Opinion: “If politicians don’t get a handle on it soon, the debt crisis will be a game-changer for the whole Western system. The economies of the United States and Europe will face years of stagnation and decline with regard to emerging nations in Asia and Latin America. In fact, the Euro Zone might break apart.
“These are some of the views Die Welt received in answer to questions it put to 17 winners of the Nobel Prize for economics who are gathered this week for the Nobel Laureate Meetings at Lindau….
“Edmund Phelps, a Colombia University professor who won the prize in 2006 for his theory on growth, says that during the past decades the West has lived above its means and in so doing has already consumed part of its future. That means that the United States, but also Europe now face a long period of stagnation….
“Other laureates also see the debt crisis as responsible for the terrible state of the economy. To Eric Maskin, government debt addiction is ruining the Western system and if politicians don’t wake up and act quickly economic turbulence can be expected to go on for years.
“James Mirrlees, who won his Nobel Prize for political economics research, rates the chances that the Western world will be facing a long period of stagnation as ‘very high.’ Myron Scholes agrees, adding that both the United States and Europe are looking at a fate similar to Japan’s lost decade if the present muddling continues….
“In one respect, the laureates feel that a decline of the West is already sealed: regardless of all and any political decisions that may be taken, the dominance of the dollar as the world’s reserve currency will fade. Its leading role will decline progressively over the coming decades.
“The economists see this as inevitable, like the devaluation of the British pound in the 20th century. They unanimously agree that the Chinese yuan will gain in stature….
“To save the Western system and its values, the laureates suggest better coordination among governments. Stronger institutions are needed to achieve results. And McFadden says that the United Nations cannot fulfill the role—in his view, it doesn’t have the support, nor does it enjoy the respect or clout, to do so.”