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There's no greater unknown unknown than that which one chooses not to see

by Migeru Mon Oct 29th, 2012 at 05:37:00 AM EST

A correspondent sends me notice of the latest paper by Jean Pisani-Ferry of the Bruegel think tank: The known unknowns and the unknown unknowns of the EMU (26th October 2012). There is even a related video on the Bruegel website!

Bruegel, as some people may remember, is hardly my favourite think tank...

And given that Jean Pisani-Ferry and his Bruegel think tank live off reinforcing the Eurocracy conventional wisdom, I am actually pleasantly surprised to find the following paragraph in there:

The second reason has to do with what the Maastricht treaty did not include, ie the prevention of non-fiscal imbalances. When thinking about possible threats that EMU should be defended against, policymakers in Maastricht looked back at past experience and identified two: inflation and fiscal laxity. Financial instability was at the time perceived as being of minor importance and, even though currency unification was expected to reinforce financial integration, no provision was envisaged to deal with the effects of private credit booms-and-busts. EMU was conceived as an economic and monetary union, not as a financial union. True, the EU could have relied on the Broad Economic Policy Guidelines (BEPGs), a catch-all procedure rooted in the treaty, but it was in fact a weak, non-binding and rather neglected procedure. This view proved to be short-sighted. While public indebtedness in the southern countries remained broadly stable or even declined during the first decade of EMU, private indebtedness financed by capital inflows skyrocketed, resulting in the previously described massive macroeconomic divergence.
Which basically means that the Eurozone policy response and the crisis diagnosis itself have been terribly flawed for 4 years and continue to be flawed. Not one of the Eurozone's policy developments purported to respond to the crisis would have made a difference to the private financial sector dynamics of the past 10 years had they been in place from the start.


This is hardly surprising coming from a Eurozone economic policy establishment that didn't bat an eye when starting in 2009 the ECB bought outright, without "sterilization" and in the primary market, 60 billion Euros worth of Pfandbriefe at the behest of the Bundesbank. How different to the wailing and gnashing of teeth that accompanied any suggestion of secondary market support of public debt after 2010.

In any case, it is fascinating (no, not really surprising) how Pisani-Ferry manages to ignore Charles Goodhart and Wynne Godley in his survey of economic criticism of the Eurozone design in the 1990s...

Goodhart? Who he? From The Economist:

Why is this relevant for the euro? Here is Mr Goodhart writing in 1998, on the eve of the euro project.
The key relationship in the C team model is the centrality of the link between political sovereignty and fiscal authority on the one hand and money creation, the mint and the central bank on the other. A key fact in the proposed Euro system is that the link is to be weakened to a degree rarely, if ever, known before. ... There is to be an unprecedented divorce between the main monetary and fiscal authorities ... the C team analysts worry whether the divorce may not have some unforeseen side effects.
The logical conclusion from this is not a new idea: the euro area needs greater fiscal integration. But the reason is different. It is not because Greece and Spain spoiled a perfect plan with their profligacy. It is because the euro enshrines the divorce of fiscal and monetary power. If you are a member of Mr Goodhart's C team this never made sense in the first place.
Not your usual eurosceptic Briton in any case:
"The European ideal has so much power that crisis and even division will not permanently prevail." So says Professor Charles Goodhart
(INET)

Hope springs eternal in the human heart.

As to Godley, there's this (which I like to quote) from 1992: Maastricht and all that

But there is much more to it all. It needs to be emphasised at the start that the establishment of a single currency in the EC would indeed bring to an end the sovereignty of its component nations and their power to take independent action on major issues. As Mr Tim Congdon has argued very cogently, the power to issue its own money, to make drafts on its own central bank, is the main thing which defines national independence. If a country gives up or loses this power, it acquires the status of a local authority or colony. Local authorities and regions obviously cannot devalue. But they also lose the power to finance deficits through money creation while other methods of raising finance are subject to central regulation. Nor can they change interest rates. As local authorities possess none of the instruments of macro-economic policy, their political choice is confined to relatively minor matters of emphasis - a bit more education here, a bit less infrastructure there. I think that when Jacques Delors lays new emphasis on the principle of `subsidiarity', he is really only telling us we will be allowed to make decisions about a larger number of relatively unimportant matters than we might previously have supposed. Perhaps he will let us have curly cucumbers after all. Big deal!
Godley (among others) managed to predict the precise endogenous failure mode of the Eurozone, 20 years in advance. Was that dumb luck? I don't think so, and neither does Dirk Bezemer in No one saw it coming, or did they?:
In Bezemer (2009), I document the models that got it right. The important question for economists is - how did they do it? What is the underlying model?

While there is obviously a diversity of approaches, one important strand of thinking is an accounting of financial stocks (debt and wealth) and flows (of credit, interest, profit and wages), as well as explicit analysis of both the real economy and the financial sector (including property).

The most detailed of these models, which has also been used to construct public projections and analyses, are "Flow of Funds" models of the US developed by Wynne Godley and associates at the Levy Economics Institute. ...

And what is the latest to come out of the Levy Institute's stock-flow-consistent macroeconomic analysis? How profligate was the Greek Government?
Breezily blaming the eurozone crisis on government profligacy is a widely-used journalistic shortcut, but by now it should be clear that it's a shortcut that doesn't help us understand what went wrong with the euro project.  It has been repeated often, though evidently not often enough, that Spain, one of the hardest hit countries, had a public debt-to-GDP ratio that was a mere 27 percent before the crisis hit.  And there is reason to believe that even in the case of Greece, the bogeyman of government profligacy, the popular narrative should be treated with a little more skepticism.
Greece is now firmly "on the way to stability": the stability of the graveyard. From Paul Mason, Love or Nothing, the real Greek parallel with Weimar
Horrified inertia is now seeping from the world of the semi-outlawed young activists into the lives of ordinary people.

Display:
This is what happens when an email prompts you to a diary-length, annotated tirade in response...

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Sat Oct 27th, 2012 at 12:17:04 PM EST
I'm impressed, Breugel output usually just stirs me into some cursing and then some minor despair.
by Metatone (metatone [a|t] gmail (dot) com) on Sat Oct 27th, 2012 at 06:21:55 PM EST
[ Parent ]
In the interview video, JPF says The warnings were there. Economists had done their job, in a way. Policymakers too often chose a complacent reading of the literature. This is despite recognising that the Euro crisis came from the direction of those risks that were overlooked by mainstream economics ('the unknown unknowns', he calls it).

This is in the same league as Olivier Blanchard's the state of Macro is good, here recalled by the always amusing Steve Keen: Neoclassical economists are fuelling neo-Nazism (October 15th, 2012)

Today's helping hand was a comment from French economist Olivier Blanchard. He qualifies as a serial offender on the comic statements front, since when wearing the hat of founding editor of the American Economic Review: Macroeconomics, he uttered the now immortal line that "the state of macro [economic theory] is good" - one year and six days after the financial crisis began.

He was the chief economist for the IMF prior to that gig, and he subsequently returned to the IMF, where he now has the curious title of "economic counsellor" (now there's another potential gag, but I digress).
While delivering the baleful news in the latest IMF World Economic Outlook that the global economy is slowing, Olivier noted that:

"In most countries, fiscal consolidation is proceeding according to plan."
"According to plan?" Well, yes, if the plan is to inspire the rise of fascist dictatorships in southern Europe, I suppose you could say that.


I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Sat Oct 27th, 2012 at 01:12:46 PM EST
"If we ignore reality, everything is fine."

The intellectual obliviousness and arrogance of these ... people ... is staggering.  

Skepticism is the first step on the road to truth. -- Denis Diderot

by ATinNM on Sat Oct 27th, 2012 at 01:21:46 PM EST
[ Parent ]
Naked Capitalism: The New Priesthood: An Interview with Yanis Varoufakis Part I (March 1, 2012)
E.E. Evans-Pritchard (the famous anthropologist) once offered a brilliant insight into the social success of the priesthood within the Azande society. The question he asked is similar to yours (regarding economists): If they get it so wrong so often, how should we explain their continuing dominance? When the Azande priests and oracles failed to predict or avert disasters, why did people continue to believe them? His explanation of the Azande's unshakeable belief in witchcraft, oracles and magic goes like this:
Azande see as well as we that the failure of their oracle to prophesy truly calls for explanation, but so entangled are they in mystical notions that they must make use of them to account for failure. The contradiction between experience and one mystical notion is explained by reference to other mystical notions. Evans-Pritchard in his Witchcraft, Oracles and Magic among the Azande, 1937
Economics, I submit to you, is not much different. Whenever it fails to predict properly some economic phenomenon (which is more often than not), that failure is accounted for by appealing to the same mystical economic notions which failed in the first place. Occasionally new notions are created in order to account for the failure of the earlier ones. For instance, the notion of natural unemployment was created in order to explain the failure of the market to engender full employment and of economics to explain that failure. More generally, unemployment and excess demand (or supply) is `proof' of insufficient competition which is to be fought by the magic of deregulation. If deregulation does not work, more privatisation will do the trick. If this fails, it must have been the fault of the labour market which is not sufficiently liberated from the spell of unions and government social security benefits. And so on. The fact that these ex post rationalisations of theoretical failure are narrated in mathematically complex language, and accompanied by myriad statistical `tests', adds to their social power to silence critics without and doubts within.


I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Sat Oct 27th, 2012 at 02:24:49 PM EST
[ Parent ]
See also Varafoukas' A Most Peculiar Failure I particularly liked his 'Dance of the Meta-Axioms' which shows the response of NCE to theoretical challenges. One meta axiom is 'methodological individualism' - 'homo economicus' - all decisions are made by rational actors. First, if possible, just ignore the challenge. If that is not possible the response is to prune back the clams on the explanatory power of rational actor theory. But this destroys the desired ability to seem to account for all behavior, 'closure'. So, wait a while and then go back to the beloved strong version of the axiom. If that is too blatant, wait longer and then reshuffle the order of the meta-axioms and perhaps change the adjectives. I would add that this debate is best conducted in the most obscure terms and the most mathematics possible.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Oct 27th, 2012 at 03:23:05 PM EST
[ Parent ]
no reality, no problem...

their reality is panning out fine, that screaming outside the window is just....noise!

quadruple glazing would deal with that, right?


"We can all be prosperous but we can't all be rich." Ian Welsh

by melo (melometa4(at)gmail.com) on Sun Oct 28th, 2012 at 06:57:16 AM EST
[ Parent ]
Jean Pisani-Ferry and Oliver Blanchard ought to share the next Ig Nobel in Economics. It would certainly be well deserved. Or is that we all have been so well disserved?

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Oct 28th, 2012 at 02:08:45 AM EST
[ Parent ]
Perhaps we should be trying to get the German court to declare the Pfandebrief transaction unconstitutional?

The big bait and switch however has been the conversion of private debt into public debt and now the concentration on crucifying the public, because of the debt.

by Metatone (metatone [a|t] gmail (dot) com) on Sat Oct 27th, 2012 at 06:28:30 PM EST
Or perhaps the Pfandbriefe could be sold in order to fund the purchase of southern European bonds?

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II
by eurogreen on Sat Oct 27th, 2012 at 06:43:35 PM EST
[ Parent ]
Well, that would be nice, but seems even less likely than my suggestion.
;-)
by Metatone (metatone [a|t] gmail (dot) com) on Sat Oct 27th, 2012 at 06:55:14 PM EST
[ Parent ]
the covered bond market seems to working well again.
by IM on Sun Oct 28th, 2012 at 06:07:47 AM EST
[ Parent ]
And the sovereign bond market would have worked well again if the ECB had come out and said they would cap sovereign yields in the secondary market at, say, 6% in 2010.

But the intent of the ECB was to bail out the covered bond market but crush the welfare state.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS

by Migeru (migeru at eurotrib dot com) on Sun Oct 28th, 2012 at 07:17:22 AM EST
[ Parent ]
the covered bond market seems to working well again

Which goes to show that the ECB has been acting as a market maker of last resort_ (let alone as lender of last resort), contrary to some claims.

It's just that the ECB has been very selective about which markets it has seen it fit to bail out.

And that, my friends, is political meddling by the central bank.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS

by Migeru (migeru at eurotrib dot com) on Sun Oct 28th, 2012 at 07:22:30 AM EST
[ Parent ]
Is it really? Isn't it more the case that the law and the treaties say direct financing of sovereigns is forbidden, but says nothing about private debt?

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Sun Oct 28th, 2012 at 07:32:04 AM EST
[ Parent ]
Secondary market purchases are not "direct financing".

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Sun Oct 28th, 2012 at 07:53:31 AM EST
[ Parent ]
Well, you are right about that. Otherwise, the current OMT program would be illegal.

Still, the interpretation is silly. Somehow the bonds are cleansed if they are just put on the market and then bought, compared to being bought outright. It might be what the law demands, but it makes no sense.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Sun Oct 28th, 2012 at 08:25:29 AM EST
[ Parent ]
You know as well as I do that the insane German economic policy establishment believes the OMT to be the work of the Devil. There might yet be a legal challenge.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Sun Oct 28th, 2012 at 08:36:39 AM EST
[ Parent ]
by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Oct 28th, 2012 at 03:49:13 PM EST
[ Parent ]
IM:
the covered bond market seems to working well again
Migeru:
Which goes to show that the ECB has been acting as a market maker of last resort_ (let alone as lender of last resort), contrary to some claims.

It's just that the ECB has been very selective about which markets it has seen it fit to bail out.

And that, my friends, is political meddling by the central bank.

Starvid:
Is it really? Isn't it more the case that the law and the treaties say direct financing of sovereigns is forbidden, but says nothing about private debt?
Willem Buiter: What's left of central bank independence?
The regulation and supervision of financial institutions and markets is a deeply political activity. Property rights are being assigned, restricted, qualified or taken away.  Banks are stopped from doing things they want to do and forced to do things they do not want to do.  Barriers to entry and exit are created, lowered or removed.  Such activities don't fit the image of an independent, a-political central bank very well.
Decisions as to which markets to stabilize by outright purchases are being made. Decisions as to which issuers to bail out are being made. Decisions as to which entities to allow as eligible counterparties for liquidity are being made. Decisions about who to hang out to dry are being made.
There are two problems with this extension of the role of the ECB into the supervisory domain.  There are no Treaty-based obstacles to any kind of financial supervisory role by the ECB, as long as it does not involve insurance (whatever that means).  But even some ECB Executive Board members are concerned that a significant supervisory role for the ECB would politicise the institutions and provide the Great Unwashed heads of state and of government (especially those from Paris) with a means of breaching the `noli me tangere' cordon sanitaire that the ECB has constructed to preserve its sole control over monetary and (de facto) exchange rate policy.
Which is why the ECB resists any meaningful bank supervisory role. (I explained here why the ECB is uniquely placed to be the Eurozone's banking supervisor, but it is also obvious that in the arrangement I describe there there isn't, indeed there can't be, any meaningful separation of the supervisory and monetary policy roles of the ECB.)

Back to Buiter

I have the opposite concern.  The ECB is so ludicrously over-independent, even for the performance of the traditional monetary policy tasks, that there is a real risk that, should it be granted a role in banking and financial supervision, it would be able to hide the (unavoidably political) supervisory decisions and actions behind the Treaty shield of monetary policy independence.  It is one thing to have monetary policy makers that are utterly unaccountable in any substantive sense (in the eyes of the ECB, accountability means `reporting obligations'!).  So have financial supervisors that cannot be held to account substantively - that cannot be fired for incompetence, for instance - would be intolerable.
The ECB's power grab, which is progressing nicely, is so worrysome precisely because there ECBankers are inviolable, by treaty. They, indeed, cannot be impeached even for gross misconduct of incompetence. The same happens to be true of the newfangled ESM, as per its defining treaty (the ESM board is inviolable and its decisions are not subject to judicial - or legilsative - review).

Meet the new sovereign - not quite the same as the old sovereign.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS

by Migeru (migeru at eurotrib dot com) on Sun Oct 28th, 2012 at 11:55:48 AM EST
[ Parent ]
No, it is a central bank doing its job. And you would recognize it too, if you weren't so hang up about the popular german name of covered bonds.
by IM on Sun Oct 28th, 2012 at 07:39:45 AM EST
[ Parent ]
And secondary market purchases of sovereign debt would also have been "a Central Bank doing its job".

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Sun Oct 28th, 2012 at 07:52:46 AM EST
[ Parent ]
No, it is a central bank doing its job. And you would recognize it too, if you weren't so hang up about the popular german name of covered bonds.

When the police arrests the unemployed black man for loitering, it's just doing its job. When the police fails to arrest the unemployed white man for loitering, it's just showing discretion within the bounds of its mandate.

The law is magnificent: It is equally illegal for the German and the Greek to sleep under bridges and beg for bread - but only the Greek gets arrested for it.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Oct 28th, 2012 at 04:05:06 PM EST
[ Parent ]
Oh, but the Pfandbriefe thing was entirely legal. There's no provision in the treaties preventing monetary financing of private debt.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Sat Oct 27th, 2012 at 07:28:43 PM EST
[ Parent ]
Before 2008 who would have conceived of such thing? Drooling businessmen dreaming dreams of unimaginable lucre? Oh, wait...

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Oct 27th, 2012 at 07:58:28 PM EST
[ Parent ]
And justified on the merits.

But you mentioned this and said pfandbrief instead of covered bonds so you could vaguely hint in a german direction.

by IM on Sun Oct 28th, 2012 at 06:04:16 AM EST
[ Parent ]
Rediscounts or repurchase agreements would have been merited. Outright purchases of private bonds is a fiscal function that the central bank should not usurp.

And there is a German angle, because Germany is the only Eurozone member where this sort of instrument is widely used.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Oct 28th, 2012 at 06:37:48 AM EST
[ Parent ]
Yes I know. Pfandbriefe in say Denmark are an instrument of god. Pfandbriefe in Germany are a devilish instrument of some sinister Bundesbank plan.

You really are predictable.  

by IM on Sun Oct 28th, 2012 at 06:51:02 AM EST
[ Parent ]
Pfandbriefe are a perfectly fine class of instruments which should be used more widely.

But the central bank should still be rediscounting them rather than buying them outright. I mean, buying Pfandbriefe beats buying structured complex derivatives or credit default swaps from AIG.

But it's still a fiscal operation, and as such should not be carried out by central banks. The proper channel for the central bank to support fiscal action is for the treasury to perform the fiscal action and the central bank to monetize the resulting government bond issue.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Oct 28th, 2012 at 04:25:44 PM EST
[ Parent ]
Remind me, rediscount is the same process as repo? Or no?

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Sun Oct 28th, 2012 at 06:12:58 PM EST
[ Parent ]
A repo at the "discount window" (which is Fed terminology).

The ECB calls its liquidity providing repos "reverse transactions" and "main *refinancing_*operations".

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS

by Migeru (migeru at eurotrib dot com) on Sun Oct 28th, 2012 at 06:16:45 PM EST
[ Parent ]
All rediscounts are repos (or near enough as makes no matter), but not all repos are rediscounts.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Oct 28th, 2012 at 06:30:45 PM EST
[ Parent ]
Which repos are not rediscounts?

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Sun Oct 28th, 2012 at 06:49:48 PM EST
[ Parent ]
Those that take place between private entities.

(Etymologically, they might be. But conventionally only the central bank does rediscounts. Everyone else does "lending.")

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Oct 28th, 2012 at 06:59:35 PM EST
[ Parent ]
You think of a repo as an overcollateralised loan. Serious people think of them as derivatives.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Sun Oct 28th, 2012 at 08:00:57 PM EST
[ Parent ]
"Pfandbriefe are a perfectly fine class of instruments which should be used more widely."

At least we agree on that.

by IM on Mon Oct 29th, 2012 at 03:13:33 AM EST
[ Parent ]
because Germany is the only Eurozone member where this sort of instrument is widely used.

And that is a bad thing!*

Covered bonds should be used more.

* And not really true. About half of all coverd bonds in europe originate in Germany. Even after you subtract the second largest danisch market, there is a lot left.

by IM on Sun Oct 28th, 2012 at 07:05:42 AM EST
[ Parent ]
I think the Pfandbriefe purchases were proportional to each country's GDP, but I'd have to check.

Still, Trichet claimed that the Bundesbank had been the one to convince the ECB of the necessity of this programme.

My beef is not with the Pfandbriefe as an instrument (they're less toxic than American-style securitization because the assets backing the bond stay on the bank's balance sheet) but with the ideological preference for bailing out private bond issuers in the primary market while screaming bloody murder over open market operations in sovereign bonds.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS

by Migeru (migeru at eurotrib dot com) on Sun Oct 28th, 2012 at 07:15:34 AM EST
[ Parent ]
And bailing out - the covered bank market was frozen. Not uncommon in late 2008/early 2009. It had to be unfrozen. Pfandbrief propagandists like to brag that no Pfandbrief ever defaulted. I don't know if that is literally true, but the default risk is low. So I don't think that bailout of private investors is really the right term.
by IM on Sun Oct 28th, 2012 at 07:32:30 AM EST
[ Parent ]
I don't think that bailout of private investors is really the right term

It was a bailout of the Pfandbrief-issuing banks.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS

by Migeru (migeru at eurotrib dot com) on Sun Oct 28th, 2012 at 07:50:45 AM EST
[ Parent ]
About half of all coverd bonds in europe originate in Germany

And Germany has 30% of the Eurozone's GDP. So the ratio of covered bonds to GDP is more than twice higher in Germany as elsewhere in the Eurozone.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS

by Migeru (migeru at eurotrib dot com) on Sun Oct 28th, 2012 at 07:19:20 AM EST
[ Parent ]
And that is a good thing. And other countries should imitate Germany. Or Denmark, if this is more palatable.
by IM on Sun Oct 28th, 2012 at 07:27:33 AM EST
[ Parent ]
That is not at issue, what's at issue is the fact that the Euro treaties allow central bank bailouts of private banks through primary market purchases, and disallow the same thing for sovereign bond markets. That's an ideological distinction. And then when legal secondary market purchases were suggested, they were disallowed on spurious political arguments about "the spirit, not the letter". That is an argument for a dysfunctional central bank. We wouldn't be discussing "convertibility risk" nearly three years later otherwise.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Sun Oct 28th, 2012 at 07:49:56 AM EST
[ Parent ]
If that is not the issue, why do you bring it up again and again? And using the german term instead of covered banks too?
by IM on Sun Oct 28th, 2012 at 07:55:22 AM EST
[ Parent ]
I bring it up because I think it's a very clear way to illustrate the ideological basis of the Eurozone.

Primary market purchases of private banks' bonds: okay.

Secondary market purchases of government bonds: not okay, despite the fact the treaties say nothing about it as they should.

The fact that the ECB has come up with "fiscal policy conditionality" as a condition for stabilizing a dysfunctional secondary markek after 3 years of crisis is an indictment of that ideological basis.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS

by Migeru (migeru at eurotrib dot com) on Sun Oct 28th, 2012 at 08:00:27 AM EST
[ Parent ]
But I repeat myself.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Sun Oct 28th, 2012 at 08:08:59 AM EST
[ Parent ]
I wanted to joke that next you would bring your other obsession, that Siemens has a bank, but

"Even Siemens, notoriously, has a banking licence and has used it recently to transfer billions in deposits held with certain Eurozone banks into its ECB reserve account."

I wonder what you will do if you ever detect the existence of GE capital....

by IM on Sun Oct 28th, 2012 at 08:18:21 AM EST
[ Parent ]
Oh, I know GE capital exists.

I also know all of this ideological banking nonsense is destroying European society's ability to care for the least fortunate. Do you think that's as it should be?

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS

by Migeru (migeru at eurotrib dot com) on Sun Oct 28th, 2012 at 08:21:24 AM EST
[ Parent ]
Look, the existence of a Siemens or VW or BMW bank is utterly irrelevant.

And has, as far as I know nothing to do with ideology. GE is in many aspects quite similar to Siemens, so why shouldn't have Siemens a (much) smaller financial arm too?

If these company banks would be abolished tomorrow nothing about our situation would change.

And you should know, as you obviously did know of GE capital.

by IM on Sun Oct 28th, 2012 at 08:30:23 AM EST
[ Parent ]
The point is, GE and Siemens are allowed to become eligible counterparties for ECB liquidity, but the EFSF or ESM are not.

Explain who is most vociferously opposed to giving the EFSF and ESM a banking licence, and why.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS

by Migeru (migeru at eurotrib dot com) on Sun Oct 28th, 2012 at 08:32:15 AM EST
[ Parent ]
Explain to me why the EFSM and ESM cannot have a banking licence.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Sun Oct 28th, 2012 at 08:28:57 AM EST
[ Parent ]
The majority of private banks bailed out of trouble by unfreezing the covered bond market were German banks.

Other private bond markets were not unfrozen by the ECB.

Your loss assessments are based on the fact of the bailout and are thus basically irrelevant.

If it makes it easier for you to understand, pretend that the covered bond market had no German component and this action had been to bail out Irish and Spanish banks in a covered bond market. Imagine what the response in Germany would have been.

by Metatone (metatone [a|t] gmail (dot) com) on Sun Oct 28th, 2012 at 08:11:51 AM EST
[ Parent ]
"Your loss assessments are based on the fact of the bailout and are thus basically irrelevant."

You don't really know what a covered bond is, right?

"Other private bond markets were not unfrozen by the ECB."

Not true.

There are irsh and spanish covered bonds too, you know.

by IM on Sun Oct 28th, 2012 at 08:20:28 AM EST
[ Parent ]
I'm really tired of your accusations of ignorance.
We had a whole thread about how you don't even know how banking works.

And yet, you accuse I, who have worked on covered bonds, of knowing less than you.

I even said the majority bailed out of trouble were German banks.

And that remains true, if you go and look at the figures.

So go look. Or shut up.
I don't care which.

by Metatone (metatone [a|t] gmail (dot) com) on Sun Oct 28th, 2012 at 09:51:28 AM EST
[ Parent ]
I didn't accuse you of ignorance several times.

I only questioned your understanding how covered bonds work.

So you do know what an covered bond is and still refuse to put that knowledge to good use. Defaults on covered bonds are very rare. You should admit that.  

"We had a whole thread about how you don't even know how banking works."

Don't you think that this is more then a bit preposterous?

"I even said the majority bailed out of trouble were German banks."

That I didn't deny. I just pointed out that a majority isn't all and buying a certain type of bond isn't baling out of trouble.

And how exactly do you structure a buying programm of covered bondswithout benefiting german issuers? Any buying of private bonds of any type would involve a lot of german banks.  

"So go look. Or shut up."

That is a clever ploy so that I don't shut up, right?

by IM on Sun Oct 28th, 2012 at 10:10:48 AM EST
[ Parent ]
You don't really know what a covered bond is, right?

... is "questioning understanding of how covered bonds work" in the sense of using a question to suggest that the other person doesn't understand how they work.

Its "questioning" like a politician "questioning" their opponent's past position in a political debate, not "questioning" as in asking a question to find something out.

A question to find something out would have been more like, "How do you come by your understanding of covered bonds?", to get the answer, "I have worked on covered bonds."


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Mon Oct 29th, 2012 at 11:40:08 AM EST
[ Parent ]
And what is this private bank nonsense?

the vast majority of banks in germany are public or mutual.

persecuted by the EU, true, because the  EU has an prejudice against the public sector and public sector banks. Funny that nobody here complains about that.  

by IM on Sun Oct 28th, 2012 at 08:24:01 AM EST
[ Parent ]
Protected by the EU. which has done everything possible to avoid having banks write down their bad loans and recapitalise themselves (unlike in the US). The result is  zombie banks which France and Germany are full of.

When the ECB actually eventually decided to start cleaning up the balance sheets of the banks (which by no means is completed yet), they stole taxpayer money and gave them to the banks in return of the overpriced bad loans. Taxpayers were shafted, when shareholders should have been. Which is quite outrageous. As long as it is about the private sector, no one in the EU seems to care about moral hazard. That only applies to governments.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Sun Oct 28th, 2012 at 08:29:43 AM EST
[ Parent ]
As long as it is about the private sector, no one in the EU seems to care about moral hazard. That only applies to governments.

And German public banks, don't forget those are okay, too. It's only Spanish Cajas and not German Sparkassen and Landesbanken which are toxic.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS

by Migeru (migeru at eurotrib dot com) on Sun Oct 28th, 2012 at 08:33:44 AM EST
[ Parent ]
if you think the EU, especially< the commission is or has ever been friendly to public sector banks, you are not informed.

(How exactly a rescue of a public sector can be good to private shareholders is a bit mysterious to me too)

by IM on Sun Oct 28th, 2012 at 08:35:53 AM EST
[ Parent ]
if you think the EU, especially< the commission is or has ever been friendly to public sector banks, you are not informed.

So now we agree that the anti-public economic ideology of the ECB is a problem?

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS

by Migeru (migeru at eurotrib dot com) on Sun Oct 28th, 2012 at 08:37:56 AM EST
[ Parent ]
Have I ever said something else?

You wanted to take the detour into one of your obsessions.

An I still suspect that discrimination against the public sector is ok in your book, as long as it is a a say irish commissioner discriminating against the german public sector.

by IM on Sun Oct 28th, 2012 at 08:45:35 AM EST
[ Parent ]
What obsession? I'm just pointing out that according to our betters ECB primary market purchases of bank bonds are okay but secondary market purchases of public debt are not. The Covered Bond programme is the best example of this.

That is that one of the many ways in which ideology messes up European central banking. And that is having real, deadly consequences for a large number of people in Europe.

You can snipe about "my obsession" all you want, but the political dynamics of the past 5 years are disgusting on many levels and I'm going to continue to say so.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS

by Migeru (migeru at eurotrib dot com) on Sun Oct 28th, 2012 at 09:14:04 AM EST
[ Parent ]
obsession a) Pfandbrief - a stodgy thing looming rather ominously in your imagination

obsession b) Siemens

And that second obsession is truly pointless. What happened, did a Siemens kitchen appliance go rogue on you?

"You can snipe about "my obsession" all you want,"

A yes, you point out and I snipe.

by IM on Sun Oct 28th, 2012 at 09:32:57 AM EST
[ Parent ]
We keep talking past each other as you refuse to explain...
obsession a) Pfandbrief - a stodgy thing looming rather ominously in your imagination
Why are primary market purchases of covered bonds okay, but secondary market purchases of government bonds not okay?

Can you exhibit a single other asset class in which the ECB has engaged in primary market purchases?

obsession b) Siemens

And that second obsession is truly pointless

Why is Siemens allowed to be an eligible counteparty for Central Bank liquidity and not the EFSF and ESM?

I should point out the European Investment Bank also became an eligible counterparty in 2009, during the crisis. Why the EIB and not the EFSF and ESM?

"You can snipe about "my obsession" all you want,"

A yes, you point out and I snipe.

I point out how the European System of Central Banks has refused to allow any and all effective government debt crisis resolution strategies out of ideological bias. The ideological biased is demonstrated by the existence of a host of other extraordinary actions by the ECB bailing out a host of other institutions, sectors and markets. However, it suits the extreme marketista ideology of the European financial policy establishment to use the government debt crisis to shut down the European welfare state.

As a Social Democrat, you seem to care remarkably little about the political implications of all this. Europe is going to be a pretty nasty place to live in 5 years' time, at the rate we're going.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS

by Migeru (migeru at eurotrib dot com) on Sun Oct 28th, 2012 at 11:39:19 AM EST
[ Parent ]
"refuse to explain..."

What?

"Why are primary market purchases of covered bonds okay, but secondary market purchases of government bonds not okay?"

Have I said that? Why I am obligated to explain the positions of others? And you know the arguments by now.

Do you really think the answer is to attack the ECB for the one time they did the right thing? And doing this while insinuating a nationalistic and conspiratorial narrative is indeed quite wrong in a bigger political context.

 "Can you exhibit a single other asset class in which the ECB has engaged in primary market purchases?"

More's the pithy. They should have acted.

"Why is Siemens allowed to be an eligible counteparty for Central Bank liquidity and not the EFSF and the ESM?"  

 "I should point out the European Investment Bank also became an eligible counterparty in 2009, during the crisis. Why the EIB and not the EFSF and ESM?"

If you want to take vienna, take vienna. So drop this Siemens thing. You sound like one of the simpler minded right wing populists. You are not interested in a banking licence; indeed ESM as set up as international financial institution can do lot of the things banks do. You want the ESM to get the ability to borrow from the ECB, nothing more.

And of course you really don't want even that but direct action from the ecb. And the ECB as primary founder of states has what to do with Siemens? Nothing at all, of course.    

"The ideological biased is demonstrated by the existence of a host of other extraordinary actions by the ECB bailing out a host of other institutions, sectors and markets."

Wait a moment, is the covered bond program one of a kind or one of a host?

 "As a Social Democrat, you seem to care remarkably little about the political implications of all this."

I do care a lot about the political implications, including rising nationalism, the rise of conspiracy theories etc. And that is exactly why I criticize your tendency to see events through a nationalistic and conspiratorial lens.

by IM on Sun Oct 28th, 2012 at 12:51:25 PM EST
[ Parent ]
«[...] And that is exactly why I criticize your tendency to see events through a nationalistic and conspiratorial lens.»

Unfortunately it happens that is the only rational way to explain what is happening. Now I would not exclude truly irrational causes, but then reason fails.

res humŕ m'és alič

by Antoni Jaume on Sun Oct 28th, 2012 at 01:10:01 PM EST
[ Parent ]
Look: The basic currency policy problem for any core and semi-peripheral economy in the post Bretton Woods international trade system has been to have a currency which is simultaneously strong against the colonies (to obtain cheap raw materials) and weak against the dollar (because the US under the pBW system is the importer of last resort).

When we can observe that...

  • The Eurozone solves the pBW currency policy problem perfectly or near-perfectly for Germany, and not at all for everyone else

  • German currency policy announcements propagate into the mouths of peripheral and semi-peripheral Eurozone governments, and never the other way

  • The ECB is murdering people in every Eurozone country except Germany

  • The Bundesbank throws infantile hissy fits in the press, and nobody else does

  • Policies are enacted which began their public career as infantile BuBa hissy fits in the press

... then why in the world should we not conclude that the Eurozone serves the German national interest at the expense of every other member? Are we likewise supposed to pretend that the WTO, IMF/World Bank and NATO aren't extensions of the US Chamber of Commerce, State Department and Ministry of Defense, respectively? That Pravda and Izvestia were practicing independent, investigative journalism? That the Mississippi poll tax wasn't racist? That the British Empire was in Africa to lift the white man's burden?

What are we, fucking two? Do we really believe that Horton heard a Who?

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Oct 28th, 2012 at 04:22:14 PM EST
[ Parent ]
Public banks have shareholders too. And the big no.1 goal is to avoid recapitalisations in which the German government will have to take part, either as a backstop for failed private rights issues, or as the owner of public banks.

For some reason, that same government doesn't seem to mind injecting capital to increase its ownership share of EADS.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Sun Oct 28th, 2012 at 08:47:03 AM EST
[ Parent ]
Nonsense. The states have re-capitalised the landesbanken heavily. One - the once mighty west LB - has been abolished. (the mutuals and public savings banks have solved their smaller problems inside their federations).

And the EU commission has harassed the public banks since decades.

the big private issuer was HRE and you know what happened there.

by IM on Sun Oct 28th, 2012 at 08:55:11 AM EST
[ Parent ]
What I think is that after German public opinion soured on SOFFIN, it became politically impossible to rescue the German banks within Germany, and that's why the Bundesbank had to bail out the Pfandbrief issuers in the primary market, for which it was necessary to convince the ECB to do an Eurozone-wide covered bond programme.

This all happened in 2009.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS

by Migeru (migeru at eurotrib dot com) on Sun Oct 28th, 2012 at 09:09:14 AM EST
[ Parent ]
Look, the federal government rescued commerzbank and HRE. The states rescued five state banks. What was left to rescue? Being orientated on domestic business, the mutuals and saving banks collectively really didn't need a rescue.

so your stealth rescue theory doesn't holds up.

by IM on Sun Oct 28th, 2012 at 09:37:12 AM EST
[ Parent ]
It breaks the spirit of the law in exactly the same way as secondary market operations.

It is an indirect subsidy to the German (and Danish etc.) governments.

It's an abomination, according to German constitutional law.

by Metatone (metatone [a|t] gmail (dot) com) on Sun Oct 28th, 2012 at 08:12:51 AM EST
[ Parent ]
Also...
Trichet's poisonous farewell to Weber
Frankfurter Allgemeine Zeitung points out that Jean-Claude Trichet could not help but send a last poisonous farewell greeting to Axel Weber who is now on his way to a teaching assignment in Chicago. The financial establishment assembled at the Frankfurt ceremony was too polite to mention explicitly the bitter public fight over the ECB's bond purchase program that opposed Trichet and Weber in the past 12 months. Trichet, however, delightfully explained that the ECB had engaged into another bond stabilization program of German Pfandbriefe, a financial product that dates back the Frederic the Great. In this issue of crucial importance to German economic interest Weber never raised any public doubts. So Trichet, who repeatedly referred to "lieber Axel" in German, added with visible pleasure: "I think we followed your advice on this."


I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Sun Oct 28th, 2012 at 08:20:02 AM EST
[ Parent ]
European Tribune - There's no greater unknown unknown than that which one chooses not to see
EMU was conceived as an economic and monetary union, not as a financial union.

could you break that down a bit for the dummies, or point to a link that does, please?

synonyms, metaphors all helpful!

i assume one can substitute 'currency union' for 'monetary union', that seems obvious enough. (or am i 'not even wrong' there?)

would it take stripping sovereign powers to effect a real financial union, and would it have to be fiscal for that?

where are the dividing semantic lines between these three terms, which all refer vaguely to 'molar' to an under-educated mind?

TIA

"We can all be prosperous but we can't all be rich." Ian Welsh

by melo (melometa4(at)gmail.com) on Sun Oct 28th, 2012 at 07:24:18 AM EST
oops, 'moolah', not molar.

"We can all be prosperous but we can't all be rich." Ian Welsh
by melo (melometa4(at)gmail.com) on Sun Oct 28th, 2012 at 07:26:27 AM EST
[ Parent ]
A dentist would tell you they are very close! :)

(I'm here all week. Try the chicken.)


-----
sapere aude

by Number 6 on Mon Oct 29th, 2012 at 12:32:39 PM EST
[ Parent ]
Economic union is essentially the EU without the EMU. The economic rules are (at least almost) the same and corporations can act in any state. A union for the corporations if you like.

Monetary union is the kind of what the EMU is, though it lacks parts. In a monetary union fiat money is the same, which means that the payment system and private monetary creation needs to run under the same rules. The bit and parts lacking are being created now, but of course in the worst possible way. A monetary union is a union of the banks.

A fiscal union is when the taxation and more importantly public money creation runs under the same rules. The EMU lacks working rules here as that would include a public spender of last resort. A fiscal union would be a union of the treasuries.

At least these are my impressions of the terms.

A vote for PES is a vote for EPP! A vote for EPP is a vote for PES! Support the coalition, vote EPP-PES in 2009!

by A swedish kind of death on Sun Oct 28th, 2012 at 03:49:15 PM EST
[ Parent ]
i will mull that...thanks SKOD!

"We can all be prosperous but we can't all be rich." Ian Welsh
by melo (melometa4(at)gmail.com) on Sun Oct 28th, 2012 at 06:27:02 PM EST
[ Parent ]
Charles Goodhart quoted in
The Economist:
Why is this relevant for the euro? Here is Mr Goodhart writing in 1998, on the eve of the euro project.
The key relationship in the C team model is the centrality of the link between political sovereignty and fiscal authority on the one hand and money creation, the mint and the central bank on the other. A key fact in the proposed Euro system is that the link is to be weakened to a degree rarely, if ever, known before. ... There is to be an unprecedented divorce between the main monetary and fiscal authorities ... the C team analysts worry whether the divorce may not have some unforeseen side effects.
The logical conclusion from this is not a new idea: the euro area needs greater fiscal integration. But the reason is different. It is not because Greece and Spain spoiled a perfect plan with their profligacy. It is because the euro enshrines the divorce of fiscal and monetary power. If you are a member of Mr Goodhart's C team this never made sense in the first place.
Mario Draghi quoted in The Daily Telegraph today
"Several governments have not yet understood that they lost their national sovereignty long ago. Because they ran up huge debts in the past, they are now dependent on the goodwill of the financial markets," Draghi said.
Actually, because they signed the Maastricht Treaty they became dependent on the goodwill of the financial markets and therefore they gave up their sovereignty, 20 years ago. Then they ran up huge debts as a result of "automatic stabilizers" in the biggest recession since the 1930s, the European welfare state is in the process of being dismantled, and Draghi thinks that is fine.

The European sovereign has spoken.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS

by Migeru (migeru at eurotrib dot com) on Sun Oct 28th, 2012 at 07:29:27 AM EST
Here is a brief summary of how it works in the U.S. Basically, each state is required to run a balanced budget, since the fed controls the currency. But it is a "voluntary" requirement taken on by each state individually, not something pushed down from the federal government.

In the case of Europe, it appears that the "we can't run a deficit" mindset that went along with having individual national currencies did not change when the practical effects of the union demanded it.

Requirements that states balance their budgets are often said to be a major difference between state and federal budgeting. State officials certainly take an obligation to balance the budget seriously, and in the debate over a federal balanced budget in the early- and mid-1990s, much of the discussion centered on the states with balanced budgets.

All the states except Vermont have a legal requirement of a balanced budget. Some are constitutional, some are statutory, and some have been derived by judicial decision from constitutional provisions about state indebtedness that do not, on their face, call for a balanced budget.

The requirements vary in stringency from state to state. In some states the requirement is that the introduced budget be balanced, or that the enacted budget be balanced. In other states policymakers are required to ensure that expenditures in a fiscal year stay within the cash available for that fiscal year. Other states may carry unavoidable deficits into the next fiscal year for resolution.


http://www.ncsl.org/issues-research/budget/state-balanced-budget-requirements.aspx
by asdf on Mon Oct 29th, 2012 at 11:21:23 AM EST
"we can run a deficit"
by asdf on Mon Oct 29th, 2012 at 11:21:53 AM EST
[ Parent ]
But we can't print money - unless we establish a state bank.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Oct 29th, 2012 at 11:58:14 AM EST
[ Parent ]
Right, and you can't have state banks. A state can go bankrupt, in theory, as Arkansas did in 1933. The concept of a state being under federal bankruptcy protection doesn't seem to exist, but a state can default on bond repayment.

http://www.nytimes.com/2011/01/23/weekinreview/23davey.html

by asdf on Mon Oct 29th, 2012 at 12:08:38 PM EST
[ Parent ]
Well, there is The Bank of North Dakota.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Oct 29th, 2012 at 05:42:08 PM EST
[ Parent ]
Yet another voice for the end of the euro project (in perhaps all it present forms).

When will the "respectable" left understand that it is time to cut bait?

Yeah, I know Jeröme, we're all "lyrical left," but you have at some point to start thinking maybe your guys got it wrong.

by redstar on Mon Oct 29th, 2012 at 03:51:27 PM EST
I think unemployment has to get up into the 35% range before that happens (e.g., British coal miners in 1932), with poor working conditions for those employed. Perhaps that sort of threshold is now met in a few countries...
by asdf on Mon Oct 29th, 2012 at 11:22:38 PM EST
[ Parent ]
My solution is to transfer more sovereignty at the European federal level and organise EU-lvel transfers. One of the biggest obstacles to that is France, and in particular the "non" left.

Otherwise: don't bail out banks, especially not your neighbors' banks.  

Wind power

by Jerome a Paris (etg@eurotrib.com) on Tue Oct 30th, 2012 at 08:29:40 AM EST
[ Parent ]
My solution is to transfer more sovereignty at the European federal level and organise EU-lvel transfers. One of the biggest obstacles to that is France, and in particular the "non" left.

When the "oui" right propose (as they are doing) to transfer power to the European level, reduce accountability and not do federal-level transfers, will you be for or against it?

And no, you will not be allowed to tweak the proposal.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS

by Migeru (migeru at eurotrib dot com) on Tue Oct 30th, 2012 at 10:02:29 AM EST
[ Parent ]
and I guess my answer will be to support it, because the fact of power transfers to the EU level is more important, ultimately, than what is done with these powers in the short term

(unless, as you will likely point out, it kills the patient, but neolib craziness will happen at the national level anyway and it's not obvious the results are less bad there, as we can see in the UK)

Wind power

by Jerome a Paris (etg@eurotrib.com) on Tue Oct 30th, 2012 at 12:43:06 PM EST
[ Parent ]
So you're okay with unelected and unaccountable government as long as it's pan-European.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Tue Oct 30th, 2012 at 12:46:14 PM EST
[ Parent ]
because the fact of power transfers to the EU level is more important, ultimately, than what is done with these powers in the short term

Yes and no.

More power to the EU parliament, even if it's current majority is right-wing. More power to the majority voting procedure in the council, even it its majority is even more right-wing.

But:

 "unelected and unaccountable government as long as it's pan-European."

The proposal to give a member of the commission power to dictate to national parliaments more power is undemocratic. And power transfer to the european level that strengthens the undemocratic and unelected parts of the EU is wrong, even if it gives the EU more power.

by IM on Wed Oct 31st, 2012 at 04:01:59 AM EST
[ Parent ]
power transfers to the EU level is more important, ultimately, than what is done with these powers in the short term

(unless, as you will likely point out, it kills the patient, but neolib craziness will happen at the national level...)

Billy Blog: Eurozone policy makers destroying prosperity (November 1, 2012)
In the last week, several major data releases have been published by Eurostat, culminating in yesterday's release of the September unemployment which shows that the jobless rate has risen to its highest in the currency union's history. There are now 18.49 million people in the Eurozone without work and that is the tip of the iceberg when it comes to assess the wasted production and lives that the fiscal austerity is creating. Just in the last month, a further 146,000 became unemployed. More than 25 per cent of available workers are unemployed in Greece and Spain. We have moved from describing this tragedy as a recession. This is now a full blown Depression of the scale of the 1930s travesty and, once again, its depth is a direct result of policy failure. All the indicators are coming together and providing an unambiguous verdict - that the Eurozone policy makers destroying prosperity and have relinquished any sense of capacity to govern, where that term means the capacity to advance public purpose and improve welfare.

The following graphic is a capture of today's (November 1, 2012) Latest News Releases at Eurostat. The juxtaposition of a listed items is very interesting (in an intellectual sense - tragic in a personal sense) and weaves a narrative that is very familiar to those who have read and understood Modern Monetary Theory (MMT).

There is no ambiguity at all in what the various data release headlines are signalling.

Okay, so Jerome, since killing the patient is no longer a hypothetical, do you still support giving the European policy elite a blank cheque to reform the EU to their liking?

What makes you believe they will not botch the institutional design like they have botched the economic policy?

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS

by Migeru (migeru at eurotrib dot com) on Thu Nov 1st, 2012 at 05:22:43 AM EST
[ Parent ]


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