Today’s macroeconomic policies are wrong, and I mean to insist in this, even if most of those involved in their implementation protest because I’m being as vocal as I can about it. Because policies that only seek to resist and hide the real pain in the Med Club countries–the euro periphery–simply achieve lower and lower profitability and excuses for political leaders to greet each other with self-congratulatory handshakes. In the meanwhile, though, youth unemployment in several eurozone economies surpasses that of in the Gaza Strip.
The cost of money is what businesses and investors use to calculate if financing is worthy and what level of gains may be at stake. Nowadays, with so much and so heavy manipulation of the yield curve, with so extensive macroeconomic policies ready to fight any bit of systemic risk, everybody believes that the ghost of volatility has been won over–in fact, we might be need it back.
But, after 30 years of experience, I would say that these periods of calm are the previous station before the storm befalls. The price of potential volatility is being underestimated; probably, we are saving our energies in the expectation that some crash is looming. Because, even if we had eliminated systemic tail risks, we haven’t yet got a sustainable solution. The business model is not exactly working well.
That is why, although unpopular, my position is that only a real, complete crisis can smash those useless macroeconomic half-baked truths and orthodox principles that are good for nothing. This is the only way in which we would sort out the current mess and find a mandate to change.
Banks in the Med Club are busy purchasing state bonds because they seem to think that Berlin will support stability until the German elections in September. At the same time, though, their clients prefer to take their money out to other banking systems in core countries.
The greatest danger, unless something is done, is that social tensions scale and political radicalism grows in Europe, with unemployment pushing young people against the institutions and the private sector telling the public sector that enough is enough. History shows us that extremisms thrive in a context like ours.