Great job, Syriza, Varoufakis, Tsipras!
And, way to go U.K. voters for giving austerity-pushing Conservatives a majority!
Almost a stupid as us Americans, who gave Republicans control of Congress.
I'm not sure, but has there ever been a time in history when more people voted against their own interests? Someone, please help me on this.
32 comments:
Although it's true that UK voters did vote against their interests, the real issue is that, in England at any rate, other than the Greens, all political parties were pro-austerity, not just the Conservatives. In Scotland and Wales the nationalist parties were anti-austerity. The anti-austerity Scottish National Party were so popular that they won nearly every parliamentary seat in Scotland (56 out of 59).
If there is no political alternative and the people are unaware of an economic alternative because the media and the economic profession spout nonsense as fact, the predictable outcome is more of the same. Just like the US.
As for Syriza, well, yes, perhaps they should be voicing some radical alternatives to the people. But your hands are tied if they people refuse to countenance leaving the euro. The troika's job is being done by the Greek people themselves.
Syriza's great failure is not that it has been unable to face down the halfwits and sadists in the troika, or get the economy humming. It can't because it is at the mercy of the very people torturing them. No, it's great failure is to educate its own people that there is only one solution - a smooth exit from the EZ.
And John YV is allegedly an educator!
Simple enough the NeoCons were able to scam the English electorate because the majority of that electorate don't understand modern sovereign money. They still believe that their government needs to tax and issue bonds in order to get the money for spending. The principal NeoCon party, the Tory Party, ran a poster which said "Don't let the SNP grab your cash". The Scottish National Party were the main minority party opposing the Tory and Labour parties austerity policy but it was widely believed that the Labour Party would only secure enough seats to form a government if it formed a coalition government with the SNP.
As I've said before, I very much respect YV and respect the difficult position he's in, but you have to wonder what YV and Syriza are playing at by refusing to explain to the Greeks that it is their handcuffing of Syriza with their continued support for the euro that is the problem.
For a long time I was hoping that Syriza were playing a cleverer and more strategic game than we gave them credit. That possibility has almost evaporated now. It does now seem that Syriza is clueless as what to do next.
The troika doesn't have to budge an inch. If the hostages side with the captors, what can the hostage negotiator do? It's the biggest case of Stockholm syndrome in history.
Schofield,
I don't think the idea of endogenous sovereign fiat money is what is holding back English voters. For the most part, it's irrelevant. And if you try explaining it, people just think a village has lost its idiot.
What is missing is a progressive social democratic party. That's it. Tell voters you'll cut taxes for working people, they'll vote for it. Tell voters you'll get rid of tuition fees, they'll vote for it. Tell voters you'll build so many homes that the extortionate prices we currently pay will collapse, they'll vote for it. And on it goes.
That's the issue for English people, not Post-Keynesian Monetary Economics. Scottish people voted for the SNP because of its appeal to social democracy. I don't believe that the SNP are socially democratic, but compared to the rest of the major UK political parties they're way off to the left.
If you are a progressive or a liberal or a social democrat or even an out-and-out socialist there is no more reason to vote Labour than Conservative. Personally speaking, I can't tell the difference.
John,
The Greens were pro-austerity as well as anti-democratic. Don't fall for their propaganda. They were targeting a surplus on the current account just like Labour and still talking about 'borrowing on good terms'.
Still economically illiterate and refusing to make the case in real terms. That's despite being a Green Party where talking in real terms allows you to define precisely what the finite stock you're manipulating is.
YV is an EU federal believer at heart and can't come to terms with anything that affects that dream.
You can see where he stands simply by reading the URL of his blog.
"They still believe that their government needs to tax and issue bonds in order to get the money for spending."
Their government does need to tax and issue bonds to get money for spending. That could of course be changed. But unless someone is putting forward a specific grand legislative proposal for re-organizing government financial operations, those remain the ground rules.
"... by refusing to explain to the Greeks that it is their handcuffing of Syriza with their continued support for the euro that is the problem."
That's only part of the problem. Greece has a corrupt, inefficient, low-performing, basket case economy hammered together out of the intersecting schemes of racketeers, kleptocrats and tax dodgers.
Tsipras isn't a 20th-century style socialist big thinker with a grand plan to transform and develop his backward country. He's just a glorified ward politician trying to keep the old pensions and largesse flowing and the racketeers happy without rocking the boat too much or attempting any serious transformation.
Neil,
You're quite right about YV's federalism. At a recent conference he made the extraordinary claim that although most Europeans want a federal European superstate, the nasty politicians won't give it to them. Either this was a knowing lie or he is living in a fantasy world.
Nevertheless, YV is (or was) the only finance minister who has relatively rational policies. When your counterparts are Schauble and Osborne, that's not necessarily a ringing endorsement, but there it is.
As for the Greens, I don't have that many illusions about them, certainly not economic ones. Far too many of their policies are reactionary backward gibberish. Perhaps I'm wrong, but I'm sure that I heard Natalie Bennett and Caroline Lucas argue against austerity. However, I wouldn't be surprised if they believed that they could run a surplus and have anti-austerity deficit spending at the same time, even though by definition they are mutually exclusive. The only sane thing about them is that they probably won't start wars that leave millions dead and entire countries ruined. Which certainly is a very good reason to vote for them. Put that on a placard: Vote Green - We Won't Kill People.
John. The NeoCons will always pop up and tell the electorate they'll have to pay for your list of goodies with more government debt which is ultimately unaffordable and will result in taxes even higher than at present. It's an easily deployed circular argument scam!
Dan. You are right it is the current system but for most people they still believe the main stream economists that money has a neutral role to play in markets. So anybody who threatens to take away their market spending money like the government is suspect!
Dan,
Of course you're right about Greece's many failings. Overcoming these historical problems - many of which were and are an outgrowth of having been ruled by fascist colonels - may well prove to be an insurmountable problem, at least in the near term. These problems have to be faced and overcome, otherwise Greece will forever be a basket case.
But these problems existed before Syriza and will probably exist after Syriza. And Syriza alone will prove incapable of doing much about it. There's a lot to be said for not rocking the boat if its sinking. As I said earlier, maybe it's the case that Syriza are playing a strategic game, moving when they can and backing down when they must. OK, all they seem to be doing is backing down and not moving forward, but I don't think any one party is capable of confronting all the many serious problems Greece faces without losing power, especially if it doesn't explain to its own voters what the problems are and how to solve them.
Schofield,
Sure that's true, but why did these arguments not work in the past? Nobody knew what a deficit was until they were recently brainwashed into believing it to be some sort of existential threat to their children. It worked, though - ordinary people rant about the deficit and the national debt!
If there is no one to argue the other side, what do you expect?
OK, in the recent past, post word war II, there was very good reason for deficit spending: the British economy needed a strong social democratic project to keep the economy from imploding and the people away from radical change.
Is it difficult arguing for deficit spending when everybody is arguing for it? Sure it is, but if no one does it, the austerians are pushing at an open door.
By the way, I'd be a little surprised if we in England voted the way did because of any SNP fears.
Like it or not (and i don't like it one bit) the Labour Party is the opposition to the Conservative Party. Fine. What kind of campaign did they run? A terrible one. Result? Tory majority. It really is that simple. All this predictable Blairite blather about not appealing to the "aspirational middle class" and "entrepreneurs and business owners" is nonsense, another self-serving excuse to move even further right and out fight the Tories from the right, which on the whole they already do and have done since 1997.
Maybe I'm alone in thinking that the Labour campaign was as pisspoor as you can get.
So there you have it: Tory-lite policies, a poorly articulated message, total disregard for Scotland, near hostility towards working people, bumbling tongue-tied shadow cabinet and an inability to counter the Tory message that Labour crashed the economy, especially difficult when the moronic clown Liam Byrne leaves a letter to his successor that there's no money left.
The question should not be why did Labour do so badly? It should be why did they do so well?
The standard belief is that banks are intermediaries that lend out savings to borrows, chiefly for investment. The government must borrow from the savings pool, so it is crowding out investment.
So in this view government has to tax or borrow to meet its funding of operations and also service principle and interest on the public debt. But what it borrows has to be repaid by taxing future saving.
So the argument comes down to use of the pool of savings.
Ask people where the savings come from in the first place, and you'll get a blank stare.
John. Who do you think said this and when?
"One of the great debates of our time is about how much of your money should be spent by the State and how much you should keep to spend on your family. Let us never forget this fundamental truth: the State has no source of money other than money which people earn themselves. If the State wishes to spend more it can do so only by borrowing your savings or by taxing you more. It is no good thinking that someone else will pay—that "someone else" is you. There is no such thing as public money; there is only taxpayers' money."
The idea of the government using "your money" to run a "deficit" on "your budget" was well established by at least 1983 if not earlier. In this particular NeoCon conference speech it was the Iron Lady.
http://www.margaretthatcher.org/document/105454
Greeks know that their problems have arisen historically from their own elite. They actually trust the EZ elite more, which is why they want to stay in the EZ but on a better deal. They are afraid that if they leave the EZ, they will be jumping from the frying pan into the fire, and they may be right based on precedent. Under capitalism, the owners are in total control. The Greek people don't seem to be willing to revolt and throw capitalism overboard at this point by electing a real socialist party with a mandate to govern on socialist principles that put work above capital.
"Ask people where the savings come from in the first place, and you'll get a blank stare."
Exactly!
Go a step further and introduce Keynes's central theme that it is inevitable that future profits are uncertain (profits being for most people where savings come from) and wouldn't it accordingly be a good idea to have a second source of money creation from your sovereign government and hence income from which to make savings and you are met by incomprehension followed by outrage on the lines of look what happened to the Weimar Republic when they tried that trick! (No thought of course given to the effect of war reparations.)
Tom,
Thanks for that. That resolves a lot and it makes perfect sense. Far from being the dunces that they're portrayed to be, the Greeks are very shrewd. The presumably believe that their continuing membership of the EZ will force the state to reform and function as a modern state. Whether that will happen is another matter.
Schofield,
I don't think there's too much separating us here. Once the UK economy had stabilised after massive state intervention post-1945, there was no further need for this dangerous idea. Even before Thatcher, Callaghan was saying very similar stuff.
Context matters. Social democracy and massive state intervention is fine post-1945 and 2008 to stop the whole show from devouring itself. So we don't hear a peep about deficits and the national debt. How convenient. Matters are very different when working people get help from the state. It really is that simple. The conservative nanny state, as Dean Baker put it.
Suppose the UK banking system had another collapse, and it desperately needed £1 trillion in state handouts (yes, I know, its central bank money, not tax money, it doesn't cost anything to do and it probably can't enter the economy), would economists and the media commentators say a word against it? No, I don't imagine they would. And we should note that since these very commentators are either unaware or do not make a distinction between central bank money and tax money that they accept that this is taxpayer money and that banks are deserving of state aid and poor people are not. Meanwhile, a desperate single mum fiddling a few extra pounds so she doesn't have to decide between food and heating is there to be savaged by the neoliberal press as a parasite.
But as I said, if no one makes the opposing argument, the game is won before it's even played. The useless trade unions back the Labour Party, a party devoted to the City, property developers and neoconservative wars. No wonder people voted Tory. Can't really blame them.
John. Your horses for courses argument is about right I'd agree. But I just believe it's important to point out the "perception scam" the NeoCons consistently wheel out especially at elections time is "it's your budget" the one you've worked hard for that "the government deficit" is coming out of! It's a very strong almost over-whelming meme because for many work for survival is a very major part of the very fabric of their being whether done reluctantly or with enthusiasm.
On reflection it's better to argue that the success of the NeoCon "perception scam" can best be countered by asking where the money comes from in the first instance for "your budget" (not your savings) and where following NeoCon logic the government gets its "deficit spending" from. Then get them to follow the money trail logic through. After all if you ask most people where their money comes from they'll tell you "Simple I go to work and the money arrives in my bank account (or pay envelope) and it comes out of company profits in the first instance."
Yes, but then you ask where the company got the money and the answer is investment or revenue. But investment comes from savings, so where does savings come from. Income not spent and income comes from company's receipts, that is, incomes spent.
So where again did the money originate.
The is no "where" in this view. The person is forced into either a vicious circle or else an infinite regress.
Then you take a govern not from your wallet and ask whose picture is on it, lie say Queen Elizabeth or George Washington. Then ask what the writing on the notes says.
Obviously the note came from government issuance or else it is counterfeit.
They you ask whether the government had to borrow or tax to issue the notes or did it is just printed them because the constitution says it can.
People know that the money comes from the government and so their belief that the government has to tax or borrow to get it is simply silly.
The only way that money gets from the government that "prints" it to the users that don't have access to the press is clearly either spending or lending through emitting physical notes and coin, or else directing its bank to credit non-government accounts.
Government obviously emits its currency into the economy for use in commerce and paying obligations to the government like taxes through government spending and transfers. The only other way that this can happen is if government lends money and most governments only lend to chartered banks.
Currency comes only from government spending or lending. TINA but counterfeiting. Government must provide the wherewithal to pay taxes. Where else could it come from.
Oh, wait. Banks could be borrowing money from government and lending it on.
Where do banks get the cash that they pass through the window. Again, from the government.
So maybe banks borrow from government to lend.
But the numbers don't add up. M1 money supply is greatly in excess of net cumulative spending and transfers by government, and government lending to banks is also limited and temporary.
So where did the extra in M1 money stock come from?
Loans create deposits. Banks only need currency to settle in cash based on window demand, or with the government, e.g., clearing checks drawn on it in payment of taxes.
Most money that is generated though bank lending is just entries on banks's spreadsheets that are moved among accounts as a result of transactions.
People that don't have their heads filled with nonsense can get this pretty quickly..
This leads into the question, why tax or borrow then, and that leads into MMT.
Tom,
That's rather well done! I read Randall Wray's modern money primer and I'm pretty sure the argument you just laid out isn't in there. Is there somewhere I can find a detailed explanation so that I can distribute it to interested parties? I know loads of trade union activists who forever drone on about taxing so as to spend.
Whenever I've tried explaining the MMT view, as far as I understand it, that the state issues the currency and does not need to collect it for it to spend, then the inevitable blank stares and glazed eyes pop up and, worse still, the whole merry go round of where money comes from commences. No doubt the problem is my explanation. Any suggestions on literature that will persuade these activists?
No don't know of a single argument that is compellingly laid out that will convince everyone, since people are different and have different views. That's the value of engaging in a discussion if the person is wiling to follow it through. Some people just can't do that and implode ending the discussion.
You have to start with their concern and then drive it backward to the logical conclusion that the view they are espousing is either built on sand, as above, or else just wrong, like the money comes from the central bank and the central banks are owned by the "Rothschilds." Not much you can do with conspiracy theory and there's a lot of that out there.
Tom,
Thanks. Actually, I think I'll just print out your previous reply and hand it out! As you say, people who are willing to accept a rational argument will be persuaded; those who aren't, won't.
I hope the long awaited Mitchell and Wray textbook will delve into the details of this money creation process, and not simply explain the policy space engendered by modern money. It makes you wonder when this textbook will appear. Anybody hear any rumours? I pray that it'll be published by a company that can keep the cost affordable.
At least it's giving me time to read Jamie Galbraith's Macro textbook in preparation.
I wrote that for people who already understand MMT. I didn't distinguish the wrong statements as wrong, since I assumed that everyone here would know that.
For example, i wrote "But investment comes from savings, so where does savings come from." This left out the "you say" before "investment comes from saving." Actually investment results in saving. That may not be clear to those just encountering this dialogue.
The problem with the conventional understanding is that it reverses the causality.
"Their government does need to tax and issue bonds to get money for spending"
Not really. The government spends and issues bonds. The Greek central bank is tasked with maintaining aggregate demand and therefore is required to discount the bonds under the ECSB charter. The ECB may back the job off to the Greek NCB to play balance sheet tricks but ultimately that's the cycle.
What the government needs to do is call the ECB's bluff - preferably by threatening to injunct them in a court for failing to fulfil their charter.
Ultimately that will result in the ECB backing down, or the ECB failing to clear the TARGET2 transfers. Either way the government can continue to spend.
"Maybe I'm alone in thinking that the Labour campaign was as pisspoor as you can get. "
You're not. Pretty much everybody I've spoken to thought it was terrible even by recent historical standards.
The approach taken was the cat sitting under the nest waiting for the baby bird to drop in its mouth. However that didn't happen - the UK economy recovered pretty much by itself just in time to save the Tories' bacon.
John,
The super platinum credit card generally works as a concept.
What you have to ask is what stops an individual from spending as much as they like.
Generally they say 'the bank bounces my cheques'.
Then you say: 'what if you owned the bank entirely and could instruct them not to do that'.
Then you point out the government owns the central bank.
OBR March 2015 Page 73 forecast expects household debt to income ratio to be above 2008 very high level by 2020:-
http://cdn.budgetresponsibility.independent.gov.uk/March2015EFO_18-03-webv1.pdf
Ultimately that will result in the ECB backing down, or the ECB failing to clear the TARGET2 transfers (Neil Wilson)
Right.
If if opted for the second alternative (cutting off the Greek NCB from TARGET2) the ECB would be preventing Greek deposits from leaving Greece - thus, effectively expelling the country from the eurozone.
But an expulsion is not allowed by the Treaties - so there's no way the ultra conservative and risk averse bureaucrats at the ECB would dare to make such a move. The likelihood is close to zero.
So, in practice (taking into account the ultimate impotence of the ECB in the matter of Greece's NCB participation in TARGET2) the Greek government is free to go on spending and paying its debts by borrowing all the necessary euros from the country's commercial banks.
A pity that Syriza refuses to recognize this - and act accordingly.
Exactly. That's the real bargaining chip. The eurocrats are not going to take the chance of blowing up the EZ by throwing Greece out. Especially not after Lehman.
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