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Green New Deal for Eurozone for Free

by ARGeezer Wed Sep 4th, 2019 at 01:31:20 AM EST

Austerity-obsessed Europe could combat climate change without raising taxes  Lars Syll  Real World Economic Review

Just to be clear, the European countries have been far better global citizens in this area than the United States. Their per-person emissions are roughly half as much as the United States. Furthermore, many European countries have already taken aggressive measures to promote clean energy and encourage conservation.

But in the battle to slow global warming, simply doing better than the United States is not good enough. The European Union can and must do more to reduce its greenhouse gas emissions.

This is where the continent's mindless push for austerity comes into the picture. European governments, led by Germany, have become obsessed with keeping deficits low and balancing budgets. Most have small deficits or even budget surpluses.

This means that there are underutilized resources in the Eurozone that can be tapped without producing additional inflation. The result of additional government spending on a Green New Deal would simply be a higher growth rate for the GNPs of constituent member states, perhaps even positive interest rates and a healthier environment.


There are certainly circumstances under which budget deficits can be too high, but these clearly do not apply to the countries in the European Union at present. Inflation has been persistently low and has been falling in recent months. The inflation rate for the eurozone countries has averaged just 1.0 percent over the last 12 months.

The story is even more dramatic if we look at interest rates. The classic problem of a large budget deficit is that it leads to high interest rates that crowd out investment. Not only are interest rates extraordinarily low across Europe, in many countries, investors have to pay governments to lend them money.
....
This is the context in which the concern for low budget deficits in these countries is utterly mindless. The financial markets are effectively begging these governments to borrow more money, but they refuse to do so.

The need to address global warming makes this refusal especially painful. The fact that interest rates and inflation are so low indicates that these governments are needlessly sacrificing growth and jobs. That story is bad enough, but the picture is much worse when we consider the pressing need to address global warming.

What are the alternatives?
These governments could either pay directly to install solar and wind power, or provide large subsidies to businesses and homeowners. They could be subsidizing the switch to electric cars and making mass transit cheap or free, while they vastly ramp up capacity. They could also be providing large subsidies to countries in the global South to take the same measures, and to also save the rainforest in the Amazon.

The best part of this story is that they don't need to raise taxes to pay for this spending. There is considerable slack in these economies, which means that they can devote several hundred billion dollars annually to slow global warming without requiring additional taxes from their populations. It is possible that a really ambitious program, which might be needed, will require additional tax revenue, but for now, these countries are needlessly leaving money on the table while the planet burns.

It is common in policy circles to ridicule U.K. Prime Minister Boris Johnson for his seemingly mindless pursuit of Brexit. While Johnson surely deserves much ridicule, the proponents of austerity deserve a much larger dose. Keeping people out of work by failing to take more aggressive steps to address global warming is far more clownish than anything that Boris Johnson is doing with Brexit.

In essence, when there is slack in an economy the government has policy room to spend for social purposes (or tax cuts for the rich.) If this spending is on projects that will increase productivity, they will more than pay for themselves over time. Lower cost of energy and transportation are obvious targets.

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Of course the same considerations apply to the USA and the still United Kingdom - if only there were the possibility of sane governments.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Sep 4th, 2019 at 01:34:32 AM EST
Show me.

Diversity is the key to economic and political evolution.
by Cat on Wed Sep 4th, 2019 at 03:03:49 PM EST
You will see it when you believe it.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Sep 4th, 2019 at 03:58:05 PM EST
[ Parent ]
You live in GDP looking for GNP.

Diversity is the key to economic and political evolution.
by Cat on Wed Sep 4th, 2019 at 08:49:49 PM EST
[ Parent ]
The Great Land Robbery

Multiply that.

Diversity is the key to economic and political evolution.

by Cat on Thu Sep 5th, 2019 at 03:14:55 AM EST
[ Parent ]
How the GI Bill's Promise Was Denied to a Million Black WWII Veterans

Multiply that.

Diversity is the key to economic and political evolution.

by Cat on Thu Sep 5th, 2019 at 03:17:57 AM EST
[ Parent ]

Multiply that.

Diversity is the key to economic and political evolution.

by Cat on Thu Sep 5th, 2019 at 03:09:51 AM EST
[ Parent ]
A $30,000-a-year job with no path to advancement?
Management's proposals range from eliminating salary step increases to charging employees $75-a-month to park at Port Covington [MD-3].

The proposed parking fee, in a lot provided by landlord Kevin Plank[CEO, Chairman Under Armour, Inc.]'s Sagamore Development, has gotten the attention of Councilman Ryan Dorsey.

Multiply that.

Diversity is the key to economic and political evolution.

by Cat on Thu Sep 5th, 2019 at 04:12:10 AM EST
[ Parent ]
Read this:https

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Sep 7th, 2019 at 11:22:20 PM EST
[ Parent ]
So I should have used GDP instead of GNP. The Eurozone is peculiar in that the countries comprising it are all currency users, not currency issuers. That was what led me to use GNP.

So now can you make some comments actually relevant to the content of original post?

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Sep 5th, 2019 at 09:21:59 PM EST
My responses to the prompt are absolutely relevant. These are anecdotal illustrations of market failure. The prompt is incoherent. It is a trash bag labeled CA COHORT OF PETTY LANDLORDS and tied with a "sustainable" climate crisis bow.

The premise of arguments for "investment" (which is NOT savings; it is rent of disposable credit and income held by propertied persons to dispossessed persons ) relies

not on reported GDP or GNP total transaction value (which does NOT identify real disposable income per person or HH in any period or one jurisdiction; it calculates an average value independent of what dependent values?)

but the supposition that "austerity" policy (a neologism, IMF structural adjustment programing terms for USD loans) inhibits transfers of wealth ... to the wealthiest "chasing yield":

The financial markets are effectively begging these governments to borrow more money, but they refuse to do so.
[...]
The best part of this story is that they don't need to raise taxes to pay for this spending ...but for now, these countries are needlessly leaving money on the table while the planet burns.
Clownish? That teaser is older than dirt, like "throwing good money after bad".

What if EU gov is working out how to tax private enterprise (corporate revenue) without passing the cost through to consumer-wage-labor, the public tax revenue is unencumbered income collected in government treasury, when it is not budgeted against interest payments. Full stop.

NEW! "green economy" frauds are rife with naked profit schemes and cliches that have no place in societies which claim to seek equity for all after the behavioral epiphanies, or "extinction rebellion," takes hold.

Lemme show, again, how casual, invidious opposition to "progressive" tax authority is, in case you missed any of the DNC Climate Crisis road show, did not read Impact of environmental tax on green development, forgot what you learned from discussion og WHO PAYS FOR THAT?, or you never fully apprehended a "stakeholder" relation to Mr Market.

Breakingviews - Door cracks open on U.S. housing reform

The door has cracked open on U.S. housing reform. Treasury Department officials want to get Fannie Mae and Freddie Mac, the two agencies that underpin the country's home-financing market, out of their post-financial crisis limbo.
[...]
Fannie and Freddie have been in "temporary" conservatorship for 11 years - a state whereby the two mortgage giants, which needed a $187 billion bailout a decade ago, are privately owned [?!] but under the thumb of their regulator, the Federal Housing Finance Agency.
They are publicly owned corporations.

Diversity is the key to economic and political evolution.
by Cat on Fri Sep 6th, 2019 at 02:12:45 PM EST
[ Parent ]
You endlessly and tiresomely quibble with the terms of discussion. Perhaps you should develop your own language. Same with economics.

Germany has relatively low rents precisely because German economic policy has not allowed bubbles in German real estate. The problems that developed in Germany were the result of German banks making reckless loans in peripheral countries and then being able to stick those countries with 100% of the costs. The contemptible regulatory policies in Europe were due to the refusal of Germany to allow European wide regulation of banks while allowing European wide operation of these same banks.

I am sorry you have relatives who are generating wealth through residential rentals. I also deplore the process by which that has happened. In the USA it was because Greenspan and others turned a blind eye to the bubble that was developing and refused to use the vast powers of prudential regulation Congress gave the Federal Reserve after the Savings and Loan crisis.

Greenspan adhered to his easy money policies until 2005, but by then monetary policy was incapable of handling the situation that had developed. Not only did we have a world class bubble in real estate but also in stocks and commodities. Financialization of residential real estate had created financial instruments, MBSs, CDOs, etc. that had face values far above their actual value. When this became known the entire financial system started to freeze.

The result was a great destruction of bank money and a large hole in the money supply. This was highly deflationary and would have sent the world economy into a debt-deflation death spiral had not Bernake and Paulson created TARP to paper over the hole and then, under Obama employed QE to take the impaired finacial instruments off the market or to arrange for other institutions to take them, along with money from the Fed to make them whole.

So while the world was staring into the abyss of deflation and depression which was being staved off by massive central bank intervention, most people were obsessed with INFLATION. TARP and QE were going to trigger massive inflation they feared. This was because the general understanding of economics had been poisoned by rich man propaganda for half a century.

The rich knew well how to make money off a depression - buy up valuable assets on the cheap and consolidate your vertical integration. But they feared inflation because it made their existing wealth less valuable. A major result of their propaganda was to normalize the view that the only legitimate way to manage the economy was through monetary policy.

While monetary policy served excellently well for getting us into a deflationary crisis, it is useless for getting us out. All monetary policy can do is make money cheaper. But that is useless if business people are afraid to invest. It was fiscal policy, direct government spending on useful projects, that got us out of the depression of the '30s, to the extent that we did recover prior to WW II. And it was a careful combination of fiscal and monetary policy that enabled the USA to prosecute WW II to conclusion and emerge with a prosperous economy.

When Obama took office the economy was at its nadir. But the Mainstream Economists he relied upon, Larry Summers in particular, were frightened by the size of the hole that had been blown in the economy and were terrified to propose a $1Trillion dollar stimulus. So they asked for and got $600 Billion, some of which was in the form of tax credits, while what was needed was more like $1.5 Trillion. The result was an anemic recovery. The justification for the anemia was AUSTERITY. Because the rich so feared inflation, millions of people had to suffer privation and many died as the result.

That is where we are today. Tax cuts for the rich, austerity for all others. The solution is deficit spending. The bottom 80% of the population is starved for income yet the economy is driven by consumption. But the other consideration is how that deficit spending is to be deployed. Right now it is buying tax cuts for the rich. That does not help consumption as the rich only consume a tiny fraction of their income, squirreling away the majority in overseas accounts, financial instruments and real estate.

What is needed is investment in the real economy. Spending on infrastructure employs real people who are un or under employed and increases the money circulating in the economy that is used for consumption. This has positive knock on effects. And yes, deficit spending on productive assets can be considered an investment. Well done, this spending becomes self liquidating. Wind farms and associated transmission facilities pay back far more than they cost over their useful life.

But Mainstream Economics, Neo-Classical Economics and its recent permutations, requires that investment be made from savings. This was basically true under the gold standard. But it is no longer true since the USA went off the gold standard in the summer of 71. An understanding of the range of options available to a nation with its own fiat currency shows that there is often policy space, options to use resources that are un or under utilized. The limit on such use is inflation.

For starters it is clear that, if we can afford to give the rich a $1 Trillion+/year tax break, we could use that same money instead to fund a Green New Deal. And, by moving to Medicare for All we could have better health care for all of the population for what we are currently spending or less. MCA would likely actually be deflationary, which would require even more deficit spending. Government assumption of student debt would have a similar effect. The newly found purchasing power of GenX and younger college grads would generate economic growth, increased GDP, that would more than pay for the cost of retiring the loans.

 

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Sep 6th, 2019 at 04:48:22 PM EST
[ Parent ]
I am using the language of economics and finance. You challenge is reconciling its arithmetc and semantic contradictions with a concern which is, paraphrasing, making a new [sic] green deal commerce policy "pay for itself." And turn a profit.

< wipes tears >

never.gets.old.

Diversity is the key to economic and political evolution.

by Cat on Fri Sep 6th, 2019 at 07:20:16 PM EST
[ Parent ]
"I am using the language of economics and finance."

And that is the basic problem. What you learned was 'Mainstream US Economics' - basically Neo-Classical Economics with a few permutations over the decades. US economics has never come close to capturing the essence of Keynes. That is why Joan Robinson, who knew Keynes, called what the US calls Keynesian Economics, the Samuelson Synthesis, bastard Keynes.

Afraid of being labeled a 'Socialist' after WW II, given the smear job Wm. Buckley and others applied to Lorie Tarshis 'Introduction to Economics', which followed Keynes closely, as Tarshis has studied under Keynes at Cambridge in the '30s, Samuelson smuggled in some derivative concepts from Keynes' followers - Hicks and Hanson and the IS/LM diagram and the Phillips Curve. These were toy classroom models that also were specific to the economic conditions for the time they were developed. The world changed. The toy models failed, and Milton Friedman blamed Keynes.

Most American economists had only that very limited understanding of Keynes. Left behind was Keynes' deep uncertainty. That would have been corrosive to the facile explanations that were the best Neo Classical Economics could provide. Neo-Classical asumptons are that the laws of economics are invariant. Keynes held that all economics is historically contingent. These are the underpinnings of Post Keynesian Economics, of which MMT has become a part.

Another difference between Keynes and Neo-Classicals is their understanding, or lack thereof, of money and its role in an economy. The standard Neo-Classical explanation for money is that it is a 'veil over the economy' and that economists have to abstract away from money to see the real economy. That is a convenient view as the rich do not want people understanding money. If you can't see the money, it is hard to follow the money. That is how US Mainstream Economics became housebroken for the rich.

MMT is based on actual monetary practice by people who have had the opportunity to closely observe how money is created, used and destroyed. It is now an integral part of Post Keynesian Economics. For MMT and Post Keynesian economists money is clearly endogenous. Around 97% of all US 'money' is bank money, created out of thin air via double entry bookkeeping when banks make loans. Money is not just a thing, but a social relationship.

Once a country has its own fiat currency that is freely traded on the ForEx markets there are policy spaces for government action that do not exist under a gold standard. The limit on deficit spending comes to be inflation, not debt. Since the Federal Reserve has not yet managed to actually hit the 2% inflation rate that they target, our economy has been seriously under performing. And 2% is a rich man's compromise number for tolerable inflation. A more realistic figure would be 3%.

Sadly, most US citizens, to the extent they have any understanding of economics, have been mis-educated to the Neo-Classical Economics view, which is compatible with the gold standard, which no longer exists. So we continue to be frightened about debt, regardless of the absence of inflation. Europe is more of he same. As, apparently, are you.

There is, however, a free and enjoyable way to get up to date on matters related to Money and Banking. Perry Mehrling of Barnard College, Columbia University, has an online version of his Money and Banking course, as senior level economics course at Barnard, available on Coursea. You can audit the course for free and most of the readings are online as well. You might find Stigum's 'Money Market' book interesting, but it is not essential to understanding what the course is about for those just auditing the course. The same is true for Mehrling's excellent 'The New Lombard Street', but it you might want to check out of a library. It is short and sweet.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Sep 6th, 2019 at 09:42:12 PM EST
[ Parent ]
is foregone tax revenue, the event which has not occurred.

Money that is not taxed and is not collected, is not exchanged, is not "given" to anyone.

Diversity is the key to economic and political evolution.

by Cat on Fri Sep 6th, 2019 at 07:36:37 PM EST
[ Parent ]
is money borrowed from and returned with excess of principal amount of money borrowed ("interest") over a period to a lender.

No matter how you dress up the element of "value", that is the transaction proposed.

Unless one borrows from a library.

Diversity is the key to economic and political evolution.

by Cat on Fri Sep 6th, 2019 at 07:50:07 PM EST
[ Parent ]
USA: the most illiterate, ignorant, litigious nation on the planet is offering advice, How to solve an immense pile of filth alias Climate Crisis by exploiting the MMT of "printing money" alias renting USD THIRTEEN TRILLION as yet collected from future $15/hr --maybe $20/hr--wages earned by building automated infrastructure, vehicles, and lenders, because "savings glut."

"What this means, I believe, is that a country with its own currency would not be subject to the kind of self-fulfilling panic that is now arguably hitting Italy*."

--
Italy picks former PM Gentiloni as EU commissioner - government source, ECON portfolio preferred over AGRI (discarded)

Diversity is the key to economic and political evolution.

by Cat on Fri Sep 6th, 2019 at 08:13:49 PM EST
[ Parent ]

No wonder. Listen to commentary from the REAL NEWS NETWORK youngsters trying to estimate the "cost" of climate crisis (regardless of "revenue" generated or "reporting period").

Diversity is the key to economic and political evolution.

by Cat on Fri Sep 6th, 2019 at 03:08:00 PM EST
Yes, we could employ the unemployed and do a Green New Deal in Europe.

Map out what needs to be done, what knowledge is needed, train people and employ them. Fund research into every likely and unlikely advantage. Build the energy structure, rebuild infrastructure and housing, adapt society to the weather problems we know is coming. If we don't know how to do large scale projects anymore, I bet some with expertise can be found in China.

Problem is that the political framework does not yet exist for deficit spending on the federal level and the political framework actively prevents deficit spending on the state level. So I don't think we will. But we should.

by fjallstrom on Tue Sep 10th, 2019 at 09:10:46 PM EST
The EU countries spent a couple of hundred million - or so - training and educating scientists, engineers, technologists, etc. and then dumped them into unemployment post-degree.

It's not only asinine it's a waste of time, money, economic development, and human potential.


She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Wed Sep 11th, 2019 at 12:06:26 AM EST
[ Parent ]
Especially during a time of negative interest rate bonds.


She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre
by ATinNM on Wed Sep 11th, 2019 at 12:07:13 AM EST
[ Parent ]
While in the US, we provide minimal guidance to our youths who then merrily run up $100,000+ in tuition debt studying subjects that have no hope of providing employment sufficient to pay off the loans.
by asdf on Wed Sep 11th, 2019 at 07:00:08 PM EST
[ Parent ]
Are you certain the situations are comparable? Ministers in charge of higher education potentially have many means for adjusting supply to demand. They could require universities to justify the expansion of degree opportunities, for starters. Perhaps fjallstrom or others with experience in European universities could answer.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Sep 12th, 2019 at 02:26:16 AM EST
[ Parent ]
Actually, the technical Framework does exist for deficit spending on a federal level. It's the European Investment Bank. It already issues "green bonds" which are outside the Maastricht national borrowing limits.

The scale of debt financing required for a genuine GND is several orders of magnitude greater than what the EIB currently deals in. Let's say 5% of EU GDP annually, for the sake of argument.

The political obstacle is that the EIB's governors are named by the member states.

Changes in policy are normally made using consensus but a double majority vote, based on the size of shares held, could also be an option if there is a clear split of opinion. Germany, France, Italy and the UK are the bank's biggest donors.

Basically, an honest-to-god GND (and not the debased parody being trumpeted by Timmermans and Vestager) would be politically possible if there were a German government which was capable of closing its coal mines. So what would that take? Would a new governing coalition with the Grünen replacing the SPD enable that?

It might, if that government were to be led by Merkel at the height of her powers...

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II

by eurogreen on Wed Sep 11th, 2019 at 08:58:44 AM EST
[ Parent ]
That would require not only a Merkel at the height of her powers, but a Merkel willing to take as much heat for a fiscally unorthodox approach as she took for her principled position on immigration. We might as well wish for Der Linke, Groen and SPD to form a coalition based on a joint will to reverse austerity and unify retirement benefits and health care over all of the Euro-Zone.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Sep 11th, 2019 at 06:27:43 PM EST
[ Parent ]
Two points about Germany and deficit spending :
  • It's the EIB, and not the nations, that would be issuing green bonds massively. Backed by the ECB.
  • There are strong signs that the German government will resort to deficit spending fairly soon : not on the massive scale required by the GND, but once you've admitted the principle of the thing... Schäuble and Weidmann will fight it, but it's coming.


It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II
by eurogreen on Thu Sep 12th, 2019 at 02:53:01 PM EST
[ Parent ]
EIB begins metamorphosis into climate bank
BIG MOVE: "updated lending policy which could see the EU bank stop funding fossil fuel projects"

Diversity is the key to economic and political evolution.
by Cat on Thu Sep 12th, 2019 at 08:03:46 PM EST
[ Parent ]
Los Angeles is going through a similar struggle regarding natural gas vs renewables. One big step towards renewables has been the approval of the Eland Project in the Mojave Desert.

The two sections of Eland will total 400 megawatts of solar power combined with up to 300 megawatts/1,200 megawatt-hours of energy storage. With storage, the effective capacity factor is in the 60 percent range, so it is able to power California for a big portion of the day and eat into peak load," said Colin Smith, solar analyst at Wood Mackenzie Power & Renewables.
The sweet aspect for rate payers is that the electricity provided under this contract will cost less than $40/MWhr. This project alone provides 1/6th of the renewable power/battery storage required to make Los Angeles DWP carbon free by 2030. The project also includes upgrades to the power switching and interconnect in Lonesome Valley that will also offer load, frequency and phase stability to the grid.

Similar Combined Solar + Battery Energy Storage systems are possible in southern Italy and in Spain. Were the EIB to fund such developments that could also constitute redistribution of wealth from northern investment to southern generation capacity and local income.

As in Los Angeles the struggle is between incumbent fossil fuel interests and the obvious cost advantages of solar + Battery Energy Storage. Unfortunately, in Europe natural gas fossil fuel infrastructure is still being built out.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Sep 13th, 2019 at 03:51:35 AM EST
[ Parent ]


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