Post Tagged with: "currency sovereignty"

Italian Election–Two Months and Counting

Italian Election–Two Months and Counting

Italy’s election has the potential for some surprises. The Five Star Movement, which is polling first in surveys, has pledged a referendum on the euro if Brussels does not change its fiscal rules. Berlusoni’s Forza Italia and Salvini’s Northern League are critical of the EU and EMU, but rather than jettison the euro, they talk about having a parallel currency.

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Why should the Trump Administration issue 50-year bonds?

As the Trump economic team comes together, their economic vision is also coming together. In the last post, I laid out some overarching themes I am seeing from them on the hopes that reducing taxes and regulation will increase productive capital formation and long-term economic growth. You can put all of these ideas under the moniker of supply-side economics. I am also seeing a few individual ideas I wouldn’t put under that umbrella including the extension of the maturities of government bond issuance. Here are some thoughts on that issue.

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A parallel currency for Greece: Part II

A parallel currency for Greece: Part II

Introducing a currency in parallel to the euro could help Greece repay its external debt and resume economic activity. This second column in a two-part series evaluates the different options and their effects on aggregate demand and fiscal sustainability. The authors propose a tax credit certificates programme, which they argue could generate new spending capacity and avoid the adoption of new austerity measures.

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A parallel currency for Greece: Part I

To prevent it from defaulting on its debt, the Greek government might need to introduce a new domestic currency, in parallel to the euro. This column, the first in a two-part series, compares the current proposals for a parallel currency and discusses how such a policy instrument could promote economic recovery.

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Why Understanding Money Matters in Greece

Why Understanding Money Matters in Greece

As Greece staggers under the weight of a depression exceeding that of the 1930s in the US, it appears difficult to see a way forward from what is becoming increasingly a Ponzi financed, extend and pretend, “bailout” scheme. In fact, there are much more creative and effective ways to solve some of the macrofinancial dilemmas that Greece is facing, and without Greece having to exit the euro. But these solutions challenge many existing economic paradigms, including the concept of “money” itself.

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Tax Anticipation Notes: A Timely Alternative Financing Instrument for Greece

Tax Anticipation Notes: A Timely Alternative Financing Instrument for Greece

The recent election of an explicitly anti-austerity party in Greece has upset the prevailing policy consensus in the eurozone, and raised a number of issues that have remained ignored or suppressed in policy circles. Expansionary fiscal consolidations have proven largely elusive. The difficulty of achieving GDP growth while reaching primary fiscal surplus targets is very evident in Greece. Avoiding rapidly escalating government debt to GDP ratios has consequently proven very challenging. Even if the arithmetic of avoiding a debt trap can be made to work, the rise of opposition parties in the eurozone suggests there are indeed political limits to fiscal consolidation. The Ponzi like nature of requesting new loans in order to service prior debt obligations, especially while nominal incomes are falling, is a third issue that Syriza has raised, and it is one that informed their opening position of rejecting any extension of the current bailout program.

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The Danish krone problem

The Danish krone problem

In the wake of the turmoil surrounding the Swiss Franc, the Danish krone has become the subject of speculative attack. Unlike the Swiss, the Danes have a peg to the euro that is permanent and long-lasting. They also have a backstop via a legal obligation from the ECB to prevent the peg from coming unstuck. Nonetheless, the peg will be tested Some thoughts on the Danish krone problem below

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Muddling through in Europe

Muddling through in Europe

The scenario I laid out for Europe for 2014 in three posts on the global economy last week is one of muddling through. However, whereas in the US, there are upside risks, in Europe the risks are mostly to the downside, politically and economically. A few thoughts on the situation follow.

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Full employment policy in the periphery without the euro exit

Full employment policy in the periphery without the euro exit

In the case of Greece, with fuel, food, and medicine making up a large share of the import bill, further economic disruption and destabilization would likely result from a choice to exit the eurozone. Exiting the euro does not appear to be an option – at least not one without a large risk of introducing further turmoil. The task then becomes to thread the policy needle – namely, to exit austerity, without exiting the euro. The following simple proposal introduces an alternative financing mechanism, along with safeguards to minimize the risk of abuse of this mechanism, which may accomplish this threading of the needle.

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Former Bank CEO and Treasury official: Issuing Treasurys isn’t government “borrowing”

Former Bank CEO and Treasury official: Issuing Treasurys isn’t government “borrowing”

Newman: “in my own book the explanation starts the cycle with government spending, thus adding to the money supply, and then issuing treasuries for roughly equivalent amount. The bond vigilantes really have it backwards.

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Austerity is still the prevailing paradigm right across Europe

Austerity is still the prevailing paradigm right across Europe

Despite Europe’s continual moving of the goalposts to give countries more breathing room, the economic paradigm in Europe is still the same: austerity. This will dampen growth in Europe for the foreseeable future and increase government debt to GDP ratios, making debt deflation and crisis a background threat which will result in sovereign restructurings regardless of recovery.

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How to Think About Government Debt and Deficits: Don’t Think of an Elephant

How to Think About Government Debt and Deficits: Don’t Think of an Elephant

Deficits present governments with the sole challenge of making good on future promises without inflation. For nations sovereign in currency, the constraint is inflation, not solvency.

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