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Michael Probst

Pressure is mounting on Mario Draghi to turn on the cash taps

Weak inflation data from the EU could force the Italian’s hand.

EUROPEAN CENTRAL BANK president Mario Draghi is coming under increasing pressure to resort to radical cash injections to ease deflation fears stalking the currency bloc.

Latest economic data from the central European Union statistics agency show that spiralling energy costs pulled consumer price inflation down to just 0.3%, some way short of the ECB’s mandated target of around 2% inflation.

Analysts said that the stubbornly low inflation data is proof that Mario Draghi’s June attempt to solve the inflation problem with ultra-low interest rates and a €400 billion targeted stimulus package has failed.

Sluggish performance by the Eurozones leading economies, including France and Germany, has further increased pressure on Frankfurt officials.

HICP Eurostat Eurostat

In a landmark speech at the economic symposium in Jackson Hole, Wyoming last week, Draghi indicated that he would be employing a freer policy from here on out, with observers now expecting a significant announcement after next week’s monthly ECB governing council meeting.

The German finance minister Wolfgang Schaeuble said that the ECB does not have the instruments to fight deflation at the moment.

Alasdair Cavalla, an economist with the Centre for Economics and Business Research in London, said that the low figures “will further increase pressure on the ECB to unleash a quantitative easing programme to stimulate price rises and ultimately spending”.

He said that the main opposition to any movement  would come from the German central bank, the Bundesbank, which could luse legal provisions to try and block it.

He added: “However, the gravity and seeming intractability of the problem mean that these previously unthinkable options are now on the table.”

Merrion capital head economist Alan McQuaid said that a QE package could be pushed through, although it was unlikely to happen next week.

Any QE package would provide a further tailwind for the relatively bouyant Irish economy, he said, with a weakening of the euro a major bonus for the large export sector here.

Read: This morning, major European economies hit the slow lane. Here’s what it means>

Read: ECB action could be ‘too little, too late’ as eurozone economies hit the slow lane>

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    Mute Sean O'Keeffe
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    Aug 29th 2014, 5:29 PM

    The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists.

    Ernest Hemingway

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    Mute Paul Parsons
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    Aug 29th 2014, 5:13 PM

    Hmm. If that 400 billion was used as investment for renewable energy projects, improving housing energy ratings, grants for efficient hybrid cars, etc wouldn’t that have been a solid medium to long term plan? I’m no economist but targeting the major sources of energy use might be a good idea towards… ya know… spiralling energy costs..

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    Mute Silent Majority
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    Aug 29th 2014, 5:30 PM

    Don’t be silly, it’s best to give it to the banks who in turn can use it to make ever riskier investments thus inflating securities markets and ultimately resulting in the currency crashing. Then we can pay our spiralling energy bills with potatoes.

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    Mute Paul Parsons
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    Aug 29th 2014, 8:10 PM

    I’d be the sort if forward thinker that would propose massive funding for a big energy saving campaign. A person or institute could avail of a grant for energy saving purposes, be it applied through tax breaks or whatever. Then this could be paid back without interest or penalties etc as the savings begin to kick on.. If that were to run for the next 20 to 30 years consider the changes that would occur. If it cost a household a few 100 to a few grand to create a basis for saving and conservation of strained resources, with the fund being gradually refilled while monatery savings are occuring, 400 billion could go a long way to help control a lot of mounting problems.

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    Mute Mike Hall
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    Aug 29th 2014, 9:43 PM

    Investment in the real economy would be exactly what is needed in the Eurozone. But that is FISCAL policy, not MONETARY policy.

    This article peddles all the usual mainstream drivel about Central Banks and the monetary system.

    I can understand why mainstream economists with careers totally invested in the last 40yrs of monetarist rubbish, educated falsely in money and banking, as the Bank of England has just admitted earlier this year. (Banks need neither ‘reserves’ nor ‘deposits’ in order tro make loans from thin air, creating new credit money in the process. By implication, the ‘money multiplier’ theory in economics textbooks is also complete drivel. As is the idea that ‘savings’ creates ‘investment’ – the causation is in reality the reverse, a corollary to the truth that loans create deposits, not the other way round.)

    But why are we still seeing all this rubbish still being peddled on by ignorant ‘churnalists’ ???

    There is +no+ transmission mechanism into the real economy from the ‘QE’ enlargement of banks’ reserves. None. Nada. Capiche??

    How many times do the idiots in politics & media need to be told this?

    The BoE are not the only ones who have been quite explicit about this… “… loans create deposits… I know this, I’m a banker…” quote from Michael Kumhoff, Chief Research Economist, IMF. The truth is there in BIS (Bank for International Settlements) papers as well as many others.

    Seriously, ‘cognitive dissonance’ doesn’t even begin to describe this….

    But perhaps not in Draghi’s case… he is one of the ruling elites & a career banker – one of those responsible for this entire deception on society in order to enrich themselves at the expense of the rest of us.

    Of course… the Euro is a fiat, free floating currency, issued on computer keyboards, and there is +no reason+ why it could not be issued on a free, gratis basis to purchase the services of every last jobless person or unused and available resourcs in the Eurozone for the benefit and prosperity of citizens generally…. purely a ‘poltical’ choice not to do this, & waste 15% of our available workforce…

    Read the ‘MMT’ (non mainstrem) economics blogs & you will know exactly why all this is true..

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    Mute Silent Majority
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    Aug 29th 2014, 9:53 PM

    If banks don’t need reserves to create credit then how do they meet cap reserve ratios? And the reason any fiat currency can’t be issued gratis to purchase the labour of the unemployed is hyperinflation, I believe that’s known as Weimar economics.

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    Mute Mike Hall
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    Aug 29th 2014, 10:28 PM

    ‘Resreve ratios’ are pure nonsense – more smoke & mirrors. As the BoE explains in their recent papers (and on youtube), any Reserve requirements need only be met some weeks later, and as the newly created money must exist +somewhere+ in the system, it creates its own ‘reserves’.

    If you bothered to actually read what the BoE and others say about this, you would know – but you won’t do that will you ‘SM’ ?

    Further, as even a (Weimar) simpleton like yourself must realise, there exists an appropriate amount of money in circulation for each level of economic activity. As the data shows, for every country, the money in circulation & GDP +always+ track very closely.

    It should be obvious to even a fool like yourself that when we have economic activity WAY BELOW our productive capacity – AS NOW – that a +primary+ reason for that is a shortage of money in circulation.

    Not really rocket science – that was supposedly the rationale for QE. To ‘encourage’ more lending from banks, thus putting more money into circulation. The problem is, not enough of us want to take on more personal debt. In sovereign currency countries like US, UK, Japan, despite their own economics/monetary ignorance, they have far more ‘fiscal space’ for counter cyclical Gov spending than Euro land, and this is why they have recovered far quicker & have far lower unemployment.

    But commercial banks are not the only possible source of increasing the money in circulation. Central Banks can issue it, and Governments can spend it into existence, regardless of whether there is some notional ‘debt’ instrument attached.

    Therefore, any sane consideration of an economy operating way below capacity would consider the amount of money required to be in circulation as an absolute priority.

    It is a trivial matter for any Government to later reduce or stabilise the amount in circulation, by taxation or reduced spending, as required, WHEN, and not before, the economy has reached (near) full capacity & employment – the most prosperous condition for the majority of citizens.

    Thus controlling inflation…. but in a way that does not simply enrich bankers via the current, very crude, interest rate increase mechanism.

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    Mute Silent Majority
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    Aug 29th 2014, 10:45 PM

    Well undoubtedly insulting people who question your theories is a time honoured tactic of the confident & intelligent, well played sir. I don’t disagree there is a shortage of money in the system, that is what happens in a credit contraction (the hint is in the word contraction). However, the economic systems we do use are designed to, although lamentably rarely truly achieve, the most efficient use of resources & capital. Simply printing money ad infinitum to ensure excess labour and resources are utilised in any manner possible may well be good for individuals, but what controls do you propose to ensure that these factors of production are utilised efficiently?
    Further to that point, what controls do you propose on your money tree to ensure a Weimar situation does not emerge? Increasing money supply inevitably reduces the purchasing power of money already in circulation; without stringent controls, your proposal would completely erode the purchasing power of money. Remember, money is ultimately worthless, it is only the goods and services for which it can be exchanged that have value, and those goods and services will remain finite even if currency production becomes infinite.

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    Mute Mike Hall
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    Aug 29th 2014, 11:27 PM

    There are no significant ‘controls’ over the purpose for which new money enters from any source, bank lending etc. or where it is spent. All banks care about is your ability to repay & the collateral available. Things like the ‘productive efficiency’ nonsense that people like you obssess over don’t come into it.

    All this ‘efficient use of resources’ stuff is pure drivel derived from the notion that ‘markets’ somehow naturally achieve this. As we saw in 2008 – they absolutely don’t. We have no other option than to simply muddle along & try to get a few essential political economy directions encouraged by Gov tax & spending policy – as now – without resorting to some centrally ‘planned’ economy. Whether planned by either Gov or Private elites. How well we do this ultimately is going to be a function of the plurality & health of our ‘democracy’. At present lamentable. But there is +no+ magical market ‘fairy’ that will deliver it for us. The last 40 yrs of belief in this non existent fairy tale is precisely why we are in this mess.

    The ultimate source of new spending power is peoples’ wages. There is no difference in their effect by those wages being supplied – AS STIMULUS – from whatever source.

    Any ‘Weimar’ comparison is completely stupid. Our political, monetary & technological systems now are completely incomparable to near 100 yrs ago.

    What do you think they said back then about air travel? Motor vehicles required someone waving a flag to walk along in front warning people!

    We are talking about a few percent of GDP required in stimulus money.

    Money which can be removed in future – when the economic activity has recovered – in an instant via adjustment to taxation. (Taxation ‘destroys’ money..)

    Really, it is absurd to imagine some ‘problem’ with doing this. It requires little more deliberation than already occurs in the ‘monetary policy’ committtee meetings to discuss base interest rates to control inflation.

    The onus imo is on all YOU ‘WEIMAR’ NUTTERS to explain why you think such controls would magically fail? Somehow beyond our collective whit to…. well, pretty much make taxation decisions as we do now, which we already KNOW potentially affect inflation.

    There is no damn difference in principle to what we do now.

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    Aug 29th 2014, 11:40 PM

    Efficient use of resources is nonsense? That’s why famine is raging across the western world then is it? As I said, we don’t achieve perfect efficiency, but we’re not far shy in truth. This “mess we’re in” could alternatively be described as the pinnacle of human civilisation, where the world is supporting a global population of 7 billion people, over 7 times what it was not two hundred years ago.
    But back to your point, basically all you propose is a temporary increase of liquidity? Isn’t that just QE, but you just don’t agree with the delivery mechanism for the new cash? Well, if we’re to go back to the “mess we’re in”, temporary increases of liquidity are what caused it. Credit increased, this increase didn’t last, so the increased liquidity turned out to be temporary.
    Your motives may well be honourable, but no matter what initial delivery system you propose for this new liquidity, it will always end up back in the same places, be it through savings, purchases or pension funds. You’re too enthralled with the cyclical nature of currency, unfortunately this is incredibly inefficient. Capital will always be hoarded; figure out a way to combat that dynamic properly and you’ll have yourself a Nobel.

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    Mute Mike Hall
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    Aug 29th 2014, 11:59 PM

    Straw man every time from you SM…

    I didn’t say ‘efficient use of resources’ is nonsense. Rather, it is totally meaningless to introduce such a concept into a discussion without YOU explaining the MECHANISM by which YOU THINK it is/can be achieved. (Or even what you define as ‘efficiency’)

    You claim ‘inefficiency’ but have no terms of reference or explanation of that.

    In other words, all it actually boils down to here is some fancy smokescreen words – pure nonsense – to express your dislike of something.

    When you say ‘Capital will always be hoarded’… you de facto state that that there is and will never be be ANY DEMOCRATIC control over the owners of Capital. That is, explicitly stating that ‘democracy’ will always be subservient to the Capital owning elites.

    Well, it clearly is now, as, I agree, it has been throughout history.

    But I argue, and state why, that need no longer be the case.

    If and when THE PEOPLE decide to truly assert their democratic sovereignty, the means to make that ECONOMIC REALITY are entirely available.

    You don’t explain why you think that’s not true, beyond simply saying ‘…can’t ever happen..’ !

    Good night :)

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    Aug 30th 2014, 12:04 AM

    Capital will always be hoarded, as you say it always has been. Figure out a realistic way to stop that happening and as I say, there’s a Nobel with your name on it. Remember, civil liberties & property rights can’t be wilfully superseded though.
    You’re still looking for parlour tricks & quick fixes. They don’t work, they never have.

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    Mute Tony Skillington
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    Aug 29th 2014, 5:05 PM

    Bet Jackson Hole isn’t as deep as the one Europe is in..

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    Mute Gavan Duffy
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    Aug 29th 2014, 6:15 PM

    The money pumped into the stock market by the US government never made it past the ultra rich, hopefully the EU doesn’t make the same mistake.

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    Mute Niall Sheridan
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    Aug 29th 2014, 5:13 PM

    Am I the only one to wonder what’s behind all the banks defaulting – albeit for a short time in each case – on the payment of wages to so many? Don’t they have enough to pay out or should we start to consider a run on he banks if they’re that dodgy?

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    Mute Richard Rodgers
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    Aug 29th 2014, 5:30 PM

    Niall
    Yes you are the only one. The technical glitches that we have observed with Irish Banks over the past few years are not unusual in IT terms and are very definitely not remotely associated with an inability to pay on the banks part as the respective financial institution is merely passing on monies received rather than monies sourced from its own funds.
    Apart for the above comment people should be cautioned from using the D word in too frequently as banking stability is also driven by confidence in the system and inappropriate commentaries sometimes have unwanted results.

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    Aug 29th 2014, 5:35 PM

    Spot on Richard, most bank runs historically have been caused by inaccurate information rather than actual liquidity problems. If you think things are bad now just wait and see what a bank run would result in.

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    Mute Niall Sheridan
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    Aug 29th 2014, 5:40 PM

    I take it Richard Rodgers works for the banks! Still an interesting comment!

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    Mute Sean O'Keeffe
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    Aug 29th 2014, 5:27 PM

    If history offers any lessons, the use of monetary inflation as a remedy for economic problems is a fools solution.

    ” The days of the dollar remaining the global reserve currency took a sharp hit today, and the ramifications of Russia’s new move for selling oil in both Roubles and Yuan are just beginning. And since there is over $17 trillion in U.S. dollars afloat and in nations outside the U.S. kept on reserve for the primary purpose of buying oil and natural gas, as more and more countries migrate to the East and find it far more inexpensive and efficient to no longer use the dollar and SWIFT systems to supply their energy needs, then these dollars will soon come crashing back to American shores, and the inflation America has exported offshore for decades will come rudely back and suddenly hit U.S. consumers and our financial system.”

    http://www.examiner.com/article/petro-dollar-era-is-officially-over-as-gazprom-begins-sales-yuan-and-rouble

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    Mute Silent Majority
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    Aug 29th 2014, 5:33 PM

    Resist! We’ve survived this long without any significant QE, we don’t need it now. This is external pressure coming on the Euro, Draghi shouldn’t fold to it. US & UK stats are distorted by their QE programmes so should not be used as comparative measures. We’re in the throes of a currency war and thanks to Germany’s previous stubbornness we are winning; let’s not throw in the towel now.

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    Mute Avina Laaf
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    Aug 29th 2014, 5:57 PM

    QE would be a disaster for Ireland’s mortgage holders who are already struggling to pay on historically low interest rates.

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    Mute SeanieRyan
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    Aug 29th 2014, 6:39 PM

    Are you high?

    Germany might be winning it for now but the rest of Europe is being torn apart by it. Internal demand and trade between countries in the Eurozone has fallen by 5% in the last decade.

    In every single measure the Euro has been an economic disaster for Europe. It has destroyed trade, growth and jobs for an entire continent.

    America has falling debt, fast falling unemployment and reasonable growth. Same with Britain.

    QE might not work in such a hyper dysfunctional currency union as the Euro is but the current approach is madness and is a threat to the political stability of the continent long term.

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    Aug 29th 2014, 6:50 PM

    Winning the currency war, and Europe is winning. US might appear to have improving economic indicators at present, but this is based on economic parlour tricks, not actually improving fundamentals. With stuttering real economic growth, why are their major indices all posting record results? You cannot contain inflation the way they have been doing indefinitely, and when it does start to spill over the dollar will be finished. If the ECB plays this right, the Euro could become the global reserve currency, and if that can be achieved then single point trade reductions will seem a very small price to pay.

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    Mute SeanieRyan
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    Aug 29th 2014, 7:00 PM

    The Euro has failed in every single measure as a currency in the last decade.

    America’s debt is falling fast once more. It had a lot but it is in a good position now. It has all the shale gas and will be exporting energy and have cheap energy at home for decades to come, so will be very competitive.

    American consumer debt is returning towards stable levels.

    A 5% trade reduction over a decade is not a very small price to pay, it is incredibly big. We should have seen high double digit falls, if it had only grown 20% in the last decade it would still have raised questions, never mind actually falling.

    The Euro is a dud, it is too unstable to be the sole reserve currency, think it will be baskets of currencies and commodities from now on.

    Dollar in decline for years to come but the Euro is in a lot worse shape and no upsides from its economy.

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    Mute Conor Feighan
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    Aug 29th 2014, 7:06 PM

    If anything, some Eurozone economies need to experience deflation (not inflation) outside of the Eurozone in order to make their economies more competitive and return to growth and, in turn, reduce deficits. During the good years a number of economies used cheap money to increase wages (and in turn prices) which, in turn, stripped them of their competitiveness. Even if the new money did find its way out of the banks (which I doubt) it would only lead to greater competitiveness problems in the long run.

    Euro is still best option for many European economies, but I can’t see how QE is anything more than kicking the problem down the road again. Proper reflection on the mistakes made by all and a rethink of how the Eurozone operates is what’s needed (significant debt relief in return for stricter budgetary controls for example). Have to consider an opt out for countries in the Eurozone who realistically cannot meet budgetary constraints whilst in the Eurozone with the option to return once everything is back in order.

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    Mute Silent Majority
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    Aug 29th 2014, 7:11 PM

    I’m not the Euro’s biggest fan by any stretch, it was a bad idea from the outset. Nonetheless, we’re in it now so trying to imitate the failures of others would be counterproductive. How are US debt levels falling though? They’re at about 18trn at the moment and this is forecast to exceed 21trn by the first quarter of next year afaik. Their recovery is based on printing money, nothing else. They might be energy independent in the future, but that can hardly be used as justification for current growth. European struggles are real economic problems, the US has very similar problems that they think they can just print away, they will regret taking the easy road in future.

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    Mute Ray_1950
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    Aug 29th 2014, 7:27 PM

    The only thing that matters is productivity and efficiency – QE or other monetary measures won’t produce this – only people can.

    Lots of people are being financially supported by others – that’s the problem, half the continent sits around doing nothing – truly believing the other half owes them a living.

    Structural change is what’s needed – nothing else will get Europe out of the situation it’s in.

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    Mute Mike Hall
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    Aug 29th 2014, 9:55 PM

    ^^^ pure mainstream drivel.

    Germany’s economy is itself flatlining… still…. 6 years on from the banking sector pyramid fraud bust of 2008.

    The reason is the deliberate ‘austerity’ strangulation in a deeply dysfunctional shared currency system…. dysfunctional for majority citizens, the bankers & other elites continue to extract unearned wealth from the rest of us, just as they did in the ‘boom’ part of the cycle… exactly as the system was designed to do.

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    Aug 29th 2014, 10:13 PM

    Productivity and efficiency being the key to economic strength is mainstream drivel?

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    Mute Ray_1950
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    Aug 29th 2014, 10:20 PM

    Mike – which part of what I said are you disagreeing with?

    I can’t tell from your comment.

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    Mute Mike Hall
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    Aug 29th 2014, 10:52 PM

    There is no problem with the ‘productivity and efficiency’ of European workers.

    That is simply ‘code’ for the desire to reduce standards of living, health care, public services etc. to Chinese or Indian peasant wage slavery levels.

    The MACRO economy is circular. Someone’s job always relies on someone else’s wage & spending. When we have insufficent circulation, some have no work. And as civilised human beings we do not let them starve, rather share what we have with them.

    There is no sane reason whatever to deliberately continue a situation (as in Euro zone) where over 15% (at least) of the workforce have no work to do. It is a staggering waste. All that is required is an appropriate ‘stimulus’ investment to expand the economy to employ them. As employment grows, the spending of their wages quickly creates a self reinforcing spiral.

    Yet political policy has been precisely the +opposite+, ‘Austerity’. Only the natural tendency toward +some+ growth has prevented an even worse disaster.

    The stimulus investment required across the Euro zone to quickly stimulate the growth cycle is a mere few percent of GDP. Peanuts & trivial for a fiat, free-floating currency zone to provide, even by free issuance.

    No more, in fact, than will +eventually+ be created by commercial banks as net new loans to expand the money in circulation…. but not until households decide they can accept more debt derived spending.

    As ever, the topic here is MACRO economics, of the +whole+ circular flow of an economy.

    If you do not understand the distinction you will +never+ choose correct public economic policy.

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    Mute Silent Majority
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    Aug 29th 2014, 11:05 PM

    What about technological advances? You don’t seem to be factoring that variable in at all. We have c.15% unemployment in Europe but in terms of goods and services what are we lacking? European populations have steadily increased over the last century while our standards of living (if we ignore the communist years in Eastern Europe) have risen exponentially. Despite the economic problems of the past few years, Europe produces more now than could even have been dreamt of in times past, but due to technological advances, this massively increased production capacity is far less labour intensive than our less productive past. There’s a lot more to macro economics than monetary policy.

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    Mute Ray_1950
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    Aug 29th 2014, 11:14 PM

    wow that was a long one!

    A stimulus spend you say?

    That’s sounds good Mike but you seem to have forgot to mention where we’d get the stimulus from – can you specify where you’d get it?

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    Aug 29th 2014, 11:19 PM

    He’d just print it Ray. His whole MMT theory is based on the premise that you can create money infinitely and it will have no inflationary effect. Apparently this theory is only being kept out of the mainstream because of the elites, or the reptilians or some such, never because of common sense or mathematics though, never mathematics. Your initial post was spot on, increase productivity & efficiency and you’re on a winner, pretty much everything else is just economic parlour tricks to try to avoid that harsh reality.

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    Mute Mike Hall
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    Aug 29th 2014, 11:42 PM

    That is categorically NOT what MMT states – which if you’d bothered to read any source materials you would see inflation control explicitly explained.

    The point is that decisions ARE ALREADY MADE as to the amount of money in circulation which MUST and DOES already increase and decrease according to the level of economic activity.

    All people like you SM are really doing here is to simply try to close down any discussion about how such decisions on the money supply are taken, by whom, and what actual effect they have on peoples lives.

    Let’s start with numero uno effect – mass unemployment. As we’ve already ALL agreed, the cause of this and our lack of growth to create new jobs and prosperity is insufficient MONEY IN CIRCULATION.

    I state quite simply & factually that there is NO REASON why governments cannot spend stimulus money into the economy, whether by ‘debt’ or ‘issuance’ – in a currency that is ‘fiat’, created from thin air on keyboards. No MONETARY REASON whatever.

    All idiots like YOU can talk talk about is some ‘structural reform’ or ‘productive efficiency’ gobbleygook nonsense that does ABSOLUTELY NOTHING to address this shortage of money in circulation that you have already agreed is the primary problem!!

    Cognitive dissonance? Effing completely… stop drinking the mainstrean Kool Aid – it is complete incoherent, self-contradictory drivel.

    The Bankers and other ruling elites have been 40+ years brainwahing you with this rubbish. Wake up.

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    Aug 29th 2014, 11:48 PM

    When did we all agree that? Money in circulation is A problem, but by no means the primary problem. You’re just looking for quick fixes and economic parlour tricks to solve deep seated & complex economic issues. Parlour tricks never work in the long run.

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    Aug 30th 2014, 12:03 AM

    Mike – you seem to be saying we’ve “all agreed” that a shortage of money is the problem.

    I’ve just read back through my comments and can’t seem to find where I agreed to that – can you confirm? Thanks

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    Mute Mike Hall
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    Aug 30th 2014, 12:17 AM

    Jeez..

    You two are pure clowns…

    How are you going to get increased economic activity – as measured in ‘money’ ! – without getting more money into circulation ??

    Are newly employed workers to be paid in mung beans? Conch shells? What?

    By definition, the money in circulation will have to increase… even the entire mainstream agrees this. That’s what all the talk about increasing bank lending is all about!

    As I’ve said before, the topic is MACRO economics, not some dumb ‘household’ finance nonsense..

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    Mute Silent Majority
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    Aug 30th 2014, 12:25 AM

    Keep insulting dissenters Mike, it gives your ideas validity. And economic activity may be measured in money, but it is by no means defined by money. The US has increased the money supply by 40bn a month for the past few years, by your reckoning their growth stats should mirror this right? I understand macro economics quite well too by the way, a hell of a lot better than you do I’d guess, despite you reading papers by a few fringe kook economists, so save the condescension. You talk like an academic or a Chicago schooler, ignoring all real world implications that defy your preconceived notions. There’s a reason that despite years of trying MMT is still ignored, and it’s not a conspiracy. You’re on the wrong page, and the wrong side of history.

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    Mute Silent Majority
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    Aug 30th 2014, 2:42 AM

    To say you cannot get increased economic activity without increasing the money supply is undoubtedly one of the most ridiculous things I’ve ever heard. You have absolutely no understanding of economics, so keep rabbiting your fringe theories all you like, you will continue to be ignored.

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    Mute Ray_1950
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    Aug 30th 2014, 11:32 AM

    Mike – can you highlight any examples we can look at of your theory in action?

    Also can you quantify how much money and over what period off time?

    A few sentences or so will suffice – no need for the essays.

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    Mute Sean Finlay
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    Aug 29th 2014, 6:11 PM

    Weaker euro better, Germany had to relent, and the hit is taking from Russian sanctions just might push it in the right direction. But QE needs to get into consumers hands.

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    Mute Kevin Brady
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    Aug 29th 2014, 11:01 PM

    If Russia retaliates with energy sanctions on Europe, the BoE and the ECB will probably be forced to raise interest rates to compensate for the massive inflation caused by rocketing fuel prices

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    Mute E=MC2
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    Aug 29th 2014, 7:14 PM

    No country has ever prospered through increased borrowing or deflating its currency. Take two European Examples; Italy and Switzerland. Italy has a history or frequent devaluations and huge debts, the economy lurches from one crisis to the next, while Switzerland has huge cash reserves, almost no borrowing, and a currency which must be held down by government buying of the bonds of EU countries. What succeeds is hard work and prudent economic management decisions by the government and citizens. Sure there have been a few bumps on the Swiss road to success such as the bad debts in UBS bank, but the intrinsic strength of the Swiss economy carried the country through. Swiss unemployment is currently around 2% and the wages and standard of living of its citizens is among the highest in the world. How anyone can propose we borrow even more money in order to supposedly prosper is beyond me, the only answer is hard work, efficiency, and prudence. But that is not a message get-rich-quick property investors and the parasitic non-working class each with their noisy cheerleaders in our populist political parties like to hear.

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    Mute Emily Elephant
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    Aug 29th 2014, 7:12 PM

    But let’s be clear about this. Inflation is a tax. Not one for which anyone is accountable, but a tax nonetheless. It works as a tax on savings and on anyone whose pay won’t be ratcheted up by the govt to try to stay ahead of prices. In the long run, it destroys the entire system of saving for the future and entrepreneurship and creates a vast state-client class.

    And if that sounds like the ravings of a right winger, consider that the USSR did it twice *for precisely that reason*.

    The ECB could look at whether its insane capital ratios rules are causing the financial system to be dysfunctional. But it won’t.

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    Mute Martin Coyle
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    Aug 29th 2014, 11:46 PM

    Who’s going to carry the can if the eu ecb get it wrong again, the most vulnerable again. The eu and ecb created the present mess lending out free money to eu countries without proper regulation.

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    Mute Kinsaleable
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    Aug 30th 2014, 12:36 AM

    How would QE affect the minions like me in real terms?

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    Mute Robin Tobin
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    Aug 29th 2014, 10:45 PM

    Europe is in receivership, great news now we can have a sensible chat about printing money and cut the crap talk about austerity which now appears to be a taboo word for Draghi. Ireland was the guinea pig now Europe can no longer use Ireland or hid behind Ireland. The project has failed and money needs to be printed and put into banks leave the Euro block tax bases alone, then it just might work.

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