Europe’s US imported nightmare

I note the US have been rather quietly urging the EU to resolve the so-called ‘Greek crisis’, which I really think is a euro-crisis, even though its current epicentre is in Greece. What the Americans are doing beyond the purview of the public gaze is anyone’s guess but we can be sure it is interventionist, self-interested and probably not helpful to the well-being of ordinary Europeans including Greeks. The US influence over Europe has, in fact, culminated in the crisis, even if that realisation is not understood by many. I have just finished reading a book by the French journalist/publisher and politician – Jean-Jacques Servan-Schreiber – who died in 2006. The book – Le Défi Américain (The American Challenge) was very popular when it was published in 1967. It initially was a major hit in France and later was translated widely. It helped me understand how the US intellectual tradition has at critical times in Europe’s modern history been so definitive.

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The concept of ‘one Europe’ under threat from austerity

The EU Flash Barometer surveys provide information about public opinion in Europe. The latest Survey(No. 418) – Introduction of the euro in the Member States that have not yet adopted the common currency – shows how confused people are in Europe at present. It seems that only 41 per cent of people in nations that “have not yet adopted the common currency” believe it would have “positive consequences” while 53 per cent think it would have “negative consequences”. That sounds as though they think the euro is a bad system. Well not exactly. The confusion might lie in the fact that the cruel system of austerity that the political elites have inflicted on the European nations is eroding the system of social stability that was established after the devastation of World War II. This is certainly the view taken by the ILO in a recent book it released. The ILO believe that the operations of the common currency (the austerity etc) is undermining the European Social Model, which is a core principle of an integrated Europe. So by insisting on maintaining the flawed currency system, the political elites are endangering the very thing they claim to revere – political integration – the ‘one Europe’.

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So-called ‘free trade’ agreements should be strongly opposed

My header this week is in solidarity for the Greek people. I hope they vote no and then realise that leaving the dysfunctional Eurozone will promise them growth and a return to some prosperity. They can become the banner nation for other crippled Eurozone nations – a guiding light out of the madness that the neo-liberal elites have created. While Greece battens down against the most incredible attack on European democracy since who knows when – perhaps since the Anschluss that led finally to war breaking out a year later in Europe, one wonders how low the Brussels elite will go to preserve control of the agenda. They clearly lost control on Friday when the Greek leadership decided to go back to the people to determine whether they wanted more poverty-inducing austerity. In response, the Brussels gang along with their Washington mates at the IMF have come out with personal attacks, lies, threats and ridiculous dissembling. But that is what happens when bullies can’t bully. But while these events are rather extraordinary in historical terms, other insidious attacks on democratic rights and choice are on-going. One of the more startling attempts to undermine the capacity of elected states to deliver on their mandate to their electorates and hand over almost absolute power over the state to international corporations is the so-called Trans-Pacific Partnership (TPP).

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European Court of Justice effectively rules that Eurozone is a shambles

On June 2015, the – Court of Justice of the European Union – issued a press release summarising their decision with respect to the ECB’s Outright Monetary Transactions (OMT) programme – Judgment of the Court of Justice in Case C-62/14 Gauweiler and Others. The decision (No.70/2015) is a devastating indictment of the Eurozone and the elites that designed it and maintain its capricious and destructive behaviours. The latest events in Greece highlight how neo-liberal Groupthink can extend into the realm of venal fantasy in defiance of reality. The European Court of Justice decision ruled that the ECB was not acting unlawfully in implementing its bond buying program, despite the German Constitutional Court ruling otherwise. The point of the ruling is that the Court has decided to take a convenient line because the economic policy making institutions in the Eurozone are so parlous that the role of the ECB can be blurred to mean anything. What a shambles.

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Saturday Quiz – June 27, 2015 – answers and discussion

Here are the answers with discussion for yesterday’s quiz. The information provided should help you understand the reasoning behind the answers. 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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Friday lay day – Greece has only one viable path – exit

Its my Friday lay day blog, which is sort of a dodge that allows me to be less focused. I have been holding my pen about Greece in abeyance lately until more details became clearer about what is going on in the so-called ‘negotiations’, which seems to be a euphemism so ugly given the reality that perhaps a new descriptor should be introduced. As the specific details emerge more clearly, the situation remains much the same as it was in January when the new Greek government was resoundingly elected to end austerity. Either the Greek government has to abandon its electoral mandate and capitulate and become just another ‘left-wing’ government overseeing the punishing austerity inflicted by the neo-liberal ideologues or it has to show leadership and take the nation out of the dysfunctional Eurozone and pursue its own path to more prosperous, if uncertain, times. Part of that leadership has to be to educate the public as to what the options are in a balanced rather than hysterical way. I have heard Syriza politicians claim that leaving the union would be catastrophic, which is not only false but just reinforces the public fear of exit. Further, all the nominations in February from Syriza politicians that the ‘negotiations’ to that date had been “successful” (Source), which any reasonable interpretation would have led to the conclusion that austerity was about to end in Greece, the reality now, is that the Greek government appears to be slowly capitulating to the venal demands of the Troika and the future for Greece is likely to be one of interminable economic stagnation, increasing poverty and rising social instability. But, hey, that is what success seems to mean now in this dark-age of Eurozone realities. If there weren’t real people involved in this tragedy, this could be a top selling farce.

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Parents are advance secret agents for the class society

Dutch economist Jan Pen wrote in his 1971 book – Income Distribution – that “Parents are advanced secret agents of the class society”, which told us emphatically that it was crucial that public policy target disadvantaged children in low-income neighbourhoods at an early age if we were going to change the patterns of social and income mobility. The message from Pen was that the damage was done by the time the child reached their teenage years. While the later stages of Capitalism has found new ways to reinforce the elites which support the continuation of its exploitation and surplus labour appropriation (for example, deregulation, suppression of trade unions, real wage suppression, fiscal austerity), it remains that class differentials, which have always restricted upward mobility and ensured income inequality and access to political influence persist, are still well defined and functional. This was highlighted in a new report published by the the American Economic Policy Institute (EPI) – Early Education Gaps by Social Class and Race Start U.S. Children Out on Unequal Footing (June 17, 2015). Not much has changed it seems for decades.

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Too much private credit undermines growth and increases inequality

The OECD has just published a new Economic Policy Paper (June 2015) – Finance and Inclusive Growth – which challenges the notion that the financial market deregulation in the period prior to the GFC, which led to a rapid increase in the absolute and relative size of the financial sector, was beneficial. It argues that in the aftermath of the credit binge, with the private sector overladened with debt, further credit “expansion is likely to slow rather than boost growth”, particularly if taken up by households. The research also shows that “Financial expansion fuels greater income inequality” and that government needs to reform the sector to stabilise growth and reduce inequality. What the paper doesn’t say (it is the OECD after all) is that their research also undermines arguments that it is better to base growth on private debt accumulation rather than public debt accumulation which matches deficits. Thus strategies in place in Australia, the UK and the Eurozone for governments to pursue surpluses which then require the private sector to increase debt to drive consumption are fraught and will ultimately fail. Again!

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A central bank can always prevent government default

I have received a lot of E-mails over the weekend about a paper released by the CEPR Policy Portal VOX (June 20, 2015) – Can central banks avoid sovereign debt crises? – which purports to provide “new evidence” to support the conclusion that “the ability of the central bank to avert a debt self-fulfilling debt crisis is limited”. It is another one of those mainstream attempts to brush away reality and draw logical conclusions from a flawed analytical framework. When one digs a bit the conclusion withers on the vine of a stylised economic model that leaves out significant features of the monetary system – such as for starters, a currency-issuing government can never go broke in terms of the liabilities its issues in its own currency. All the smoke and mirrors of stylised New Keynesian mathematical models cannot render that reality false.In other words, the paper and the lineage of papers it draws upon should be disregarded by anyone who desires to understand how the monetary system operates and the capacity and opportunities that the currency-issuing government (including its central bank) has within that system.

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