Eskozia eta independentzia (Nor da nor? Who is who?) (2)

Hasierarako, ikus Eskozia eta independentzia (Nor da nor? Who is who?)

Segida:

(a) Ohar bereziak

Malcolm1

Kairin van Sweeden2

Bi hauei Derek Henry-k emandako erantzuna, in Eskozia eta independentzia (Nor da nor? Who is who?)

(b) Derek Henry eta Eskozia-ren independentzia, behin eta berriz…

(i) Eskozia berriz eta aspaldiko akats teoriko berberak, berriro!

(ii) Eskoziar batek (Derek Henry) dioena Diru Teoria Modernoaz

(iii) Eskoziaz, Kataluniaz eta Euskal Herriaz (gehigarriak)

(iv) E-posten trukaketa Robin McAlpine-rekin

(v) Eskozia independenteak moneta propioa behar du (the new Scotish pound)

(vi) Iritzi sendo eta desberdinetako garaian bizi gara (4)

(vii) Eskozia, adi!

(viii) Eskoziako independentziaz eta moneta propioaz, eskoziar baten ikuspuntutik

(ix) Eskozia, twitter-misterioa?

(x) Eskozia: Ikasgai batzuk

(xi) Eskoziako mugimendu ‘independentistaz’ hitz bi

(xii) Eskozia: mugimendu ‘independentista’, Robin McAlpine, Richard Murphy, SNP delakoa eta Europar Batasuna

(xiii) EBZ Bill Mitchell-en arabera (1)

(xiv) Eskoziaz, berriz

(xv) Eskozia europar distopiarantz

(xvi) Eskozia europar distopiarantz, Irlandako modeloari jarraituz

(xvii) Laboristen galtzeko arriskuak haien Brexit-ekiko jarrera islatu ahalko luke

(xviii) Eskozia ‘independentea’ Europar Batasunean (aka, Eurozone Dystopia-n)

(xix) Eskozia bere independentzia monetarioaren alde

(xx) Bill Mitchell-ek Alderdi Laboristari buruz

(xxi) Zergak: Europar Batasuna eta Eskozia

(xxii) Bill Mitchell-en Britainia Handia-EB liskarra

(xxiii) Eskoziar batek (Derek Henry) dioena Diru Teoria Modernoaz

(xxiv Derek Henry eskoziarrak hauteskundeak eta geroko giroaz

Derek Henry eta Eskozia (berriz)

(c) Derek Henry-k emandako beste hiru erantzun3


Ikus http://bilbo.economicoutlook.net/blog/?p=46692#comment-70955:

Malcolm Reavell

Wednesday, January 13, 2021 at 21:11

By the way events have unfolded in the last year, it appears that shifts within the independence movement has meant they are no longer interested in an MMT solution nor an anti-EU voice and I am no longer part of their dialogue.
They have instead sought to build a strategy using input from those who purport to be MMTers but who sadly lack the qualifications to claim that expertise and are pro-EU and all that that represents.”
[Bill Mitchell, in Scotland: a nation cannot be independent and use another nation’s currency or even peg to it: http://bilbo.economicoutlook.net/blog/?p=46692]

Not sure who you’re getting at there, but you’re wrong. We are building on an MMT framework and making progress. You must visit the Modern Money Scotland Group and the Scottish Currency Group on facebook. The SCG has Warren, Stephanie and others on board, and MMS has recruited Fadhel for his expertise on emerging nations and degrees of sovereignty. You’re welcome to join, you know where to find us.

Agreed, the EU question is a thorn in the side, but those of us who understand MMT are working to educate people, but the EU question has to be separated from the initial issue of independence and currency.

Ikus http://bilbo.economicoutlook.net/blog/?p=46692#comment-70954:

Kairin van Sweeden

Wednesday, January 13, 2021 at 21:01

So a couple of things. At Modern Money Scotland we promote a Scottish currency and its champion – Dr Tim Rideout. We understand that fiscal and monetary independence is key to being independent, along with the abundance of natural resources that we are lucky to have in Scotland.
Whether the Scottish people will vote to go back into the EU is an unknown right now. This possibility can only occur:
1. Once we get a referendum and the people of Scotland vote for independence
2. A pro-EU party or coalition are in power
3. We install our own currency and central bank
4. We call referendum on re-joining the EU
This will be a number of years after the vote for independence and we can’t get a section 30 yet.
At Modern Money Scotland our first job is to convince independence voters that we need to have our own currency to be independent, so that they, in turn, can convince those who previously voted no what the ‘mechanical’ workings of independence are.
We are a long way from rejoining the EU and if an independent Scottish people vote for that, that is their democratic right. When we become independent and there is a referendum on the EU, I for one will work to educate both myself and others on both the pros and the cons.
Independence first though, eh?

Ikus http://bilbo.economicoutlook.net/blog/?p=46692#comment-70991:

1. Derek Henry

Friday, January 15, 2021 at 8:25

Replying to This is me

These are tired old arguements of no substance. Warren Mosler has debated them away over many years. In a debate on Twitter which was watched by many with a poster called Scottish pensions an expert in the pension industry Warren destroyed this debate.3Let me try and explain. The logical facts and reason are you are making the mistake they all make and that is assume nothing changes after independence. That the mainstream logic is followed. In this case with the SNP being so clueless you are probably correct. However, using the MMT lens your point does not make any sense.

You are correct when you say would have to agree to accept responsibility for a share of the UK’s national debt. They would do this by issuing new debt instruments, payable to WM, and denominated in sterling. You are correct when you say who own the debt will not volunteer to redenominate the debt from sterling to the new currency.

I say so what ? What are the real issues with that ?

You will use mainstream logic “sound finance” the statu quo. I will say not so fast let’s look at this issue from another prespective.

1. The last thing the ISG should do is convert the sterling debt into the new currency. You don’t want to force conversion. There’s a right way and a wrong way to do it. You are proposing the wrong way. The right way. You don’t actually leave sterling the ISG simply starts spending and taxing in the new currency. The conversion is on a 1:1 basis. Whatever you taxes and spent in sterling you tax and spend the same amount in the new currency. Now you have independent fiscal policy and independent monetary policy.

2. Don’t force conversion on bank deposits from Sterling to the new currency if people want to hold sterling you let them gold sterling. Let’s say half want to keep sterling and half need the new currency to pay their taxes and run their businesses. If you convert everybody to the new currency those people who need sterling will sell the new currency to get sterling the want and it can drop 60%. So you don’t do that. So the sell the new currency to get sterling the central bank doesn’t know what to do so they raise interest rates. Import prices go through the roof with job losses everywhere.

3. Leave it alone everybody is happy those that want sterling have sterling those that want the new currency have the new currency. Those that now need the new currency now have to sell sterling and buy the new currency. That pushes the new currency up not down. Where are these people going to get the new currency when it is scare at this moment time ?

4. From the only place that has it the ISG. The ISG will sell the new currency to these people at a slight premium in exchange for these people’s sterling. The currency is wanting to get stronger at this point but the ISG will sell enough to keep it stable. Now the ISG is hoarding sterling what are they going to use that sterling for ?

5. To service that sterling debt that you say is going to be a nightmare of course. They will service it over time and manage it and reduce it over time without a collapse in the currency. The simple fact is said debt need be no worse with your own currency, and less of an issue if you have your own currency and sustain higher levels of real domestic output. The sterling debt is a drag on the Scottish economy now but with your own fiscal policy a job guarentee and monetary policy setting the interest rate to zero it can be less of a drag using your own currency.

6. Mortgage debts etc in sterling is complete nonsense. The banking sector looking to earn profits for their shareholders. Will step in like they have everywhere in the world when countries have become independent like the Baltic states, Czech republic, Australia, Cananda, New Zealand the list is endless and provide a service to their customers to convert these debts into the local currency for them. It is absurd to think otherwise.

7. You are right of course that gamblers in the FX markets will gamble heavily and start shorting the new currency. Even though the ISG has launched in the correct way above that the SNP are not capable of understanding. So there is a danger that the SNP who are clueless will do it the wrong way and the gamblers will run riot in top of that I fully accept that reality. It doesn’t make your arguement correct though. As I’ve shown above.

8. If people who are in charge do launch it in the correct way above using the MMT lens then more fool the gamblers. They are going to get burned. Speculators playing silly games laying on shorts in the new currency. They will do so until there is nobody is prepared to take the other side, no soft holders to panic out of their savings and no more flash crashes allowing dealers to close open long positions. In other words until the liquidity drains away until all that is left is that required for the underlying trade flows.

Then you will get the mother of all bear squeezes.currency

The game, of course, is to tempt the patsy of last resort — the central bank — into the speculation market to throw fresh salmon to the bears. A wise central bank will avoid doing this. Instead it will offer to clear needed trade flows with its reserves on a strict national policy basis — food and power: yes, Learjets: no. It will offer refinancing to firms who have foreign currency loans, as long as they go through administration first so that the foreign currency loan is wiped out and the foreign bank is force to take the loss. A wise central bank would do everything it can to ensure the squeeze stays on track. It would make its intentions known — there will be no liquidity for speculation outside the ‘natural’ supply. And that means, in an over-the-counter market of foreign exchange, liquidity may run out.

A wise central bank understands that is the responsibility of the other central bank with the high currency value and an excess export policy to decide what they want to do. A wise central bank will keeps it head while all around are losing theirs.

2. Derek Henry

Friday, January 15, 2021 at 8:49

This is me part 2.

Now that you have independent fiscal policy and monetary policy you can hoard even more sterling that keeps reducing the sterling debt over time until eventually it is dealt with. Without any of the issues you are so worried about becoming a problem.

1. You can sustain full employment by introducing a job guarentee and output, and a permanent 0 rate policy, but real terms of (external) trade can be problematic in any case. With or without your own currency. But by introducing full employment at home The higher levels of domestic output from having your own currency works in your favour in support of your real wealth. It attracts both foreign direct investment which again keeps the new currency strong. Attracts imports.

2. Since you’ve created full employment at home exporters will be standing in line begging to sell you their goods and services. Even discount their own currency to do it. This allows you to use your skills and real resources and more productive projects within your own borders. Ideally your exports should be fully automated if you can and the strategic ones should be state owned.

3. By setting the interest rate at zero. This allows you to see where the inflation is coming from that can be managed with a fiscal adjustment either via more taxes or less spending. Government can command any resources available for sale in its currency and can use its sovereign power to force those resources to be freed up so it can purchase them for the public good. The only constraint is what skills and real resources are available.

This is in sharp contrast to the neo-liberal viewpoint which is that government is just another organisation in the system that has to compete for resources by price. Business and banks always get first choice of resources and government has to make do with the scraps. They believe the bankers and businesses should be in charge and that the population are just factors of production to be shifted around, like ingots of steel, as business requires.

4. Banks can only lend directly to borrowers for capital development purposes (i.e. business credit lines and household loans), and the banks keep those loans on their books until cleared.

Banks must operate on a single balance sheet. No hiving things off into ‘off balance sheet’ subsidiaries to try and hide them.

Banks cannot accept collateral. Collateral is a fixed charge over an asset as an insurance policy and aligns the incentives of banks with those possessing assets, not ideas. It stops banks being capital developers and turns them into pawn shops. That is the wrong alignment of incentives. We want loan officers with skin in the game. Their success should depend upon the success of the borrower. Banks should line up in insolvency with the other unsecured creditors (and importantly behind the remaining preferential creditors — employees).

Depositors are protected 100% at all amounts. A depositor in a commercial bank is holding nothing more than an outsourced central bank account. They are not investors in the bank and should never be treated as such.

Regulation is provided by the bank resolution agency, which is a public body funded entirely by government. There is no charge or levy to the banks for the operation.

The job of the bank resolution agency is to ensure the banks are properly capitalised given their loan book and declare them solvent. If they are not, they take the bank over and resolve it with any excess losses absorbed by government. This aligns the incentives of the regulator. If they get the solvency calculation wrong and the capital buffers exhaust, the regulator stands the cost.

The Central Bank provides unlimited, unsecured lending to regulated banks at zero interest rates. Collateral serves no purpose since the bank has been declared solvent (and therefore there is no reason for it to be illiquid), and collateralised Central Bank lending just shifts the losses to depositors who are protected 100% anyway.

Once you get rid of interbank collateral and funding requirements, you get rid of one of the final excuses for keeping Government Bonds. National Savings annuities for pensions (allowing retiring individuals to receive a secure lifetime income) would get rid of the final one. Transferable instruments that confer government welfare on the owners do not serve the public purpose. Government welfare receipt is a social decision, not a market driven one.

As the asset side is heavily regulated, you want the liability side to be as cheap as possible. Unlimited central bank access ensures liquidity for depositors and allows lending-only banks to arise. It gets rid of the Interbank overnight market and replaces it with central bank overnight accounts. It puts the Central Bank ‘in the bank’ as a major investor — with open access to the commercial bank’s loan book via the work of the solvency regulator.

All levies, liquidity ratios, reserve requirements and the like are eliminated. The cost of maintaining the collateral system is eliminated. The result is loans at a low price with the quantity restricted solely by credit quality. As an economy heats up, credit quality declines and loans become restricted — systemically preventing the Ponzi stages of finance that lead to a Minsky Moment.

You get a natural and steady withdrawal of funding that is far more surgically targeted and responsive to local conditions, than the carpet bombing approach of interest rate adjustment.

This leaves the payment system, which should be as costless as cash and clear just as instantly to eliminate transaction frictions. Whether that should be publicly provided, or remain outsourced to the banks is an open question. Depositors are a cost to the bank and would effectively be a tax, but leaving them with the banks would give them an incentive to get the cost of clearing provision down. It may boil down to a political question that depends upon your view of the effectiveness of public and private provision. I’d lean towards an Open clearing system created by the state (or even states) and available to all on an open licence. We want one good clearing system.

Which of course is What Turkey and Argentina should do. Not the ” sound finance” approach they follow that of course causes all of the things that you suggest will happen to an independent Scotland.

There is another way the MMT way that can manage these issues much more effectively than the “sound finance” way ever could.

3. Derek Henry

Friday, January 15, 2021 at 9:14

This is me part 3 rep!y.

The Canadian dollar has made very large movements versus the USD over the past decades. Nothing bad has really happened ?

Same with the Aussie dollar – it has gyrated between US$0.50 and US$1.10 since floating in the mid 1980s. Can you point to anything bad happening ?

Floating rates adjust that is their job.

You can call it a “collapse” and write op-eds about how terrible it is, but you cannot point to anything that’s particularly negative. Very different from the Great Depression, where policymakers had an insane desire to defend the gold parity at any cost. Or Compared to defending foreign FX reserves associated with fixed FX it has been a breeze in comparison. Floating rates have been a breathe of fresh air.

Most of the scare stories about what would happen if Scotland became independent are just that. Scare stories to scare the children. Stories that happens under different monetary trimester no longer apply to floating FX.

Firstly, floating currencies do not fall forever; at some valuation becomes attractive and the market reaches a new flow equilibrium Secondly, currency volatility prevents the buildup of positions by investors who are concerned about currency risk in the first place.

An exchange rate is a relative price: one currency unit for another. If we look at the post-1990 period, inflation rates in the developed countries have been quiescent, bouncing around 2% for most countries. As such, each currency has relatively stable purchasing power for domestic goods and services, including the cost of wages.

The stability of wages has one side effect: if a currency falls rapidly versus its developed peers, the cost of wages falls relative to other countries. This drops input costs for production relative to other countries. And even if imported inputs rise in price in domestic terms due to the drop in the exchange rate, those input costs are unaffected when expressed in terms of the foreign currency unit.

The result is that domestic exporters suddenly have greater prospective profit margins versus their international peers. This will have two effects: buoy the attractiveness of the local equity market and attract investment inflows (either reallocations of capital by multinationals, or foreign direct investment).

These capital flows (and the prospect of future flows) help put a floor under the domestic currency. This helps explain why there have been no cases of developed currencies going to zero in the foreign exchange marketplace.

You can talk about Argentina, Turkey, Venezuela all The usual suspects and their ” sound finance” obsessions regarding foreign debt. We will highlight the mistakes they’ve made in following false beliefs and the errors they made when using fiscal and monetary policy and The economic choices they made that made things worse not better. MMT’rs would have ran all these countries differently.

The risks that you have highlighted are purely political. Fully linked to the belief of the mainstream economic profession and ” sound finance ”. The MMT lens manages those risks and exposed the rest as myths. Which just leaves the political risks.

That is something we can agree on the SNP are clueless don’t have a clue what they are doing. That is the political risk that will probably make your arguments come true. That I am 100% sure of but as shown in my replies to you it doesn’t have to be that way.

MMT economists would run Scotland differently compared to the madness of the SNP.

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