Elkarrizketa W. Mosler-ekin (zenbait zipriztin- eta 3)

[1] Ikus  https://www.unibertsitatea.net/blogak/heterodoxia/2015/12/02/elkarrizketa-w-mosler-ekin-zenbait-zipriztin-1/.

[2] Ikus https://www.unibertsitatea.net/blogak/heterodoxia/2015/12/03/elkarrizketa-w-mosler-ekin-zenbait-zipriztin-2/.

[3] Ingelesez: “The European Union has decided that export-led growth is the way to go, and they kind of looked to Germany as the example for this model. Everybody is trying to do that to be competitive. All these programs are designed to reduce costs in Greece, to make them more competitive so that they can export. Now, a couple of issues with that, and one of them is a macro issue: the whole world can’t be exporters, because everybody can’t export, somebody’s got to import, where is it going to go, to the moon or something? Wherever it goes, there’s somebody importing. At best, all the trade in the world adds up to zero. For every export there’s an import.”

[4] Ingelesez: “Apart from that, there’s another aspect before I get to the more serious problem, not that this is any less serious, and that is: exports are real costs and imports are real benefits. The real wealth of any region is everything you produce domestically plus everything the rest of the world sends to you, minus what you send to them. Production makes your pile bigger, imports make your pile bigger, and exports make your pile smaller, you’re sending that away. In effect, if you look at war reparations, when you win the war, the other country sends things to you, you don’t send things to them. When Caesar conquered Gaul, Gaul sent grain to Rome, Rome didn’t start sending grain to Gaul as war reparations. Imports are real benefits, exports are real costs, and you use the monetary system to optimize that, and that used to be called real terms of trade. You try to get the most for the least. If you’re going to export, the whole point is to get imports, and you try to get as many imports as possible for your exports. So the idea that export-led growth makes any sense, it’s completely out of context with today’s realities.”

[5] Ingelesez: “So the idea that export-led growth makes any sense, it’s completely out of context with today’s realities. That did make some sense under what was called mercantilism, where the game was to get as much gold as possible, whoever had the most gold wins, so the exporters were getting the money,  which was gold, and they were building gold stocks, and whoever got the most gold won. It was just an arbitrary game, and going into World War II, the United States had won the game, it had more gold than anybody else, except we didn’t have any tanks or planes or guns and it took four years to mount a counterattack.”

[6] Ingelesez: “So anyway, back to today’s context: exports are real costs and imports are real benefits, so what’s the whole point of the European Union export-led growth strategy? It doesn’t make any sense at all. But, all that aside, if you’re going to do it, the way it’s done is, and you can look at the old German export-led growth model, which was successful on its own terms. You use tight fiscal policy to suppress domestic demand and you have all kinds of structural reforms and deals with the unions and labor to keep wages down to keep competitiveness, and that helps your exports. Now suddenly you’re competitive and you can export.”

[7] Ingelesez: “What that does is it makes your currency go up, and so what the exporters did, what Germany used to do is, they would buy dollars to keep the Mark down, so Marks to buy dollars. They even bought lira to export to Italy, to keep the Mark down versus the lira. So part of the export-led growth strategy is, you have to buy the other guy’s currency whether you like it or not to keep your competitiveness, otherwise your currency appreciates and your policy is self-defeating. That’s happened a couple of times over the years in the European Union, when just as exports get going a little bit the euro goes up, and then they go down and you lose your advantages.”

[8] Ingelesez: “Now, the problem in the European Union with this strategy is that buying dollars, for example, ideologically they can’t do it because then it would look like the ECB is building dollar reserves and in fact they would be building dollar reserves. It would give the appearance that the dollar is backing the euro and they want the euro to be the reserve currency, not the dollar, and so they’d be supporting the dollar’s role in the world, whatever that means, so they just don’t do it, they can’t do it. And so instead, they just generally let the euro go up.”

[9] Ingelesez: “More recently, what the central bank has been doing, what Draghi’s been doing, has been tricking the world’s portfolio managers into selling euro by doing things that they think are inflationary, that they think are expansionary, things that cause a currency to go down, and those are negative interest rates and quantitative easing.”

[10] Ingelesez: “All the world’s Western-educated now, they’ve all gone to The University of Chicago and Stanford and the London School of Economics, and they all know that pumping up the money supply through quantitative easing and negative rates makes the currency to go down and it causes inflation.”

[11] Ingelesez: “They’re wrong, because it doesn’t, as I explained before. In fact, those policies remove interest income, they’re taxes on the economy, they actually cause the currency to get stronger, they cause the price pressures to go lower, you get deflationary pressures instead of inflationary pressures. We’ve seen the deflationary pressures on the euro right now, bordering on deflation. And the policies of quantitative easing and negative rates have done nothing to ease that.”

[12] Ingelesez: “Now, why has the euro gone down? It’s because they’ve frightened portfolio managers around the world into selling their euro. So you’ve got even the Swiss National Bank buy Swiss Francs with the euro, the Swiss National Bank takes the euro and they’ve kept 33% in dollars, so they’ve sold euro to buy dollars. I’m sure they’re scared to death of holding the euro because of the quantitative easing and negative rates. Same with the Bank of China or Bank of Japan. They’ve got all of these mainstream-type, traditionally-trained central bankers in just blind fear of holding euro right now, and so that’s temporarily kept the euro from appreciating, which it would have otherwise done because the lower euro has driven trade into massive surplus. I think the last numbers were a 31 billion euro trade surplus, for the last month.”

[13] Ingelesez: “The competitiveness is causing a trade surplus, which is sort of the point of the policy, but what that means is that when Americans buy an Audi or a Volkswagen…they take their dollars, they give them to the dealer, the dealer gives them to Mercedes or to Volkswagen, then they sell their dollars, buy euro, meet their payroll and build their reserves, whatever they do with their money.”

[14] Ingelesez: “What happens when you are running a trade surplus is the world is selling dollars to buy euro, to buy products. Selling yen to buy euro to buy products. So it puts continuous upward pressure on the euro, which in this case has been offset by massive portfolio selling. You can look at the drops in central bank holdings from near 30 percent to under 20 percent reserves in euro right now. At some point that dries up.”

[15] Ingelesez: “An analogy would be if the corn crop failed because it didn’t rain and there was a drought. You would think that the price would go up because of supply and demand, but if a big company…had a huge warehouse full of corn, and had it backwards and decided to believe that the drought was going to cause prices to go down instead of up and they started selling their warehouse full of corn, well the price would go down even though there was a drought and a shortage, because all of the supply is coming out of the warehouse. That’s portfolio selling, so to speak. Eventually they’re going to run out, and there is a shortage, people are eating more than is being grown and the price is going to go up at some point, but depending on the size of their warehouse, the price can go down for a long time. It can go down for a year or two years, I can’t tell you the timing. But you can see the flows when you see the international accounts. You can see it’s going down and you can see the euro reserves are dropping all over the world in all of these official types of accounts, and they can only drop so far and then they’re gone.”

[16] Ingelesez: “And as they do drop, they’re keeping the euro at levels that’s supporting a growing trade surplus, which is trading the euros out as fast as they’re selling them, and then they’re gone and then everybody’s underweight in euro or short, and they are no euro to buy back. Then it goes the other way.”

[17] Ezagutzen dugu ‘bail-out’ zer den, alegia ‘fidantza ordaindu’, diru laguntza.

[18] Ingelesez: “A bail-in is just a tax on depositors, so it’s another tax, it just removes more euro from the economy, reduces sales and makes things worse. I don’t think any of them understand the role of bank capital. I guess they’re looking at it from a safety point of view. But you’ve got the European Union now regulating and supervising the banking system, so they’re examining every loan for safety.”

[19] Ingelesez: “And you’ve had years, tens of years decades of public banks in Europe, that ran with no capital. Central banks can run with no capital. The banking system doesn’t need capital to operate. Capital is a political decision based on the amount of risk that the regulators they decide they want to take on the bank’s loan portfolio. But they’re supervising and regulating that loan portfolio on a day-to-day basis, so it’s kind of like their own loan portfolio. So it’s just as easy to regulate risk on the regulatory side as it is on the capital side.” Gehigarria: “It doesn’t seem to come into the conversation at all, but I don’t see any problem with requiring higher capital ratios if they want. And, in an environment where banking is profitable, raising capital is not a problem for those ratios. But in the European Union, the problem is that it’s not a profitable environment for banking. Therefore, it’s hard for banks or nearly impossible to raise capital. It’s a self-defeating policy. If they were to relax the deficit limits from three to eight percent, for example, and the European Union was growing at three percent, banking would be profitable and then there’d be no issue about raising capital. There’d be capital waiting in line to get in. They’d have to be restricting bank licenses.”

[20] Ingelesez: “So you create a weak economy with a low aggregate demand and then you wonder why you can’t capitalize your banks…they’re speaking out of both sides of their mouth.·

[21] Ingelesez: “I wouldn’t call it necessarily a solution, but it’s an option. The solution is larger deficits. If the European Union won’t allow a larger deficit, if they force spending cuts, if they force taxes, if they cut spending more, then the option is one, to just sit there and suffer and then watch your civilization be destroyed, or two, to do it on your own, to go back to your own currency.”

[22] Ingelesez: “If you’re going to do it on your own currency, I have proposals on how to do that in a way that actually, I think, works. The first thing you do is, you just start taxing and spending in the new currency, the new drachma. When you do that, you’re not “leaving” the euro, you’re not doing anything, you’re not abandoning anything, you’re just changing your tax liability from euro to drachma. And you leave the number the same: if it was 100 euro, it’s now 100 drachma.”

[23] Gogoratu zor publikoa zer den: “… public debt, … is just bank deposits in the central bank.”

[24] Ingelesez: “Then, you start paying your public employees in drachma, and if it was 100 euro, it’s now 100 drachma. You haven’t left anything, you haven’t broken any promises or bent any treaties or defaulted on any debt.”

[25] Ingelesez: “You haven’t converted any bank deposits, and specifically, I say don’t convert any bank deposits. If the banks have euro deposits, just leave them alone. If the debt is in euro, just leave it alone.”

[26] Ingelesez: “The easiest way to explain that is to make an assumption that–it’s just an arbitrary number now– but let’s say half the people want to hold the euro but half the people want to hold the new drachma. Half the bank depositors want to keep the euro and half of them want the drachma. If you convert everything to drachma, now you’ve got half the money supply, half the funds in the banking system, that are very unhappy. They wanted the euro, they don’t want the drachma, so they will sell the drachma to buy euro. That will drive the new currency down 30, 40, 50 percent, just like everyone predicts, and then you start getting inflation in terms of importing prices, and then the central bank doesn’t know how to deal with this so they raise rates, and unemployment goes up and you’re right back in this disaster that the Greeks have known so well, which is why they’d rather have high unemployment but let the Germans run the money rather than let the local government run the money, because they’ve seen what happened before when the local government ran the money. That’s what happens when you convert deposits, you get right back into that mess that politicians and technocrats just can’t deal with, and the government collapses and falls apart, and you’ve got blood in the streets again.”

[27] Ingelesez: “If, on the other hand, you don’t convert the deposits, you leave them in euro, now you’ve got half of those people, the people who wanted euro, they’re okay, but the other half need drachma to run their businesses, run their lives, pay their kids’ tuition, pay their taxes, and they have euro. So they need to sell the euro to buy drachma to run their lives, because there aren’t any drachma out there. So they’re selling euro to buy drachma, and now the drachma is a strong currency. You’ve created probably the biggest short squeeze in the history of the world, because everybody needs this stuff and there isn’t any. That allows the government to sell drachma at a slight premium to the euro, maybe 1.01 or something small, so that people can sell their euro, buy drachma at a reasonable price to run their lives, and that keeps the currency stable and it gives the government a source of euro income to pay down and service their euro debt for some period of time, and it gives them three months, six months or a year’s breathing space to deal with the new economy and the new realities without having to deal with a currency that’s collapsing. And, it gives them a source of euro income to deal with it.”

[28] Ingelesez: “Now, I’m not saying that there won’t be other problems, like corruption and whatnot, but at least you’re working in the context of a firm currency and euro income to deal with your issues. The most important thing about conversion is to not convert the bank deposits, just leave them alone. And don’t convert the public debt, which is just bank deposits in the central bank. Just leave it alone, and that will give you a smooth, or much, much smoother transition period towards running an independent nation.”