debt deflation

Today, Spanish newspapers confirmed that a number of regional governments on the verge of bankruptcy must follow Spanish banks in requesting aid from the central government. However, with Spanish central government itself facing record euro…

Just when you think that things can get no worse in Spain, they do.

The large increases in Target2 imbalances at the heart of the euro zone's banking system are widely considered not just a risk to national governments in the event of a eurozone breakup, but also a sign of capital flight. We have seen the…

Debt deflation is taking hold in Europe. We have seen the crash in Greece's economy unfold over the last two years. And now we are witnessing similar things in Spain. As Marshall Auerback puts it, Spain is the New Greece. But now come signs…

This week's newsletter will focus on Europe again as this morning the European summit has produced significant changes in European economic policy. Spanish Prime Minister Rajoy and Italian Prime Minister Monti threatened to 'block…

Charles Kindleberger’s classic book on the Great Depression was originally published 40 years ago. In the preface to a new edition, two leading economists argue that the lessons are as relevant as ever.

Spain has become the new Greece. Actually, in many respects Spain is now worse than Greece. The Spanish unemployment rate is already so high and unlike Athens, Madrid has made no headway in reducing its public debt levels (whereas the…

The news from Spain's statistical agency INE is that the Spanish economy shrank 0.3% in the first quarter of 2011. Spain thus joins ten other Western European economies in recession. None of this should come as a surprise. Given the policy…

Collapsing credit demand ultimately leads to a loss of banking capital, which is the exact opposite of what the LTRO program was set up to achieve. Interestingly, as the charts below show, banks seem to think that there will be a slowing of…

The following is a March 1932 speech by then US President Herbert Hoover about the growing US deficit. As I indicated in previous posts on Hoover's travails, the President earnestly wanted to balance the budget (see Herbert Hoover: White…