Politically correct bigots.

Did you know there has been five days of riots in the immigrant areas of Stockholm? I don’t blame you if you don’t know because the British elite has kept very quiet about it. Those riots don’t, of course, suit the pro multi culti agenda of the British elite.

I listen to a good half hour of BBC output on the radio and TV per day, and far as I know they didn’t report on the riots till after there had been five days (or nights) of riots. I discovered about the riots much earlier from other sources: the Wall Street Journal and the Russian TV channel “Russia Today”.

I never thought the day would come when I’d start to consider a Russian news service more informative and reliable than the BBC.

In contrast, British news organisations HAVE REPORTED the hacking to death and beheading of a British soldier in London by two Muslims in graphic detail as from the moment the atrocity occurred. Indeed, they reported that story in such length and detail that I got seriously bored with it: I wanted to be told what was going on in the rest of the world  - and not just in Stockholm. But the lunatic behaviour of two Muslims in London doesn’t seriously call into question the alleged wonders of multiculturalism or Islam because one cannot make generalisations about a religion just from the behaviour of two people. So our British PC news outlets are happy enough to report THAT STORY.

Stockholm is different: hundreds of immigrants / Muslims were involved, so there one CAN MAKE generalisations. So you can see why the politically correct want to keep quite about that, can’t you?

Another left of centre and pro Muslim news outlet is the Guardian newspaper, which after a few days of riots DID REPORT the story (in a short article at the bottom of an inside page: “Fourth day of riots in Stockholm”). But – and you’ll be amazed to hear this – there was no mention of immigrants. According to The Guardian, those responsible were “youths”. Swedish youths? Danish youths? Norwegian youths? Youths from Lapland?

Well you don’t even need to be told the answer to that, do you?

Incidentally, if you think the word "bigot" in the above title is a bit strong, my reason for using the word is that it is normal practice by the politically correct to describe anyone who disagrees with them as a bigot (or racist, or xenophobe, etc). So if the politically correct want strong language, I'm up for that, though I'd prefer more moderate language.

More intellectual dishonesty from Kenneth Rogoff.

Rogoff always likes to portray himself as an impartial academic. The truth, as is obvious to anyone with more than three brain cells, is that he is into propaganda big time.

His latest piece of propaganda is an article entitled “Europe’s lost Keynsians”.  And the thrust of the article is that there are loads of Keynsians (his favourite bête noir) advocating an end to austerity in the Eurozone. He then goes on to explain that simple Keynsian type stimulus won’t cure the Eurozone’s problems.

Well anyone with a modest grasp of economics worked that out long ago!

Rogoff is of course quite right to point to the numerous and vociferous calls for an end to austerity in the Eurozone. But these calls ARE NOT COMEING FROM THOSE WITH A GRASP OF ECONOMICS.

They are coming from ordinary people, trade unions and others with a relatively poor grasp of the subject. And no one can blame them: unemployment is clearly a serious problem in the EZ.

So why is Rogoff trying to blame “Keynsians” for a mistake made by people with little grasp of economics and who are quite clearly not sophisticated Keynsians? Well it’s because Rogoff opposes Keynsian policies in countries which are not “Eurozone type" countries: that’s countries which issue their own currencies, like the US, Japan, UK etc.

So . . . pull the other one, Rogoff.

Or, to do Rogoff justice, perhaps he is stupid rather than dishonest. Perhaps he really thinks his point about simple Keynsian stimulus not being a cure for EZ problems is original.

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P.S. 25th May, 2013.  Looks like Paul Krugman takes as jaundiced a view of Rogoff's article as I do.

IMF: piss off out of the UK - your advice is not needed.

Front page headline in the Financial Times this morning is that the IMF is advising the UK to spend more in infrastructure so as to help escape the recession. 

Well – doh – infrastructure spending is about the daftest way there is to deal with a recession and for the blindingly obvious reason that it often takes years to get infrastructure projects going – never mine the number of years it takes to complete them. And by that time the recession may be over.
 

Of course the amount to spend on infrastructure should be under constant review, and (statement of the obvious) the objective should always be to spend whatever the optimum amount is. But that’s all LONG TERM stuff.

Sudden increases in infrastructure spending is not a clever way to try to escape a recession. Apart from anything else, attempts at sudden increases in spending on ANY AREA is likely to run into skilled labour shortages, even in a recession.

International Monetary Fund.  Vacancy. A vacancy has arisen at the IMF for an economist. Pay and perks are generous, and the successful candidate will enjoy early retirement, all gratis the World's long suffering taxpayers. The successful candidate should be able to demonstrate a complete ignorance of economics and be devoid of common sense. Apply in person to Christine Lagarde who is currently appearing in court in Paris in connection with alleged embezzlement of public funds while she served under Francois Mitterand (probably in more than one sense of the phrase).

 

IMF continues to hyperventilate about sovereign debt.

This voluminous paper by the IMF is a waste of ink and paper. It’s entitled “Fiscal Adjustment in an Uncertain World”, and was published in April 2013.

Basically it argues that deficits and national debts are too high. But the paper itself says “in practice it is difficult to pinpoint what constitutes a prudent amount of public debt.” (p.vii).

Well forgive me stating the obvious, but if you don’t know what constitutes a “prudent” amount of debt, how do you know that any particular level of debt is too high or too low?

Anyway, their basic argument (surprise, surprise) is that too high a level of debt constrains economic growth. And with a view to bolstering the claim, they cite (you won’t believe this) Rogoff and Reinhart.

Now if the IMF had cited R&R before the recent uncovering of  flaws in R&R’s work, then OK. But this IMF work was published in April this year: that’s AFTER the flaws in R&R’s work was publicised. Taxpayers of the world are clearly getting brilliant value for money from the IMF, I don’t think.

Authors who back R & R.

Next, and with a view to bolstering their claim that excessive debt constrains growth they cite a number of other “authorities”. The first of these is another IMF paper.

The paper is “Fiscal Deficits, Public Debt, and Sovereign Bond Yields” by Messers Baldacci and Kumar. And basically all this paper shows is that there is a tendency for high debt to result in the relevant country having to pay a relatively high rate of interest on that debt.

Well of course!!!!  The average six year old has probably worked that out.

What both the above IMF papers completely miss is the following point, which has been fully grasped by most advocates of Modern Monetary Theory (MMT), and doubtless many others.

In a recession, governments need to run deficits and those deficits CAN ACCUMULATE as debt. Though as Keynes and Milton Friedman both pointed out, they can equally well accumulate as extra monetary base.

Now recessions are caused by a decline in private sector spending, i.e. by an increase in private sector saving. (That’s saving of money or something near money, like public debt, rather than saving in the form of accumulating physical assets, like houses.)

In short, recessions are caused by an increased desire for what MMTers tend to call “private sector net financial assets”. And if you have an “increased desire” for something, you aren’t going to demand a huge price holding an additional stock of that item, are you?

In other words, where a government runs up debt so as to deal with a recession, it won’t have to pay very much interest on that debt. Want some evidence for that? Well the “real” or “inflation adjusted” rate of interest on US, UK, German and Japanese debt has been around ZERO for the last few years!!!!!

Conclusion so far: in that a government runs up debt so as to deal with a recession, those increased rates of interest that the IMF worries about just won’t materialise.

But of course, governments don’t run up debts just to deal with recessions. Governments sometimes run up debts for unjustified reasons. A common reason is that voters tend to blame tax increases on politicians more than they blame politicians for the increased interest rates that result from irresponsible government borrowing. So politicians are always tempted to pay for government spending by borrowing rather than by raising taxes.

Thus the “discovery” by Baldacci and Kumar that there is a tendency for high debt to result in high interest rates is no discovery at all. It simply reflects the fact that governments are less than 100% responsible when it comes to running up debt.

The IMF paper does quote so called “authorities” other than R&R and Baldacci and Kumar. But the latter two pairs of authors are such a joke that I just cannot be bothered looking at the other so called authorities.

Conclusion.

What the IMF SHOULD BE SAYING is something along the lines of: “present debt levels are perfectly OK because that debt is being used to counter the recession, but governments need to be prepared to raise taxes and/or cut public spending when the recovery comes. And if a government FAILS TO raise taxes or cut public spending come the recovery, then interest rates will rise.”

Instead, what the IMF is saying is more along the lines: “high debts PER SE are undesirable, and ANY reduction in deficits and/or debts is to be welcomed.”

And a final bit of advice for the IMF in connection with what constitutes a "prudent" level of debt. Keynes answered that one long ago when he said "Look after unemployment and the budget looks after itself".  In other words, keep unemployment as low as is consistent with acceptable inflation. As to the debt, if the private sector hankers for a big stock of private sector net financial assets, then the debt will be relatively high. If not, it won't. And trying (a la IMF) to somehow FORCE a lower level on debt onto the private sector than the private sector wants will simply lead to excess unemployment. Thus any preconceived ideas as to how big the debt should be are pure nonsense.