Rogoff's Bleak Forecast for the Euro

We have all seen recently what the current Eurozone mess can do to our stockmarkets and to our economy. Therefore, it is in India's interest that Eurozone mess never gets out of control, especially this year when the government's finances are already stretched and it doesn't have the wherewithal for a bailout. Then there is the worrisome current account deficit problem arising from the weakened growth of exports thanks to less-than-satisfactory growth of the global economy and rise in the value of our imports, many of which, we can't do without, chiefly crude oil and edibile oils. To top it RBI has the problem of keeping inflation under check which is still at a fairly high level. In this backdrop, it is further chastening to read eminent economist Kenneth Rogoff's recent article on the euro which has been reproduced in some places http://www.project-syndicate.org/commentary/a-centerless-euro-cannot-hold. Now Rogoff is no ordinary dude. He is famous for having studied recessions and downturns over centuries in his book with his ex-World Banker co-author Carmen Reinhart called  "This Time is Different: Eight Centuries of Financial Folly". He discusses arguments from the theories of two Nobel prize winners James Meade and Robert Mundell to paint a fairly grim future for the euro. Why is an article like this important? Because  you just have to peep into business papers and TV channels to see the plethora of so-called experts who are giving advice and predictions based on the assumption that things will get back to the same old ways of pre-2008. But will they? Has the global economy changed irreversibly by the global economic crisis? Food for thought.

"Occupy Wall Street" Protests and Our Future

"Occupy Wall Street" type of protests are now spreading across many nations. Every economic crisis makes things difficult for people especially the poor and those in the margins. When economic crisis is triggered off by financial crisis, things take much longer to come back to longer. History of financial crises testify to this fact. If you go through such history, you would know that the current global financial crisis may not show signs of getting over before 2013-14 at the earliest, if the past is anything to go by. Some of the side-effects of the remdies will remain one one or two generations for many countries. What makes things a little different from the kind of financial crisis-triggered economic crisis is that now, we are all globalised and news travels fast and far. There are media to give vent to discontent and give it a critical mass. There is Facebook, Twitter, TVand so on. A prolonged global economic crisis will test the patience of more and more people. That puts prevalent systems, which have extablished primacy over time, such as democracy and market-led economic systems, under enormous pressure. If a system doesn't work why would people respect them? What is frightening is that there are no other well-tested alternatives. This leaves the fiield open for demagogues and pretenders who could manipulate systems and people channelising discontents. We have enough examples of people who in the past have effectively undermined democracy and market economies. In the near future, could world change from the way we know it? It may well be.