CSO BOP Seminars – Slides Post author By Philip Lane Post date February 24, 2012 The presentations from yesterday’s event can be downloaded here. There was much discussion at the event of different concepts of debt. The defining contribution on this general topic is here. Categories In Uncategorized 39 Comments on CSO BOP Seminars – Slides ← Central Bank Appoints New Chief Economist → Pillar of Salt? Two reactions to the BOI Report 39 replies on “CSO BOP Seminars – Slides” @Philip Lane Well done on yesterday. You gave an excellent presentation on what is a very difficult topic. Am I correct in thinking that Mr Soares of the ECB also mentioned that the ECB were not confident in these Net International Investment (NIIF) stats on a European level ? In other words the measurement of this is not just an Irish problem? From your talk, it would appear that international investors are measuring us against a number that many academics have little confidence in. And even if the CSO managed to get the exact number, its relevance to the Irish economy is very questionable. @Philip Split my sides laughing, second link. Helped me forget how much we are owed for a while. Thanks. Ah Tommy…… Tommy …..Tommy – I wonder if Tiernan like Fireworks are going off in the average Micks head ? – Tommy is the Preacher me thinks. A dangerous man. Tommy a half continent has to die & so give up its raw material spoils , it may be China or it may be Europe – looks like North America is leaving Dodge again…just in time. Everyone’s an economist these days! Google Ireland Ltd booked revenues of €11bn in 2010 — equivalent to 15% of Irish service exports in that year. There was a rise of €3bn in the year. – – have a sackful of salt at hand when you next hear an armchair ‘expert’ hyperventilating about services exports! Dutch FDI figures are hugely misleading. The IMF says the Netherlands was the No. 1 recipient of foreign direct investment (FDI) globally as of end-2009, but because most of the funds passed through on the way to other economies the Netherlands was also the top source of FDI, according to new data from the IMF᾽s Coordinated Direct Investment Survey (CDIS). The United States had the second-largest amount of inward and outward direct investment, followed by Luxembourg. China received the fourth-largest amount of direct investment, 45 percent of which was invested via Hong Kong. The Netherlands had a total of $3.0 trillion in inward direct investment positions and had invested $3.7 trillion in other economies as of end-2009. Luxembourg was No. 3 and like the Netherlands was largely an “in transit” destination. Both countries have special legislation that provides advantages to multinational corporations using these countries as pass-throughs. http://www.finfacts-premium.com/2012/1499/tax_havens_Netherlands_Facebook_Bono Best to have a sackful of salt at hand whoever’s hyperventilating about Irish exports. Many professional experts are just as dumb on the subject as the armchair variety. Still no thread about Mario Draghis quite extraordinary political comments. Amazing but not surprising I guess. At least the plot is in plain view anyhow. Any thoughts from the Great & the Good on this site ? Or is such thoughts Dorkish & in bad taste during these strange days. @Dork re ; Mario Draghis quite extraordinary political comments. Can you link? @Joe Its covered on the Wall Street journal but I can’t get the link – just go to Yves Smith site “Naked Capitalism” and you should get it. A man who administers a Sea of Credit and yet calls for reduced real money production / debt peonage. Central Bankers with fiscal / political blocking powers act like Gods. Much more dangerous then Tommy, this Mario Bloke. Its time to eject – why would you want to remain in this den of vipers ? @Joseph Ryan, check the two links that DOCM posted. I liked this: “Draghi: It’s hard to say if the crisis is over. Let us look at the positive changes of the last few months. There is greater stability in financial markets. Many governments have taken decisions on both fiscal consolidation and structural reforms. We have a fiscal compact where the European governments are starting to release national sovereignty for the common intent of being together. The banking system seems less fragile than it was a year ago. Some bond markets have reopened. ” ECB says that the fiscal compact is about releasing national sovereignty. And this: “Draghi: The Securities Market Program bought these bonds because the monetary policy transmission channels were broken. The purchase of these bonds was done for public interest reasons. Also people tend to forget that this money the ECB has spent is not private money. It is public money, it is taxpayers’ money and the ECB is committed to protect the taxpayers’ money.” If they are committed to protecting taxpayers money, why did they put the money at risk in the first place? @ All Herewith the links I posted. http://www.ecb.int/press/key/date/2012/html/sp120224_1.en.html http://www.ecb.int/press/key/date/2012/html/sp120224.en.html @ All Together with two others (from Colm McCarthy’s ‘Endgame?’ thread). http://blogs.reuters.com/james-saft/ http://www.ft.com/intl/cms/s/0/fed87d52-20c3-11e1-816d-00144feabdc0.html#axzz1nKWdUFMk @ Stephen Kinsella Everyone has always been an economist. Their misfortune was to forget and to farm out the task. @ All FYI http://www.bloomberg.com/video/86963542/ & why didn’t he tell the German newspaper about the upcoming fiscal union? “Draghi: I wouldn’t take such a negative view. Many things have happened in Europe in the last year and a half. You have different countries that have different initial conditions–high debt, low growth countries and countries with low debt and high growth–and they pose the fundamental question of how do we go on without being a fiscal union. We can’t have a system where you spend as you want, and then you ask to issue (debt) together. You can’t have a system where you spend and I pay for that. Before we move to a fiscal union we have to have in place a system where countries can show that they can stand on their own. And this is the prerequisite for countries to trust each other. This so-called fiscal compact treaty is actually a major political achievement because it’s the first step towards a fiscal union. It’s a treaty whereby countries release national sovereignty in order to accept common fiscal rules that are especially binding, and accept monitoring and accept to have these rules in their primary legislation so they are not easy to change. So that’s the beginning.” For a contrast in tone and content, here’s Mervyn King’s last speech. http://www.bankofengland.co.uk/publications/speeches/2012/speech541.pdf Draghi interview http://online.wsj.com/article/SB10001424052970203960804577241221244896782.html @ The Dork of Cork Here is a link to a video on the topic of national debt, gold standard, silver standard a replay of Gerald Grattan McGeer. The banks issuing debt and the Governments borrowing is an issue that is growing legs. The sub titles are in Swedish. Video: “The Secret of Oz” http://www.prudentinvestor.com/ @ All FYI the latest from the G20. http://www.bloomberg.com/news/2012-02-26/geithner-schaeuble-spar-over-sovereign-debt-crisis.html The plain speaking of the Canadian finance minister may be noted. His comments underline the fact that the crisis in the euro is of the plain old-fashioned balance of payments variety which is, in turn, the symptom of the failure to put in place a fully functioning single market, the essential concomitant of a successful single currency, further aggravated by the failure to coordinate more deeply areas of economic, fiscal, labour and social policies which remain the remit of national governments. To quote Merkel, everyone needs to “do their homework”. Herewith a reminder of the class assignment. http://www.number10.gov.uk/news/joint-letter-to-president-van-rompuy-and-president-barroso/ Off topic but some of you may be interested in this articuation of what can be wrong with ‘positive thinking’ or belief ‘in the market’ or that ‘it’ll be ok at some undetermined point in the future’. @Mickey I agree with 90% of Bill Stills full money ideas – although he does not deal with how trade can optimally function outside a countries borders under fully national non interest bearing money systems without the use of war to obtain materials. Having said that the Globalization process is a creature of international banking anyhow with particular emphasise on the control of energy systems via the Swiss / Saudi conduit and the like. The World remains a Bankers Oyster with the default process completly inverted from Edwards III Days. @DOCM re Bloomberg link on G20. “G-20 officials meeting in Mexico City are heeding U.S. calls to defer a German bid to raise fresh money for the International Monetary Fund that could be used to help defuse the crisis.” The German position of looking for IMF funds is not only flawed it is also self serving and contradictory. What Germany is essentially looking for are IMF funds that will support countries to buy its surplus, while steadfastly refusing itself to provide funds and moralising on the benefits of husbandry to countries in difficulty. In addition, that ‘homework’ letter [ http://www.number10.gov.uk/news/joint-letter-to-president-van-rompuy-and-president-barroso/%5D is the most turgid piece of rubbish that I have read in a long time. Again it is utterly illogical. Having created huge imbalances within Europe in the current single market, it now proposes to further ‘liberalise’ the European market and extend that liberalization to cover BRIC countries. The hegemony that Michael D Higgins has railed against is truly pernicious but appears to have almost total dominance. Higgins speech was a tour de force. Well worth listening to, even for people who may disagree with him. http://www2.lse.ac.uk/newsAndMedia/videoAndAudio/channels/publicLecturesAndEvents/player.aspx?id=1362 @ Joseph Ryan Thanks for the link! The joint letter may well be turgid, no doubt because it was minutely negotiated by the advisers to the twelve signatories, but it goes to the heart of the matter. The issue is not about liberalisation for the sake of it but in order to create an efficient single market. Efficient in this context means what it says on the tin; a productive use of resources for the creation of maximum employment and the elimination to the extent possible in rent-seeking in the individual economies which is inimical to the achievement of that objective. Without it, the euro cannot prevail. The issue of the depredations of an out-of-control financial system is a different one. Such a system prospers in circumstances where the lack of a properly functioning single market gives rise to major imbalances which, in turn, give rise to their destabilising creditor and debtor equivalents. The article by Colm McCarthy in the Sindo today in relation to energy is a good example of the reluctance, that is as widespread in Ireland in certain quarters as it is in Europe, to face up to the fact that if one wishes to share a single currency one must also share a single market. http://www.independent.ie/opinion/analysis/colm-mccarthy-selling-off-our-energy-businesses-makes-sense-3031782.html @ DOCM ‘The issue of the depredations of an out-of-control financial system is a different one. Such a system prospers in circumstances where the lack of a properly functioning single market gives rise to major imbalances which, in turn, give rise to their destabilising creditor and debtor equivalents.’ There was penty of predation on Wall St, so the single market, or lack of same in nEurope, has nowt to do with it. Finacialisation is endemic. @ Paul Quigley FYI (Googled more or less at random). http://newsandinsight.thomsonreuters.com/Legal/News/2011/09_-_September/First_German_MBS_suits_spell_vast_new_exposure_for_U_S__banks/ Now, I wonder how these German banks got the dollars to invest! @DOCM Still have not got a plausible explanation on how competition in natural monopolies actually work although I enjoy travelling down PD like cul de sacs as much as the average Mick. The simple truth is that the spectacular failure of deregulated energy policey has been a success for the energy monopolists who cannot make any money out of gluts as the wealth is socialised amongest the populace under those conditions – subtracting surpluses which they for some funny reason wish to call profits. There is no need to make simple economic matters complex because they are not – vertical , horizontal ,slanted , parallel ,perpendicular arguments are merely economic sexual positions for the Energy consuming Proles. The engineering maxim of keeping it simple stupid is a strange concept to our economic evangelists. http://www.youtube.com/watch?v=CaAEp3MxC0w @Joe Give us a break – Fabian Socialism is the last refuge of a Banking scoundrel. The Leprechaun is a sad little creature. @ Paul Quigley The French magazine Geo Histoire currently has an issue devoted to the “thirty glorious” years of Keynesianism 1945-75 and this gets a mention http://www.premiumorange.com/dialectikon/page14.html Lors de sa conférence de presse du 28 octobre 1966, De Gaulle répond à une question sur les marchés financiers : « La Bourse, en 1962 était exagérément bonne. En 1966, elle est exagérément mauvaise, mais vous savez, la politique de la France ne se fait pas à la corbeille. » Les journalistes applaudissent chaleureusement. De Gaulle ne marque pas une défiance de la Bourse, mais affirme simplement qu’un gouvernement ne change pas de politique en fonction de l’humeur des agents de change. He said the politics of France are not made in the trash A government does not change its policies according to the caprice of the market. And the journalists all applauded loudly. @Dork I know little of the Fabians but anybody from the left that challenges the current nonsense of the efficient markets hegemony will keep my attention for a while. @Seafoid How times have changed. The markets now dictate everything. For markets read mobile, fettered and ephemeral capital that does not accept losses. @Joseph Sorry , it was just my Inner Gaullist coming out …..I dislike those old London games. Getting back to topic…… online.wsj.com/article/BT-CO-20120118-708232.html “Europe is particularly exposed to high oil prices, as the commodity makes up a large proportion of weak European economies’ current account deficits, BAML said. According to the bank, oil imports are responsible for close to 80% of the combined current-account deficits of Italy, France, Spain, Greece and Portugal. The bank’s calculations suggest that a 10% rise in oil prices would increase these five countries’ current account deficit by a combined $21 billion.” Dork -The weakest European economies are all countries with a very low self sufficiency ratios for energy. With all of the pIigs in the same energy boat and unable to get rational oil reducing fiscal funds from the core to stop the bleeding. Energy & monetory policey are poles apart in Europe with devastating results for its victims. Rational action must be taken – with people given enough money tokens – produced to optimise the use of anti oil practises rather then stone age balance the books economics or trying to make natural utilties such as our public transport system profitable at the expense of exporting our money supply which is worse then crazy , its retarded. Medium to large sized Euro cities need to follow the Lyon example. http://www.trams-in-france.net/lyon.htm @ DOCM ‘The issue is not about liberalisation for the sake of it but in order to create an efficient single market. Efficient in this context means what it says on the tin; a productive use of resources for the creation of maximum employment and the elimination to the extent possible in rent-seeking in the individual economies which is inimical to the achievement of that objective. Without it, the euro cannot prevail. The issue of the depredations of an out-of-control financial system is a different one. Such a system prospers in circumstances where the lack of a properly functioning single market gives rise to major imbalances which, in turn, give rise to their destabilising creditor and debtor equivalent.’ You hold that there is a real economy and a financial sphere. The real economy, you say, ought to work on ‘market’ principles, which requires the removal of certain distortions which operate mainly at the national level. You recognise the serious problems in the sphere of finance, but see that a a separate problem. Keynes’ contribution was that he established that the modern economy is financial to the core, and that credit is the key to it all. The events since 2007 have ben an object lessson in that regard. One of the reasons that the ‘homework’ letter is turgid is that it is based on pre-Keynesian world view. The Dork makes the very interesting and critical connection between credit and energy, which wasn’t obvious in Keynes’ day. He is wrong, though, to disparage the President. The office is part of our republic, which was not achieved without sacrifice. The man himself is a very well read and literate academic, who wasn’t reared in luxury. No one is perfect, and Fabian socialism is a respectable political tradition. Whether it is adequate for today’s conditions is another point. The comical bit was finding Suds in the Chair. @ JR The changes post WW2 were driven by people who had experienced the 1930s and what the failure of private capital led to. “Speculator” became a dirty word. They went too far. It will happen again. They are going to tear the ar*e out of it encore. The magazine had a very interesting interview with Jacques Delors on the subject of planning. The key point about the current set up is that nobody is in charge. Look at what happened in the Irish case. Massive oversupply of housing that nobody wanted. Well done, folks. Keep it up. I’ve noticed a trend recently that many threads, irrespective of the topic/issue raised in the initial post, end up focusing on these fundamental issues about the role of markets and the boundaries of the state. These are the key questions, but the ‘grown-ups’ here seem to have little interest, appear reluctant to engage and generally prefer to avoid opportunities for sustained and considered engagement on these issues. This silence speaks volumes. @ Paul Hunt There may be an understandable reluctance to follow Dorothy up the yellow brick road to the Land of Oz. @PH, I agree with you that those issues are important, but they are hardly the only key questions. If many threads keep on focusing on these issues irrespective of the topic of the initial post, it has to be partly because you never give them a tactical rest. The constant barrage of commentary on the motivations of the main players, as opposed to the economics, can’t be encouraging for any academic economist specialising in the area who might consider dipping a toe in the water. @BCT, The advanced economies have gone through – and are still going through – an economic dislocation that, potentially, is as damaging as the Great Depression. The only reason it hasn’t been as damaging is that, unlike then, sufficient policy architecture is in place to provide some automatic and discretionary stabilisation. Ireland has had a blow-out more severe than most other advanced economies. Only in some very specific areas may economics be considered a science. It is primarily a discipline that attempts to apply the scientific method But if it doesn’t embrace political economy it has little public value. And as for providing the academic tractitioners with a ‘tactical rest’..good lord, all I’m trying to do is rouse them from their slumbers. Just keep in mind who butters the bread. PayPal is part of the liberalisation of markets as is the IFSC. The De Gaulle vision would have kept Ireland as an economic backwater. The Irish economy could have been run prudently and like Singapore had a dip in GDP but be placed to bounce back strongly when the recovery came. In Singapore, a single person is limited to an apartment of a max size. In Ireland when the capital gains tax rate was halved to 20% coupled with the introduction of 5 and 10-year interest only mortgages and a top income tax rate of over 40%, it became a ‘slam dunk’ to invest in property. The euro and the rest of the excuses are just part of the pervasive denial. @Micheal You are right Micheal , The Irish legoland economy could not have existed under De Gaulles vision. Sneems vibrant hat tip economy would have remained a economic backwater…….. @ Paul Quigley Responding to your comment; I said; ” The issue of the depredations of an out-of-control financial system is a different one. Such a system prospers in circumstances where the lack of a properly functioning single market gives rise to major imbalances which, in turn, give rise to their destabilising creditor and debtor equivalent.” You say; “You hold that there is a real economy and a financial sphere. The real economy, you say, ought to work on ‘market’ principles, which requires the removal of certain distortions which operate mainly at the national level. You recognise the serious problems in the sphere of finance, but see that a a separate problem. Keynes’ contribution was that he established that the modern economy is financial to the core, and that credit is the key to it all. The events since 2007 have been an object lesson in that regard. One of the reasons that the ‘homework’ letter is turgid is that it is based on pre-Keynesian world view”. If you read what you are quoting me as saying, you will see that I do not hold the view you attribute to me. I believe in a real economy, containing real people, manufacturing real goods and services which can be very well or very badly run, well if the factors of production are organised in the most efficient manner, badly if an economy is riddled with inefficiencies and rent-seeking activity. The point that I am making is that, if the latter is the case, it creates the context in which the modern system of financing on which every economy is dependent – no argument there – can run wild. The effect is exacerbated in a badly-designed monetary union such as the euro. You will be reassured by the fact that Paul Krugman shares your view. http://www.nytimes.com/2012/02/27/opinion/krugman-what-ails-europe.html?ref=global It is, however, an interesting juncture to consider this issue. The “homework” letter is being largely ignored by Van Rompuy in the run-up to the European Council. This is, no doubt, attributable to the electoral strategy being adopted by Sarkozy which might be summed up as “hanging on to nurse (Merkel) for fear of meeting something worse”. In desperation, he is following the German model e.g. increase in “social” VAT to ease burden on employers, introduction of short-time working, promising referendum to overcome blockages in the area of social security etc. In short, he sees himself with the teacher assigning the homework, not the pupils, and is trying to align France with the successful North rather than the failing South. Krugman does not make a very persuasive point with regard to Sweden. Were he to study the situation more closely, he would realise that Sweden did most of the “homework” required in the wake of its banking crisis (which has nothing to do with dismantling its system of a social market economy). It may also be noted that Draghi also stayed well clear of the topic, sticking to the ECB’s rather tired and all-embracing mantra of the need to remove “structural rigidities” and leaving the task where it belongs; with the governments of the EU. @ Michael Hennigan Re the butter- the big picture is that the top 1% are creaming it and have been for the last 30 years. Sooner or later it’s going to fall over. The markets don’t like an agitated public. It’s back there in the collective memory. @ DOCM Your EC political assessments are, as usual, well evidenced. I think Krugman has identified some really critical things, such as the destruction of the middle class, but I agre his take on the Euro-drama is not fine-grained enough. If I may quote you again,, re your economic approach: ‘I believe in a real economy, containing real people, manufacturing real goods and services which can be very well or very badly run, well if the factors of production are organised in the most efficient manner, badly if an economy is riddled with inefficiencies and rent-seeking activity. ‘ How can we identify inefficiencies without some model of what constitutes efficiency ? Stiglitz has a chapter in his Selected Works entitled ‘On the impossibility of informationally efficient markets’. Principal agent problems, rent seeking. monopoly practices, externalities and endemic moral hazard constitute the kind of ‘acceptable and profitable inefficiencies’ on which big business is founded. Finance has always been a slippery trade, where all of the above phenomena thrive. What has happened in the last 30 years is that financial dynamics have increasingly become the dominant global dynamic. Keynes, Fisher and Minsky were right. The externalities are ferocious now. It’s not a quesiton of ‘fixing the market’, because it’s too late for that. It’s a question of ‘fixing the economy’, which is the same as ‘fixing broken social relations’, I believe. As Pierre Bourdieu convincingly demonstrated, homo economicus is a product of history, so we probably need homo sapiens to come back for a spell. As Karl Polanyi described in his ‘Great Transformation’, it’s always been about about setting limits to markets. Elininating smaller, natiional-level rent- seekers in favour of bigger, global rent seekers will not really get us far. Comments are closed.