Britain should reject the Brexit ‘agreement’ but proceed with the exit

It is Wednesday, and only a short blog post beckons today. I have restrained myself from commenting on Theresa May’s unbelievable Brexit deal, which has the dirty paws of the European Commission all over it. Regular readers will know that if I had have been a voter in Britain in June 2016, I would have resolutely and happily voted in favour of Brexit. And if I was a British Parliamentarian now I would vote to reject the ‘deal’ and force the Brexit on British terms. I will write a little more about that in a further post. But today, I just want to pass comment on the extraordinary UK Guardian article from Phillip Inman – A leftwing UK post-Brexit is as likely as a socialist Rees-Mogg (November 24 2018) – which summarises the problem quite well. I say ‘well’ because it illustrates the progressive surrender that has allowed the neoliberal era and monstrosities like the European Union to persist. You can see it all over the place – surrender that is. The Democratic obsession with Paygo in the US. The British Labour fiscal rule in Britain. The ‘we will have a bigger surplus’ boast from the Australian Labor Party, when there is around 15 per cent underutilised productive labour. Inman’s article is encouraging the Left in Britain to lie down and surrender to the dictates of the neoliberal, corporatist machine that is the EU. It presents an impoverished vision of the future and a disgustingly vapid depiction of the possibilities that a truly progressive British Labor government could achieve once it jettisons the neoliberal frames.
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    Posted in Britain, Capital controls, Demise of the Left, Fiscal Statements, Framing and Language, Politics, Reclaim the State, UK Economy | 24 Comments

    The ‘fiscal contraction expansion’ lie lives on – now playing in Italy – Part 2

    This is the second and final part in my discussion about the latest attempts by the IMF and notable New Keynesian macroeconomists to keep the ‘fiscal contraction expansion’ lie alive. The crisis in Italy is once again giving these characters a ‘playing field’ to rehearse their destructive ideas that rose to prominence during the worst days of the GFC, when the European Commission and the IMF (along with the OECD and other groups) touted the idea of ‘growth friendly’ austerity. Nations were told that if they savagely cut public spending their economies would grow because interest rates would be lower and private investment would more than fill the gap left by the spending cuts. History tells us that the application of this nonsense caused devastation throughout, with Greece being the showcase nation. The damage and carnage left by the application of these mainstream New Keynesian ideas are still reverberating in elevated unemployment rates, high poverty rates, broken communities and increased suicide rates, to name a few of the pathologies it engendered. In their article – The Italian Budget: A Case of Contractionary Fiscal Expansion? – Olivier Blanchard and Jeromin Zettlemeyer, from the Peter Peterson Institute for International Economics continue to argue the case for austerity in Italy as the only way to engender growth. In this second part of my analysis of their argument I show that there is little evidential basis for concluding that Italy is a special case. I argue that imposing fiscal austerity on Italy will turn out badly. The broader conclusion is that the mainstream economics profession has learned very little from the GFC. For them the story stays the same. It is one that we should reject in every circle it arises.
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      Posted in Central banking, Eurozone, Fiscal Statements | 9 Comments

      The ‘fiscal contraction expansion’ lie lives on – now playing in Italy – Part 1

      Pathetic was the first word that came to mind when I read this article – The Italian Budget: A Case of Contractionary Fiscal Expansion? – written by Olivier Blanchard and Jeromin Zettlemeyer, from the Peter Peterson Institute for International Economics. Here is a former IMF chief economist and a former German economic bureaucrat continuing to rehearse the failed ‘fiscal contraction expansion’ lie that rose to prominence during the worst days of the GFC, when the European Commission and the IMF (along with the OECD and other groups) touted the idea of ‘growth friendly’ austerity. Nations were told that if they savagely cut public spending their economies would grow because interest rates would be lower and private investment would more than fill the gap left by the spending cuts. History tells us that the application of this nonsense caused devastation throughout, with Greece being the showcase nation. The damage and carnage left by the application of these mainstream New Keynesian ideas are still reverberating in elevated unemployment rates, high poverty rates, broken communities and increased suicide rates, to name a few of the pathologies it engendered. But the ‘boys are back in town’ (sorry Thin Lizzy) and Blanchard and Zettlemeyer are falling in behind the IMF and the European Commission against the current Italian government by demanding fiscal cutbacks. It will turn out badly for Italy if the government buckles under this sort of pressure. It once again shows that the mainstream economics profession has learned very little from the GFC. For them the story stays the same. It is one that we should reject in every circle it arises. This is Part 1 of a two-part analysis of the latest incarnation of this ruse my profession inflicts on societies.
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        Posted in Eurozone, Fiscal Statements, IMF | 15 Comments

        The Weekend Quiz – November 24-25, 2018 – answers and discussion

        Here are the answers with discussion for this Weekend’s Quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of modern monetary theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.
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          Posted in Saturday quiz | 5 Comments

          The Weekend Quiz – November 24-25, 2018

          Welcome to The Weekend Quiz. The quiz tests whether you have been paying attention or not to the blog posts that I post. See how you go with the following questions. Your results are only known to you and no records are retained.
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            Posted in Saturday quiz | 4 Comments

            Japan still to slip in the sea under its central bank debt burden

            President Trump banned a CNN reporter only to find his position overturned by the judicial system. Well CNN is guilty of at least one thing – publishing misleading and alarmist economic reports about Japan. In a CNN Business article last week (November 13, 2018) – Japan’s economy has a $5 trillion problem – readers were told that the Bank of Japan has no “dwindling options to juice growth if a new crisis hits” because “it’s now sitting on assets worth more than the country’s entire economy”. The real story should have been that the Bank of Japan continues to demonstrate the categorical failure of mainstream macroeconomics and, conversely, ratify the core principles of Modern Monetary Theory (MMT). That is what the Japanese experience since the early 1990s tells us. And all the stories about special cases; cultural peculiarities, closed markets, etc that the mainstream economists wheel out when another one of their predictions about how Japan is about to sink into the sea as a result of its public debt levels, or that interest rates are about to go through the roof because of the on-going and substantial fiscal deficits; or that inflation is about to accelerate because of the massive monetary injections; and more, are just smokescreens to divert our attention from the poverty of their analytical framework. The Japanese 10-year bond trade is called the ‘widow maker’ because hedge funds who try to short it lose big. The Japanese monetary system is my real-time, non-linear economic laboratory which allows all the key macroeconomic propositions to play out live. And MMT is never very far off the mark. Try juxtaposing New Keynesian theory against Japan – total dissonance.
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              Posted in Central banking, Japan, Politics | 43 Comments

              Eurozone fiscal rules bias nations to stagnation – exit is the remedy

              It is Wednesday and I am doing the final corrections to our Macroeconomics textbook manuscript before it goes off to the ‘printers’ for publication in March 2019. It has been a long haul and I can say that writing a textbook is much harder than writing a monograph not only because the latter are more exciting in the drafting phase. The attention to detail in a textbook that runs over 600 pages is quite taxing. Anyway, that is taking my attention today. I also plan to write some more about Brexit in the coming weeks and Japan (tomorrow). But today, I have updated some ECB data on household and corporate borrowing and the cost of borrowing to see what sort of recovery is going on. With nations such as Germany now recording negative growth in the third-quarter, it is clear that the Eurozone is stalling again. The explanation doesn’t require any rocket science. It is all there in the behaviour of the non-government sector (saving more overall) and fiscal rules that are too tight to offset that saving desire. The reliance on monetary policy is an ineffective tool to provide the offset in non-government saving overall. Fiscal policy has to be reinstated to the primary position and that means nations such as Italy must consider exiting the dysfunctional monetary union that biases nations to recession and stagnation.
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                Posted in Central banking, Eurozone, Fiscal Statements | 26 Comments

                The flexibility experiment in Portugal has largely failed

                Portugal has been held out by the Europhile Left as a demonstration of how progressive policies can manifest in the European Union, even with the Fiscal Compact and the Stability and Growth Pact (SGP). In 2015, after the new Socialist government took over with supply guarantees from the Left Bloc (Bloco de Esquerda) and the Portuguese Communist Party (PCP) and The Greens (Partido Ecologista “Os Verdes”), it set about challenging the austerity mindset that has blanketed the European continent in stagnation. Things improved in 2016 with increased government spending. But by 2017, the European Commission had reasserted its austerity mindset and the supposed flexibility that the Left were hoping and which Portugal had briefly embraced in 2016 was gone. And we learned that the neoliberal bias of the Eurozone and its fiscal rules dominates any progressive ambitions that a nation state might entertain. Another blow for the Europhile Left. The lesson: start looking at and supporting exit if you are truly serious about restoring a progressive policy agenda in Europe.
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                  Posted in Demise of the Left, Eurozone, Reclaim the State | 3 Comments

                  EU Services Notification Directive will undermine democracy within cities

                  In a blog post last week – Financial services agreements – the EU as a neoliberal, corporatist project (November 13, 2018) – I wrote about the way the EU compromised the capacity of elected Member State governments to advance the well-being of their nations by the way they negotiate trade arrangements in services, particularly with respect to the financial services sector. For all those Europhiles that regularly deny the core agenda of the EU is to compromise democratic outcomes in favour of capital, that analysis, alone, should be sufficient to discourage those thoughts. Of course, that isn’t the only manifestation of this neoliberal, corporatist bias in the way the EU has developed over the last decades. I mostly conduct my analysis at the macroeconomic level but I am also interested (as my publication record demonstrates) in urban and regional analysis. At the level of the European city, the EU is behaving in the exactly the same way – to curb that ability of city authorities to render their cities favourable environments for the residents who live there.
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                    Posted in Britain, Eurozone, Politics, Reclaiming community, UK Economy | 11 Comments

                    The Weekend Quiz – November 17-18, 2018 – answers and discussion

                    Here are the answers with discussion for this Weekend’s Quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of modern monetary theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.
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                      Posted in Saturday quiz | 14 Comments