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May 1, 2020

Guys

My patience has been exhausted.  The comments page on this blog has been used by some to post very long comments plus diatribes and attacks on other commentators, some times reaching beyond what is acceptable in tone and fairness.  I have put up with this for years as long as people were not racist or violent.  But now I have had enough.  People who submit long comments (that sometimes match the length of my own posts) are abusing the purpose of this blog and so should get their own blog and post there.  People who attack others in a personal and threatening manner will be blocked.  Expect some of you ‘regulars’ to disappear from the comments page.  You can attack me or others on your own blog.

Self-correcting economies and macro management

December 2, 2015

The Keynesians have a problem.  Why has it taken so long to recover from the slump of 2008-9 even after central banks have applied Keynesian-style unconventional monetary policies?  The answer from Britain’s leading Keynesian Simon Wren-Lewis and from America’s top Keynesian, Paul Krugman, is that capitalist economies in slumps are not self-correcting.

So we need central banks to apply easy money policies, especially when an economy is in a ‘liquidity trap’, where everybody holds cash and won’t spend.  And when interest rates are at zero (zero-bound) and nothing happens, we then need ‘unconventional’ monetary policies like quantitative easing (printing money to buy government bonds from banks) or negative interest rates (charging banks for holding cash).

But even these policies are not working.  The major economies are still growing well below previous trend growth rates and many still have not got their GDP per head levels back above pre-global crash levels.  Indeed, a recent analysis by Eichengreen and O’Rourke shows that this Long Depression is even worse than the Great Depression, at least when measured by industrial output.

Global industrial output from start of Great Depression and Great Recession

Slow recovery

Krugman points out that a new paper by former IMF chief Olivier Blanchard and others finds that recoveries can take a long time for ‘self-correction’ of up to six years – pretty close to what has happened since the end of the Great Recession.  As Krugman puts it: “The long run is pretty long, in other words; we might not all be dead, but most of us will be hitting mandatory retirement.”  I’m already there.

So this is not a good advert for the success of Keynesian-style easy money policies.  The retort of Simon Wren-Lewis is that if you think monetary policy is useless, what if a central bank hiked interest-rates at the depth of slump?  Don’t you think that would damage an economy?  So macroeconomic policy does matter.  Or as another Keynesian, Nick Rowe, puts it: “The most dangerous idea in macroeconomics is that monetary policy doesn’t matter”. 

Now I’m sure that hiking interest rates when profits for corporations and house prices are falling would be hugely damaging.  But this is like saying that pulling on a string (hiking rates or reducing money supply) will pull an economy down when it’s already down.  But it does not follow that pushing on a string (cutting rates or increasing money supply) will make an economy go forward – as QE has proved.

In a way, Marx’s theory of crisis is ‘self-correcting’.  Capitalism is never in permanent crisis; slumps do not last forever.  If capital values (means of production and labour) are cut enough to restore profitability through bankruptcies of weaker capitals and unemployment, then eventually those stronger capitals will start to invest again.  However, in a depression, with low profitability and high debt, that could take a long time.

Nevertheless, the Keynesians still look to show that macro policy can turn even a depression around and we don’t have to wait for ‘self correcting’ factors like profitability.  Economics graduate Matthew Rognlie is a rising star in mainstream economics, recently feted by the likes Krugman and others for his trashing of Thomas Piketty’s conclusion that inequality was set to rise over the next decades unless there is policy action.

Now Rognlie has been turning out fast some new academic papers. One recent paper argues that the Great Recession was triggered by speculative over-investment in housing – an Austrian economics explanation, as he says.  But the Great Recession and the subsequent weak recovery show that, without macro management, economies may not self-correct as the Austrians believe.  That’s because the loss of income for householders defaulting on their homes spills over into demand for real investment and spending.

In another paper, Rognlie tell us that unconventional monetary policy (negative interest rates) can work in restoring investment and consumer demand as long as the demand for money is ‘elastic enough’.  The trouble is that this does not seem to be the case in a depression – there’s no demand to spend money however much you create, if there is no profit in it.

What was also odd was that this debate among the Keynesians made little mention of the main Keynesian policy: more government spending to restore economic growth.  Krugman, Wren-Lewis, Rowe and Rognlie were only concerned with the efficacy of easy monetary policy.  Yet this is the Keynes of the Treatise on Money written in 1931.  After five more years of depression in the 1930s, Keynes then wrote The General Theory in which he recognised the failure of easy money policies and proposed fiscal spending instead, and even the ‘socialisation of investment’, as necessary to end the depression.

Ironically, there is a new report out which updates the analysis of the IMF economists of a few years ago who reckoned that they underestimated the ‘multiplier effect’ of austerity (fiscal contraction) on growth. At the time, this was made quite a fuss of by leftists within the labour movement, as it seemed to prove that austerity was the cause of the Great Recession and the ensuing depression.

In this blog, on several occasions, I have thrown some cold water over this conclusion and the role of the Keynesian multiplier.  Well, the new analysis shows that the size of fiscal multiplier was not underestimated after all. “The authors do not find convincing evidence for stronger-than-expected fiscal multipliers for EU countries during the sovereign debt crisis (2012-2013) or during the tepid recovery thereafter.” 

So the original IMF estimates were right that the multiplier effect of more or less government spending on growth was small and not larger during the period of ‘austerity’ policies adopted by various European governments since 2009.  Keynesian monetary policy appears to have made little difference in restoring economic growth and incomes since 2009 and Keynesian fiscal policy would not either.

UK budget: slashing public services and welfare

November 25, 2015

The main headline news from the UK’s annual government spending review is that the British Conservative chancellor George Osborne has done a U-turn on his previous plan to cut what are called tax credits that supplement the pay of the poorest working families.  The planned cuts in these ‘credits’ were part of the aim to cut another £12bn off the already huge cuts in welfare spending that the Conservatives have made.  This backtracking by Osborne is a victory for the campaigning of the left-wing Corbyn-McDonnell Labour opposition leadership.  If the so-called moderates were still the leaders of Labour, there would have been no fight at all.

This U-turn means that the government will exceed its own self-imposed ‘cap’ on welfare spending for the next three years.  But, as shadow chancellor John McDonnell has pointed out, cuts in income to the poorest working (not unemployed) families are still in the pipeline.  That’s because the Conservative government plans to introduce what it calls ‘universal credits’ to cover all sorts of benefits in two years and phase out tax credits.  The new credits will pay out much less.  Working families will lose so that the government can meet its ludicrous target of ‘balancing the books’ on the government budget by 2019.

TME

The irony is that, despite all the measures of austerity imposed by the Conservatives since they came into office in 2010, they still cannot get the government deficit down in cash terms and are way behind their original targets for annual deficits as a share of GDP.

OBR

That’s because of two things.  The government has reduced taxes so much for the rich and for corporations that the tax returns have just not met targets.  And the UK economy has grown much more slowly since 2010 than forecast, so tax revenues have grown more slowly.  This has forced the government to keep on cutting government spending to try and get the annual deficit down and stop the public debt to GDP ratio from rising.

Forced to maintain spending on health and education (although as share of GDP they will fall), the government is imposing huge cuts in other public services: transport -37%, agriculture -15%, justice -17%, culture -22%.  In this spending review, the government also announced an increase in ‘defence’ spending and a little more on health, although it wants £25bn in ‘savings’ from the health service over the next four years – ludicrous as the population rises and gets older.

The Chancellor boasted that by the end of this parliament in 2020, government spending will be only 36% of GDP, making it the lowest ratio among advanced economies, excepting Switzerland and Australia.  This is a marker for how anti-state spending this government is and how pro big business it is.

The Chancellor has been lucky in that interest rates remain very low, keeping the cost of servicing public debt low. But it is also fudging projections for future tax revenues, claiming that the UK economy can grow at about 2.4% a year for the next four years. He is hoping to reach his 2020 budget target by cutting spending less than previously planned now in order to impose larger spending cuts and tax increases later. And there are new taxes: increased local government tax, a tax on buying homes for renting out, a levy on employers to pay for apprenticeships and the introduction of loans for grants for nurses and other students.  Nurses will now have to pay for their qualifications training and then get low pay and long hours.

But if global interest rates rise with the start of Fed hikes and a global recession returns and stops the UK economy in its tracks, then even these revised budget projections will turn to dust.

Rethinking economics: value, irrationality and debt

June 30, 2015

I had to cut short my attendance at this year’s Rethinking Economics conference in London (http://www.rethinkingweekend.org/).  That was because of the surprise developments in Greece which required my attention under the instructions of the God Mammon.

So I was deprived the opportunity of attending a number of presentations and seminars.  Here is the agenda of the two-day conference
(http://www.rethinkingweekend.org/wp-content/uploads/2015/05/Conference-Programme-27-28-June.pdf).
Also, here are my previous posts on last year’s London and New York conferences.

https://thenextrecession.wordpress.com/2014/06/30/rethinking-economics/

https://thenextrecession.wordpress.com/2014/09/16/rethinking-economics-in-the-backwater/

Rethinking Economics is an international organisation of academics and graduate students in economics seeking to develop an alternative and pluralist economics discipline beyond the stifling orthodoxy of mainstream neoclassical theory that dominates nearly all economics departments in universities and colleges.

This year’s looked well attended to me.  The opening contribution was by France Coppola, an economist from the financial sector who regularly blogs at http://coppolacomment.blogspot.co.uk/

Coppola treated us to a short lecture on value theory.  She criticised Adam Smith’s distinction between use value and exchange value from his famous example of water having great use value but no exchange value and diamonds having low use value but high exchange value.  She pointed out that the use value of water is much lower in Scotland which is abundant with water than in the Sahara where water is scarce.  Thus the degree of scarcity will affect the level of use value and also the exchange value, as the cost of water has been rising faster than the value of gold in recent years.

Coppola sought to expose Adam Smith’s value theory in this way and thus presumably pose more heterodox alternatives.  The problem with this is that scarcity is not Adam Smith’s value theory.  Smith held to a labour theory of value, as did all the classical economists.  The diamond-water example is, in a way, exceptional to the classical or Marxist approach to value, namely that, under capitalism and market forces, the value of something depends ultimately on the labour time expended to produce it.  It was the neoclassical counter-revolution in economics that turned this objective theory of value into a subjective psychological one of marginal utility (or use value) based on individual consumer ‘preferences’.  I’m not sure Coppola was helping the audience on this question with her approach to value.

Talking of the psychological approach to economic behaviour, the conference was honoured to get Daniel Kahneman, the veteran Nobel prize winning behavioural economist, to speak at a plenary session.  Kahneman is an Israeli-American psychologist, notable for his work on the psychology of judgement and decision-making. His empirical findings challenge the assumption of human rationality prevailing in modern economic theory. In 2015, The Economist listed him as the seventh most influential economist in the world.  Thinking, Fast and Slow is his best-selling book, which summarizes research that he conducted over decades.

Kahneman developed what he called ‘prospect theory’ in criticising the traditional utility theory of value promoted in all the mainstream economics textbooks.  Kahneman’s research has shown that people do not behave as mainstream marginal utility theory suggests: namely making ‘rational’ choices.  Instead people have ‘behavioural biases’.  For example, they are more likely to act to avert a loss rather than look to achieve a gain in any investment or spending decision.  In other words, people have higher utility in avoiding losing than in winning; there is not equal utility, as marginalist theory assumes.

Kahneman argues that there is “pervasive optimistic bias” in individuals.  They have an irrational or unwarranted optimism.  This leads people to take on risky projects without considering the ultimate costs – again against rational choice assumed by mainstream theory.  In an echo of the famous saying by George W Bush’s neo-con defence secretary, Donald Rumsfeld, Kahneman reckons that people usually just make choices on what they know (known knowns), sometimes even ‘known unknowns’, but never consider unknown phenomena, ‘unknown unknowns’, like a financial crash.  People do not consider the role of chance and falsely assume that a future event will mirror a past event.

Kahneman’s work certainly exposes the unrealistic assumptions of marginal utility theory, the bedrock of mainstream economics.  But it offers as an alternative, really a theory of chaos, that we can know nothing and predict nothing.  This was a ready excuse used by the bankers and monetary policy officials to explain the global financial crash in 2008. The official leaders of capitalism and the banking ‘community’ then fell back on the argument of Nassim Taleb, an American financial analyst, that the crisis was a ‘black swan’ – something that could not have been expected or even known until it was, and then with devastating consequences: an ‘unknown unknown’.

Before Europeans ‘discovered’ Australia, it was thought that all swans were white. But the discovery in the 18th century that there were black swans in Australia dispelled that notion.  Taleb argues that many events are like that. It is assumed that something just cannot happen: it is ruled out. But Taleb says, even though the chance is small, the very unlikely can happen and when it does it will have a big impact.  The global credit crunch (and the ensuing economic crisis) has been suggested as an example of the Black Swan theory.

From a Marxist dialectical point of view, the Black Swan theory has some attraction. For example, revolution is a rare event in history. So rare that many (mainly apologists of the existing order) would rule it out as impossible.  But it can and does happen, as we know. And its impact, when it does, is profound. In that sense, revolution is a Black Swan event. But where Marxists would disagree with Taleb (and Kahneman?) is that he argues that chance is what rules history. Randomness without cause is not how to view the world. This is far too one-sided and undialectical. Sure, chance plays a role in history, but only in the context of necessity.

The credit crunch and the current economic slump could have been triggered by some unpredictable event like the collapse of some financial institution or the loss of bets on bond markets by a ‘rogue trader’ in a French bank. And the oil price explosion may have been the product of the ‘arbitrary’ decision of President Bush to attack Iraq.  But Marxists would argue that those things happened because the laws of motion of capitalism were being played out towards a crisis. Similarly, the recent spout of natural disasters like tsunamis, earthquakes, flooding etc are not an act of God.  Global warming is man-made.  The current economic crisis was no chance event that nobody could have predicted.

Kahneman’s work leads to that of behavioural economists like Nobel prize winners, Robert Shiller and George Akerlof.  This school argues that changes in a capitalist economy can be best explained by changes in the unpredictable behaviour of consumers and investors.  This is the inherent flaw in a modern economy: uncertainty and psychology.  It’s not the drive for profit versus social need, but the psychological perceptions of individuals. Thus the US home price collapse came about because consumers have a bias towards precaution and savings as debt mounted – just like that.

Shiller argues that investors and economic agents are so irrational that speculation, ‘herding’ and uncertainty can lead to instability and economic crisis. He wrote a book with George Akerlof, called Animal Spirits, the Keynesian term for investment motivations.  Akerlof is married to Janet Yellen, the successor to Ben Bernanke as head of the US Federal Reserve (see my posts
https://thenextrecession.wordpress.com/2013/10/14/the-noblest-fama-and-shiller/
and
https://thenextrecession.wordpress.com/2013/05/10/the-cat-is-stuck-up-a-tree-how-did-it-get-there-and-how-do-you-get-it-down/).

What worries me with the ‘irrational exuberance’ theory of crises is it leaves economics in a psychological purgatory, with no scientific analysis and predictive power.  Also, it leads to a utopian view of how to fix crises.  Shiller says markets can get out of line and then cause busts.  This is due to the irrational behaviour of human beings, not to the drive for profits by private capital.  The answer is to change people’s behaviour; in particular, big multinational companies and banks need to have ‘social purpose’ and not just want to increase profits.  That is really like asking a lion if he would keep his claws in while stroking the lamb (see my recent post on Inclusive capitalism, https://thenextrecession.wordpress.com/2015/06/26/lady-rothschild-thomas-piketty-and-inclusive-capitalism/).

In contrast, in another keynote session, Will we crash again?, Professor Steve Keen, now head of Kingston University economics, presented an objective and empirically testable theory of crises based on the excessive growth of private sector debt.  Keen is noted for his strong post-Keynesian critique of mainstream marginalist equilibrium economics in his excellent book, Debunking Economics and also for being one of the few economists to predict the 2008 crash (I would claim to be another – but that is another long story!).

Keen went through the conditions that led to the current crisis and showed that the conventional wisdom got the crisis back to front – in effect, they blamed the symptom for causing the disease. The real cause – the bursting of a private debt bubble – still hasn’t been addressed and lies in waiting ready to cause the next crisis in the next 2-5 years. To escape, economists need to embrace unorthodox thinking and so must policymakers, but the odds are that they will not.

I have written on Keen’s views in several places on my blog.  See

https://thenextrecession.wordpress.com/2011/10/07/riccardo-bellofiore-steve-keen-and-the-delusions-of-debt/

https://thenextrecession.wordpress.com/2012/04/21/paul-krugman-steve-keen-and-the-mysticism-of-keynesian-economics/

Keen’s focus on the growth of private sector debt as a key trigger of financial crashes (following the work of Hyman Minsky), is very relevant.  Take the new evidence going back to 1870 on where the dangerous concoction of excessive debt and asset price bubbles can lead (http://conference.nber.org/confer/2015/EASE15/Jorda_Schularick_Taylor.pdf).

However, both the Keen-Minsky debt school and the behaviourist ‘animal spirits’ school have one thing in common.  They see the flaws of capitalism in the financial sector only. In contrast, Marx posits the ultimate cause of capitalist crises in the capitalist production process, specifically in production for profit.  That does not mean the financial sector and, in particular, the size and movement of credit does not play any role in capitalist crises.  On the contrary, the growth of credit and fictitious capital (as Marx called speculative investment in stocks, bonds and other forms of money assets) picks up precisely in order to compensate for the downward pressure on profitability in the accumulation of real capital.

And that’s the point. Capitalism only grows if profitability is rising.  In the US, with profitability declining after 2005, the huge expansion of credit (or what Marx called fictitious capital) could not be sustained because it was not bringing enough profit from the real economy. Eventually, the housing and financial sectors (the most unproductive parts of capitalist investment) stopped booming and reversed.

Rethinking Economics is a very good development, opening the doors to more heterodox thinking in academic economics.  But all the conferences that I have attended have been dominated by the views of orthodox Keynesians (Robert Skidelsky was there this year) or post-Keynesians (Keen, Ann Pettifor etc).  The views of Marxist economics were notable by their absence.

Bye, bye, Bird

October 29, 2013

On Friday, I am going to the funeral of Antonia Bird who died of cancer last week.  Antonia was a great British stage, film and TV director, making several riveting Hollywood movies.  But more important, she was an exciting and class conscious director of both fiction and non-fiction drama.  Here are some obituaries.

http://www.theguardian.com/film/2013/oct/28/antonia-bird

http://www.theguardian.com/commentisfree/2013/oct/28/antonia-bird-film-maker-death

http://www.bfi.org.uk/news-opinion/sight-sound-magazine/comment/obituaries/antonia-bird-1951-2013

And Antonia was a committed socialist, something omitted from most accounts of her life, and yet central to her motivations.

She made several great movies, but the one I Iiked a lot was Hamburg Cell, the best account and explanation of the motives and actions of the 9/11 bombers.

http://www.amazon.com/The-Hamburg-Cell-Karim-Saleh/dp/B000I2J6KK

I was honoured to have been her friend, along with husband Ian, and comrade.

Bye , bye, Bird.

Apologies again!

April 5, 2011

Ignore my latest post on profits – it’s a mistaken send again!  I keep hitting the wrong buttons.

Await the real piece soon!

Michael

Apologies

April 4, 2011

Guys

Sorry about the last post on Ireland – pressed the wrong button and you got a half finished piece with loads of rubbishy errors.  It has been fixed so you should read it again.

 

Michael

Is the euro dead?

May 25, 2010

If you read the pages of the Wall Street Journal or the Financial Times (as you do!), you would be forgiven for thinking that Europe is about to implode economically and the great experiment of a European single currency is dead in the water.  We are told by eminent Keynesian economists like Paul Krugman in New York that the euro is going to collapse, while monetarists like Wolfgang Munchau in the FT explain the whole Eurozone is bankrupt and the Eurozone is going to break up into little nationalist pieces very soon.

But is the euro really being killed off by the government debt crisis in Europe?  The short answer is no, or at least not yet.

The long answer is this.  The government debt crisis started in the same way as the mortgage debt crisis started in the US.  That started with the smallest fragment of the mortgage market, the high risk, sub-prime-no questions asked part of the housing market.  When that went belly up as sub-prime mortgagees defaulted on their rising debts, it spread into the rest of the mortgage market.

Most of America’s mortgages were bundled up into bonds and sold to ‘stupid Germans’, as ‘fabulous Fabio’ of Goldman Sachs called his clients when he marketed his dodgy batch of mortgage ‘derivatives’ to them.  So when US house prices plummeted, not just the US mortgage lenders went bust, huge losses were racked up across the world, particularly among Eurozone banks.  So the sub-prime crisis spread to the prime and to the world.

This sovereign debt crisis is a product of an expansion of debt in the government sector, as politicians desperately tried to bail out the banks and avoid a Great Depression.  Government bailouts of the financial sector and spending to keep enough people at work have led to huge government budget deficits and an expansion of public sector debt to levels not seen since the second world war.  And this time, this debt is not just confined to a few countries that paid for that war.  This time every capitalist economy is taking on another mountain debt of that governments (and that means you and me) will owe to the banks and other financial institutions and through them to the pension funds and other savers.

Public debt to annual output was about 60% in the UK, 50% in the US and 65% in the Eurozone before the crisis and the Great Recession.  Next year it will be 95% in the UK, 90% in the US and about 85% in the Eurozone.

The smallest part of the Eurozone had the worst debt ratio: namely Greece.  As I have explained before in a previous post (Greek countdown, 1 February 2010), Greek capitalism is one of the weakest in the whole of Europe.  But the Greeks blagged their way into the Eurozone and with help of subsides from the rest of the Europe, they were able to maintain some semblance of standards of living for the populace, while the capitalists themselves lived the life, paying no taxes and corrupt as hell.  The Great Recession exposed a Greek public debt ratio of 120% of GDP and rising.

The Germans had had enough of them and wanted the Greek capitalists to stop the party.  The Greek leaders are now trying to get the Greek people to pay for the mess.  Markets panicked when they realised what a mess Greek capitalism was really in and worried that the Germans would let them go to the wall so they could not pay their debts.  They began to wonder if other Eurozone countries like Portugal or Spain could meet the same fate.

If several countries with big debts found that they could not ‘roll over’ those debts or borrow any more except at exorbitant rates, they may decide to default on their obligations.  Thus the sub-prime Greeks would have spread the crisis to the prime Spaniards or Italians.

That is the fear and also the prediction of many American and British commentators.  But then they are biased.  For the Americans, a united and strong European capitalism is a threat to their hegemony and British capitalists are divided between those who look to the Americans for leadership and those who look to Europe for markets.  The ‘eurosceptics’ want to see European capitalism break up.

But it is not going to happen because the Greeks or the Portuguese default on their debts.  They may get thrown out of the Eurozone but the currency will survive.  It would only collapse if Franco-German capitalism wants it to.

The great European project began after the war for two reasons.  The leaders of recovering European capitalism wanted to set up a structure to ensure that there could never be another war on the continent of Europe (something not entirely achieved if you count the Balkans).  The French would embrace the Germans in an economic and trade pact that would ensure German nationalism was entrapped, replacing it with European unity.

The second reason was to turn Europe into a major competing power with the American capitalism.  To do that, they needed to set up a free trade area and then eventually a single European currency.  This aim was a great success as Europe shot forward during the Golden age of capitalism in the 1950s and 1960s.  Europe gained relatively over the US during the 1970s and 1980s as American capitalism’s relative decline was exposed, signified by the ending of the dollar’s fixing to a gold standard in 1971 – an indicator that the US could no longer afford to support economically the rest of the capitalist world against economic slump or the Soviet Union.

But in the 1990s, Europe stuttered.  After the fall of the Wall, West German capitalist leaders decided to annex eastern Germany.  This was very expensive, but on balance was regarded as better than the alternative of leaving it separated and outside their influence.  But for a while German capitalism had to leave the project of the euro to the French who allowed all sorts of riff raff like Greece, Portugal, Spain and even Italy to enter the Eurozone.  As a result, strong German capitalism with a strong currency was watered down into a weaker currency zone.

Now the chickens have come home to roost.  German capitalist leaders are now much less enamoured of the whole European project which has weakened them.  They have sacrificed profits to build this Eurozone and now the Greeks have cheated.  There has been a nationalist surge among Germans, fed up with the idea of  having to pay more taxes to finance the lives of a Greek elite (although it has been described in the German papers as the ‘fat cats’ of Greek public sector workers).  But the Germans have been persuaded by the French and the Italians to cough more funds to hold the euro project together.

The Eurozone won’t break up unless the Germans want it to.  So far, they are willing to make the project work rather than abandon it.  But the price for others like Greece, Portugal  or Spain will be severe cuts in living standards to pay down the public debt.  It remains to be seen whether governments in those countries can force these measures through or popular protest will throw them out.  If the latter happens, then the Germans might call it a day.  But that scenario is still some years away.

If we get some economic growth over the next few years and popular protest is sufficiently contained, then Eurozone governments will probably muddle through and the euro will continue.  After all, the debt hangover after the Great Recession (see my post, The overhang of debt, 1 March 2010) is actually much less in the Eurozone than it is in the UK, the US, or Japan where debt levels are even higher.  If there is to be a debt crisis, that’s where you should look over the next few years.