Back to the 1970s but with more inequality

Back to the 1970s but with more inequality, by John Rubino.

Not so long ago, Europe seemed to have its financial house more-or-less in order. German government spending was actually falling. Industries that had been nationalized in the socialist 70s were being privatized. …

Then – gradually at first and now very quickly – everything went sideways.

Mario Draghi took over for Trichet at the ECB and promised to do “whatever it takes” to generate at least 2% inflation. Then he proceeded to deliver on that promise with massive asset purchases and negative interest rates.

Inequality – which, we’re now coming to realize – is fed by low interest rates and easy money, rose to near-US proportions. Immigration was mishandled to the point that it became THE political issue. And populist parties opposed to the existing system attracted enough votes to rattle the mainstream parties.

The entrenched political/financial class, shocked by the unwashed masses’ effrontery, are now responding exactly as you’d expect, with massive increases in social spending, promises of even easier money (Draghi actually claimed that there was “plenty of headroom” to cut rates from the current -0.4%) and, well, whatever else it takes to stay in power. …

Watch out:

The next stage – again always and everywhere – is rising inflation and a currency crisis that wipes out the savings of the people the inflationary policies were supposed to help.

Europe’s Struggling Political Parties Promise a Return to the Pre-Thatcherite Era, by Bojan Pancevski.

To win voters lost to an anti-globalization backlash, Europe’s mainstream parties are going back to the 1970s.

In Germany, the U.K, Denmark, France and Spain, these parties are aiming to reverse decades of pro-market policy and promising greater state control of business and the economy, more welfare benefits, bigger pensions and higher taxes for corporations and the wealthy. Some have discussed nationalizations and expropriations.

It could add up to the biggest shift in economic policy on the continent in decades. …

“The zeitgeist of globalization and liberalization is over,” said Ralf Stegner, vice chairman of the 130-year-old Social Democratic Party, the junior partner in Chancellor Angela Merkel’s government coalition. “The state needs to become much more involved in key areas such as work, pensions and health care.

The policies mark the end of an era in Europe that started four decades ago, with the ascent of former British Prime Minister Margaret Thatcher and her U.S. ally, President Ronald Reagan. …

Even in countries where populist parties are already in government, such as Poland, those parties have shifted their focus from nationalist and anti-immigration rhetoric to championing generous welfare policies and state aid. …

In the U.K., Jeremy Corbyn, leader of the opposition Labor Party, has proposed renationalizing railways, public utilities, the postal service and the Royal Bank of Scotland, the country’s second-biggest lender. It’s effectively a reversal of the privatization spree initiated by Ms. Thatcher. The party is also toying with policies such as universal basic income for all and a four-day working week for public-sector employees.