Bill Black: The Kamikaze Economics of Forcing Austerity on the Ukraine

Naked Capitalism has the story Bill Black: The Kamikaze Economics of Forcing Austerity on the Ukraine.  I’ll just give you the conclusion in the excerpt below.

The Ukraine faces severe problems beyond Russia and its energy dependence on Russia.  It has an enormous informal business sector because it is so difficult to start a legitimate business.  Ecuador recently adopted a law, and new technology, to make it radically faster to start a legitimate small business.  This is great for entrepreneurs, growth, reduced corruption, and collecting taxes.  It is a radical reform that people of all political stripes can support.  Similarly, anti-fraud and corruption efforts can save the Ukraine billions of dollars and spur growth.  President Obama could develop an aid, stimulus, debt relief, and reform package for the Ukraine based on ideas like this that would that have broad appeal and help the working class and entrepreneurs.  It would also be good for peace and security without being hostile to anyone.  Instead, we are committing kamikaze capitalism that is so crazy that it should be criminal.

What are the chances that new Ukrainian billionaires will emerge from the Western style economic “aide” while the Ukrainian middle-class declines?  Bill black further points out an obvious mistake and a way to avoid that mistake.

The EU and the U.S. can easily pay off Ukraine’s debts (or if they prefer any debt owed to non-Russian entities) and replace it with very low interest rate debt in the Ukraine’s own currency with interest payments deferred for a decade.  Ukraine has made the double mistake of trying to peg its currency to the dollar and to borrow in foreign currencies.

How many times do we have to witness the havoc that is brought on by borrowing in a foreign currency and also trying to peg a currency to the dollar?  You can see the train wreck coming in plenty of time to avoid it, but there doesn’t seem to be anything a sane person can do to prevent it.

I bet you thought that Conservatives were against assisted suicide.  They surely don’t seem to be acting on that principle in this case.

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