Reserves...

Article;
Can Europes Markets Climb through the slump



Comment;
Europe is fixed in a problem of too much of the government debt and deleveraging of it. That is too much of government debt as high as 200% of GDP. The deleveraging process necessitates tightening of the fiscal belt which is counter productive during recession. We simply call it austerity. Higher taxes and spending cuts. When government spends money it creates employment actually a multiple of it through multiplier. European countries are mostly welfare states and they spend a lot on welfare. And, when the government spending is stopped that multiplier stops working. They have spent so high that the sum can not be derived from taxes without curbing demand. This, in a recession can not be done. The countries had a relief if either they had a reserve or the privilege to monetize their debt. Economies are stuck without money, they can not devalue. No real monetary track of economy. A single centarl bank regulates the market  and of course it does not offer different interest rates to economies in different part of the cycle. Some are better than others, they need different interest rates. The ability to monetize your debt or a default, may be half, will be the only ways to go around if we need the governments to spend more and create more employment…