Hans-Werner Sinn calls for "creative destruction."
The only way out of the trap is a hefty dose of creative destruction, which in Europe would have to be accompanied by debt relief and exits from the eurozone, with subsequent currency devaluations. The shock would be painful for the incumbent wealth owners, but, after a rapid decline in the dollar values of asset prices, including land and real estate, new businesses and investment projects would soon have room to grow, and new jobs would be created. The natural return on investment would again be high, meaning that the economy could expand once again at normal interest rates. The sooner this purge is allowed to take place, the milder it will be, and the sooner Europeans and others will be able to breathe easy again.Creative destruction = liquidation. As Sinn recognizes, it would blow up the EZ. Well, that one way to do it.
Secular Stagnation or Self-Inflicted Malaise?
Hans-Werner Sinn, Professor of Economics and Public Finance at the University of Munich, was President of the Ifo Institute for Economic Research and serves on the German economy ministry’s Advisory Council