Antiausterian policies in small countries - feasible? | 70 comments (70 topical, editorial, 0 hidden)

Re: Attempted intimidation... (none / 1)

Both printing Punts and firing the central banker can be struck down by the court. But in the meantime executive power rules, and if the time is used to establish that this is a functioning policy, then you use that either in a cat-and-mouse game (change the rules slightly and claim you have complied) or stand your ground against the dictates from Brussels.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Fri May 4th, 2012 at 10:26:02 AM EST
[ Parent ]

Re: Attempted intimidation... (none / 1)

The Cypriot central banker reshuffle does not seem to have been challenged in the Court.

For that matter, I'm not totally convinced that the powers that be want the Court to be looking too closely at their - uh - creative interpretation of the treaties.

I guess in the final extremity, you could always get a few pictures of the outgoing central banker with his favourite hooker and resign him instead of firing him.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri May 4th, 2012 at 10:40:42 AM EST
[ Parent ]

Re: Attempted intimidation... (none / 1)

JakeS:

The Cypriot central banker reshuffle does not seem to have been challenged in the Court.

I thought - but have no other source then the wording - that the term was up. If I remember EMU rules correctly its a six year term and appointment is by the parliament-appointed CB board. Firing a CB board member during the term can be challenged in national court and firing the boss can be challenged in the Court. Can't find a source right now.

JakeS:

For that matter, I'm not totally convinced that the powers that be want the Court to be looking too closely at their - uh - creative interpretation of the treaties.

Yes, firing for subverting EMU treaties with respect to other goals then price stability and using ECB to subvert other EU-treaties, would make a court hearing an interesting spectacle.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Sat May 5th, 2012 at 04:58:07 AM EST
[ Parent ]

Re: Attempted intimidation... (none / 0)

The trick would be to hold implicit and explicit threats of default in reserve and then proceed to implement your plan and pay back the debt in Euros. The debt would get paid, but not be accompanied by the 'soaking' of the rest of the economy that is the point of the current scheme. It would seem that the further Ireland proceeded along this path the more secure she would be in continuing. By so doing she would be providing a light for the feet of others.

One possibility would be to carefully 'privatize' the process of the creation and administration of the Punt. Then they could plead respect for private property. :-)

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri May 4th, 2012 at 11:23:39 AM EST
[ Parent ]

Re: Attempted intimidation... (none / 0)

The Euro is hard currency for Ireland. There is no guarantee that it can pay back these debts. In fact, if I were to bet, I would bet on "not."

And if not, then they need to hang on to their strategic hard currency reserve, not expend it on frivolous things like pleasing foreign creditors.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri May 4th, 2012 at 11:39:20 AM EST
[ Parent ]

Re: Attempted intimidation... (none / 0)

The proposal is really unvetted, but it was Steve Keen's surmise that, by exchanging a significant portion of domestically circulating Euros for Punts that this would enable foreign creditors to be paid without crippling the domestic money supply. And additional Euros would still be entering Ireland, as it has a trade surplus. How much of the available Euro reserve so obtained it would be wise to pay on debts to other countries or the ECB should be a tactical decision - designed to buy time for the domestic economy to recover.

While no details were spelled out, I expect that it would be necessary to require all cross border transactions to be conducted through the Irish CB. This is what worked in China, however the Argentine experience might suggest other options. I don't know.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri May 4th, 2012 at 12:28:22 PM EST
[ Parent ]

Re: Attempted intimidation... (none / 0)

But it will have a current account deficit, which means that there will not be a net inflow of hard currency, unless .

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri May 4th, 2012 at 12:40:11 PM EST
[ Parent ]

Proofreading is my friend (none / 0)

... unless they default on external debts, or take steps to prevent expatriation of profits.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri May 4th, 2012 at 12:41:15 PM EST
[ Parent ]

Re: Proofreading is my friend (none / 0)

Are you saying that the present current account surplus will turn negative if they implemented the proposed New Punt plan or that they do not now have a surplus? Were such a New Punt to be implemented it would allow for more domestic economic activity. Were it to be devalued relative to the Euro that would reduce imports. The effects on Intel and other transnational corporations could be mitigated by allowing such corporations to continue to make purchases of raw materials in Euros, and, of course, to price and sell their products in Euros.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat May 5th, 2012 at 10:26:32 AM EST
[ Parent ]

Re: Proofreading is my friend (none / 0)

Ireland has a current account deficit, but a trade surplus.

Now, for a normal country, that would mean that after repudiating sufficient amounts of foreign debt, it would have a current accounts surplus. But Ireland is not a normal country, because the difference between trade balance and current accounts balance is driven by expatriation of profits rather than expatriation of interest payments (as is usually the case).

That means they can't default and peg the New Punt to the €, because they can't defend that peg.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat May 5th, 2012 at 04:58:04 PM EST
[ Parent ]

Antiausterian policies in small countries - feasible? | 70 comments (70 topical, 0 editorial, 0 hidden)

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