Bill Mitchell — It is (way past) time to dissolve the disastrous EMU experiment in an orderly manner

Sometimes there is clarity. Like when the Koch brothers-funded report on US health care came up with the ‘wrong’ conclusion – that is the right conclusion – $US2 trillion dollars worth of right conclusion. And like when a hard-core German economist breaks ranks and lays out the case for scrapping the Eurozone. Clarity. In the past week there have been some notable contributions to the debate about the viability of the Eurozone. Two German academics, coming from opposite directions, basically reach the same conclusion – the EMU is dysfunctional and prone to crisis and poor outcomes. And then in the same week, a third German, an economist basically breaks ranks with the Europhile reform lobby (neoliberal though it is) and sets out in fairly clear terms how the distrust between Member States is so high that reforms will always be cheated on and the intent derailed. He opposes the creation of a federal fiscal capacity because weak nations would overstate the extent of recession to get more money. Further, more money would be forthcoming to these nations as a perverse ‘reward’ for failing to deregulate their labour markets. His arguments demonstrate without doubt why functional reforms will not be possible in the EMU. It is time (way past that) to dissolve the disastrous experiment in an orderly manner.

For those paying attention to goings-on in the EZ. Bill catches us up on the latest iteration of the debate, which is starting to shift toward the "this is not working and isn't workable" POV. The Germans are still being Germans and insisting on ordoliberalism.

Bill Mitchell – billy blog
It is (way past) time to dissolve the disastrous EMU experiment in an orderly manner
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Hans-Werner Sinn — Secular Stagnation or Self-Inflicted Malaise?

Hans-Werner Sinn calls for "creative destruction."

The only way out of the trap is a hefty dose of creative destruction, which in Europe would have to be accompanied by debt relief and exits from the eurozone, with subsequent currency devaluations. The shock would be painful for the incumbent wealth owners, but, after a rapid decline in the dollar values of asset prices, including land and real estate, new businesses and investment projects would soon have room to grow, and new jobs would be created. The natural return on investment would again be high, meaning that the economy could expand once again at normal interest rates. The sooner this purge is allowed to take place, the milder it will be, and the sooner Europeans and others will be able to breathe easy again.

Creative destruction = liquidation. As Sinn recognizes, it would blow up the EZ. Well, that one way to do it.

Project Syndicate
Secular Stagnation or Self-Inflicted Malaise?

Hans-Werner Sinn, Professor of Economics and Public Finance at the University of Munich, was President of the Ifo Institute for Economic Research and serves on the German economy ministry’s Advisory Council

Gavin Kennedy— Flawed Knowledge Of Adam Smith's Political Economy Yields Poor Results

Hans-Werner Sinn gets Adam Smith egregiously wrong. Sinn is not even in the right century. And that's not all.

Professor Hans-Werner Sinn displays a touching faith in the efficiency of modern States correcting the inefficiencies of modern firms. Governments are often complicit in crony-capitalism when they are ‘captured’ by powerful corporate interests.

Adam Smith's Lost Legacy
Flawed Knowledge Of Adam Smith's Political Economy Yields Poor Results

Gavin Kennedy | Founder and Chairman of Negotiate, and Emeritus Professor at Heriot-Watt University

Norbert Haering — ECB Bond buying as a hard-right bank centered political strategy

…If this sounds like a conspiracy theory for you, just consider what Hans-Werner Sinn, President of the IFO economic research institute, one of the politically better connected economists in Germany, let slip in a guest comment in “Handelsblatt” October 7, 2014 (in German) about the true rulers of Europe. He confides that in autumn 2011 Italian prime minister Silvio Berlusconi wanted to solve Italy’s economic problems by leaving the Euro and devaluating. “To that goal, he had already had some preliminary talks with other governments of the euro area. He had an agreement with the Greek prime minister Papandreou, who had wanted to make his people chose in a referendum between exit and a hard austerity policy”, Sinn informs us and continues: “Both had to step down in November 2011, almost at the same time”. He gives the following reason: “An exit was going against higher-ranking political interests, but also against the interest of the banking system.” 

Such wild “conspiracy theories” we are used to hear only from the fringes of politics – not from heads of economic think tanks! If the interests of the banking system are at stake (the interests of the “fifth power”, as the former head of Deutsche Bank, Rolf Breuer, or the former chief economist of the Bundesbank and the European Central Bank, Otmar Issing, named it) then the citizens of European countries have nothing to decide any more. In such cases, they are given a government which does what suits the “higher-ranking interests and the interest of the banking system”. Democracy takes a break. Everybody is invited to figure out for themselves what the “higher-ranking public interests” are and, above all, whose interests these are.

Real World Economic Review

ECB Bond buying as a hard-right bank centered political strategy
Norbert Haering

Read the whole post in the light of:

"The powers of financial capitalism had (a) far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank... sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world." — Carroll Quigley (1910-1977) | Professor of History at Georgetown University, member of the Council on Foreign Relations (CFR), mentor to Bill Clinton, in Tragedy and Hope, 1966


Carroll Quigley, Tragedy and Hope: A History of the World in Our Time (PDF)
Volumes 1-8
New York: The Macmillan Company, 1966

Hans-Werner Sinn — Economics and Its Critics

For what it's worth. Defending the neoclassical approach.

There is much to criticize in economics nowadays – not least that the profession focuses far too little on political issues and far too much on beating students to death with mathematics. But much current criticism of economics is based on misunderstanding and ignorance...

Another malady that economists sometimes diagnose might be called “Keynes disease.” If demand is too weak, it can lead to a sharp drop in employment (because wages and prices are rigid in the short term). The disease can be cured with injections of public, debt-financed stimulus – like giving a cardiac patient doses of nitroglycerine to keep his heart going. 

Contrary to what many think, there is no fundamental bias against this medicine in mainstream economics today. But stimulus cannot be seen as a universal remedy. Many ailments that may afflict an economy are chronic, not acute, and thus call for other types of treatment. Trying Keynesian therapy to resolve, say, the structural problems currently affecting the countries of southern Europe would be like trying to cure a broken leg with heart medicine.

Project syndicate
Economics and Its Critics
Hans-Werner Sinn | Professor of Economics and Public Finance at the University of Munich, is President of the Ifo Institute for Economic Research and serves on the German economy ministry’s Advisory Council

Jörg Bibow — Germany’s Über-Economists Are Rampant Again

The rest of the world is holding its breath as the eurozone continues wobbling along the brink of deflation. In fact, numerous member states are already experiencing what it means to let “it” happen again. With the region stuck in depression since 2008, Euroland authorities are writing fresh world records in failing to improve the well-being of their citizens. The only thing that keeps rising in the eurozone is indebtedness—as the unsurprising consequence and symptom of its collective austerity insanity. 

But that is not how the German authorities, or for that matter German economists, view the world. Blatantly ignoring the dismal facts that their favored medicine has produced, they never tire of calling for more of the same: austerity, austerity, and another extra dose of austerity please. By contrast, anything that might possibly help to turn fortunes around gets rejected out of hand as conflicting with the requirements of stability-oriented policymaking. In Germany, neither facts nor economic theory matter at all, it seems. Policy prescriptions simply have to match the ruling austerity-cum-competitiveness ideology, no matter what.…

Multiplier Effect 

Germany’s Über-Economists Are Rampant Again
Jörg Bibow