Not to forget this is the just the beginning of ‘doing what it takes’ to sustain the euro, and make it ‘safe’ for investors.

That’s all inclusive, though not necessarily immediate.

And ‘anchoring’ the short end ‘automatically’ goes a very long way towards anchoring the long end with regard to risk premium.

Karim writes:

Draghi announced significant philosophical changes today. The key announcements were:

  • The ECB was ready to renounce seniority on its bond purchases.
  • The size of future purchases was open-ended: ‘size adequate to reach its objectives’.
  • Future purchases may not be sterilized, as they have been with the SMP so far.
  • Purchases would be front-end focused as that ‘falls squarely in line with monetary policy instruments’. A key instrument is obviously the LTROs. So would imagine purchases would be 3yrs and in on the curve.

The adherence of governments to their commitments and the fulfilment by the EFSF/ESM of their role are necessary conditions [for some action on the ECB side]. The Governing Council, within its mandate to maintain price stability over the medium term and in observance of its independence in determining monetary policy, may undertake outright open market operations of a size adequate to reach its objective. In this context, the concerns of private investors about seniority will be addressed.

Other news was that:

  • As in the excerpt above, purchases would be subject to strict conditionality via the EFSF (i.e., Spain has to accept a Memorandum of Understanding). Fiscal consolidation and structural reform were listed as the key conditions.
  • He threw cold water on the ESM getting a banking license, saying he was ‘surprised by the attention this has received’.
  • Logistics and objectives on bond purchases were TBD by a committee.
  • Further non-standard measures were forthcoming.
  • Rate cuts were discussed but unanimously voted down; as for a negative depo rate he said ‘we are in unchartered waters’, implying the hurdle may be high.

Relative to levels before Draghi’s London speech last week, Spanish 2y yields are 200bps lower, and 10yr yields are 50bps lower.

160 Responses

  1. I heard the ‘seniority will be addressed’.
    I did not hear that ‘The ECB was ready to renounce seniority’.

  2. “The Governing Council, within its mandate to maintain price stability over the medium term and in observance of its independence in determining monetary policy, may undertake outright open market operations of a size adequate to reach its objective. In this context, the concerns of private investors about seniority will be addressed.”

    Sounds like they’re planning on targeting rate as opposed to quantity. May have to change the name from QUANTITATIVE EASING to something else.

  3. A word from Europe (Italy). I hope you are all familiar with the contents of the EFSF/ESM and Fiscal Compact Treaties. I case you are not I inform you that what comes attached to them is the worst kind of Neoliberal Austeritiy agenda and loss of sovereignty in the history of the modern Western world. This destroys any hope Warren may harbour that we are coming out of this disaster. The disaster is only just beginning for us. The real aim of Draghi, Merkel and Hollande is to keep us under the screw of Neoliberal Austerities long enough to bleed us dry. Then they’ll spit us out of the Eurozone. PB

    1. @Paolo Barnard,

      Sounds like consumption. By the time they finish spitting up parts, there won’t be anything left alive.

      Coughing up your organs is not a cure – even if it makes you feel better briefly.

    2. @Paolo Barnard, Paolo,
      I agree with you that it is hard to find any positive developments at the moment in Europe.
      See my comments about that on this blog on Warren’s post of July 11th, 2012.

      Most Italian people I know all say that Monti won’t last long. Especially after he promised to cut on packages for govt officials, but instead cut on pensioners.
      We hear now already that Germany builds in that any help will only come with guarantees that Italy will continue Monti’s policies after elections next year.

      The fact that Italy runs a primary surplus (I believe this year of 4%) would make it in fact logical and attractive at a certain moment to exit the euro.

      I think it was Berlusconi recently that mentioned that if the ECB does not step up to the plate ‘we have to activate our own printing presses again in Rome’.
      Don’t get me wrong, I am not suggesting Berlusconi is the ideal leader for Italy. I do think however he is shark enough not to let anyone put him under any screw you refer to.

      I have 2 questions:
      1. Why do you think that Draghi (Italian himself) would have the aim to destroy Italy’s economy and afterwards kick Italy out of the euro?
      2. How do you look at the problems of corruption and tax evasion in Italy?

      1. @walter, Hi Walter, a few answers. Whether Monti falls or not is irrelevant. Italy has ratified the Fiscal Compact and thus inserted balanced budgets in its Constitution. We have lost all fiscal, budget and political sovereignty, the Neoliberal-financial lobbies infiltrated EU Commission is now in charge of all 3 of them (the Compact has a lot more horrors in it, no time here to explain). Traditional polical parties, even if they understood what’s going on (which they don’t), are now powerless to do anything meaningful. As long as Italy remains a curency user there is no way out of this disaster. I’m aware that Warren has suggested a fiscally sustainable solution for the Eurozone, but what he fails to acknowledge is the political realities of it: there’s not a chance in hell that anyone even remotely associated with Good Deficits will ever get near a position in Brussels.
        As for Berlusconi, the guy is an egomaniac that raves about things in an incoherent manner. One day he says No euro, the next he says We need more euro.
        A for your questions: 1) because Draghi is one of the world’s top banks’ lobbyist, a member of the elite Group of 30 (the world’s top deregulators of derivatives), a Goldman boy, a privatizations fanatic. He cares nothing about States and people. His job is doing the banks bidding. 2) Italy is possibily the most corrupt country on earth. Not so much politics, but us, the Italians. However, the worst corruption we ever had subtracted no more than 1% of GDP to our wealth, while the GFC has knocked out 20% of our GDP (ove 400 bill.s). Tax evasion was never a public expenditure problem when we had a sovereign currency. It’s a problem now. PB

      2. @Paolo Barnard,It’s clear that the Fiscal Compact is more like a Suicide Pact. Strange enough everybody is still talking about the 3% deficit limit while the new target is already 0.5% or balanced budgets as you describe.
        In the meantime we see that the ECB clears payment instructions of all member states with practically everybody violating the rules (however unworkable these rules are).

        Being a currency user does not per definition mean that life is bad.
        I mean, Tuscany, Emilia-Romagna etc were already currency users when Italy had its lira. It obviously depends on the policies at the level of the currency issuer.
        There is clearly a huge education gap to be closed before we get more sensible policies out of Brussels (out of Washington too by the way, and out of many more govts).

        I agree that too low deficits can be more harmful than corruption or tax evasion. I do not think however that that is a justification for these issues.
        When choosing to be in a union with others, obeying to the same rules regarding these issues would be helpful to support the base for the necessary transfers within the union.

        Each member state can exit the euro. That sovereignty they all have. It is not a prison. See Warren’s MMT exit strategy.
        How realistic do you see the chances that Italy will exit?

    3. yes, they are being seriously austeriofied.

      and the tax structure is now so aggressively pro cyclical that any recovery is likely to be very short lived as well.

      fixing the solvency issue, which seems to me is now underway, will mean a strong euro, ultra low consumption, export driven nightmare
      chasing its exports driving up euro tail in a high unemployment deflationary debacle.

      if this dynamic is not reversed, it will end only with serious blood in the streets.
      not that a war would ever start in europe…

      1. @WARREN MOSLER,

        A war in Europe is extremely unlikely because the Americans are firmly in control, with military bases, sometimes nuclear-armed, in every country but France.

        This is a positive for the Europeans, considering the ham they have done themselves in the past. It’s also a rare example in the present of the US being a “force for the good in the world”, in Mrs. Clinton cherished words.

        Europe ceased to be the center of the world in November 1918, as A J P Taylor perceptively observed and wrote some 50 years ago. This harsh reality, however, has still not been internalized by the European elite – they insist on trying to give their continent the mission of building, via greater political and monetary unity, a force equivalent to the US on the world stage.

        This is laughable, of course, as well as unrealistic but the problem remains in the sense that European megalomania (of which the euro project is an important part) will make many real victims before it reaches a likely demise.

      2. @WARREN MOSLER, Could you please explain how you see ‘fixing the solvency issue, which seems to me is now underway’?

        The ECB could announce caps on let’s say SP bond yields up to 3yrs. But it will only do so when govts have applied to the EFSF/ESM. The means of these rescue funds are limited however. What is going to happen when the eur 500bn of the ESM is used up?

        The ESM is not likely to get a banking license which will increase its firepower. Draghi clearly stated that this should come from the govts, not the ecb. Govts have to have unanimity on this issue. In other words Germany could veto this.

      3. @walter,

        The ESM mechanism is used to lock the country into Austerity measures.

        It then purchases a notional quantity of bonds (first I presume when they are cheapest).

        The ECB then states that it will bring the yield down to X% and it goes there partially by expectation and partially by actual ECB buying.

        The whole idea is to get maximum amount of bang for the minimum amount of ECB balance sheet expansion.

      4. @walter,

        Depends how much of the ESM fund they use to buy bonds and how much is the ECB ‘maintaining the effectiveness of monetary policy’ by expanding its balance sheet.

        My bet is that they will do very little ESM buying and an awful lot of ECB ‘monetary policy’ buying.

        In which case the £500bn EUR will last a very long time.

      5. @walter, Neil, do you expect that to be sterilized. i know that from MMT point of view that does not matter, but the market may interpret unsterilized buying as ‘money printing ‘ etc which could lead to a temporal sell off in the euro. On the other hand any bond buying may help eliminate the collapse discount that is in the euro now.

      6. @walter,

        QE didn’t lead to a ‘sell off’ in the UK, or in the US and it won’t in the Euro.

        The value of exchange rates are not set so simplistically.

        There may be an acceleration of the run of deposits to Germany but TARGET2 balances that out automatically anyway. However it’s just as likely to go the other way.

        Bear in mind that ECB buying is effectively the ECB taking the huge German balance on which it is paying 0.75% (if that) and buying bonds with it that pay 7.5%. In other words it is just doing what neo-liberal economic theory says those holding the German balance ought to be doing anyway.

      7. @walter,

        “Each member state can exit the euro. That sovereignty they all have. It is not a prison”.

        That is not correct, unfortunately.

        There is no legal mechanism for euro exit, specifically. In fact, according to EC jurists a country has to exit the EU as a whole in order to leave the euro.

    4. @Paolo Barnard,

      It’s highly unlikely that Italy will ever have the good fortune of being expelled from the eurozone.

      (Unless, of course, events get out of control in such an unforeseen way that things never intended by the euro elite do eventually happen. Sometimes, History reserves surprises even for its supposed makers).

      From its beginnings, the euro was designed as the perfect trap.

      At least the (neoliberal, but still proud) Brits clearly saw what was coming: “the euro means being trapped inside a burning building with no exit”, so said William Hague in the now distant 1990s.

      While the poor Italians, Spaniards et alia were too blinded by European ideology to notice what was being set up against them under the name of a closer Union.

      Today it’s really impressive to watch a once independent nation like Spain submit to the eurocracy’s wishes without uttering as much as a whisper in protest. The power of conformity never ceases to surprise us.

      And soon we’ll see if Italy (a EU/EC founding member, let’s not forget) will be able to perform much better under extreme pressure, when her turn finally comes.

      1. @Jose Guilherme, You’re right. Things are plainly this way: say you captured a goldmine. Then you work out a way to paralyze the rightful owners of the mine by means of some terrifying superstition, while you actively siphon off all the gold. Would you ever let that mine go before you finish? Italy is still one of the richest countries on earth in terms of public goods and savings, so they’ll keep us in the eurozone as long as they need. Germany is now silently buying up our best motor companies for very cheap. The latest being Ducati, going to Audi. It’s plunder, plain robbery.

      2. @Paolo Barnard,
        Looks to me there is a bit more going on than paralyzing by superstition. How do you see the many cases of Chinese, Russian, Indian investors taking over German companies?

  4. While the ECB may have announced philosophical changes regarding seniority and unlimited size, these actions still appear conditional on structural reform (i.e. austerity). As I noted in a recent post (
    “By working to prevent an all out collapse of the EMU, Draghi is merely taking the necessary actions to maintain his position. If Spain or other European countries must “suffer from a decade of recessions with unemployment over 20%” in order to implement the desired structural reforms than so be it.”

    In this sense, the philosophy has not really shifted at all. The ECB will continue to support government funding, when necessary, but only in return for a reduction in spending/deficits. The most likely outcome remains a long period of high unemployment and stagnating/declining growth. Will maintaining the Euro under this scenario be politically feasible?

    1. @Woj (@BubblesandBusts),

      Absolutely true. They want to repeat the “reforms” undertaken in Eastern Europe, including the infamous “cooling out the economy” from the late 1990s Poland.

      Professor Leszek Balcerowicz managed to push the unemployment rate to 20% in 2003 and finally achieved his goal (working together with the post-communists and members of the Solidarity Trade Union movement such as M. Krzaklewski).

      Socialism was eradicated as an ideology – social-democrats were replaced by populist nationalists and Catholic extremists.

      A similar experiment undertaken in Hungary yielded an even more spectacular result – fascism was resurrected as a viable political option.

      When I was young and stupid I wanted Poland to look like Western Europe. It is entirely possible that my dream may come true in a slightly perverted way – the West will look like Poland.

      The Eastern European motto is “dog eat dog”. The only trouble is that the world is not frozen in motion and sooner or later the Europeans will be confronted with the inevitable rise of Asia.

      1. @Adam (ak),

        “When I was young and stupid I wanted Poland to look like Western Europe”.


        The last decades of European History, in a nutshell.


  5. @Walter: the Lisbon Treaty has no provisions for eurozone exit at all. An exit by Italy would require 27 unanimous votes in the EU Council and re-writing of the Treaty, plain impossible. Italy can of course leave and slam the door on them. However no mainstream politician here is even dreaming of doing so (not even the Northern League). That’s why I’m inviting Mosler + Galbraith + Kelton + Auerback + Parguez for a major Oct. conference on the MMT way to orderly exit from the euro, targeted to employers associations and the public. We’ll draw a national blueprint, the first of this kind in the EU.

    As for the ESM, I agree with @Neil totally. Also because Natixis has worked out that Italy alone would use up all of the ESM in just 3 months.

    1. @Paolo Barnard,

      The October conference is a great idea.

      Also, we should not forget that political change in Europe can only be achieved via the ballot box. If electorates within the PIIGS start voting massively for anti-euro forces then no amount of eurocratic tricks will be capable of preventing the EMU’s deserved demise.

      Forget about demonstrations for they are essentially useless. Organize opposition within the political parties and educate the electorate with meetings on MMT.

      This two-pronged strategy can work because people will inevitably – even if slowly – react to an increasingly desperate situation and end up supporting the forces that point towards a way out.

      Maybe Italy – a large country with a functioning economy – will be the place where the tide reverts and the euro project is smashed.

    2. @Paolo Barnard, Seems to me that absence of exit provisions in treaties does not imply absence of rights to exit.

      To spread MMT education is clearly the way forward to create enough support among population and politicians.
      Unfortunately time is not on our side and the education gap is huge.

      Ideal would be to convince Brussels and to have the euro managed in a proper way, MMT style.
      Seems to me that each member state has to determine in a democratic way about the alternative of an exit.
      I am afraid that an ‘orderly exit’ is kind of ‘contradictio in terminis’.
      As far as I read above, Warren sees this in terms of an Italian ultimatum to the EU.

      Let’s wait and see with regards to the ratio between ESM and ECB buying.
      One thing is for sure, the ESM, without banking license, has very limited means and it is not yet clear how they go to cope with that.
      A bit pro forma ESM combined with unlimited ECB looks very easy.
      Of course the fact that the ECB says that it will buy helps to prevent the need for purchases.
      Looks to me Draghi woke up suspiciously late to suddenly find out that front-end purchases fall squarely in line with monetary policy instruments.

    3. @Paolo Barnard,

      I don’t understand why this question is always discussed in black and white terms: either country leaves or not.

      Wouln’t it be more easier to take another currency to use alongside euro? If it can be used in payment of taxes, MMT says, people will accept it.

      And I don’t think there are any clausules that prevent member nations from issuing secondary currency, like there are in the USA where it is legally prohibited.

      And maybe even balanced budget amendments could be circumstanedd by creating some new public entity that could be in charge of deficit spending? Or it could be argued that meaning of balanced budged amentment consitutes only euro spending because that is the currency that Italy does not have right to issue.

  6. Warren,

    Regarding your comments above:
    “Italy needs to send an ultimatum to the EU-

    increase our deficit limit, and fund it, to accommodate our savings desires or we’re out.”

    How do you see this for the total euro zone – Each member state sending this kind of ultimatum or only the ones with primary surplus, like Italy?

      1. @WARREN MOSLER, Right, it does not make much sense to have any arbitrary limit on public deficits (other than the inflation barrier) since we do not know in advance how the savings desire will be. I think Wynn Godley once pointed that out very clearly.

        This raises of course the question why savings desires differ so strongly in different countries.
        Does that have to do with low public welfare, so that people need to take care of themselves? We see for instance in China a relatively high savings ratio that is often explained like that.
        (inverse relation between savings desire and public welfare).

        Do you see any risk that high savings will ‘suddenly’ or gradually with public welfare improving be converted into spending and lead to (high) inflation? (probably a one of correction if happening at all)

      2. i suspect local pension contributions have a lot to do with savings desires?
        also we’d have to get to full employment on the way to (high) inflation

  7. @everyone: the general indoctrination here has been devastating. Things like “States must spend like a good family” + “tax the rich to pay for social security” + “debt = our granchildren’s debt” + “we have been profligate, so we deserve the pain” are mainstream everywhere. Forget the politicians and the media. As far as I know, I’m now the only journalist in Europe (sic) that’s organizing a national MMT movement. It’s as bad as that. Yes, we have a lot of work ahead. My shift of strategy is now to get the employers on board, the small medium firms and the workers. My paradigm is: firms+families are in the same sinking boat. No more ‘bosses vs employees’ rhetoric. They’ve been pushed into a chicken shed to pick on each other so that they wouldn’t see their common enemy: Neoclassical, Neomecantile, Neoliberal economics. MMT can save firms and families alike, that is over 78% of our GDP. If I pull this off here, then we’ll see something significant come out of Europe.

    1. @Paolo Barnard, Paolo, warren has said one world currency (with proper counter-cyclical policy) is not inherently evil. I don’t know how he missed class on mundell’s optimal currency area, but warren is out of paradigm. Its a damn shame too. I don’t want to say warren is evil, so lets just give him the benefit of the doubt (as he says he gives to others) that he is simply ignorant that one world currency (or just a few) won’t bring in DARK FORCES that we can’t even begin to conceptualize. A navy admiral once told me the damn problem with engineers, is they always want to fix things, like that faulty guillotine hanging over thier neck that just needs a little adjustment to work properly, that their head will soon be detached if they “fix it” doesn’t seem to phase them. Perhaps this is what warren has.

      Paolo, I wish you success, but the forces against you haven’t even really begun. The apathy of the sheeple that must be overcome, then the ability to focus them on higher order feedback in thier governments once you do get them aroused, then allowing the time for this change! Long before you make any real progress in any of those, the powers you fight will begin to do some really nasty things to you if you do start enacting change. Here we had people like brooksely borne, bill black, citigroup chairman Reed, etc etc most threatened and stomped over like ants.

      Do you want to end up like bill black and be able to look at yourself in the mirror as you slave away at your menial JOB, or like warren mosler and have your superyacht and private estate in the islands?

      There was a time I couldn’t send a bean pit trader into the markets knowing the order I told him to execute would more than likely be misconstrued by my peers and profit greatly from that, some people here at this blog can do that though. Neitzche warned about looking into the abyss and becoming what you fight.

      Don’t waste your life tilting at windmills, do as warren has done so you too can have all the spoils of financial warfare. Watch the teachers actions Paolo, and maybe don’t focus so much on his words. Anyone who advocates for one world currency is paving a road to heck, even if they have good intentions.

      1. @Save America, Cannot quite comprehend the gist of your message. I have no alternative but to fight on. Warren is the least profit seeking expert I ever encountered.

      2. @Paolo Barnard, Warren seems to be of the mindset that one currency for the whole area can work (and the ecb will do whatever it takes, even if many souls have to rot and die, 10s of millions even), even though many other optimal currency area ideals are not being achieved and will never be achieved from the way it looks to me. Spain with 50% youth unemployment is a total disaster by any measure that will cause massive problems that reverberate for at least 2 to 3 generations even if the problems started to be fixed now.

        The gist of my message is that warren is of a mindset that even 1 world currency could be acceptable. But in a roger erickson “return on coordination” feedback aspect, every fiber of my being, and every cell of my body makes me feel like warren is wrong on this issue. The very nature of uniting the whole area under one currency, even with mosler sponsored MMT proposals, puts too much power into too few hands. He is out of paradigm, he reminds me of setzer and others with the council of foreign relations who see a one world currency in 50 years if not sooner, this cannot be good for 9 billion humans.

        I would like for you Paolo to substantiate your comment that he is the least profit seeking expert ever? He admits he sends bean pit traders to execute orders that look fumbled to fool other traders, a real PERVERSION of our capital markets if you ask me. He admits he went to italy many years ago to talk to the central bankers because he had massive PROFITS to make. Do you think he is not currently trading currency now? Norbert Weiner of MIT warned of people like warren mosler decades ago, even the most nicest and charitable of “capitalists” would doom the planet to extinction when 9 billion people couldn’t be “productive” in thier system in the future, they will be the death of us all, his words. Warren says there is no wisdom in what norbert wiener predicted, but who is Warren next to the father of cybernetics and of MIT? I like warren, but the road to hell is paved with good intentions. Perhaps like FDO15 and many others though, (after they have all used the system to amass great wealth) now they see the system as EVIL, more trouble than it is worth, and needing reform. The USA is not an optimal currency area, neither is europe, and I haven’t seen any studies but my assumption is that the Yuan in china needs to break up too, to better serve the people. I get the sense from these monetary types, that the people are here to serve the currency system, instead of the other way around.

        All the mmt proposals in the universe won’t save all your european youth who are rotting on the vine when the larger macro issue is that the regulation and organization of an optimal currency area is perverted to meet the needs of some banksters at the cost of the people.

        Where have you seen warren say the USA currency needs to break up to better serve the people under it? Or the euro currency? Everything I read from warren is going the other way, how we can more centralize things, bring more people under failed optimal currency regimes and inflict even more damage. In THEORY a lot of warrens ideas look great up in the ivory tower, but in real world practice with real human monkeys, the theories break down and policy gets implemented that hurts many humans lives, needlessly.

      3. @Paolo Barnard, Think of it like this, if we build a large financial “titanic”, where all people are under 1 currency, and the captains of the ship are corrupt or just stupid, how many people die when the financial iceberg is struck (accidentally or intentionallY)?

        However if we have lots of small superyachts instead, is it even POSSIBLE to send so many people into the side of an iceberg at the same time? By design or by error? The problem with large centralized system is the risk is greatly magnified. Possibilities of error that affect many masses of people begin to materialize that are simply not possible under less centralization.

        Warrens one currency area puts a large amount of people crashing into the side of the iceberg at the same time, and his counter cyclical policy options are simply intractable.

        But 20 small superyachts hitting the iceberg at one time (20 seperate currencies) doesn’t seem to happen.

        Right now warrens policy options call for the national government to implement jobs programs to help all these rotting unemployed, but It seems to me, 50 states, with 50 state currencies, could probably much more EASILY implement counter cyclical unemployment policy and jobs gaurantees than the federal government. Local knowledge and local efficiency is much better at the local level, not at the federal level where warren is trying to get policy action, the proof is in the empirical pudding.

  8. @Willie Lomax: A couple of preliminary points. Warren’s been syaing “Either the Eurozone expands fiscal policy to whatever it takes to provide well being to us, or we should leave it”. Doesn’t seem to be the stance of one that advocates one currency at all costs. I’ve heard myself Warren in Venice take the myth of “We must stay in the eurozone or else” apart, bit by bit. He’s been consistently to the left of our leftwing unions with regards to labour issues and welfare. However I myself told him many times that a US like federal system in the EU is wrong, because the ruling ideology here is far to the right of the most reactionary of US forces.

    With regards to his business dealings, I inform you that the very first question I asked Warren in Venice in front of a packed audience was “Mr Mosler, are you a speculator?”. His reply was satisfactory. Having said this, I would advise you to bring a lot more substance to your allegations against him, so far yours are just rumours. Warren has come to Italy to speak about MMT for free, worked with me for free, will come back here for free, will provide tuition to me for free, spends a lot of his time to reply to Italian MMTers for free. Well, if he’s a billionaire speculator I don’t know, but if all billionaire speculators dedicated that much free time to a good cause I’d be glad. PB

    1. @Paolo Barnard,

      1. Is my understanding correct that you are against a federal europe because you do not see a democratic way to reach majority for MMT on european level, but do see those possibilities on smaller scale, let’s say member state level?
      2. Today’s world has become a village. In such environment I think there is a lot to say for a few big currency blocks, maybe even one world currency. Do not forget that a small country with its own currency always faces the necessity of relatively high imports. Without running a trade surplus this often means a devaluing currency.
      3. Above, sub 3, you referred to ‘paralyzing by superstition’, ‘plunder’, ‘plain robbery’ when german Audi buys italian Ducati. To me it looks there is a bit more going on. How do you see the many cases of Chinese, Russian, Indian investors taking over German companies?

      1. @walter, 1) Correct 2) Full employment in Italy means producing at home some of the stuff you buy abroad, you must understand that here the Neoliberal reforms of the 90’s destroyed many national producers of goods that now we have to buy abroad, energy imports here are a paltry 1,7% GDP, a sovereign new Lira will more likely appreciate vs euro, I agree with Warren: exports real cost. 3) I can speak for my country: they’re buying up stuff for dead cheap, that’s what the Spiral of Forced Economic Deflation imposed on Italy does for the Germans. I have no knowledge of large Chinese Russian acquisitions of German companies.

      2. @Paolo Barnard,

        Beware that if you are too successful in spreading the MMT word in Italy the most likely outcome will not be Italy abandoning the Euro but Italy breaking up into a rich North Italy that could stay in the Euro and poor South Italy which will be not much more than an agricultural subsistence economy with its own currency nobody else will care about.

      3. @Paolo Barnard,

        Have you thought of exploring the possibility raised by Marc Lavoie in his November, 2011 paper on neo-chartalism – of Italy regaining a measure of monetary sovereignty under the euro immediately, by getting its commercial banks to buy Italy’s public debt and ordering the Bank of Italy to accept it as collateral?

        The Italian government could use the proceeds of those debt sales, held as deposits at domestic banks, to redeem securities held by foreign banks that they only accept to roll over at intolerably high rates.

        The domestic banks would replace the deposits with advances provided by the Bank of Italy against said collateral; and the Bank of Italy would simultaneously increase its liabilities towards the Eurosystem.

        Since there is no limit to the debit position that a National Central Bank can incur on the books of the ECB (Peter Garber dixit!), Italy would thus avoid the pressure of foreign markets against its debt.

        This means there is a “loophole” in the present rules of the eurosystem. The only missing link required to use this “loophole” is a eurozone member bold (and knowledgeable)enough to:

        a)thoroughly research the technical details of this process and subsequently

        b)defy and beat the ECB/EC at their own game, by using existing rules to freely finance public deficits and thereby dispense the need for “aid” packages with the attached massive doses austerity.

        IMO, Italy is the only country among the unfairly denominated PIIGS with enough stature to engage in this kind of tactic with the sole purpose of defending her national interests and protecting her economy.

        What do you think?

        (The Marc Lavoie paper can be found at
        pages 19 to 24 dealing specifically with this issue)

      4. @Mammoth,” poor South Italy which will be not much more than an agricultural subsistence economy with its own currency nobody else will care about. ”

        Mammoth, what does it matter what the rest of world cares about southern italy’s currency or not? If having thier own seperate currency is best for thier set of people, and government policy and counter cyclical efforts are efficient and maximized, isn’t that the goal? You degrade the “agricultural” economy, but try to eat your paper or gold, corn futures have made a few of my peers wealthy very recently, lowly corn, not high tech missles or cancer cures, imagine that! LOL! I bet starving irradiated japanese would love southern italy agriculture, don’t be so harsh on lowly farmers working the land.

      5. @Paolo Barnard,
        I agree, export is a cost, but there is no free ride. The variant, ‘we issue our own currency and import all’ does not exist. And for domestic production, in an open world, competitiveness does also play a role.
        I think we all witness a concentration of capital happening right in front of us. A trend to oligopolies, probably even monopolies. I think that characteristic, logic development, in capitalism was already described by Marx. It looks to me that globalization, modern communication techniques etc accelerate this whole process.
        Competitiveness requires economies of scale and those are more likely to be achieved in a united Europe than with each country digging itself in between walls of protectionism.
        The deflationary pressures coming from emerging economies are there. For Germany, just as well as for Italy. We may not like these pressures, but protectionism and finger pointing are classical mistakes during an economic downturn.

        Personally I get the impression that we are getting closer to the understanding that further integration towards European tsy with euro bonds and fiscal transfers is needed.
        In the meantime a week ago it was Nowodny (austrian in ecb), this weekend Faymann (austrian Chancellor), that express their sympathy towards a bank license for ESM. And today we hear the SPD in Germany also in favor of euro bonds, just as the Netherlands before. Both on the condition that a proper enforcement agency for fiscal policy will be put in place.

      6. underneath it all competitiveness is about optimizing real terms of trade.

        and yes, there is no free ride because the cost of the ride is exports

    2. @Paolo Barnard, “Warren’s been syaing “Either the Eurozone expands fiscal policy to whatever it takes to provide well being to us, or we should leave it”.

      Paolo, leave it, what is stopping your people? They should have left it in 08. Lets go back 12 years or 15 years, how many of your people were for it? Who are the architects that brought it upon them then, and keeping them in it now? What is GOOD about having so many human lives controlled by so much centralized power ruled over by so few people? The entire impetus of the founding of my country was to get away from too much centralized power and control from your region of the world. Those founders went on to say do everything it takes to keep national/federal/centralized powers as weak as possible, because even if good intentions exist in all the people, all that HUGE power in control of so few, will corrupt even Jesus. The monster takes on a life of its own.

      Warren has proven with his blog here, we can’t implement proper counter-cyclical policy at the national/federal level, too many problems, problems that would not be so intractable if the size of things were smaller. We can’t get a jobs gaurantee at the federal level, we can’t get the federal government to give money out to states and cities (like they did the banks), so the cities decades long growth and organization is currently being obliterated and sent into chaos. Warren, with all his efforts, can’t get a few simple policy proposals implemented, sorry Paolo, if warren can’t get it done, its not doable, he had a conference in 96, and still today in 2012 I don’t see any major change coming with jobs gaurantees, per capita money distribtution, etc etc, the sacred cows are too sacred and will not be slaughtered Paolo. Not one major politician is even discussing seriously warren’s counter-cyclical proposals in this election cycle from what I see – EPIC FAIL! Do I blame warren that he is an idiot? Or his proposals are foolish? No, I don’t think that. Or do I blame a government that is out of control, that has outgrown its service? Time to put the sacred cow out to pasture.

      “Doesn’t seem to be the stance of one that advocates one currency at all costs.”

      The USA is not an optimal currency area, but no one wants to seriously tackle this sacred cow, history, tradition, pride, familiarity, all are getting in the way of science and efficiency. I have never heard warren say lets do best by the people and break up currency areas that are not optimal. Most of his postings here are policy proposals for larger more inclusive currency areas, policy proposals that are not gaining any traction since 96 from what it looks like to me. How long do you kick a dead horse Paolo? How long do you get on that dead horse and then tilt at windmills? Warren, monetary guru, since 96 has been at this, how many more people need to die or suffer until we say things are not working and doing more of the same is silly? If anything, we are actually WORSE off Paolo, as many posters here have shown, from irving fisher, to godley, and many others, they at least had some understanding of MMT principles decades ago, and today we have almost no one in key policy making. But senator al Franken of Saturday night live is up in DC making sure things are right, but warren didn’t even a few percent of votes for his DC senate seat.

      ” I’ve heard myself Warren in Venice take the myth of “We must stay in the eurozone or else” apart, bit by bit.”

      He should post more here then on that, not only the eurozone needing some renovation, but the USA as well, I never hear him talk about this. You should have already left the euro, my friends in iceland say its not so bad doing your own thing.

      ” He’s been consistently to the left of our leftwing unions with regards to labour issues and welfare.”

      Even in leftist europe, how seriously do you think major politicians will have a national europe jobs gaurantee and per capita spending? It is an intractable problem, warren has done EVERYTHING he can to fight this cow, and isn’t making progress, instead we have went in reverse the past few decades, perhaps the cow needs to be put out to pasture.

      “With regards to his business dealings, I inform you that the very first question I asked Warren in Venice in front of a packed audience was “Mr Mosler, are you a speculator?”. His reply was satisfactory.”

      What was his reply specifically? He has employees and children and his own assets to take care of and support, he got wealthy off a system that he admits is more trouble than it is worth. Did he say he stopped speculating? Goes against what I have seen him post here about his eur/usd calls.

      “Having said this, I would advise you to bring a lot more substance to your allegations against him, so far yours are just rumours.”

      No, NOTHING I said was a rumor. In his book warren admits to sending bean pit traders to execute what appears to be fumbled orders to fool other bond gods, perverting our capital markets. FACT. Here at this blog warren admitted to going to italy years ago because he had profits at stake – FACT. I get the sense at this stage in life warren might have what we call in the industry “white guilt” and how silly all this financial machinations are and here his blog is proof, he wants change and reform. Current methods are not working though, in fact, it seems we have went in reverse the past few decades. Paolo, what do you do when things are not working, but are going in reverse? Do you do the same things or try a change in strategy?

      “Warren has come to Italy to speak about MMT for free, worked with me for free, will come back here for free, will provide tuition to me for free, spends a lot of his time to reply to Italian MMTers for free. Well, if he’s a billionaire speculator I don’t know, but if all billionaire speculators edicated that much free time to a good cause I’d be glad. PB”

      I like Warren, a lot of people with wealth contribute for free in many places. Doesn’t change the fact that as much as I like Warren, he has proven day after day we are not making progress, his blog here proves day after day in fact that we are going in reverse. Even warren himself just posted an article that he is surprised after 2008 that the libor sillyness was so prevalent. Sorry Paolo, I am not about wasting more people’s lives and time on failed strategies, kicking dead horses, or tilting at windmills. Current methods are not working, in fact we are going in reverse, and it is time for a change in strategy if you want real progress.

      Paolo I will leave you with this:

      This is john carmack, one of renaissancemen class that warren is in, probably one of the top developers in the world. His almost 4 hour keynote a few days ago. For 20 years he had hoped the rest of world would bring about innovation in virtual reality, he reached out to all the companies, suggested ideas, and got the door slammed in his face, but then he found this kid working in his basement a few months ago in california and now we have a new industry coming about.

      There is hope for you Paolo, one human being can make a huge difference in this world that even Sony, MSFT, and all thier resources couldn’t do. But even carmack says in this keynote Paolo, there is too much lagresse in sacred cows, keeping old systems in place, stifling truly revolutionary innovation with small piece meal changes. Carmack is very upset and frustrated that sacred cows are so hard to slaughter.

      I can’t even imagine anyone, from senator al franken to candidate romney to MMT’er Mosler saying the USA is a sacred cow and she is not an optimal currency area and we should break up her currency to better serve more people with counter-cyclical policy, it is too sacred of a cow, unfortunately.

      1. @Save America, I’m not in a position to pass judgement on Warren’s record in the US other than acknowledging that he has been MMT’s chief brain all along. Again, I can judge Warren for his record here, and it’s been, in my opinion, superb. The problem with breaking up the US is that it may lead the country straight into the hands of the Ultra Libertarian fanatics, and that’s my idea of hell on earth, you shall excuse me. You guys had the New Deal, so this means that MMT there can work. The fact that your policy makers have consistently rejected any hint of an MMT expansion of fiscal policy means only that you must change them, not the whole country. And logic suggests that if they can’t be persuaded to change fiscal policy, it’s even less likely that you get them to dismantle America. Europe is immensely less innovative than America, tipically here we trail behind the US in every apect of life and only catch up 20 years later. But as I already said, the Counter Reformation here has been ferocious, only chance for us is to brak away form Brussels. I’m sure Warren can address your critique himself. PB

      2. @Paolo Barnard, I will pass judgement from what I see about warrens success in your Area, you say yourself you are the only serious MMT journalist, the ONLY one, in that whole area, hundreds of millions of people, ONLY ONE, that is not success, that is EPIC FAIL. There is no other way to define it, total and complete FAILURE. Current methods are not working.

        I agree with you totally, America will not be changed, it will be destroyed, from within, run itself aground, and from those ashes a new phoenix will arise, as is going to happen in your part of the world too.

        A couple hundred years ago some dudes tried to change things from within in europe, saw they could not win that fight, and fled to the new world and started over.

        So best to focus efforts on rebuilding a better system after the current one explodes in a tom hickey wet dream, or flee somewhere else and build anew before the explosion, than trying to save what you admit is not saveable, there is no chance in hell we are going to do what is necessary to right the sinking ship, is there? As you said, we HAD the new deal, we should be the BEST country in the whole world for Warren’s policies, we HAD instutitional policy makers who UNDERSTOOD some if not all MMT memes decades ago, but it is all GONE NOW, BYE BYE BABY! We have went in Reverse, the country that had the NEW DEAL is totally unreceptive to Mosler Policy Goals at almost EVERY LEVEL, so don’t look to us to LEAD the Way for you Paolo, we dropped the torch baby! Financial History should reflect poorly on the USA for this, we had a time to be exceptional and lead the world if we had just kept our institutional memory, and make this hunk of dirt a better place for all 8 billion, instead we went in reverse. Mosler puts a lot of time into trying to fix this screwup, I commend his efforts, but he is failing. 1 serious MMT journalist in all of europe, out of hundreds of millions of people is total disaster.

    3. @Paolo Barnard,

      “With regards to his business dealings, I inform you that the very first question I asked Warren in Venice in front of a packed audience was “Mr Mosler, are you a speculator?”. His reply was satisfactory.”

      What a tease you are. So what was Warren’s reply? Anything other than “Yes, but …” would have been dishonest.

      1. @WARREN MOSLER,
        @Warren, @Paolo
        I remember that video. I was at that time also wondering:
        a) why does Paolo ask that question? (what is the purpose)
        b) what does Paolo mean by ‘speculator’?

      2. I assumed that was a term familiar with his audience, and in any case I was simply going to tell everyone what I actually do and let them react accordingly.

      3. @ESM,

        “it’s on the video.”

        Ok, for those who can’t find the video, or (more likely) those who find it excruciating to watch since it involves Warren’s comments being translated into Italian every 3 seconds, Warren essentially says “Yes, I was a speculator, but it’s ok because I made my money at the expense of Goldman Sachs, Morgan Stanley, Credit Suisse, et al.”

        I think there’s nothing wrong with being a speculator. On average, speculators contribute to liquidity and improve market efficiency. But I also think it’s delusional to argue that you are a “good” kind of speculator because you are only taking money from the big banks.

        When you do a profitable trade with a big bank, one of two things happens: either (1) the big bank lays off the trade with the market and somebody other than that big bank loses the money; or (2) the big bank takes the loss and prospectively increases its bid/ask spread or reduces the liquidity it provides, so as to reduce the chance of taking such a loss again. In both cases, ultimately, somebody else besides the big bank ends up taking the loss.

        Of course, taking a loss is not necessarily a bad thing. It is perfectly rational for certain market participants to pay (i.e. take a loss) in order to hedge or otherwise reduce risk.

        Bottom line though is that Warren’s implicit argument is logically no different from a shoplifter’s who argues that he is just stealing from a large corporation and not from regular people.

      4. first, your ‘essentially’ is incomplete, and, second, I never argued ‘good’ or ‘bad’ but just said what I did.
        nor did I agree with the ‘speculator’ label, best I can recall, as by most definitions that’s not what I was.
        Relative value investor would be far closer than speculator. The name of the fund was Illinois Income Investors.

      5. @ESM, I think there’s nothing wrong with being a speculator. On average, speculators contribute to liquidity and improve market efficiency:

        ESM, google “keynes liquidity fetish” and read the first 5 or 10 links, and then tell me why there is nothing wrong with being a speculator or relative value investor or what have you? I don’t understand and need a big brained person like you to make it simple for me. Professor Delong told me liquidity has become the great evil, and this “liquidity fetish” will destroy us.

      6. @ESM, Dear friend, every morning as I wake up I use stuff that has cost the lives of some thousands humans in some unlucky part of the world. And so do you. Shall we drop this hypocrisy please and acknowledge that we are all sinners, drenched in someone else’s blood up to our eyeballs. I’m struggling as best as I can to wash some of that blood off me by fighting for a better world. Ok, Warren may have done wrong, but now he’s doing a lot of good, so welcome. Instead of pinpointing his alleged sins, why don’t you follow his example? And with this I consider the argument closed, thanks. PB

      7. @ESM, Oh wait, here is our own MMTer RANDY WRAY at CFEPS quoting what keynes considered the GREATEST EVIL – not one of the greatest, but THE GREATEST EVIL – ESM: Delong says this is still the greatest evil, but some say liquidity and speculators and relative value investors is a good thing?

        He concluded there are no automatic, self-righting forces operating in capitalist economies that would move them toward full employment of resources. Indeed, he described destabilizing “whirlwinds” of optimism and pessimism, in striking contrast to the Smithian notion of an “invisible hand” that would guide markets toward stable equilibrium. Also, like Marx, Keynes identified what he called the “fetish” for liquidity as a primary destabilizing force that erects barriers to the achievement of full employment. Most relevantly, rising liquidity preference lowers the demand for capital assets, which leads to lower production of investment goods and thus falling income and employment through the multiplier effect.

      8. @ESM,

        “Relative value investor would be far closer than speculator.”

        It’s a distinction without a difference. By relative value, you mean only that you tried to be market neutral.

        Look, I know exactly what you and III/AVM did and does, and I have great respect for it. You were pioneers in fixed-income arbitrage. But don’t think for a minute that the leftist wack-jobs that have been attracted to MMT like children to an ice cream truck wouldn’t call you a bankster/fraudster/vulture/criminal if it wasn’t for the fact that you are no longer an abstraction to them. The flaw lies with them, not with you.

      9. @ESM, Paolo I want you and warren to succeed, I think ESM does too, as probably every other person that comes here. Why else would we all spend so much time here? Something is wrong in the force though, the darkside is winning, and things need to be made better. All I am saying is what has come before, and is happening now, is not working, and there needs to be some serious changes, so that you and warren and all the rest of us can live in a better world. 1 reporter out of 400 million europeans is proof, something completely different in strategy needs to happen. I think Sada has failed in maximizing her fathers time. She should do a weekly webcast with warren, that has audio and video, tackling the financial topics of the week in an MMT perspective. People are lazy, and READING here is consuming, but listening or watching a video is much easier. Think of puplavas weekly audio interviews, or deek jacksons FKN news broadcasts, Russia Today, boo and huffy. Optionstrader Oscar on youtube, etc etc

        People want easy to watch and digest INFO, sada could film warren once a week or more, with interviews or just commentary, post it to youtube or wherever, and people would get in the habit of coming and watching thier weekly MMT newscast. That would go much further. Sada, step up!

        Who here wouldn’t like to tune in once a week to a warren mosler MMT youtube newscast and send all thier friends to it? Put on a sharp suit Warren and knock em dead.

      10. @ESM,


        “Dear friend, every morning as I wake up I use stuff that has cost the lives of some thousands humans in some unlucky part of the world. And so do you.”

        First of all, what “stuff” are you talking about? Second of all, there are different degrees of moral culpability. Somebody who buys stolen goods knowingly is not as evil as somebody who steals. And somebody who buys stolen goods unknowingly is even less culpable. Third of all, I am arguing that Warren has done nothing wrong, aside from perhaps being a little slippery in answering a question so as not to offend his hosts.

      11. @ESM,

        This guy can do it on a shoestring budget Sada Mosler! Step up, it would cost practically NOTHING for you to do a weekly MMT newscast that would affect more sheeple. Paolo could point his friends and peers to a weekly video, since they are obviously to lazy to come here and READ. And if warren threw in a little humor every week, even more sheeple would come back regularly. You don’t need a seat in congress warren mosler to have a bully pulpit, you can reach a lot through youtube, leverage the technological advancement of millions of years of evolution and progress to your advantage, who was Stephen Colbert before he got his own news show? Or Bill Oreilly or Peter Schiff or Steven Forbes or even that Mike Norman back in the day – LOL! Step up! Get with the program, blogs are so last decade, youtube video broadcasts, that is the medium today!

      12. @ESM,


        “Most relevantly, rising liquidity preference lowers the demand for capital assets, which leads to lower production of investment goods and thus falling income and employment through the multiplier effect.”

        Speculators increase liquidity which lowers the damaging effect of liquidity preference. Yes, there are times (perhaps once per year on average), when all of the speculators run for the exits at the same time and liquidity vanishes and the market goes haywire, and people in Congress start blathering on about the need for more regulation, and the people on this blog start spouting off about fraudsters and banksters, but in the real world, no damage is done, and the market quickly forgets about such episodes.

        In fact, one of the reasons the housing bubble rise and fall was so damaging is that there is extremely poor liquidity in the housing market. It takes years for prices to adjust, and during those years, the government has time to implement additional regulations and policies which slow down the process even further. In any case, there would have been very little damage done if the government understood MMT.

      13. falling employment means lower taxes for a given size govt are in order, pronto!

        Note my proposals- banks can’t lend vs financial assets/ultra narrow banking in general, pension funds can’t buy equities, no more govt securities,
        etc. etc. Let’s do that, and then take a hard look at whatever forms of speculation might remain, which would regulated by the gaming commissions…

      14. @ESM, poor liquidity in the housing market.

        Pam Bondi the AG in my state couldn’t understand why O was trying to force the state AG’s to accept a federal workout that was ineffective for the citizens, my local bank of america friends cant understand why so much inventory is being held off market, then yves at naked capitalism shows evidence it is more profitable for banks to delay workouts (because of government payments), and cause families to lose thier homes, they are rewarded for max pain to the people, by design, and MMT doesn’t fix the evil in mens hearts. The housing illiquidity may be one sector, but financial asset liquidity is priority, high frequency trading algorithms and knight recently and others may not agree with your once a year blowup idea. What 80% of the market volume is now one trading algorithm trying to out-trade another, delong is no fool, he wouldn’t say liquidity fetish is the greatest evil of all if there was no basis to it.

  9. @Save America: Time to end the discussion.I agree on 1 point: only journlist that’s creating a serious MMT movement in EU is tragic. Who’s fault? Lots of factors, US MMTers have some faults, buy by far the most culpable of all is public opinion, too apathetic, too lazy, too uninterested. I have no solution for this, and this is the N. 1 problem. Bye for now, Paolo

  10. @walter: It seems to me that you guys just cannot get the point on Europe. I don’t know how to say it any longer… Look: fiscal transfers are as likely in this Europe as was a wealth trasfer programme from white to blacks in Rhodesia. You just don’t know the history of this system, it took them 75 years to build it, and starting with the same aim as today: destroy the industrial base of southern Europe, create a huge reserve army of the unemployed in the PIIGS, destroy the very notion of a sovereign State. And it’s all happening right now. There is no competition in this model, Germany and France never even thought of it. Just slavery for the south. Period. PB

    1. @Paolo Barnard,
      1. Who do you mean with ” ‘you guys’ just cannot get the point on Europe” and ” ‘you’ just don’t know the history of this system”? The americans, mmt-ers, non-europeans, non-italians?
      2. Who do you mean with “it took ‘them’ 75 years to build it”? The neo-liberals, Germany, France & Germany, all Europe except the south or except the PIIGS?
      3. I think fiscal transfers are de facto already happening in Europe. I do not think that there are a lot of people in the countries that gave bail-out loans to Greece who have the illusion that that money will be repaid.
      All member states have fiscal transfers between their own regions and have long traditions with those systems. All member states are well aware of the differences in the economies of the other member states. This was all known prior to the formation of the union. People are well aware of objective factors as size, geographical resources and location, history, climate etc that create those differences. There is enough solidarity for transfers between the member states, but I hope you agree that if in land A there is strict tax collection and in land B tax evasion is rampant then the basis for a transfer from A to B is eroded. Hence my earlier questions about your opinion on tax evasion and corruption.
      4. I think your ‘Rhodesia’ analogy, ‘slavery for the south’ etc etc create a lot of negative energy and are not very constructive. You may claim it’s reality, but I’m pretty sure that to many it looks far from that.
      MMT can have a very positive contribution to solving monetary problems, not just for Italy or Europe, but for the world as a whole.
      We are all aware that the fight against mainstream is frustrating at times, to say the least.
      As you know, one of the beauties of MMT is that it is highly descriptive and non-political (not left, not right).
      Such beauty deserves the positivity of Italian charm and elegance.

      1. @walter, 1) Most non Europeans, most Europeans as well 2) French technocrats in the 30’s, then the Austrian school, then French + German technocrats, a host of EU think tanks+lobbies, the Neolcassicals, the Neomercantile corporations of Germany, and finally Italian + Dutch + Luxembourg technocrats too, all with the blessing of the US that always knew better. I wrote a 100 pages essay on this 3) Totally wrong. Those are NOT transfers, they are hangman’s nooses that serve the purpose of completing the plundering of those stupid enough to accept them. You ought to study in details the content of the transfer mechanisms, like the ESM or Fiscal Compact Treaties to realise what I’m saying. Not a single euro of those so called transfers is going to social purposes, it’s all going to save the banks’ balance sheets. I truly think you have a very foggy idea of what’s going on here. 4) There’s no elegance in forcing 300 Italians to commit suicide in just 8 months out of economic despair; no elegance in having 11% of Italians who cannot now heat their houses in the winter; no elegance in throwing millions of pensioners into charity income when they toiled all their lives hoping to die in dignity; no elegance in seeing our PM doling out 2 billion euros to a bank that’s denying 10 K euros to desperate employers who want to save their firm and the employees; no elegance in having now 10% of students surviving on prostitution. And I could go on and on. You live in the richest country in the world where 40 millions Americans can eat only once a day. You know why it happens? Because there are not enough people over there who are prepared to say out loud that 40 million people starving in the US is a crime agaist humanity. They are not prepared to say this because it’s inelagant. PB

      2. Agreed, pretty much the entire global fiscal posture is a crime against humanity with a real cost by every measure greater than all the wars in history combined.

      3. By the way, I said much the same about ethanol on this blog a while back, when we first started burning up our food supply for motor fuel. I said it would starve people to death globally who would be losing their food supply to motor fuel, and it wouldn’t stop until the marginal person starving to death had sufficient political power to stop it. And that might be at least the 100 millionth person to die from it.

      4. @Paolo Barnard,
        you make it sound as if Italy’s problems were caused by the Euro, which is not true. Italy always has had the most corrupt politicians and the most inefficient bureaucracy of Western Europe. That’s neither Germany’s nor France’s nor the neoliberals’ fault.

      5. @Paolo Barnard, Paolo learn fromhistory. The rebellious colonists in the states tried to stay free. They lost the civil war and are still slaves today. There is no hope. Many more will starve and die and nothing will change for u. Perhaps it is time to accept the system must totally collapse from within before you can do anything productive.

      6. @Paolo Barnard,

        “You live in the richest country in the world where 40 millions Americans can eat only once a day.”

        This is false. The US actually has a very generous safety net when it comes to food. In fact, obesity is probably the worst health problem among the poor in the US, with roughly 1/3 of women below the poverty line classified as obese.


        “… with a real cost by every measure greater than all the wars in history combined.” (emphasis added)

        Ummm. How about the measure of # of people who suffer violent deaths? Also, how about the measure of where we would be now in terms of World GDP, based on compounded growth in the absence of war? I understand your point. Although it’s not obviously true, it may be true. But saying it is not helpful.


        Agreed. I actually believe that Italy’s worst problem is demographic. Not enough young people. It’s really a shame that Mexico and Italy don’t share a border. There wouldn’t even be much of a language barrier for immigrants from Mexico.

        In any event, Italy has benefited from the Euro. Imports = benefit; exports = cost. But it is understandable that people are upset now that their unsustainably high standard of living has to drop. MMT says you don’t have to let aggregate demand slip below the domestic economy’s capacity while this is happening. That is really all it says. It will ease the pain, but it can’t make it go away completely.

      7. @Paolo Barnard,
        1. Well, it looks you find about the whole world does not understand Europe and its history. We take notice of that.
        2. Most western European countries and supported by the US, that’s about the whole western world. And all with the aim of ‘slavery for the south’ (your words). We take notice of that too.
        3. With regards to the fiscal transfers the following:

        When it comes to bail out loans there are no fools among the populations.
        The people in the paying countries have no illusions about repayment and the people in the receiving countries have no illusions that the money will go to their pocket.
        Both are told ‘austerity is needed, because it’s necessary to send resp. to obtain’.

        With regards to my expectation that many bail out loans will turn out to be fiscal transfers I refer to today’s IMF calls for govts to take haircuts on Greek loans.

        Apart from bail out loans that will turn out to be transfers there have been of course money transfers already for many years from net payers to net receivers in Europe via the EU.

        My own experience in Europe and in talking to other European people is quite different from yours.
        To my opinion the development in Europe over the last 75 years have a lot more facets to it than setting up your alleged model for slavery in the south.
        As Warren correctly points out, mismanagement of fiat money is a problem around the entire globe. I think it is hard to maintain that the whole globe is full of intentionally set up slavery models.

        The solidarity in Europe is there, many think over the borderlines, but tax evasion and corruption need to be addressed.
        You may have noticed that there are lots of protests sending money to Greece, but no protests for money sent to Ireland and Portugal.

        4. Yes, I agree, the world is full of misery and people prefer to look the other way. It’s sad. People make strange choices.

        To promote MMT and bring changes we can focus on accusations about the misery or on the benefits of proposed solutions. It’s about a negative or positive approach. It’s about destruction or construction.

        I just do not believe that the way forward is that we should accuse everybody of crimes against humanity when they don’t accept MMT.
        This whole attitude of going around blaming and accusing is not so difficult and we see it all the time. Just turn on your TV and they all roll over each other. In contrast to what you claim, everybody is prepared to say so. It’s bold and they like it.

        Personally I favor education. To explain how fiat money is supposed to work is the way to go to get a broader support for implementation. Convincing by force of logic.


    Are you FREAKING kidding me sada mosler? 5 relevant MMT videos in the entire YOUTUBE UNIVERSE?!?! Seriously? And 1 of those is keen and the other is some guy attacking chartalists! LOL! EPIC FAIL!

    And a youtube search for MOSLER only pulls up car racing, way to go technology IT people, you really winning for team MOSLER, he will be remembered on youtube for having a fast car while the financial world went to smithereens. I don’t get you warren mosler, you throw all that money into a neural net fund trying to show someone you not ready to be put out to pasture like an old cow, but have EPICALLY FAILED to get MMT into youtube memespace and only your car videos inhabit those youtube servers, is that the legacy we will remember Mosler by, a failed senate run, a failed MMT blog, but a successful youtube MT 900 archive? STEP UP! Do I need to start going on youtube with my version of an MMT weekly newzcast? The psycho? Ok, you guys leave me no choice 😉

  12. Paolo has many italian youtube videos, what is the problem warren mosler and sada mosler, how come the ONE sole MMT gunman in europe has way more ITALIAN videos than you guys do? You don’t even have 1 good mosler MMT video that comes up in youtube search from what I can find. Pathetic epic fail!

    Mike Norman gets 30 THOUSAND views, but where is warren mosler MMT youtube vidoes, disgraceful! You can’t be a renaissanceman Warren when Paolo and Mike Norman are wiping the youtube walls with you! You go Paolo, show warren how it is done, he obviously has some feebleminds in his IT department who don’t understand how to get him and his message up in search rankings.

  13. @ESM: I would like you to think that I’m 54, had 26 years in investigative journalism, covered wars, and have been 12 years after the Neoliberal power grab. If I embraced MMT is beacuse MMT is right. I use my own head, always. I never mixed with the leftist wack-jobs, actually, they hate me. Have a nice day. PB

  14. @Jose Guilherme : “Have you thought of exploring the possibility raised by Marc Lavoie in his November, 2011 paper on neo-chartalism – of Italy regaining a measure of monetary sovereignty under the euro immediately, by getting its commercial banks to buy Italy’s public debt

    ——- They are already doing it. In fact most of the Italian issuances of bonds are now bought by internal banks.

    and ordering the Bank of Italy to accept it as collateral?

    —— Cannot happen. Many years ago the BoI was separated from the Treasury and given full independence. Our govt can’t order a BoI clerk to make it tea.

    The Italian government could use the proceeds of those debt sales, held as deposits at domestic banks, to redeem securities held by foreign banks that they only accept to roll over at intolerably high rates.

    —— They are the same rates Italian investors demand to buy It. bonds.

    The domestic banks would replace the deposits with advances provided by the Bank of Italy against said collateral; and the Bank of Italy would simultaneously increase its liabilities towards the Eurosystem.

    Since there is no limit to the debit position that a National Central Bank can incur on the books of the ECB (Peter Garber dixit!), Italy would thus avoid the pressure of foreign markets against its debt.

    —– Doesn’t seem to be the case. BoI has to do the clearing with the ECB, doesn’t sit at the top of the pyramind of money creation in the EU.

    This means there is a “loophole” in the present rules of the eurosystem. …

    What do you think?

    —–I appreciate your interest in our dire predicament. However I just can’t comprehend why we have to figure out some improbable and convoluted solutions to a problem just in order to survive within that problem. Why can’t we just erase the flipping problem altoghether? The problem is the Euro, a monetary aberration that must die period. You can work out all the loopholes you want, but as long as we have to borrow in a foreign currency we’ll be always at someone else’s mercy. PB

    1. @Paolo Barnard, Paolo I salute u.too many other ivory tower types get caught up in rube Goldberg finances and increasing complexity to justifr their lives research and careers. It takes someone like u to come along and cut through that red tape and say this is yo complicated. And unnecessary and bad for commoners.

    2. @Paolo Barnard,

      Maybe I did not express myself clearly enough.

      The steps to take would be the following.

      1. Find a state-owned commercial bank (if there isn’t one, do nationalization on a private bank)to buy all newly-issued public debt securities at par and with a low coupon.

      2. The Italian government uses the proceeds to redeem all maturing bonds held abroad (say, in Germany). The Bank of Italy lends to the commercial bank (taking as collateral the government bond, a practice allowed by the ECB under current rules)funds at the prevailing eurosystem rate of less than 1%; the funds replace the government deposits transfered abroad to redeem the bonds.

      3. These amounts will necessarily show up at the end of the process (Target 2) as a debit position towards the eurosystem on the Bank of Italy´s books and a credit position towards the eurosystem on the books of the Bundesbank.

      In practice, the eurosystem (ECB) will end up replacing the previous external creditors of Italy and this process may continue indefinitely, again according to Target 2 rules.

      Just check out the latest figures: Italy already has about 200 billion euros of negative claims on the eurosystem (Target 2), mainly from capital flight out of Italy. Build up a few hundred billion more of negative balances as a result of public debt and I’m sure you’ll hear the screams of pain coming from the EU.

      More practical results:

      a) the state-owned commercial bank gets a profit from the spread.

      b) default risk on Italian bonds is eliminated.

      c) Italy will never need to ask for aid packages and will thus be liberated from the threat of foreign-imposed austerity.

      All this may seem technically complex but, hey, Target 2 IS complex.

      In reality, Italy has at her disposal a straightforward mechanism to escape from the more stringent constraints of the euro even before deciding on abandoning the EMU.

      I do not see this as being convoluted at all. It can be done right now. It would subvert the purposes of the eurocrats. And all this while playing by the rules.

      Why not try it? Come on, just beat them at their own game.

      1. @Jose Guilherme,
        The ECB has already shown its readiness to throw government bonds off the list of assets eligible for collateral. This is not going to work.

      2. Agreed.
        But more important is that there is no political will to increase deficit spending nor popular support.
        The challenge for MMT is to effect that change.
        Once the political will and popular support change, the means will not be a problem.

      3. @Jacob Goense, warren I have talked w some neuroscience types about your problem. It relates to other problems they were studying. Years ago the idea was floated to create a university that was specifically created for our government class of people. The reason being is that when u look at human beings as programmable machines whose neural pathways begin to crystallize in adulthood you run into very interesting problems of societal management. Ie you can’t take humans trained to think in certain ways and reprogram them to enact counter cyclical algorithms. So this university was to create a class of machines/people that had neural pathways formed counter cyclically to the masses. Perhaps this is the problem u face. Too many machines have been programmed to work under debt limits and u cannot reprogram those machines to think countercyclically. Because their neural paths have crystalized. If true. Your efforts here are wasted in the short term. U will need decades to create counter cyclical machines and then place them in government to aid the masses.

      4. @Jacob Goense, obviously the upshot is that the way our government works. They are trying to take a machine programmed one way and put them into a government position of counter cyclical programming that can’t be absorbed by the crystalized brain. Thus the reasoning for a university for govt class of people programed in mmt ways from youth.

      5. @Jacob Goense, I would go as far to say if you accept this premise. U and Paolo and others are doing harm. U are trying to force round pegs into square holes Nd that is not wise.

      6. @Jacob Goense,

        We’re talking about Italy, not a small economy like Greece.

        If the ECB dared refuse to accept Italy’s debt as collateral this would cause catastrophic disruption in the eurosystem due to the enormous amounts of the country’s outstanding debt currently held on the asset side of bank balance sheets all over Europe. Won’t happen.

        And – even in the Greek case – the Bank of Greece would always have the option of extending ELA which is not subject to ECB collateral rules.

        So, yes, this CAN work. Indeed, it’s guaranteed to work under Target 2.

        It’s only that no government has dared to try it (perhaps out of ignorance or for fear of causing the wrath of the EU authorities) – yet.

    1. @sdvan,

      Yes, Sdvan, from the point of view of society, it’s a waste of time and resources to squeeze out the last bit of latency for doing electronic trades. But aside from the waste of resources (which is very small on the grand scale of things), that little arms race isn’t hurting anyone.

      Ironically, there are many people on this blog who argue that funding basic research (like building a 20TeV supercollider to find the Higgs Boson – something that was apparently done with a much smaller machine) is extremely important because of all of the potential spinoffs. But they never seem to give any consideration to the spinoffs that come from competition in the financial world.

      1. @ESM,

        “never seem to give any consideration to the spinoffs that come from competition in the financial world”

        So “competition in the financial world” is aka basic research? What spin-offs do you mean because I am struggling to find any *positive* ones.

      2. @Sergei,

        Well, I think the finance industry has been a big driver for the computer industry, and in particular the supercomputing industry. I remember people using Cray supercomputers in the early ’90s to run mortgage prepayment models, and most trading shops had multiple computers per employee long before the average worker even used a computer in the workplace. As Sdvan’s link hints at, financial companies have invested a lot in developing and improving electronic networks over the last two decades. Furthermore, financial data storage needs helped drive the disk storage industry before amateur digital photography and cheap DNA sequencing came along.

        I know there have been advances in the use of quasi-Monte Carlo methods in finance (e.g. low-discrepancy sequences). I’m sure there have been significant advances in statistical methods, as well as secure communications protocols.

        But most importantly any spinoffs the financial industry has produced are freebies. As a for-profit sector, they are funding themselves by providing services for monetary resources in voluntary exchanges. They are not surviving on grants from a government which procured resources from the people through coercion. Yes, I know, this is all theory. In practice, the financial industry sucks off the government teat, just like every other industry does. But I would argue that’s a completely separate issue. The financial industry would exist and be vibrant even without all of the government nonsense. It would just be about 1/3 the size.

      3. @Sergei,

        ESM, with exception of monte carlo everything you mentioned could be mentioned also with regards to the entertainment industry. StarTrek existed before banks realized they might have some interest rate risk and need to run prepayment models. And SGI was founded also before that in a clear response to real market demand.

        Networks? Interned was invented well before banks started using it. And internet became household only when it gained critical mass and financial sector has no merit in this.

        Data storage? I have serious doubts that financial sector 20-30 years had so huge data requirements as to drive the development of the single industry. At the very least financial sector was absolutely happy to tape storage given the frequency of access to the data. Its data requirements are mostly for backups and logs and not for data as such.

        Secure communication protocols? Not a big deal at all.

        What else? I do not know. I am not convinced by your arguments at all. In the pre-HFT era financial sector did not drive anything at all. Lots of big banks and generally big companies still use software developed in the 70-80ies and written in languages which noone knows today. I have a friend who knows one such programming language and that is a reason why he is employed by IBM. Because noone else does.

      4. @Sergei,

        “Lots of big banks and generally big companies still use software developed in the 70-80ies and written in languages which noone knows today.”

        Actually, this helps make my point. Financial companies made heavy use of computers and programmers long before virtually any other industry. I mean how many businesses hired programmers internally in the 1970s? Yes, it’s amusing that banks still rely on legacy programs written in dead languages. But they develop cutting edge software as well. It’s a weird mix.

      5. @Sergei,

        Nope, it does not help your argument at all. When I did my university I studied stuff called fortran. It was an extremely popular language. And it was a language developed with a clear purpose to solve math problems. Another common language used during those days was LISP. It was also developed for math problems. And so on. In those days banks did not solve any math problems. Their problems were accounting, payments, basic reporting and similar stuff. There were no banking languages and general purpose languages came later. So banks simply used what was available at the time and that was fortran, lisp and so on.

      6. @Sergei,

        You forgot COBOL, which was actually the primary language used in finance I believe, and perhaps was even primarily used in finance.

        Yes, I know LISP and Fortran very well, or at least I did. LISP of course ended up being used primarily for AI research.

      7. @Sergei,

        Remember, my argument is not that banks developed computers and computer programming themselves. It’s that banks, through their “useless and wasteful” competition with other banks, created demand for these products and services which had ancillary benefits for other areas of human endeavor.

        I am only using the same argument that others use for supporting funding for high energy physics research, or astrophysics, or sending rovers out to study the surface of Mars. Beneficial spinoffs do not only spring from government-funded basic research. They also come from economic activities that many people here consider to be wasteful.

      8. @Sergei,

        “It’s that banks, through their “useless and wasteful” competition with other banks, created demand for these products and services which had ancillary benefits for other areas of human endeavor.”

        Yes, and I say that it is a much more recent phenomenon that banks seriously drive consumption of IT services which might have positive spill-over effects into broader market. I gave arguments why I believe your examples of data, networks, processing power etc are not sufficient to argue your case of banks driving broad innovation. As for the recent phenomenon I do not see any positive spill-over effects due to enormous demands for IT services from banks. And I think HFT was mentioned as a good example of such demands where data, network, computing power and so on all come together. We all had it before.

        I personally use a 350 euro laptop, have 8mb internet connection and I do not need anything more that that. However my friend who works for local telecom says that the main bandwidth consumer is not banks/finance (and this telecom is the main provider of high quality service to all big businesses) but home entertainment, digital TV and 50 inch TV-sets which need blue-ray volumes of data. He says that average transfer volumes are about 50gb per day per connection. And we are primarily talking households here.

      9. @ESM,

        ESM, this world was feeling very comfortable with fixed rate 30y mortgage and similar product that even a grandma could understand. Many of those spin-offs are not understood even by those who spun them off. LTCM & Lehman to name just two of those.

      10. @Sergei,

        Plain vanilla, fixed payment (principal and interest) mortgages make no sense. Doesn’t it seem strange that somebody takes out a loan to buy a house when they are just starting out on their careers and ends up committing to make the same monthly payment in yr 1, when they have little equity and little income, as they do in year 29, when they have lots of equity and lots of income?

        The fancier hybrid ARMs, IOs, and option ARMs make much more sense. It’s just too bad that a number of factors came together in a perfect storm to give these alternative products a bad reputation.

      11. @Sergei,

        “The fancier hybrid ARMs, IOs, and option ARMs make much more sense”

        Here we completely dis-agree. Fancier – yes. Value-adding – no. Everything you mention is technically subject to consumer protection laws. Some countries do have such laws and they outline not only requirements for manuals of micro-wave ovens 🙂 but also requirements for financial products. It should be banks who manage interest rate and so on risks. A guy who is one year after the college has no clue and should not have any clue about any fancy stuff that banks can skillfully stuff him with.

      12. @ESM,

        And squeezing out every last bit of latency can be counterproductive.

        By the end of 2007, UNX was at the top of the list. The Plexus Group rankings of the leading trading firms hadn’t even mentioned UNX a year earlier. Now UNX was at the top, in nearly every relevant category…

        Harrison understood that geography was causing delay: even at the speed of light, it was taking UNX’s orders a relatively long time to move across the country.

        He studied UNX’s transaction speeds and noticed that it took about sixty-five milliseconds from when trades entered UNX’s computers until they were completed in New York. About half of that time was coast-to-coast travel. Closer meant faster. And faster meant better. So Harrison packed up UNX’s computers, shipped them to New York, and then turned them back on.

        This is where the story gets, as Harrison put it, weird. He explains: “When we got everything set up in New York, the trades were faster, just as we expected. We saved thirty-five milliseconds by moving everything east. All of that went exactly as we planned.”

        “But all of a sudden, our trading costs were higher. We were paying more to buy shares, and we were receiving less when we sold. The trading speeds were faster, but the execution was inferior. It was one of the strangest things I’d ever seen. We spent a huge amount of time confirming the results, testing and testing, but they held across the board. No matter what we tried, faster was worse.”

        “Finally, we gave up and decided to slow down our computers a little bit, just to see what would happen. We delayed their operation. And when we went back up to sixty-five milliseconds of trade time, we went back to the top of the charts. It was really bizarre.”

      13. @MamMoTh,

        Interesting article. Don’t really know what the issue was, except that shipping computers to NY was perhaps not enough to be competitive. My old firm at the same time was paying to have their computers co-located at the stock exchanges themselves.

        Flash crashes don’t bother me. I never ever submit a market order to buy or sell a stock. I simply put in a limit order two or three bid/ask spreads in the money, and if the market moves so I don’t get executed, I just do it again using the new market prices (after checking to make sure nothing crazy has happened).

  15. Warren. Yes it has been 20 years and you have already had major bypass of your heart. Let’s talk succession plan. Who are the next 5 mmters we should follow and support after your passing to keep the dream alive?

      1. @Paolo Barnard, Paolo this is the new dynamic internet age. Warren or any of us could die anytime. Before that happens what is wrong with asking him who would be the other people or organizations we should support? Poland had a lot of people die in a plane crash. Bad planning. Many people come to this blog. If waren falls off his boat tomorrow I would like his input for where we should go to continue the cause.

      2. @sdvan,

        As your rightly stated we live in the internet age, that means we the crowd will need to organise ourselves irrespective of if there exists a succession plan. We don’t need to ask Warren for a suggestion of who we should follow if he should die….. Use your brain! MMT is bigger than just one person. If any of the founding MMTers happens to unfortunately pass away then others will naturally fill the void. If any of the founding MMTers happens to pass they should sleep peacefully knowing that what they have created will be carried forth by those who wish to uphold the truth. MMT is the truth wrt to the modern financial system, and this fact ensures that MMT legacy will never be forgotten. Eventually one way or another the truth will prevail.

      3. @Paolo Barnard,

        You care about privacy but then you ask if Sdvan is insane? On a public board no less? Pretty ironic. :^)

        For the record, Warren has mentioned his operation on this board before. IIRC, it was a mitral valve repair and not a major heart bypass.

      4. @ESM, Rarely did I read a more pointless insensitive provocation. No need to comment further. Have a nice day. PB

  16. @Jose Guilherme August 7th, 2012 at 8:22 am (sorry, reply button is gone)

    ECB doesn’t have to take all Italian bonds off the list, just the new issues that were stuffed down the throat of this special purpose government bank for an unrealistic price.

    ELAs for Greek/Italian/Irish central banks based on buildings and other non marketable assets are given out by constrained member central banks. Their expense, their risk and no, they can’t just draw from a TARGET2 account for this.

    @WARREN MOSLER August 7th, 2012 at 6:10 am
    Frankly the idea of giving back unlimited deficit spending power to our elected politicians scares me. I can find many that’ll be able to spend us out of any crisis and finding popular support for it is relatively easy. They are not even doing that bad currently, it is not like Europe has been austerified into double digit economical shrinkage. The real problem with finding mmt support starts when it is time to do the reverse.

    1. @Jacob Goense,

      Net financial outflows from any eurozone member state cause a rise in said country’s national central bank (NCB) debt to the eurosystem. And financial outflows include the interest and principal payments on the foreign debt of every country.

      When a government repays a bond held abroad this will merely shift the “debt” from the foreign bondholder to the eurosystem.

      As simple as that. But with two great advantages:

      a) the debts will simply buid up – indefinitely – as credit balances on the eurosystem’s books.

      b) the interest rate on that debt will be much lower than the repaid bond’s coupon, close to only 1%.

      BTW – I’m not making this up. It comes from my reading of four relatively recent papers on Target 2 by Peter Garber, John Whittaker (2) and Marc Lavoie.

      See, for instance, this quote from Garber: “There is no limit to the extent of…liabilities…that a NCB can incur; and these liabilities can be carried indefinitely as there is no time prescribed for sttlement of balances”.

  17. Paolo. U should read this whole interview. U are finished game over dude.

    A snippet, suggesting once again that “It’s the derivatives, stupid!”

    Prof. Hudson: I want to comment on your earlier point. It is true that the parasitic financial dynamic stems from America. But that is official policy; it is not a secret. It is not a conspiracy, it is very open. I am told that when Mr. Geithner came here to meet with the German bankers about the Greek debt, the Germans and Mrs. Merkel were in favor of a default, saying: Look, they can’t pay. But Mr. Geithner said that the German and the French banks and other banks have taken out credit default insurance with the American banks. These American banks would go under if Greece defaulted. Mrs. Merkel agreed to sacrifice the German banks and to impose losses on the German banks in order to help America. She seems to have put American interests before her own national interest, and cost the German people hundreds of billions of dollars by doing this. It is as if the leaders of Europe are hypnotized by a kind of Dr. Caligari who ends up to be running the asylum.

    1. @sdvan,

      Not sure what he’s talking about. Greek did default, credit default swaps were triggered and paid off, and the effect on the market and on US banks was imperceptible.

      1. @ESM, from the interview I like how he is saying the issues with other countries was balance of trade and external payments. Not domestic debt. He almost seems in paradigm. It sounds like to me he wants to nationalize all the banks. Wipe out the shareholders and bondholders and take taxes off labor and put it on the rentiers. Thank you for your comments esm. Much appreciated

  18. @walter: “I think it is hard to maintain that the whole globe is full of intentionally set up slavery models”

    Ever opened a history book? I you happen to do so, search for, among many examples, Nazism, or Plan Condor, or Tibet, or IMF and Africa or… or… or…

    Never said that if one rejects MMT will be guilty of crimes against humanity. Nice talking to everyone, see you at the next discussion. PB

    1. @Paolo Barnard, Paolo I am worried about your soul. U seem very stressed and unhappy. If u let this world make u angry and emotional all the time u have lost. Do like Jesus and get u an escort ( u did say, 10% of students need to escort yes?). Help them get tuition paid and help yourself relax the way a Mary Magdalene can help. Respectfully and truly deeply concerned.

  19. Paolo,

    1. Above , sub 3, you claim that the worst corruption subtracted less than 1% from Italy’s GDP, but the GFC more than 20% (over 400bn eur).
    Eurostat data however show the following for Italy’s GDP mp (*€Mio):
    2007: 1,554,199
    2008: 1,575,144
    2009: 1,519,695
    2010: 1,553,166
    2011: 1,580,220
    You can find these data under these links:

    Could you please explain on what your claim is based?

    2. With regards to your question to Warren in Venice “Mr Mosler, are you a speculator?”:
    a) Why you asked that question? (What was the purpose?)
    b) What do you mean by ‘speculator’?

    1. @walter, 1) Data is 457 billions of real economy loss due to GFC from 2007 to 2011, source Bank of Italy, statistical bullettin november 2011. Also: tax evasion in sovereign currency State is nothing but an informal way to increase fiscal transfers to non-govt. Not a crime per se. Not anything that can jeopardize public servicies.

      2) I had invited Warren to address a highly progressive audience in Venice. He had a reputation over here as a sports car billionaire, hedge fund manager that made billions betting all over the place, owner of a French castle that he had had dismembered and shipped over to Florida, and a tax avoidance guy who was living in this tax heaven off the coast of Florida (actually this was form the Post). As you know, this gossip was rampant on the web. So when I announced that Mosler was appearing at an event of mine to speak about MMT and social issues, I was swamped with accusations of having sold out to this kind of speculator. I honestly didn’t know the degree of truth or lies in that reputation, but I valued Warren for his great MMT mind. So first thing I did when he was here was to ask him “are you really this nasty piece of work?” So he could defend himself. He answered, and the rest went fine. People here loved him.

      I had to fight a similar battle for Randy Wray, because of his association to the Levy, where, as you know, Morgan Stanley is on the board of govs. Again, folks here telling me “this MMT is a fraud, they’re up to their neck with the Big Banks” and so on. Not easy. PB

      1. @Paolo Barnard, I didn’t know about the french castle but warren does get 3% tax rates under a special usvi economic program. You can look up warren on the corporation wiki site and see his soap company and plane company and others. Hard to trust 1 source when it comes to bank of Italy numbers but this all academic. U come across as very snarky and angry, can’t make converts out of sinners if u tell them to get lost. Your strategy is doomed to failure. Perhaps if you lighten up like warren more people will be receptive to u. Even if u have a good message but filled w hate and rage. They turn away. Paolo I hope you find peace, beware that you do not become the monsters u fight. Filled with rage and unhappiness as you Starr into the abyss

      2. fyi

        the soap company was a favor to a friend who never made anything of it and no soap has been produced for maybe 10 years or more.
        I don’t have a plane business and never did.
        The car company is down to two employees and actively offered for sale.
        The USVI is a US territory and the EDC program you attempted to describe is promoted by the US Department of the Interior to foster development and open to all to explore.

        And in general I delete cheap shots.

      3. an llc that owned some planes for me that never became any kind of business and the planes have now been sold to partially cover legal costs for the totally unrelated crash in question.

      4. @sdvan, just read the latest ramo court stuff. I hate lawyers with a passion. The tricks they have pulled on u warren to get money out of u. It makes me sick and I feel your pain. No worries. Even if some crooked judge and lawyer steal all your money. They can’t steal the treasures u have built in heaven. Its not fair Ohio judges can trump your judges. Probably paid off corrupt cronies.

      5. then you know it wan’t an operating plane company. just an LLC that owned some planes unrelated to the crash in question, which have since been sold to cover court costs.

        their claims are entirely frivolous as you note, but none the less costly to defend against.

      6. @Paolo Barnard,

        Sadly, most people of left-wing persuasion in Europe are well-meaning but completely clueless on the nature and workings of the European monetary system.

        They are thus unable to mount an effective opposition to the massive propaganda campaigns sponsored by the pro-EMU elites promoting the notion of austerity as a cure for the real or imaginary economic woes afflicting Europe.

        Who cares if Warren Mosler is rich or poor? The only relevant matter should be: are his theories correct? Can they help us out in finding a solution to the horrible mess that Europe finds herself in?

        If the European left is still in the primitive stage of worrying about people’s wealth before rationally considering their ideas and proposals, then I’m afraid we have to be pessimistic on the probability of the continent finding a rapid solution to its self-made crisis.

      7. @Jose Guilherme,

        I think that’s to do with a lot of left leaning types hating the idea that somebody can be successful, earn more than they do and have access to more resources because of that.

        I listen to Warren *because* he’s made a few bob. That suggests that his theories hold in the real world.

        I never take FX tips from anybody who hasn’t already retired to somewhere nice. 🙂

        One of the characteristics of MMT is that it irritates right and left wing in equal measure. That suggests to me that it’s somewhere near correct.

      8. @Jose Guilherme, Jose warren is a spiritual leader for me. In a country that had the new deal and we have since went in reverse. Many souls will be tested. To lose our patience, understanding or love for each other then nothing else matters and darkness wins. Too many lose patience and understanding trying to do the right thing. Paolo can be a good force. But not if he is so easily riled. He needs to turn the modern day finance nazis into friends and supporters not alienate them.

      9. @Jose Guilherme, Problem here is very complex. First and foremost, all opponents of MMT, and also many MMTers themselves, fail to understand that according to MMT govt money is not wealth per se. Govt money is a means, a code, a keystroke with no intrinsic value that could allow society to create goods and services at full employment, which are the real wealth . So lots of critics will say, at least here, that MMT is the umpteenth theory of monetary capitalism. The left will say that we never address class warfare. They just don’t understand modern money.

        You Americans must also face up the the fact that because of the history of US imperialism of the past 100 years at least, and now beacuse of the tragic legacy of the US triggered GFC, anything that smaks of US+Big Money+Big Banks is instinctive anathema for the Left. So imagine Warren: an American, said to be rich, big banks experience and he’s MMT’s chief man. It was hard for me here, but eventually we succeeded.

        However there is a moral point here that is paramount, and it’s what I call the Soros dilemma: can anyone serve two masters? (it’s in the Gospels) Can you do any good to society if on the one hand you do progressive deeds but on the other you’re active in the speculative world? My answer is a resolute NO. Fortunately Warren’s now abandoned that world, and he’s made that clear back in Venice. So now Warren’s value for any progressive cause is twofold: MMT’s chief brain but also one who truly knows how the financial world can screw us up, and so he’s best placed to help us defend ourselves effectively.

        I want to make it clear to all: I’m not a fan of Warren’s, I scrutinize him like I do with everyone elese. So fa I saw honesty and a good dose of humbleness in him. Good enough for me.

      10. @Jose Guilherme, us caused gfc? I recall pension funds in Norway looking for products and securitizedproducts met their demand. Perhaps foreign demand canbe blamed as much as domestic supply? We have Obama and he said u didn’t build that! Best president in a long time and this worlds best hope to retard the profit nazis. U better pray in Europe Obama wins. If Romney wins u and the rest of us will lose 100 years of civilized growth.

      11. @Paolo Barnard, Paolo,
        Could you please be so helpful to provide us the link (and page nr) to your source.
        All statistical bulletins of BoI I see are quarterly and around 160 pages. None of them published in Nov 2011. Thanks in advance.

      12. @walter, Sorry my error. It’s Bollettino statistico BoI 16 december 2009 final estimate includes Decreto Salva Banche of Tremonti and Draghis bail out funds to banks. Total 457 bills euros lost to real economy.

  20. Paolo,
    Regarding your ‘Soros dilemma’. To your opinion, speculators who do progressive deeds do not pass the test. They cannot do any good to society.
    But what do you mean by ‘speculator’ (or ‘being active in the speculative world’ as you call it)?

    1. @walter, Walter, the BoI thing I didn’t make it up, if this is what you suspect. A simple google search would have given it to you ages ago, here…1593.1593.0.3080.…0.0…1c.TlCsP__oFNA&pbx=1&bav=on.2,or.r_gc.r_pw.r_qf.&fp=928f94fe27fe4230&biw=878&bih=479

      A speculator:someone that plays with the markets for own shot term gains regadless of what his deeds may do to entire societies. You really so naive? Or you provoking me?

      1. @Paolo Barnard,Paolo,

        Looks to me the link to the Supplement of 16.12.2009 does not support your claim of “457 billions of real economy loss due to GFC from 2007 to 2011”.
        It basically shows a drop in the financial markets in 2008, not a destruction of real wealth in 2008.
        As far as I see it shows in Table 1A that the wealth of Italian families, as measured by real assets plus financial assets minus financial liabilities, decreased in 2008 by 161 bn eur (=8444.6 – 8283.6; current prices; I assume Dec 2009) or 433.4bn eur (=8717.0-8283.6; 2008 prices).
        In Table 3A (current prices) it shows that the main decrease is in the financial assets, particularly stocks (Azioni etc).

        My goal is not to go into academic number crunching, but you need to be careful with throwing out these claims. Your opponents will just use it against you.
        As indicated before I agree that too low deficits can be more harmful than corruption and tax evasion, but a comparison is not so simple.
        Be also aware of the following:
        MMT’s call to increase deficits till we reach full employment is all the time rejected by mainstream claiming that (hyper) inflation will occur.
        When we ask them to show on what their claim is based so we can have a look at such forecasts then they are never at home.
        Let’s not make the same mistake.

        Thanks for your clarification of your definition of ‘speculator’. It is quite different than many other definitions that I encounter such as under these links.

      2. @walter, The relevant data is constant prices, over 400 bills euros + bail out + Tremonti decree = 457. I fully consider loss of financial assets as real economy loss. I know that technically speaking ‘real’ is not financial, but again I don’t accept the distinction nowadays any longer. My claim is therefore correct. You seem to be very unsettled by tax evasion and corruption. Again: petty stuff compared with the current financial coup d’etat in the EU. Taxes, in Liras, used to destroy keystrokes, tax evasion was informal fiscal expansion, not a crime. Again: the worst corruption we ever had stole a 1% of GDP in 10 years. The current financial coup d’etat is knocking out our GDP at such a speed that I dearly wish we were back to the good old days of Tangentopoli. PB

      3. @Paolo Barnard,

        the worst corruption we ever had stole a 1% of GDP in 10 years.

        you must be joking.

        tax evasion was informal fiscal expansion, not a crime.

        expansion of the balance sheet of the evaders, at the expense of those who complied, and a crime everywhere but in Italy. no wonder you are really deep in it.

        Don’t forget the 20% loss of GDP if Italy goes back to the lira, or even 50% for the South if the North stays in the Euro and leaves the South bartering tomatoes in the sunshine.

      4. @walter,

        Un says US must stop corn ethanol subs to save starving masses (and warren has said the same), but Africa is dying from obesity, maybe you are right mammoth, south italian tomato guys are finished, can’t compete with cargill and monsanto and have no more use to this planet, time to put them out to pasture.

        Bernie Sanders is coming after the tax evaders/lobbyists, warrens pirate days in the carribbean are numbered. You know I realize sanders is out of paradigm when he says all he can buy is made in china stuff, but he is such a powerful and authorative speaker, he nails the decimation of our social and welfare programs though. He is the best entertainment we have on Cspan!

      5. @walter,Paolo,
        It seems you also have a definition of GDP that is different from the rest of the world. That does not make discussions easier.
        With regards to the Italian families maybe to have a look at a similar, more recent report (per end 2010, dated 14.12.2011). Things look then already ‘less bad’. Swings in stock markets??
        Also, it does not hold that we should say thank you to ourselves when stocks go up and to blame others (the system, speculators, gfc etc) when they go down.
        I doubt whether the rest of Italy shares your wished return to Tangentopoli.

        But, yes, I agree, still lots of hurdles ahead for a better Europe.
        Looks like Jens Weidmann (Buba) does have some explaining to do. See this link:
        And some counter’s-bundesbank-a-bond-buying-hypocrite/
        But let’s keep that discussion for another time. This post on this blog starts to run over and we start to repeat ourselves.

  21. Mammoth, again I will ask you why are you so negative on southern italy, farmers, agriculture, tomatoes and food? You seem to think the farmers need the north, when in fact soon it may be the NORTH begging for some tomatoes. From what it seems of the optimal currency area paper in the USA for breaking up the US dollar, the lines divide across industrial versus agricultural states, they need different counter-cyclical cycles and monetary policy to be most effective. Currently in the currency area we have, the agricultural states suffer and would be better served with thier own currency area.

    In a world where the UN just released a report that a global food crisis is on the horizon and maybe a billion people will starve to death, in a world where even Paolo himself says it is a crying shame 40 million people in the USA must be on food stamps just to survive, why do u “ridicule” the farmer who makes tomato3s? In a world where even our esteemed HOST mosler says the financial system is structured in a way where fuel for machines is more important (right now) than food for people and with ethanol policies and other misallocated policies will cause hundreds of millions to starve to death.

    Right now the lowly tomato farmer may be stomped under your boot and spit on, but soon you may be begging for his mercy as you starve. You will cry out, I am mammoth, PHD extrodinaire Ivy league school monetary engineer, give me food you vermin! And the lowly tomato farmer will say FU, we got too many PHD monetary engineers, die!

    I remember reading in the bolshevik revolution, the people in the city starved to death while the farmers had food. I don’t agree with anything you say that southern italy NEEDS northern italy, in fact I am thinking it would be a more efficient currency area better able to enact counter-cyclical monetary policy *that helps real human beings) if southern italy had thier own currency.

    I will leave you with this thought Mammoth, 10,000 PHD’s may be very smart, it may have taken them 20 years to get all that knowledge in thier brain, they may all think they are irreplaceable and more important than the lowly tomato farmer and more valuable to society, but other people besides me are beginning to question wether they should eat or just let them die and starve because they are really WORTHLESS in the big scheme of things (where food and food producers will trump all in a possible future and northern italy will be on thier knees BEGGING for southern italy to not let them starve to death and die):

    I am sickened by the vast sums I see households squandering on hopelessly marginal “investments” in expensive higher education, healthcare and housing. I too am caught in the crony-capitalist/State cartel web of waste, skimming and fraud: we have paid tens of thousands of dollars on no-frills healthcare insurance (no eyewear, no dental, no meds, $50 co-pay) in the past decade, and received perhaps 3% of this sum in care.

    But to not have health insurance in America is to invite financial ruin should we suffer some serious illness. The same “must-have” argument supports the conventional wisdom about education: a young person “must have” a college degree if they hope to escape a lifetime of poverty. The issue isn’t education per se, it’s the ever-rising cost of an education that has arguably lost value in a global job market that faces a vast surplus of educated workers and a scarcity of secure, high-paying jobs.

    Simply put, minting 10,000 PhD chemists (for example) does not magically create 10,000 jobs for PhD chemists.

    I see family after family making enormous sacrifices to send their children to costly colleges or make bloated mortgage payments with little hope of positive return; I see families who did not have health insurance struggling to pay off crushing bills for hospital care. I personally know people with science PhDs and post-doctoral experience at top universities competing for scarce academic/research jobs against fields of 60 or more other qualified candidates.

    Yes, education and healthcare are necessary, but cartels have leveraged this necessity into vast skimming operations that yield marginal returns even as their costs balloon without limit.

    Housing is also a necessity, but it does not follow that it is a high-yield investment. Rather, it has become a sinkhole for hard-earned, scarce cash.

    Ratholes are not investments, regardless of what the cartels profiting from the Status Quo claim.

    1. @Save America,

      I have nothing against farmers in Southern Italy. It’s just the idea that going back to the lira will somehow increase the productivity of those producers of tomatoes is utterly ridiculous. And yes, food prices can keep increasing to the point industrial countries will become poorer in real terms or face starvation, but that’s a long way down the road. (Not to mention that the lucrative production of tomatoe pulp in in the hands of the Mafia using romanian slaves who sometimes disappear if they happen to complain.)

  22. PS, my Bible says it is the meek lowly tomato farmer that is going to get the earth!! But I can’t wait for you mammoth to pound on me why my thinking is wrong and italy must remain as one nation, under god, indivisible, with liberty and justice for all 😉 lol!

    Paolo, did you say warren was helping you in any monetary way? funding you or students that help you or such? I think a big macro trend you need to worry about Paolo is warren may be flat broke in the very near future, the world is coming after him and his peer group, they are going to remove tax strategies relating to assets, trading, capital hoarding that warrens group has so far enjoyed, what is left the state will dismantle from his business enterprises (warren admits he aint making money off soap, planes, cars, or anything really), Obama will tell him he didn’t build anything and the 8 billion starving masses of the world will take everything productive he has left, and in a world where neutrinos are beamed through the earth and only MIT AI supercomputers can trade and make money on nanosecond market inefficiencies, warren just cant compete anymore as a trader, and even if he could, the state will enact policies to make sure they get any excess he is able to produce. I read where warren has 400 acres that the government wants to take and make into a national park (his neighbors are ready to donate 1600 acres – they know its pointless to fight “the state”, so eminent domain laws will take more of his capital and assets, and what is left of his puny material wealth will be sucked up by greedy corrupt judges and lawyers using every corrup crony trick in the universe to get his last dollar out of him (as warren admitted, he has lawsuits that are draining him dry), so he wont be able to fund you much longer, but his treasures in heaven are unTOUCHable!

    Paolo, don’t worry though, about warren, this has all happened before, I remember reading some papers from the cato institute about warren mosler who lived back in roman days, they fled the roman empire because everything they had was taken to feed the growing empire, moslers willingly through themselves into slavery under other moslers to escape tax burdens, back then moslers moved far away into places like germany so that the roman state couldn’t tax them and take thier excess productivity and crush them into poverty. Maybe doable back then, but today, where the drones and satellites and AI computers know what you are going to do before you yourself know what you are going to do, not possible.

    1. @Save America, Warren I watched this movie with tom cruise called far and away, it had a beautiful song from enya I think. The rich warren mosler land owner in that movie starved just as quickly as the poor lowly serf, but they all went to america and survived. If just in time inventory chains and peak oil and all these other things start breaking down, are you warren mosler going to stay int he USVI and starve with the locals or pack up and move? Will a tomato be important to you if you haven’t eaten in a few days, do you grow your own tomatoes warren. FOr that matter, can the agricultural output of the island you live on sustain the current population? Can a whole island of people who formerly worked at the USVI refinery plant really live on rum alone?? 😉 LOL!

      What a sad comment for a beautiful song:

      may God knows how i suffer when i r emember that i married my treasure love and get 15 years married but now seperated just bcs money , stab me every time i hear this song , beautiful but killing me softly ….

      kolhgb 2 months ago

    2. @Save America,

      I don’t care if Italy should remain as one nation or not.

      It’s not much of a real nation anyway. The only think people have in common is their love for the football (soccer) team and Ferrari. They didn’t even have a common language until after WWII, when television became widespread.

      But who do you think wants to break apart from whom, the North from the South or the South from the North?

      1. @MamMoTh, Yes, no common language, and that was due to poor communication in our caves. But since last thursday we now have the wheel! So some hope is there.

  23. @walter: Yes and no. GDP has a very established meaning, we all know, but I happen to disagree not seldom. Say: bad road maintenance, lots of potholes, GDP goes up for all the tyres people will have to change. Is that good? Yes and no. I covered Africa for many years. You read IMF reports, fantastic data, you get out of your Lusaka hotel and see for yourself. Come to Italy, come with me to see some Bosnia looking landscape where previously we had some of the most successful chem or steel plants in the world, now masses of unemployed work flex for 700 euros a month. You see, I learned REAL economics in the Rust Belt over there in the US when the dot com was hysterical in LA or NY. I hope you now understand me. Bye for now. PB

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