Category: Political Economy
Fed Chairman Bernanke, Gold and the Gold Standard
In yesterday’s lecture, Federal Reserve Chairman rejected the idea that a return to a gold standard is desirable or practical. His pointed remarks come as Republican presidential candidate Ron Paul has fanned ideas in some quarters of the benefits of the discipline of a gold standard. Previously the outgoing World Bank head Robert Zoellick had also advocated a return to a gold standard. In addition, there have been press reports suggesting that some central banks have recently stepped up their purchases of gold for monetary (reserve) purposes
On Spain, Spanish banks and Spanish local elections
The LTROs may have helped ease this year’s roll-over risk (Spain has met almost 50% of this year’s refinancing needs). But they have not substantially altered the market’s views of the risks of an eventual restructuring
(Re) Occupy Greece
Germany and Papademos have ended Greece’s political sovereignty, but Greece gave up its economic sovereignty long ago when it adopted the euro. Two aspects of national economic sovereignty were inherently lost with nations that gave up their own currency and adopted the euro. A member nation could no longer have a monetary policy and it could no longer revalue its currency. The designers of the euro required a measure sharply curtailing the member nations’ remaining economic sovereignty. The demand that the euro nations surrender the last vestige of their economic sovereignty was deliberate. The euro’s designers viewed national economic sovereignty as the gravest threat to the euro’s success. Their great fear was that inflation could lead to a weak euro, so they adopted the “Stability and Growth” Pact to sharply limit the member states’ ability to control their fiscal policies. The Pact forbade member nations from running material budgetary deficits even during a severe recession or depression
On the Greek default and easy money from the ECB
Here is a video of my latest appearance on Capital Account with Lauren Lyster. We spoke specifically about the situation in Europe; and that means Greece in the first instance. We also talked a lot about the ECB’s LTRO program which I see as a back door sovereign monetisation scheme as much as a bank liquidity program
Model on food prices and social unrest predicts crisis in 2013
The people at NECSI sent me the following interesting blurb on the relationship between rise food prices and social unrest
Dutch Treat: More on a Possible Maastricht Breach by the Netherlands
Developments in the Netherlands may steal the limelight as the French election is still more than a month away. The key issue in the Netherlands is that last week, the Dutch Bureau of Economic Policy Analysis warned that next year’s deficit will exceed the 3% target. This has the potential of triggering a political crisis. The overshoot is going to require more austerity measures and the governing coalition may not survive
Is Germany about to lose its best friend?
Will Germany lose its best friend in the Upright Brigade? And if so, will this encourage Greece, Portugal, Ireland, Italy and Spain etc. to question Germany-encouraged austerity policies? Spain’s prime minister has already said that the country will not meet its deficit target this year — and that he’s not too bothered about missing it, either! On the question of austerity, Germany is looking more isolated these days. Will it soften its stance and help provide a bullish case for Europe
The Tragedy that is Spain
The devolution in Spain is particularly troubling. The new fiscal compact had just been signed last week, which includes somewhat more rigorous fiscal rule and enforcement, when Spain’s PM Rajoy revealed that this year’s deficit would come in around 5.8% of GDP rather the 4.4% target. This of course follows last year’s 8.5% overshoot of the 6% target. The problem that for Spain is that the 4.4% target was based on forecasts for more than 2% growth this year. However, in late February, the EU cuts its forecast to a 1% contraction. This still seems optimistic. The IMF forecasts a 1.7% contraction, which the Spanish government now accepts
Right-wing political extremism in the Great Depression
The enduring global crisis is giving rise to fears that economic hard times will feed political extremism, as it did in the 1930s. This column suggests that the danger of political polarisation and extremism is greatest in countries with relatively recent histories of democracy, with existing right-wing extremist parties, and with electoral systems that create low hurdles to parliamentary representation of new parties. But above all, it is greatest where depressed economic conditions are allowed to persist
The Giant 21st Century Asset Grab
The financial plan is basically an asset grab. They want to load the whole economy down with debt. A consumer will come in and say, I’d like to take out a loan. They’ll say, how much do you earn? Everything over subsistence they’ll want as a loan
MMT for Austrians
We (also) do not want black helicopters flying around dropping bags of cash; and we (also) oppose government “pump-priming” demand stimulus—the libertarians and Austrians and even Milton Friedman are correct in their argument that this would generate inflation. Come to think of it, MMTers have more in common with Austerians than with “military Keynesianism” that supposes that high enough spending on the defence sector will cause full employment to “trickle down”. Most MMTers believe we’d get intolerable inflation before the jobs trickle down to Harlem. But can we “afford” full employment
A Primer on the Euro Breakup
In this piece Variant Perception looks at the mechanics of a currency breakup and how it would happen. This piece is longer than most of their pieces and is a slightly more wonkish piece than usual, but the first two pages provide a summary of the entire piece