Bill Mitchell — The EU outdoes itself in the madness stakes

One of the themes I exercised when speaking in Europe recently, particularly when presenting at the French Senate Commission and the Ministry of Finance, was that by pushing European integration into an unworkable currency union and refusing to budge, the European political class was undermining the valid aspects of the ‘European Project’, which the likes of Jean Monnet and Robert Schuman saw as a way of bringing peace to the Continent after several attempts by Germany to usurp the rights of citizens in other European nations through military endeavours. Research released by the The PopuList Project – is a UK Guardian motivated attempt to bring together academics and journalist to study shifts in European voting sentiment since 1989. It is overseen by Martin Rooduijn at the University of Amsterdam. The latest results are rather alarming for those who hang on to hope that the European Union is capable of progressive reform. And the latest shenanigans in the European Commission and the Council over the ‘Budget’ is indicative of why the PopuList Project is generating such results. If there was foresight among the leaders in Europe they would take a step back and restore national currencies and restore the quality of European democracy, which has been significantly compromised since the 1990s....

Bill Mitchell – billy blog
The EU outdoes itself in the madness stakes
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Russia and the EU Are Ready to Switch to Settlements in Euros — Anatoly Bazhan

If the plan to adopt national currency settlements between Russia and the EU succeeds, the dollar space in global trade will undoubtedly be curtailed even more. The question is how strong the impact will be. We believe the reduction is going to be noticeable, although not considerable. Currently, the Russian-EU trade accounts for about 2 percent of global trade. Given that the US dollar is used in about half of transactions, removing it from the Russian-EU relations would diminish the importance of the US dollar by not more than 1 percent. However, since the dollar just cannot be ousted completely, its practical decrease in our estimate will most probably make up about 0.7 percent. The dollar component in the international currency reserves will correspondingly become slightly lower.

The United States will certainly take a negative stance on such developments and not only because they are to weaken the effect of possible accounts freezing but also because they will lead to the further slide of the dollar to the category of ordinary currencies and to the future loss of advantages that secure the US dollar dominance in the world economy.

Valdai Analytics
Russia and the EU Are Ready to Switch to Settlements in Euros

Anatoly Bazhan

Lars P. Syll — MMT perspectives on the euro

The cost of giving up currency sovereignty. Even Germany isn't doing well under the euro now.

Lars P. Syll’s Blog
MMT perspectives on the euro
Lars P. Syll | Professor, Malmo University

Matias Vernengo — Still time to save the euro

Free book.

My humble opinion.

Naked Keynesianism
Still time to save the euro
Matias Vernengo | Associate Professor of Economics, Bucknell University

Lars P. Syll — My finest hour

Fifteen years ago, Swedish citizens were asked if they wanted to join the eurozone. Of the more than 80 % of registered voters participating in the referendum close to 57 % said NO.

Yours truly — unlike the ‘usual suspects’ among establishment economists — participated​ actively in the fight against the euro — and it’s still something I’m immensely proud of....

Lars P. Syll’s Blog
My finest hour
Lars P. Syll | Professor, Malmo University

Ambrose Evans-Pritchard — Bundesbank back in charge of ECB, sending shivers through Italy

The European Central Bank has dropped its long-standing pledge to boost stimulus if conditions deteriorate, signalling the triumph of German-led hawks and marking a major turning point in the eurozone’s monetary regime.

The approaching end to the QE-era pulls away the protective shield for Italy and the high-debt Latin states, and for thousands of “zombie companies” kept afloat on monetary life-support.

Italy is the lynchpin of the euro. If Italy fails, the EZ fails. Stay tuned.

The Telegraph
Bundesbank back in charge of ECB, sending shivers through Italy
Ambrose Evans-Pritchard

Serban V.C. Enache — Bulgaria and the Euro — How Mosler Bonds could help

MMT-based analysis and policy advice. Short.

Splice Today
Bulgaria and the Euro — How Mosler Bonds could help.
Serban V.C. Enache

Since Trump, US dollar is getting killed.

Trump may be reveling in the stock market's gains since his election victory, but the dollar is going in the other direction. It is getting killed.

When Trump was elected the Dollar Index was at 98. Now it's at 90. Dollar/yen was at 118, now it's at 110. Euro/dollar was at 1.04, now it's at 1.23. British pound was at 1.23, now it's at 1.37. Canadian dollar was at 1.36, now it's at 1.24.

Trump has been a disaster for the dollar.

What's more, the dollar's fall is still in its early stages. With his monkey idiot Treasury Secretary, Steve Mnuchin, and the endless sanctions on everybody--the literal weaponization of the US dollar--these fools have set in motion a powerful trend of global "de-dollarization."

It is becoming plainly obvious to countries and institutions around the world that the risk of being shut out of the global, dollar-based transaction and clearing system is too great so alternatives are being sought. This is one explanation for the rise of Bitcoin and other cryptocurrenices. You can also see it in newly emerging bilateral agreements between nations, such as China and Russia, where transactions and trade are being conducted in ruble and yuan.

Add to this the fiscal stimulus of the tax cuts (money printing) and the Fed's rate hikes which they stupidly believe squash inflation. (5 rate hikes since Dec 2015 and inflation up, dollar down, gold up, oil up.)

It's over for the dollar. Trump and Mnuchin...the tag team that will destroy the dollar.

Get short, everybody. Get short.

Bill Mitchell — Contrasting narratives about the outcomes of the euro

I have presented to a diversity of participants at the various events we have attended in the US, UK and Europe over the last 2 weeks. One way of expressing this diversity is in terms of the type of audience. At many events, the audience has been comprised of people who would see themselves as activists on the progressive side of politics. Some have been students, others, members of Leftist political parties, local business people, and community organisations. They uniformly express concern over the state of Europe, and the Eurozone in particular. They express concern about unemployment, underemployment, precarious work, poor wages growth, welfare cuts, infrastructure degradation, and other uncertainties relating to the state of politics. I sense that some of the participants were pro-Europe and pro-euro, but, there was an overwhelming feeling that the monetary union had failed and would be difficult to retrieve. On the other hand, I have addressed events where politicians, central bankers, private bankers, finance ministry officials and the like have been the main participants. Here the message changed significantly. I heard politicians, firmly wedded to the European ideal, talk about how the Eurozone had brought unlimited benefits to the Member States and how solidarity among states and citizens enhanced by European Commission leadership was taking Europe to a new, higher level. Hello! Earth calling! It was quite an eye-opener to see how much denial there is among those who have done well from the system.…

"Let them eat cake."

Bill Mitchell – billy blog
Contrasting narratives about the outcomes of the euro
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Ramanan — Unsustainable Processes Of The EU

Link to web application written in R using Godley ratios.

The Case for Concerted Action
Unsustainable Processes Of The EU
V. Ramanan

Bill Mitchell — The chickens are coming home to roost for Europe’s so-called powerhouse

When I was in Portugal a few years ago (Porto mainly), I noticed taxi drivers at the rank queue who would get out of their cars when the front of the queue changed and push them to the next spot in the queue. It was like something one would see in a very poor nation without fuel. But then austerity had created poverty in Portugal and the taxi drivers were just trying to eke out a living as best they could and make as many savings as they could along the way to spread the meagre receipts they earned as far as possible. But then that was just Portugal, right! They have been living beyond their means for years and needed the reality check that austerity brought, right! They should follow Germany’s lead and tighten their belts and enjoy low unemployment and the strongest economy in the Eurozone, right! But, of course, the reality is different. Germany has become so obsessed with recording fiscal surpluses that its trucks can no longer transit important bridges and so the export model is being undermined. It is so obsessed with screwing its own people and overseeing an increasing bias to precarious work with low pay that the future retirements of their workforce is in jeopardy. The chickens are coming home to roost in a big way for Europe’s so-called powerhouse. No other nation should follow its lead....

Bill Mitchell – billy blog
The chickens are coming home to roost for Europe’s so-called powerhouse
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

See also

Lars P. Syll’s Blog
Why the euro divides Europe
Lars P. Syll | Professor, Malmo University

Reuters — Row over euro heats up in Le Pen's party after French election defeat

While a large majority of FN supporters back a return to the French franc, opinion polls indicate three-quarters of French voters want to keep the euro, including many older voters who fear their euro-denominated pensions could be devalued....

Reuters
Row over euro heats up in Le Pen's party after French election defeat

Matthew C. Klein — If you like the euro, why not just call for a global gold standard?

Members of the single currency are forced to issue obligations in a currency none of them can print. They made the choice to sacrifice their monetary sovereignty in exchange for lower costs of trade and greater cross-border financial flows. For the many members hoping to piggyback off Germany’s postwar record of stability, joining the euro would also mean eliminating the risk premiums associated with excessive inflation and devaluation. These were the same arguments that were made about the virtues of the gold standard in the 19th century....

When currency issuers become currency users.

FT Alphaville (may require free registration)
If you like the euro, why not just call for a global gold standard?

Matthew C. Klein

ht Lambert Stether at Naked Capitalism

Bill Mitchell — Mario Draghi uses TARGET2 to cower Italy into staying within the Eurozone

The new US President has now scrapped the TPP and is turning his attention to NAFTA. These are developments that those on the Left should applaud. No so the conservative, neo-liberal government in Australia which is claiming it is pushing ahead with the TPP (sure, with Indonesia) and hinting that China might be part of a new TPP arrangement sans the US. That, in itself, is incredible given that the TPP was designed to counter the growing trade strength of China. But the ground is certainly shifting. Even the IMF is embracing China and added the Renminbi to the Special Drawing Rights basket last September (along with the USD, the euro, Yen and pound), which is recognition that the IMF doesn’t think the Chinese have been manipulating the currency – one of the paranoid claims of the new US President. But in Europe, people are getting anxious after the President of the ECB Mario Draghi decided to put pressure on Italy with threats they would owe the Eurosystem (through the Banca d’Italia) some 358.6 billion euros, which are that nation’s TARGET2 liabilities as at November 2016. The real currency manipulator, German who continues to game its Eurozone partners (via an undervalued euro) is also claiming it is owed cash as a result of its increasing TARGET2 assets. The threat from Draghi is hollow and Italy should just ignore it and get on with leaving the Eurozone and restoring its prosperity as an independent currency-issuing state.…

Bill Mitchell – billy blog

Mario Draghi uses TARGET2 to cower Italy into staying within the Eurozone

Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Lara Merling — Germany Does Have Unfair Trade Advantages

While China is commonly accused of currency manipulation to provide cheap exports, the IMF has recently decided the renminbi (RMB) is no longer undervalued and added it in its reserve currency basket, along with other major currencies. However, an IMF analysis of Germany’s currency found “an undervaluation of 5-15 percent” for the Euro in the case of Germany. Thus for Germany, the Euro has a significantly lower value than a solely German currency would have....

The Minskys
Germany Does Have Unfair Trade Advantages
Lara Merling

Nobel economics prize winner: ‘The euro was a mistake’

The European Union should embark on a process of decentralisation and return certain areas of decision making to the member states if it wants to survive and thrive, according to Nobel Memorial Prize in Economic Sciences winner Oliver Hart.…

Hart argued that “the euro was an mistake” and said that it’s an opinion that he has maintained ever since the monetary union was first introduced.

The economist added that it “wouldn’t be a sad thing at all” if in the future Europe abandoned the single currency and that the British were “very clever” to stay out of it.

EurActiv
Nobel economics prize winner: ‘The euro was a mistake’
Carmen Rodríguez
Translated By Samuel Morgan

Sputnik International — Hasta la Vista Euro! The Rise of Spain's Alternative Currencies

The past few years have seen the growing popularity of social currency in Spain, where ordinary people are ditching the euro and exchanging services and products using an alternative currency.…

Sputnik International
Hasta la Vista Euro! The Rise of Spain's Alternative Currencies

Matthew Lynn — The Deutsche Bank crisis could take Angela Merkel down – and the Euro

Deutsche Bank is teetering. Lehman?  Creditanstalt?

The Telegraph
The Deutsche Bank crisis could take Angela Merkel down – and the Euro
Matthew Lynn

Martin Armstrong — The Coming Dollar Rally – Chaos in Europe

Martin Armstrong observes that the idea of creating a single European currency arose out of the Plaza Accord of 1985.

Most people have no idea that the idea of creating the euro actually took place back in 1985 and was proposed as well as supported by the the United States. The idea was put forth at the Plaza Accord when the birth of the G5 was established. The idea was that the dollar was too high and that its strength was because it had emerged as the only major world currency. The idea was born that if Europe created a single currency, there would be a rival to the dollar.…

Armstrong Economics
The Coming Dollar Rally – Chaos in Europe
Martin Armstrong

Joseph Stiglitz — On course to fail

That would be the euro.

The Economist
On course to fail

Editorial on Joseph Stiglitz's The Euro: How a Common Currency Threatens the Future of Europe