http://www.globalresearch.ca/index.php?context=va&a­m­p­;­a­i­d­=­1­8­5­4­5.The Coming European Debt WarsEU Countries sinking into Depressionby Prof. Michael Hudson….”Until this debt problem is resolved – and the only way to resolve it is to negotiate a debt write-off – European expansion (the absorption of New Europe into Old Europe) seems over. But the transition to this future solution will not be easy. Financial interests still wield dominant power over the EU, and will resist the inevitable. Gordon Brown already has shown his colors in his threats against Iceland to illegally and improperly use the IMF as a collection agent for debts that Iceland doesn’t legally owe, and to blackball Icelandic membership in the EU.Confronted with Mr. Brown’s bullying – and that of Britain’s Dutch poodles – 97% of Icelandic voters opposed the debt settlement that Britain and the Netherlands sought to force down the throat of Allthing members last month. This high a vote has not been seen in the world since the old Stalinist era.It is only a foretaste. The choice that Europe ends up making will likely drive millions into the streets. Political and economic alliances will shift, currencies will crumble and governments will fall. The European Union and indeed, the international financial system will change in ways yet to be seen. This will be especially the case if nations adopt the Argentina model and refuse to make payment until steep discounts are made.Paying in euros – for real estate and personal income streams in negative equity, where the debts exceed the current value of income flows available to pay mortgages or for that matter, personal debts – is impossible for nations that hope to maintain a modicum of civil society. “Austerity plans” IMF and EU style is an antiseptic, technocratic jargon for life-shortening and killing impact of gutting income, social services, spending on health on hospitals, education and other basic needs, and selling off public infrastructure for buyers to turn nations into “tollbooth economies” where everyone is obliged to pay access prices for roads, education, medical care and other costs of living and doing business that have long been subsidized by progressive taxation in North America and Western Europe.The battle lines are being drawn regarding how private and public debts are to be repaid. For nations that balk at repayment in euros, the creditor nations have their “muscle” waiting in the wings: the credit rating agencies. At the first sign a nation is balking in paying in hard currency, or even at the first hint of it questioning a foreign debt as improper, the agencies will move in to reduce a nation’s credit rating. This will increase the cost of borrowing and threaten to paralyze the economy by starving it for credit.The most recent shot was fired n April 6 when Moody’s downgraded Iceland’s debt from stable to negative. “Moody’s acknowledged that Iceland might still achieve a better deal in renewed negotiations, but said the current uncertainty was hurting the country’s short-term economic and financial prospects.”[1]The fight is on. It should be an interesting decade….Prof. Micheal Hudson is Chief Economic Advisor to the Reform Task Force Latvia (RTFL). His website is michael-hudson.com.

Hey blindman,I miss the old days when there were 50 regular contributors to this blog. Lots of good insight and links.I live in southern Oregon where the gap between the rich and poor has always been huge. The middle class here is small and always having to work hard to keep from being part of the poor. I believe this has given me a differing perspective than those who live in the more affluent neighborhoods.For me, the idea that qe can smooth the economic road is sort of like trying to repair a broken car while you are still driving.I still see the engine of a health economy as the productive capacity of the society. I have to get back to the basics. Writing a book about planting a tree does have some productive benefit to all those who can read and want to plant a tree and don’t already know how. But if you don’t want to plant a tree or you can’t read, then it has none. Once you have more trees planted than society needs, then both the book and the tree planter are irrelevant. This is a finite world and fruit is perishable. So you have to sell your production to stay in business for enough to pay the bills, including those who prune and harvest the fruit. But when the tree planter doesn’t have the job of planting trees, pruning or picking, then he doesn’t have the income to purchase the fruits from the tree either, unless he was planting the tree for his own benefit.So economics isn’t just about the productive capacity but also the ability to purchase and use those productive capacities. In a balanced world, where the cost of ownership and production are minimal, all that has to happen is for the price of the fruit to drop enough to find a market. In our world of high taxes, regulations, debt and high energy costs, it isn’t so easy to lower the price of the fruit. In fact, it can be more expensive than can be afforded. People can go hungry while the fruit drops from the trees and rots.This isn’t just about fruit trees. It goes for all intellectual property rights and productivity. The amount of production and the ability to support debt and overhead costs relies on the ability of any society to purchase/support the overhead costs.What has happened in the last decades has been that costs have been driven up by higher fees, higher taxes, and cheap money chasing pretty much any asset class that moved. Instead of the prices falling, they have also gone up. What hasn’t kept up with this phenomenon have been the wages, the income of the average citizen in our society. Partly because of the socialistic tendencies of government that tried to insure against all calamities with forced insurances and rules and regulation but also due to cheap money causing inflationary tendencies. We know how that worked with housing but it also worked with all assets.Because of the cheap money, assets got so expensive that the income derived from their ownership was woefully inadequate to service the debts and pay all the other expenses. Especially when the cost of borrowing did not reflect any risk nor did it reflect the reality of option ARM type lending to people who had no assets, little or no income and no history of repayment. Insane…What good is it to have an orchard if no one can purchase the fruit because the cost of owning that orchard far exceeds the value that society can pay for the product.So what we need is for the debts and the value of the underlying assets to be written down and ownership to be cleared of most encumbrances. Then the owner can afford to pay for help and that help can afford to purchase other necessities.QE does nothing to benefit this. All it does is give the elite play money to purchase assets with a prices higher than economically viable. So they lay more people off and the downward spiral continues. This appears that this will continue until there are only two classes of people, those with connections and thus own the assets and the poor who will not have enough income to purchase anything. Maybe not even the basic essentials. At that point, all the assets are devalued because most of them have no functional use.Interesting that Professor Roubini and his brethren have little clue as to the outcome of the game they are playing or cheerleading.