Congratulations to Messers Mosler and Pilkington for at least trying to do something about Euro periphery austerity. (h/t to Naked Capitalism)
Don’t take my summary of their proposal as gospel. But their proposal, far as I can see, is that periphery governments issue bonds which can be used in payment of tax in relevant periphery countries. These bonds would only be used for payment of tax in the event of the country defaulting on its Euro denominated debt.
Warren Mosler is a successful bond trader, so I hesitate to question this scheme. But it strikes me that the austerity being imposed on the periphery is the EZ’s highly unsatisfactory method of dealing with lack of periphery competitiveness. If Mosler bonds have a stimulatory effect (i.e. bring less austerity) these bonds just undermine the above attempt to improve periphery competitiveness.
That in turn means that those holding Euro denominated periphery bonds will want even more interest.
Or perhaps I’ve missed something.