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Saturday, 27 February

17:00

The Weekend Quiz – February 27-28, 2016 – answers and discussion Bill Mitchell – billy blog

Here are the answers with discussion for this week’s Weekend Quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of modern monetary theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

Question 1:

A national government which issues its own floating currency is never vulnerable for financial reasons to defaulting on its own outstanding debt.

The answer is False.

The answer would be true if the sentence had added “and only issues debt in its own currency”. In that situation, the national government can always service its debts denominated in domestic currency.

The answer is thus false because of the word “never”. In some circumstances even a government that issues its own currency and floats in on international currencyu markets is exposed to insolvency – that is, when the government borrows in foreign currencies in addition to its own currency.

It also makes no significant difference for solvency whether the debt is held domestically or by foreign holders because it is serviced in the same manner in either case – by crediting bank accounts.

The situation changes when the government issues debt in a foreign-currency. Given it does not issue that currency then it is in the same situation as a private holder of foreign-currency denominated debt.

Private sector debt obligations have to be serviced out of income, asset sales, or by further borrowing. This is why long-term servicing is enhanced by productive investments and by keeping the interest rate below the overall growth rate.

Private sector debts are always subj...

01:05

TPP literally a Mickey Mouse deal AFTINET

26 February 2016

The CEO of Disney has boasted of influencing the intellectual property chapter of the TPP in a letter to his employees.

The TPP text locks in strong specific legal rights for copyright holders and criminalisation of copyright breaches, with much vaguer references to fair use provisions for consumers.

The letter to Disney employees asks them to open their wallets and contribute to the company’s lobbying efforts, boasting that “we played a major roll in ensuring that the "Trade Promotion Authority" legislation set high standards for intellectual property (IP) provisions in our trade negotiations... We used that language in TPA to advocate successfully for a strong IP chapter in the Trans-Pacific Partnership (TPP) trade negotiations.”

Read the article here

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Friday, 26 February

12:25

India’s 2016 Budget: What to Expect The Diplomat » Pacific Money

International investors will be eager for reassurance that India's 2016 budget will keep the emerging giant on track.

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Thursday, 25 February

19:32

The British Monetarist infestation Bill Mitchell – billy blog

I have been on the search for historical turning points again today. The famous Mitterand austerity turn in 1983 is one of these points. Another, which I will consider today, was the British Labour Prime Minster James Callaghan’s speech to Labour Party Conference held at Blackpool on September 28, 1976 was laced with pro-Monetarist assertions that have been used by many on the Left as being defining points in the decline of the state to run independent domestic policy aimed at maintaining full employment. This is a further instalment of my next book on globalisation and the capacities of the nation-state, which I am working on with Italian journalist Thomas Fazi. We expect to finalise the manuscript in May 2016. Today, I am writing about the background events that turned Britain on to Monetarism. Margaret Thatcher was, in fact, a ‘johnny-come-lately’ in this respect. The British Labour Party were infested with the Monetarist virus in the late 1960s and Callaghan’s 1976 Speech just consolidated what had been happening over the decade prior. Further, it was not the oil crisis in the early 1970s that provided the open door for governments to reject Keynesian policy. In Britain, the Treasury and Bank of England were captivated by the ideas of Milton Friedman some years prior to the OPEC price push.

To understand how Callaghan’s Speech has been viewed over the decades, we only have to read a relatively recent article written by Liam Halligan in the UK Telegraph (August 18, 2012) – A message from the 1970s on state spending – which considered Callaghan’s speech to be “among the most important uttered in the history of modern British politics”.

The Telegraph...

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Friday, 19 February

17:00

The Weekend Quiz – February 20-21, 2016 Bill Mitchell – billy blog

Welcome to The Weekend Quiz, which used to be known as the Saturday Quiz! The quiz tests whether you have been paying attention over the last seven days. See how you go with the following questions. Your results are only known to you and no records are retained.

Please go to The Weekend Quiz – February 20-21, 2016 to view the quiz

Wednesday, 17 February

17:53

The impossibility theorem that beguiles the Left Bill Mitchell – billy blog

Some years ago (June 27, 2007), Harvard economist Dani Rodrik outlined what he called his “impossibility theorem”, which said that “democracy, national sovereignty and global economic integration are mutually incompatible: we can combine any two of the three, but never have all three simultaneously and in full”. In his brief article – The inescapable trilemma of the world economy – he made the case that “deep economic integration required we eliminate all transaction costs … in … cross-border dealings” and that “Nation-states are a fundamental source of such transaction costs”. Ergo, if you want ‘deep’ integration then the Nation-state has to surrender. His “trilemma” guides his view of how the “international economic system” should be reformed. He think that if “want more globalization, we must either give up some democracy or some national sovereignty”. This view has been adopted by political parties as if the conceptual framework is in some way binding. The trilemma has been skillfully sold as a narrative by right-wing think tanks and others who serve the interests of capital. The so-called progressive politicians have fallen into the trap and have shifted their political parties closer and closer to their right-wing opponents, such that now it is hard to distinguish between the major parties in most nations. The reality is that while the impossibility theorem beguiles the Left – its applicability as a binding constraint on government is limited. It is as vapid as the statements made by these career politicians on both sides of politics that they serve the people.

The UK Guardian article (February 16, 2016) –...

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