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

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.

Price Stability

The ECB is very explicit in defining price stability.

We read that – The definition of price stability:

Price stability is defined as a year-on-year increase in the Harmonised Index of Consumer Prices (HICP) for the euro area of below 2%.

This was the “quantitative definition” agreed on by the ECB’s Governing Council.

The ECB notes that this definition “makes the monetary policy more transparent” and “provides a clear and measurable yardstick against which the European citizens can hold the ECB accountable”.

To maintain price stability is the “focus of its monetary policy” for the “euro area as a whole”.

The definition is buttressed by further qualification.

1. “not only inflation above 2% but also deflation (i.e. price level declines) is inconsistent with price stability”.

2. “Inflation rates of below, but close to, 2% are low enough for the economy to fully reap the benefits of price stability” So the 2 per cent is the upper bound but deviations below that limit are increasingly undesirable. The ECB thus desires inflation in the euro area to be around 2 per cent recognising that some Member States will deviate from that euro area-wide target.

As an aside, the reality is that the ECB is a failing institution irrespective of what is happening in individual Member States such as Greece and Spain.

The following graph shows the annual inflation rate for the Eurozone 19 Member States from January 2009 to April 2016 (blue bars) with the red price stability rule shown for ease of comparison.

Since December 2014, the Eurozone has been enduring deflation (that is, price levels falling) 41 per cent of the time (7 months out of 17) and a further 2 months where the HICP (price) level was on the cusp of deflating. So inflation was only positive in 48 per cent of the months since December 2014.

It is clear from the graph that the ECB hasn’t achieved outcomes close to its price stability charter over the last seven years (at least) and irrespective of all the other problems the Eurozone has at present, it is obvious that we would give the ECB a fail grade in terms of its own benchmarks.

It has failed to maintain price stability even on its own logic.

ECB_Price_Stability_Inflation_2009_April_2016

The fact that it is pumping something like 80 billion euros a month into bank reserves under its latest QE exercise as a strategy to push the inflation rate back up to around 2 per cent is a clear statement that they think their policy settings have failed.

The problem is that pumping up bank reserves will do very little for the aggregate inflation rate while economies are mired in stagnation in their real economies (production, employment etc).

Please read the following blogs – Building bank reserves will not expand credit and Building bank reserves is not inflationary – for further discussion.

Article 140 of the Treaty and Protocol No 13

Article 140 of the Treaty ion the Functioning of the European Union is straightforward enough.

It relates to how the European Commission Deals with nations that “are committed under the Treaty … to adopt the euro”.

It reads:

1. At least once every two years, or at the request of a Member State with a derogation, the Commission and the European Central Bank shall report to the Council on the progress made by the Member States with a derogation in fulfilling their obligations regarding the achievement of economic and monetary union. These reports shall include an examination of the compatibility between the national legislation of each of these Member States, including the statutes of its national central bank, and Articles 130 and 131 and the Statute of the ESCB and of the ECB. The reports shall also examine the achievement of a high degree of sustainable convergence by reference to the fulfilment by each Member State of the following criteria:

– the achievement of a high degree of price stability; this will be apparent from a rate of inflation which is close to that of, at most, the three best performing Member States in terms of price stability,

– the sustainability of the government financial position; this will be apparent from having achieved a government budgetary position without a deficit that is excessive as determined in accordance with Article 126(6),

— the observance of the normal fluctuation margins provided for by the exchange-rate mechanism of the European Monetary System, for at least two years, without devaluing against the euro,

— the durability of convergence achieved by the Member State with a derogation and of its participation in the exchange-rate mechanism being reflected in the long-term interest-rate levels.

….

The related Article 1 of Protocol (No 13), which gives operation to Article 140 in relation to the convergence criteria says that:

The criterion on price stability referred to in the first indent of Article 140(1) of the Treaty on the Functioning of the European Union shall mean that a Member State has a price performance that is sustainable and an average rate of inflation, observed over a period of one year before the examination, that does not exceed by more than 11⁄2 percentage points that of, at most, the three best performing Member States in terms of price stability. Inflation shall be measured by means of the consumer price index on a comparable basis taking into account differences in national definitions.

Note the use of the term “that is sustainable”.

The European Council has to consult with the European Parliament and then determine if any of the Member States “fulfill the necessary conditions on the basis of the criteria in paragraph 1 …”

So the “Convergence Reports examine whether the Member States satisfy the necessary conditions to adopt the single currency.”

This blog addresses the first of the criteria noted above:

the achievement of a high degree of price stability; this will be apparent from a rate of inflation which is close to that of, at most, the three best performing Member States in terms of price stability …

Both the ECB and the European Commission produce Convergence Reports under the Treaty.

The European Commission and ECB Convergence Reports 2016

The EC and ECB 2016 Reports are available as at June 7, 2016:

1. ECB Convergence Report 2016.

2. European Commission Convergence Report 2016

The ECB (and EC) methodology is as follows:

1. Calculate the annual percentage changes in the HICP for each monthly observation.

2. Average these monthly observations (annual inflation rate) over the period May 2015 to April 2016 which forms the reference period.

3. Select the three nations with the lowest ‘inflation’ rate, which might lead you to think that rate would have to be positive. You would be wrong. The lowest ‘inflation’ rate includes deflation. So in this era of deflation, The ECB and the EC were looking for the nations with the highest rate of deflation as their “best-performing Member States” according to Article 140.

4. Average the deflation rates of these three ‘superlative’ nations.

5. Add 1.5 percentage points to that result to come up with the benchmark for assessing the nations convergence performance to join the euro based on the ‘price stability’ criterion.

But hidden, pretty close to the surface of this arithmetical exercise is the ideology of the political elites that are destroying the prosperity of citizens within the European Union and the Eurozone, in particular.

Here are the empirics of the exercise.

The following graph shows those average annual inflation rates for the monthly observations in the reference period (columns). I will come back to the little green triangles shortly.

As you see, the three red columns, plunging well into the negative territory of the y-axis are Bulgaria (-1.0 average annual inflation rate), Spain (-1.6 average annual inflation rate), and Slovenia (-1.4 average annual inflation rate).

These nations form what the ECB and the European Commission judge as being their best-performing Member States

Eurozone_HICP_convergence_May_2015_April_2016

It is almost impossible to believe these technocrats are serious.

They try to make themselves look ‘scientific’ and real-world grounded by their decision to exclude Cyprus and Romania, which as you can see from the graph are seriously deflating.

The ECB wrote:

The inflation rates of Cyprus and Romania have been excluded from the calculation of the reference value. Price developments in these countries over the reference period resulted in a 12-month average inflation rate in April 2016 of -1.8% and -1.3% respectively. These two countries have been treated as “outliers” for the calculation of the reference value, as in both countries inflation rates were significantly lower than the comparable rates in other Member States over the reference period and this was due, in both countries, to exceptional factors. Cyprus has been undergoing an extraordinarily deep recession, with the result that its price developments have been dampened by an exceptionally large negative output gap. In Romania, the successive VAT cuts introduced recently are strongly affecting price developments, keeping HICP inflation in negative territory.

So, the good old Eurozone institutions remain up to their ‘arbitrary’ best. A special rule for this, an outlier for that!

The same deal that they gave Germany in 2003 when it should have been fined under the Stability and Growth Pact rules for on-going violation of the (ridiculous) 3 per cent fiscal deficit threshold.

The same deal they have recently given Spain which is running a fiscal deficit of 5.2 per cent or thereabouts. Brussels turned a blind eye to the PP government and allowed them to introduce an old-fashioned fiscal stimulus, which spawned the current growth spurt, because they knew an election was coming up late last year and didn’t want any pony-tailed politicians or, worse, communists, seizing power. They already have Portugal to deal with.

The same deal that has never seen a nation fined under the SGP rules.

“Exceptional factors” – the ‘out’ clause. How convenient.

Of course, they would have further exposed their idiocy if they had have used Cyprus and Romania as their benchmarks, so they thought that by excluding them their other ‘best-peformed’ deflating nations would look like representing a reasonable benchmark for their crazy assessments.

This outfit (the Eurozone institutions) is a joke! A vicious, venal joke, but a joke nonetheless!

What about those green triangles? Well they are the actual inflation rate between May 2015 and April 2016 – (taking the percentage difference between the two observations) and thus giving the latest result more importance in the assessment.

What you see is that the best-performing Member States have deflated much more than the averaging process indicates. We also see how widespread the deflation has come across all the Member States (shown).

The ECB claims that:

The average rate of HICP inflation over the 12-month reference period from May 2015 to April 2016 is reviewed in the light of the country’s economic performance over the last ten years in terms of price stability. This allows a more detailed examination of the sustainability of price developments in the country under review. In this connection, attention is paid to the orientation of monetary policy, in particular to whether the focus of the monetary authorities has been primarily on achieving and maintaining price stability, as well as to the contribution of other areas of economic policy to this objective.

So under that review they must have concluded that the central bank in Bulgaria has failed as badly as the ECB, itself has failed in the Eurozone.

A deflation rate of -2.5 per cent (Bulgaria over May 2015 and April 2016) is hardly close to a 2 per cent inflation rate, which is the price stability benchmark as espoused by the ECB.

I also note that the unemployment rate in 2015 for Bulgaria was 9.2 per cent, Spain 22.1 per cent, and Slovenia 9 per cent. The EU average was 9.4 per cent and the Eurozone average was 10.9 per cent.

The conclusion of the ECB was that:

All Member States except Sweden meet the price stability criterion.

That sinful inflationary Sweden! What did it do wrong?

Well its benchmark inflation rate between May 2015 and April 2016 was 0.9 per cent, which apart from Belgium and Malta (1.2 per cent) made it the closest nation (along with Austria – 0.9 per cent) to the ECB’s own definition of price stability (2 per cent).

The citizens of Sweden should be breathing a sigh of relief that they will not yet be allowed to join this exclusive club of deflationary nations.

Conclusion

The citizens of Britain might wonder what luck they have being able to vote next week on their on-going membership of this crazy (and failed) political construct (the European Union).

When policy becomes so distorted that nations with rampant deflation and elevated levels of unemployment (particularly youth) are held out as the “best-performing Member States” you know that reality has fallen off the cliff and neoliberal Groupthink is dominant.

You know that well-paid technocrats in nice offices in Brussels and Frankfurt have moved a few chess pieces and congratulated themselves on their genius without realising that those chess pieces are really millions of people without jobs and fast entering the growing ranks of the impoverished.

A reality check is needed! Groupthink thwarts that.

Britain has a chance. Get out now!

Paperback version of my Eurozone book now available

My current book – Eurozone Dystopia: Groupthink and Denial on a Grand Scale (published May 2015) – carries an on-line price of £99.00.

It is now available in much cheaper paperback form for £32.00.

Also the eBook is available 36.27 US dollars from Google Play or 61.45 Australian dollars from eBooks.com.

That is enough for today!

(c) Copyright 2016 William Mitchell. All Rights Reserved.

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    38 Responses to The European Commission and ECB outdo themselves in their quest for absurdity

    1. Andy says:

      It’s very close here in the referendum Bill.
      Corbyn now has to make the most difficult speech of his career I think.
      Needs to get the balance right so he can come out of this with some credibility if we do escape the EU.

    2. bill says:

      Dear Andy (at 2016/06/14 at 3:34 pm)

      I am not sure it is as close as you say. The polls are rigged I think. The bookmakers’ odds (where money can be lost or made) are currently (last time I looked) saying that Remain is almost twice as likely as Exit. Sadly, I think those odds are a more realistic guide to what the opinion polls are saying.

      Bad luck from the UK.

      best wishes
      bill

    3. Andy says:

      Look at the odds again Bill. Could be odds on Brexit by the end of the day.

    4. bill says:

      Dear Andy (at 2016/06/14 at 5:13 pm)

      They have certainly shortened towards Brexit in the last four days (when I last looked). Hope springs eternal and I am not even British!

      best wishes
      bill

    5. Bob says:

      Some of the propaganda has been beyond absurd in the referendum:

      http://www.reuters.com/article/us-britain-eu-tusk-idUSKCN0YZ0Q9

      “If Britons vote to leave the European Union in a June 23 referendum it could be the beginning of the end for the 28-nation bloc and for western political civilization more generally, European Council President Donald Tusk said.

      In an interview with German newspaper Bild, Tusk said a so-called Brexit vote would provide a major boost to radical anti-European forces who he said would be “drinking champagne”.

      “Why is it so dangerous? Because no one can foresee what the long-term consequences would be,” Tusk said. “As a historian I fear that Brexit could be the beginning of the destruction of not only the EU but also of western political civilization in its entirety.”

      Everyone in the EU would lose out economically if Britain left, Tusk said.

      “Every family knows that a divorce is traumatic for everyone. Everyone in the EU, but especially the Brits themselves, would lose out economically,” he said.

      The latest polls show Britons are almost evenly split over whether to stay or go.

      Although he expressed hope that the EU would survive in the event of a Brexit, Tusk said the price would be high.”

      End of western political civilization!

    6. Willem says:

      Madness. Even in Belgium where only the tax hikes on electricity have driven inflation. Where will it end?

    7. Woe says:

      Some decent people are worried about the prospect of a cemented-into-power Conservative Party without the EU’s modest environmental/consumer protections. It’s a point, isn’t it?

    8. larry says:

      Woe, yes it is a potential worry, especially with the current rich Thatcherite lot.

    9. CharlesJ says:

      Bill,
      I agree that the polls may be rigged. We saw in the run-up to the general election how wrong the polls were. I believe it was a deliberate attempt to cause Labour voters to be complacent and encourage Tories to vote. I think the same think is happening now with the referendum. My guess is that it is about 50/50.

      Kind Regards

    10. larry says:

      CharlesJ, my guess is 50/50 as well, especially after looking at the bookies’ odds this morning. Tusk, if he believes what he says, that the sky is going to fall in, belongs in a rubber room with a copy of Chicken Little. Bob’s incredulity is “on the money”. The collapse of Western civilization indeed. Schaeuble has threatened the English, Alex Salmond and other SNPers have threatened the English, the Irish are making noises, and Cameron doesn’t even believe in this referendum. He is only doing it to placate nutters on his own back benches. And the entire thing has backfired on him. They’re out to get him. There is no question that Bill is right that the EU is comprised of a set of dysfunctional institutions. And the Eurogroup is the worst of the lot. It doesn’t even have legal standing.

      But Charles, the Tories only have a 12 seat majority, not like the 144 Thatcher got in her second term. It is hardly a mandate, whatever they like to think and try to convince others to think. The front bench are a dangerous bunch for anyone who isn’t rich.

      The Times and Sunday Times, a Murdoch paper with the Sunday Times once great under the editorship of Harold Evans until 1981, has just sent round a notice that we have all heard both sides, now hear the facts. I don’t think so.

    11. larry says:

      It is my understanding that the referendum vote is not binding, only advisory. Parliament will have to vote on it. It seems that Cameron has set this up from the very beginning. Now, let us assume that the vote is for Leave, but Parliament fails to vote the result through. Cameron might be through, even though he might immediately get rid of his Outer front benchers. If this is the case, the cat will surely be among the pigeons.

    12. J Christensen says:

      If the result is to exit, the elite will most likely just start the campaign to reverse the outcome.

    13. Joel S. says:

      Hello Everyone, would someone please explain to me where the ECB sends the interest and principal payments that it receives on the securities that it holds? In the US, the Federal Reserve returns the surplus funds to the Treasury. While the ECB is similar to the Fed, there is no European equivalent to the US Treasury. I read up on the ECB on their website and also on their Wikipedia page, but I failed to find the answer.
      Thanks, Joel

    14. Will R says:

      CharlesJ and all.

      The dozens of Conservative MPs in marginal seats who are alleged to have committed electoral criminal overspending may explain the polls v results anomaly.

    15. Kevin Hardin says:

      Whilst I will be voting out it is with no enthusiasm and with no expectation of a progressive
      pay off.The political right will undoubtably be triumphant .

    16. Simonsky says:

      Bill-that’s a bit of a naive comment about the ‘debate’ in the UK which is so dumbed-down it’s barely above ground level. The Brexit camp is represented by the most vile bunch of racist rentier shysters on the planet and the IN camp is in cloud-cuckoo land about reforming the EU from within. What choice is that? You advise OUT but for us in the UK that could mean a worsening of the situation as the rest of the NHS is privatised and ‘internal devaluation’ goes on steroids and a TTIP deal is done with America. I suppose you could take a dialectical appraoch and swallow the worsening conditions with the hope of a resurgence of the Left with a Modern Money appraoch.

    17. CharlesJ says:

      Simonsky,
      The Tories will not threaten their very narrow majority in the commons by implementing harsh internal devaluation and other unpopular policies. They wont even need internal devaluation as the pound devalues anyway. They know that they will not get in at the next election unless the take a pragmatic approach IMHO.

      Kind Regards

    18. Simonsky says:

      CharlesJ-you might be right, I hope so but with a Labour Party that will have to rebirth itself the economic policies will still be the same. Even a devalued pound won’t stop wealth extraction and the sweating of assets and lack of infrastructure spending.

    19. larry says:

      Simonsky, the TTIP deal may not even pass the Congress and Merkel has turned against it, so it may not be passed in Europe either. though Obama has said that, in the effectively interregnum period, he will make a concerted effort to get it passed in Congress. He could succeed. But neither Clinton nor Trump are positive about the treaty.

      I think the debate is just about to get off the ground, but I would be loathe to say how far off. The better arguments for Remaining are not economic and the economic arguments on both sides are completely specious. Bill is quite right about that. The Treasury has effectively just made up its figures. But then, they have some form in this area. On Tuesday, we will see Osborne and Darling put forward the economic argument for Remaining. From what I have seen so far, this is going to be a discussion about fantasy.

      Schaeuble has already said that should Britain leave, they will be made to leave the single market. I think his track record suggests that he can actually make that happen. The arguments should be about reality rather than fantasy, about what you must leave behind should you vote Leave, since we all already know what will happen should we Remain. And it isn’t only the arguments about the economy that are specious. So are the arguments about sovereignty, for the most part, although some of the lost sovereignty has been to the benefit of the majority of the public. Hopefully, CharlesJ and Simonsky, the debate will become more realistic.

    20. larry says:

      I should have mentioned that Cameron has just ruled out discussing immigration, an issue that is exercising many in England, particularly in the NE, which was a Labour heartland. It is a self-selective survey, so one must be careful, but those who came forward to be interviewed in the industrial north are more worried about immigration than economics. Whether they need to be or not, they are, and thus Cameron, who is primarily responsible for this referendum, should discuss it.

    21. CharlesJ says:

      larry,
      The key economic argument for the immediate effects of departure are about how changes to our trading relationships affect potential GDP and therefore the output gap. Obviously both sides have completely ignored this. My own view is that I would tolerate some above target inflation if a larger part of government spending is committed to measures that will increase potential GDP in the longer term. I don’t expect any large inflation spike however.

      Kind Regards

    22. larry says:

      No one has taken up my remark that the government is not bound by the referendum result, that it can virtually ignore it or circumvent it in some way because it is only advisory, as this is the way that Cameron set the referendum up initially. Governments have done this in the past. A Cameron do-nothing tactic becomes particularly plausible if the result is on a knife-edge where both sides can accuse each other of some sort of perfidy. Is he capable of such fancy footwork? Would he have the nerve?

      If the government is not bound by the result and has no intentions of doing other than what the Cameron loyalist cabinet wants, then the entire exercise has been one in futility. Everyone has been acting as if the result will be binding. If it is not and all the effort and energy has been expended to no effect, I shudder to think what the consequence among the public might be. Infuriated might be a tame description. Incandescent might be a little better. On a knife-edge vote, he might have some leeway to finesse the result; but what if there is a small albeit clear majority vote for Leave?

    23. CharlesJ says:

      larry,
      Yes I am aware of all of that, but the ‘One Nation’ conservatives like Gove and Borris would not tolerate that and would have Cameron and Osborne removed. So the Tories themselves will deal with that issue in-house IMHO.

      Kind Regards

    24. Simonsky says:

      As has been pointed out in another blog, there still has to be a majority vote in Parliament for a change in the Primary Legislation relating to the EU – which could be problematic. What a mess -a complete avoidance of the real issues which should be:

      1) Housing Costs
      2) Job security and living wage
      3) Job creation
      4) Sustainable house building and house insulation
      5) Ending the ‘house as pension scheme’ asset bubble (Pigs might fly)
      6) Ending debt bondage for the young.
      7) Credit controls for banks
      8) Ending buy-to-let rentierism and foreign purchase of ‘assets.’

      the list goes on…

    25. Kevin Hardin says:

      A realistic assessment of the EU referendum here in the UK is reasonable fears vrs dubious hopes.
      I am on the dubious hopes side ( which I would have thought most MMT ‘iers with their positive
      vision for the future would also plump for) but I can certainly understand why reasonable fears both
      short term economic and political (the emboldenment of the political right and their pernicious dubious
      hopes) will sway many progressives to vote remain.Lets be clear neither fiscal stimulus or pursuing
      full voluntary employment is on the ballot paper.

      economic

    26. acorn says:

      Bill, would I be wasting my money paying to read this at Wiley Online? What is Quantile Cointegration?

      “US Fiscal Sustainability and the Causality Relationship between Government Expenditures and Revenues: A New Approach Based on Quantile Cointegration” Pei-Fen Chen

    27. Ajit says:

      On Brexit, almost all the left liberal media outlets have made it their mission to support Remain camp. They are doing their very best to peddle all sorts of myths, threats to convince the people that disaster is certain if people voted for Leave. Labour Party, Corbyn, Greens, Trade Unions, New Statesman, Guardian, Monbiot, plenty of leftists all doing their best to ensure people vote for remain.

      Look at this propaganda piece on LRB, by a certain Ferdinand Mount, an adviser for Thatcher, no less.

      http://www.lrb.co.uk/v38/n10/ferdinand-mount/nigels-against-the-world

      He even drags Putin to scare the voters. Just like during cold war the elites scared the people with talk like “Russians are coming & they are 10 feet tall”.

      One of the most ridiculous parts of the whole article is this gem.

      “Yes, Monnet and Schuman used devious means to chivvy the process along, but the end purpose was a worthy one: in return for a modest and ultimately retrievable (how else could we be holding this referendum?) sacrifice of day-to-day sovereignty and a piffling contribution from national revenues (the UK’s net contribution to the EU is well under one per cent of government spending), the nation-state would be able to hold up its head and bask in the sun again. ”

      He claims EU represents only a modest sacrifice of day to day sovereignty. But ECB writing threatening letters to Govt of Ireland and Spain about cutting off access to funds doesn’t sound like modest sacrifice of sovereignty. And on Greece, ECB turned off the liquidity and practically closed the banking system to make elected Govt to cave in to all demands. No negotiation.

      Underlying all the arguments in the Remain camp is the stupid idea that Nation State is dead & it should be replaced with some supra national institution like EU. It doesn’t occur to them that problem is inequality in power & wealth within Nation state, not nation state itself. They are gleefully giving up hard won sovereignty (control over their governments) to some distant institution in the irrational hope that it will somehow be democratic. They can’t ensure political & public control over their own national government & they are dreaming about democratizing even more complex EU.

      These people are living under the shadow of two world wars even now.

    28. larry says:

      Charles, the Outers may get rid of Cameron, though Osborne may be a bit harder, but it isn’t a sure thing that they have the votes to change what Cameron decides. It is not clear to me that they do. They can do what they like within their own party, but that won’t necessarily translate to the wider Parliament. Boris has blotted his own copy book to a certain extent — he’s no longer seen as quite the bumbling fool that he likes to pretend he is. Some people in the mainstream media have even compared him to Trump. So, how much sway he will have seems to me an open question.

    29. Matt says:

      Bill,

      Voting leave is not an easy choice for progressives and MMTers in the UK. Both sides are represented by rabid neoliberals. The choice on the ballot is not EU/austerity vs full employment/fiscal stimulus. The real problems outlined by Simonsky above have not had a look in. I’m not surprised swathes of working class people in ex-industrial towns and cities are furious. It’s just a shame the real culprits have been able to deflect the blame so successfully (yet again).

      We’re not Greece or Ireland or Spain. The UK is already a sole currency issuer, we could already be doing most of what we’d like to see done. Emboldening the right and losing our workers’ rights is the nightmare scenario. After Gideon’s promise today of cuts and tax hikes post-Brexit I can’t help worry it’s been a double bluff all along. Strip us of all protections and get to work ‘re-balancing the books’ using Brexit as the scapegoat. “We told you so, you left us no choice” will be the mantra.

      I’m not pro-EU. I’m not against leaving, I just don’t trust the motivations of those leading us towards exit.

    30. Alex Hanin says:

      According to well informed sources, Brexit could trigger terrifying nuclear incidents in Japan, a crash of the dollar (with ensuing hyperinflation), a military coup in Zambia, daily terrorist attacks all over Europe, and the death of the recently born panda in Belgium.

      I don’t want the panda to die. I’ll vote ‘remain’.

    31. /L says:

      Employment rate in Bulgaria 48 %. A poverty stricken country that is on the World Banks map of countries where there are people that live on $2/day (PPP dollar). Anyhow all the eastern EU members is on the map.
      An ageing society that have merely 48 % of people in working age in some sort of “working” activity, at least some hours a week. A country with enormous development needs and way more than half of the working age population is idle.
      Bulgaria became EU member 2007, almost nine years ago, its 26 years since “the wall” came down.
      One could compare what was achieved in Western Europe from 1945 to 1970 with “Keynesian” full employment policies, albeit “strangled” with BW “gold standard”.

      The EU elite has gone beyond madness, Brussels have become an asylum.

      the end of civilization
      “As a historian I fear that Brexit could be the beginning of the destruction of not only the EU but also of western political civilisation in its entirety.”
      Donald Tusk – President of the European Council

    32. Kevin Hardin says:

      There are reasons to be scared recessions in the US and the U.K. are likely due to fiscal
      drag .Historically major financial busts are on a longer cycle but with such a weak recovery
      from 2008 ,no major reform of banks too big to fail, who can say what potential derivative risks,
      additionally. in the Uk there is a housing bubble another financial meltdown to go with a
      recession can not be ruled out.
      The historic abandonment of ‘the left’ from economic alternatives could increasingly deliver
      working class support to nationalist populist parties wihich are not historically benign .
      Mr Tusk has some legitimate fears but cannot understand he is part of the problem.
      How does groupthink learn from the consequences of its own failures?
      National sovereignty or pooled soveirgnty both beg the question power to do what?
      I will vote out in the hope that national sovereignty will be easier to change direction that
      the political will(of both the electors and elected) will be less dissolute but it is a reasonable
      fear that change will be in the wrong direction.

    33. James says:

      “Some decent people are worried about the prospect of a cemented-into-power Conservative Party without the EU’s modest environmental/consumer protections. It’s a point, isn’t it?”

      Sorry, but I’d have to say that it isn’t a point. It’s a deliberate distortion – by the political parties, not by you :-) – to hijack the referendum for party political purposes, and get people to vote to ‘remain’ based on anxiety. That’s not what a referendum is meant to be for.

      The referendum is about self-governance as a nation under representative democracy (flawed though it is) versus governance as a new entity at the continental level based on technocracy, placing democratically-elected representatives lower down the system than the technocrats.

      It is above and beyond choosing which policies you’d like for the NHS etc. This isn’t an election. To treat it as one is a massive twisting of reality and a dangerous wasting of an extremely rare opportunity to decide how the nation is governed: we are voting for or against a particular system of government, not a particular colour of party political government, not a set of policies or policy options.

      As for the EU’s supposed protections of the environment and such like, they’re a shameful myth. The EU is a menace to the environment. We could start with the Common Fisheries Policy, and continue into so-called ‘green’ policies which the EU uses as a lever, motivated by its desire for power over nations. The idea that the EU is concerned with the environment, or workers’ rights, or the NHS, or any of those things, is risible and doesn’t stand up to scrutiny of the evidence. The EU is concerned with accruing power to itself, preferably without recourse to the people for their permission. It now has the power to remove prime ministers from office. If that’s what you want it to have, then vote to ‘Remain’.

      “Voting leave is not an easy choice for progressives and MMTers in the UK.”

      I disagree. Everyone I know is both of those things and made up their minds about the EU a long time ago. How much evidence do you need? We’ve had decades of it.

      “Both sides are represented by rabid neoliberals.”
      ” I just don’t trust the motivations of those leading us towards exit.”

      Ah, I see, your attention is taken up with the people involved, rather than the EU itself. You’re making a decision based on the media’s theatrical presentation of personalities and party political shenanigans. You’re not focusing on the EU, the UK, etc. This referendum is about two systems of government, and which you want to be governed by. You’re not being asked to vote in a popularity contest based on people; you’re being asked to assess something fundamental about the systems themselves. You’re not being led – we, the people, are leading. That’s what a referendum does. We are in the driving seat. The politicians are attempting to distract you from your leadership position. Looks like it’s working. Is that what you want?

      “The choice on the ballot is not EU/austerity vs full employment/fiscal stimulus.”

      You’re treating this as an election based on economics. Sorry to be blunt, but you’re making a mistake. There is nothing economic on the ballot paper because this is not about economic policies, or any other policies. Even if you would prefer it to be about economic policies so that you could make your decision based on your subject of interest, I’m afraid it isn’t, and I’m afraid that nor should it be; this is about how we are governed, not how our economy is run. I realise this is an economics blog but not everything in life is about economics. There is more at stake here than MMT or Neoliberalism or any other economic schools of thought. Do you want the EU’s system of government? If so, vote to ‘Remain’, if not, vote to ‘leave’.

    34. James says:

      I want to add, that voting to ‘Remain’ will ensure that the very thing people complain about will continue:

      When we vote in a UK election, we complain that we get the same policies no matter who we choose. One of the reasons for that is the EU.

      The UK’s economic, fiscal and monetary policies are harmonised via the EU. The British public could vote in someone radical, for instance, someone who would implement MMT, but because the EU as a whole is not interested in MMT then the UK would never be able to implement it.

      Even if you voted in MMT-supporting governments across a majority of the EU’s member states – which is obviously a fantasy of epic proportions – they would have to undo all parts of the treaties binding them to neoliberalism and rule by bankers and start all over again, before they could implement MMT. Is that likely to happen if you vote to ‘Remain’? If you vote to ‘leave’ you will maintain a system of government based on electing people to take forward policies you want to have, but if you vote ‘remain’ you will maintain a system of overriding policy choices in favour of centralised technocrats being above your elected representatives.

      The EU is an impediment to MMT. Its system of government is part of what thwarts the public’s electional choices when they attempt to choose different policies or go in new directions. We’ve seen this time and again. ‘Elections change nothing’, they say. They’re not lying. And all some want to do is, just like in 1975, vote based on three people who will come and go. The EU outlives and outlasts them all. That’s its purpose – to enshrine fixed policies that politicians can’t touch. Which means that the people can’t touch them either. People quite rightly distrust politicians, but for some reason they trust technocrats working in the EU. Trusting the EU to sort out your politicians for you is a very dicey game. In short, the EU appeals to people’s instinctual anxieties about democracy. Vote for the EU on the 23rd if you’re so inclined. I’ll be voting to end our allegiance to supranational and technocratic government and I’ll be very happy to do so as a progressive and as a fan of MMT.

    35. Punchy says:

      What a howling mess. More proof the smartest guy on the planet is Dumb and the rest of us just different shades of dumber.
      The protected class with your secure jobs and super pretending you are independant from the 1% of wealth controllers are bound to keep the status quo going for as long as possible. The 1% control the politicians who in turn control the Protected class. (No wonder both sides of Politics hate Trump. He cant be controlled by the 1%, so they will shoot him.)
      If I was part of the protected class I would do the same. Society has become every person for themselves. So grab what you can to support your family. Be warned. The unprotected class with our part time jobs or week to week job security will eventually take you down one way or the other. Why should we put up with the protected class making rules for us to live under? The protected class are looking down on us from on high then looking up to their masters in despair. Can the protected see the end coming? Sure they can and they are fighting to avoid it. The protected class killed the Roman Empire. Nothings changed.
      If Brexit happens the Brussels protected class must make sure the UK suffers. If UK does well after Brexit then Brussels will Fall. Meanwhile the 1% are starting to loose control of the protected class and their masters.
      Don’t be too upset you just found out you are dumb. In a 1000 years there could be a smart version of yourself studying your stupidness just for fun. So try not to be fooled by your own educated arrogance. If any two of you get together to make rules for us to live by its likely to be OK. Add a third dummy and the mess starts. Add a whole City of Brussels protected dummies and you get the EU.
      Anyway if it all turns to poop we will rediscover who really has the last word. The Generals in the armed forces.
      Just ask a Thai.
      Cheers Punchy

    36. Robert says:

      Bill

      “The same deal that has never seen a nation fined under the SGP rules”

      Was not Portugal fined – at the insistence of, especially, Germany – for failing to meet the criteria? If I remember right this happened before it became known that Germany itself along with France – the two principal instigators of the GSP – was going to infringe the very same regime they had insisted in getting incorporated into the EZ rules and had demanded be enforced upon the wretched Portugese. When it became known that they themselves were going to fail to fulfil their own criteria both countries brazenly trumpeted that they had not the slightest intention of complying with any demand the Commission might make that they swallow the same medicine as they had prescribed for everyone else – because THEY were far too important and anyway “exceptional circumstances” applied in their cases. Brussels of course caved in.

      If I’m right your criticism of their and the Commission’s behaviour is not nearly severe enough. In fact it’s difficult to come up with language sufficiently condemnatory to match the heinousness of their offence. “Breathtakingly cynical”, “mendacious”, “unscrupulous” come to mind among others but seem inadequate.

    37. Robert says:

      “On Brexit, almost all the left liberal media outlets have made it their mission to support Remain camp. They are doing their very best to peddle all sorts of myths, threats to convince the people that disaster is certain if people voted for Leave. Labour Party, Corbyn, Greens, Trade Unions, New Statesman, Guardian, Monbiot, plenty of leftists all doing their best to ensure people vote for remain.

      Look at this propaganda piece on LRB, by a certain Ferdinand Mount, an adviser for Thatcher, no less.”

      Interesting to learn that this “adviser for Thatcher, no less” now stands revealed as having been a closet ‘leftist’ all along! Will wonders never cease?

      “These people are living under the shadow of two world wars even now”.

      Now that, at least, is undeniable. I am, and so might you (justifiably) be if you had lived through one. But even if you haven’t you can scarcely be unaware of what their consequences were. For me it always was of paramount importance that – however shoddy the political jockeying and however transparent the naked pursuit of sectional interests might sometimes be – over-arching everything was an idealistic political vision: to so bind together the former warring states of Europe that war between them would forever become inconceivable.

      Nothing will convince me that this was other than a noble aim or that I was wrong to vote for it. Beside it all the petty squabbling and back-biting now going on, the sheer little-mindedness being displayed, is puerile.

      And let’s be clear: Bill’s virulent hostility to the EU is an expression of a particular, partisan, political outlook. Nothing wrong with that – we’re all engaging in polemics in varying degrees; but let it not be mistaken for olympian detachment.

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