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- Jake Friends come and go. Enemies accumulate.
That European influence obviously is not strong enough, but the situation today would be no different with the Buba- you'd have devaluations, and I fail to see how that is any worse than austerity.
Case in point, the UK, which supposedly avoided the eurozone crisis by devaluating, and is doing even more austerity today. Wind power
Oh, and you want to withdraw rediscount facilities from all banks that assist in speculative attacks against your currency. You can't attack a currency unless you can short it, and you can't short it unless its central bank is being a sucker.
While everyone is pretending that these investor attacks on sovereign political entities which we know as nation states are somehow the fault of the nation states themselves it's impossible to deal with the political reality of what's actually happening - which is that a gang of thugs with baseball bats is kicking in the windows of democracy.
This is an extended economic Kristallnacht. It's soft violence-by-spreadsheet rather than hard violence with a fist to the face. But it's still criminal violence, with immensely destructive consequences - and not the genteel debate about financial niceties that it pretends to be.
Here's a useful graph of UK insolvencies. (The downtick last year was the result of new legislation which created a simplified pseudo-bankruptcy process for certain debtors.)
Considering that Osborne's plan seems to be to move public debt to private households, the next few years aren't going to be a happy experience for many people.
And I should learn to proofread better.
And it's not quite true that you can't short a currency unless the CB is being a sucker. The CB is just the most common sucker in a Soros attack, but any entity that has domestic currency lying around in large quantities can be the sucker.
Also, if your CB is not committing to defend a lower bound, it should be brokering currency swaps between foreign central banks and domestic firms that are considered to be of strategic importance and require imports of raw materials or intermediate goods. That way, you would minimise disruptions in the event of a Soros attack that you find yourself unable to defend against.
There's a world of difference when it comes to the effect on employment. Economics is politics by other means
(Cheat sheet: Countries that devalue win relative to countries that commit Austerity against their economies.)
Was French unemployment worse in 93-08 than it was in 78-93? Growth? General state of the economy? How about Italy? Greece? Spain? Wind power
There was a bubble, ie a perception of more wealth than there really was, and there needs to be a downwards adjustment of sorts. The questions are how big it is, and who bears the pain.
My point is to say that the bigger problem is the allocation of pain rather than the size of the crash. Asset owners, in particular financial asset owners, are protected at the expense of workers. Austerity ensures that, but it can certainly also happen under devaluation/inflation, depending on which policies go along.
I don't think there's anything today that cannot be solved by high marginal tax rates and severe re-regulation (and breakup) of banks. Wind power
My point is to say that the bigger problem is the allocation of pain rather than the size of the crash. Asset owners, in particular financial asset owners, are protected at the expense of workers. Austerity ensures that, but it can certainly also happen under devaluation/inflation, depending on which policies go along. I don't think there's anything today that cannot be solved by high marginal tax rates and severe re-regulation (and breakup) of banks.
I don't think there's anything today that cannot be solved by high marginal tax rates and severe re-regulation (and breakup) of banks.
How would this solve the problems of Portugal?
As I see it, the currency union means that the peripheral countries need transfers and an industrial policy or we are eventually facing the depopulation of the periphery. Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
But the problem isn't just the fact that the policies make no sense - it's that there's no group or organisation that can offer a solid counterpunch against them.
Effectively the Bundesbank and "investors" decide policy, and governments exist solely to implement it.
If the policy happens to be suicidally inappropriate for a given government, that government can always be replaced.
However, governments are not allowed to set policy for banks and investors. Even minor restrictions, like the ones being proposed in the UK, are met with outraged howls and self-righteous huffing.
It's obvious that nation states are no longer able to act as sovereign entities. Even when pols understand what's happening, and don't choose to be complicit with it, there's very little individual governments can do.
The only workable solution is an EU-wide - preferably an international - political front to oppose investor domination.
This can't take the form of a single party or wing, but has to include senior (dissenting) figures from across the region working together and coordinating responses and actions.
This isn't likely to happen - I'm not holding my breath for it. But unfortunately I think it may be the only way to stop the neo-lib thugs before they break something permanently.
China will continue to buy Spanish debt and will help to fund a restructuring of its savings banks, a Spanish government source said after Chinese Premier Wen Jiabao met Spanish Prime Minister Jose Luis Rodriguez Zapatero in Beijing.
['s Macho Moment of the Day™ Technology] It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II
senior (dissenting) figures from across the region working together
a choir in the wilderness? 'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty
Asset owners, in particular financial asset owners, are protected at the expense of workers. Austerity ensures that, but it can certainly also happen under devaluation/inflation, depending on which policies go along.
Inflation helps the owners of productive assets if higher prices allow them to pocket higher margins. Other than that, inflation is bad for the wealthy. Economics is politics by other means
Potentially including all pensioners.
Inflation helps the owners of productive assets if higher prices allow them to pocket higher margins.
Except when imported raw materials make up a high part of their production costs.
Additionally, when inflation is chiefly inflation of imported food and heating fuel, that will disproportionately hit the poor. *Lunatic*, n. One whose delusions are out of fashion.
Debt Asset owners are not protected by inflation. Potentially including all pensioners.
Debt Asset owners are not protected by inflation.
But that is an argument against privatising pensions, not an argument against inflation.
Inflation helps the owners of productive assets if higher prices allow them to pocket higher margins. Except when imported raw materials make up a high part of their production costs. Additionally, when inflation is chiefly inflation of imported food and heating fuel, that will disproportionately hit the poor.
Additionally, when inflation is chiefly inflation of imported food and heating fuel, that will disproportionately hit the poor.
True. But imported inflation is not amenable to fiscal or interest rate policy. The only long-term way to deal with imported inflation is import substitution or reduced dependence on the goods in question. And the short-term solution to imported inflation - interest rate hikes or austerity in order to improve (or defend) your terms of trade with RoW - works at cross purposes with the industrial policy required to reduce your import dependencies.
What is the relationship there? Pensions weren't yet privatised when this happened to pensioners in ex-communist states. Methinks this has more to do with the model of retirement funds as a pot of lifetime savings, whether private or state-run.
And the short-term solution to imported inflation - interest rate hikes or austerity in order to improve (or defend) your terms of trade with RoW - works at cross purposes with the industrial policy required to reduce your import dependencies.
Does that apply to basic food items and heating fuel?
Let me add a third problem I see with the inflation narrative: on the side of wealthy people. What inflation eats away at is the value of their assets. If they can decouple at least a good part of their income from asset prices and keep their assets (bee it gold or stocks in companies not going bust or means of production), then they don't loose anything physical, and the value of those assets will rebound in the next rally. I imagine this is not something that can't be countered with some nice taxes on wealth, but don't you agree that the rich don't automatically suffer the inflation route? *Lunatic*, n. One whose delusions are out of fashion.
Well, yes, the point of retaining state control of the pensions is that you can index them, precisely because the state works on cash rather than accrual accounting.
Suppose you want to actively reduce your import dependency on fuel. This requires you to, in the aggregate, invest more in your housing stock and industrial plant than you would under a business-as-usual scenario. Both contractionary fiscal policy and contractionary interest rate policy will impair that investment. I suppose that in principle you might reconcile overall contractionary policy with greater targeted investment if you go all-out command economy in the relevant sectors, but as long as you want to retain a monetary economy with fungible money it's hard to see how that would work in practise.
Let me add a third problem I see with the inflation narrative: on the side of wealthy people. What inflation eats away at is the value of their assets. If they can decouple at least a good part of their income from asset prices and keep their assets (bee it gold or stocks in companies not going bust or means of production), then they don't loose anything physical, and the value of those assets will rebound in the next rally. I imagine this is not something that can't be countered with some nice taxes on wealth, but don't you agree that the rich don't automatically suffer the inflation route?
Inflation is not a tax on wealth, it's a tax on lazy money. So a rich person won't automatically suffer under inflation, and a poor person won't automatically gain.
More precisely, inflation is a tax on net creditors and those wage-earners and benefits claimants that are in a weaker political position than they were when their wages and benefits were originally instituted (due to the high downward rigidity of nominal wages and benefits). It is a subsidy to net debtors and employers who are in a stronger bargaining position than they used to be. That makes it a net loss for the financial sector, lazy money and weakly organised labour, and a net gain for the industrial sector and homeowners.
Devaluation or depreciation is a tax on imports and a subsidy for exports. Overall that translates to a net benefit for people associated with primary or manufacturing industries and a net loss for people associated with the financial or service sectors.
Contractionary interest rate policy is a tax on the future and a subsidy to the present. Homeowners and the industrial sector lose, because they are capital intensive; lazy money and the financial sector win because they are capital-extensive.
Contractionary fiscal policies are a tax on labour and the industrial sector, both of which are sensitive to the state of demand.
Further, economic activity is impaired by double-digit inflation rates, appreciation of the currency, contractionary interest rate policy and contractionary fiscal policy, and boosted by depreciation of the currency and expansionary interest rate and fiscal policy (note that there is no documented gain from further lowering inflation once you've eliminated the disruption caused by impairment of the ability of the currency to function as money).
As you will see, there is no perfect overlap between any of these groups and "the wealthy" or "the poor." But it is often possible to construct combinations that will favour the groups you want to favour. A combination of expansionary fiscal policy and moderate inflation favours labour and the industrial sector while it penalises the financial sector, lazy money and benefit claimants that lack adequate political power to defend the real value of their claims. Conversely, a combination of a strong currency, low inflation and contractionary interest rates favours lazy money and the financial sector, at the expense of homeowners, the industrial sector and overall economic performance (incidentally, I think that is as good an explanation as any for why this policy combination is so popular with The Serious People).
[proof needed] - and in Europe.
There is nothing sufficiently unique about Europe to exempts us from simple accounting relations. Cycle-averaged balanced budgets in a nominally growing economy impose an upwards unemployment bias by withdrawing fiat-money purchasing power from the economy, relative to the demand for fiat-money purchasing power.
Was French unemployment worse in 93-08 than it was in 78-93? Growth? General state of the economy?
Both of those periods are dominated by intra-European fixed-rate ForEx regimes (the ERM between '79 and '93, the EMU between '98 and '08), so you can hardly use a comparison between the two to test a hypothesis on the influence of floating versus fixed exchange rates.
I am not contesting that repeated devaluations in a fixed exchange rate system is a poor policy. This is, I believe, a theoretically well founded and clearly empirically validated conclusion. My contentions are that
Simple inspection suggests that the 1993 devaluation was much less painful than the 2008 austerity, but in order to make a compelling case one would have to compare the magnitude of the required exchange rate adjustments to achieve real exchange rate parity with the one's choice of indicators of economic performance. I don't have 1993 price level, unemployment and exchange rate data on hand for these countries, but if you're really interested I can probably get them and run the numbers.
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