The Navigator Podcast Episode 21 – Brexit, Austerity and the Land Tax

 

Some Further Reading:

Brexit

Austerity
Land Tax
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2 comments

  1. Hi guys, enjoyable chat podcast 🙂

    Just wanted to add something in here.. Around the 38mins mark, you mention Modern Monetary Theory, Austerity, the ECB, and even Australian (MMT) economist Bill Mitchell, and myself as an MMT advocate/student. (nice to be mentioned 🙂 )

    The ECB has been quietly buying Euro member Gov Bonds and other securities, in order to put money into both Governments hands and the economy generally, otherwise, as the ECB and Euro elites know, the Euro would have collapsed some years ago.

    Had the ECB not bought Gov Bonds, particularly of the ‘PIGS’, and made its ‘we will do whatever it takes’, Euro Bond markets would have continued to demand ever larger (usurious) interest rates on the rather self-reinforcing basis that certain Govs would be forced to default on the Bonds. And exit/collapse the Euro as a consequence.
    Currency issuing (free gratis) central banks not only perform their ‘lender of last resort’ function for high st. banks (to prevent runs), they also perform a related function for Govs.

    Of course, such ECB issuance to buy Gov Bonds is in contravention of Article 123 of the Treaty, which stipulates no ECB (no central bank) ‘monetary financing’ of Govs is permitted. But when Bond ‘vigilantes’ began a self reinforcing spiral of increasing Italian and Spanish bond interest rates, to absurd levels, the hubris and stupidity of the Euro currency system design was exposed.

    The ECB, the EU Commission, the Bundesbank and senior German politicians all know Article 123 was de facto out of the window, or the Euro would have collapsed. But they all refuse to admit that publicly. So we are left with a de facto Eurozone wide fiscal authority, unelected, and residing in the ECB, and those who dominate its policies (Germany).

    This is the real point here – the democratic legitimacy, and the reality that ECB, EU Commission and other authorities all recognise that when economic cycles down turn, eg after a shock like 2008, there needs to be a counter cyclical actor in the economy with the finance capacity to spend and stimulate the cycle back to growth and recovery of lost jobs, output etc.

    The Euro system has just proved the necessity of this. Left to the private sector, to fend for itself, with no private entity willing to jump first and start increasing spending or investment (and risk bankruptcy), the spiral downward is inevitable.

    MMT, with the correct understanding of the monetary system and macro economy operation, predicted the Euro problem decades ago.

    What the Eurozone now needs is some economics, monetary and political honesty about the deep flaws of the system. And a public discussion about the fact that a currency issuing, politically controlled entity, to provide stimulus fiscal spending, in the event of the cyclical down turns, is essential to maintain output, stability and jobs. Otherwise, as we see with Eurozone unemployment still at a level twice that of comparable (even poorly managed) sovereign currency economies (eg US, UK, Japan), we waste €100 billion plus worth of lost output/production of real goods and services every year this mass ignorance and elite hubris persists.

    But, of course, it is always the labour class majority that bear the brunt of these losses, not the Capital owner elites who also effectively run our Govs and public institutions… so the latter appear to favour continuing the status quo, ignore the faults, have the ECB operate without legal mandate or democratic legitimacy, and do just enough to prevent collapse, but leave the labour class struggling and dying on the streets.

    Sorry for the lengthy comment, but economics education, that MMT, unfortunately exclusively, offers (as the mainstream is still utter fraud and nonsense, incl academe), is *essential*, as I hope you will realise, to make sensible political judgements and choices about our economies?

    Here is (Professor) Bill Mitchell, explaining what the ECB and EU authorities have been doing…

    http://bilbo.economicoutlook.net/blog/?p=36809

    “… The ECB has elaborate rules that present a chimera of responsibility and assurance. They are consistently violated because the rules get in the road of essential policy interventions to keep the system afloat.

    While QE has been a smokescreen and really amounts in the Eurozone case to the ECB funding government spending through the backdoor, the fact is that it has kept the Eurozone from collapsing.

    To panic that the ECB is running out of debt to purchase just goes to show how ridiculous this straitjacketed system is.

    The straitjacket only biased the system to stagnant outcomes and dramatically limits its ability to deal with economic crises.

    Eventually, the Member States will have to see sense and change the whole nonsensical system… ”

    Best wishes,
    Mike

    Liked by 1 person

    • Hi Mike, thanks for listening and commenting. I do recall you saying that the ECB buy bonds through the secondary and tertiary bond markets. However, what I was referring to here was the time of the bailout. If I’m not mistaken the bond markets had collapsed and the ECB did not start buying bonds until a few years after the bailouts. If this is untrue and I’m wrong I will happily clarify that on the next show. Great to talking to you again.

      Like

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