Merkantilismens återkomst

Kloka ord från Danne Nordling:

Merkantilismen och analogin med vanliga hushåll är tydligen fel. Europas politik verkar styras av ett ekonomiskt tankefel. Det var ett sådant Karl Marx var ute efter när det gällde kapitalismen. Men det finns inte något sådant där. Tvärtom skulle man genom ett fasthållande av de kapitalistiska principerna ha kunnat undvika dagens kris. Länder med underskott i utrikeshandeln ska enbart kunna ha detta för att utländska kapitalister går in och investerar i nya maskiner, fabriker och anläggningar. Några fasta växelkurser och konstlade valutaunioner, som medger uppbyggnaden av gigantiska obalanser, ska man inte ha.

Detta nygamla nationella fokus på export, istället för produktivitet, har försatt oss i den ytterligt besvärliga situation vi nu befinner oss i. Tyvärr tycks det vara få som tänker i dessa banor.

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Europas finansiella framtid

Johan Norberg är inte optimistisk.

En grekisk skuldnedskrivning är nödvändig, och en halvering av skulderna till bankerna låter imponerande. Men det är en halvering av en ganska liten del av skulderna.

Ungefär 30 procent har de lånat av grekiska banker och pensionsfonder, ytterligare 30 procent av andra euro- stater, av centralbanken och IMF.

Det är alltså bara 40 procent av skulderna som ska halveras. Detskadar bankerna, utan att risken försvinner att Grekland ändå går mot en kaotisk konkurs så småningom.

De 440 miljarder euro som finns i EFSF är inte tillräckligt för att stödja till exempel ett Italien på fallrepet.

Det är svårt att se hur man ska kunna trixa sig runt problemet utan ge sig på roten. Ett antal stater har dragit på sig utgifter som är större än vad de klarar att finansiera. Marknaden har insett detta, och är inte villiga att låna ut mer pengar. Dessa stater måste förstås minska sina utgifter, och det rätt kraftigt. Det kommer att vara smärtsamt, och insikten om behovet tycks inte ha spridit sig bland ländernas medborgare. Så länge det är fallet kommer politikerna, så långt det är möjligt, att undvika att väcka sina drömmande undersåtar.

Lägg till detta personlig prestige, och egon av federal storlek, så är det lätt att instämma i Norbergs pessimism.

Läs gärna även Danne Nordling för en djupare analys av läget.

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Reading On The U.S. Debt Downgrade

S&P has downgraded U.S. debt from AAA to AA+. But what does that mean?

Dylan Matthews presents arguments both for why it might matter, and why it won’t. Tyler Cowen shares some quick thoughts (written before the actual downgrade was announced).

My initial thinking is that the AA+ rating should not have a huge impact. The debt situation was not exactly unknown, and very little new knowledge has sipped out. But to my mind the debt crisis really is a crisis, although that was just as true a year ago as it is today. I’ll reiterate that spending needs to be genuinely cut. Probably, revenues must be raised too, preferably by broadening the tax base. Perhaps a gas tax should be considered as well.

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Was Spending Really Cut?

A while back I wrote:

The way they will do it, is to cut spending in the future. Then, after they’ve been re-elected, there is a high probability that the cuts will be cancelled before they actually happen.

According to an excellent article by Will Wilkinson, that appears to be what has happened.

Unless the bill fails, which it might, it looks like our democracy will have raised the debt ceiling, didn’t really cut a thing, passed off responsibility for substantial deficit reduction to a “super committee”, which will either come up with a plan that does not bind the future executive and legislature or will trip a “trigger” that won’t go into effect until after the next election, and then, again, will go into effect only if the government of the future wants it to go into effect.

The piece is full of interesting facts, among them a graph depicting how federal spending will develop under the new bill. Hint: it’s not downwards.

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Should The Debt Ceiling Be Removed?

Thomas Sowell thinks it’s worth considering, writing in the National Review:

The national-debt-ceiling law should be judged by what it actually does, not by how good an idea it seems to be. The one thing that the national-debt ceiling has never done is put a ceiling on the rising national debt. Time and time again, for years on end, the national-debt ceiling has been raised whenever the national debt got near whatever the current ceiling was.

Regardless of what it is supposed to do, what the national-debt ceiling actually does is enable any administration to get all the political benefits of runaway spending for the benefit of their favorite constituencies — and then invite the opposition party to share the blame, by either raising the national-debt ceiling or voting for unpopular cutbacks in spending or increases in taxes.

The idea of a debt ceiling is good, provided that the law creating it is credible. In its American version, clearly it’s not. And it can’t be reformed into credibility either, because what it comes down to is not how the law is written but how it’s treated by the lawmakers.

The law should be repealed, and the debt ought instead to be debated in a more appropriate context: budget negotiations.

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Debt Ceiling Debate Summed Up

Tim Harford tells you all you need to know to get a grip on the absurdity that is the U.S. debt ceiling debate. Key sentences:

“Mum, I’m confused. You and Dad knew what your income was going to be and you agreed all the spending. So, basically, you agreed spending that would guarantee that you’d break through the debt ceiling. So you’ve agreed to exceed the debt ceiling.”

“Yes – we agreed to exceed the debt ceiling. But we haven’t agreed to raise it. That’s the problem.”

“But that doesn’t make any sense!”

“It doesn’t matter that it doesn’t make any sense. The point is he has bargaining power now.”

As they say, read the whole thing.

I find the debate bizarre. Why have a debt ceiling, if it doesn’t actually mean anything? Because of its misguiding name, one might have thought the point of the law was to direct lawmakers into creating budgets that would keep the balance from breaking through the ceiling. But instead, it’s just an opportunity to get a new roof every few years.

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Buffet On Getting Rid Of The Deficit

I could end the deficit in 5 minutes. You just pass a law that says that anytime there is a deficit of more than 3% of GDP all sitting members of congress are ineligible for reelection.

I expect they will strike a deal, although not a very good one. There will be some modest tax increases — which seems appropriate under the circumstances — and some pretend spending cuts. The way they will do it, is to cut spending in the future. Then, after they’ve been re-elected, there is a high probability that the cuts will be cancelled before they actually happen.

HT: Signal vs Noise
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