|George - one of the few|
who predicted the
George Magnus, Senior Economic Adviser to UBS, is one of the few economists who gave strong warning signals as early as February 2007 of the financial and liquidity crisis which hit in 2008. If only the Bank he advises adopted his views in their investment strategies!!
Whatever George ( he likes to be called by the first name!) says should be taken very very seriously.
This is an extract from his letter published yesterday in the Financial Times about UK's dissent on the proposed EU Treaty change.
"What the European summit agreed to do was to seal a permanent and pro-cyclical austerity zone from Portugal to Greece and from Finland to Italy. Leaders have done this because they have misdiagnosed the causes of the sovereign debt and banking crisis, and have therefore ended up with a flawed agenda and inappropriate tools.
The narrative is lifted straight out of the 1930's. The crisis will escalate further in 2012 as the European contracts, sovereign solvency becomes increasingly elusive, and distrust pervades European financial markets.
The UK’s position only seems catastrophic if Europe took a giant leap forward to a successful fiscal union enshrined in treaty change, backed up by a timetable for joint liability European bonds, and sustained by a credible growth agenda.
What happened was a loose and inadequate agreement to cope with a future crisis, and a continent-wide austerity zone that will make the current crisis a lot worse next year. At the very least, we should reserve judgement as to whether the UK prime minister’s conduct has made him a hillbilly or, even if not for the right reasons, a hero."
I see great probability that Cameron will be proved a hero even though he took the right decision for the wrong reasons. Fiscal policy has to be anti-cyclical not pro-cyclical. It's elementary and the fact the Germany is forcing everyone to dump Keynes economic thinking is scandalous and will eventually prove disastrous.
It is like calling the fire services telling them your house is on fire and instead of sending the fire-engine they send a fire-prevention consultant to re-design your house.