Wednesday, December 21, 2011

Beating the Drum Louder: Delusional Economics (MarcoBusiness)

From bad to worse for the IMF

For some time now I have been pointing out poor economic policy implementations within the European economy and how those policies are likely to effect the real economies of European nations. As I re-stated on Monday, my major concern with the current thinking from European economic leaders is their misguided belief that implementing austerity before credit write-downs/offs is a credible policy for a highly indebted, non-export competitive nation with a non-deflatable currency.

As I have explained many times before, this policy will fail because the deflationary effects of austerity will mean that the economy no longer has the ability to services its existing debts as it is not receiving compensation for that deflation via its export sector due to the non-responsive currency.

So, as I have been saying, all that will happen with the continued implementation of these policies is failing periphery economies which will require constant bailouts. 

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