Warren Mosler lists the dangerous misunderstandings of monetary operations of recent Wall Street Journal Euro Symposium. Luckily for Ireland, we will have three US based economists who do understand Modern Money systems to debunk these myths at a Smart Taxes & TASC co event Dublin on May 9th. Watch this space for more info.
WSJ Euro Symposium- Eichengreen, Sinn, Feldstein, Solbes, Hanke
Posted by WARREN MOSLER on March 8th, 2011
The utter lack of understanding of monetary operations is telling.
None recognize the significance of the fiscal hierarchy move that shifted the euro member nations from currency issuer to currency users, making them much like US states in that regard.
None recognize the difference between deficits at the ‘currency issuer’ level and deficits at the ‘currency user’ level.
None recognize that the problem is a shortage of aggregate demand, that is not caused by a lack of available bank credit, and that ‘fixing the banks’ changes nothing in that regard.
None recognize that the liability side of banking is not the place for market discipline and that the ECB is the only source of credible deposit insurance.
None recognize that the ECB is in the role of currency issuer and is the only entity that is not revenue constrained.
None recognized the role of fiscal balance in offsetting the ’savings desires’ that cause unemployment and the output gap in general.
None have proposed a means of allowing govt deficits that can be sustained at full employment levels.
None have recognized that the forces at work have resulted in the ECB has assuming the role of dictating permissible ‘terms and conditions’ for its funding that has become mandatory for the survival of the currency union. This includes the ECB dictating fiscal policy for the member nations.
This list could go on forever.
