How to Stop a Second Great Depression

Confidence in the global economy is slipping, as wealthy nations fail to control debt and prevent growing fears over defaults and government bonds once assumed to be safe. In an essay for the Financial Times, financier and philanthropist George Soros urges three bold steps for Europe to allow orderly default by Greece, if necessary, and keep the global markets calm: create a common treasury for the eurozone, put major banks under control of the European Central Bank in exchange for guarantees and recapitalization, and allow struggling nations to refinance debt at a low rates. Unfortunately, a long-term solution also requires resumed economic growth, fiscal stimulus and complex treaty negotiations. Heavy reliance on debt in recent years has constrained policymakers. Banks will protest a European takeover, Soros notes, and public pressure is required. Disappointments over failure to plan ahead for default is not an option and could push markets over the edge into another great global depression. – YaleGlobal