tag:blogger.com,1999:blog-8764541874043694159.post3297690389635718971..comments2024-03-28T07:33:46.151+00:00Comments on Coppola Comment: A plan to turn the Euro from zero to heroFrances Coppolahttp://www.blogger.com/profile/09399390283774592713noreply@blogger.comBlogger25125tag:blogger.com,1999:blog-8764541874043694159.post-47791355329652177742016-04-06T18:40:46.641+01:002016-04-06T18:40:46.641+01:00What is really needed is an implicit guarantee of ...What is really needed is an implicit guarantee of the ECB of my debts. Then at least i would be happy.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-66091833135759992842016-04-04T10:09:30.762+01:002016-04-04T10:09:30.762+01:00No, no major economy allows others to print their ...No, no major economy allows others to print their currency. Through your ECB guarantee on member state bonds, you allow any member state to print euros (because the guarantee makes bonds = banknotes) which is both too riksy and has zero chance of becoming politically acceptable. If you need to add more and more rules at some point it should be obvious your solution is much harder to implement than a federal treasury. This proposal is the worst of both worlds: it combines the disadvantages of federalism with the disadvantages of disbanding the euro (which is indeed also an option).<br /><br />I don't think central banks, or more generally money, have as much impact as monetary geeks thing they have... (though I fully understand that people like to think their area of expertise is all important.) Try to play through the following thought experiment: what would happen if governments simply withdrew from the business of money issuance? Would the world end or would people simply use some asset index or other as a unit of account? Any liquid paper is currency at the functional level. To avoid distractions, assume paper cash has gone Swedish (been replaced by electronic payments) worldwide for the purpose of the thought experiment.cighttp://commentisglee.wordpress.com/noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-15245678025491420092016-04-04T10:05:01.043+01:002016-04-04T10:05:01.043+01:00It's always interesting to read new proposals ...It's always interesting to read new proposals to make the Euro a "viable currency". The problem is however the same at least since the International Clearing Union was first proposed: no matter how sound the coordination rules would be, there is no way they can be enforced. Points 2 and 3 are therefore based on wishful thinking. They would replace the current (stupid) rules with admittedly better rules but they would be equally inapplicable. Deficits countries will be forced to adjust, while surplus countries will not be under the same pressure. And power politics will always make sure that sanctions are never imposed. <br />So the only real solution would be point 1 which would essentially make intra-EZ trade imbalances irrelevant. Countries could keep financing their trade deficits while maintaining employment through fiscal deficits. This would make the EZ into a quasi federation. Of course if such a proposal were to be realistically made, it would drive Germany and other countries away from the project and lead to the collapse of the Euro. Trying to "save" the Euro by making it something else from a fixed e/r arrangement is a self-defeating strategy. <br />Only countries with flexible exchange rates and autonomous fiscal and monetary policies can avoid - to a large extent - the need for coordination. This is after all the lesson of the Gold Standard demise of the 1930s, as Eichengreen has explained. Mirco Tomasihttps://www.blogger.com/profile/04422757122795456350noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-86493474591238542562016-04-02T20:05:23.517+01:002016-04-02T20:05:23.517+01:00Regarding the inflation, I always say that inflati...Regarding the inflation, I always say that inflation of domestic goods and services is the only important measure as any inflation/deflation imported from abroad is not a measure of domestic demand. One should raise interest rates only if domestic demand is too high. Imported inflation, if anything, has a tightening effect, which should not be added to by further monetary tightening.<br /><br />So yes, I agree, domestic inflation or wage inflation are both more sensible measures than raw inflation numbers.<br /><br />The point about the 'open chequebook' is that every other major economy has the same open chequebook and still act responsibly. I don't believe that an economy can work effectively without full central bank support. I write about this a lot in the paper on my blog.<br /><br />I would also suggest that many countries run suboptimal policy (eg the UK) by thinking that the chequebook is arbitrarily closed when it isn't.<br /><br />I'm not saying there aren't huge obstacles to any plan like this working. There would need to be a lot more rules put in place. There would probably, for example, need to be some synchronisation of tax policy. And certain commonly agreed standards for government spending.<br /><br />What I am saying is that I believe that something like the suggestion above is the minimum requirement for a currency union of this nature. And without it the optimal option, by far, is an amicable, organised break up of the Eurozone. And soon, because it causes more and more damage every year it runs.<br /><br />Ari Andricopouloshttps://www.blogger.com/profile/00181838814176635218noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-83984994952780198682016-04-02T18:41:50.936+01:002016-04-02T18:41:50.936+01:00Thanks,
But when the Scots tax more and the spend...Thanks,<br /><br />But when the Scots tax more and the spending keeps on getting cut is that not a reciepe for disaster.<br /><br />Would it not have been better to leave the taxes alone and let people spend or save ? Or try policies that would make people spend instead ?<br /><br />I'm not sure how the new set up will work. How will the extra taxes be turned into Scottish goverment spending in this new set up? Because as we know in the current set up they are destroyed in the reserve drain.<br /><br />Thanks.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-17564663587022185232016-04-02T11:31:19.198+01:002016-04-02T11:31:19.198+01:00The UK is a full fiscal union with fiscal transfer... The UK is a full fiscal union with fiscal transfers, unlike the Eurozone. Obviously the further we go with devolution, the more the union is weakened. That's why the Smith Commission stopped short of recommending full transfer of tax and spending powers to Scotland. Frances Coppolahttps://www.blogger.com/profile/09399390283774592713noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-72184181905705159332016-04-02T09:23:26.113+01:002016-04-02T09:23:26.113+01:00National level inflation targets do not make sense...National level inflation targets do not make sense, when any product or service that can be traded long distance is not priced nationally and out of control of national governments. Maybe a nominal wage inflation target could make some sense, though targeting any inflation number when you don't control the money supply is a bit fishy.<br /><br />An open guarantee of member state debt is not gonna happen, it's too much of an open chequebook. Ari do you give your credit card number, CVV and PIN to all your friends and just expect them to behave? There's no alternative to an Eurozone treasury and matching institutions.cighttp://commentisglee.wordpress.com/noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-78775364516472958222016-04-02T01:26:40.929+01:002016-04-02T01:26:40.929+01:00This comment has been removed by a blog administrator.The Dork of Corkhttps://www.blogger.com/profile/03352247603806622458noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-42356483441058602762016-04-02T00:50:38.606+01:002016-04-02T00:50:38.606+01:00This comment has been removed by a blog administrator.The Dork of Corkhttps://www.blogger.com/profile/03352247603806622458noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-14396795115775745432016-04-02T00:33:57.547+01:002016-04-02T00:33:57.547+01:00This comment has been removed by a blog administrator.The Dork of Corkhttps://www.blogger.com/profile/03352247603806622458noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-85560225486152130552016-04-01T22:17:30.814+01:002016-04-01T22:17:30.814+01:00What do you think the answers are for Scotland Fra...What do you think the answers are for Scotland Frances ?<br /><br />Was it a mistake to take extra powers since they don't have their own currency ?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-85243680915620330012016-04-01T19:19:19.844+01:002016-04-01T19:19:19.844+01:00Dork, you are off topic AGAIN. Last two comments d...Dork, you are off topic AGAIN. Last two comments deleted for this reason. This post is not about the UK. Frances Coppolahttps://www.blogger.com/profile/09399390283774592713noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-88115232674330613492016-04-01T19:15:26.464+01:002016-04-01T19:15:26.464+01:00This comment has been removed by a blog administrator.The Dork of Corkhttps://www.blogger.com/profile/03352247603806622458noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-60162353097806740242016-04-01T18:55:19.971+01:002016-04-01T18:55:19.971+01:00This comment has been removed by a blog administrator.The Dork of Corkhttps://www.blogger.com/profile/03352247603806622458noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-11884427720067209182016-04-01T17:51:16.675+01:002016-04-01T17:51:16.675+01:00Hmm, good point. And there are other issues, like ...Hmm, good point. And there are other issues, like running large non-inflationary deficits by, for example, giving big tax cuts to the rich or otherwise giving out monetary favours.<br /><br />These sorts of problems would need to addressed some way, but in the end this idea does need the governments to act responsibly or it too will fail.<br /><br />Ari Andricopouloshttps://www.blogger.com/profile/00181838814176635218noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-24378147138573331462016-04-01T13:45:19.464+01:002016-04-01T13:45:19.464+01:00If government deficits no longer matter, why shoul...If government deficits no longer matter, why should a country be worried about a fine when it doesn't hit the inflation target?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-59317406511705298992016-04-01T12:49:08.224+01:002016-04-01T12:49:08.224+01:00"The south working the debt off to the north&..."The south working the debt off to the north"<br />This is the "successful" Irish model of export lead growth...<br />A economic model that requires sociological collapse.<br />A continual neverending and chronic deficit of local consumption <br />The ICB recorded another 3.7% drop of Loans to households in February.(consumer credit is the only current domestic albeit grossly inefficient and destructive means to distribute purchasing power)<br />Currently it's absence is creating a massive house purchasing crisis rather then a physical house shortage as is commonly purposely falsely stated.<br /><br />The crisis is one of distribution of purchasing power.<br />The current system requires additional production to distribute additional purchasing power.<br />But this additional production creates costs which can never be recovered.<br />We see in Ireland the fascist national roads authority beginning to restart production and destruction of the countryside so that people can save 5minutes of their lives while almost all local shops and pubs have closed. <br /><br />How on earth can such a economic dystopia be someones vision for the future?<br /><br />As Oliver Heydorn states you must be prepared to freely give more so as to prevent the chronic waste witnessed in our breaking societies.The Dork of Corkhttps://www.blogger.com/profile/03352247603806622458noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-69944463986025290782016-04-01T10:57:29.369+01:002016-04-01T10:57:29.369+01:00Disagree with this article on a fundemental level....Disagree with this article on a fundemental level.<br />He wants the south to resume "work" to pay off the north.<br />This working for nothing will just add to costs (inflation)and therefore reduce the standard of living even further.<br /><br />The function of work should be to produce goods for consumption ( not to add to Capitalistic friction in the name of work)<br /><br />The author wants to become another US or Uk inexplicably forgetting these are also failed societies.<br /><br />Refer to Oliver Heydorns recent piece - "the social credit path to sustainable consumption."<br /><br />It has become very clear that "working" or near full employment in the UK has had devastating effects on the real standard of living given the wasted effort required to access the mainly european industrial surplus.<br /><br />The Dork of Corkhttps://www.blogger.com/profile/03352247603806622458noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-72991577496058898712016-04-01T10:24:06.438+01:002016-04-01T10:24:06.438+01:00This seems to be a "constrained" form of...This seems to be a "constrained" form of fiscal union (no transfers). Rather similar to what might eventually have been proposed should Scotland have voted to leave the UK but wished to retain Bank of England as its central bank. Politically impossible I suspect, but not unreasonable.<br /><br />But would ECB be a "proper" central bank, a lender of last resort to the € zone commercial banks? That would also be necessary, I think. At the very least it would require a € zone deposit insurance scheme. This is also politically very difficult and reopens the transfer issue.kimhttps://www.blogger.com/profile/14723336787491859579noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-6237746258346016112016-04-01T09:47:52.823+01:002016-04-01T09:47:52.823+01:00Inflation over target would be a nice problem for ...Inflation over target would be a nice problem for the Eurozone to have!<br />Increasing taxes over spending (the direct opposite of fiscal stimulus) is in fact a very effective way of reducing inflation. But again movement of the EU/Eurozone towards tax harmonisation limits the potential of this.Dannyhttps://www.blogger.com/profile/09106739466558486588noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-10754004742774280332016-04-01T03:50:32.894+01:002016-04-01T03:50:32.894+01:00Aw here there's an easy way to sort it all out...Aw here there's an easy way to sort it all out----scrap the EU in the morning and we can all look after our own affairs and take responsibility for our own successes and failures and hopefully avoid being pushed over a cliff by incompetent Eurocrats.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-39343070725355772022016-04-01T01:13:25.199+01:002016-04-01T01:13:25.199+01:00If you want the ECB to implicitly guarantee of all...If you want the ECB to implicitly guarantee of all debt, why not simply ask every member of the EZ to hold a referendum that would read...<br /><br />Do you want to become a territory within the federal United States of Europe, with the federal government to be based in Brussels or Berlin.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-36003254673313485442016-03-31T23:07:03.010+01:002016-03-31T23:07:03.010+01:00It is easy inducing a fiscal stimulus if inflation...It is easy inducing a fiscal stimulus if inflation is low but less easy to constrain (I.e austerity) when inflation rises over target. It is at this point that monetary tightening (rate increases) becomes a better tool for managing inflation. In fact this highlights that the two need to work in tandem. It is because we have this irresponsible fiscal constraint that we need to go full throttle with money. Both levers then become useless.Nonyhttps://www.blogger.com/profile/13983385911990276771noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-43021576160487643802016-03-31T17:09:16.473+01:002016-03-31T17:09:16.473+01:00I think that fiscal policy is actually a much more...I think that fiscal policy is actually a much more straightforward way to hit an inflation target rather than relying on the more indirect effects from monetary policy. Fiscal policy allows direct injections of money to boost demand - monetary policy is less targeted. This is especially true at the lower bound where the monetary policy used is of the barely tested variety.<br /><br />I agree with you about the political will needing to be there and this part would be very difficult to achieve. Partly this is because there is not widespread agreement that there is even a problem to solve.Ari Andricopouloshttps://www.blogger.com/profile/00181838814176635218noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-71731545129226751492016-03-31T16:43:10.127+01:002016-03-31T16:43:10.127+01:00Realistically how effectively do you think individ...Realistically how effectively do you think individual states within the Eurozone can hit inflation targets? Is there ever going to be enough fiscal freedom? I think the evidence suggests that even monetary sovereigns are poor at hitting inflation targets. Personally I would include employment rates in there as a target too. Getting rid of the current stability and growth pact is obviously a good idea but I can see a lot of political resistance - pretty much the same as fiscal transfers. There just seems to be entrenched thinking against such a move. Dannyhttps://www.blogger.com/profile/09106739466558486588noreply@blogger.com