- 24 Jun 2018 06:03
#14927071
Sorry for the unclear title/subject.
The people of the EU can force the treaty to be changed only by threatening that their particular nation will leave if changes are not made. The UK has already left.
However, 1st the people need to have their aha moment where they get it the Neo-liberalism is totally not working because it is wrong in several ways; and that the ECB and the EU need to use Modern Monetary Theory instead. The people of the UK can reach their aha moment and then should use their fiat currency to end austerity overnight.
Neo-liberal economic theory is frozen into the treaty that formed the EU.
What is so wrong with Neo-liberalism? 1] It is still the gold standard in most times. Yes, nations don't ever use gold, but their finances are treated by the treaty as if they did have to worry about the same things that they would with the gold standard. 2] The IMF and ECB forced austerity* onto nations (including even it seems the UK) when the GFC of 2008 jumped their debt to GDP ratio up a little. 3] This means the nations can't run a deficit year after year to allow all its people to be able to save euros at the same time and also run a trade deficit. 4] This means they can't grow their way out of austerity.
What makes MMT so much better? 1] MMT asserts that the *definition* of the 3 Sectors of the economy means that for the people and companies of a nation to be in surplus [have more euros** at the end of the year than at the start] when the nation has a trade deficit; then the nation's Gov. must be in deficit. 2] MMT asserts that the scare stories of hyper inflation are not applicable to a well run nation. That inflation can *only* be a problem when there is real full employment, because if there is still under utilized labor then the companies can hire them and increase their output. This increased output will suck up the money that would otherwise be used to bid up prices. 3] MMT asserts that austerity is always a terrible idea. 4] MMT asserts that nations should be in deficit all the time and that if they have their own fiat currency they can always make the payments on their debt***. 5] MMT asserts that the deposits in all the banks of the EU nations must be insured by an entity that can create euros to make any payment no matter how huge the crisis. Bank deposits *must* be secure. This implies that all the banks should be regulated by the same agency and use the same rules. Does this require a new EU-wide Central Government? Maybe, yes.
..* . Austerity doesn't work like it did 150 years ago because taxing incomes and using a VAT tax means that Gov. spending cuts which by definition must cut the people's incomes will always reduce the nation's GDP because spending is reduced because the people's incomes are reduced. See my thread here on this topic.
** . This is net euros or hard euros. The people can save euros that were created by other people borrowing from a bank and spending the 'soft' euros they borrowed. But, then not all the people can have net savings because some went into debt. Everyone wants to save. We are told we need to, but we can't if the Gov. is running a surplus. In fact the Gov. surplus must come at the expense of the private sectors savings.
*** . This doesn't apply to the EU nations. The EU uses the euro and this means that there must be some way to let nations always pay their debt payments or the euro must be abandoned. This "some way" would have to involve the ECB lending euros to member nations no matter what the circumstances are. How this is possible I have no idea.
. . . An alternate idea might be for the ECB to give interest free some number (=X) of euros for every person who lives in that nation, i.e. give to that nation's Gov. This gift would let every nation increase its spending without adding to its debt, just like a country with a fiat currency can. Do this on the 1st of each month. There would need to be a way for the nations to track who moved in and from where so that nation could have its population reduced. It doesn't matter all that much to me if the count is off some. But, the count can't be allowed to keep growing faster than the population. Every nation would want to cheat. The size of X could be changed from time to time, especially if full employment is reached.
The people of the EU can force the treaty to be changed only by threatening that their particular nation will leave if changes are not made. The UK has already left.
However, 1st the people need to have their aha moment where they get it the Neo-liberalism is totally not working because it is wrong in several ways; and that the ECB and the EU need to use Modern Monetary Theory instead. The people of the UK can reach their aha moment and then should use their fiat currency to end austerity overnight.
Neo-liberal economic theory is frozen into the treaty that formed the EU.
What is so wrong with Neo-liberalism? 1] It is still the gold standard in most times. Yes, nations don't ever use gold, but their finances are treated by the treaty as if they did have to worry about the same things that they would with the gold standard. 2] The IMF and ECB forced austerity* onto nations (including even it seems the UK) when the GFC of 2008 jumped their debt to GDP ratio up a little. 3] This means the nations can't run a deficit year after year to allow all its people to be able to save euros at the same time and also run a trade deficit. 4] This means they can't grow their way out of austerity.
What makes MMT so much better? 1] MMT asserts that the *definition* of the 3 Sectors of the economy means that for the people and companies of a nation to be in surplus [have more euros** at the end of the year than at the start] when the nation has a trade deficit; then the nation's Gov. must be in deficit. 2] MMT asserts that the scare stories of hyper inflation are not applicable to a well run nation. That inflation can *only* be a problem when there is real full employment, because if there is still under utilized labor then the companies can hire them and increase their output. This increased output will suck up the money that would otherwise be used to bid up prices. 3] MMT asserts that austerity is always a terrible idea. 4] MMT asserts that nations should be in deficit all the time and that if they have their own fiat currency they can always make the payments on their debt***. 5] MMT asserts that the deposits in all the banks of the EU nations must be insured by an entity that can create euros to make any payment no matter how huge the crisis. Bank deposits *must* be secure. This implies that all the banks should be regulated by the same agency and use the same rules. Does this require a new EU-wide Central Government? Maybe, yes.
..* . Austerity doesn't work like it did 150 years ago because taxing incomes and using a VAT tax means that Gov. spending cuts which by definition must cut the people's incomes will always reduce the nation's GDP because spending is reduced because the people's incomes are reduced. See my thread here on this topic.
** . This is net euros or hard euros. The people can save euros that were created by other people borrowing from a bank and spending the 'soft' euros they borrowed. But, then not all the people can have net savings because some went into debt. Everyone wants to save. We are told we need to, but we can't if the Gov. is running a surplus. In fact the Gov. surplus must come at the expense of the private sectors savings.
*** . This doesn't apply to the EU nations. The EU uses the euro and this means that there must be some way to let nations always pay their debt payments or the euro must be abandoned. This "some way" would have to involve the ECB lending euros to member nations no matter what the circumstances are. How this is possible I have no idea.
. . . An alternate idea might be for the ECB to give interest free some number (=X) of euros for every person who lives in that nation, i.e. give to that nation's Gov. This gift would let every nation increase its spending without adding to its debt, just like a country with a fiat currency can. Do this on the 1st of each month. There would need to be a way for the nations to track who moved in and from where so that nation could have its population reduced. It doesn't matter all that much to me if the count is off some. But, the count can't be allowed to keep growing faster than the population. Every nation would want to cheat. The size of X could be changed from time to time, especially if full employment is reached.