Monday, August 25, 2014

Bill Mitchell — Eurozone has failed – a major shift in direction is needed


Summary analysis from Bill: It's the (neoliberal) design, stupid.
Conclusion
As it stands, the Eurozone is a failed system. It has been for 14 years.
Unless there is a major shift in thinking it will continue to be.
The fix —
What is required immediately is: 
1. Overlook the SGP rules – allow nations to exceed the deficit and debt thresholds (encourage them to do so) – they can invoke the emergency let outs in the Treaty. 
2. Announce that the ECB will buy any government debt. This can be done within the Treaty via the secondary markets. That will eliminate any problems with bond markets and higher yields. The ECB can guarantee solvency implicitly in this way and still stick within the legal constraints. 
3. Announce a massive public employment and public infrastructure program throughout Europe. That would eliminate unemployment and spur growth in private spending. 
4. Do not waste time introducing a quantitative easing program. All bond purchases should be tied to increasing fiscal deficits. 
5. Provide a demogrant of some euro amount to all people in the bottom 3 quintiles of the income distribution funded by the ECB. That would flow straight into the expenditure stream. There is nothing in the Treaty rules that say the ECB cannot do this. They just cannot bail out governments or allow overdrafts to them.
Bill Mitchell – billy blog
Eurozone has failed – a major shift in direction is neededBill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at the Charles Darwin University, Northern Territory, Australia

9 comments:

mike norman said...

Same rehashed stuff from Bill and MMT. MMT declares "victory" in that it predicted this, but nobody is paying attention, particularly TPTB so it's a pretty hollow victory. The Eurozone has failed, but so has MMT.
#disillusioned

Malmo's Ghost said...

Mike kisses no one's ass. Too bad we don't have more like him. MN would make a fantastic president.

Schofield said...

That photo of you Mike Norman looks "rehashed" to me. Any way of really proving that it isn't?

Unknown said...

I agree Mike.

However, we are all products of those that came before us, are we not.

Nothing, not even European group think changes overnight.

Matt Franko said...

Well you don't fix a problem with cognition thru politics. ...

NeilW said...

MMT economists are just there to show how it works.

It is the politics that decides where to go with the information.

Matt Franko said...

Neil "information" means 'knowledge communicated' ..... here:

http://www.etymonline.com/index.php?term=information

imo there is no evidence that any "knowledge has been communicated..." no evidence at all, only rationalization...

Hence most people dont have the "information" or 'communicated knowledge'... empirically this is indisputable....

You wrote that nice piece a while back on the Scotland independence while they were going to peg their currency at the same time... so you made the point that they functionally would not be independent if they did this.... ok I get it...

but this realization comes thru some sort of mathematical relationship that most people cant realize...

So you say: "they wont be independent if they peg" and 99.999% of others think "what the heck is Neil talking about???? What does currency systems have to do with independence????? If they vote and say they are 'independent' then they ARE 'independent'...???"

This lack of mathematical cognitive ability is what we are up against at core... not many people have the mathematical cognitive ability to see the dependent relationships...

rsp,

NeilW said...

"If they vote and say they are 'independent' then they ARE 'independent'"

That's my point about politicians. The raw material is the currency system and the impact of spending and investment.

It is for the politicians to turn that into a coherent vision that appeals to the population.

My pitch for Scotland would be jobs and pensions for all, which we can have because MMT show that we can have that.

But you have to start with the hook, not the explanation.

Matt Franko said...

Neil that is often Roger's point.... shape the behavior thru "vision" or "goals"... then the details will work themselves out.... ie people will figure out a way to get it done if they collectively can form the same goal.... this is from the evolutionary perspective...

I think this skips over some creative steps though.... at some point, some people (specialists/technocrats...) have to put the system together .... right now we dont have the appropriate qualified people in the technocratic positions...

Politicians here are usually "lawyer-types" not technocrats who understand quantitative systems , so we have the "blind leading the blind" over here.... unqualified technocrats advising non-technocrats on how to design and operate our economic systems.... chaos of course is the result.... rsp,