The latest scam from the European Commission – the ‘roadmap’ – Part 1

Scam merchants come in many forms. We keep getting ‘official’ requests fir bank details from E-mails that wouldn’t pass a primary school spelling or grammar bee. Creeps prey on old people to rip them off in ‘essential’ house repairs that are neither essential or actually repaired once the money changes hands. Fake charity impersonation is another. The sad and lonely regularly get duped on dating and romance WWW sites. Employers often pay below legal wages and conditions. Banksters fake loan documents and push credit onto the ill-prepared and vulnerable. The ratings agencies corruptly provide AAA ratings for money. And it goes on. And then we have the European Commission. This is one hell of a scam agency. They regularly conduct expensive ‘reviews’ or whatever, hosting meetings with fine food and wine for the Euro in-crowd, and swan around Europe between fine hotels on generous expense accounts. Out of all this come ‘grand statements’ full of motherhood statements, such as the 2005 “Priority” statement: A deeper and fairer economic and monetary union. Then we had the 2015 – The Five Presidents’ Report: Completing Europe’s Economic and Monetary Union – which inspired zero confidence that anything was about to change. Reform proposals come out of Europe on a regular basis but none get to grips with the problem – the euro itself! And the latest scam from the European Commission is their self-named roadmap for – Completing Europe’s Economic and Monetary Union – policy package. Scams come in many forms. This is one of them. The really sad part is the Europhile Left think that the latest statement is a mostly a ‘step forward’ and that there is hope. Sorry. One word. Germany. This is Part 1 of a two-part blog analysing the latest ‘proposals’ from the European Commission.

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The EMU reform ruse – Part 4 and Final

This is the final part of my four-part discussion of a so-called progressive proposal advanced by German academic Fritz Sharpf to reform the Eurozone into two tiers: a ‘Northern’ hard currency tier and a ‘Southern’ non-euro tier with the latter nations tying their currencies to the euro. We have seen that rather than providing a framework for convergence between the current Eurozone Member States, Sharpfs’ proposal would not liberate the weaker nations from the yoke of the euro, In fact, the proposal would just tie the exiting nations to the euro in a slightly different way – one that will not provide sufficient flexibility to make much difference. Further, Sharpf recommends that the ‘Northern’ nations should retain the euro and operate within the current European Commission orthodoxy. Yet he admits that this regime kills the democratic process. In other words, his proposal sustains that technocratic illegitimacy which would not appear to be the basis for a progressive solution. Finally, while he dichotomises the current 19 Eurozone Member States into a Northern and Southern grouping, there is no reliable way to allocate the Member States across the groups that would remain in the euro and those who would exit. What criteria would reasonably allocate nations to stay in the so-called Northern hard currency zone with the euro? For example, I do not think that a democratic France can ever function reasonably in a hard currency arrangement with Germany. The hard currency zone would effectively just revert to a ‘mark zone’ tantamount to the last EMS arrangement prior to the euro. That configuration was totally unworkable and that dysfunction would repeat itself. In other words, the proposal makes little operational sense. My view is that the vast majority of the Member States would be in the ‘Southern’ group, which would effectively end the EMU in any functional sense. Hardly a proposal for reform.

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The EMU reform ruse – Part 3

This is the third part of my mini-series which have been evaluating one so-called progressive reform approach to the Eurozone disaster. Part 2 provided essential background, given that one of the proposals being circulated by progressives involves the weaker Eurozone nations re-establishing their own currencies and then pegging them against the Euro. I showed that attempts to maintain any form of fixed parities among the core European states has been chaotic and led to breakdown. Along the way, the weaker trading nations were subject to austerity biases and elevated levels of unemployment. Given the scope of the topic, it will take me two more parts to finalise the discussion. In this part and the final part 4 I will discuss the second proposal from German academic Fritz Sharpf, which appears to have gained some traction with the Europhile Left, much to my disappointment. Here we commence the analysis of Sharpf’s “Two-tiered European Community” proposal.

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The EMU reform ruse – Part 1

On October 31, 2017, my blog – Europhile Left deluded if it thinks reform process will produce functional outcomes – countered some of the nonsense coming out of Europe (from the so-called progressive side) that the Eurozone hadn’t failed when judged by it bias towards mass unemployment and increasing precariousness of its citizens. I particularly noted the terrible record in terms of youth unemployment and NEETs. Yesterday’s blog – Massive Eurozone infrastructure deficit requires urgent redress – documented how much damage the austerity bias of the Eurozone has caused to essential productive infrastructure – human and physical and the ridiculous underinvestment by governments locked into mindless Stability and Growth Pact (and its recent derivatives) rules. Unphased, the Europhiles keep telling me that reform processes are underway and that we need to be patient. That the glorious vision outlined in the October 1990 European Commission Report – One Market, One Money Report, which, apparently outlined a vision of domestic-demand driven convergence bliss for the Economic and Monetary Union. I analysed that Report in detail in my 2015 book – Eurozone Dystopia: Groupthink and Denial on a Grand Scale – and have to say that anyone who holds it out as a plan for the future must have been reading a different report or affected by heavy drugs. Today, I am considering recent reform proposals put forward by German academic Fritz Sharpf, who considers the neoliberal Eurozone experiment has failed but can be resurrected without abandoning the essential mechanics of the monetary union. Tomorrow, I will start to consider a so-called progressive proposal that breaks the EMU into two tiers – a Northern hard currency zone and a ‘Southern’ zone where nations reintroduce their own currencies, but peg them against the euro with ECB support. It will not surprise regular readers to know that I disagree with Sharpf’s reform agenda.

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Massive Eurozone infrastructure deficit requires urgent redress

The latest – EIB Investment Report 2017/2018 – published last week by the European Investment Bank tells anyone who cares to take those Europhile Rose Coloured Glasses off for just a second how deep the failure of the European policy making structures are and how long the negative impacts of those failures will resonate. This is the true ‘burden for our (their) grand kids’ sort of stuff. In claiming they had to run tight fiscal policy biased towards surpluses to avoid forcing the future generations to carry an unfair burden, these European policy makers and leaders have done exactly the opposite, as predicted – they have created an appalling future for their youth and their children to follow. The whole European monetary experiment is a failure and is beyond reform. It needs to be scrapped, national sovereignty restored and people within their own countries left, through democratic institutions to determine how the public sector operates in their best interests. The Troika technocrats should be led out to pasture. And, to the Europhile Left: take of your rose coloured glasses.

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Household debt is part of a broader problem – be informed

The head of the Australian Prudential Regulation Authority (APRA), which was created in 1998 as part of the sham to separate regulation from policy and pretend the Reserve Bank of Australia was independent, gave a speech in Sydney yesterday (November 21, 2017) – Housing – The importance of solid foundations. The reason the speech is important is because it demonstrates the disconnect in policy making and the failure of key policy makers and regulators to connect macroeconomic dots. Australia – like the rest of the world – needs politicians and officials who understand how the macroeconomic aggregates are connected. One cannot have a conversation about household debt without recognising that it is, in part, directly related to the fiscal position of the government and the nation’s external position. While the APRA boss is correct to highlight the precarious nature of household balance sheets given the record and increasing debt levels being borne by households who are experiencing a wages squeeze and a government intent on austerity cuts, he should be educating the public on the broader context. Then there would be more acceptance of expanding discretionary fiscal deficits and a wages policy designed to bring real wages growth back into line with productivity growth. If that was the case, much of the idiotic conversations – some masquerading as ‘research’ results would disappear.

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IMF policies undermine the health of mothers and children in the poorest nations

In our new book Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto Books, 2017) – Thomas Fazi and I argue that a new progressive agenda would see the abolition of the IMF and the World Bank and the creation of a new multilateral institution that is entrusted with ensuring poor nations can access necessary funds to prevent their societies collapsing. This organisation would not be a bulwark for inflicting neoliberal policies on the poorer nations, but rather, a body that assisted nations in developing first-class health, education and environmental care capacities and infrastructure in a fully employed environment. It would help insulate such nations from the vicissitudes of global finance by supporting capital controls and other anti-speculative policy tools. The current multilateral framework dominated by the likes of the IMF and the World Bank have failed categorically in this regard. Recent research, which, in part consolidates a rich body of research going back to 1987, has found that the so-called ‘structural adjustment policies’ that accompany assistance from these organisations have materially damaged child and maternal health in the nations where these conditionality programs have been imposed. The IMF likes to talk about intergenerational fairness, especially in relation to the alleged burdens that fiscal deficits leave for future generations, but then they support and implement policies that unambiguously damage the health and well-being of children in poorer nations, while allowing real resources to be sucked out of those nations to the benefit of the global rich. A criminal enterprise.

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Europhile Left deluded if it thinks reform process will produce functional outcomes

A recent twitter exchange with some Europhiles who believe that it is better to wait for some, as yet unspecified, incremental reform process for the Eurozone rather than precipitate exit and the restoration of currency sovereignty was summed up for me by one of the tweets from Andrew Watt. In trying to defend the abandonment of sovereignty and make a case for continuing with the so-called reform dialogue, he wrote (October 27, 2017): “Unemployment in “periphery” was v hi before €. Fell rapidly. Then rose sharply, has now fallen somewhat. So picture very mixed.” I found that a deeply offensive claim to make and responded: “It is not a mixed picture at all. Youth unemployment has never been as high. Greek unemployment was never > 12%. Now > 20% indefinitely.” I also attached a graph (see over). I think this little exchange captures the essence of the delusion among many in the Left that we document in our new book – Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto Books, 2017). The Europhiles maintain a blind faith in what they claim to be a reform process, which when carried through will reduce some of the acknowledged shortcomings (I would say disastrously terminal design flaws). They don’t put any time dimension on this ‘process’ but claim it is an on-going dialogue and we should sit tight and wait for it to deliver. Apparently waiting for ‘pigs to fly’ is a better strategy than dealing with the basic problems that this failed system has created. I think otherwise. The human disaster that the Eurozone has created impacts daily on peoples’ lives. It is entrenching long-term costs where a whole generation of Europeans has been denied the chance to work. That will reverberate for the rest of their lives and create dysfunctional outcomes no matter what ‘reforms’ are introduced. The damage is already done and remedies are desperately needed now. The so-called ‘reforms’ to date have been pathetic (think: banking union) and do not redress the flawed design. And to put a finer point on it: Germany will never allow sufficient changes to be made to render the EMU a functioning and effective federation. The Europhile Left is deluded if it thinks otherwise.

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When the mainstream Left gets lost down its Europhile hole

Thomas Fazi and I recently published an Op Ed in Social Europe (October 20, 2017) – Everything You Know About Neoliberalism Is Wrong, which is a precis of the main arguments in our new book Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto Books, 2017). It seems that our message resonates with a lot of people. And, inasmuch as it is deeply critical of the extant Left position on ‘internationalism’ who continually seem to live in terror of those amorphous financial markets just waiting for a chance to send a nation state bankrupt, it seems to have also upset some who I consider to be the ‘lost’ mainstream Left. One such critic accuses us of using a “presumptuous title” but he is seemingly unable to capture the pop culture irony that is inherent in the choice. Just a bit of fun Andrew. Since when is comedy presumptuous? But failing to grasp the subtlety of the title is just the start. Things go downhill from there.

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The ‘infinite-horizon fiscal gap’ is just an infinity of nonsense – try measuring that!

The ‘infinite-horizon fiscal gap’ is just an infinity of nonsense. That is, if such a level of ridiculousness can be measured, which it cannot. So suffice to say a pretty large dose of nonsense. Certainly nothing to take seriously. Anyone who sprouts this nonsense declares themselves unqualified to discuss notions of sovereignty and the capacities of a currency-issuing state. But while some mainstream economists are firmly stuck in their Groupthink-riddled stupors with their ‘infinite-horizon fiscal gap’ calculations producing ever increasing (scaremungous) $ sums that the US government is allegedly unable to ever pay, the movers and shakers of the political scene, such as the Koch Brothers in the US, feel no compunction to stick with a consistent line attacking fiscal deficits. A few years ago they were predicting mayhem and insolvency just like the stupified academics. How things change when some dollars are up for grabs even if the fiscal deficit has to rise to transfer that largesse to the non-government sector. Then it is look the other way on the deficit and send us the cash. Sickening.

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Three recent interviews – transcripts and video

Today, I have translated two interviews I did while I was in Europe recently. The original interviews were in Spanish. The first interview was with Andrés Villena Oliver for CTXT and was published in the Spanish newspaper Público. It was conducted at Ecooo in Madrid on September 28, 2017. The the second interview was with journalist Marta Luengo Garcés from the progressive newspaper El Salto Diaro. It was conducted at the Principe Pio Hotel in Madrid on September 29, 2017. You can get a feel for the concerns of the progressive journalists in Spain by the type of questions they asked me. I have also included the video of an interview I did yesterday (October 16, 2017) with Steve Grumbine of the Real Progressives. That should keep readers more than busy until tomorrow.

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Wolfgang Schäuble is gone but his disastrous legacy will continue

History is often made by single, very powerful individuals acting on their own mission according to their own calling. Many of these individuals are seemingly immune to the reality around them and try to recreate their own reality – sometimes succeeding to advance the well-being of those around them and beyond, but, usually, they just leave the main stage after creating havoc. I could name names. But only one name is relevant for today’s blog – Wolfgang Schäuble, the former CDU German Minister for Finance. Schäuble resigned that role after the recent German elections and is now being feted by the mainstream press as some sort of visionary who kept the Eurozone together through his disciplined thinking and his resistance to populist ideas that would have broken the discipline imposed on Member States by the European Finance Ministers. History tells us differently. He has overseen a disastrous period in European history where its major step towards political and economic integration in the 1990s has delivered dysfunctional and divergent outcomes for the Member States. Some countries (Greece) has been ruined by the policies he championed while others are in serious trouble. Further, despite him claiming the monetary union has been successful, the fact is that the Eurozone is still together only because the ECB has been effectively violating the no bailout articles of the Treaty of Lisbon via its various quantitative easing programs since May 2010. Should it stayed within the ‘law’ of the union, then several nations would have been forced into insolvency between 2010 and 2012. The problem is that while Schäuble is now gone from the political stage, his disastrous legacy will continue.

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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.

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Mainstream macroeconomics credibility went out the window years ago

The Vice President of the European Central Bank, Vítor Constâncio, gave the opening speech – Developing models for policy analysis in central banks – at the Annual Research Conference, Frankfurt am Main, on September 25, 2017. Last time I heard Constâncio speak in person, in Florence 2015, he was in typical Europhile central bank denial. He thought the Eurozone was fine, a great success given the low inflation, inferring that the ECB’s conduct had something to do with that. He didn’t talk about the millions of people that had deliberately been rendered jobless because of the austerity obsession of the Troika, of which his institution was an integral part. Things might be changing a bit as the evidence mounts that the mainstream approach to macroeconomics and monetary theory is moribund, at best. But the changes are really just more of the same. There is no willingness to admit that the whole framework is without merit. The mainstream profession is lost in my view and clutching at anything they can to stay credible. But credibility went out the window years ago.

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Running trains faster but leaving more people on the platform is nonsense

Earlier in the week I was in Britain. Walking around the streets of Brighton, for example, was a stark reminder of how a wealthy nation can leave large numbers of people behind in terms of material well-being, opportunity and, if you study the faces of the people, hope. I am used to seeing poverty and mental illness on the streets of the US cities but in Brighton, England it very visible now as Britain has struggled under the yoke of austerity. Swathes of people living from day to day without hope under the current policy structures, damaging themselves through visible alcohol and substance abuse, cold from lack of shelter and adequate clothing, and the rest of it. And then a little diversion around the City area of London, where the overcoats the men wear cost upwards of £2,000 and the faces are full of intent. Two worlds really. I was thinking about those recent experiences when I read the latest release from the IMF (September 20, 2017) – Growth That Reaches Everyone: Facts, Factors, Tools. Their analysis continues the slow move of the IMF to acknowledging, not only the reality the world faces, but also, by implication, the massive costs that this institution has inflicted on poor people around the world.

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Jean-Claude Juncker in denial and somewhat delusional

Last week (September 13, 2017), the President of the European Commission, Jean-Claude Juncker, presented his State of the Union Address 2017 in Strasbourg before the European Parliament. My only query arising from the speech was which Member State has left, given that the President began his speech by thanking “the 27 leaders of our Member States” (joke). He opened by saying how unity among the Member States had “showed that Europe can deliver for its citizens when and where it matters”. I wonder which Planet he was referring to. I thought Europe was on the Mother Earth and it certainly hasn’t been delivering for its citizens, if the usual measures are considered. Juncker’s speech just continues what I considered to be ‘Groupthink and Denial on a Grand Scale’, which was the subtitle of my 2015 book – Eurozone Dystopia: Groupthink and Denial on a Grand Scale. It is amazing that the denial continues after 10 years and that guys like Juncker can still command an audience and a salary.

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ECB is running out of debt to buy – more smoke and mirrors needed

There was a Bloomberg report yesterday (September 6, 2017) – Draghi’s Claim of QE Flexibility Is Attracting Doubters – that made me laugh. The sort of laugh that comes when you just realise there is parallel language spoken out there that makes no sense and reinforces stupidity with stupidity. Much like most of mainstream economics commentary. The journalist was trying to argue that times is up for the ECB’s Quantitative Easing strategy because they are running out of debt to buy. Whew! That sounds like a catastrophe. The point is that the elephant in the room is ignored. The ECB is already massively violating the Treaty of Lisbon constraints on funding government deficits. It is time they realised that without that ‘quasi fiscal support’ (given the ECB is effectively the only functioning federal fiscal authority by default in the Eurozone), the system will collapse under the weight of austerity. Leadership demands they take the next step and allow the ECB to openly fund deficits using Overt Monetary Financing (OMF). But the lack of leadership tells us they will not take this obvious step. The grinding nature of Eurozone economic history will continue as a result – and then the next crisis will hit.

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Reclaiming the State

On June 3, 1951, the Socialist International association was formed in London. It is still going. It is “a worldwide association of political parties, most of which seek to establish democratic socialism”. Its roots date back to the C19th (to the First International formed in 1864) when it was considered beneficial to unite national working class movements into a global force to overthrow Capitalism. Internal bickering among various factions led to various dissolutions and reformations over the last 150 odd years. In 2013, the membership split when the German SPD decided to set up an competing group, the Progressive Alliance, which saw a host of so-called social democratic parties (including the Australian Labor Party) join and desert the SI. Both bodies are dogged by internecine conflict and members who have fallen for the neo-liberal macroeconomic myths. More recently, DIEM25 has emerged to pursue a Pan-European vision of Left-wing politics. The more recent dynamics of these movements deny power of the nation state in a globalised economy and global financial flows. They are all failing because of this denial.

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Fiscal policy is effective, safe to use, and markets know it

The Federal Reserve Bank of Kansas City has just hosted its annual Economic Policy Symposium at Jackson Hole in Wyoming where central banks, treasury officials, financial market types and (mainstream) economists from the academy and business gather to discuss economic policy. As you might expect, the agenda is set by the mainstream view of the world and there is little diversity in the discussion. A Groupthink reinforcing session. One paper that was interesting was from two US Berkeley academics – Fiscal Stimulus and Fiscal Sustainability – which the news reports claimed suggested that governments should be increasing fiscal expansion even though they may be carrying high levels of public debt. The conclusion reached by the paper is correct but the methodology is mainstream and so progressives should not get carried away with the idea that there is signs that some give is emerging, which will lead to more progressive outcomes. A progressive solution will only come when the neo-liberal dominance of my profession is terminated and an entirely new macroeconomics paradigm based on Modern Monetary Theory (MMT) is established. There is still a long way to go though.

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Europe – the deliberate wastage of its youth continues

Earlier this month (August 11, 2017), Eurostat published the latest European Union data for – Young people in the EU: education and employment. This data now allows us to track the fortunes of three age cohorts – 15-19, 20-24 and 25-29 years since before the crisis to the end of 2016. So a teenager prior to the crisis (2007) would be transiting into the 25-29 years cohort in 2016. One of the disturbing trends shown in the data is the increasing number of young people in the older ‘youth’ categories that in 2016 we classified as being Neither in Employment, nor in Education or Training (NEET). Some will have been in that category for the entire duration of the crisis – that is, they dropped out of school early, are not receiving any skills development and are unemployed. Whereas in 2007, the proportion of NEETs in the 25-29 years cohort was 17.2 per cent, that figure has risen to 18.8 per cent by 2016 (although the peak of 20.7 per cent was reached in 2012). This suggests that the systems which provide transitions between education and employment are not working effectively because the demand-side of the labour market is deficient. That is, there is a lack of jobs available overall and the most disadvantaged youth workers are at the back of the queue along with the disabled and other stigmatised cohorts (for example, Roma people in the European context). There is an urgent need for a true Youth Job Guarantee, to replace the faux Youth Guarantee that was introduced in 2012. But then that would require abandoning the obsession with austerity and dysfunctional fiscal rules. The European Commission’s answer to the problem will be to have another ‘summit’ or two and issue plenty of statements replete with motherhood statements.

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