Hugh Hendry on the economy and the sovereign debt crisis
Below is an audio You Tube clip of Hugh Hendry on the euro zone crisis, the UK economy, hedge funds, shortselling and a lot more. The Hendry video runs 15 minutes.
The headline quote was, "we’re not in a recession in the UK, we’re in a depression". But I believe Hendry’s greatest insight into the depression and crisis was the following:
We’ve reached a very rare moment in economic history where the problem is greater than the ability of the politicians to respond.
I agree with that formulation. When I think about the political economy of the European sovereign debt crisis, I think primarily about how large hierarchical systems respond to crisis. My view is that institutional inertia means that crises need strong leadership to create the preconditions for change. This is something along the lines of what anthropologist Jared Diamond postulates about societies in his book Collapse.
But in Europe, the euro zone has an institutional structure that is specifically designed to thwart strong leadership. The European institutional principle of unanimity will almost certainly mean institutional inertia and bailout fatigue will eventually prevail. Whether the euro zone survives afterward is dependent on how far economic nationalism has progressed when the crucial decisions are made. The longer Europe’s political class continues to socialise losses and resists the inevitable and democratic outcome of credit writedowns, the greater resonance messages from nationalist political leaders like Marine Le Pen will have.