The famous Economist, John Maynard Keynes described the situation in The Economic Consequences of the Peace: “The inflationism of the currency systems of Europe has proceeded to extraordinary lengths. The various belligerent Governments, unable, or too timid or too short-sighted to secure from loans or taxes the resources they required, have printed notes for the balance. In English, Keynes said, they couldn’t pay their bills so they printed MORE money. Sound familiar? Its Called Hyperinflation. Czech premier, Mirek Topolanek, currently European Union president, calls it ‘a way to hell’
A day after his government collapsed because of a parliamentary vote of no-confidence, Topolanek took the EU presidency on a collision course with Washington over how to deal with the global economic recession.
Most European leaders favor tighter financial regulation, while the U.S. has been pushing for larger economic stimulus plans.
Topolanek’s comments are the strongest criticism so far from a European leader as the 27-nation bloc bristles from recent U.S. criticism that it is not spending enough to stimulate demand.
They also pave the way for a stormy summit next week in London between leaders of the Group of 20 industrialized countries.
The host of the summit, British Prime Minister Gordon Brown, praised Obama on Tuesday for his willingness to work with Europe on reforming the global economy in the run-up to the G-20 summit.
The United States plans to spend heavily to try and lift its economy out of recession with a $787 billion economic stimulus plan of tax rebates, health and welfare benefits, as well as extra energy and infrastructure spending.
To encourage banks to lend again, the government will also pump $1 trillion into the financial system by buying up treasury bonds and mortgage securities in an effort to clear some of the “toxic assets” — devalued and untradeable assets — from banks’ balance sheets.
Topolanek bluntly said that “the United States did not take the right path.”.
He slammed the U.S.’ widening budget deficit and protectionist trade measures — such as the “Buy America” — and said that “all of these steps, these combinations and permanency is the way to hell.”
“We need to read the history books and the lessons of history and the biggest success of the (EU) is the refusal to go this way,” he said.
“Americans will need liquidity to finance all their measures and they will balance this with the sale of their bonds but this will undermine the stability of the global financial market,” said Topolanek.
Obama insisted Tuesday that his massive budget proposal is moving the nation down the right path and will help the ailing economy grow again. “This budget is inseparable from this recovery,” he said, “because it is what lays the foundation for a secure and lasting prosperity.”
Obama also claimed early progress in his aggressive campaign to lead the United States out of its worst economic crisis in 70 years and declared that despite obstacles ahead, the U.S. is “moving in the right direction.”