Austerity or Stimulus?

What is the best way to extract the global economy from the present serious debt crisis? This is the question posed by every news comment programme, and it is very clear that the experts do not have any answers.

Austerity is the orthodox prescription. It is a simple concept:

Government spending more than it is receiving in taxes?
Then Government must spend less.

This hits the poor, by reducing services and adding to the ranks of the unemployed, and it hits the economy by damaging private firms who service the public sector, and therefore reducing total tax take. By widening the rich poor gap, we compound the social problems and lay up more demonstrations, riots and strikes in the future.

So austerity  is simple, but worse than useless.

It is like a mediaeval physician who tries to cure anaemia with a course of bloodletting. 

So what is the alternative to austerity?

The first principle is Keynesian stimulus. In 2011 this means Green Keynesian stimulus, primarily centred on energy conservation and renewable energy. This has the attraction of taking people out of fuel poverty, securing our energy needs, blunting the malign effects of Peak Oil, and addressing climate change - a very attractive set of attractions.

But how can the stimulus be paid for? Conservatives argue very strongly that we cannot borrow our way out of debt.

There are three interlocking answers to this challenge.

First, Green Wage Subsidy is an ultra-low cost way of getting people off benefit and into good, constructive green work without any compulsion.

Second, getting the rich to pay their fair share of taxation will overcome the deficit and bring in enough to pay for any stimulus.

Third, by terminating the monopoly of private financial corporations on the creation of money, Government, acting in the interests of the people, can escape the ever deepening circle of debt, and can create money to provide the necessary stimulus.

Should Greens back the Merkozy Plan for Europe?

As I see it (and I may be wrong, and certainly not telling the whole story) Merkozy are following an impeccable logic.

To preserve the Euro, while at the same time guaranteeing failing economies within the Eurozone (EZ), it is necesary to bring about fiscal union, as in common tax laws.

Failure to preserve the Euro would bring about the end of the world as we know it.

Therefore fiscal union it is.

That's the logic, like it or not.

We can confidently expect that the mighty Eurosceptic Right are not going to like it.
So in that case, they are just going to have to lump it, because the the alternative, as far as I know, is global economic malaise. Global recession. A Great Depression.

Maybe I'm being a wishy-washy bleeding heart soft headed liberal treehugger greenie here, but I think this is an outcome to be avoided.

Maybe we should welcome the downfall of Capitalism (whatever that is), and join Nigel Farage in calling for its immediate death through doing whatever we can to disrupt closer European Union as a response to the economic crisis.

Unfortunately, I see a big economic crash as causing huge pain, chiefly manifested as unemployent, but with risks of crime, conflict, social disquiet, riots, attempted revolutions, international quarrels, wars and even, God forbid, nuclear war.

This tips me personally towards trying to fix the present system, by rapid introduction of reforms, as follows:

1. Global Financial Transaction Tax Agreement
2. Global closure of tax havens
3. Trans-National corporations acounts transparency
4. Stimulus not Austerity as the way to renew broken economies

Austerity measures are toxic in a depression. It is necessary to stimulate the economy, but the block to this approach is that we are up to our necks in debt, so we need a very low cost approach to stimulus. It would ideally work equally for both public and private employers. It must be an investment in the future, since we have got to hand on something other than debt to our children.

That is a tough set of specifications. Hmm...Ah yes. The Green Wage Subsidy.


There are many other measure to be added, from controlling TNCs to living on a low income, but I can't cover everything in one posting.

So, on balance I reckon that we should back the Merkozy Plan, but insist that it is followed by radical reforms to terminate the haemorrhage of wealth from the pockets of the 99% into the accounts of the 1%.

I could be wrong, but it feels right to me.

That monetary reform debate

I have been debating money creation for a few years now. I find that the most adamant opponents of any suggestion that banks create money through issuing loans are accountants and bankers. This is true both within the Green Party and in the real world too.

There is a distinct tendency for them to be pretty ad hominem in the debate, pouring scorn on the idea that money is not created by the Central Bank, and implying that since accountants are happy with the way things are, there is no debate to be had, and that anyone who disagrees needs to read economics.

This is like a doctor telling a patient who asks for a second opinion that the patient needs to study medicine first. This is not the case. It is possible for a patient to get accurate knowledge of his own case without studying the whole of medicine.

The problem with reading an economics textbook is - which one? Classical? Neo-classical? Marxian? Austrian? Chicago? Keynesian? Post Keynesian?

There are so many schools of economics that it is clear that it is not an objective science. It cannot be, since human judgements and human actions are an integral part of the field.

The key argument of the defenders of the status quo seems to be that money is created by the Money Multiplier, and so everything is OK.

This is a non-argument. The money multiplier simply states that if £100 is deposited in a bank with a Fractional Reserve (or equivalent) of 20%, £814 can be lent out. The 100 has turned into 814. £714 of money in circulation has been created by bank deposits and loans.

So the core argument of the accountants is the same as the core argument of the monetary reformers. Money is created in the process of banks making loans.

The second argument is that the money is created by the Central Banks. It is true that the central banks authorise the creation of money by the banks, allowing them to do so by setting reserve requirements and capital adequacy, but I challenge any accountant to identify the cash flows that indicate Bank of England ends each the day by creating the amount of money that banks have loaned out that day.

NHS. RIP. Thanks to Daily Mail type journalists

In a mood of sadness and grief I went to see my MP John Penrose (Con, Tourism Minister) yesterday, about the NHS Bill.

I just told him about my life spent in service of the NHS , which for all its faults, is infinitely better and more efficient than the US system. Lansley's reforms are taking us rapidly towards that system. I told him how sad it made me feel that people are going to lose it.

The last regular option for us is to get 100k signatures on this e-petition which calls of the Government to drop the NHS Bill.
It has 14k signatures at the moment.
It could be done, with massive viral circulation, but it doesn't look hopeful.

There's a Drop the Bill website here with some good info.

But John Penrose told me it is all done and dusted, will come back from the Lords, and then get Royal Assent.

I'm going to try to find out what Royal Assent means in terms of procedure. Clearly the Queen has to sign it. Do they post it to her, or is the Bill taken to Buckingham Palace in a sedan chair or something?

If so, we could blockade Buckingham Palace with our bodies.

We could also write to the Queen and ask her to refuse to sign, or at least insist that Andrew Lansley personally holds her right forearm and moves it about to make a part-Royal squiggle that could be challenged in the courts.

Dreams of course. It is impossible that the British people, misinformed as they are by a corporate media, would bestir themselves to defend the NHS, turning out in numbers to block the loss of the best thing that the UK has ever done.

It is all very sad. I feel sad and angry - and the anger primarily has to be directed to the journalistic profession, who did not convey true information about the NHS Bill to their readers and listeners.

When people find out what has happened, in 2 or 3 years, they are going to be really angry. Really Angry. Which will probably mean that lots of people get hurt, and will have to wait for days in a dirty crowded A&E department waiting to be treated.