Stock market reaction knee jerk and irrational…as usual

The negative initial reaction to the election in France of François Hollande and the repudiation of austerity in Greece was not unexpected. Nevertheless it is irrational and by the end of the day stocks seem to be recovering although the Euro was trading at a lower exchange rate. The lower exchange rate for the euro would be a good thing as it would help spur European exports and attract both tourism from outside the euro zone and inward investment. Plus Hollande’s emphasis upon growing the economy and ending austerity is good for business and hence for stock prices. Higher aggregate demand means greater sales and more profits and lower unemployment and stronger growth. The Greek situation is more complex but also can be improved rapidly by suspending the excessive and unnecessary austerity being imposed there and seeking a coalition of parties who can agree on the way forward. An optimistic wind is blowing in Europe and it would be smart to set one’s sails to it.


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.
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