A British blogger and self-taught economist reportedly is attracting worldwide attention for repeatedly predicting during recent years that the euro zone wouldn’t survive.
Edward Hugh, of Barcelona, Spain, warned that it was unrealistic to believe that aging, penny-pinching Germans could successfully coexist under one currency with youthful, credit-card-wielding Irish, Greeks and Spaniards who shared the euro with them, the New York Times reports.
Now that the European sovereign debt crisis is rattling world markets, driving the euro lower almost every day and raising doubts about the future of the monetary union, his Internet musings have become a must-read for an influential and growing global audience, including policymakers in the White House, according to the report.
His bleak message is nearly always the same: since Spain and other struggling countries of the euro zone like Greece, Portugal, Ireland and Italy cannot devalue their common currency unilaterally, they have little choice but to endure what would essentially be a 20 percent internal devaluation instead, according to the report.
That means their public and private sector wages need to fall by roughly that amount if those countries are ever to restore competitiveness, lift exports and bring in the cash needed to pay down their debts, the Times reported.
“Why haven’t these countries converged” with the rest of Europe? he asks. “It’s demographics. As populations age, there are fewer people in their 20s to 40s to buy new houses, so they save more. The younger a country is, the more dependent it is on credit to get growth.”
Most economists, married as they are to their “promiscuous but essentially useless” economic models, Hugh says, missed what he considers an easily predictable outcome. That “is why we are in such a big mess now,” he says.
Hugh has even been courted by the International Monetary Fund, which recently asked him to fly to Madrid to assist in its analysis of the Spanish economy.
“It’s quite nice, actually,” Mr. Hugh, 61, told the Times.“I am meeting all sorts of interesting people and they are paying me to have lunch with them.”
“I guess I am countercyclical,” he said with a laugh. “For all the years during the boom when everyone was doing well here, I wasn’t doing anything. Now I am a household name in Catalonia.”
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