This is a very powerful piece with which it is almost impossible to take issue. Unfortunately, the conclusion with regard to the future trajectory of Hollande is unlikely to be borne out. The sad fact is that France has Scandinavian levels of state spending but not those of social organisation. Germany is somewhat better placed because of a large export sector but at the cost of a completely skewed income distribution.
These problems will first have to be resolved.
Gideon Rachman’s comment linked to on the other thread is also pertinent.
“A foolish consistency is the hobgoblin of little minds, adored by little statesmen and philosophers and divines. With consistency a great soul has simply nothing to do. He may as well concern himself with his shadow on the wall. Speak what you think now in hard words, and to-morrow speak what to-morrow thinks in hard words again, though it contradict every thing you said to-day. — ‘Ah, so you shall be sure to be misunderstood.’ — Is it so bad, then, to be misunderstood? Pythagoras was misunderstood, and Socrates, and Jesus, and Luther, and Copernicus, and Galileo, and Newton, and every pure and wise spirit that ever took flesh. To be great is to be misunderstood”. (Ralph Waldo Emerson)/
I think Sachs was bitch slapped all over the Newsnight shop by some Glaswegian thug.
Adam Curtis figured him out pretty good already.
But the Euro is always good for a laugh.
Jens Weidmann does that strange German comedy act pretty well anyhow.
FT :Monetary policy is no panacea for Europe’s ills……….
“For example, the funding of banks that are not financially sound or against inadequate collateral would shift substantial risks between national taxpayers. Such implicit transfers are therefore beyond the mandate of the eurozome’s central banks. Rescuing banks using taxpayers’ money is something that can only be decided by national parliaments.”
Did Noonan get that letter of comfort signed in the Dail first ?, I can’t remember now but I could not give a toss really.
Look lads you can’t build a Euro empire if you perist in extracting a userous rate from the medium of exchange.
I mean the Anglo boys like doing that too and all but when their ass is on the line…..
I’m off to the pub for a quick one.
We could recognize the source of the problem being that banks create the money supply through loans and so every euro has a corresponding debt. Banks delete this money as loan repayments are processed also and reducing debt reduces the money supply by the same amount.
While we’ve had this system for a long time we’re finally at the point where mortgages take two incomes 30 years to repay and cannot increase further.
We will have to start discussing the fundamentals of how modern money is created ad deleted before we get significant recovery.
@ PF: “We will have to start discussing the fundamentals of how modern money is created ad deleted before we get significant recovery.”
Most folk don’t do fundamentals Paul. So not much hope there. Recovery (as most folk attempt to understand it) is not going to occur. Its that simple. Its that blunt. Yes, there will be some faux recoverii – but they will only benefit those folk who can siphon off some of the cash flow stream that passes them. The rest will wither.
Why has no ‘recovery’ occurred to date – other than in false statistical reports? The suckers who bought into the consumer boom – using their future incomes to pay for their stupidity, have current incomes which are inadequate. So, they re-trench. And this re-trenching process is set to go on for a long time. Until we notice that out aggregate economic activity is close to 1970s levels.
Undderstanding fundamentals means you need to read, and read, and read. How many folk do that on a daily basis?
The truism remains that it is not possible to create growth by political fiat or, for that matter, treaty clause.
Still, all signs point to a new EU growth initiative over the summer. This would include increased infrastructure lending by the European Investment Bank, increased structural funding and new moves to prise open closed sectors of the economy.
Yet this is notoriously difficult territory. There’s been no end of failed growth plans in the past, all of them accompanied by solemn promises and supposedly rigorous procedures to ensure ambitious targets were met. Dust gathered instead.
When it comes to the really difficult stuff – like facing down entrenched vested interests – governments tend to proceed their merry way down easy street.
I see your point but I think there are many people who read a lot about the crisis and especially economists. After all conventional roads to recovery have been debated and exhausted surely a look at the fundamentals will happen.
There does seem to be a growing appreciation for the money creation process and how every euro has a corresponding debt. There’s less appreciation for how money is deleted through loan repayments but hopefully that will change too.
“When it comes to the really difficult stuff – like facing down entrenched vested interests – governments tend to proceed their merry way down easy street.”
It’s the same everywhere, but Ireland is more notorious than most. I am frequently asked to be specific on the sectors, actions and reforms. Sometimes this is a genuine request; mostly its simply a disingenuous, cunning reaction from the ranks of the pampered. Ireland is so darned small that getting into detail would involve, if not actually naming names, targeting actors who would be clearly identifiable. Everyone has a divine right to their ‘good name’ in Ireland after all. This most certainly was a factor in the defeat of the Oireachtas Inquiries ‘Abbeylara’ amendment referendum.
I have absolutely no desire to put Philip Lane and his colleagues at risk of a libel action – because that is the weapon of choice of the well-heeled and well-entrenched. I doubt he would consent to publishing anything I were to draft of this nature and if he were I doubt he would be prepared to defend it as robustly as I would. Personally I wouldn’t care, because what would come out in contesting such an action would have a better than sporting chance of defeating it.
It speaks volumes about the emptiness of the democratic process in Ireland, that adversarial disputation, based on facts, evidence and analysis, about the nature of the structural reforms required is impossible outside the remit of judicial or quasi-judicial procedures. What passes for ‘debate’ in the Oireachtas, via ‘public consultations’ or the outputs of statutory bodeis or review groups or task forces, in the media or in the blogosphere is just so much hot air.
I can understand why our leading economists are reluctant to engage. But they also fail to see major deficiencies in thier discipline. Their narrow neoclassical microeconomic mindset leaves them with little of use to say. And the macroeconomists persist in thier search for silver bullets.
This crisis has been more than 30 years in the making, economic structures and pattersn of behvaiour at the micro level have altered out of all recognition in this time. Many mainstream economists have been well rewarded as useful idiots assisting this transformation. It will be a long haul to re-balance seriously out of balance economies – and almost all are out of balance in their own idiosyncratic ways.
A bit of honesty and hard graft are required over a long period. But who’d willingly opt for that, when, for the left, there are opportunities to raid, tax and spend, and, for the others comfortably ensconced, it could be distinctly uncomfortable?
Theres one major problem with Ireland at the moment – people don’t have enough tokens in their pocket to use the public transport available now , although they should be building for the future Punt Ireland.
Anyway undergrounds are becoming unfashionable these days chiefly because of their cost.
Besides if you think the private car is going the way of the dodo – whats the point of a underground ?
I say stick tram tracks on the surface of those empty roads.
Our transport infrastruture should orbit the British Tram / narrow gauge network of 100 years ago.
Putting down rails on intact victorian lines is cheap in comparison to road build.
Extend the Green line further south a bit.
Its terminus badly needs to end at a major population centre (Shankill ?)
Sachs is onto something, but he hasn’t quite got there. Indeed its not simple a matter of growth versus austerity. There’s something rotten in the state of Denmark, its the banking system:
“German politicians have refused to acknowledge the role of the unregulated German banks in creating Europe’s boom and bust. If they acknowledged the role of the German banks in this mess, the politicians would be under more pressure to recapitalize the banks.”
But then he’s lost the trail and gone in random pursuit of ‘recapitalising’ the banks and….
“Structuralists call for increased public spending paid for with tax increases rather than deficits, to increase the role of government in education, jobs, and banking recapitalisation.”
I don’t think Sachs has fully grasped the extent and depth of the problems in the European banking system.
No proper solution to the banking crisis in Europe has yet been found. Inflating away the problem will not inflate away the problem In a world of freely floating currencies breathing in inflation would erode confidence in the euro and hasten its demise.
Austerity and the deficit problems of EMU members do need to be addressed, but in themselves they will not cure the debt problems locked into the european banking system. LTRO has papered over the cracks and dimmed the problem on the sovereign side to some extent, but lending is not taking place, the generators in the engine room of the Titanic are largely compromised if not shutting down.
I believe there is discussion about a european banking union that would operate similar to the FED with I presume the ECB’s equivalent of Fed’s FOMC being the ECB’s ESM. The political obstacles to this are tremendous. The devastation wreaked by the breaking up of the euro banking system as democracies are sucked into the hole of the private banking system of the euro, would be tremendous.
An orderly break up of the euro is best. Greece, Ireland, Portugal and Spain are leading candidates for state backed, independent public banking systems that should focus on employment and the real economy, instead of band aid for a virtual banking system that has sucked blood from the EA peripheral economies until there is no blood left.
Confronting the debt based problems of the European banking system would amount to default on a massive scale. Austerity, growth and “Structuralists call for increased public spending paid for with tax increases ” cannot be used to merely pay off debt thats become unsustainable and off the wall.
Its time to bring to a close a financial experiment that has turned into a horror story.
@PF: Paul I admire your optimism, but my own experiences have been on the negative side. Most folk have deeply embedded belief systems – and nothing short of a personal trauma is likely to shift their thinking.
Perhaps I should have been a tad more careful with my reading comment. You may be reading more and more of the ‘same’ stuff and have you beliefs continually re-affirmed. Or you read more and more of ‘different stuff’ and have your beliefs continually challenged. Its a world of difference. Its the latter folk who are the ones who can engage with you in a meaningful intellectual manner. They are curious, doubtful and will listen carefully.
I try to explain to anyone who is dopey enough to listen to me, that ‘modern money’ is a virtual construct. It appears out of nothing. They become quite confused about this as they believe that you could not possibly ‘lend’ something you do not physically possess. If I broach the subject that credit and debt are also money: eyes glaze. As for the idea that money is ‘destroyed’ when you pay down a loan: neural fuses blow out.
Everyday (real) experiences dictate how folk structure their cognitive frames. They find the virtuality of modern money, credit and debt counterintuitive.
Let me know if you come across a ‘good’ book on the subject of modern money, credit and debt. Thanks.
It’s an interesting piece, but the notion that it is almost impossible to take issue with it is odd. If it was so obviously correct, the ideas that Sachs proposes would be accepted more widely, and not widely regarded as tax-and-spend flakiness.
One particular thought occurs to me as being immediately relevant. If the response to a downturn is to raise taxes for balanced-budget fiscal expansion, presumably the response to an upturn is to symmetrically cut taxes for a balanced budget fiscal contraction. Somehow, I’m not convinced that Sachs would be as enthusiastic about this.
“Decease of 16.0% in new private cars licensed in April
There were 9,388 new private cars licensed in April 2012, compared with 11,171 in April 2011, a decrease of 16.0%.
The number of new goods vehicles licensed in April 2012 was 1,047 compared with 1,219 in the corresponding month last year – a decrease of 14.1%.
The licensing figures also show that:
■In April 2012, the total number of all vehicles licensed was 15,417 compared with 18,321 in the corresponding month last year – a decrease of 15.9%. See Table 1 below.
■The total number of all new vehicles licensed during April 2012 was 11,263 compared with 13,246 during the same month in 2011 – a decrease of 15.0%.
■In April, of the 9,388 new private cars licensed, 2,091 (22.3%) were petrol and 7,018 (74.8%) were diesel. See Table 2A below.
■The highest number of new private cars licensed in April 2012, classified by make, was Volkswagen (1,338) followed by Nissan (928), Toyota (827) and Renault (789)……”
Dork : the Volkswagen UP is probally doing well in this envoirment.
‘Our transport infrastruture should orbit the British Tram / narrow gauge network of 100 years ago’+1
Dart Underground would facilitate the private combustion engine car going the way of the dodo. One can’t build train lines on roads in use today, there’d be chaos. What would you do, shut down the Quays?
I think the expense is worth it, as it frees up so much capacity at the loop line bridge, allowing for electrification of the Maynooth line, and proper intergration of the rail network in Dublin. Throw in a few park and rides and you’d have benefits like capturing a lot of Kildare and the east midlands currently driving in to the City for work.
If one was off the mindset that the euro is over, we should be building these things now.
A new trend has emerged in the new private car market….
Band A is now the dominant Band….for Y2012.
Y2011 M1 : Band A : 5182 Band B : 6,916
Y2011 M2 : Band A : 5,580 B : 6,716
Y2011 M3 : Band A : 5,236 B : 5,978
Y2011 M4 : Band A : 5,005 B : 5,170
So band B still remained the most popular Brand during the first third of the 2011 season.
Y2012 M1 : Band A : 7,489 Band B : 5,860
Y2012 M2 : Band A : 5,613 B : 4,381
Y2012 M3 : A : 5,467 B : 4,375
Y2012 M4 : A : 5,045 B : 3,626
How much is this due to new technology or car manufacturers simply gaming the co2 figures as the fiat 500 900c was claimed to have done by some people in Utube land ?
Or is it simply people trying to save money.
There is now clearly a demand for a new Band A+ class with perhaps a sub 100g / km or 90g / km emission.
Everyone here at Sensible Money has experienced the same process by which explaining the idea that banks create and destroy money is met with confusion.
I think J.K. Galbraith said it best when he said ‘The process by which money is created is so simple that the mind is repelled’.
My optimism doesn’t extend to everyone understanding how modern money is created but I think it’s reasonable to expect more from our economists in this regard. It’s not that difficult a process to understand and if economists can get their head around the ‘money multiplier’ then they can surely understand the digital version of events.
What gives me hope of monetary reform finding its way onto the media agenda is that it’s too difficult to keep the current system of money creation and deletion by banks going.
1. Mortgages have hit the natural limit of taking two incomes thirty years to repay.
2. National debts are unsustainable.
3. The money supply can no longer double every ten years as has happened.
4. No-one is willing or able to organize a bank loan and we have no other source of money while loan repayments continue to cancel money from existence.
Looking forward to a change from the current system, I have great hope for the future.
Being a Cork lad and all I am never quite sure how Dublin fits together…. we favour simplicity down here because we are well………….
Why can’t they just build a new inner orbital tram line connecting Pearse station with Heuston station intersecting with Luas green line Charlemont.
It looks elegant from the map at least although I imagine there would be a few complications.
Perhaps Grand canal dock station would be the best terminus…….as I don’t see major car population increases anytime soon.
The French seem prepared to rip up the streets to get to some of the poorest parts of Paris anyhow. http://www.youtube.com/watch?v=7muJbIeOIEw
It looks impressive and would indeed be much needed but I fear transport planners have not fully got their heads around the death of the private car as a principal means of travel.
(The Irish private car fleet is aging rapidly)
This will mean a more diffuse public transport network especially in lower population density Ireland.
The Dart underground could therefore be a product of its time…. of manic intensity…
But as I said I simply don’t understand how that City works so am not qualified.
My head orbits Kent & Albert street station servicing possible future Youghal , Muskery & Passage west lines which are not as Sexy as the Dart underground and given the cold shoulder by the “planners” http://www.geograph.ie/photo/76470