{"id":19649,"date":"2012-06-01T18:01:51","date_gmt":"2012-06-01T08:01:51","guid":{"rendered":"https:\/\/billmitchell.org\/blog\/?p=19649"},"modified":"2012-06-01T18:01:51","modified_gmt":"2012-06-01T08:01:51","slug":"when-a-poet-knows-more-than-most-economists","status":"publish","type":"post","link":"https:\/\/billmitchell.org\/blog\/?p=19649","title":{"rendered":"When a poet knows more than most economists"},"content":{"rendered":"

\t\t\t\tIt is Friday and I have been reading poetry. Then I read some ECB statements and some Spanish government documents after some number crunching (not reported here). And as usual I conclude the elites in Europe still think they will bluff their way through a deteriorating situation – some 4 years or so after it began – and stick to their ideological precepts as if there is no tomorrow. The problem for them is that the rest of us including bond markets, households, private firms and banks don’t follow the script that the Troika have written. Madame Lagarde can strut around on her tax-free salary telling Greeks they should pay their taxes and that it was payback time but that does little other than to make her look poor while the situation worsens. The Spaniards, facing bank failure, crippling unemployment generally, and specifically, more than half of their 15-24 year-olds jobless and, presumably, becoming alienated and dislocated from mainstream ambitions, came up with a plan that might have eased their own problems (for a while). It seems that the plan would not violate EMU rules. The right-wing BuBa types however, obsessed with an imaginary fear that inflation is about to swamp the Eurozone and end life as we know it, responded as only they can – by posing a non-problem while leaving the real problem to deteriorate further. A poet and a playwright could not have come up with text portraying this level of paralysis and madness even if they had tried.
\n
\nA little journey back in time<\/strong><\/p>\n

Before we get on to SMPs, LTROs and the rest of the acronym soup I thought a little reflection from the great English poet, philosopher and writer – Samuel Taylor Coleridge<\/a> – is in order.<\/p>\n

Upon mention of Coleridge’s name I immediately started reciting the – Rime of the Ancient Mariner<\/a> – which reflects the era that I attended secondary school – “… with my cross-bow I shot the albatross”.<\/p>\n

But alas the reason I introduce Coleridge is that he would have been very familiar with the budget deficit and national debt hysteria that commands the daily financial press and has filtered into our common-folk lives as scary stuff.<\/p>\n

While enduring the burden of his opium addiction, Coleridge had very clear understandings on the role of credit and government spending backed by taxes. In his essay – On the Vulgar Errors Respecting Taxes and Taxation<\/a> – which was published in The Friend, No. 12, Thursday, November 9, 1809 and is worth reading in full, he revealed these understandings.<\/p>\n

There was a massive debate in England at the time about taxation and national debt, in particular due to the wars that Britain had been waging with France and in the American colonies.<\/p>\n

Among the gems are this statement:<\/p>\n

\nBut how often do we hear, even from the mouths of our parliamentary advocates for popularity, the taxes stated as so much money actually lost to the people; and a nation in debt represented as the same both in kind and consequences, as an individual tradesman on the brink of bankruptcy ? It is scarcely possible, that these men should be themselves deceived; that they should be so ignorant of history as not to know that the freest nations, being at the same time commercial, have been at all times the most heavily taxed : or so void of common sense as not to see that there is no analogy in the case of a tradesman and his creditors, to a nation indebted to itself.\n<\/p><\/blockquote>\n

In a section discussing the claims that taxation is evil, he wrote:<\/p>\n

\nThere are so many real Evils, so many just causes of Complaint in the Constitution and Administration of Governments, our own not excepted, that it becomes the imperious Duty of every Well-wisher of his Country, to prevent, as much as him lies, the feelings and efforts of his Compatriots from losing themselves on a wrong scent. Whether a System of Taxation is injurious or beneficial on the whole, is to be known, not by the amount of the sum taken from each Individual, but by that which remains behind.\n<\/p><\/blockquote>\n

Reflecting the fact that aggregate demand is what is important in determining the growth of a nation.<\/p>\n

He also reflected on the hysterical claims that the National Debt would constrain all activity and cause national insolvency. While out in the South West of England with friends:<\/p>\n

\n… one of the Company turned the Conversation to the weight of Taxes and the consequent hardness of the times. I answered, that if the Taxes were a real weight, and that in proportion to their Amount, we must have been ruined long ago … the National debt … has more than quintupled … [and] … instead of being poorer and poorer, we are richer and richer … what can we attribute this stupendous progression of national Improvement, but to that System of credit and paper Currency, of which the national Debt is both the Reservoir and the Water-works?\n<\/p><\/blockquote>\n

And further on the benefits of government spending:<\/p>\n

\nTo what then do we owe our strength and our immunity? The sovereignty of Law: the incorruptness of its administration; the number and political importance of our religious Sect, which in an incalculable degree have added to the dignity of the Establishment; the purity, or least the decorum of private Morals, and the independence, activity, and weight, of public Opinion? These and similar Advantages are doubtless the materials of the Fortress but what has been the cement? What has bound them together? What has rendered Great Britain, from the Orkneys to the Rocks of Scilly, indeed and with more than metaphorical propriety a BODY POLITIC, our Roads, Rivers, and Canals being so truly the veins, arteries, and nerves, of the State, that every pulse in the Metropolis produces a correspondent pulsation in the remotest Village on its extreme Shores? What made the stoppage of the national Bank the conversation of a day without causing one irregular throb, or the stagnation of the commercial Current in the minutest Vessel? I answer without hesitation, that the cause and Mother Principle of this unexampled Confidence, of this system<\/em> of Credit, which is as much stronger than mere positive Possessions, as the soul of Man is than his Body, or as the force of a might Mass in free motion, than the pressure of its separate component parts would be in a state of rest – the main cause of this, I say, has been our NATIONAL DEBT.\n<\/p><\/blockquote>\n

That is a nice way to start on a Friday, n’est-ce pas?<\/p>\n

The Irish vote and Greek intentions<\/strong><\/p>\n

And while on scary public perceptions, I urged the Irish overnight to vote No! No! and again No!. We will find out later today what the outcome was.<\/p>\n

Here is a little pre-Saturday Quiz warm-up – so you ease into tomorrow’s quiz, imbued with a renewed sense of confidence \ud83d\ude42<\/p>\n

Which of these posters was put up by representatives of the right-wing elites who are bent on impoverishing their nation so their leaders can continue to travel to Brussels and enjoy the sumptuous wining and dining associated with EC Summits and which one was altered by those who care about the people? (Hint: think right and left).<\/p>\n

\"\"<\/a><\/p>\n

<\/div>\n

But I also received an interesting E-mail from my mate in Athens (thanks Vassilis) about the voting intentions and preferences of the Greek people. We are told daily that the Greeks do not want to abandon the Euro and the EU elite bullies are playing on that and threatening them with all hell if they elect a government later this month that opposes austerity and the bailout.<\/p>\n

Madame Lagarde as one – to wit!<\/p>\n

But it seems that when the situation is really examined the preferences are not exactly as the popular pro-Euro, pro-Austerity Western press is depicting.<\/p>\n

There is now a more detailed public poll (available only in the Greek language at present) which tells us the following:<\/p>\n

1. If the Greeks are asked the question – Euro or Drachma? The majority reply Euro.<\/p>\n

2. The responses change dramatically when this question is framed in the context of the austerity measures.<\/p>\n

Specifically (translated) the question was:<\/p>\n

\nPlease state if you agree, Yes or No, with the following statement: Greece must stay in the Euro, under any circumstances, even if this means the implementation of all the austerity measures necessary for this.\n<\/p><\/blockquote>\n

The responses ran 54 per cent negative (people do not agree with that statement) and 46 per cent positive, among those who responded meaningfully, that is, excluding those who did not respond or refused to answer.<\/p>\n

Spain and the ECB<\/strong><\/p>\n

Now we get to the real topic for today – Spain.<\/p>\n

Bloomberg reported today (June 1, 2012) – Merkel’s Isolation Deepens as Draghi Criticizes Strategy<\/a> – that “German Chancellor Angela Merkel was besieged by critics for letting the euro crisis smolder, with the leaders of Italy and the European Central Bank demanding bolder steps to stabilize the 17-nation economy”.<\/p>\n

The Italian duo – Monti (Prime Minister) and Draghi (ECB) are urging (pushing was the word used):<\/p>\n

\n… Germany to give up its opposition to direct euro- area aid for struggling banks.\n<\/p><\/blockquote>\n

The latest meltdown drama is playing out in Spain as its funding costs rise and its banking system continues in its zombie state.<\/p>\n

The Spanish government came up with a plan earlier this week to help its most obvious first candidate for failure Bankia – that they claim was completely within the current (ridiculous) EMU rules and may have staved off an increasing crisis (for a time).<\/p>\n

The plan was simple but would have been an effective and sensible way of easing the growing crisis:<\/p>\n