Economic Policy and Political Power in European Crises

Please cite the paper as:
Gerson P. Lima, (2015), Economic Policy and Political Power in European Crises, World Economics Association (WEA) Conferences, No. 2 2015, The European Crisis, 1st October to 1st December, 2015

This paper has been included in the publication
“The European Crisis”

Download from WEA books Purchase from Amazon UK

Abstract

This paper analyses the European Union crisis assuming that the economy is commanded by a veiled political power linked to the financial market. This connection is important for a financial crisis is consequence of financial capital supply excess, especially money supply excess, leading to risky operations and financial capital losses internally and abroad. A critical appreciation of the monetary policy reveals that it cannot deliver the promised price stability for the interest rent on public debt is mainly paid with new money printed by the central banks when buying Treasury bonds in open market operations. Inverse operations do not withdraw this liquidity for bond sales comprise interests. An experiment with US data is quoted to support the idea that the origin of the past and future American financial crises is the money printed to pay interest on the US public debt. Next it is demonstrated that the stock of money issued by government to make fiscal policy converges to a theoretical point of equilibrium. It is also observed that fiscal policy does not cause inflation for it is not always expansive and higher prices in this case are indication that people’s wealth increased; so, they are climbing the Maslow’s Pyramid and buying dearer stuffs. The European union are said to have two crises, the general one touching almost all countries where monetary policy prevails and its particular crisis, the risk of dismantling due to potential state members bankrupts. Collecting arguments, the conclusion is that there are evidences to support the Hellinger’s proposal of a parallel currency emission by state-members to make local fiscal policy. It is finally stated that even if this proposal is attractive to decision makers it must be, as any other economic policy, interesting to the political power and preserve democracy.

Keywords: , , , ,

Recent comments

7 Comments ↓

7 comment

  • Ayoub says:

    The Financial crises is aresult of combination of different causes .(1) misue of banking credits (2) Real economic sectors ignored (3) political orientation not go in harmony with economic orientation
    (4) misuse of loans and grants (5) Modes of finance not suitable … etc

    • Gerson P. Lima says:

      Thanks for your comment Ayoub, you are right about the immediate causes of financial crises; they must be associated with excess financial capital demand. However, I am searching into the first cause of the causes you point to; excess demand can only be realised if excess supply comes first. I would appreciate it very much if you could enrich your comment stressing your opinion on what is new in my paper.

  • Rudolf T.Z. Scheu says:

    Do not forget the democratic crisis: Europe is plagued by a severe Nazi revival.

    • Gerson P. Lima says:

      Thanks Rudolf. Is this revival a reaction to imigrants taking the employment of Europeans?

      • Rudolf T.Z. Scheu says:

        Yes, partly. As individuals groups tend to panic in crisis times. Another factor: overpopulation: no politician dares to speak about it because children, the family are holy. And last but not least: nobody knows how to oppose violent people _without_ violence.

  • M.M van Wijck says:

    Accepting the terms and interest rates connected to loans to be repayed as possible cause of crisis if the offer of liquidities is extended
    considerably, a system based on grants could be viewed as a solution, since many countries seem to organize large amounts of grants
    to pay investments. World Statistics Organization delivers data concerning avarage grant elements % on external debts, Large economies
    organized large % of grants in relation to their external debts in 2013 : China: 67%, Brazil 59% , India 78% and Turkey 48%.
    The chart shows a blank region to the Northern hemisphere where no percentages of grants would have been allowed, but possibly no data
    are delivered by governments or Central Banks. EU 2013 provided only 0.00007% of EU GDP to SMEs in grants. (EU budget figures).
    Grants could mean a solution if the blame is not shifted down onto the source collected by taxes, but is adjoined into a monetary decided
    policy to create masses of liquidities electronically multiplicated to be allowed to private enterprises and governments evitating debt posts.
    Degrees could be an issue to collective monetary policies, f.i. via IMF.

  • Laszlo Kulin says:

    From all the World regions the opinion that I can give is the opinion of the Central-European people in Hungary. How they feel about what kind at personal role thay can play in the solution at the worldwide economic crisis.
    The 2001 terrorist attack which destroyed the World Trade Centers in New York, shook the Americans’ faith in Safety. This continuous terrorist danger has created a worldwide economical crisis, which also affets credit. The banks enlarged their credit products and satisfied the claims. The money markets wavered, the investors withdrew.
    During this time the central and Eastern-European goverments and the democratic people tried to use it to their advantage. There should be economic progress, we skould be able to any where in the World, our children should be able to study anywhere in the World.
    We should be able to take all kinds of industrial products into our homes. Paralell to this unfortunately, a significant part at the vaters started to say that the Democrats have no need at improvement on these disadvantages. Many have started to state growing out of crime, give to much credit.
    To me, this view opinion is unexeptable. We can only give preference to the Democratic Benefit, if we take into account the disadvantages and solve them. However, because the crisis is global, we must find the common solution among nations around the World. Just like the, NEW DEAL in 1930 in the USA, it was neccessary that Economic problems should be strategically chosen. Central and Eastern-Europe must set realistic goals for their residents. It’s not a realistic goal that the Eastern European states should regulate the wealthy states’ century developed system.
    I think that freedom and democracy’ from them and from the USA as a gift. The third century state citizens must ask themselves the question:
    How much they are able to sacrafice so they can live in freedom?
    How much money, work, and how much are they able to sacrafice concerning their self centerd goals?

    Laszlo Kulin
    social policy
    Hungary