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Missing an European Treasury | 13 comments (13 topical, editorial, 0 hidden)
The fundamental dilemma of the Eurozone ... (4.00 / 7)
... at the moment is that the power to deficit spend as a sovereign economy resides at the level of the currency unit. A state within that unit must treat deficits as borrowing.

Now, the mainstream conventional foolishness obscures this, because it pretends that a sovereign economy must treat deficits as borrowing, which is ... well, foolish, hence the name. So under the mainstream conventional foolishness, there is no change of category for the individual states of a currency zone.

In reality (cf. billy blog, Clowns to the left, jokers to the right), a sovereign economy can deficit spend if it has sufficient domestic unemployed resources that the residual inflationary pressure from outbidding already employed resources is on the order of ongoing productivity growth. There is no finance constraint ... but a state within that sovereign economy does face a finance constraint.

So the flaw in the policies to agree to restrain government deficits of EU members to a certain level is not the agreement per se, but rather the lack of a facility at the Eurozone level to create deficits corresponding to the size of the unemployment gap to be transferred to the member states in the event of an economic downturn.

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 Thu Mar 25th, 2010 at 10:24:16 AM EST
Re: The fundamental dilemma of the Eurozone ... (none / 0)
Even with such a facility as you describe it would be necessary for those representing the preponderance of decision making power in the monetary union to understand and accept those necessities. To make this possible it will, (would?), probably be necessary to re-propagandize the populations of various countries along different lines from what has been the case for thirty or forty years.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Mar 25th, 2010 at 04:33:48 PM EST
[ Parent ]
Re: The fundamental dilemma of the Eurozone ... (none / 0)
In not so elaborate words, the European Treasury would work as a vehicle to invest unallocated resources at better off states into troubled states. It draws extra liquidity from one place to another with liquidity wanton.

luis_de_sousa@mastodon.social
by Luis de Sousa (luis[dot]de[dot]sousa[at]protonmail[dot]ch) on Fri Mar 26th, 2010 at 04:25:57 AM EST
[ Parent ]
Re: The fundamental dilemma of the Eurozone ... (none / 1)
No, it creates liquidity to mobilize unemployed resources. Indeed, the reaction to a downturn need not involve the transfer of resources ... it could be distributed on a per capita basis in response to the gap between potential output and actual output.

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 Fri Mar 26th, 2010 at 11:18:53 AM EST
[ Parent ]

Missing an European Treasury | 13 comments (13 topical, 0 editorial, 0 hidden)
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