European Union

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Taking back ‘our’ borders

Published by Anonymous (not verified) on Sat, 27/11/2021 - 2:17am in

So diplomatically skilled is Boris Johnson in writing his letter to President Macron which he seems to have tweeted first rather than actually sending it first, that Gerard Darmanin, France’s Home Affairs minister, quickly uninvited his UK counterpart, in spite of her recently discovered empathy for immigrants. Neither Johnson nor Patel much appeal to the... Read more

Making Brexit Work

Published by Anonymous (not verified) on Mon, 08/11/2021 - 9:18pm in

Keir Starmer is being much criticised on yesterday’s Marr programme for his suggestion that he wants to ‘make Brexit work’. Some seem to be of the view that he is making impossible goals for Labour, because with the exception of the current government, we all now know it does not work. He can, it is... Read more

Is a balance of payments deficit by definition a desire of supplying countries to invest?

Published by Anonymous (not verified) on Fri, 05/11/2021 - 9:13am in

This, to me is a very difficult question but in a recent seminar from the UK in a Changing Europe it was suggested by Meredith Crowley. She thought that a deficit was an indication of a desire to invest. I’m rather conflicted… For what always worries me is our food deficit. Maybe other countries do... Read more

Cultural Brexit roolz

Published by Anonymous (not verified) on Wed, 03/11/2021 - 6:49am in

The Manchester Evening News has reported that there have been complaints to Offcom because apparently the opening scene of the BBC’s ‘Strictly Come Dancing’ is performed to the music of Beethoven’s Ode to Joy – and thus is indicative of the BBC’s anti Brexit bias! Firstly, this is actually indicative of how ‘culture’ can better... Read more

Macron sums it up

Published by Anonymous (not verified) on Mon, 01/11/2021 - 10:36am in

In an interview with the Financial Times, President Macron has said When you spend years negotiating a treaty and then a few months later you do the opposite of what was decided on the aspects that suit you the least, it is not a big sign of your credibility. To this has been added additional... Read more

In the battle between government and the hedge fund gamblers – the government has all the cards

Published by Anonymous (not verified) on Thu, 28/10/2021 - 5:05pm in

Given my inflation report yesterday, I have shifted my usual Wednesday light blog post day and music feature to today. The economic debate has moved in recent years from ‘when is the government going broke’ to ‘hyperinflation is approaching’. It amazes me how puerile the economic commentary is as journalists and economists seeking headlines trot out headlines about how bad something (insert: insolvency, inflation, whatever is the latest craze) is going to be and what needs to be done about it. Nothing much happens in the real world and they keep their jobs and begin the next mania. Replay. And so it goes. It seems though that within this fictional world, that masquerades as informed economic commentary, subtle changes are underway. Governments worked out that during the GFC, the only weapon they had that would save the system was fiscal policy. They also worked out that large-scale bond buying by their central banks complemented the effective use of fiscal policy and didn’t deliver all the maelstrom that the mainstream New Keynesian textbooks predicted. The pandemic has accentuated that. And now there is this sort of stand-off between the ‘markets’ that were given too much latitude in the pre-GFC period and governments. The market players, who have become accustomed to manipulating government policy to ratify their speculative bets, which delivered massive profits to the hedge funds and the like, are now confronting central banks and treasuries that actually have power and cannot be bullied into delivering such policy ratification. That is progress and interesting to observe.

Monetary policy developments

With all the inflation hysteria about at present, I guess it is a relief from the ‘government is going broke’ narrative that we have morphed out of since the pandemic began.

It was only a matter of time I guess.

And when the latest anxieties provide no data to perpetuate the fear, then I guess we will switch back to the insolvency stuff for a while.

It comes in cycles, that is what I have observed over the course of my career.

There was a Financial Times article (October 26, 2021) – Lagarde set to push back on market bets of eurozone rate rise – which is relevant to what I have been writing about in recent weeks about the way the financial markets try to bully policy makers into pushing up rates and the profits of the gamblers (banks etc) in those markets by invoking inflation fears.

When you examine the voices in this debate – the interest rates must rise lobby – are dominated by the big investment banks who get platforms in the mainstream media (or whose opinions are propagated to the public by compliant journalists).

They tell the public that inflation is already ‘priced in’, which gives the impression that rising interest rates are somehow a fait accompli.

It is one of the biggest cons around and even the public broadcaster falls into the con by regularly having these ‘experts’ on TV and radio to give commentary without disclosing whether their companies (banks etc) would have portfolio positions that would benefit if policy makers followed the advice given by the ‘expert’.

The FT article notes that:

Investors, however, are betting the ECB could begin raising its deposit rate as soon as late 2022. These expectations helped lift Germany’s two-year bond yield from minus 0.78 per cent in August to minus 0.66 per cent on Monday.

Investors is code for speculative gamblers.

The article though discloses that the ECB really is in charge here.

It reports that an ECB official noted that “he did not think the market had “fully absorbed” the central bank’s new guidance on when it will raise rates.”

Which means the ECB is staring down the gambling bullies who will lose significant amounts if the ECB holds its line.

The ECB has made it clear that reates will not increase rates any time soon – before 2024 is not likely.

And the battle between the hype and the reality is, in my opinion, in favour of reality.

As I have noted many times, inflation has to have distributional propagation – the wage-price spiral – for it to become sustained rather than just reflect ephemeral supply constraints.

The FT article reported the comment of one economist – “One of the reasons we are less worried about a tightening of monetary policy in the eurozone . . . is what is happening with wages.”

Wages growth is flat.

And will not accelerate any time soon.

There was also an interesting input this week in the form of the latest Discussion Paper (No 40/2021) from the Deutsche Bundesbank (released October 26, 2021) –
Hitting the elusive inflation target.

Interesting doesn’t mean that it is correct.

It means, rather that the questions posed by the researchers are interesting and suggest paradigmic tension.

The Discussion Paper’s motivation is based on the observation that:

Since the 2001 recession, core inflation has been on average below the Federal Reserve’s implicit 2% target … This phenomenon has become even more severe in the aftermath of the 2008 recession. In other words, the “conquest of US inflation” that started with the Volcker disinflation seems to have gone too far …

In a low nominal interest rate environment, this deflationary bias is a predictable consequence of a symmetric strategy to stabilize inflation, like the one followed by the Federal Reserve until the revision of its framework announced in August 2020 …

We argue that in the current low interest rate environment, it is advantageous for a central bank to be more concerned about inflation running below target than about inflation going above target. A low inflation target should be combined with an asymmetric monetary policy strategy calling for more aggressive actions when inflation is below target than when inflation is above target.

So this is a little step away from the hardline New Keynesian view that monetary policy should be conducted in a symmetric fashion.

I say ‘little step’ because the same sort of New Keynesian nonsense is rehearsed in the paper – which I do not recommend anyone read. I have done the hard yards to filter it.

The point is that while the authors still believe that monetary policy adjustments are an effective way to discipline the economic cycle, they now recognise that the, previously dominant, ‘forward-looking’ approach, where central banks have tightened monetary policy prematurely because they ‘fear’ future inflation, is a costly approach.

Even within the New Keynesian mindset they are manipulating equations to show that it is better to allow inflation to reveal itself as being well above the target before policy should tighten.

Of course, the absence of any discussion of the role the bias in fiscal policy towards surplus generation (fiscal drag) has played in the persistently low inflation environment is telling.

MMTed update

We are close to completing a short new course which we hope to offer in early December, depending on how time plays out.

We are highly resource constrained because we are financially constrained, unlike a currency-issuing government, so things take time to develop.

We also hope to offer the MOOC, which we ran earlier this year again in the not too distant future.

We are also looking for an app developer who is interested in helping us. If you are interested and skilful, please contact me on my usual E-mail or phone addresses and I will fill you in with the details.

We cannot pay any large cheques though!

Music – a (pre)-funky morning

This is what I have been listening to while working this morning.

One of my favourite bands was (is) – Sly & The Family Stone – who defined, in my view, the late 1960s West Coast US sound combining soul, funk and pyschedelic instrumentation.

It was led by the brilliant – Sylvestor Stewart (aka Sly Stone) who many attribute being one of the pioneers of what became funk music in the 1970s.

This single – Everybody Is A Star – was released in December 1969 and I recall as a teenager that it was one of the best things I had ever heard.

It was the b-side to their song – Thank You (Falettinme Be Mice Elf Agin.

The a- and b- side reached number 1 in the Billboard charts in February 1970.

It was compiled on their 1970 – Great Hits – album, which was among my favourites of all time.

The single was classified as – Psychedelic Soul – and was the last release the band made before turning very funky.

That is enough for today!

(c) Copyright 2021 William Mitchell. All Rights Reserved.

Water beyond satire

Published by Anonymous (not verified) on Tue, 26/10/2021 - 4:00am in

I wonder if they have they appointed a Minister for water-borne diseases yet? Not only does Parliament seem, on the second reading at least to have purposely avoided requiring water companies to better control their sewage outflows into the sea and rivers, Brexit itself means that the imported chemicals designed to reduce toxicity are in... Read more

Facing chaos and needing a scapegoat, the Tories seek an endless fight with Europe | Fintan O’Toole

Published by Anonymous (not verified) on Sun, 17/10/2021 - 5:30pm in

The EU’s proposals on the Northern Ireland protocol offered what business leaders wanted, but the prime minister prefers failure and grievance

Last week, Boris Johnson, with his paintbrush and easel at his holiday villa in Marbella, touched up his self-portrait as the reincarnation of Winston Churchill. Meanwhile, another bodysnatcher, Johnson’s Brexit tsar, David Frost, was also in sunny Iberia. In Lisbon on Tuesday evening, he channelled the intellectual father of modern conservatism, the 18th-century Irish writer and politician Edmund Burke.

Frost demanded that the EU agree to rewrite completely the Northern Ireland protocol of the withdrawal treaty that Johnson hailed in October 2019 as a “fantastic deal for all of the UK”. His speech was entitled, in imitation of a famous Burke pamphlet, “Observations on the present state of the nation”.

Continue reading...

Brexit going too well..

Published by Anonymous (not verified) on Wed, 06/10/2021 - 1:00am in Northern Ireland. A couple of minutes of explanation: Of course, we couldn’t possibly have a part of the UK avoiding the Tory dystopian chaos – and where practicality might, for once, trump ideology – could we? As the Byline Times points out: Meanwhile, in Northern Ireland, there is an interesting control experiment occurring as... Read more

Live Stream on Currencies footage – Helsinki, October 2, 2021

Published by Anonymous (not verified) on Mon, 04/10/2021 - 11:57am in

It is a public holiday today celebrating – Labour Day – which recognises the struggles to successfully gain an 8-hour working day for workers. The first of the many marches in this struggle occurred in my hometown of Melbourne on April 21, 1856, and history shows that this march was successful in achieving the first 8-hour day decision in the world, without loss of pay. So today we think of that. If workers unite they have the capacity to achieve great things. What follows is a brief report and footage from a debate I participated in on October 2, 2021, which was organised by some groups in Helsinki, Finland.

I have several deadlines at present so I am using the Labour Day holiday to advance those while taking a day from blog posting other than what follows.

Event – Currency Arrangements, Helsinki, October 2, 2021

The Finish-based group Talousdemokratia together with the University of Helsinki organised a public debate on Saturday, October 2, 2021, which was streamed live via YouTube.

The topic was “The eurozone and other currency arrangements in a global economy” and I joined Professor Heikki Patomäki, one of my colleagues at the University of Helsinki in an interesting discussion about history, politics and economics.

The topics I addressed were as follows:

1. The capacities of a currency issuer and the consequences of using a foreign currency.

2. The dysfunctional architecture of the EMU – deliberately chosen to reinforce neoliberal ideological principles.

3. The reality that any crisis will always be worse in the EMU because of the monetary choices the architects made. A specific reference to the pandemic etc.

4. What are the options for reform? Federal Europe, etc

5. What are the chances of reform? Not good.

If you follow the whole stream you will see where Heikki and I agree and disagree.

Thanks to Niina, Ari and Konsta for their work in organising this.

The program was:

1. Introductions – to 8:32 minutes.

2. My talk (we were allocated maximum 30 minutes)- 8:40 to 38:00

3. Questions to me – 38:00 to 42:50

4. Heikki’s talk – 44:50 to 1:18:55

5. Panel discussion – 1:19:00 to 2:06:00

6. Some questions from audience followed to 2:22:00

Here is the full proceedings:

That is enough for today!

(c) Copyright 2021 William Mitchell. All Rights Reserved.