Lately, I find myself having a recurring conversation. The people and the places change but the basic premise stays the same. I meet friends whom I haven’t seen in some time, I ask them how they are, what they’ve been up to. They shrug. “Nothing” they say. They are either unemployed or working in an area divorced from that of their training, part-time in a bar perhaps. These are people from a wide variety of backgrounds; qualified carpenters and electricians, science and engineering graduates, graphic designers and academics. When I tell them I am working I suffer from a vague sense of embarrassment, as if I somehow cheated and escaped the recession that we are all embroiled in. I know in reality this is not the case. I am also caught up in the noxious landscape of austerity. I may not be as victimised as some others but I am not immune. I am the 99%…..

He compares the current neoliberal economic mindset to restricting early software architecture created by chance that establish lock-in…

The computer scientist Jaron Lanier in his book You Are Not a Gadget describes a process he terms ‘lock-in’.  Lock-in describes what happens when particular programmes, despite their limitations, become the standard, and because it proves impractical to change or dispose of all the software and hardware that has been developed using this programming, the technology remains stagnated through its basic underlying architecture.  Lanier uses the example of MIDI, a programme that represents musical notes.  When developed in the 1980s, MIDI offered a very crude way to represent music digitally – it could represent the rather static expressions of a keyboard but not the transient expressions of a saxophone for example.  What perhaps started as a first step towards digital musical expression became widely used and, thus, became locked-in.  Thirty years after its inception then, MIDI remains the standard scheme to represent music in software, to the ultimate detriment of musical expression.  This occurs, Lanier suggests, because while it is easy to build small programmes from scratch, it is extraordinarily difficult to change existing larger programmes.

I think that lock-in offers a good metaphor for role of the state in terms of the current crisis.  For the past thirty years, nation states have been programmed into a mode of neoliberal thinking.  This mode of thinking is now to a large extent locked-in.  We can see this in the response of nation states to the financial crisis.  This crisis was brought about by an excess of neoliberalism – an all too optimistic faith in markets and the retraction of state oversight and regulation – but the solutions being proposed use the same neoliberal architecture as their foundation.  Like MIDI does to the musical note, these solutions diminish democracy so as to make it compatible with the limitations of the neoliberal programme.  Moreover, nation states do not stand in isolation, but are routed into global political and financial systems.  Thus, the ‘big’ programme gets bigger.

If the neoliberal project is the cumbersome ‘big’ programme, Occupy is the ‘small’ programme.  For the participants, it is a joy no doubt to watch it grow and flourish.  But the greater challenge for the group is to influence the architecture of the ‘big’ programme.  This is no small feat.  There is a lot at stake in the status-quo.  This is partly, as Marxists rightly suggest, because powerful interests exert political influence in order to retain or enhance their position in the system.  But it is also, I think partly down to a lack of political imagination.  The system stays the same because our leaders can’t imagine what it would be like to create something different.  There is a broad consensus calling for reform, but the programme is so big and so many interests are involved that these reforms become more and more inconsequential and we are left with lock-in.  Leaders are interested in fixing the bugs in the programme, not changing the underlying architecture.  (link to full article)

 

…..

By Marshall Auerback

Forget about the S&P downgrade, which has had ZERO impact on the global equity markets. The downgrade was supposed to mean that it would be more likely that the US government would not be able to pay its debt than previously assumed. IF the markets took this warning seriously, then they would have attached a higher risk premium to US government bonds. Of course, the opposite occurred. US bonds soared in price. In other words, investors, both here and abroad, voted with money as loudly as possible that they view the US government debt as a very safe haven in a time of financial turmoil

So if it wasn’t the S&P downgrade which caused this downward cascade in the global equity markets, then what was it? By far, the most important factor currently driving the market’s bear trends is Europe or, more specifically, the future of the euro and the European Monetary Union. Systemic risk has migrated across the Atlantic to the euro zone.

And after yesterday’s joke of a summit between German Chancellor Merkel and French President Nicolas Sarkozy, it appears yet again that Europe’s policy makers have comprehensively blown it. Their persistent reluctance to get ahead of the looming systemic ticking bomb at the heart of the euro project has reached the point where it is likely to doom the euro’s existence. Their repeated “rescue plans” (and equally fatuous statements about new committees and “euro solidarity) can no longer mask the central problem, which is that countries with very different economies are yoked to the same currency in the absence of a fiscal transfer union which would otherwise facilitate growth, not ongoing economic depression and political turmoil.

Rather than attempting to stave off a double-dip recession by easing fiscal and monetary policy, the European Central Bank (ECB) has gone careening off in the opposite direction. The euro project is consequently being turned into a Hooverian instrument of economic torture from sado-monetarists, such as Jean-Claude Trichet, who see each bailout as a way for irresponsible nations to offload their liabilities onto their fitter neighbors, rather than considering the flawed institutional structures which created the need for these stop-gap measures in the first place. Interest rates have been raised, and member states have been forced into self-defeating austerity programmes which, by destroying growth, have made underlying debt dynamics even worse. It is hard to imagine a more tragic and self-defeating type of policy mix. It is 1937 writ large.

Other economic commentators have framed possible responses to Ireland’s debt crisis in very narrow terms, advocating either a rigorous adherence to austerity programmes or unilateral default on our debt.

Those who promote austerity however have not been fully honest about the risks of this approach. They include the possibility that the Irish economy could enter into a spiral of deflation, economic stagnation and experience a sharp increase in overall levels of unemployment. Given the fragile state of the global economy, these negative trends could prove very difficult to reverse.

Those who support a unilateral default on our debts and taking a chance with the international money markets are being less than honest about the economic and financial difficulties that Ireland will face in such circumstances.

Michael Casey’s helpful contribution to this debate has been to remind us of the unique position of central banks which he points out can “create new money by the stroke of a pen”. Casey proposes that the Irish Central Bank should be permitted to print new money and lend it to the cash-strapped Government in order to relieve current pressure on it. This sets him apart from many other economic commentators who appear to view governments as almost completely dependent on private bond markets to access critical money supplies.

Casey points out that over the years, the Central Bank has occasionally lent money to the government of the day to part-finance its fiscal deficit, and that the central banks of other countries have engaged in similar action. He envisages circumstances in which the Central Bank might lend €3 billion a year, for example, to the Government over the next four years, on a strictly emergency basis. He argues that this would prevent recession becoming entrenched, reduce unemployment and emigration, avoid punitive interest charges and protect the most vulnerable in our society.

While Casey concedes that printing money might cause price inflation later on, he questions whether that would be such a bad thing, given Ireland’s present circumstances. He suggests that it might encourage consumer spending and would also inflate away some of the real burden of our present debt. He reminds us that other countries have done this in extreme situations.

Given Casey’s impeccable economic credentials as former chief economist with the Central Bank and board member of the International Monetary Fund, surely his proposal should be given serious consideration by national and European policy-makers?

Casey is not alone in advocating a more flexible approach on the part of central banks to monetary policy. A pioneering community of economists in the University of Missouri, Kansas have elaborated a new macroeconomic model known as Modern Monetary Theory, which challenges some of the basic assumptions of conventional monetary theory. It advocates a more activist role for governments and central banks in overall economic development and the promotion of full employment.

These economists will be amongst the keynote speakers at a conference in Croke Park on May 9th entitled “Lessons from the Crisis : Money, Taxes and Saving in a Changing World” co-hosted by Tasc (Think Tank for Action on Social Change) and Smart Taxes (Fiscal Policy for Sustainability network). Richard Douthwaite, an Irish economist who has written about the possibilities for the European Central Bank to use its monetary policy to engage in ‘deficit easing’ in order to tackle the debt crisis in the Eurozone, will be another speaker at the conference.

Those interested in attending can register at contact@tascnet.ie.

Social Justice x Citizen Journalism

- worth putting up with annoying advertisement.

http://socialjusticexcitizenjournalism.blogspot.com/2011/04/james-galbraith-on-great-crisis-in-us.html

Lessons from the Crisis will showcase an alternative set of economic policies that aims to recover economic control, staunch the loss of jobs and emigration and create a secure future for young and old in Ireland.

Smart Taxes and Tasc collaborate to bring together international and national speakers from the cutting edge of progressive and sustainable economic fields.  In particular, three leading US based exponents of the Modern Monetary Theory school that is the subject of much excited debate amongst leading economists, will share their transformational perspective.

FREE Admittance and Lunch : To Book Email  contact@tascnet.ie

Programme – Lessons from the Crisis: Money, Taxes and Saving in a Changing World

hosted by

TASC and Smart Taxes

May 9th, 9.30 am – 4 pm, Croke Park Conference Centre

9.00 am Registration, tea/coffee

09.30 am Dr Nat O’Connor, TASC
Opening remarks: the day in context

New Money Theories

Chair: Paul Sweeney, Chair, TASC Economists’ Network

09.35 am Richard Douthwaite, Feasta
The Money and Energy Relationship
09.55 am Marshal Auerback, Roosevelt Institute
Ireland and the EMU: Bailout or ransom demand?
10.15 am Dr Stephanie Kelton, University of Missouri – Kansas City
A Fix for the Euro Bug: Modern Money Theory, Sovereignty and Fiscal policy

10.35 am Discussion

11.15 am Coffee

Risk and security: Towards a new pension model

Chair: Prof Gerry Hughes, TCD Pension Policy Research Group

11.25 am Prof Randall Wray, University of Missouri – Kansas City
Real Future Security: Modern Money Theory and Deficits, Pensions, Bonds
11.45 am David Korowicz, FEASTA
Risk and Resiliance of Irish Pension Investment

12.05 pm Sinéad Pentony, TASC
Removing Risk from Irish Pensions: Towards a New Pensions Model

12.25 pm Discussion

13.00 Lunch

New Fiscal Frameworks

Chair: TBC

14.00 Tom McDonnell, TASC
Making the numbers work: A new fiscal framework for Ireland
14.20 Michael Taft, Unite
A new deal for Ireland: Jobs & a new fiscal framework
14.40 Prof Randall Wray
A Jobs-Based Monetary Policy for the Eurozone
15.00 Discussion

15.40 Dr Nat O’Connor, TASC
Summing up
Next Steps for TASC
15.55 Emer O’Siochru
Next Steps for Smart Taxes

16.00 End

…Can all this be avoided? Yes, and the remedy is both simple, immediate, and would quickly lead to unprecedented global prosperity.

All the euro zone has to do is have the ECB write the check, and announce immediate and annual distributions of 10% of GDP to member nations to pay down their outstanding debts, and at the same time impose national deficit ceilings sufficiently high to promote desired levels of aggregate demand. And the penalty for non compliance would be the withdrawal of ECB support. This would remove credit concerns, without increasing government spending, so there would be no inflationary impact.

And all the rest of the world has to do is recognize that federal taxes function to regulate aggregate demand, and not to fund expenditures per se. And then set taxation and/or government spending at levels that sustain desired aggregate demand.

They need to know the question is not whether longer term the budget deficit is sustainable- as it’s always nominally sustainable- but instead worry about sustaining aggregate demand at desired levels, both long term and short term.

But, unfortunately, I see the odds of a catastrophic collapse in aggregate demand as far higher than the odds of an awakening to a global understanding of actual monetary operations.

He ends with this …
Part of the reason this may be so hard for progressives to wrap our minds around is that not only does it upend conventional wisdom about the role of money, government spending and taxes — it also requires that we rethink our views regarding the economic “success” of the Clinton administration.

Getting back to the quote from masaccio at the top of the post… The old structures (policy prescriptions from orthodox economists, either saltwater and freshwater) haven’t worked and aren’t working. Recognizing that is step one. Step two is learning to think away from the formal structures learned in school. Yes, it may be hard… but we are lucky: We have a community of heterodox economists who are in the business of developing a new macroeconomics, who have a track record unmatched by orthodox economists and who want to teach us, all of us — from Paul Krugman to a random pseudonym on the web — what they know.

We ordinary citizens have no standing to complain about the blindered and ignorant ideology of our country’s economists and politicians if we are unwilling to take off our own blinders and consider, with an genuinely open mind, these new ideas…

Too much is at stake not to try.

Progressives in Ireland will get to hear three MMT stars, Randlall Wray, Marshall Auerback and Stephanie Kelton in Dublin on the 9th of May 2011.  Conference title; ‘Learning from the Crisis’, Croke Park Conference Centre.   Details on this site and on TASC soon.  The visit was instigated by Smart Taxes and partnered by TASC.

Dear Paul

We are both academics and have been trained to PhD level in economics. We should therefore understand the difference between good scholarship and bad scholarship whether the final outcome is a peer-reviewed journal article, published book or Op-Ed piece for a popular media publication (such as the New York Times).

and he finishes with

Conclusion

I am disappointed Paul that you would represent the progressive view with such poor scholarship.

If you want to represent MMT correctly you can always send me an E-mail and I will help you get the words right!

That is enough for today!

And there is an awful lot in between worth reading (link to full article)

21 March 2011 by Cullen Roche

HYPERINFLATION – IT’S MORE THAN JUST A MONETARY PHENOMENON

“Inflation is always and everywhere a monetary phenomenon.” – Milton Friedman

Hyperinflation is poorly understood. As its name might imply, most people believe hyperinflation is merely inflation on steroids. But that’s not necessarily accurate. Inflation can and does occur in a perfectly healthy economy. In fact, since 1913 when the Fed was founded inflation in the USA has consistently risen at 3.5% per year on average. One might assume that this means the country has experienced some great injustice, but the truth is that the 1900′s were characterized by the greatest economic expansion and wealth creation the world has ever seen. Despite the common citation that “the $USD has lost 90% of its value” Americans experienced an unprecedented period of prosperity during this inflation. In fact, the prosperity became so gross in the 1990′s that Americans felt entitled to second homes, second cars, and just about every other luxury good known to man. What has not occurred is hyperinflation, which is a very different animal than inflation. Hyperinflation is a disorderly economic progression that leads to complete psychological rejection of the sovereign currency.  (link to full article)

However, while the list of conditions for hyperinflation make the the US or UK  very safe, they look worryingly familiar to Ireland within the EMU. Smart Taxes score is in bold.

What is consistent among cases of hyperinflation is a number of rare exogenous circumstances:

• A ceding of monetary sovereignty (usually in the form of foreign denominated debt, a currency peg, etc).      Yes, We tick this box
• Extraordinarily unusual social circumstances (war, regime change, etc.).                                                               No, thankfully
• Very low levels of faith in government during regime change (high public mistrust).                                             Yes, We tick this box
• Ineffective government response or rampant corruption.                                                                                              Yes, We certainly tick this box
• Combustible political environment.                                                                                                                                    No, OK here because of public passivity
• A collapse in the domestic economy.                                                                                                                                   No, Not Yet, but wait one year
• A breakdown in the tax system.                                                                                                                                            No, Not yet, but rising black economy

The most notable environments involving hyperinflations are war, regime change, government corruption and a ceding of monetary sovereignty.