Monday, 17 October 2011
The euro's future is all our futures. Whether or not you like the single
currency, the world economy's health depends on its survival. Should the
euro collapse, we will find ourselves heading into another Great Depression.
Its establishment removed the currency risk which had inhibited investment
across the eurozone. Suddenly, a single European capital market became a
reality. Germans could invest in Italy, Spaniards could invest in France and
Belgians could invest in Portugal. National borders which had so limited
economic opportunity simply dissolved.
Its arrival led, within Europe, to a turbocharged version of globalisation.
But it was an unstable version: the abolition of multiple currencies also
led to the emergence of massive imbalances.
German exports went through the roof. Partly this was luck: Germany happened
to make a lot of capital goods, precisely the kinds of things in demand in
China and elsewhere. German exports also did well because its companies
maintained strict control over their labour costs even though they no longer
had to face the tyranny of Deutsche Mark appreciation.
The rise in exports could have persuaded Germans to live the good life. They
might have spent the benefits of their new-found competitiveness on
consumer goods, sucking in more imports and keeping their balance of
payments position in check. They decided, instead, to save the income and
their trade surplus soared.
For Germans, a big trade surplus is a sign of success, so much so that many
in Berlin think others should follow their example. While it's a familiar
lament, it is also economically illiterate. For every German trade surplus,
there has to be an offsetting deficit elsewhere in the world. Everyone
cannot follow the German model. Indeed, the bigger the German surplus, the
more other countries will have to head in the opposite direction.
Although we tend to think about trade surpluses and deficits in terms of
competitiveness, this is mostly the wrong approach. A country that manages
to sell more exports may be more competitive than it was previously, but
that in no way implies that it should refuse to buy more imports. Indeed, it
may be that two countries both become more competitive simultaneously,
allowing them to export more to each other with no impact on their balance
of payments position.
In truth, surpluses and deficits are much more about the balance between
domestic savings and investment. If Germans want to save more than they
invest, they may end up with a balance of payments current account surplus
regardless of their competitiveness. The surplus savings may leak abroad and
end up funding someone else's current account deficit.
Over time, Germany has lent more while countries like Italy have borrowed
more. But to know what's caused what, we need to look at the capital markets
. If lenders chose to increase lending and had to persuade borrowers to
borrow more, interest rates would have to fall. If, instead, borrowers chose
to increase their borrowing and had to persuade lenders to lend more,
interest rates would have to go up.
For much of the euro's life, the story has been much more about the
generosity of lenders than the desperation of borrowers. Until the 2008
crisis, interest rates on peripheral debt fell lower and lower. In effect,
Germany's export success was generating higher surplus savings which had to
find a home. With the end of currency risk, these savings went south,
forcing interest rates in Italy, Spain and elsewhere downwards. As rates
fell, so southern European nations borrowed more.
Unfortunately, the crisis then intervened. Incomes ended up lower than
expected and the ability of southern debtors to repay their northern
creditors was seriously impaired. The creditors chose to blame those in the
south for having borrowed too much. Yet, it was at least as much a story
about the creditors having lent too much. Demanding austerity from the south
was all very well but it was hardly the fairest way of sharing the burden.
Moreover, it hasn't worked. Many investors now believe that, in the absence
of common cause between north and south, the euro will be torn apart. And
they're making their own contribution to the process. They sell Italian
bonds while buying their German counterparts, figuring that, in a post-euro
world, a new Italian currency would fall against a new German currency. And
they sell the institutions that own Italian bonds. In the absence of
political unity, we end up with financial mayhem.
Imagine that Europe is unable to agree on a convincing solution. Imagine
that the anti-euro bets increase and that the single currency crumbles. What
sort of financial system would we be left with?
With the reintroduction of currency risk, financial institutions would have
to unwind a huge chunk of their cross-border holdings. There would be no
point investing French pensions in Italian lira assets if a newly-introduced
lira were to find itself constantly falling against the currencies of
northern Europe. It would leave French pensioners seriously short of French
franc savings. There would also be massive legal uncertainty. If the euro
disappeared, how would an Italian bond issued in euros and owned by a French
institution be valued?
The rush to unwind would create massive doubts over the health of individual
institutions, leading to a drying-up of credit. Lending would collapse,
bankruptcies would soar and co-ordination among European policymakers would
be nigh-on impossible to achieve. We would face financial anarchy on a scale
big enough to throw Europe – and much of the rest of the world – into
another Great Depression.
So we need a solution. And it's a solution that must accept collective
responsibility. The north may want to blame the south but that is the wrong
strategy. In the event of a euro meltdown, the northern creditors would
suffer as much as anyone else. Berlin and Paris will now have to take
political risks to come up with a solution. But it's better to take
political risks – including a sharing of the burden between creditors and
debtors – than to face monumental economic failure.
Stephen King is the global chief economist at HSBC
http://www.independent.co.uk/news/business/comment/stephen-king
