Market mayhem Dow drops 512 points: European and American double whammy need for stimulus not austerity

The Dow dropped over 512 points in today’s trading, the largest one day drop in points since the 2008 crash, arousing fears of a second crisis and a deeper  second recession. Given the destructive American debt ceiling debate, its austerity self -imposed straightjacket and the mismanagement of Europe’s sovereign debt problems and the bias of its leadership toward austerity including the very ill informed behaviour of the European central bank this comes as no surprise. The political and economic elites continue to make the same mistakes as the leadership of the leading powers during the late 1920s and early 1930s.

However, there is still time to avert total disaster. This would require a sea change in the policy biases of those in positions of power. Employment stimulus, growth and debt burden reduction through lower unemployment and economic growth should be the top priorities. The conversion of the European central bank into an institution that escapes from its monetarist inflation obsessed blinders and creates a true united states of Europe needs also to be at the top of the agenda.

If that is not possible it is unlikely that the Euro will last very long.

(Update: 8:57 p.m. the Japanese market has so far dropped 4 % as the sell off continues in Asia.)

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About haroldchorneyeconomist

I am Professor of political economy at Concordia university in Montréal, Québec, Canada. I received my B.A.Hons (econ.&poli sci) from the University of Manitoba. I also completed my M.A. degree in economics there. Went on to spend two years at the London School of Economics as a Ph.D. student in economics and then completed my Ph.D. in political economy at the University of Toronto. Was named a John W.Dafoe fellow, a CMHC fellow and a Canada Council fellow. I also was named a Woodrow Wilson fellow in 1968 after completing my first class honours undergraduate degree. Worked as an economist in the area of education, labour economics and as the senior economist with the Manitoba Housing and Renewal Corporation for the Government of Manitoba from 1972 to 1978. I also have worked as an economic consultant for MDT socio-economic consultants and have been consulted on urban planning, health policy, linguistic duality and public sector finance questions by the governments of Manitoba, Saskatchewan,the cities of Regina and Saskatoon, Ontario and the Federal government of Canada. I have also been consulted by senior leaders of the British Labour party, MPs from the Progressive Conservative party, the Liberal party and the New Democrats on economic policy questions. Members of the Government of France under the Presidency of Francois Mitterand discussed my work on public sector deficits. I have also run for elected office at the municipal level. I first began to write about quantitative easing as a useful policy option during the early 1980s.
This entry was posted in deficits and debt, fiscal policy, U.S., unemployment and tagged , , . Bookmark the permalink.

4 Responses to Market mayhem Dow drops 512 points: European and American double whammy need for stimulus not austerity

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