this is a major IMF policy paper – here.


For austerians, everything proves need for more austerity.

Economy is doing well -> gotta save for bad times.

Economy tanks -> gotta save beause there is budged deficit.

Austerity is europe’s new religion, and Olli Rehn is pope of austerity.

Are jobs the number 1 priority? Really?
Surely not starving or freezing to death is a number 1 priority. Surely living a life where you’re allowed to have hopes and dreams is a kind of priority.
Roman slaves had jobs. In fact unemployment was very low among Roman slaves. Would the IMF see that as a good economic model?

What credibilty do the IMF have at this point? None as far as I am concerned.

Despite all the back door briefing, they stood behind the policy of gifting large bank creditors their losses at the expense of the Irish taxpayer from 2008 to 2013 and still do for all we know.
Yet a few weeks ago, they agreed to stick it to small depositors in Cyprus.

They want to impose a policy of ‘repossession’, but do not spell out the economics of this policy in a country where almost all banks are
State owned.
So, what are the practical economics of the ‘turf em out’ IMF.

The IMF stood over the most optimistic of growth forecasts since their arrival. The forecasts were certainly not worth the paper they were written on.

The IMF has a credibility problem. It has failed to analyse the situation. It has failed to forecast correctly. But most importantly, it has failed to have the courage of its apparently secret convictions, when confronted with real politic.


“In fact unemployment was very low among Roman slaves. Would the IMF see that as a good economic model?”

Most large employers I know still yearn for a similar model and I thought that’s where we’re heading.

@ Hepion

For ivory tower economists and conscience-ridden liberals everything proves the need for easy-money policies and ever-growing mounds of debt.

The economy is doing well -> gotta spend it while we have it.
The economy is doing poorly -> gotta spend our way out of the hole.

If governments and/or households had actually done any saving during the good times then we wouldn’t be going through a prolonged global balance sheet recsession/depression.


is the double down of the double down a cancelling of the GGBs on the BOJ balance sheet or a least a swap into 200 year low coupon debt. That would do wonders for the D/GDP ratio.

Have the Brits not already done a baby version of this wheeze? How would the folks in Frankfurt react to this sort of pargadigm shift. I would think they would have to lie down in a darkened room and listen to Wagner.


“If governments and/or households had actually done any saving during the good times then we wouldn’t be going through a prolonged global balance sheet recsession/depression..”

If both parties had done what you believed they should have done would there actually have been any ‘good times’??

Answers on a postcard to Charlie McGreevy – I’m led to believe he’s very interested in this debate.

@ Yields of Bust

There would still have been good times, just not crazy max out your credit card great times.

Bill Gross thinks that US growth would have been 2% instead of 3.5% without the spiraling debt increases (

Jeremy Grantham reckons it wasn’t additive at all (

Maybe they are right, maybe they aren’t but somehow I doubt that the cure to a parabolic rise in debt is a parabolic-ier rise in debt.


There is a good angle in the latest edition of Private Eye concerning the state of economics

“George Osbourne has advised Britons to save and spend all their money at the same time”

Reading some of the IMF papers, I sometimes think that these economists could do with some time away in the real world rather than being in their cubicles analysing data.

The paper pulls together lots of issues on removing perceived impediments to job creation. What and how to sell is another matter.

“There has been some disconnect, at least in the short run, between unemployment rate changes and growth in this recovery,” Fed chairman Ben Bernanke said at a news conference last month. “There have been periods, at least, where unemployment has fallen relatively quickly even though growth has been more limited. We’re just going to have to monitor developments in the economy and see what happens.”

However, the authors see consistency in Arthur Okun’s finding in the early 1960s of the link between economic growth and the unemployment rate.

Even so, while US manufacturing jobs were at 12.3m in 2012 compared with 17.6m in 1998, the United States retained a leading position as a manufacturing nation. However, the increased job numbers in the non-tradeable sector were at lower pay and benefits than in manufacturing.

The pattern has been evident in the US and UK in recent years:

Prof Michael Spence has said that for two decades prior to the 2008 crisis, employment levels were maintained – – and downward pressure on incomes mitigated – – by creating jobs in non-tradeable sectors. In some cases, this took the form of rapid growth in government; in others, like the US, a pattern of excessive, debt-fueled consumption underpinned a large shift in employment to (non-tradable) services and construction. Indeed, government and health care (both largely non-tradable) accounted for almost 40% of net employment growth in the US between 1990 and 2008.

I always wonder about the desirability of more jobs in the US healthcare sector. They already spend far too much as a % of gdp on health due to chronic rent seeking.

This paper points to technology as a global megatrend that is affecting our ability to create jobs.

People should wake up and take note of this serious development which is impacting hugely on the middle classes.

The change in the sector I work in has been phenomenal. We have more than halved our skilled administrative support staff over the last few years. Productivity per member of support staff has increased hugely due to technological advances coupled with a review of procedures in the face of reduced turnover. At the same time, wage expectations have declined substantially. The aim for all businesses is to emerge from the downturn “leaner and meaner”.

The rapid advances in eGovernment Europe-wide are further removing the hideous red tape which has sustained so many for so long. Similarly the rapid spread of document management systems, document scanning and relational databases to SMEs and over the last 10 years is a slow burner that has now flared to an inferno.

Getting rid of red tape is necessary if we are to keep our place in the pack of competing countries. However, just because it is a measure to protect ourselves economically doesn’t mean it will create any jobs.

As pointed out by the report, the next big area of outsourcing is services, including administrative and professional services. This is going to come as a major shock to many. Eventually, as all these services are performed elsewhere and money is forever flowing out of the country the question is going to arise as to where we are going to get the money to buy all these cheaper imported goods ans services.

Good piece here on US labour v capital.
“Between 1990 and 2008, virtually all (97.7 percent) of the net new jobs came from what economists call the “nontradable” sector, which is a funky way of saying the work must be done locally (e.g.: government, education, health care). Even in the recovery, health care, food service, and other local and low-paying industries have led the jobs recovery.”
And Ireland….
“Last year, Apple, PayPal, Cisco Systems, Dropbox, and other foreign companies backed by the nation’s development agency, IDA Ireland, announced 12,722 new positions, while job losses at IDA-supported businesses fell to a decade low of 6,125”

@ JR: “But most importantly, it has failed to have the courage of its apparently secret convictions, when confronted with real politic.

I’ve mentioned this before. Sociopaths KNOW they are RIGHT. And they act accordingly. To do otherwise would be to admit they are ill – that is, doing the opposite of what they know to be right. Being wrong – or even ‘reflecting’, is only for ‘little folk’.

@ Zhou: “The aim for all businesses is to emerge from the downturn “leaner and meaner”.”

I’d skip the leaner bit. But the delusional belief that an ’emergence’ will emerge – is just that, delusional. There has been no nett increase in liquid fossil fuel energy resources in almost 7 years (NG is not a chemical substitute for liquid fuels). If the global and regional downturns are to be halted we need a significant increase in liquid hydrocarbon fuels (together with a 50% price decrease) to ‘fuel’ global growth. Are these likely? No!

“Getting rid of red tape is necessary if we are to keep our place in the pack of competing countries.”

Pardon? Oh! If you mean the Race to the Bottom competition. Yes indeed! Increasing industrial productivity probably means increasing the population of robots. That will be fun for human employment opportunities. And in order to ‘stimulate demand’ lots of folk will need lots of wage and salary increases. Likely? No!

Services? Oh dear! I also have this quaint notion that services can only be supported upon a base of productive activity (you make stuff, it sells abroad, you import the surplus income – and you can have services.

And as for technology. Sure you can force it to its margins – but that’s it! Then what? Actually, the process reverses. The Red Tape re-emerges. Funny that.

And those slaves. Sure they worked long hours, but their owners were obliged to feed them, house them and cloth them.

There is a general pattern here where Governments or small and medium sized nations are at he mercy of businesses which can easily relocate in a globalised market.

This has also meant that employees of such companies are also in a very weak bargaining position. Not only can their employer dispose of them as it sees fit, but they are subject to the costs of living in their home country while competing with workers from other countries.

The export of services may greatly exacerbate this position. One of the great strengths of western democracies is that they have stable and transparent legal and financial frameworks. This has meant that financial accounting and legal aspects of business has been located in western countries. Ireland has been successfully competing to provide those financial accoutning and legal services to multinationals.

However, Ireland will likely become subject to more competition from other countries. Technology plays a big role in this because it makes it possible to outsource English legal work to India (world leaders in outsourced services) while still availing of English laws and Courts.

The long run effect of these changes is probably increased global equality, increased global growth and productivity. However, that is the global position. The short to medium effect on Ireland, but more particularly on our large trading partners in the USA, UK and rest of the EU, could be a sustained reduction of employment levels in the services sector.

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