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Adam Smith did not write about importing people (immigrants). Also, at his time there were no immigrants from the UK to America, only SETTLERS which is a totally different concept. To talk of Adam Smith as the paradigm of economics on trade is misleading, because for about a century after Smith England did not apply much free trade, even raised tariffs against India on textiles in order to develop its textile industry. America also mostly ignored free trade and Germany and Japan built their industry on the base of protectionism (Liszt not Smith). There is just nothing in classical economic thought about mass immigration of cheap labour from totally different civilization. Even the "melting pot" idea of Zwingler was "melting pot of european races" if you quote him exactly. Every Pew and Gallup poll in every country in the western world shows a majority against immigration. Here in Italy the latest Pew/WSJ poll has 80% saying they want to reduce immigration. And in rich East Asian countries and Israel they just do not allow mass immigration despite low fertility. I do not know about Canada but the majority of Americans say they "do not recognize their country". I lived in London in 1990 and I do not recognize it, people say "I go the England" when they live London for the countryside. I do not recognize now even Milan, Italy. But turning to Economics since the start of the crisis in 2009 we got 3,3 millions immigrants in spite of 10-12% unemployment here in Italy. Before the Euro we had less than 50k immigrants per year, with the Euro up to 500k, but with slower economic growth and even a Depression. In the USA the numbers are different, but not by much if you look at participation rate and real wages. Which economic theory proves the West needs mass immigration (and also Japan or Korea) ? We have 23 millions people working now in Italy out of 60 millions, about 8-10 millions could go to work if we would reach a participation rate like that of Japan, where much more people are at work, inequality is less and they do not let basically anybody in. Same Korea, Taiwan, Singapre. People should read Richard Wernerm who explains the German and Japanese model
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I graduated in 1984, in 1982 I was studying Macro in a very left wing department and what my marxist or paleo keynesians were saying was that jacking up interest rates to 13% in the US and even higher in the EU created a terrible recessione and terrible unemployment. Nobody was talking about debt, lending money and the rich lending at higher interest thanks to Volcker. This because at the time private and public debt was 1,5 times GDP and now is between 3 and 4 times GDP. Nobody was buying homes and cars with debt at the time, among the working class, then (at least in Europe), so interest rates did matter for different reasons. Labor shaere of income distribution was the highest at the time and has been going downhill since then so pushing up rates to 13% was bad for labour then and squeezing rates to 0% has been also bad for labour now ? (at least if you look at the numbers). Monetary policy has different effects depending on the ratio of debt to income, but I haven't seen models about that expect for Steve Keen's. Interest rates set by CB matter for international porfolio and fx movements, but not that much for domestic demand and investment. What happened around 1982 in the whole western world was that "helicopter money" was banned AT THE SAME TIME that interest rates were jacked up to the moon and this was the "policy regime" change that really mattered. After 30 years though, now things are coming around ... see the latest issue of Foreign Affairs: "Print Less but Transfer More - Why Central Banks Should Give Money Directly to the People" ["...Cash transfers stand a better chance of achieving those goals than do interest-rate shifts and quantitative easing, and at a much lower cost. Because they are more efficient, helicopter drops would require the banks to print much less money...] Interest rates matter much less than the quantity of money (credit and CB money) for the majority of the people, they matter mostly for people in financial markets (and macroeconomists)
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I have been waiting for a while to have an excuse to ask NR take on our (helicopter) solution for a large southern european beleaugered country, which cannot ask for its CB money, because of EU treaties restrictions and teutonic money views. I know the title here is "WHEN IS the Helicopter...", but maybe it is possibile to enlarge it a bit ? We (me, my colleague Cattaneo, an ex-FMI economist Biagio Bossone and Warren Mosler who is known over here) just published a book to argue that the Italian government should unilaterally go with the following helicopter scheme, (which is actually a remake of Hjialmar Schacht's successful solution for Germany in the Thirties to exit the Great Depression) Italy could issue (free-of-charge, electronic) Tax Credit Certificates to enterprises and workers. As bills of exchange, tax credits would not require future reimbursement from the State. Rather, two years after issuance, the State would accept them for the payment of all taxes and financial obligations to itself. Deferred Tax Credit would be deferred money. Yet, their recipients could immediately convert them in euro (by selling them in the financial market at a discount comparable to that on a two-year, zero coupon government bond), and use them for cutting taxes. The two-year deferral provision would allow output to respond to increased demand and generate the revenues to (somehow) offset the shortfalls that payments in CCF would cause to tax receipts in euro. Facing a €300 billion gap vis-à-vis its pre-crisis output trend, and assuming estimates of the fiscal multiplier (I know...that is tricky..), Italy could close the gap in 3 to 4 years by issuing tax credits at a €200 billion yearly rate (13% of GDP), without (maybe) exceeding the Maastricht treaty 3% budget deficit limit and steadily reducing the debt/GDP ratio, as required by the fiscal compact. With current output slack, even a 200 billions money issuances would not impact inflation much (maybe 4% the UK with its 12% deficit in 2011 ?), expecially since allocations to enterprises would deflate gross labor costs. (BTW, No additional public expenditure for us, only huge tax cuts! maybe they will like it in Chicago!). Since 200 billions euros is a huge chunk of money and markets and could spooke markets (I am a professional trader BTW), we add Warren Mosler's brilliant idea to issue a new type of government debt: the “tax-backed bond”, similar to current government bonds except that they would contain a clause stating that if the country failed to make its payments when due—and only if this happens—the bonds would be acceptable to make tax payments within the country in question. This tax backing, (the Gov that values them at par), would set a floor below which the value of Italian BTP could not fall, assuring investors that Italy's bonds are always “money good” and dwarfing an attack like the one of the summer of 2011 Basically we would create 200 billions of "new euros", only for Italy, through deferred tax credit and use the money to cut 200 billions of taxes. Plus we would somehow transform Italian gov bonds into "money" (10 year bonds accepted at par to pay taxes). Sorry to be so long, for the poor English and to be maybe off topic, but it is an ingenuos, Helicopter, "quasi monetary solution" to the EU crisis and maybe NR would be interested enough to tell us which flaws he sees in it --- See our post at save-the-euro/ and
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Jul 31, 2014