Any way out?: AEI's John Makin on the European debt crisis (Economic Outlook)

Several US banks were downgraded this week by Standard & Poor's because of their exposure to the European crisis. In addition, the recent central bank swap agreements have underscored the severity of the crisis facing European banks.

Additional credit downgrades in Europe are being considered, and on December 8-9, 2011 European Union and European Central Bank policymakers will meet to continue to search for solutions to contain the crisis. In this context, AEI economist John Makin explores, in his latest Economic Outlook, why the Eurozone crisis has worsened so quickly in recent weeks and what options this leaves for Europe. Makin explains that:

  • The quickly worsening European debt crisis--preordained by a false belief that sovereign governments do not default--constitutes the biggest threat to the US economy and its financial system.
  • Europe is caught in a vicious cycle where an intensifying financial crisis slows growth and raises borrowing costs, exacerbating the crisis.
  • Europe has three ugly options: (1) borrow more money from outside; (2) have the European Central Bank (ECB) buy more government bonds; (3) allow the European Monetary Union to collapse. In the end, the ECB will probably be forced to triple its balance sheet.

John Makin writes AEI's monthly Economic Outlook. A former consultant to the US Treasury Department, the Congressional Budget Office, and the International Monetary Fund, Makin is available for media inquiries, and can be reached at jmakin@aei.org or through his assistant, daniel.hanson@aei.org (202.862.5883). For radio or television interviews, please e-mail jesse.blumenthal@aei.org.

Also Visit
AEIdeas Blog The American Magazine
About the Author

 

John H.
Makin
  • John H. Makin is a resident scholar at the American Enterprise Institute (AEI) where he studies the US economy, monetary policy, financial markets, corporate taxation and banking. He also studies and writes frequently about Japanese, Chinese and European economic issues.

    Makin has served as a consultant to the US Treasury Department, the Congressional Budget Office, and the International Monetary Fund. He spent twenty years on Wall Street as the chief economist, and later as a principal of Caxton Associates a trading and investment firm. Earlier, Makin taught economics at various universities including the University of Virginia. He has also been a scholar at the Bank of Japan, the Federal Reserve Bank of San Francisco, the Federal Bank of Chicago, and the National Bureau of Economic Research. A prolific writer, Makin is the author of numerous books and articles on financial, monetary, and fiscal policy. Makin also writes AEI's monthly Economic Outlook which pairs insightful research with current economic topics.

    Makin received his doctorate and master’s degree in economics from University of Chicago, and bachelor’s degree in economics from Trinity College.


    Follow John Makin on Twitter.

  • Phone: 202-862-5828
    Email: jmakin@aei.org
  • Assistant Info

    Name: Brittany Pineros
    Phone: 202-862-5926
    Email: brittany.pineros@aei.org

What's new on AEI

image Getting it right: US national security policy and al Qaeda since 2011
image Net neutrality rundown: What the NPRM means for you
image The Schuette decision
image Snatching failure from victory in Afghanistan
AEI on Facebook
Events Calendar
  • 21
    MON
  • 22
    TUE
  • 23
    WED
  • 24
    THU
  • 25
    FRI
Wednesday, April 23, 2014 | 12:00 p.m. – 1:30 p.m.
Graduation day: How dads’ involvement impacts higher education success

Join a diverse group of panelists — including sociologists, education experts, and students — for a discussion of how public policy and culture can help families lay a firmer foundation for their children’s educational success, and of how the effects of paternal involvement vary by socioeconomic background.

Thursday, April 24, 2014 | 12:00 p.m. – 1:30 p.m.
Getting it right: A better strategy to defeat al Qaeda

This event will coincide with the release of a new report by AEI’s Mary Habeck, which analyzes why current national security policy is failing to stop the advancement of al Qaeda and its affiliates and what the US can do to develop a successful strategy to defeat this enemy.

Event Registration is Closed
Friday, April 25, 2014 | 9:15 a.m. – 1:15 p.m.
Obamacare’s rocky start and uncertain future

During this event, experts with many different views on the ACA will offer their predictions for the future.   

Event Registration is Closed
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.