Disclaimer. After nearly 40 years managing money for some of the largest life offices and investment managers in the world, I think I have something to offer. These days I'm retired, and I can't by law give you advice. While I do make mistakes, I try hard to do my analysis thoroughly, and to make sure my data are correct (old habits die hard!) Also, don't ask me why I called it "Volewica". It's too late, now.

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Monday, October 22, 2012

Pundit extraordinaire

Martin Wolf, of the FT.

MARTIN Wolf has not got every call right in the global financial crisis, but it's hard to think of a significant one he's got wrong. In an uncertain world, he is now probably the most trusted commentator on the global economy.

When Europe's leaders decided their top priority should be to cut deficits, he warned this would condemn the European Union to a long recession, making deficits bigger, not smaller. Each time leaders declared they had found the solution to its problems, he shredded their PR bluff with relentless logic.

If governments, banks and companies all pursued contractionary policies at once, he asked, where would the growth come from?

Unless someone bought more goods and services, there could be no growth. Unless someone borrowed, there was no benefit in saving. The common euro currency meant countries could not devalue as a short cut to raising competitiveness. And while one country in trouble could adopt austerity as the way out, a continent could not.

Wolf's critique was resisted by the Bundesbank, the European Central Bank, the British government and the bureaucrats in Brussels. But time proved him right. Years that should have been used to get Europe out of trouble instead have dug it deeper into it.

Read more here.

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