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16.11.2018
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Metropol, Zürich

47. Economic Conference

Re-examining our Approaches to Monetary Policy

William White

Ways out of the Global Debt Trap: Restructuring and Forgiveness

Hans-Werner Sinn

Target-Kredite und Negativ-Zinsen: Die Entgrenzung der EZB-Politik

The speakers’ analyses at the 47th Economic Conference sounded gloomy and pessimistic. Many listeners in the packed auditorium of the Metropol described them as realistic. William White, former chief economist at the Bank for International Settlements (BIS), developed four scenarios for the future. He spoke about the global dimension of rapidly increasing national debt. Turning away from the expansionary monetary policy is necessary, he said, because the high level of debt – not only of the state, but also of private individuals and companies – harbors great risks. However, an exit would be painful and therefore politically difficult to cope with. A proper debt restructuring including debt relief seems to him to be the least bad option; financial repression or even fiscal dominance in conjunction with high inflation would be the worst alternatives.

Hans-Werner Sinn, Professor Emeritus at the University of Munich and Germany’s best-known economist, focused on the eurozone and Italy. The global economy is growing and German exports are strong, partly because the euro is still below its purchasing power parity and Germany is undervalued in the euro. The German domestic economy is being stimulated by low interest rates and a continuing flight to tangible assets. Overcoming all debt limits has also boosted the domestic economy in the eurozone. However, a look at industrial production shows that the southern European countries are still in serious difficulties. The crisis is also continuing in France. The Bundesbank holds around 1,000 billion worthless claims against the other euro countries on its balance sheet, for which it has had to grant overdraft facilities. This is one of the reasons why Germany has already accumulated huge losses in the Eurosystem. Italy’s new government will demand a lot of money from Germany and threaten to leave if it does not receive it. As long as Germany is prepared to give the money and keep providing new guarantees for the over-indebted countries in the eurozone, the euro will continue to exist. Of the three alternatives “far-reaching reforms in Italy”, “Italy’s exit from the euro” or “Italy’s financing by the euro partners, especially Germany”, the latter seems most likely to him. The fact that Italy’s exit (from the euro) seems to make the most economic sense to him could be heard between the lines, but an explicit statement on this topic could not be wrung out of him.

Translated in DeepL

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Ways out of the Global Debt Trap: Restructuring and Forgiveness
William White, Präsentation

William White47. Economic Conference

Ways out of the Global Debt Trap: Restructuring and ForgivenessWilliam White

Senior Fellow am C.D. Howe Institute, Toronto, ehemaliger Berater und Chefökonom der Bank für Internationalen Zahlungsausgleich (BIZ)

http://williamwhite.ca

Presentation

 

Professor an der Ludwig-Maximilians-Universität München,
Präsident a.D., ifo Institut München

Professor Sinn hat frei gesprochen. Die folgenden Zeilen reflektieren einige seiner Gedanken zum Thema Kredite, Schulden und Zinsen in der Euro-Zone.

Für weitere Informationen besuchen Sie bitte seine Website: http://www.hanswernersinn.de

Die Weltwirtschaft wächst, und Deutschlands Exporte sind stark, auch weil der Euro noch immer unter seiner Kaufkraftparität liegt und Deutschland im Euro unterbewertet ist. Die deutsche Binnenwirtschaft wird durch den niedrigen Zins und eine nach wie vor zu verzeichnende Flucht in die Sachwerte belebt. Der Bruch sämtlicher Schuldenschranken hat in der Eurozone die Binnenkonjunktur zusätzlich beflügelt. Ein Blick auf die Industrieproduktion zeigt indes, dass die Länder Südeuropas sich nach wie vor in grossen Schwierigkeiten befinden. Auch in Frankreich dauert die Krise an. Die Bundesbank hält etwa 1000 Milliarden wertlose Forderungen gegen die anderen Euro-Länder in ihrer Bilanz, für die sie Überziehungskredite hat gewähren müssen. Das ist einer der Gründe dafür, dass Deutschland bereits riesige Verluste im Euro- system aufgehäuft hat. Italiens neue Regierung wird viel Geld von Deutschland verlangen und mit dem Austritt drohen, falls es das nicht erhält. Solange Deutschland bereit ist, das Geld zu geben und stets wieder neue Bürgschaften für die überschuldeten Länder der Eurozone zu gewähren, wird der Euro Bestand haben.