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Austerity policies based on flawed research?

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  • #62
    Scofflaw
    Registered Users, Registered Users 2 Posts: 23,283 ✭✭✭✭Scofflaw


    Cody Pomeray wrote: »
    What, no US chart?

    I admit I would consider the US - a continental sized economy - a poorer comparison for Ireland than the UK...
    Cody Pomeray wrote: »
    On the UK: Perhaps you're making the error of assuming that QE was instigated in the UK in order to reduce unemployment... or that any failure to actually bring unemployment down implies that it was a failure.

    In fact, the argument goes that without QE, the situation could have been much worse. That QE is the buffer that insulates the UK's banking system from its exposure to the Eurozone.

    I'm not saying that QE is a magic bullet either in the UK or the US. But I hope nobody is seriously expecting a chart like the above to be an adequate rebuttal to its potential.

    Sure - the chart was a specific response to the post it was responding to.

    cordially,
    Scofflaw


  • #63
    Scofflaw
    Registered Users, Registered Users 2 Posts: 23,283 ✭✭✭✭Scofflaw


    Cody Pomeray wrote: »
    It doesn't necessarily have to mean borrowing on the back of the Treasury or raising taxes.

    In fact, the fiscal rules and the sovereign indebtedness make that impossible for pretty much everyone as far as i am aware.

    So the additional borrowing would have to be done by an agency of the Eurozone: the ESM or the EIB, for example. The good thing about those agencies is that they only need the initial capital, and then they can raise funds as many multiples of that.

    That agency could then invite private financing to join with it in investments, again enlarging the scale of a stimulus.

    Obviously, the stimulus should be focused on production and exports.

    Hollande has suggested all of this. It;s not particularly imaginative. It's so amazingly boring it might actually work.

    I have to agree - I'd certainly favour such a stimulus being run at the European level rather than winding up as a set of national pork barrels.

    cordially,
    Scofflaw


  • #64
    Tipp Man
    Closed Accounts Posts: 4,025 ✭✭✭Tipp Man


    Cody Pomeray wrote: »
    This is descending into slogans.

    are you not interested in engaging with the economic arguments being put forward about structural investment and production capacity at all.

    There is no point in even having a discussion about structural investment and production capacity in the context of Ireland because

    a) we don't have the money to spend on those investments
    b) we can't borrow the money because we already have too much borrowings

    so this talk about stimulus is just a complete waste of time -that is the whole point i was trying to make in my initial post. We have no option but to cut expenditure

    Anyway government expenditure is probably the most pointless/useless/inefficient method of economic stimulation that there is


  • #65
    Cody Pomeray
    Closed Accounts Posts: 3,648 ✭✭✭Cody Pomeray


    Scofflaw wrote: »
    I admit I would consider the US - a continental sized economy - a poorer comparison for Ireland than the UK...
    That's unfortunate, because any Irish stimulus would be on foot of a Eurozone stimulus.

    In the absence of such a package, the UK economy, being heavily exposed to the Eurozone, is clearly going to under-perform. Stimulus or none.

    Clearly, using the UK as an example of a potential stimulus is inappropriate.


  • #66
    Rightwing
    Closed Accounts Posts: 8,101 ✭✭✭Rightwing


    Scofflaw wrote: »
    I have to agree - I'd certainly favour such a stimulus being run at the European level rather than winding up as a set of national pork barrels.

    cordially,
    Scofflaw

    And what if all our competitors used stimulus to boost their production and exports ?


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  • #67
    Cody Pomeray
    Closed Accounts Posts: 3,648 ✭✭✭Cody Pomeray


    Rightwing wrote: »
    And what if all our competitors used stimulus to boost their production and exports ?
    well that's already started happening. Eurozone countries are increasing their proportion of their non Eurozone exports.


  • #68
    KyussBishop
    Closed Accounts Posts: 5,797 ✭✭✭KyussBishop


    Tipp Man wrote: »
    Are you actually for real???? That's what the whole bloody thread is about - it opened with the OP saying that austerity was based on flawed research and that stimulus was the answer

    Here's 2 posts for starters
    You're being obtuse here, in ignoring both what I've said, and your selective reading of the discussion as limited to Ireland, when the discussion has not gotten stuck in revolving around Ireland, but has branched to EU-wide policies which can resolve the crisis through stimulus rather than austerity.

    If you want to ignore the wider discussion to put out the usual austerity rhetoric, then it will be pretty easy to show how you are trying to narrow/frame discussion, to try and make it suit the austerity rhetoric, and it will look a lot like you don't have an interest in the wider discussion or in anything other than promoting austerity.


  • #69
    Suryavarman
    Registered Users, Registered Users 2 Posts: 2,583 ✭✭✭Suryavarman


    Rightwing wrote: »
    And what if all our competitors used stimulus to boost their production and exports ?

    Then Ireland would just start producing and exporting different goods.


  • #70
    Rightwing
    Closed Accounts Posts: 8,101 ✭✭✭Rightwing


    Suryavarman wrote: »
    Then Ireland would just start producing and exporting different goods.

    That's flawed. Not every country will be able to do that. For that to work, only some countries can do it. China is dominant, regardless of what we do. They produce cheaper, so unless and until we drastically reduce our costs we're going nowhere.


  • #71
    Cody Pomeray
    Closed Accounts Posts: 3,648 ✭✭✭Cody Pomeray


    we're not competing with china. or india. or bangladesh. we're not trying to.


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  • #72
    Suryavarman
    Registered Users, Registered Users 2 Posts: 2,583 ✭✭✭Suryavarman


    Rightwing wrote: »
    That's flawed. Not every country will be able to do that. For that to work, only some countries can do it. China is dominant, regardless of what we do. They produce cheaper, so unless and until we drastically reduce our costs we're going nowhere.

    It's not flawed. It's reality. It's comparative advantage.

    Chinese labour might be cheaper but it is nowhere near as productive as Irish labour.

    The reason Ireland is going nowhere at the moment is because of all the uncertainty over policy and future economic condtions in Ireland and the EU.


  • #73
    Rightwing
    Closed Accounts Posts: 8,101 ✭✭✭Rightwing


    Cody Pomeray wrote: »
    we're not competing with china. or india. or bangladesh. we're not trying to.

    That's what M Martin told us afew years back,,,'we don't need manufacturing, we're a smart economy'.

    The rest is history.


  • #74
    Cody Pomeray
    Closed Accounts Posts: 3,648 ✭✭✭Cody Pomeray


    Rightwing wrote: »
    That's what M Martin told us,,,'we don't need manufacturing, we're a smart economy'.

    The rest is history.
    so you think that if we can't compete with china, we can't have an industrial base?

    explain germany.


  • #75
    Scofflaw
    Registered Users, Registered Users 2 Posts: 23,283 ✭✭✭✭Scofflaw


    Cody Pomeray wrote: »
    That's unfortunate, because any Irish stimulus would be on foot of a Eurozone stimulus.

    In the absence of such a package, the UK economy, being heavily exposed to the Eurozone, is clearly going to under-perform. Stimulus or none.

    Clearly, using the UK as an example of a potential stimulus is inappropriate.

    If that happens, it will then be a relevant concern for comparisons, certainly. At the moment, not so much.

    cordially,
    Scofflaw


  • #76
    Suryavarman
    Registered Users, Registered Users 2 Posts: 2,583 ✭✭✭Suryavarman


    Rightwing wrote: »
    That's what somebody told us afew years back,,,'we don't need agriculture, we're an industrial economy'.

    The rest is history.

    FYP.


  • #77
    Tipp Man
    Closed Accounts Posts: 4,025 ✭✭✭Tipp Man


    KyussBishop wrote: »
    You're being obtuse here, in ignoring both what I've said, and your selective reading of the discussion as limited to Ireland, when the discussion has not gotten stuck in revolving around Ireland, but has branched to EU-wide policies which can resolve the crisis through stimulus rather than austerity.

    If you want to ignore the wider discussion to put out the usual austerity rhetoric, then it will be pretty easy to show how you are trying to narrow/frame discussion, to try and make it suit the austerity rhetoric, and it will look a lot like you don't have an interest in the wider discussion or in anything other than promoting austerity.

    The point is valid across the whole of Europe, who the hell is going to pay for this "stimulus"

    France? Broke
    Italy? More broke
    Spain? As broke as Ireland
    Uk? Rapidly heading to brokeville
    Nobody else big enough

    So are you expecting Germany to pay for an entire stimulus package for most of Europe??

    As I said, as long as somebody else is paying

    What's the problem with getting our own house in order and having the discipline to do it??


  • #78
    Rightwing
    Closed Accounts Posts: 8,101 ✭✭✭Rightwing


    Cody Pomeray wrote: »
    so you think that if we can't compete with china, we can't have an industrial base?

    explain germany.

    Germany have low costs. They don't cripple small businesses with red tape, they don't have a grossly overpaid Public sector or welfare.

    They believe in austerity.

    I'll trust them ahead of ahern/biffo et al


  • #79
    Farmer Pudsey
    Registered Users, Registered Users 2 Posts: 6,326 ✭✭✭Farmer Pudsey


    Tipp Man wrote: »
    The point is valid across the whole of Europe, who the hell is going to pay for this "stimulus"

    France? Broke
    Italy? More broke
    Spain? As broke as Ireland
    Uk? Rapidly heading to brokeville
    Nobody else big enough

    So are you expecting Germany to pay for an entire stimulus package for most of Europe??

    As I said, as long as somebody else is paying

    What's the problem with getting our own house in order and having the discipline to do it??

    Do you not know that Kyuss believes in money creation like Robert Mugabe. It would be an never ending load of first communion parties.


  • #80
    Tipp Man
    Closed Accounts Posts: 4,025 ✭✭✭Tipp Man


    Farmer Pudsey wrote: »
    Do you not know that Kyuss believes in money creation like Robert Mugabe. It would be an never ending load of first communion parties.

    Ah I didn't know who I was dealing with


  • #81
    Cody Pomeray
    Closed Accounts Posts: 3,648 ✭✭✭Cody Pomeray


    Rightwing wrote: »
    Germany have low costs. They don't cripple small businesses with red tape, they don't have a grossly overpaid Public sector or welfare.

    They believe in austerity.

    I'll trust them ahead of ahern/biffo et al
    Hmm. I'm not sure I'd say they believe in austerity.

    They believe in industrial wage restraint and investment in infrastructure. If you want to call that austerity, lets go with that.

    Our 'red tape' is also pretty much non existent. We have little option but to perpetuate wage restraint here, if not falling real wages. What we're missing is investment in infrastructure. Enter stimulus argument...


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  • #82
    KyussBishop
    Closed Accounts Posts: 5,797 ✭✭✭KyussBishop


    Tipp Man wrote: »
    The point is valid across the whole of Europe, who the hell is going to pay for this "stimulus"

    France? Broke
    Italy? More broke
    Spain? As broke as Ireland
    Uk? Rapidly heading to brokeville
    Nobody else big enough

    So are you expecting Germany to pay for an entire stimulus package for most of Europe??

    As I said, as long as somebody else is paying

    What's the problem with getting our own house in order and having the discipline to do it??
    Again, deliberately ignoring my posts. I made clear, it was not the public debt vs GDP of individual nations that matters if there are to be EU-wide recovery policies, it is the public debt vs GDP of the EU as a whole, which leaves enormous room for financing recovery, and with each individual country being able to sustainably pay back their share of debts in the (potentially very) long run.

    Keeping the level of debts sustainable is what matters, if that is the course chosen for ending the crisis; economically that is easily achievable at an EU-level, even if it's unlikely to ever happen politically.


  • #83
    Scofflaw
    Registered Users, Registered Users 2 Posts: 23,283 ✭✭✭✭Scofflaw


    Rightwing wrote: »
    And what if all our competitors used stimulus to boost their production and exports ?

    Then we all get richer together. I think you're using the zero-sum mercantilist model rather than thinking about comparative advantage.

    cordially,
    Scofflaw


  • #84
    KyussBishop
    Closed Accounts Posts: 5,797 ✭✭✭KyussBishop


    Farmer Pudsey wrote: »
    Do you not know that Kyuss believes in money creation like Robert Mugabe. It would be an never ending load of first communion parties.
    If you feel it is a topic so easily debunked, try engaging it in argument, rather than this kind of predictable trite response; your unwillingness to, instead engaging in the usual hyperinflation scaremongering, betrays both an ignorance of the topic, and conscious knowledge that you don't have an argument that can debunk it.

    Money creation is not a 'belief' either, where do you think all the money comes from in a fiat money system? Private banks create money all the time (a view shared by many, including a leading editor of the Financial Times, plus the Bank of England, and many central banks around the world), yet somehow it is unthinkable that it may be possible for government to as well.


    To you, private money creation is 'good', and public money creation is somehow 'bad', yet I would bet you can't explain the difference between them, or how any criticisms you apply to one, do not apply to the other.
    It was private banks and money creation after all, which inflated the property bubble which blew up and left us with this mess, and private banks/finance inflating many asset bubbles now, increasing our cost of living; actual real examples of inflation caused by private means, go largely uncriticised.

    Where, using money creation, private banks add money to the economy through loans, government can add money using public spending (limited by inflation targets, thus debunking the lazy hyperinflation nonsense); where private banks take money out of the economy through debt repayments + interest, government can take money out through taxes (but without the inherent unsustainability of banks debt-based money).

    It's simple enough (when the right narrative for explaining it is found), and the analogies between how public/private money creation work are pretty clear, yet despite the mechanics of it being so analogous, public money creation is somehow supposed to magically lead to hyperinflation (with the mechanism of that being totally unexplained by anyone making the claim, and despite repeatedly stating public spending would be limited by inflation targets; requiring the most dishonest obtuseness to ignore).


    Such trite scaremongering (usually put forward with maximum condescension), shows a total lack of interest in engaging in honest discussion, and shows very conscious knowledge that the arguments you make are dishonest.


  • #85
    View
    Registered Users, Registered Users 2 Posts: 3,872 ✭✭✭View


    KyussBishop wrote: »
    Where, using money creation, private banks add money to the economy through loans, government can add money using public spending (limited by inflation targets, thus debunking the lazy hyperinflation nonsense); where private banks take money out of the economy through debt repayments + interest, government can take money out through taxes (but without the inherent unsustainability of banks debt-based money).

    The problem with that is the (usual) expectation is the bank will make a net profit (I.e. the interest repayments) from their activities and will be able to repay its debts from the debt repayments on its loans.

    By way of contrast there are few areas where a government makes anything other than a total loss on its expenditure, hence the activities engaged in almost invariably won't cover the cost of the additional debts it incurs. Building a new hospital may be wonderful and put money into the economy but no one expects that hospital to generate a net (tangible) profit for the government. Presumably that hospital would need to confine itself to carrying out some profitable line of medicine like plastic surgery for the rich and would refuse admission to poor people wanting treatment for non-profitable illnesses.


  • #86
    KyussBishop
    Closed Accounts Posts: 5,797 ✭✭✭KyussBishop


    View wrote: »
    The problem with that is the (usual) expectation is the bank will make a net profit (I.e. the interest repayments) from their activities and will be able to repay its debts from the debt repayments on its loans.

    By way of contrast there are few areas where a government makes anything other than a total loss on its expenditure, hence the activities engaged in almost invariably won't cover the cost of the additional debts it incurs. Building a new hospital may be wonderful and put money into the economy but no one expects that hospital to generate a net (tangible) profit for the government. Presumably that hospital would need to confine itself to carrying out some profitable line of medicine like plastic surgery for the rich and would refuse admission to poor people wanting treatment for non-profitable illnesses.
    Government would not need debt, or to turn a profit, when it has access to money creation (it would just need to manage inflation); this is why public money creation is so politically powerful:
    It allows sustainable government spending (limited by inflation targets) without the need to secure profits, which allows public services to prioritize social values, not profits (and prevents economic trouble, like now, from forcing government to prioritize profits/money at the expense of social values, due to debt burdens - there would be no need for such public debt anymore).

    This makes monetary reform probably the most important political/economic game changer in the world at the moment; it will disarm a huge amount of conservative economic narrative in politics (crap which has been holding society/politics back for almost 40 years now), allowing politics to become much more inherently progressive.


  • #87
    View
    Registered Users, Registered Users 2 Posts: 3,872 ✭✭✭View


    KyussBishop wrote: »
    Government would not need debt, or to turn a profit, when it has access to money creation (it would just need to manage inflation); this is why public money creation is so politically powerful:

    It may be politically powerful - that doesn't mean it's economically powerful.

    If a company has X amount of shares in issuance, each share is worth 1/Xth of the net wealth of the company. If it increases the number of shares it has in issuance, it doesn't mean the net wealth of the company increases, rather it merely dilutes the value of each share in existence (each share is now worth a decreased 1/(X+Y)th of the company).

    Likewise, each unit of money in existence is ultimately worth a fraction of the net wealth of the area that uses it. Issuing more money doesn't increase that net wealth (immediately, altough it may help long term) rather it devalues the value of each unit of money in circulation.

    Look at it this way, a Saudi Arabian company is negotiating with you to sell you oil at $100 a barrel. Overnight, the US Federal Reserve doubles the amount of dollars in issuance.

    Are the Saudis going to still accept $100 for their barrel of oil? It might be nice if they did accept $100 of the newly devalued dollars because you'd are ultimately using € to pay. Instead though they are going to want the same amount in (Saudi) Riyals, so they will want $200 for their oil. You are not going to buy oil at half-price unfortunately!
    KyussBishop wrote: »
    It allows sustainable government spending (limited by inflation targets) without the need to secure profits, which allows public services to prioritize social values, not profits (and prevents economic trouble, like now, from forcing government to prioritize profits/money at the expense of social values, due to debt burdens - there would be no need for such public debt anymore).

    This makes monetary reform probably the most important political/economic game changer in the world at the moment; it will disarm a huge amount of conservative economic narrative in politics (crap which has been holding society/politics back for almost 40 years now), allowing politics to become much more inherently progressive.

    Dozens of countries around the world have gone down the road of churning our more more in order to create "wealth". It doesn't work because on anything other than a short term basis because the value of the currency drops and the prices of imports from other currency areas increase.

    Perhaps more fundamentally though as governments spends their money largely on non-profit activities, they essentially engage in economic value destruction (albeit socially useful activities) on a continual basis (e.g. That local hospital is a drain on the public purse even if highly desirable). That reduces the net wealth of a government and its people. Unless that is counter-balanced by economic value creation - an area governments are notoriously bad at - the result of what you are suggesting is not "sustainable government spending" but unsustainable spending and - ultimately - the hard reality of bail-outs and increasing poverty.


  • #88
    djpbarry
    Registered Users, Registered Users 2 Posts: 13,104 ✭✭✭✭djpbarry


    KyussBishop wrote: »
    It doesn't have to be done, but it may be hard for the Euro to survive the rest of the decade/crisis without it.

    I don't need to put together spending figures etc.; I would see it spend up to the point of a sustainable public debt vs GDP level, and hold steady at that point while the EU economies recover.
    Considering so many Eurozone countries have significant unsustainable debt as is, I’m not at all convinced that much can be achieved through an EU-wide stimulus programme before the entire Eurozone accrues unsustainable levels of debt.


  • #89
    Rightwing
    Closed Accounts Posts: 8,101 ✭✭✭Rightwing


    Cody Pomeray wrote: »
    Hmm. I'm not sure I'd say they believe in austerity.

    They believe in industrial wage restraint and investment in infrastructure. If you want to call that austerity, lets go with that.

    Our 'red tape' is also pretty much non existent. We have little option but to perpetuate wage restraint here, if not falling real wages. What we're missing is investment in infrastructure. Enter stimulus argument...

    What investment in infrastructure would you like to see here?

    I see motorways in places there's no need for them. No point spending good money just to have a few lads in work for a few months. That only increases debt.


  • #90
    Cody Pomeray
    Closed Accounts Posts: 3,648 ✭✭✭Cody Pomeray


    djpbarry wrote: »
    Considering so many Eurozone countries have significant unsustainable debt as is, I’m not at all convinced that much can be achieved through an EU-wide stimulus programme before the entire Eurozone accrues unsustainable levels of debt.
    Bond issuance by European Investment Bank, the European Stability Mechanism, or a specially-designed SPV delivered of capital by the Eurozone governments would not adversely affect Eurozone debt dynamics, the "Golden Rule" or any other fiscal constrains beyond the initial capital input. Quite the opposite, it ought to improve Eurozone debt dynamics.

    It wouldn't have to be simply a case of the Government raising taxes and spending it 1:1. That would be very irresponsible, imo.
    Rightwing wrote: »
    What investment in infrastructure would you like to see here?
    Specifically I would like to see private banking groups co-operate with the EIB or other agency of the EU/ Eurozone to provide finance for Irish manufacturing, energy and innovation companies. A certain amount of this would have to be infrastructural too, and would be invested in public infrastructure like roads and ports.

    That would be replicated in the other programme countries as a 'sweetener' to austerity - but not an end to wage restraint and fiscal responsibility by government.


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  • #91
    20Cent
    Registered Users, Registered Users 2 Posts: 8,940 ✭✭✭20Cent


    Paper has been cited 450 times, a lot more than just one piece of research fubared.
    http://scholar.google.com/scholar?q=GROWTH+IN+A+TIME+OF+DEBT&btnG=&hl=en&as_sdt=0%2C5


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