It is very kind of Prof. Summers to take the time to lecture us in Europe about our failings. It is very tempting to respond with “Physician, heal thyself”. Before lecturing us he might ponder the dysfunctional political process in the US that has kicked the can down the road on the federal government’s legal authority to borrow so that, absent any resolution (almost a certainty in an election year), automatic spending cuts and tax increases will kick in at the start of 2013. Or he might ponder the fact that much of the US’s public infrastructure, particularly its roads and bridges, are crumbling, require huge investment, but there is neither will nor ability to marshall this - at a time when there is huge underused capacity in the construction sector, a stimulus that would boost future economic performance is badly required and pension and insurance funds have ‘good money’ seeking a home, but government is adding to, rather than reducing, uncertainty about investment recovery. Or he might ponder the huge edifice of behavioural regulation in Dodd-Frank, when the fundamental problem was, and remains, structural and only structural remedies will resolve the problem.
When he has pondered on these matters and arrived at a possible resolution, I would very much welcome his insights on our woes.
he might also usefully reconsider his (implicit) view that all markets in factors, products and services are efficient - with the apparently glaring exception of labour as a factor of production. And that it is only in labour markets that structural reforms are required. There is no doubt that markets in factors, products and services are generally more efficient in the US than they are in Europe, but he should not think that they are free from serious distortions and inefficiencies. Structural reforms in Europe are required as much, if not more, in markets for services and investment than they do in labour markets. Europe is wedded to a failed policy and regulatory model, in particular, for infrastructure and utility services. There is huge scope for reform - without displacing any workers - that would provide an investment stimulus and boost future economic perfromance. But governing politicians, policy-makers and regulators have this uncanny ability to grasp the wrong end of the stick.
Larry summers is obviously an asshole and bears a lot of responsibility for the current crisis but I think to be fair that he did in fact want to break up some of the too big to fail banks and also as I understand it he would be a big proponent of more stimulus. He’s hardly to blame for the dysfunctions of the us system, the main problem with which as I see it is the senate filibuster . Hopefully however next gets the presidency and a majority in both houses has the cojones to do away with it .
Would we really say that a European politician has no right to comment on American politics because europe is mess.
The more I read your posts the more I realise that you are not interested in tackling the cause of the crisis or finding genuine solutions, but rather you would prefer to use the crisis to push an agenda involving the “liberalisation” of labour markets.
Its funny, but as others have pointed out, it is countries like the Scandanavian ones that have weathered this crisis better than most. Do the Scandanavian countries have the uptopian efficient labour markets that you wish to inflict on the rest of us?
Perhaps if you read my comment again you might notice that my point is that the primary focus should be on distortions and dysfunctions in factor, product and service markets - RATHER THAN SUMMERS ET AL’S FOCUS ON LABOUR MARKETS.
I have consistently argued that equating ’structural reform’ with ‘liberalisation’ of labour markets is totally counter-productive and self-defeating. Tackle the distortions and inefficiencies in other markets first and you might that the labour market requires very little ‘reform’.
Why would anyone want a banking union where the banks can produce unlimited credit leverage and then get bailed out by a now multi border central treasury type operation even more divorced from the people & politics…….unless you are a banker or livelihood is dependent on banking gifts.
I just see decay.
This action will further incentivise banks to increase their leverage ratios as they will have a bigger pool to draw on.
Angie baby is right to resist this pox.
Regulation at EU level: http://www.bloomberg.com/news/2012-06-15/how-to-say-deceptive-accounting-in-spanish.html
“Charlie McCreevy, then the EU’s commissioner for financial services:No, I’m making the point is that the rules did not allow the dynamic provisioning that the Spanish banks did, and the Spanish banking regulator insisted that they still have the dynamic provisioning. And they did so, but I strictly speaking should have taken action against them for doing this responsible set of actions. That’s the point I’m making is the ludicrousy in my view of some of these particular rules. The Spanish … and it’s worked pretty well for them.”
Banking union led by people of that calibre? Or is it impossible that another person in charge would do the same?
Many people visit this site because they learn things they either didn’t know, or didn’t understand previously. The natural Irish susceptibility to the vortex of spin generated by the presence of any deposit of bullsh!t large enough to generate its own gravitational field is accepted as read by many.
Specifics and details not generally known might appeal to the as yet unconverted.
Spin! Gilmore is spinning for all he is worth today with the same sh1t they fed to RTE and which was denied by the EU promptly.
As for the Referendum…..could be more fertilizer flying about…
“9.22am: Germany’s constitutional court has upheld the case against the European Stability Mechanism, the permanent rescue fund to replace the EFSF. The court said Angela Merkel’s government had not consulted parliament sufficiently about the configuration of the scheme.
The ESM is supposed to come into effect in July but has not yet been ratified by many eurozone member states, including Germany. This ruling does not bar the ESM from taking effect, but it can’t be helpful in terms of getting it through parliament.”…telegraph.
It’s supposed to start in July and I presume the Bundestag takes vacation in July.
Slowly and painfully seeking to persuade people - many of whom are determined to remain unpersuadable - may have some use, but when the problems are institutional, as I’ve pointed out above, one has to wait for - and use - glaring examples of institutional failure to force the case for reform.
The waters are closing over Tol-dole-gate and the fetid pond will soon be still and calm, but further instances of institutional failure are inevitable. All one needs is one instance that resonates with the public in a striking and sustained manner. Tol-dole-gate didn’t fit the bill. There will be others. But it is impossible to identify them in advance and, in particular, which one will strike the necessary chord with the public.
Official Ireland remains confident that it can manage or brush off instances of institutional failure - and one should not under-estimate its ability to do so, but its confidence in this respect is more than likely to be the rock on which it perishes.
It is amazing that when the requirement, and opportunity, for some limited instituional reform arises the reaction of Official Ireland is to set its face adamantly against even limited reform that might pre-empt a later and greater fiasco - and inevitably invite the visitation of this later and greater fiasco.
Such is life. We just have to be patient. But it should be fun.
When all the bank losses and capital shortfalls have been socialised on the feckless peripherals, and all the cash has long since flown to the ‘core’, a banking union will ‘hey presto’ become possible.
But if the Greek depositor gets Drachmas for his euro, then Europe will not be big enough to contain the bank queues looking for their money.
Seems Gilmore forgot to tell Mickey Noonan about the relief being sought according to the RTE news.
Noonan said he was no aware of any official proposals…
Ah well, I suppose Gilmore has to be doing something.
Nice to see the commission and Barroso pushing a Eurozone deposit garantee and banking resolution scheme, with the key point funded by the banks themselves. It seems there proposal doesnt mean any treaty changes as it doesnt involve taxpayers money.
Hopefully this idea gains traction and is not watered down or changed according to national interests.
Of course a key point is that currently there is not enough money there, however the ECB could start the fund off with a few loans.
When central banking started its main advantage was stopping runs on banks by making sure people can get back their deposits. Why should national governments be responsible for deposit garantees?
Re yesterday’s big announcement…seems the left hand is not letting the right hand know anything….you couldn’t make it up
“On yesterday’s report where sources had said the Troika had examined the effect of extending the maturity of Ireland’s loans, Mr Noonan said there had been no indication of such a move at official level.
“But everywhere people gather where people have an interest in the euro zone, there are a variety of solutions being discussed and I presume there was some level of discussion at some level about this,” he said.
He added he presumed any extension of the term of loans would not be for new loans but for existing ones too.
“There five or six or seven or eight big ideas around at the moment. So far I have no indication that any of them is advancing or is the preferred option,” he said.”
In June 2010, less than a week after two official reports were published on the monumental mismanagement of the Irish economy during the Celtic Tiger period, the Irish Exporters’ Association awarded a gold medal to McCreevy for his role as an EU commissioner in pushing through the EU Services Directive.
The Institute of Chartered Accountants in Ireland in 2006 presented its inaugural Lifetime Achievement Award to Charlie McCreevy, a chartered accountant by profession, citing his role as Minister for Finance in presiding over a period of historic prosperity. He was also lauded for always having spoken his mind, while few doubted his candour.
Two years before, McCreevy was voted Ireland’s Best Ever Minister for Finance, according to a poll conducted amongst the readers of Finance Magazine. Other former ministers who polled well included Ray MacSharry in second place and Civil War era minister Michael Collins in tenth. In a separate sub-poll carried out amongst the leading Irish financial services economists, McCreevy was also voted as the best finance minister
Damien Kiberd wrote in the Sunday Times in April 2004:”Worryingly, there have been some suggestions that Charlie McCreevy, the finance minister, might relinquish his current post as part of a summer cabinet reshuffle but it would be better for all of us if he stayed where he is. McCreevy is not just a ’safe pair of hands.’ He is also tough enough to prevent EU interference with Ireland’s benign corporate and capital tax regimes and simultaneously to resist the growing clamour for government meddling in the finely balanced property sector….Property enthusiasts will claim that we need not fear a meltdown because we have entered a different era, an era of long-term cheap credit. Perhaps. But an adjustment to somewhat higher money rates next year is going to place immense strain on at least part of the house-owning public in this country.
For this reason, we need strong leadership at the Department of Finance. The sort of leadership that will ignore calls from Oireachtas committees, NESC and academic economists for substantial interference in the whole property and construction sector.”
I mean Europe does not exist on a political level - its merely a juristiction , a base of operations - a geographical area where highly leveraged but diminishing capital is free to move around anywhere, at any time for no particular purpose other to get a yield off other peoples diminishing capital.
A pointless but interesting entropy experiment.
Eloquently put! Your presentation also illustrates the intellectual poverty of the capital versus labour left-right dialectic. Unfortunately, it is alive and well in the Socialist Party in France.
The spotlight is, however, getting brighter and brighter cf. quotation from an article in the Sindo.
“Tanaiste Eamon Gilmore sent an email to party members on Friday assuring them that compulsory redundancies are not under consideration. “Labour will make sure that this commitment (not to enforce compulsory redundancies) is met.”
However, a defiant Mr Varadkar told the Sunday Independent: “No Government rules out all its options before going into negotiations and redundancies are an option, though one of last resort.
“I understand Labour’s position. They represent the public sector unions and they are going to want to get as good a deal for the unions as they can,” he added.
Several Fine Gael ministers came to the defence of Mr Varadkar saying that it is insane to think that compulsory redundancies would not form part of any new Croke Park deal.
“Even the troika is making that point,” one said”.
Michael Collins remains my vote for No. 1. He started with nothing, converted it to zero, and then he made something out of it.
As I have noted many times before on this blog and elsewhere, The Progressive Democrat Ideology of Rabid_Free_Mawrketteerism (aped from Regan/Thatcher and the US neo_kons; and key barrier to entry to finance and economics akademia) provided the syrnge to the latent heroin tendency in Fianna Fail emergent since TACA in the mid-60s as the idealistic romantic revolutionaires moved on [the main diff between FF and Fine Gael being that FF had a better dealer on power ...
PD emerged from FF and then its ideology morphed into the FF power elite .... the drivers being Mary Harney, Michael McDowell, Charlie McCreevy, and Bertie Ahern. These four, imho, bear primary political responisbility for the change in focus from mid to late 90s on ...... and a positive and real economic recovery was then destroyed in the 00s - and treasonously so from 2002-2007. There are other senior politicals in cabinet and outside at this time [collective cabinet responsibility etc] but it fully penetrated ‘into’ and was itself fully supported by ‘the inbred upper_echelon insider governance institutional matrix’ that had emerged since the 60s whole sole purpose is to ‘rule for the right kind of people’ and fool and keep regressively down the rest of the class and underclass citizenry in a seriously unbalanced society. It is a travesty of so-called republicanism ….
The natural coalition at the mo is FF/FG
The next coaliton should be Labour/Sinn Féin
Labour, again imho, have made a serious .. er.. ‘error of judgement’ as their presence in gov with FG [which has a significant PD ideology in its upper reaches] ensures that the next gov will be a FG/FF coalition. This should be enough to drive any sane man or woman to either despair or the hills - and I’ve been camped out in the hills for quite a while!
Irish power and governance dynamics appear to be incredibly resilient over the past 5 years; over the past 50 years.
Hey - no surprise but many of those Germans citizens have gone to Speksavers
Germany driving up wrong side of the road
19 June 2012 Der Spiegel Hamburg
But no panicking, please: No one seriously wants Germany to pay the debts of Europe. The days of the gold standard ended when the payments between the central banks were cleared in Fort Knox, and the gold bars were shifted from one vault to another. A banking union and euro-bonds should integrate Germany into a system of mutual security. Without such a system, Europe will break down. [,,,]
Merkel the Tentative
It is a historical shame that during this crisis we have a chancellor for whom Europe is not an affair of the heart. In such moments, moments that one can in good conscience call historic, it is important to recognise the political realities – but only in order to change them.
So it’s worth thinking about what might have been under different circumstances. Nietzsche wrote: “The question ‘What would happen if this and not that occurred’ is almost unanimously rejected, and yet it is precisely the cardinal question.” We like to put the march of history down to impersonal forces. But at the turning points of history there always stands an individual. Had the “99-day Emperor” Frederick III not died of throat cancer, and had Bismarck stayed longer by his side, would the Great War perhaps have been prevented?
One can assume that an SPD [German Social Democrat Party] Chancellor would have behaved differently at the start of the crisis than Merkel the Tentative. And one can hope that a new chancellor – or a new woman chancellor – will behave differently after the next election. Small note: Hannelore Kraft has replaced Angela Merkel as the most popular politician in the country. Europe just needs to hold out till then.
excerpt from a ‘working draft brief - PLAN_D’ leaked somehow from the Blind Biddy Hedge Fund:
The legal effect of redenominating existing debts
For holders of debt that relates to a state withdrawing from the euro, what would be the impact? This would depend, essentially, on four factors:
If the governing law of the debt is that of the departing state, the debt is effectively at the disposal of the departing state. If the departing state wants to change the currency of payment, it can do so.
If the currency of payment is the currency of the departing state, it can redefine the currency as it sees fit.
The third factor is place of payment. If the place of payment is in the departing state, and the state makes it illegal to pay in euros, then even foreign courts have discretion to give effect to the departing state’s law.
And in terms of the place of any litigation, if you end up in the departing state’s courts, the assumption must be that those courts will give effect to the departing state’s redenomination laws.
The bottom line to everything is practicality. If you are owed money and have to go to the departing state in order to enforce that debt, whatever other factors there are in your favour, the odds are the departing state’s courts will give effect to its redenomination legislation.