Mike, before making a call for the central bank to create more cheap credit to help the economy perhaps it is worth remembering that cheap credit is what got us in the mess we’re in. Most commentary agree this is a balance sheet recession and the balance sheets all over the place got stuffed with junk assets as a result of cheap credit which skewed risk metrics and resulted in misallocation of resources (as it always does). Why do you think more cheap credit can fix a recession caused by cheap credit?

And what do you mean that the money created by ECB was not for public use? It was handed over to the Italian government – the use as public as it gets. What you’re really arguing is that the 4% interest difference, which in essence reflects the risk of lending to Italy, is eliminated I guess by direct lending of ECB to Italy at 1% or 0% or whatever arbitrary interest rate. We got into this mess by giving unlimited funds to builders to invest into apartments in Monaghan or whatever other unfeasible schemes. And now we’re going to fix it by giving unlimited funds to government and then at some stage in the future we’re going to neutralize all this crap by raising taxes and cutting spending?? I think that it should be obvious that even now we’re unable to neutralize past excess lending so what makes you think we’ll be able to neutralize it once we’ve created even more?

Dom

You have completely misunderstood & misrepresented what I wrote.

I proposed the ECB finance an employer of last resort scheme entirely debt & interest free using the money issuance ability that it has as the Euro currency central bank. No ‘credit’ is involved. This is +not+ simply giving money to governments. It’s strictly to finance the hiring of unemployed (at minimum wage).

Loading up the Italian government & it’s citizens with ever more over priced debt is +not+ creating money to public purpose. Quite the opposite.

The property asset bubble is only the tip of the iceburg as regards the massive debt money issuance of private banks. Most of it to no purpose, capital formation etc. in the real economy. Yet ultimately this debt extracts its yield from the productive economy of citizens. In creating another €500B euro credit line for the banks the ECB has merely made the debt & debt service pile bigger.

The problem is that there are so many CDS & other derivative positions existing (still) that the debt write down that should have happened, could not without the entire financial system crashing. (The financial elites effectively changed the rules of capitalism to suit themselves.) (Although, if all we’re going to get is the current failing policies, frankly, I’d be in favour of taking the risk of repudiating all the ‘odious’ debt.)

Putting debt free money into the real economy will also help the balance sheet situation by adding to the aggregate asset side. Don’t forget that a balance sheet has two sides. (And also don’t forget that a money issuing central bank ‘balance sheet’ is meaningless in the conventional sense – it’s liabilities need never be ‘repaid’ as it can create money at will.) But it’s real purpose is to restore the aggregate demand spending that has been lost thru’ both private & governments’ deleveraging & income (=spending loss). This is the only thing that will restore growth when the entire world is choosing austerity. Keynes ‘fallacy of composition’ is as true today as it was 80 years ago.

The question of whether governments can be trusted to manage an economy properly is a political one, not one of monetary economics. But what would you rather do, fix the undemocratic governments we have or continue with them entirely captured by the interests of an unelected & rapacious financial elite? Your argument there makes no sense whatever to me, and is no ‘solution’. If you continue to think within the paradigm handed down by the financial elites, the only (non) solution you’re left with is simply ‘beggar=thy=neighbour’, everyone for themself. Precisely the divide & rule (on entirely false basis) that the elites want you to sign up to.

Study the blog I linked. You won’t ‘get it’ in 2 minutes. If your understanding is derived from the ‘micro’ economics of a business or household, you most certainly do not understand the possibilities, and even aspects of the present operation of a fiat ‘macro’ monetary system. This is the biggest failing of the entire mainstream economics profession, not understanding either banking or the monetary system. But then, they’ve had a lot of ‘help’ (in not understanding) from the top few percent who profit from this.

Ex Yugoslavia was doing exactly that – printing money to keep people in employment. It wasn’t particularly smart because it started off exactly as you suggested (we’ll print some and once the thing is fixed we’ll stop, honest) and ended up with my folks having to exchange their salary into Deutsche Mark (on the black market) as soon as they got it and then sell some DEM every few days for day-to-day expenses. I simply do not see how printing money which is not covered with the equivalent rise in production can produce anything else but inflation.

And you’re not serious with your suggestion that I should study that blog. Unless you can point out to one or two articles where ideas are summarized I may have a look. But I haven’t time to study dozens of diverse articles to try to figure out what the idea is. Besides, you may make some effort and summarize in few bullet points the basics of this idea you guys have. In my view fundamentals are simple:

- you can have productive jobs and if there was any chance of having productive jobs the banks would use the 1% three years funding available from ECB to invest in such jobs. They are not doing this because still there is overhang of misallocation from the previous bubble
- and then you can have subsidiesed jobs which produce less than the cost of keeping such jobs. The difference between the cost and the produce has to be paid through transfers, inflation or borrowing.

I have no doubt which kind of jobs would be produced by government run schemes funded through primary emission of the central banks.

Dom,

You’re still not listening & misrepresenting what I’m writing. Yugoslavia did +not+ do what I’m proposing. And I note you don’t offer any counter solution.

I’ve already told you some study is required. I’m not going to throw up an inadequately short treatise here for you to give it 5 secs thought & throw up a spurious response, which appears to be what you’ve done so far.

The financial elites just love people to stay ignorant of any alternative. What I’ve offered you is a body of work going back decades by economists that correctly predicted both the crash & the inherent Euro system problems ratcheting up again in todays news. If you can’t be bothered, don’t expect things to get any better – they won’t, rather worse. Might be your job next time.

Interesting. You are able to produce two page of waffle here but can’t give a summary or at least point where on the blog is one supposed to inform himself on what is being proposed. That blog is not structured and one would have to spend days reading all entries to figure out what is being proposed. I obviously have no intention of doing that even if I had time. This for example is the list of categories on that blog and even that is not indicative as to where can one find a consolidated set of ideas / policies that are being advocated:

Categories
Admin
Britain
Climate change
Debriefing 101
Economics
Eurozone
Friends like this
Guest blogger
Hyperinflation
Inflation
Job Guarantee
Labour costs
Labour Force
Letters to
Linux
Music
National Accounts
Permaculture
Personal
Politics
Q&A
RBA decisions
Saturday quiz
Teaching models
Youth unemployment

Now, if you are not capable or willing to summarize what is being proposed, obviously you have no interest in having a debate. This ay even be because you are not capable of having a debate or because the idea is so vague and in-concise that it is impossible to defend its premises. In any case you remind me of some vehement advocates of Marx’s theories (not to say that what you are proposing equals to Marxism – so far I have no clue what you’re proposing) who exhibited the same reaction to any challenge: ‘you don’t understand – go study’.

An idea which can’t be summarized on half a page is worthless.
So unless you can add some substance to this debate, don’t bother responding.

Dom

There are hyperlinks throughout Bill Mitchell’s blogs to further explanation of the principles underlying his commentary.

Above, I advocate a means of expanding & growing the economy via expansion of the private sector. Which is clearly retaining & furthering the private enterprise model of capitalism in the real economy that produces goods & services.

Yet you seem to think there’s Marxism there, presumably implying some centrally planned economy of government bureaucrats? What a joke.

You have proven again you have not understood a word I’ve said & with that remark you wouldn’t get an ‘E’ grade in politics or economic history at junior level.

No, there’s no debate to be had with someone so proud of their ignorance they aren’t prepared to read more than half a page to broaden their mind.

Mike, it looks like you are trolling mate. I clearly said that I am making no parallels between what you are saying and Marxism because you’ve said nothing of substance that would enable me to draw any parallels between what you are proposing and Marxism. So much about understanding.

Secondly, you are contradicting yourself. First you say that the ECB should create debt-free money (out of thin air which is different from what Yugoslavia was doing exactly how?) “to enable governments to hire the unemployed (at minimum wage) to stimulate the Euro economy & reverse the ruinous policy of needless austerity” and then you state that you “advocate a means of expanding & growing the economy via expansion of the private sector” (you have done nothing of a sort). You clearly have no idea what you’re talking about and are unable to express yourself in a coherent fashion. All you seem to be capable of is to call up the authority of Bill Mitchell and keep referring to that blog. You say there are hyperlinks on that blog (what a surprise, really I could not see that!) but still you are unable to produce one or two hyperlinks to this wonderful theory you are ‘proposing’. That is very least you could do in the absence of your own capability to outline what is going on.

Dom

Trying to explain economics to you is like trying to explain it to 5 yo. Last time go on the Job Guarantee scheme I’ve explained. I’ll use round figures. Bare in my mind, the economy is a dynamic system & is not properly understood with the kind of rubbish ‘equilibrium’ thinking that the mainstream models used to completely miss the crash.

1. We now have 15% of the entire workforce doing nothing at at, around 450,000.

2. Using ECB created money – no debt, no interest – we hire the lot at minimum wage.

3. These 450,000 now have have, say, an average of €100 per week more than their dole to spend into the economy. Annualised, that equals a €2.25 billion per annum more aggregate demand (spending).

4. The Irish government has no dole or rent allowance to pay for the 450,000 & now receives some PRSI from them. Let’s say a net saving of €300 each per week. Annualised, thats €6.75 billion.

5. The government decides to restore some of the previously cut spending on services & public investment. Let’s say €3 billion. The remaining €3.75B of savings won’t fully reduce the annual deficit immediately. But as the economy grows, let’s say over 3 to 4 years conservatively to achieve 95% + employment, increasing tax recieipts will automatically & increasingly reduce the deficit, even to a point of surplus, as we go.

6. Total increase in spending into the Irish economy is then €2.25 + €3 = €5.25 billion. Which means an INCREASE of approx. 4% in GNP growth – demand to be met by the provision of PRIVATE SECTOR goods & services. (Note for the economics ignorant – public sector spending is STILL spending in the economy & produces increased aggregate demand. It is all GNP/GDP & has a positive effect on the private sector beyond direct labour.)

7. In practice, as soon as spending begins to increase, as 90% of Irish jobs (non JG) pay higher than minimum wage, workers will transfer to the new private sector jobs required to meet the increasing aggregate demand. A virtuous circle is created which both accelerates growth in the private sector & produces net savings in government expenditure. (Recall, the JG cost is NOT government expenditure.)

8. It’s likely not every last JG worker will take up a private sector job. So lets assume, for whatever reason, 20% of our original 450,000 stay either on the dole or JG. That’s only 90,000 or approx. HALF the NUMBERS & COST that we had during the so called BOOM times !! (And half, say, of that cost would/could be met by ECB created money, PROVIDING it does not cause excess, ‘demand-pull’ as opposed to external ‘cost-push’ inflation.)

9. The net result is a near (say 98%) full employment society. A much more prosperous & socially cohesive society where nobody gets dumped or left behind to suffer ill health, suicide, reduced life expectancy or all the other sh1t that comes with cronicly high levels of poverty.

10. It’s true to say that the top few percent, especially the financial elites, would probably not be able to cream off multiple €billions from ordinary citizens for no useful purpose whatever. But the major employer still remains the private sector. Much the same opportunities for success & wealth, for talented entrepreneurs willing to engage in the real economy of goods & services, will still exist.

So, I repeat, Dom, try studying some economics beyond the scope of a half page of tripe spewed out by the mainstream in media & economics. Or wallow in the present mess of massive inequality of opportunity & wealth, high unemployment & high income/job insecurity & crap public services. Your choice.

How can you know explaining economy to me is like explaining to a 5 yo when so far you haven’t gone near explaining anything. This is your first entry which attempts to explain something and as such is a major breakthrough. I am glad you finally came out in the open and exposed the theoretical origins of ‘your’ proposal.

Starting with the Job Guarantee scheme, firstly you should note that this is not a private sector solution. Contrary to your earlier claims that that this involves no government bureaucracy – in theories of MMT school to which you implicitly refer – this is a public jobs buffer designed to pick up slack employment when the private sector is letting go. There is no much elaboration either by you or by the MMT to explain what these public jobs will be producing at the time when the demand for private sector employment is falling. This is probably so because it does not matter one iota what they will be producing because it is assumed that they are paid by money pulled out of the hat. So they may as well be sitting at home and spend the Euros printed by ECB. That is a wonderful scheme and all we have to do is to convince ECB to print us a few billion and transfer with no strings attached please. This might even work for Ireland which is but a pimple on Europe’s bottom with our paltry 450k unemployed we require no more than the budget of Munich city to pay them minimum wage. But if this theory is any good it should work on a grand scale too. Taking into account that Eurozone has 16.3m unemployed it would cost E200b just to pay their minimum wages every year. The problem with back of the envelope figures (especially done by guys who never worked in the real economy like you) is that they are grossly inadequate – in this case the cost of employment is much more than the E7 per hour cost of wages. To give someone meaningful employment one has to provide tools, infrastructure, has overheads etc which runs in tens of thousands of Euro per (government) created low value added job. So we’re talking trillions of Euros needed to keep EU in employment printed by ECB without an impact on CPI and of course the values of our savings and pensions. I can see why you were shying away from the detail of ‘your’ grand scheme.

Dom

Yet again you demonstrate your poor ability to think about anything longer than 5 seconds before spouting more rubbish.

You say….might as well pay people to sit home & do nothing (but spend their minimum wage income). If you’d thought about that longer than 5secs you might have considered that there needs to be an incentive to take new private sector jobs as they arise. Allowing them to do nothing would be a serious disincentive. The minimum wage must be worked for to provide the incentive to move to normal permanent jobs, as they arise.

Was that really so hard to figure out, Dom?

Your suggestion that overhead costs need be high is completely rediculous. There are millions of useful jobs that could be done in the community with very little overhead or infrastructure requirement. In fact the overheads of many jobs in the public sector are not that high either, principally those services based. But it doesn’t matter how ‘productive’ or otherwise JG jobs are. Doesn’t matter what they do so long as they don’t compete with existing employment.

But, yet again, you miss the vital point that ALL spending adds to aggregate demand & will stimulate the economy & private sector enterprise & jobs. So, in the unlikely event that overhead costs add as much again to the price, that money will all help to the economy to grow and recover even faster.

Macro economics is not really your forte, is it Dom?

Of course as the private sector recovers, the numbers of on JG schemes will reduce to a fraction of present needs, starting as we are in the worst recession since the 1930s. Finally, it hardly matters if it’s double the actual wage cost because IT’S NOT A COST – the ECB provides the money debt free.

Congratulations, you’ve twigged the proposal comes from the MMT school of economics, who correctly predicted the financial crash (warren Mosler) & continue with the most accurate commentary on the failure to fix anything (except prop up casino banks) in the 4yrs since. Did you finally do some reading or pick that up on a half page summary somewhere & mention it to try and sound knowledgeable in macro economics (but fail anyway)?

By the way, I’m still waiting to hear YOUR solution for the economic mess? Or maybe you don’t think it’s that bad, still have your job, you’re doing ok etc.?

Why are you so angry because I don’t spend days thinking about your dud proposals? Mate, I am experienced and smart enough to recognize a dog when I see one. Simplicity is the key. Once you simplify things – everything is clear. For example, look at this idea of ‘yours’: we have a stimulus designed as a social welfare scheme where recipients are subjected to forced labour (I’m fully behind you on that one, though) to earn their spending money which comes from the money tree. I mean, you could not make this up. We’ve seen stimulus, we’ve seen the money tree and we’ve seen public works schemes. None of this stuff works, never has and never will, and the fact that MMT-ers predicted crash doesn’t make this idea any better.

As far as my idea is concerned – I don’t have one (equally as you don’t have one and the other people’s idea you’re subscribing to does not seem to be very clear to you). They way things are set up with all the bullshit politicians pondering to stupid voters and entitlement junkies while being corrupted by the vested interests – things are quite bleak for the West. There is not one single idea that can make up for decades of spendthrift by the baby-boomers who wanted it all and wanted in now and to manifest their philosophy life they created the biggest debt balloon in the history. Credit was the instant substitute for poverty providing momentarily gratification without the need for saving and foregoing consumption to accumulate wealth. It’s been like this for decades and now the chickens are coming home to roost. At best it will be decades of slow decay which I will watch with popcorn and coke for now from the Middle East and perhaps from Asia little later. Asia still subscribes to proper values which enrich the society – education, work and savings.

Well, showing your true colours there Dom. (Sounds like the current version of the script from neo liberals who caused the mess.)

Advocating forced labour for the unemployed, admiring the slave labour of Asia. But not for you eh, sitting comfortably in the Middle East ;)

I’m sure the 1/4 million or so that lost their jobs in Ireland these last 3 yrs will really love your attitude.

(I mentioned earlier btw that the JG scheme proposed is voluntary. But then, you don’t really do reading eh, Dom, unless it confirms your bigoted views?)

Funny comment about ‘entitlement junkies’. The only ones I can see are the wealthy top few percent who expect to gamble & receive unsustainably high unearned income with no risk. Any losses to be covered by the ordinary working (or unemployed) citizens. Also expecting (& getting) their wealth to continue to increase whilst all others’ diminishes in recession. But I don’t think you meant them did you? Maybe you’re a banker yourself? (Something that sounds like it anyway.)

It’s obvious you never wanted to engage in a ‘debate’, nor are you capable of it. What a very, very sad man you are, the height of your pleasure eating popcorn & drinking coke (so sad lol!), whilst gloating over those suffering unemployment, poverty & job insecurity in recession. Do stay in the Middle East, no loss to Ireland. (If you were ever here.)

Is it that I don’t do reading or is it that you don’t really do thinking? Now you say that the JG scheme is voluntary but in the previous entry you were saying that allowing people to do nothing would be a serious disincentive from taking private sector jobs once they become available. So what are you going to do? Cancel the social welfare for those who don’t voluntary join the local community ‘let’s paint the school fence for E7 per hour’ squad? Or are you going to allow them to do nothing (which if you can remember stuff for longer than 2 hours is a ‘serious disincentive’) and receive welfare?

It is obvious that you are making this stuff up as you go along. You are absolutely clueless and your latest ad hominem entry clearly shows the bitter anger of intellectual impotency.