Economist Fadhel Kaboub talks about Africa and the global South, including issues of external debt, food deficits, energy deficits, and manufacturing deficits.
Hmmmmm . . . an "African Union" similar to a "European Union" will be EXCEPTIONALLY helpful to Africans in my uninformed opinion! A uniform currency will CERTAINLY help by any means.
"Uniform currency?" Like the Euro? That giving up of monetary sovereignty by EU members reduced each country to the same status as US states, unable to issue their own currencies to deficit spend out of economic shocks. That turned European countries, like Greece, Spain, and Italy into paupers.
"In this brief we show that Euroland—comprising the 16, out
of a total of 27, European Union (EU) countries that use the
euro—is in a particularly difficult situation, and not simply
because its policymakers fail to realize the scope of the problem
or that the Maastricht Treaty restricts the size and nature of possible interventions. Rather, we continue to argue that the nature
of the euro limits fiscal policy space (Bell [Kelton} 2003, Sardoni
and Wray 2006). At the level of individual member states, the
euro is not a sovereign currency, so it imposes serious constraints
I was, too. But, Real Progressives provided me answeres to questions I had been asking for a couple of decades. Learning the basics of federal finance as described by Modern Monetary Theory, MMT, was illuminating, to be sure. I hope you will join us with the Macro N Cheese podcasts on Saturdays, and for the discussion group ZOOM meetings on Tuesday nights, Macro N Chill. You can find a link to register, and plenty of information on all that's offered by going to: realprogressives.org. Reach out with questions.
Mark, the problem with the Eurozone is not necessarily the currency union itself, but rather the limitations on fiscal policy placed on member states via the Fiscal Stability Treaty and so forth. There are also issues we see today with the European Central Bank’s monetary policy agenda. During the Covid pandemic, when the debt limiting policies of the Eurozone were paused, we saw that Eurozone members were able to spend to help citizens and businesses get through the pandemic. However, instead of potentially learning from this, the Germans and others seemingly want to go back to the fiscal policy barriers of the GFC era. The politically-imposed barriers are the problem more than the currency union.
I’ve heard Mosler question the whole concept of monetary sovereignty, as commonly used by non-Mosler MMTers, and I believe Wray and company have been doing research in this area. We’ll have to keep an eye on that because the MMT narratives may indeed need to shift from monetary sovereignty towards conditions which allow for proper fiscal policy. After all, if the US Congress imposed debt limits as is sometimes threatened, the US’ monetary sovereignty itself may not keep the US from being much different than the Eurozone.
Now, all of this said, is ole’ Klassik advocating for the Eurozone? Not really, but that is mostly because of cultural/political factors which allow for debt limits and such to flourish in Europe more than for any economic theoretical purposes. Even compared to the US, Europe seems to refuse to loosen their grip on neoliberalism and ordoliberalism. How much this applies to Africa would be a good question for Fadhel Kaboub. I suspect that with Africa the issue is going to be austerity imposed from the outside in addition to potential austerity policies imposed from within which aren’t directly influenced by the US and EU.
True, but, those are policy limitations imposed only to justify preventing any progressive plans or idea; never when spending is for what those empowered to make policy want.
Please re-read my original reply that quotes Wray and links to the sourced paper.
Mark, I'm very familiar with Wray's publication. This line is the salient bit from Wray: "The most likely (and certainly the most desirable) outcome of the crisis in Euroland will shift greater fiscal responsibility toward the sovereign; that is, the European Parliament. "
The emphasis here is that the problem is not with the currency union itself, but rather with fiscal policy tied to the currency union which prevents sensible use of fiscal policy. In essence this isn't really any different than the proposed US debt limits. If such debt limits were passed by the US Congress, the problem isn't with the US Dollar itself, but rather the artificial limitations placed on the Dollar. The same is generally true with the Euro. The Euro can exist without the debt limits.
Mosler has spoken about this topic and I know Wray is working on a publication on the Eurozone. With all of this, I think there will be further refinement in MMT phrasing from those two sides at least.
"True, but, those are policy limitations imposed only to justify preventing any progressive plans or idea; never when spending is for what those empowered to make policy want."
There is a bit of a difference here between the US and Europe. The Europe/UK often takes more of a hard monetarist stance in rhetoric and policy than the US where monetarism is often cited, but rarely followed when Congress wishes to pass corporate welfare or expand the military. Social spending is a different story. With Covid and pressure put on NATO by the US, European fiscal policy might start looking more like what we see in the US. It might be a small victory, but at least monetarist myths might finally be breaking somewhat in Europe.
The US has no financial limit on spending. The limitations are the availability of the real resources for sale and the ability of the economy to produce what Govt wants/needs to purchase to provision itself.
If you are referring to the "debt ceiling," that is a political policy choices that has no financial or economic justification.
Yes, I agree. The situation with the hypothetical debt ceiling in the US is quite similar to the debt limits in the Eurozone.
I want to link to a lecture given by Dirk Enhts on January 22, 2024 to the Modern Money Lab YouTube channel. It is directly about the current state of the Eurozone as compared to previous discussions of the Eurozone during/after the GFC. The part starting at the 54 minute mark in the video is a good summary of where things are now: https://www.youtube.com/watch?v=TIedS1Vxq_Y
I suppose while I'm on the topic of recent Modern Money Lab videos, and perhaps more on the topic of Africa, here is one of Warren Mosler's rants against the term 'monetary sovereignty' at around the 51 minute point in the video and he discusses the current state of the Eurozone at around 64.5 minutes into the video: https://youtu.be/CxlWbLT3FbA
Hmmmmm . . . an "African Union" similar to a "European Union" will be EXCEPTIONALLY helpful to Africans in my uninformed opinion! A uniform currency will CERTAINLY help by any means.
"Uniform currency?" Like the Euro? That giving up of monetary sovereignty by EU members reduced each country to the same status as US states, unable to issue their own currencies to deficit spend out of economic shocks. That turned European countries, like Greece, Spain, and Italy into paupers.
"In this brief we show that Euroland—comprising the 16, out
of a total of 27, European Union (EU) countries that use the
euro—is in a particularly difficult situation, and not simply
because its policymakers fail to realize the scope of the problem
or that the Maastricht Treaty restricts the size and nature of possible interventions. Rather, we continue to argue that the nature
of the euro limits fiscal policy space (Bell [Kelton} 2003, Sardoni
and Wray 2006). At the level of individual member states, the
euro is not a sovereign currency, so it imposes serious constraints
on the ability of states to mount a substantial fiscal stimulus." -- https://www.econstor.eu/bitstream/10419/54329/1/631368787.pdf
I'm not versed in economics, so I can admit I am as niave as they come.
I was, too. But, Real Progressives provided me answeres to questions I had been asking for a couple of decades. Learning the basics of federal finance as described by Modern Monetary Theory, MMT, was illuminating, to be sure. I hope you will join us with the Macro N Cheese podcasts on Saturdays, and for the discussion group ZOOM meetings on Tuesday nights, Macro N Chill. You can find a link to register, and plenty of information on all that's offered by going to: realprogressives.org. Reach out with questions.
Mark, the problem with the Eurozone is not necessarily the currency union itself, but rather the limitations on fiscal policy placed on member states via the Fiscal Stability Treaty and so forth. There are also issues we see today with the European Central Bank’s monetary policy agenda. During the Covid pandemic, when the debt limiting policies of the Eurozone were paused, we saw that Eurozone members were able to spend to help citizens and businesses get through the pandemic. However, instead of potentially learning from this, the Germans and others seemingly want to go back to the fiscal policy barriers of the GFC era. The politically-imposed barriers are the problem more than the currency union.
I’ve heard Mosler question the whole concept of monetary sovereignty, as commonly used by non-Mosler MMTers, and I believe Wray and company have been doing research in this area. We’ll have to keep an eye on that because the MMT narratives may indeed need to shift from monetary sovereignty towards conditions which allow for proper fiscal policy. After all, if the US Congress imposed debt limits as is sometimes threatened, the US’ monetary sovereignty itself may not keep the US from being much different than the Eurozone.
Now, all of this said, is ole’ Klassik advocating for the Eurozone? Not really, but that is mostly because of cultural/political factors which allow for debt limits and such to flourish in Europe more than for any economic theoretical purposes. Even compared to the US, Europe seems to refuse to loosen their grip on neoliberalism and ordoliberalism. How much this applies to Africa would be a good question for Fadhel Kaboub. I suspect that with Africa the issue is going to be austerity imposed from the outside in addition to potential austerity policies imposed from within which aren’t directly influenced by the US and EU.
True, but, those are policy limitations imposed only to justify preventing any progressive plans or idea; never when spending is for what those empowered to make policy want.
Please re-read my original reply that quotes Wray and links to the sourced paper.
Mark, I'm very familiar with Wray's publication. This line is the salient bit from Wray: "The most likely (and certainly the most desirable) outcome of the crisis in Euroland will shift greater fiscal responsibility toward the sovereign; that is, the European Parliament. "
The emphasis here is that the problem is not with the currency union itself, but rather with fiscal policy tied to the currency union which prevents sensible use of fiscal policy. In essence this isn't really any different than the proposed US debt limits. If such debt limits were passed by the US Congress, the problem isn't with the US Dollar itself, but rather the artificial limitations placed on the Dollar. The same is generally true with the Euro. The Euro can exist without the debt limits.
Mosler has spoken about this topic and I know Wray is working on a publication on the Eurozone. With all of this, I think there will be further refinement in MMT phrasing from those two sides at least.
"True, but, those are policy limitations imposed only to justify preventing any progressive plans or idea; never when spending is for what those empowered to make policy want."
There is a bit of a difference here between the US and Europe. The Europe/UK often takes more of a hard monetarist stance in rhetoric and policy than the US where monetarism is often cited, but rarely followed when Congress wishes to pass corporate welfare or expand the military. Social spending is a different story. With Covid and pressure put on NATO by the US, European fiscal policy might start looking more like what we see in the US. It might be a small victory, but at least monetarist myths might finally be breaking somewhat in Europe.
The US has no financial limit on spending. The limitations are the availability of the real resources for sale and the ability of the economy to produce what Govt wants/needs to purchase to provision itself.
If you are referring to the "debt ceiling," that is a political policy choices that has no financial or economic justification.
Yes, I agree. The situation with the hypothetical debt ceiling in the US is quite similar to the debt limits in the Eurozone.
I want to link to a lecture given by Dirk Enhts on January 22, 2024 to the Modern Money Lab YouTube channel. It is directly about the current state of the Eurozone as compared to previous discussions of the Eurozone during/after the GFC. The part starting at the 54 minute mark in the video is a good summary of where things are now: https://www.youtube.com/watch?v=TIedS1Vxq_Y
I suppose while I'm on the topic of recent Modern Money Lab videos, and perhaps more on the topic of Africa, here is one of Warren Mosler's rants against the term 'monetary sovereignty' at around the 51 minute point in the video and he discusses the current state of the Eurozone at around 64.5 minutes into the video: https://youtu.be/CxlWbLT3FbA