Central banks should just write off all their government debt holdings

The tensions in the public policy debate between economists is intensifying and on show in Europe, where these sort of obvious conflicts between adherence to dogma and a recognition that ‘out-the-box’ solutions are not only possible but preferred. More of these latter thought offerings are starting to appear as more people come to understand that the mainstream dogma has become more of a security blanket for reputations rather than saying anything about reality. One such proposal emerged last week in the form of a letter to the major European newspapers signed by more than 100 economists and politicians calling for the ECB to write-off its massive public debt holdings, which currently amount to around 25 per cent of total outstanding public debt. It is a good idea but some of the framing leaves a lot to be desired. At any rate, central banks everywhere should be buying up massive amounts of government debt and hitting the keyboard with zeros and writing it off. The world would be a much better place if they did that.

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A very dangerous variant of the global virus is spreading again after being subdued throughout 2020

There is a new variant of the global virus spreading again after being subdued throughout 2020. This is a very dangerous variant and if it takes hold will guarantee massive human suffering, and, a further, substantial shift in national income towards the top-end-of-town. I refer to the creeping infestation that is starting to pop up claiming that austerity will be required to pay for all the “profligacy” associated with government approach to the pandemic. I have seen this virus in the wild and it is creepy and being spread by those who seem to want to gain attention as time passes them by. Overheating threats, austerity threats – it is all part of the economics establishment trying to remain relevant. A vaccine will not work. They need to be permanently isolated.

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European Union – no democracy, no rule of law, no solidarity, no human rights, no economic miracle!

On Monday (February 1, 2021), I wrote about recent developments in the EU, which make it hard to argue that it can be reformed in any way that would deliver progressive outcomes. There was also a good article in the London Review of Books (January 7, 2021) – Ever Closer Union? – by veteran British author Perry Anderson, which, while long, is worth reading if you somehow still think the EU is a haven for democracy and progressive potential. It provides a massive body of evidence that reinforces the view I presented in my 2015 book – Eurozone Dystopia: Groupthink and Denial on a Grand Scale (published May 2015). It amazes me that the EU is held out as something progressives should aspire to be members of.

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It’s hard to conceive of anything the EU could manage properly

Since Britain left the European Union, the Remainer Woke Brigade (RWB) has associated every little bit of bad news that has been published about that nation to the decision to leave the EU. Op Ed articles, Tweets and the like. All scathing of the decision, indicating a failure to accept the democratic volition of the 2016 Referendum. They lost. They can’t get over it. But in the last few weeks there has been an extraordinary silence from this media ‘traffic’. It is of no surprise to me that this should be so. Their beloved EU has been demonstrating across multiple fronts why no sensible nation would want to be part of it bungling and dysfunctional membership. I also admit that I have been astounded how bad things have become under this European administration. Britain did the right thing in getting free of it even though its political scene is not yet capable of dealing with the new scope it now has. But the events of the last few weeks in Europe have been nothing short of breathtaking in their hypocrisy, incompetence and venality. The cosmopolitan progressive set have surely now realised that their dreams of pan-national workers paradise led by Brussels is just a figment of their own imagination.

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Comical claims by mainstream economists that the facts have changed

Last week, I wrote this blog post – OECD is apparently now anti austerity – warning, the leopard hasn’t changed its spots (January 12, 2021) – which warned against accepting the idea the growing number of mainstream economists, who were now advocating fiscal dominance, was evidence of a fundamental shift in New Keynesian thinking about macroeconomics. The reality is that they haven’t really shifted much at all and Max Planck’s postulate that paradigms shift one funeral at a time remains true. There are very few cases where the senior members of a dominant paradigm, voluntarily abandon their views when the evidence becomes overwhelmingly against them. They iterate, they declare ad hoc anomalies, they try to voice ideas that a new rival paradigm is articulating which resonate better with the data. This sort of strategy is common across academic disciplines which are under assault from a combination of poor predictive performance (data incongruity) and the arrival of a more convincing alternative paradigm. It is in full swing in macroeconomics now. But don’t believe these characters are suddenly accepting Modern Monetary Theory (MMT) and realising their previous belief system was never a sound way of characterising our fiat monetary systems. If you dig you discover these characters remain charlatans and will do almost anything to maintain their status as the dominant economists.

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OECD is apparently now anti austerity – warning, the leopard hasn’t changed its spots

In the last week, we have heard from the Chief Economist at the OECD (Laurence Boone), who has been touted on social media as offering a fundamental shift in economic thinking at the institution towards fiscal dominance. This is an example of a series of public statements by various New Keynesian (that is, mainstream macroeconomists) who are apparently defining the new macroeconomics of fiscal dominance. The point is this. Within the mainstream macroeconomics there was always scope for discretionary fiscal intervention under certain conditions. The conditionality is what separates their version of the possibilities from those identified and explained by Modern Monetary Theory (MMT). Just because these characters are coming out of their austerity bunkers to scramble to what they think is the right side of history doesn’t mean their underlying economics has changed. If you dig, you will find the same framework in place, just nuanced a little to suit the times. But the leopard hasn’t changed its spots. The underlying train wreck is still there and will be rehearsed again at some future date unless we push forward in abandoning the whole New Keynesian approach.

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Britain is now free of the legal neoliberalism that has killed prosperity in Europe

So Britain finally became free – sort of – from the European Union last week. I haven’t fully read the terms of the departure but the progress I have made so far in the text (several hundred pages) leads me to conclude that Britain has not gone completely free from the corporatist cabal that is the European Union. The agreement will see a Partnership Council established which locks Britain in to an on-going bureaucratic process dominated by technocrats – the sort of things the EU revels in and gets it nowhere. Overall, though, despite all the detail, Britain’s future policy settings will be guided by its polity and resolved within its own institutions. That means that the Labour Party has the chance to really push a progressive agenda. I doubt that it will but there are no excuses now. Which brings me to look at some data which shows how the fiscal rules imposed by the European Union, particularly in the 19 Member States who surrendered their currencies, have constrained prosperity and worked against everything that citizens were told.

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Europe’s neoliberal DNA is still at work

Many progressives are claiming that the EU has seen the light as evidenced by their relaxation of the harsh Stability and Growth Pact rules during the pandemic. There are even papers coming out advocating a ‘Post Third Way’ revival of social democratic forces in Europe to further integrate and reorient it along the lines of the social Europe narratives. I think this enthusiasm misrepresents what is going on in Europe at present. The hard-core, neoliberal DNA has not morphed. There has been no relaxation of the SGP rules given that a thorough knowledge of the legal basis of the Pact shows that there is scope in the rules for what is going on at present. Further, there is evidence that even though the temporary provisions in the SGP are being exercised, the European Commission is resorting to blackmail by imposing conditionality on Member States who want access to the stimulus funds. It seems that to get the funds, Member States have to fast track structural reforms, which means the stimulus funds are not stimulus funds at all, but, rather offsets, partial or otherwise, for the damage that cutting pensions etc will cause. Europe’s neoliberal DNA is still at work!

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ECB operations are like the wild west and beyond democratic legitimacy

I read a very interesting study by two Dutch academics last week – The ECB, the courts and the issue of democratic legitimacy after Weiss – which will be published in the Common Market Law Review (Vol 57, No 6, 2020). It examines the way in which the ECB operations and policy interventions have gone way beyond their original conception in the Maastricht Treaty and now conflict with democratic accountability. While the authors propose ways to address the democratic deficit, I am sceptical. Essentially, there needs to be a fundamental change in the Treaty and the establishment of a federal fiscal capacity embedded into a genuine European government. But then pigs might fly!

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A video, papers to be read and a song

It’s Wednesday and so only some snippets today. First, a video of a seminar I participated at the other day where we talk about the future of Europe (and the World). Second, some working papers that might be of interest. And finally a music segment. I felt like posting the 1980s song from The Vapors – Turning Japanese – after the Reserve Bank of Australia announced yesterday they were now modelling their monetary policy interventions of the excellent template that has been pioneered by the Bank of Japan. You know get the government to buy all of its debt – then pay itself back – then remit the payments as ‘dividends’ back to itself. Right pocket meet Left pocket. I will analysis the big shift in the RBA’s position tomorrow. And when you listen to the RBA Governor this morning trying to tell Australians that black is white when we all know it is black and they have let the cat out of the bag, you will realise why the whole hysterical show they are putting on is important. But that is tomorrow. And I hated the song anyway.

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