Alternative Economic Models and the Treaty

At one level, the Fiscal Treaty is quite a limited shift in European fiscal arrangements, especially relative to the already-agreed six pack. (This short guide is a handy reference, while the sixpack details are here.)

The headline on today’s IT op-ed by Terrence McDonough suggests that it is riskier to vote yes than to vote no.  Since controlled macroeconomic experiments are not possible, there will inevitably be differences in such assessments across economists with different economic models of the world.

McDonough’s evaluation of the balance of risks is consistent with his broader analysis of the European crisis. For instance, as reported in the Irish Times in July 2011:

AN IRISH big bang involving debt default and withdrawal from the euro is needed to take the economy out of depression, the United Left Alliance national convention was told at the weekend.

Terence McDonagh, an economist from NUI Galway, told more than 400 delegates from around the country who attended the convention in Dublin on Saturday that five measures implemented simultaneously over a 48-hour period would reinvigorate the economy.

The alliance’s forum focused on its future and how it might develop into a national party.

Formed before the last general election, the alliance comprises the Socialist Party, the People Before Profit group and the Workers and Unemployed Action Group as well as some independent members.

Prof McDonagh said he wished to propose a radical economic programme to address the economic “depression”. He said the country should default on its debt, leave the euro, build a single public bank, provide a jobs guarantee for all workers and nationalise the Corrib gas field.

By 2014, the State would owe €200 billion, €80 billion of which was to bail out the European banking system, he said.

A further €80 billion was attributable to “the elite’s refusal” to tax itself. “Irish working people and poor people cannot pay, shouldn’t have to pay and sooner or later won’t pay,” he said.

Arguments against default suggested there would not be any money in ATMs or to pay nurses or bus drivers; the solution to this was to leave the euro and print our own currency. This would take us out of the “euro madhouse” and allow us to reinflate the economy.

The creation of a new public bank, taking with it assets of existing banks, would leave behind a bad credit bank owned by shareholders, bondholders and the European Central Bank.

“If the ECB believes the bondholders should not be burned, they can pay them first,” Prof McDonagh said, to a round of applause. The Government should provide a jobs guarantee and “command unused labour resources for the common good”.

It should also purchase and develop domestic energy assets, including the Corrib gas field, he said.

I imagine that voters that share this analysis will indeed be inclined to vote No.

The set of potential No voters is of course far wider than this cohort, just as the set of potential Yes voters surely encompasses a wide range of views on the prevailing economic model and the future of Europe.

33 replies on “Alternative Economic Models and the Treaty”

Prof McDonagh said he wished to propose a radical economic programme to address the economic “depression”. He said the country should default on its debt, leave the euro, build a single public bank, provide a jobs guarantee for all workers and nationalise the Corrib gas field.

i wonder where the cash will come from?

Makes a lot of sense to me, I’ve left this elsewhere:

That certainly is a must read. Its a fine article by Terrence McDonough professor of economics at NUI Galway

Let me go through a number of the points he raises:

“A fourth possibility is the restructuring of debt. The Anglo-Irish promissory note payments alone constitute €3 billion in any given year. Most commentators outside Ireland believe restructuring of some sort will eventually take place in any event.”

This is the most disgraceful aspect of the Compact. The Irish negotiating team have been humiliated in negotiations on any attempt to have this written down. Latest news on this is the possibility of an EFSF bond to replace ELA/PN but the view is extended maturity dates and lower annual cost will nevertheless be offset by a higher overall cost than the current ELA/PN arrangements. They will probably mid May try to bribe taxpayers with this news mid May. The whole odious debt of the IBRC mess should be written off by EFSF.

“A fifth, under-discussed, possibility is the issuance of innovative debt instruments. It would be possible to make Irish bonds acceptable in payment of taxes in the event of any default. This should eliminate the risk premium which makes it difficult for Ireland to re-enter the markets at this time.”

Excellent suggestion that could potentially release a huge quantity of savings that wont be spent in the economy otherwise

” The implementation of the 0.5 per cent structural deficit rule in the new treaty is considerably more stringent than any of the existing “six-pack” regulations, which are themselves unwise. Eventually, a shortage of government bonds will emerge, forcing conservative investors such as pension funds into less safe investments, risking the reappearance of dangerous asset bubbles.”

All these rules are driven by bankers with hair shirts making sure to get their money back. They can all be reduced on one rule, spend less and give us the savings you make on this in the form of interest on the loans you currently have or on those we can foolishly persuade you to take out to pay back your previous loans

“2. Debt should be 60 per cent of GDP. If debt is greater than 60 per cent, it will be reduced by 1/20 per year over the next 20 years. This would start in 2018, when the bailout terms expire, and could require up to €5 billion a year in savings to 2038.”

I’m sorry, but I’m afraid the version of Orwell’s Newspeak, deliberately impoverished language, practiced by FG/LB and the Y campaign means we cannot speak of that. We cannot describe the target of the €5 billion in 2018. Some have said in 2018, having dried the marrow from the bone of the taxpayers, the IFSC and Corporation Tax will then be raised, but discussion on this is verboten.

“The “common sense” regarding the fiscal treaty retailed by the Government is at direct right angles to reality. There will be no disaster in the event of the need for a second bailout. It is the adoption of the budget provisions of the treaty which is a risky and perilous experiment.”

Why is prof Terrence McDonough not negotiating our bailout? Why are people like Michael O Leary relegated to the sidelines. We have the blind leading the blind in official Ireland who got us into the mess making a bigger mess of getting out of it. Now the same lot are making a bigger mess than the ‘guarantee’ and are giving away the keys to the Constitution ? The bankers even have the European Court of Justice turned into a bailiff !

Its long past the time to leave the euro mess behind !

As to where the money would come from?

I would call this the “Ireland Fund”. List of participants could be quite long:

1. IMF
2. UK
3. US
4. Canada
5. Russia
6. China
7. Norway
8. Sweden
9. International Bank for Reconstruction and Development
10. Bank for International Settlements

Negotiations would take place on debt write down with the ECB.

As soon as you raise the above with the ECB, they’ll race to offer write down of IBRC debt or try to persuade you, you don’t understand the capital flows a 15 yr old can understand. Just tell them the Irish Constitution is not for sale and they need to take their hands off it 🙂

“Since controlled macroeconomic experiments are not possible, there will inevitably be differences in …assessments [of the Fiscal Treaty] across economists with different economic models of the world.”

Tolerance, deference and politeness are indeed wonderful attributes that should be encouraged – and encouraged to flourish. But, even in the absence of controlled macroeconomic experiments, if economics is to have any standing as a discipline it has to involve a continuing process to assess the relevance and validity of competing models with a view to winnowing out those that fail to exhibit sufficient relevance and validity and to refining and modifying those that do – thereby expanding the accepted body of tested theory and practice.

Otherwise it is just a multi-sect, occasionally fractious, but generally politely conducted, religion – with pretensions to guide and influence the body politic. Much like the Church of England used to be.

This, I fear, is what the academic practise of economics in Ireland has become. As well as providing a convenient veneer of respectability behind which the political classes and sectional economic interests can play their self-serving games, it has also become their plaything.

While I have syspathy with ssome of Terence McDonogh’s argument, particularly “the elite’s refusal” to tax itself”, he needs to get his facts correct.

The quote from today IrTimes below could hardly be correct. A possibility of €5billion per year ‘savings’ required between 2018 and 2038. That means total ‘savings’ of 100billion over 20 years!!

“2. Debt should be 60 per cent of GDP. If debt is greater than 60 per cent, it will be reduced by 1/20 per year over the next 20 years. This would start in 2018, when the bailout terms expire, and could require up to €5 billion a year in savings to 2038.”

That said, let us not pretent that exit from the euro and default (on the banking portion of State debt) or policy driven continental economic collapse are beyond the realms of possibility.
In fact it is policy driven continental economics that is already driving us, together with other European economies, closer to the edge.

There are so many holes in Prof. McDonough’s argument that it is hard to know where to start. I see Prof. Lane has declined even to attempt the task, pointing us instead to evidence of McD’s “loony left” viewpoints in general.

But to engage more substantively with the points being argued:

1. Unless the EU as whole does a complete volte face on the wording and spirit of the new Treaties, we will have a much harder time getting new money if we vote no. It’s not impossible – the EU specialises in “solving” unsolvable problems – but we’ll have a harder time of it, and will probably have to undergo some further ritual humiliation before we get there. Corporation tax, anyone?

2. Whatever about legalities and formalities and procedures, we have zero chance of getting access to IMF funds, absent agreement from the large EU States who bankroll it. And they will simply not agree if this is a way of sidestepping the ESM Treaty – why should they?

3. “Partially closing the budget deficit” – you mean extra up-front austerity to correct the deficit? Sounds like a good idea – in fact the Fiscal Advisory Council has advocated the same – but doing it all on tax while sparing social welfare and other State beneficiaries seems fanciful. To close an Excehquer deficit of €18.6bn (2012 figure) in one or two years is perhaps do-able, if Attila the Hun or Morgan Kelly takes the reins in Merrion St, but even Attila couldn’t suppress the ensuing uprising if he went after tax alone.

4. The implementation of the 0.5 per cent structural deficit rule in the new treaty is NOT considerably more stringent than the existing “six-pack” regulations. It is just a re-statement of what is contained in the regulations. Just follow the links provided by Prof. Lane to see for yourself.

5. “€5bn a year in savings up to 2038” – this makes no economic or mathematical sense, and can only be put down to an ecstatic flight of scaremongering. As soon as the debt ratio has stabilised, and our primary deficit is at an appropriate level – by around the year 2019 on current projections – debt dynamics mean that the debt ratio will come down of its own accord without recourse to additional savings effort.

That’s it, I’ve run out of energy for now.

chance –
will not get

@Con Moriarty,

Unlike other better-governed polities there is long tradition in Ireland of ‘Official Ireland’ suppressing adversarial disputation based on facts, evidence and analysis. Such adversarial disputation is permitted only in civil court cases and, to some extent, during election campaigns and in industrial disputes. It hardly ever arises in the faux ‘debates’ that take place in the Oireachtas, is specifically excluded in any of these wonderful ‘public consultations’ on policy formulation and regulatory and is almost verboten in ‘public debates’ involving our ‘opinion formers’ or ‘public intellectuals’.

Instead we get round after round of shadow-boxing, shape-throwing and, occasionally, subtle, cunning, but plausibly deniable, ad hominem invective which masquerades for the real thing.

Is it any wonder that the Irish economy has been brought to its knees twice in one generation – largely caused by totally inept domestic economic and regulatory policies (with entirely predictable economic consequences) – when so many with knowledge and competence remained silent, hid their insights in academic-speak in broad daylight, or murmered ‘sotto voce’ behind the scenes? Despite the economic expertise available in the public domain – much of it highly voluble since the balloon went up, is it not significant that it was an academic economic historian – not understtod to be focusing on recent histiry – who called the emerging debacle? Is it any surprise that there is a total unwillingness among our ‘public intellectuals’ to address the microeconomic structural reforms that are required or the refroms required in the institutions and procesures of governance?

I fear you will find you’re wasting your time here. Official Ireland is set up on its course. It will only alter this when another, entirely predictable ‘car crash’ occurs. And then we’ll get the usual blind panic similar to that which delivered unto us the blanket bank guarantee.

The inability to learn and adapt is particularly dispiriting. All we’re with is the resilience and good sense of a majority of citizens. And these are being ground down and negated by the self-serving antics of those who have a duty to serve them.

@ Paul Hunt

I think Professor Lane’s quoting of Prof McDonough didn’t really need any additional explanation or comments. Such beliefs as a “jobs guarantee” are quite extreme, and nationalisation of Corrib seem more at home in Argentina, Venezuela and Bolivia at the moment. A fantastic post.


Returning to today’s Op-Ed in the Irish Times by Terrence McDonough ….. as distinct from the swerve-ball tossed in by Philip Lane …. (well, economists do differ … )

I find this Op-Ed most useful, and as noted in the previous ‘Funding’ thread posted by Seamus Coffey, in firmly debunking the FG/FF/LP line that voting NO to the Fiscal Corset (as der Spiegel puts it) will automatically remove access to European funding post 2013.

In last night’s Vincent Browne debate this ESM line, based on the politics of emotional fearmongering, was the clear strategy of both X-Minister Martin (who clearly won the hectoring debate) and Minister Coveney (who made not a single substantive comment on the actual content/substance of the kompact).

Pragmatic realism, in this debate, was most evident from Mary Lou McDonald of Sinn Fein. It is quite simply inconceivable that the EC and ECB would allow Ireland to default due to the shortage of a few billion in 2014 – particularly as there is a fairly large BOND to refinance – and we surely know by now how the ECB reacts to paying bondholders.

Returning to the swerve-ball:

On Irish citizens forced to pay off private debts +1
On the Irish upper-echelons paying insufficient tax +1

On Leaving the Euro NO – but it remains an option if the lunacy of unsustainable debt due to Financial System dumping and the DebtSpiral due to the ill-considered Fiscal Corset makes such a move inevitable.

@ Con Moriarty,

Re 5 and your problem re the mathematics of ¢5bn adjustment.

Here’s some Math:

“Say, Ireland’s debt/GDP ratio peaks at 120% GDP (I am rounding up the actual forecasts here). Under ‘interpreted’ adjustment mechanism, we would be expected to reduce the overall debt by 1/20th of 120% minus 60% or by 3% of GDP in year one. Under the actual Treaty, we are expected to reduce it by 1/20th of 120% or 6% of GDP in year one. Say our GDP is 175 billion in that year. Under interpreted rule, we have to find €5.25 billion to reduce debt levels, under actual Treaty language, we are expected to come up with €10.5 billion. To put this into perspective, the average level of gross investment in the Irish economy is forecast by the IMF to be around 10%pa between 2012 and 2017 or ca €17.5 billion under above assumptions. This means that the Fiscal Compact adjustment path would take out 60 percent of the entire annual investment in the economy. That is hardly a chop-change of a difference. ”

Now, tell me where the ¢5bn will be taken from? Plus I’m crossing fingers that Gurdgiev/Matthews are not stretching their interpretation and its not double that.

Re 4, “NOT considerably more stringent” maybe you are not familiar with the new bespoke terms of The Treaty that give powers to The European Court of Justice to impose fines and who knows what else if its rules are set aside.

Re 3, Thats just a gross misinterpretation of McDonough’s points. He’s advocating a multi point set of joined up approaches including taxation but while top earners
take the brunt of taxation ‘while sparing social welfare and other State beneficiaries’ though this makes sense, is simply not made in the article. I presume he means reversing the current 1:2:3 proportionality of expense born for the austerity with the figure 1 being taxpayers and social welfare beneficiaries, with a reverse switch to a more appropriate top earners being asked to take the brunt of it. Official Ireland have passed on the bill for it sofar.

Re 2, Your argument is fallacious and shows lack of knowledge of how the IMF works. IMF is composed of 188 countries that belong to it. If your argument were good, Argentina would not have gotten bailout. Outside the euro, Ireland will be able to apply for funding .

Re 1,

Consider Corporation Tax already gone if the treaty is ratified. There is no other source of funding I can see that Ireland can draw upon to pay the penal terms of its current bailout.

Frankly, opportunity for bailout has been squandered by the present incumbents. There is no alternative but to leave the mess of the euro. The blind man cap in hand approach has not yielded results for Irish taxpayers.

The Compact is insurance European bankers get their money back. Vote No and don’t let them get their hands on your constitution or you’ll be losing much more than your Corporation Tax.

It is a bit disingenuous of Terrence McDonough as a Marxist economist to state the “no” case in the mainstream framework that he adopts in recent radio/tv interviews. The Marxist view is in favor of the current system collapsing, in order to usher in the Workers Paradise Version 7.0. Many of his listeners misunderstand his message, that he is advocating a collapse followed by a rebirth.

@Gregory Connor

I was wondering who would be first with the ‘reds under the bed’ …..

True to form Gregory!

Do you wish to challenge any of the potential sources of funding suggested by Terrence McDonough?

Do you wish, or are you competent, to justify the social scientific validity of the key constraints within the so called Fiscal Compact – 0.5, 60.0, 1/20 – based on empirical evidence and any plausible economic thought/theory in the traditions of Marx or Smith?

@ Colm,

The “Math” you provide is largely irrelevant. Ireland will be subject to the numerical requirement of the debt brake rule three years after we leave the excessive deficit procedure. At present it is forecast that the deficit will fall below the 3% level in 2015 so it will be three years after that, at the earliest, when the rule applies.

We don’t have projections out to 2018 and even if we did there would be little point in putting much weight on them. In the medium term the debt ratio is expected to peak at just above 120% of GDP in 2013 and fall gradually from there.

Let’s assume it has fallen to 110% of GDP by 2018 and further assume that nominal GDP in €200 billion so the stock of debt would be €220 billion. These are only for illustrative purposes.

Anyway, under the debt brake rule country’s much reduce the excess over the 60% threshold by 1/20th per year (this is calculated as an average over a three-year period). On a single year basis a country with a debt ratio of 110% needs to reduce it to 107.5% of GDP the following year.

With a balanced budget (keeping the stock of debt at €220 billion) this can be satisfied with a nominal GDP of €204.65 billion. In the first year the country can satisfy the rule with a balanced budget and nominal growth of around 2.3%. If inflation is at the ECB’s target of 2% this can be achieved with real growth of around 0.3%.

It is only in the case of zero nominal growth that the debt reduction you refer to is possible and 215/200 = 1.075. I think it is highly unlikely that nominal growth would be zero in 2018 and even more so over a three year period.

Also note that the country doesn’t necessarily have to hit the debt reduction target but merely has to budget credibly to do so. If there are factors outside the government’s control that cause them to meet the target they just try again the following year and do not have to make up the shortfall.

The regulation which gives effect to the debt reduction rule (1177/2011) also states that:

“In implementing the debt ratio adjustment benchmark, account shall be taken of the influence of the cycle on the pace of debt reduction.”

The €5 billion number has little basis in reality. And whether it could be double that is even further removed from reality. The numerical requirement is in relation to the excess over the 60% of GDP threshold not the full amount of the debt.

a little more from Seamus Coffey arising from the previous ‘Funding’ Thread … and relevant here

‘Today Irish Times carries an opinion piece from Prof. Terence McDonough of NUIG on the Treaty on Stability, Cooperation and Governance. It is headed ‘Treaty not a safe option but a perilous experiment’.

I agree with some the article says in relation to the funding options available to Ireland in the event of a ‘No’ vote. Towards the end of the article there is a summary of “what’s on the table” in four points. There are a number of parts in this list that I disagree with.

Read on:

@Mr. Bond,

I agree, but a subtle, though effective, debunking of this economic nonsense here is one thing. A more forthright debunking in the mainstream media, where I supect some voters are on the look out for some sense and guidance and might be enticed by this confection, is quite another.

But it’s not the done thing, you see, old boy.

I can keep pointing out the economic illiteracy and the strategic lunacy of this stuff until I’m blue in the face, but it won’t make a blind bit of difference.

Tut Tut.
Come the Autarkical Armageddon (Double-A rated of course) toiling in the future paradise plantations of the “Sunny South East”-I for one welcome that The Good Prof. will be harnessing all his expertise precisely to “command unused labour resources for the common good”:

(2005) “Placing Ireland in socially responsible networks of global banana production?”.

(2005) “Bananas Ethical Quality: Multi-stakeholders, Corporate Social Responsibility and Corporate Governance”

(2005) “The Banana Business: Transforming Brands And Labour Relations Through Green Social Responsibility”.

(2006) “Chiquita Brands and the banana business: brands and labour relations transformations”

(2004) “Banana Wars: Multi-stakeholders and Corporate Governance”

I have an national (Irish identity) and a European one, probably like a lot of my peers in Ireland, and certainly like my work colleagues (in Brussels in the Institutions).

The fiscal treaty is a strange beast, as it opens up a conflict between them. For all the reasons put out here frequently, I think that the treaty is on balance positive for Ireland. Therefore as an Irish citizen I would vote for it.

However, as a European citizen, and interested in the effective funtioing of the European polity, I think it is a mess, a dogs dinner, and will inevitably undermine the European project in the future.

If you believe that Irish rejection would lead to a rethink about the correct approach across the EU – vote NO. Ireland can be a trailblazer, and you can put the EU’s wider interests first. If you think that Ireland should look after its own narrow interest, vote YES.

We are truly in a prisoners dilema (and our fellow prisoners probably believe that the morally right thing to do is for everyone to confess their sins — see Kevin’s post)

@ Con

“2. Whatever about legalities and formalities and procedures, we have zero chance of getting access to IMF funds, absent agreement from the large EU States who bankroll it. And they will simply not agree if this is a way of sidestepping the ESM Treaty – why should they? ”

I would suggest this betrays a certain naivety as to how the IMF works if you think there is a “zero” chance of of getting access these funds absent the ESM back up. The IMF’s primary role is ensure the creditors it represents through the fund are reimbursed. It is an adjunct to the World Bank which is always controlled by the USA, the number 2 of the IMF is ALWAYS an American notwithstanding the director is a rotating 5 year role but the number 2 carriers a lot of power. Germany and France combined have just 10% voting rights in the IMF. It would seem politically inconcievable that Ireland would be denied IMF support given the funds history of throwing cash for the last 40 years at warlords and dictators throughout the southern hemisphere. There would undoubtedly be a price pay for bringing these guys on board but if it means you can write off (and I deliberately use that word as opposed to default – why not if private creditor debt can legitimately be called sovereign debt we can all play word games) 60% of your debt in one swoop then a higher rate to finance getting our fiscal budgets in order over a 5-10 year period will be well worth while….it is a complete nonsense to suggest that markets will never trust the Irish again. If we get our finances in order there will be no shortage of well priced financing available on the international market.

@ Seamus,

re “The €5 billion number has little basis in reality. And whether it could be double that is even further removed from reality. The numerical requirement is in relation to the excess over the 60% of GDP threshold not the full amount of the debt.”

I agree the 60% is not to be applied to the full amount. The figures from Mathews I quoted were based on the interpreted amount:

“Under the actual Treaty, we are expected to reduce it by 1/20th of 120% or 6% of GDP in year one. Say our GDP is 175 billion in that year. Under interpreted rule, we have to find €5.25 billion to reduce debt levels, ”

Re: “Let’s assume it has fallen to 110% of GDP by 2018”

No, Lets not assume that. The agreed figures among commentators eg Gurdgiev, Mathews, Whelan is debt peaking at 120% In fact, according to current estimates given by IMF at growth of .5% our debt levels will rise to unsustainable levels.

But I know you are trying to put the best gloss on this. This ‘soft landing approach’
proved many commentators wrong in earlier years. I would point out that commentators during the boom seeing increasing GNP, eg have a look at the following fascinating document, which makes the error of attributing growth to the presence of the multi nationals, globalisation and membership of the euro and argues growth has nothing to do with a property bubble.


Unemployment in 1999 was at 6%, GNP was 6.5% having scored over 6% for the previous 5 years.

But I agree, but from another perspective, that ¢5 bn above is unlikely to be enforced by the troika. The reason is ECB has so watered down its own Treaty as to allow all members to interpret it in their own way including the future ESM committee. The excessive deficit procedure can be watered away by the levels of debt you carry:-)

(13) Implementing the existing excessive deficit procedure on the basis of both the deficit criterion and the debt criterion requires a numerical benchmark, which takes into account the business cycle, against which to assess whether the ratio of the government debt to gross domestic product (GDP) is sufficiently diminishing and is approaching the reference value at a satisfactory pace. A transitional period should be introduced in order to allow Member States subject to an excessive deficit procedure at the date of adoption of this Regulation to adapt their policies to the numerical benchmark for debt reduction. This should also apply to Member States which are subject to a Union or International Monetary Fund adjustment programme. existence of an excessive deficit, which should take into account the whole range of relevant factors covered by the Commission’s report under Article 126(3) TFEU. In particular, the assessment of the effect of the cycle and the composition of the stock-flow adjustment on debt developments may be sufficient to avoid that the existence of an excessive deficit be established on the basis of the debt criterion.

(20) In assessing the case for an extension of the deadline for correcting the excessive deficit, particular consideration should be given to severe economic downturns in the euro area or in the Union as a whole, provided that this does not endanger fiscal sustainability in the medium term.

The problem is really one of interpretation. In my view, the ¢5 billion is an interpretation that the facts outlined above support. However, depending on ‘the kindness of strangers’ (13) above could be invoked.

The probability is with growth rates at .7% and debt peak forecasts of 120% and the treat to the stability of the European financial system this represents, the ECB will invoke a form of economic cryogenics to suit Ireland as Ireland is sent into a state of unconscious immobility. They’ll keep it on life support while they toy with wrestling away corporation tax, or other trophies, asset sale sell offs, as the economic remains of this country are slowly absorbed into the core.

They should be told to keep their hands off our constitution. We’ll show how mature and enterprising we really are by leaving the euro; or, we are so eager to impress our bailiffs that we are unable to stand up for ourselves, give them a blank cheque to write in how much we owe them, in order to win their approval and comply with the Borg bankers whose unelected committees of private financial interests control the EU 🙂

@ Gregory

I find the label you of Marxist you give to McDonough rather quaint and endearing.
I’m see myself as a free market capitalist democrat and support his views. In my view, the ‘right’ has now become ‘left’ as they support a plutocratic, soviet style rouble currency the euro is turning into with the same divisions and similar disdain for democracy.

Guys I do not give Terence McDonough the label of Marxist economist — that is the label he gives himself.

@ Colm

Seamus’ point is rather simple – as long as nominal growth is 2.3% or more, no money needs to be “taken out” of the economy at all. Gurdgievs figures and his interpretation of the 1/20th rule which Karl Whelan has actually taken issue with to some degree this week, only make sense in a zero nominal growth scenario.The IMF sees a long term structural nominal growth rate of around 5% for your guide.

@ Seamus

Many thanks for putting the 1/20th issue to bed once and for all

Ireland of course……. base money.
Although I have my doubts about nationalising the Corrib – we simply don’t have the expertise.
It would be like the Brits declaring they want to build Nukes again – on their own.
All their collage grads are into advertising & stuff now.
Apart from some boutique manufucturing in the core The West has essentially deindustrialized.
I would stick to building railways for the moment – at least until we return to early 20th century Industrial capacity levels.
Remember they ain’t building the Titanic II in Belfast.

@Gregory Connor

Do you wish to challenge any of the potential sources of funding suggested by Terrence McDonough?

Do you wish, or are you competent, to justify the social scientific validity of the key constraints within the so called Fiscal Compact – 0.5, 60.0, 1/20 – based on empirical evidence and any plausible economic thought/theory in the traditions of Marx or Smith?

Feel free to label yourself as an XXXXX economist.

PS .
If the BoE keeps doing what its doing shipbuilding will eventually come back to the Clyde & Lagan but it takes time to build from such a broken base.

DeGlobalization is only a matter of time.
South Korea could be in a spot of bother withen 10 years.

Yes on the how of the 1/20th. it does tend to confuse.

But does it have any social scientific economic validity whatsoever; or is it merely arbitrary as imposed by a certain power elite at a particular point in time? Unless informed otherwise, by an economist of standing and form (marxist, keynesian, institutionalist, developmental, minskyite, etc etc etc) I must assume the latter.

WRT the the odious vichy_financial system debt – and following Oscar Wilde – we get done twice – once on the way up and then again on the way down …

@ Taghin

In case you haven’t seen this, watch yesterday’s Milken Institute debate. Some good contributions. Most interesting is Hugh Hendry from 12.05 to just after 16.

He pops up at 45.55 and 52.40. Not sure the US will allow parity between the $ and the Euro as he says…..although the euro is likely to depreciate from where it is now (the world of fx experts have been consistently wrong on $ /Euro over the last years).

Then, 1.02 also.

“We have reached a profound point in economic history where the truth is unpalatable to the political class – and that truth is that the scale and magnitude of the problem is larger than their ability to respond – and it terrifies them.”

Finally at 1:10:10 – “we are single-digit years away from the most profound market clearing moment”

@ Bond

Re “as long as nominal growth is 2.3% or more,”

And growth for this year is projected to be, 0.7%

And unsustainable growth re IMF is, 0.5%

The game is up, we’ve had these bloated figures re growth to justify the setting up of NAMA, the penal bailouts, and now the same delusory figures contradicted by our own short term growth rates, growths in the EA, all pure, undistilled, nonsense.

But, we all need a good laugh, show me where these growth figures are to come from 🙂 By the way, don’t mention these growth rates to the troika or they’ll be expecting a bigger payoff and a faster one when we try to renegotiate that EFSF bond coming down the line mid May. All growth will be sucked out to stifle your growth with our Treaty of Versailles Compact.

If we leave the euro, we’ll get them; but only if we leave the euro.

@ Colm

Here are the IMF’s projections for Ireland from 2012 to 2017. As you seem to put such weight in their projections for real growth it might be useful to cast your eye over the full gamut.

They have the debt declining from 2013 and indicate it will be 109.2% of GDP by 2017. The downward trajectory suggests it would be even lower if a 2018 projection was available. I was actually being a bit cautious in using a figure of 110% for 2018 rather than trying to put a bit of ‘gloss’ on it.

Here are the IMF’s projections for nominal growth over the same time period.

2012: 1.9%
2013: 3.2%
2014: 4.1%
2015: 4.5%
2016: 4.5%
2017: 4.5%

I have no idea what the actual outcome will be but based on this pattern, assuming a nominal growth rate of 2.3% in 2018 is not an outlandish claim to make. If you are going to debate the figures please try to use the correct ones.

“Why the Eurozone is destined to fail…”

Bill Mitchell

To quote former central banker, Prof of International Finance & widely regarded expert on monetary systems:

“Academically, MMT has never been challenged. From what I study on it, they are right.”

So, vote yes for more failure, or no to demand a thorough rethink of the entire monetary union.

And, economists of, stop shuffling the fecking deckchairs & start addressing the real issues.

@Student of “Q”

waiting … patiently … don’t really need a book … a few paragraphs will do – a few simple enough equations – four or five key citations – nothing too fancy … the usual professorial back of the envelope stuff … you can even toss in the ol’ “do not cite without permission” or even “an anonymous professorial source” – just something to lend some credence, however dubious and ontologically challenged, to the actual economics of the situation ….

Comments are closed.