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“If the interest rate Greece has to pay for its debts keeps rising, the country may have to default on its obligations. The euro has been sliding against the US dollar for weeks. Concerns about the public finances of eurozone countries Portugal, Ireland, Greece, and Spain, the so-called “PIGS,” have emerged in financial markets. Greece is facing

A specter is haunting the world, and especially Europe: the specter of a sovereign insolvency. The acute sovereign-debt crisis is largely the result of government interventions in response to the financial crisis. As Austrian business-cycle theory explains, the credit expansion of the fractional-reserve-banking system had caused an unsustainable

Whenever the government causes a mess, chances are high that it will accuse speculators of being responsible. In the recent financial crisis, speculators and their financial instruments have been under attack again. Some famous investors have even supported governments’ attacks on speculators. Warren Buffet has called derivatives “financial

Europe is in turmoil once again. The sovereign-debt crisis threatens to spread from Ireland to Portugal and Spain. It all began with the financial crisis. Before the financial crisis, several governments of the eurozone , most notably those of Portugal, Italy, Ireland, Greece, and Spain (PIIGS), had been able to finance their deficits at

Recently, Ben Bernanke indicated that Quantitative Easing II (QE2) might be followed by QE3, etc. In an interview at the beginning of December, Bernanke was asked, “Do you anticipate a scenario in which you would commit to more than $600 billion?” Bernanke’s answer was startling. “Oh, it’s certainly possible,” he said. “And again, it depends on

[Excerpted from Tragedy of the Euro (2010)] There has been a fight between the advocates of two different ideals from the beginning of the European Union. Which stance it should adopt: the classical-liberal vision, or the socialist vision of Europe? The introduction of the euro has played a key role in the strategies of these two visions.   In

The late 1990s saw a strengthening of the International Monetary Fund’s core mandate as a global financial parent on the lookout for perceived instabilities to correct in the name of economic development. Several alterations in the scope of its operations following the crises of the previous 20 years had given the Fund a far wider range of policy

[Excerpted from Tragedy of the Euro (2010)] When property rights in money are poorly defined, negative external effects develop. The institutional setup of the euro, with its poorly defined property rights, has brought it close to collapse and can be called a tragedy of the commons. Fiat Money and External Costs External costs and benefits are the

When it comes to deflation, even Austrian economists disagree. In contrast to those who favor a 100 percent–reserve system and the effect such a system would have on prices, Austrian defenders of a fractional-reserve, free-banking (FRFB) system still seem to harbor a fear of price deflation. Examples of this group include Steven Horwitz , George

Both the Federal Reserve (Fed) and the European Central Bank (ECB) are owners of the printing press. They produce base money. On top of the base-money production, the fractional-reserve-banking system can produce money out of thin air. Both central banks produce money in order to finance their respective governments. As a result of their money