Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.

What is left economics?

by rootless2 Sun May 22nd, 2011 at 09:28:19 PM EST

Just for reference, I want to provide a little counter-narrative on what is left/right in the US and the continuing worldwide economic crisis: A Quick Note on Bank Liabilities (The Baseline Scenario blog)

[S]ome decision must be reached on bank liabilities. Sweden guaranteed all of them. If forced to say, I would go the Swedish route; but of course we can't do that unless we're prepared to put all troubled banks in receivership. And I'm ready to be persuaded that some debts should not be honored -- this is a deeply technical question.
This is Paul Krugman advocating the Irish solution for the US in 2009.


Display:
Eurozone member states are not in a position to guarantee anything.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Mon May 23rd, 2011 at 04:24:40 AM EST
[ET Moderation Technology™]

Fixed lazy linking.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Mon May 23rd, 2011 at 04:26:53 AM EST
...full employment economics.

25 years ago Hymen Minsky had an outline of necessary reforms for financial stability and full employment. I think it would still be applicable. The problem is that 30 years of Thatcher/Reagan/Friedman-ite grip on the public discourse has rendered left economics unserious.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Mon May 23rd, 2011 at 04:28:55 AM EST
Maybe it is the fact that it is Monday morning, but I fail to see what narrative your quote counters.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
by A swedish kind of death on Mon May 23rd, 2011 at 04:29:28 AM EST
The US narrative is that Krugman and Stiglitz offer a left wing critique of Obama administration policies. My point is simply to bring up now that the Irish solution was not particularly left wing.
by rootless2 on Mon May 23rd, 2011 at 07:34:38 AM EST
[ Parent ]
[S]ome decision must be reached on bank liabilities. Sweden guaranteed all of them. If forced to say, I would go the Swedish route; but of course we can't do that unless we're prepared to put all troubled banks in receivership. And I'm ready to be persuaded that some debts should not be honored -- this is a deeply technical question.

Your quote, Krugman's words, my bolding - the difference between the Irish solution and the Swedish solution.

It's rather important.

by Metatone (metatone [a|t] gmail (dot) com) on Mon May 23rd, 2011 at 11:22:15 AM EST
[ Parent ]
The Irish banks are in receivership.
by rootless2 on Mon May 23rd, 2011 at 07:39:47 PM EST
[ Parent ]
That is factually inaccurate.

Anglo-Irish is in receivership. It is also the only Irish bank that has as yet burned any bondholders. At all.

This is not a coincidence. It is, in fact, precisely the difference between the Irish and the Swedish model of dealing with bank crises: The Irish issued blanket guarantees; the Swedish put their banks into receivership.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon May 23rd, 2011 at 09:02:48 PM EST
[ Parent ]
http://www.bbc.co.uk/news/uk-northern-ireland-12067615

and

http://online.wsj.com/article/SB10001424052748703806304576234180828120692.html
Four of the six banks are already fully, or mostly, nationalized.

That was my information - what is wrong with it?

by rootless2 on Mon May 23rd, 2011 at 09:51:13 PM EST
[ Parent ]
Uh, those are not receiverships. Those are the government buying an insolvent institution at an inflated price.

That is not the same thing.

After AIB was discovered to have even more shit on its books than previously estimated (to the tune of around € 24 bn), the (new) Irish government announced that there would be bondholder haircuts on those € 24 bn.

"Receivership" is central bankese for what an American would call "Ch. 11 bankruptcy" if it happened to any non-depository institution. (Banks are special, so they get slightly special treatment, but you can read "Ch. 11 bankruptcy" whenever you see "receivership" without much loss of information.) What you're seeing in Ireland is the government wiping out the shareholders (which is right and proper), giving free money to the creditors who should be taking haircuts (which is not) and then buying an equity stake in a still insolvent bank (which is just plain stupid).

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue May 24th, 2011 at 04:58:16 AM EST
[ Parent ]
You are misdefining "receivership" - not surprising since what Krugman proposed was that the US government engage in a process that did not exist. There are many forms of receivership.

Krugman did not propose that the US Treasury push banks into C7 bankruptcy proceedings because he understood that to be impractical.

He waved his hands about what to do about non-bank financial institutions as if there had been some legal mechanism in place to wind them down analogous to FDIC procedures - which there was not.

In fact, the term Krugman uses most often is nationalization. And he specifically suggests government assumption of bank debts.

by rootless2 on Tue May 24th, 2011 at 10:06:08 AM EST
[ Parent ]
Receivership, as the term applies to the United States of America.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue May 24th, 2011 at 11:27:52 AM EST
[ Parent ]
I will grant you that Ireland did not apply US law to its banks.

 

by rootless2 on Tue May 24th, 2011 at 11:52:39 AM EST
[ Parent ]
Had you clicked through the link and scrolled down a mite further, you would have noticed that the overview in question also contains a section on the relevant Irish procedures.

And while I understand the value of determined apologetics for whatever politician is currently or historically running on an I'm-not-a-Republican platform, it becomes a little tiresome to read poorly argued attacks on people like Stiglitz who in any objective analysis is closer to a sanity-based position than Summers ever was. Or, for that matter attempts to defend expedient compromise on its merits as policy instead of on its merits as political gamesmanship.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue May 24th, 2011 at 12:20:52 PM EST
[ Parent ]
Well that's nice, but off point. The distance between what Krugman proposed and what Ireland did is something you still have not demonstrated.
by rootless2 on Tue May 24th, 2011 at 01:30:37 PM EST
[ Parent ]
Where, precisely, am I defending Krugman's policy recommendations? I pointed out that your claims about the history of the Irish crisis were inaccurate.

I stopped being a regular reader of Krugman sometime in the last half of the first Bush term, so I don't know what his recommendations are in sufficient detail to critique them.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue May 24th, 2011 at 06:41:52 PM EST
[ Parent ]
I will grant you that Ireland did not apply US law to its banks.

 

by rootless2 on Tue May 24th, 2011 at 11:52:50 AM EST
[ Parent ]
The Irish government started out with a blanket guarantee of the entire liabilities of the Irish banks, all the way from deposits to subordinated unsecured debt, to the tune of several times the country's GDP. Everyone screamed bloody murder when they did it, but it took over a year to blow up in their faces.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Tue May 24th, 2011 at 01:37:50 AM EST
[ Parent ]


Display:
Go to: [ European Tribune Homepage : Top of page : Top of comments ]