There is another way to simple-minded austerity (or is it bloody minded?), actually a couple of options. Some economists from both hemispheres of the globe dispute the economic analysis of the deficit hawks in the US and elsewhere. Take the time to watch these videos and presentations at the Sustainability Teach-in that describe a Modern Monetary Theory (MMT) that has been developing in academia for at least 15 years but has only emerged into public consciousness since the crisis. Names to watch for are Marshall Auerback (Canada) and Warren Mosler (US) on how the money, tax and bond systems really works and Bill Mitchell (Aus) on the need and real possibility to have full employment in any sovereign country.
Admittedly, Ireland is not sovereign in monetary terms as is the US, UK or Australia but we could still try Option 1: demand the ECB makes a per capita adjustment to Euro Member State accounts on a population basis to the tune of 1 trillion (a new Lisbon referendum might be just the opportunity). That would reduce Ireland’s need to beg from the masters of the universe by about 14 billion. If the ECB will not play ball, the government could try Option 2: announce that it is happy to accept the bonds it issues at face value in payment of Irish taxes. That eliminates the default risk thus reducing the coupon spread to a more acceptable level. It would also encourage more Irish people to buy Irish bonds (currently we hold al low confidence 15% of the total). The ECB wont like it because they would be terrified the other so called PIIGS might copy and they couldn’t bully us around anymore…but hey, they could then do Option 1, which actually give them great control over any EMU government that strays from the Stability and Growth pact terms.
If you want to learn more go to www.smarttaxes.org where we have been documenting our learning curve on MMT for the past year. The foregoing does not mean we do not have to reform our dysfunctional public service and benefits systems and readjust the taxes on work and investment with better kinds of taxes, especially Land Value Tax, Carbon Tax and other environmental taxes. These Monetary Options (1 more so than 2) will give us the time and clear direction so that that we can reform while maintaining full employment through a ‘Job Guarantee’ scheme of needed environmental and community works so that domestic demand is strengthened sufficiently to overcome the devastating debt-deflationary pressures that have already been set in train.
