Lecturing the Senate Budget Committee

15 Mar, 2015 at 15:56 | Posted in Economics, Politics & Society | 8 Comments

blythWatch Mark Blyth give the Senate Budget Committee a well-earned lecture on public debt here. Absolutely fabulous!

8 Comments

  1. Statement of Mark Blyth Eastman Professor of Political Economy
    The Watson Institute for International Studies and Brown University
    Before the Committee on the Budget
    United States Senate
    Hearing on “The Benefits of a Balanced Budget”
    March 11th 2015

    Click to access blyth—senate-testimony-on-balanced-budgets-copy.pdf

    Comment by Jan Milch— 17 Mar, 2015 #

  2. Varoufakis has made and continues to make the exact same points and yet you and others are focusing on ‘appearances’ and ‘spectacle’ and dedicate blog posts to characterizing the pictorial content of a Paris Match article as a “blunder”. Have a word with yourselves and become a bit less naive, a bit more mature, a bit more savvy.

    Comment by GrkStav— 16 Mar, 2015 #

  3. Professor Syll,

    Blyth’s speech in front of the SPD was also on point:

    http://www.socialeurope.eu/2015/03/creditors-paradise/

    https://www.jacobinmag.com/2015/02/germany-austerity-blyth-speech-spd/

    “In such a world, why would you, the average worker, ever get a pay rise? Indeed, is it any wonder that inequality is everywhere an issue? In Europe this plays out at the national level, and at the international level of creditor countries (good) and debtor countries (bad), where the rights of the creditors must be protected and the mantra that “you must pay your debts” must be respected.

    Yet even in terms of simple welfare economics, this is nonsense. If the cost of squeezing the debtor is to keep her in debt servitude, or if the losses to the creditors are less than the costs of servicing the debt in perpetuity, then default is efficient, if not moral.

    Today it is a profound irony that European social democrats worry deeply, as they should, about the investor protection clauses embedded in the proposed Transatlantic Investment Treaty with the US, and yet they demand enforcement of exactly the same creditor protections on their fellow Europeans without pausing for breath for the money they “lent” to them to bail out their own banking systems’ errant lending decisions.

    Something has gone badly wrong when social democracy thinks this is OK. It is not. Because it begs the fundamental question, “what are you for — if you are for this?” The German Social Democrats, for we are all the heirs of Rosa Luxemburg, today stand as the joint enforcers of a creditor’s paradise. Is that who you really want to be? Modern European history has turned many times on the choices of the SPD. This is one of those moments.

    It’s great that my book has helped remind you of the poverty of these ideas. But the point is to recover your voice, not just your historical memory. Your vote share isn’t going down because you are not shadowing the CDU enough. Its going down because if all you do is that, why should anyone vote for you at all?”

    Comment by Matt Pappalardo— 16 Mar, 2015 #

  4. what’s up with that Greek accent (he, he)

    Comment by DW— 16 Mar, 2015 #

  5. “under-revenuing” is a game-changer.

    Comment by dan— 16 Mar, 2015 #

  6. “Syriza should use the next four months to get Greek banks lending to its own government”

    FEBRUARY 26, 2015 // BY: JOSH RYAN-COLLINS

    http://www.neweconomics.org/blog/entry/syriza-should-use-the-next-four-months-to-get-greek-banks-lending-again

    “Whatever the pros and cons of the current agreement between Syriza and the euro-institutions, it has at least given Syriza a bit of time to consider some longer-term policy options.

    A number of commentators and economists from both sides of the political spectrum have recently proposed a ‘third way’ in the shape of a parallel or complementary currency. NEF certainly supports such an approach and has been advocating parallel currencies for the eurozone since 2003. A complementary currency (or ‘-ies’) could help boost short-term liquidity by providing an alternative ‘means of exchange’ function to the euro.

    But what Greece really needs – if it does stay in the euro – is more euros, the currency that its vast public debt mountain is denominated in. At the moment, it’s not clear where such euros would come from. It would not come from government spending, since Syriza is required to run a primary surplus – in other words, save more than it spends. Even if Greece is eventually allowed to participate in the European Central Bank (ECB)’s quantitative easing (QE) program, it is unlikely to get money in to the real economy. And while Syriza is no doubt serious about clamping down on tax avoidance, the scale of the debt and the EU institutions’ refusal to write any of it off, suggests that this is not a long term solution. Further inward investment also looks unlikely given Syriza’s plans to reverse or at least put on hold further privatisation.

    There is, however, one type of institution in Greece that can create euros out of nothing – the commercial banks. Unfortunately Greek banks have stopped lending since the crisis began – many of them are basically insolvent and have very little appetite for making loans to Greek firms that look very shaky themselves (see figure 1 below). They are currently being kept alive with emergency funding from the ECB.

    But what if Greek banks lent to the Greek government? This is theproposal that economist Richard Werner of the University of Southampton made a few years ago to solve the European sovereign debt crisis, describing it as ‘enhanced debt-management’. If such loans were long-term contracts and not tradable (unlike sovereign bonds), the interest rates the government would pay on them would be considerably lower than it pays to borrow on international markets since governments receive, according to global Basel regulations, the lowest risk weighting of 0%. This also means the banks would need zero new capital to back these loans, enabling them to grow and rebuild the quality of their balance sheets. Eventually they would start lending normally to businesses again.

    Meanwhile, the Greek government could use these loans to invest in infrastructure and capital intensive projects that Syriza has already identified as much needed. These would have strong multiplier effects that would boost employment and demand in Greece, raising tax revenues (assuming Syriza was successful in its tax collection reforms) and thus enabling it to sustainably reduce the public deficit without further damaging austerity.

    Syriza claims to have won some space to design and implement their own reforms rather than have them laid down by the Troika. By using their own commercial banks’ power of credit creation, they might just be able to turn the debt-deflation spiral in to a positive feedback loop, with healthier banks and sensibly priced government debt that’s not subject to speculative attacks from bond vigilantes, increasing demand and a reducing deficit.”

    Comment by Jan Milch— 15 Mar, 2015 #

    • OK, so the Greek government starts writing cheques drawn on Greek banks which have just created billions out of thin air.

      A proportion of the cheques would be deposited at banks OUTSIDE Greece, since the extra spending in Greece would suck in imports. And the latter banks would want settlement in genuine ECB Euros at their national central bank, which in turn would want settlement from the Greek central bank. But the Greek central bank account at the ECB is on life support. Effectively there aren’t any Euros there to spare.

      Comment by Ralph Musgrave— 16 Mar, 2015 #

  7. Here is the link: http://www.budget.senate.gov/democratic/public/index.cfm/2015/3/the-better-way-benefits-of-a-balanced-budget

    Bluth speaks at about 50 minutes. Very concise and to the point.

    Comment by Fredrick Welfare— 15 Mar, 2015 #


Sorry, the comment form is closed at this time.

Blog at WordPress.com.
Entries and Comments feeds.