If Reinhart and Rogoff's 'error' has discredited the prevailing policy dogma, now is the time for an alternative that worksThe Guardian (UK)
There's no need for all this economic sadomasochism
David Graeber | Reader in Social Anthropology at Goldsmiths College, University of London
(h/t Alex Little via Twitter)
Shout out to Warren Mosler, Philip Pilkington, and MMT.
Ponzi/Pyramid/Amway scheme.
ReplyDeleteMosler's idea is that someone will definitely buy the bonds because he will find the price attractive enough (if bond prices go down a lot) to exchange the stuff and pay lower taxes net-net.
But soon the indebtedness to foreigners will rise so high because of current account deficits (and they are already high - such as 100% for Greece, Portugal, Ireland, Spain etc) that nobody will buy the bonds in sufficient quantity because people do not arbitrage to eternity.
Epic fail.
Posted on Ramanan's website the other day:
ReplyDeletehttp://www.concertedaction.com/wp-content/uploads/2013/04/Euro-Area-Current-Account-Balances.png
Check Ireland.
I agree that BoP issues will still be a problem. But let's get our facts straight. Also the plan is to give the periphery countries bargaining power vis-a-vis Germany by allowing them to solvent.
For all Ramanan talks about how to iron out trade-imbalances using political planning, he seems to know very little about how to actually play politics! You think the periphery can push against Germany on trade when Germany holds their purse-strings? Please!
Ramanan, start looking behind the headlines... yeah?
Graeber makes a fatal mistake of "agreeing" that R&R's trash is trash ONLY because of their minor spreadsheet error. That very effectively hands back a victory just won, before any benefit accrues from it! Now the few benefitting from Austerity can safely focus entirely on the easily defensible position that anyone can make minor mistakes.
ReplyDeleteStrategy and policy in social adaptation matter. Blind tactics are ALWAYS easily defeated. That is WHY aristocracy and oligarchy continue.
Please tell David Graeber to wise up, and start acting MORE PROFESSIONALLY. Everything he's done to date is necessary, but NOT sufficient.
In a boxing match, you do NOT set up your opponent by effectively feinting with a left jab ... only to offer up your chin as a stationary follow-on target. This is political boxing, not a crude slugfest.
"nobody will buy the bonds in sufficient quantity because people do not arbitrage to eternity."
ReplyDeleteSo they will take cash instead of bonds?
If people want to sell goods to the US in exchange for dollars, and they want to save those dollars, then at some point they (or someone else) will buy US bonds.
It seems to me that if they don't want to sell goods to the US in exchange for dollars, then the bonds will just be bought by other people instead.
Someone will buy them, or they will get cash/ reserve balances instead.