Posts

Showing posts from November, 2018

A poignant Remembrance

Image
On Remembrance Sunday, we remember those who died in war. Particularly the First World War, but also those who gave their lives fighting in subsequent wars. This year, I sang at two remembrance services in which all the music was written by people who either died in war themselves or had relatives who died. The poems of Wilfred Owen, who died one week before Armistice in November 1918, brought home poignantly to us the "pity of war".

Perhaps one day we will also honour those who did not fight but still lost their lives, and all those whose lives were ruined by war - the parents desperately trying to find out what happened to their children, the wives left to bring up children on their own, the soldiers whose mental and physical health was ruined, the villagers and townspeople whose homes and livelihoods were wiped out, the thousands of women raped. And perhaps one day we will end the jingoism that disfigures many of our remembrance services. There is nothing to celebrate a…

Some governments really are like households

Image
In my last post, I said that the fact that a government can buy anything that is for sale in its own currency is not sufficient to confer monetary sovereignty. A country which is dependent on essential imports, such as foodstuffs and oil, for which it must pay in dollars is not monetarily sovereign. Some people disputed this on the grounds that such a country could earn the dollars it needs through exports. So I thought I would write a post discussing how realistic this is in practice.

Strictly speaking, the only country in the world that can always pay for everything it needs in its own currency is the United States. However, most developed  countries that issue their own currencies have deep and liquid FX markets that enable them to exchange their currencies freely for other currencies; many also have swap lines with the Federal Reserve. Eurozone countries don't issue their own currencies, but the bloc as a whole issues the world's second reserve currency. It is not going t…

Now state pension ages are equalised, let's fix the real problems

Image
Today is a day for celebration. After nearly 60 years of inequality and discrimination - originally against women, and more recently against men - the state pension age is at last the same for men and women. For one day only, both men and women will retire at 65. Tomorrow, the state pension age for both men and women will start rising again in lockstep, reaching 66 by 2020 and then to 67 and 68.

I make no apology for celebrating the equalisation of pension ages. In my view this is long overdue. I have expected it all of my working life, having first discussed it when I was still at school. I never thought it was fair that my brother 14 months younger than me should receive his state pension 6 years and 4 months later than me. We both work for our livings and we have both brought up children. Life has dealt us different cards - I am significantly poorer than him - but that is not a reason for me to have a much earlier state pension purely by virtue of being female.

That said, the rise…

The myth of monetary sovereignty

Image
How many countries can really claim to have full monetary sovereignty?
The simplistic answer is "any country which issues its own currency, has free movement of capital and a floating exchange rate." I have seen this trotted out MANY times, particularly by non-economists of the MMT persuasion. It is, unfortunately, wrong
This is a more complex definition from a prominent MMT economist:
1. Issues its own currency exclusively
2. Requires all taxes and related obligations to be extinguished in that currency
3. Can purchase anything that is for sale in that currency at any time it chooses, without financial constraints. That includes all idle labour
4. Its central bank sets the interest rate
5. The currency floats
6. The Government does not borrow in any currency other than its own.

This appears solid. But in fact, it too is wrong.  

The big hole in this is the external borrowing constraint - item 6 in the list. If a government genuinely could purchase everything the co…