Monday, June 13, 2016

Bill Mitchell — The European Commission and ECB outdo themselves in their quest for absurdity


Bill is on a tear.
As the years have passed, I have become inured to the depths of absurdity that the European Commission and the political elites its nurtures go to justify their existence. The Maastricht exercise in the late 1980s and early 1990s was comical. The convergence process towards Phase III of the Economic and Monetary Union in the 1990s was established a new norm for craziness. Who would believe the stuff that went on. Then the Goldman Sachs fiddle to allow Greece to enter the Eurozone two years later than the rest. What! Then the Stability and Growth Pact fudges in 2003 when Germany (and France) were clearly in violation of the rules they had bullied the other Member States into accepting. Look the other way and whistle! Then the GFC and the on-going mess. By now the Commission and the Council were outdoing themselves in pursuing absurdity. It was a pity that millions of innocent citizens have had their lives wrecked through unemployment and poverty as a result. And, now, perhaps, this lot have exceeded their own capacity for nonsense. I refer to the latest Convergence Reports published by the European Commission and the European Central Bank. Hypocrisy has no limit it seems. The Eurozone and EU is now firmly entrenched in austerity and deflation and the policy makers think that is the desirable benchmark for others to aspire to. Who could have invented this stuff! And, in relation to the upcoming vote in Britain – how the hell would any reasonable citizen want to be part of this sham outfit (EU) if they had a choice.
Bill Mitchell – billy blog
The European Commission and ECB outdo themselves in their quest for absurdity
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

26 comments:

Michael Norman said...

Years and years of blah, blah, blah, academic whining from Bill and the rest of the MMT "leadership." I'm sick of it. At least I am teaching people how to make money from this stuff. I can't even listen to their shit anymore. It's useless.

Bob said...

That's not his role. He's an academic, whose purpose is to question as well as inform public policy. If Bill can get the buffer stock of employed mechanism accepted by his colleagues that would be a blow to mainstream orthodoxy. Unfortunately academia has become corrupted. Many of his colleagues are whores.

Matt Franko said...

Well they have the rates at zero or below so what is the problem?

This ZIRP/NIRP is an MMT policy Rx things should be booming over there...

Bob, his colleagues are stupid....

Matt Franko said...

Why not at least take some solace in the fact that the ECB has the rates at ZIRP?

You cant always get everything you want... at least they have the rates at zero...

Why no MMT high fives on this count at least?

Bob said...

Where's the job guarantee?

Are you sure there is such a thing as a stupid whore?

Andrew Anderson said...

Solution: Hand out new fiat equally to all Eurozone citizens and who will complain since even German savers will get their share?

Tom Hickey said...

This ZIRP/NIRP is an MMT policy Rx things should be booming over there...


Not with fiscal austerity.

That's the MMT point. ZIRP as monetary policy and functional finance as fiscal policy.

Tom Hickey said...

Solution: Hand out new fiat equally to all Eurozone citizens and who will complain since even German savers will get their share?

You either have to convince the European Commission and the ECB or get the the treaties that created the EZ changed.

You up for that?

Matt Franko said...

Well then Tom they have 50% of their Rx in place so why not take credit for that part?

iow usually if you get half of your plan in place you would acknowledge that part of the plan has been successful...

It would at least keep the troops motivated...

Tom Hickey said...

Well then Tom they have 50% of their Rx in place so why not take credit for that part?

MMT recommends permanently setting the interest rate to zero.

CB are at zero now "temporarily" and they don't like it one bit. They are trying in every way they can to move the rate up by stoking some inflation.

The present situation bears no resemblance to the MMT position other than coincidentally.

Detroit Dan said...

From my perspective, the MMT community has gotten the effects of QE (and related ZIRP/NIRP) exactly right. When I first started following Bill Mitchell and company about 7 years ago, the MMT line was that monetary policy would be ineffective in fixing the economy. Exchanging government bonds for government cash would not jump start the economy. And they were clearly right.

Matt Franko said...

But the CB people have the rates at zero so that should be the qualitative outcome the MMT people advocate so why not encourage remaining here ? Then doing whatever with fiscal?

Andrew Anderson said...

You up for that? Tom Hickey

Not at all, at least not directly. Besides, I would brainstorm the idea first.

MMT recommends permanently setting the interest rate to zero.
Tom Hickey

There's a proper way to lower interest rates and an improper way. The improper way is divisive and benefits the banks and the so-called creditworthy.

The proper way to lower interest rates would be equal fiat distributions to all citizens into their individual accounts at the central bank since that way cheats no one. Of course other privileges for the banks should be abolished too to maximize the amount of new fiat that could be distributed for a given amount of price inflation.

Six said...

"then Tom they have 50% of their Rx in place so why not take credit for that part?"

50% of what Rx? What does the other "50% of their Rx" consist of? How did you determine that ZIRP was 50% of "their Rx"? Does Rx mean prescription in your bizarre rantings? It's often difficult to follow what your obsessing about.

Tom Hickey said...

But the CB people have the rates at zero so that should be the qualitative outcome the MMT people advocate so why not encourage remaining here ? Then doing whatever with fiscal?

MMT is for setting the rate to zero since it is non-predictive.

Interest rate setting useless as policy tool other than to contract the economy by being set too high for new investment to be profitable. That is used to squeeze labor to "wring inflation out of the system."

The idea behind it is banks as intermediaries of savings, to the cb should se the right high enough to encourage savers but not so high as to make new investment too costly (and risky).

The premises are wrong as MMT shows.

Six said...

Matt, MMT is mostly about fiscal policy. Only a half wit would believe that ZIRP is "50% of their Rx".

Matthew Franko said...

Before the GFC, financials were like 40% of S&P earnings, then those idiots blew out and everybody who worked there got thrown out of their jobs, which is what MMT is after with the ZIRP and they want a 'small financial sector' so now they have that with the ZIRP/NIRP so why not cheerlead for the current zero rate policy?

Look at Bill's post it doesnt even talk about the policy rate once... it only mentions "inflation rate!" or "deflation rate!"....

The MMT top end of towners should be very satisfied with the QUALITATIVE results here at the ZIRP/NIRP... so I dont see why they dont talk about this if it is a good policy...

If your Dr says get your cholesterol down and your blood pressure down, and you get only the one down, its not like that doesnt help... iow your Dr wouldnt say it didnt matter.....

Six said...

Warren Mosler on ZIRP:

"yes, lower rates hurt savers, which weakens the economy. And therefore you would be right to think that Fed rate hikes would help the economy. But why not instead make the low rates permanent and eliminate payroll taxes and increase Social Security payments to make up for the lost interest income, while keeping rates low for investment, home mortgages, car loans and lower costs for businesses to keep prices down.

And what about the budget deficit? Well, with a permanent 0 percent rate policy, there is no interest to speak of being paid, so you can forget about all those issues. And so the trick is to cut taxes or increase spending just enough to keep the economy humming along at full employment, which is what the real goal is."

His argument is a little more nuanced than you like to pretend it is, Matt.

Tom Hickey said...

ower rates hurt savers

Lower rates don't necessarily "hurt" savers by giving them less interest. The risk premium on default free government security is acknowledged for what it is, zero. That is just reality. Government is under no obligation to provide a subsidy to savers.

The way savers would "hurt" is as presently, having to accept risk to get a higher return than zero. That's fine. It encourages new investment, which under capitalism is where saving should be directed rather than to hoarding.

Under the Mosler plan the Treasury will still auction T-bills and they will presumably still sell at a discount reflecting the inflation premium. The interest rates in the private sector will be set by the private sector and reflect current conditions and market expectations.

Ben Johannson said...

Bill develops socio-political weapons, you develop applied weapons. I would say there's room for both.

John said...

Mike, I love you! I really do. If I ever make it to New York, drinks are on me for the whole weekend, but give Bill a break.

The man is an absolute phenomenon. He writes a highly detailed and usually amazing posts nearly every single day. Most economists couldn't write one of his posts in a lifetime. He's one man, he's absolutely tireless and without him much of MMT would be lost in the wilderness. He's the greatest economist in the world, up there with Minsky and co. What do you want him to do? His profession despises and laughs at him, yet he keeps plugging on. We're all frustrated and pissed off but let's not turn on each other. Peace out, man.

jrbarch said...

More important Bill surfs and plays in a band (Australians will get that)! Ayres Rock on our economic landscape; and if anyone thinks they can change that landscape faster and better, step up ....

John said...

jrbarch, I listened to Bill's band's gig the other day: https://www.youtube.com/watch?v=vTg-akm2Qbo&index=27&list=UUN97AcRDSbl9Rcd1Lmxk7gw

I must say that it was pretty damn good! The world's greatest economist can jam! And he can pull off wearing a beret! They should think about changing the name of the band to William and the Conquerors. That's how I think of Bill: William the Conqueror!

Matt Franko said...

"up there with Minsky and co. "

That's an insult to Bill....

To paraphrase the real greatest heavyweight the Easton Assassin Larry Holmes, Minsky couldn't hold Bill's jockstrap...

But that doesn't change the fact that we are still getting nowhere on present course

John said...

Matt: "But that doesn't change the fact that we are still getting nowhere on present course."

Twenty years ago Warren Mosler was speaking to a handful of people, and even they thought he was crazy. Things have come a long way. A lot of that is down to Bill and Randy. Mike does a superb job with his videos. Remember when Mike was routinely abused on the comments section of his Youtube videos? That doesn't happen any more. Mike's reaching a bigger audience. They may not agree with him, but they're nor dismissing and abusing him. There's even a grudging respect for him. Bill's doing the same in the academic sphere. The MMT blogs are doing what they can, while Bill, Randy and the rest are tireless in their efforts. Who would have thought that someone like Stephanie Kelton would be invited to congress to be the chief economist for one of the mainstream parties on the senate budget committee? Where there was an eery silence, a voice can now be heard. The FT, WP, NYT have covered MMT. Even Martin Wolf now quotes Warren Mosler.

Will Bill's books become the standard texts at universities? If that's what we're waiting for then we'll wait forever. Not even Keynes is taught at universities!

By the way, when you joke about Larry Holmes like that it makes me think that the rest of the comment is also a joke, when we know it isn't! Hyman could hold Bill's surfboard. Bill could hold Hyman's, um, squash racquet?

jrbarch said...

Michael: “I can't even listen to their shit anymore. It's useless”.
Matt: "But that doesn't change the fact that we are still getting nowhere on present course."
John: “Things have come a long way”.


All true in one way or another. The problem is that constant study of statements serves only to increase the responsibility, or produce brain fatigue, staleness, and subsequent revolt. Only that which is brought into use in life (e.g. Mike & Matt trading) is of practical value, and retains its livingness. Everything about MMT (information) has to be verified and tested in the crucible of life experience. It might begin with a few traders, but has to widen into social living. This means people taking it upon themselves, to pass the information on to others. Hats off to MNE is this regard.

There will be psychologists who know a lot more about group dynamics than I do, but I think there is the leverage point. Groups can idolise, ostracise, cripple, kill, etc. their leaders or prominent personalities; and personalities can betray, etc., misrepresent, use for personal gain, let down their group. Syriza is the latest example with Podemos waiting in the wings to be tested. The Spanish are a fiery, passionate people. I had the feeling the Eurocrats felt they were dealing with (Syrizan) lambs. If there can be a successful group willing to publicise and act on MMT theory, then sometimes surprising things can happen – one thunderclap can set off an avalanche. The whole society seems to be precipitous, a network of groups, all vying with each other.

I don’t know what there is about the basics of MMT there is not to like; I don’t think capitalism is the end story in a primitive tribal, slave, feudal, evolution of the human sense of an economy. Elitism is so hollow, it has to fall apart (in Aus. politicians are referred to as the ‘hollow-men’). In the meantime, one by one, talking to the people you know at least helps leaven the field. People are getting more and more restless, and the propaganda machines are on overload. I believe in human beings, so I think somewhere there will be a group break through and hopefully soon.