Any government that promises to remain within the EU can do nothing. The government has to credibly threaten to leave the EU, and maybe even take unilateral steps like suspending loan re-payments and implementing capital controls. The EU can clearly humiliate poor little Greece, but what happens when voters in Spain, Italy or even France act on their hatred of the austerity and their governments start to listen?
I would go further and say that there is no future in the EMU. Europe is not going to go forward to institute either a political union or even a fiscal union. The project is doomed and the faster than countries recognize this and bail, the less their populations will suffer and the threat of conflict in Europe will be reduced.
The Continental Europeans need also to recognize that the US and UK are run by Wall Street and the City, and act accordingly.
Social Democracy For The 21St Century: A Post Keynesian Perspective
Greece promises to Balance Budget: What the hell just happened?
Lord Keynes
The Continental Europeans need also to recognize that the US and UK are run by Wall Street and the City, and act accordingly.
Social Democracy For The 21St Century: A Post Keynesian Perspective
Greece promises to Balance Budget: What the hell just happened?
Lord Keynes
10 comments:
The whole point of humiliating Greece was to show that there is no way you can change.
That's why they did it. Our way or 'disaster'.
And until Post Keynesians realise that 'capital controls' and the rest of their fixed exchange obsessions are totally unnecessary and counter productive we will get nowhere.
Let the Euros leave the country, continue to issue ELA as required to the banks steadily decreasing the haircut as required and when the ECB finally plucks up the courage to pull the plug you automatically have an MMT compliant banking system where the central bank is the major creditor in all the domestic commercial banks and can start dictating terms.
Redenominate the bank assets and liabilities and pass the central bank via administration if necessary to wipe out the TARGET2 deficit. The default then hits the ECB right in the balance sheet where it hurts them the most.
Love you Tom.
The thing about these left intellectuals is I have noticed that they feel a little embarrassed when you encounter them with undeniable facts from MMT. They don't say this to you but from their reaction I can tell they want to complicate things a little more and they are not running with this "primitive MMT stuff". They knew all this before yet the next day they make some very simple mistakes that totally contradict MMT. They are intellectually bankrupt just like the Austrians are. I think before any progressive ideas can move forward we need to deal with the left. In a way they are our real enemy. I didn't like Varoufakis comment on MMT in that clip.
Neil Wilson,
This was Bill Mitchell on a Greek exit back in 2012:
"Would Greece need to impose capital controls? It is likely that the Greek government would require some strict capital controls. Malaysia gained major benefits from adopting this strategy in 1997. The IMF has now demonstrated the conditions under which capital controls, previously eschewed by free market ideologues, can be highly beneficial to a nation making large currency adjustments. Greece would fall into this sample."
http://bilbo.economicoutlook.net/blog/?p=21418
Kristjan,
Is your comment directed at me?
You know MMT came right out of Post Keynesianism, right?
Frankly, MMT is just the latest -- and, yes, a very interesting and dynamic -- modern branch of Post Keynesianism.
The difference with older PKers is mainly on the issue of the balance of payments constraints. MMT is fine for the US, Japan, Germany, China, and probably the UK, France, Australia and some other nations.
A lot of other nations -- especially developing ones -- will be hit by the balance of payments constraint, however. You need a big reform of the international payments system to make it work. If I recall even Bill Mitchell admits this.
No, it is not directed at you LK. I've enjoyed reading your blog
Tom Hickey,
So glad you agree on the Eurozone.
My main fear is that so many of the anti-austerity left is committed to a utopian and unrealistic vision of the EU.
If they don't wake up soon, the right will step in, and things will get very ugly indeed.
The problem with the left is that they are utopian internationalists, and this plays right into the hands of the transnational neoliberal globalizers. In other words, their internationalist idealism is being used by transnational corporatists end-running the national sovereignty that restricts their activities and taxes their profits.
While I am a utopian internationalist globalist by disposition, I am realistic enough to know that conditions are not ripe for it at this point. The historical dialectic has a way to run yet.
Marx the sociologist knew this, but Marx the activist believed that the process could be rushed along with revolution.
LK,
Perhaps rather than appealing to authority by selective quotation you could explain why that is a great idea.
Capital controls are largely unnecessary - over and above the usual market management adjustment routines used in stock markets across the world which should be normally in place in any financial market. Often they aren't in currency markets due to ideology, but I take it as given that they would be put in place by any sensible government.
So it's really a question of what you mean by 'capital controls'.
The correct approach as ever is to get 'real' and manage what is being imported to make sure things work.
PK people are rather too obsessed with this myth of the 'balance of payments constraint' as well. It's complete rubbish. You can only import what you can export based upon the real terms of trade - including what exporters will save in your scrip to ensure that they make the sale. You then cut your coat to that cloth.
The finance follows reality. So manage reality.
Redenominate the bank assets and liabilities (..) if necessary to wipe out the TARGET2 deficit
That´s a common misconception.
In fact, there is absolutely no need to wipe out the TARGET2 liabilities.
These liabilities are not "payable" - they´re a type of perpetuity where only the interest is due.
Even after a country exits the euro, this TARGET2 debt (owed by the Greek NCB to the ESCB) will continue to pay interest only, meaning it would be much less burdensome for Greece than “normal” government debt with both interest and payment of principal obligations.
At the current MRO rate, the burden on Greece would be practically zero per cent of GDP.
What Syriza didn´t do (but could have done) is behave "as if" the ECB´s threats don´t matter, go to the country´s commercial banks and force them to make loans to the government.
Then it would be in a position to use the newly-created deposits to pay urgent bills and - even better - transfer them abroad and pay the bonds on the ECB´s balance sheet.
TARGET2 liabilities would increase with such payments abroad, but we´ve seen this is advantageous for Greece.
If the ECB reacted by making good on its threat to yank the ELA and effectively expel Greece from the euro (an ilegal move) Greece would keep the moral high ground.
And if the ECB refrained from carrying out its threats, then Greece would have shown the EU than even under EMU, a country can take emergency measures to safeguard its economy.
A shame they didn´t do that.
Oh my lord!
To people not previously tainted by orthodox "economics" ... the simple question is this.
What the hell does it mean to "balance" fiat?
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