Europe’s Creditanstalt Moment is Ticking Ever Closer

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This paragraph from Martin Wolf has been much quoted over the past day:

Before now, I had never really understood how the 1930s could happen. Now I do. All one needs are fragile economies, a rigid monetary regime, intense debate over what must be done, widespread belief that suffering is good, myopic politicians, an inability to co-operate and failure to stay ahead of events. Perhaps the panic will vanish. But investors who are buying bonds at current rates are indicating a deep aversion to the downside risks. Policy makers must eliminate this panic, not stoke it.

This describes my own reaction to events of the past year or so perfectly. Still, I think this paragraph from the same piece might be more important:

It is often forgotten that the failure of Austria’s Creditanstalt in 1931 led to a wave of bank failures across the continent. That turned out to be the beginning of the end of the gold standard and caused a second downward leg of the Great Depression itself. The fear must now be that a wave of banking and sovereign failures might cause a similar meltdown inside the eurozone, the closest thing the world now has to the old gold standard. The failure of the eurozone would, in turn, generate further massive disruption in the European and even global financial systems, possibly even knocking over the walls now containing the depression.

To the extent that I continue to hold out a shred of optimism, this is why. European policymakers may be in nearly terminal denial, but I still think that when they finally and fully stare into the abyss and understand that it’s staring back at them — when their Creditanstalt moment comes — they’ll act. They won’t want to, and they’ll wait until the 59th minute of the 11th hour to do so. But when the big hand on the clock is finally just seconds away from ticking past midnight, they’ll do what needs to be done.

This is the worst of all solutions except for the one in which they don’t act at all. But it will prevent a rerun of the 1930s. I hope.

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DEMOCRACY DOES NOT EXIST...

without free and fair elections, a vigorous free press, and engaged citizens to reclaim power from those who abuse it.

In this election year unlike any other—against a backdrop of a pandemic, an economic crisis, racial reckoning, and so much daily crazy—Mother Jones' journalism is driven by one simple question: Will America will move closer to, or further from, justice and equity in the years to come?

If you're able to, please join us in this mission with a donation today. Our reporting right now is focused on voting rights and election security, corruption, disinformation, racial and gender equity, and the climate crisis. We can’t do it without the support of readers like you, and we need to give it everything we've got between now and November. Thank you.

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