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Defla-inflation – the Answer to Europe’s Problems
The problem of stagnant economies! (Cartoonist - Chip Bok; published on 2005-06-05; source and courtesy - cartoonistgroup.com).
Curse of the ‘Strong-Euro’
Euro-zone would not have gotten itself into such a twist but for chasing the ‘strong’ Euro chimera.
An over-valued Euro made imports cheaper, gave excess inflows, liquidity, and the average Europeans abroad, a false sense of prosperity.
The strong Euro also made way for stagnating, indebted, deficit-prone economies of Europe.
Behind the ‘Strong-Euro’
Of course, Europe needed to make a success of the Euro. If the USA could ride on a dollar-float equal to US GDP, for the last 60 years (1950-2010), could EU be left standing, watching, inactive and hurting (as in envy).
USA let the Euro-Ride continue for the last 7 years (2002-2009) knowing that this can only result in a over-priced, stagnant, option-less Europe. Makes me wonder if Goldman Sachs acted alone in arranging all those off-book loans to Greece?
Hank Paulson … have you been naughty, again?
This may look like Bleak House on 'Bleaker' Street! But the situation ain't so bad. (Cartoonist Bruce Tinsley; Mallard Fillmore series; published on 2010-04-15; source and courtesy - cartoonistgroup.com).
A nervous Europe
Erosion of Western dominance makes Europe resort to underhand ideas, legalistic sleights of hand that stretch definitions and prolongs the war of attrition.
- With Indian and Chinese manufacturing on the roll a nervous Europe is stuck for answers.
- With Indian pharma and auto sectors challenging the world, Euro-powers are nervous and fidgety.
- With surging Chinese manufacturing, Europe has run out of answers.
- With an indifferent USAon one side and the economic expansion of Asia on the other side makes for one, very nervous Europe.
Luring Kenya, with an Uganda waiting in the wings, by the use of ‘incentives’ to create legal hurdles for pharma-imports is a demonstration of this strategy.
TRIPS recognises IPRs as territorial rights and IP is protected only in the jurisdiction where it is registered. However, Kenya’s recent Anti-Counterfeit Act even recognises IPRs protected in other countries . This would make generic goods imported into or transiting through Kenya illegal if a patent exists anywhere in the world. This has serious repercussions not only for Indian exports but also takes away right of Kenya to independently define patentability criteria based on its development requirements. This is also a loss for Kenya, which in initial stages of its development would be denied the opportunity of drawing innovation and encouraging economic growth within the country.
Many other African countries are being lured into the same trap. There were allegations that EU provided funds for a similar bill in Uganda. Such legislations would deny public access to generic drugs and make them dependent on monopoly of a few patent drug suppliers. Three AIDS victims had to move Kenya’s Constitutional Court against the Anti-Counterfeit Act for a stay on the grounds that it denied them access to generic anti-retroviral drugs and, thus, violated their Right to Life. (via Time to challenge plus-size IPRs-Comments & Analysis-Opinion-The Economic Times).
How will Europe get out of this pit?
How will Europe unwind this complex knot?
The way out for Europe will mean severe belt-tightening. Not an easy thing in easy times, belt-tightening is the bitter pill that Europe may need to swallow.
A mix of defla-inflation with Euro-devaluation will be needed to fix things for some time. Deflation in wages, property and stock prices, inflation in consumer prices combined with Euro devaluation below dollar parity may see Euro zone on the road to growth! Not an easy road!
Is it a wonder that you get to hear a stuck Europe, squealing!
Related articles
- China Rebuffs Hopes It Might Help Bail Out Europe (online.wsj.com)
- Europe Aiming To Ramp Up Crisis Fund As Other Nations Raise Alarm (huffingtonpost.com)
- Pastor to be extradited to Kenya accused of stealing babies (guardian.co.uk)
- Euro Crisis to Hurt Ireland’s Deficit-Cutting Efforts (online.wsj.com)
- The euro will survive (That’s not a typo) (money.cnn.com)
- Mandelson calls for Euro backing (independent.co.uk)
- Crisis, Wages Get Stuck in a Conundrum (online.wsj.com)
- Immi-grunts and Assimilation (behind2ndlook.wordpress.com)
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