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A global economic debate plays out in Canada as our government goes from miser to spendthrift

Canada's Prime Minister Justin Trudeau and Finance Minister Bill Morneau are taking Canada into unknown waters, betting that spending will do what austerity has not.

Canada’s Prime Minister Justin Trudeau and Finance Minister Bill Morneau are taking Canada into unknown waters, betting that spending will do what austerity has not. (Reuters)

Canada has abruptly switched sides in one of the perennial political and economic battles over how to restart a sagging economy.

To put it in a way that would not please either side, it is the contest between the misers and the spendthrifts. After years of the penny-pinching approach, Canada has switched tack to become a big spender.

And despite some very strong feelings on either side, it is not absolutely clear which is the right path to prosperity. The world will be watching.

The clash over the best way to boost a moribund economy is by no means solely a Canadian argument. Nor is it just a modern debate.

Historical debate

Countries from China and Japan, to Greece and Ireland have taken different views on the subject.

Historically, the dispute has arisen repeatedly — notably during the Great Depression, when the first response of austerity was blamed for making the problem worse. But when governments then altered strategy, new spending failed to lead to a miracle recovery.

Despite monetary stimulus and negative interest rates, Japan’s economy has lapsed into deflation and economic stagnation. (Reuters)

There is plenty of evidence on both sides. As I noted back in 2010, Japan and Ireland backed opposing strategies. But the countries’ circumstances are so different it is hard to declare a definitive winner.

China and Greece switched sides. Greece was driven by the ballot box toward bigger spending, then restrained by their stern European central bankers. China faced alternating worries, first cutting back on fears of overheating and then suddenly spurring new spending on fears of falling growth.

…click on the above link to read the rest of the article…

How Iceland Escaped From The One Bank

January 6, 2016

How Iceland Escaped From The One Bank

What have the governments of the corrupt Western bloc spent most of their time doing since the Crash of ’08? We can answer this question in three parts:

1) Creating increasingly falsified “statistics” to fabricate the illusion that their economies were not on the verge of all-out economic collapse;

2) Hacking and slashing every social program in sight in order to generate the false savings known as Austerity; and

3) Creating new funny-money and taking on new debt at an exponentially increasing rate in order to delaycollapse, since all that Austerity accomplished was an acceleration of these death spirals.

Making these points apparent to newer readers will require additional elaboration. The starting point is the Crash of ’08 itself. What caused these nations to go from being merely heavily indebted to hopelessly insolvent overnight? That can be summed up in a single euphemism of fraud and crime: “too big to fail.”

At the end of 2008, the West’s puppet governments succumbed to History’s ultimate act of blackmail at the hands of History’s largest and most rapacious crime syndicate: the One Bank . “Give us all your money, or we’ll blow up your entire financial system.” That is the real meaning of “too big to fail”: institutionalized extortion, in perpetuity.

What was the real price tag for this massive extortion operation? Forget the phony numbers published by our corrupt governments and their mouthpieces in the corporate media. The total quantum for these extortion payments was in the tens of TRILLIONS . Obviously the Deadbeat Debtors of the West couldn’t raise more than a tiny fraction of that amount of blackmail money up front. Thus, most of this shakedown of (supposedly) sovereign governments came in the form of future tax breaks and “loss guarantees.”

…click on the above link to read the rest of the article…

Spain Says “No”

December 25, 2015

Spain Says “No”

podemos

For the third time in a year, the tight-fisted, austerity policies of the European Union (EU) took a beating, as Spanish voters crushed their rightwing government and overturned four decades of two-party reign. Following in the footsteps of Greek and Portuguese voters earlier this year, Spaniards soundly rejected the economic formula of the Troika—the European Central Bank, the European Commission and the International Monetary Fund—that has impoverished millions of people and driven the jobless rate to almost a quarter of the country.

Greece’s leftist prime minister, Alex Tsipras said “Austerity has been politically defeated in Spain,” and that the election was a sign “that Europe was changing.” Italy’s prime minister, Matteo Renzi said, “As already happened in Greece and Portugal, governments which apply rigid austerity measures…are destined to lose their majorities.”

The big loser in the Spanish elections was the rightwing Popular Party (PP) that lost 63 seats and its majority in the 350-member parliament. The PP won more votes than any other single party, but its support fell from 44 percent in the 2011 elections to 28.7 percent. While PP Prime Minister Mariano Rajoy ran on a platform that the Spanish economy had recovered from its disastrous plummet following the 2007-08 worldwide financial crisis, voters were not buying.

The economy is indeed growing—3.1 percent this year and projections for 2.7 percent in 2016—but after four years it has yet to reach pre-crisis levels. Unemployment has remained at 21 percent nationwide and more than double that figure among youth and in Spain’s battered south.

Besides delivering a decisive “no” to austerity, Spaniards also turned out the two-party system that has dominated Spain since the death of dictator Francisco Franco in 1975. For 40 years the PP and Socialists Workers Party (PSOE) have taken turns running the country, racking up a track record of corruption and malfeasance.

…click on the above link to read the rest of the article…

Europe – Here we GO Again

November 24, 2015

Europe – Here we GO Again

The European economic crisis just keeps getting worse. The European Commission is now planning to pool all money for bank bailouts among nations. That means the funds set aside in Germany to weather German bank failures can be used in France. Meanwhile, the EU is preparing for relaxing the stability policy (austerity) because of refugees and terror. This emergency position will allow countries to now increase their debt under the exception of “Acts of God”. This clause can be pretty much justify anything.

Furthermore, now tens of thousands of pensioners in Germany have to pay taxes on their pensions for the first time in 2016. Through a pension increase of 2.5%, this will result in a lower net take-home for the first time since this will exceed the basic allowance in the coming year. The Ministry of Finance expects characterized with 310 million euros in additional tax revenue.

New Socialist Government Keeps Portuguese People Under The Whip

November 13, 2015

New Socialist Government Keeps Portuguese People Under The Whip

Portuguese Revolution Falls Far Short

The austerity imposed on the Portuguese people by the One Percent has resulted in the election of a coalition government of socialists, communists, and a “left bloc.” In the 20th century, socialism and the fear of communism humanized Europe, but beginning with Margaret Thatcher the achievements of decades of social reforms have been rolled back throughout Europe as bought-and-paid for governments have given all preference to the One Percent. Public assets are being privatized, and social pensions and services are being reduced in order to make interest payments to private banks.

When the recent Portuguese vote gave a majority to the anti-austerity bloc, the right-wing Portuguese president, Anibal Cavaco Silva, a creature of Washington and the big banks, announced that the leftwing would not be permitted to form a government, just as the senior British general announced that a Labour Government formed by Jeremy Corbyn would not be permitted to form.

True to her word, Anibal reappointed the austerity prime minister, Passos Coelho. However, the unity of the socialists with the communists and the left bloc swept Coelho from office and the president had to recognize a new government.

The new government means that for the first in a long time there is a government in Portugual that possibly could represent the people rather than Washington and the One Percent. However, if the new government leaves the banks in charge and remains committed to the EU, the current president, previous prime minister, and previous finance minister, Maria Luis Albuquerque, will continue to work to overthrow the people’s will as occurred in Greece.

The new Portuguese government cannot escape austerity without nationalizing the banks and leaving the EU. The failure of the Greek government to bite the bullet resulted in the Greek government’s acceptance of the austerity that it was elected to oppose.

…click on the above link to read the rest of the article…

“Social Explosion” Begins In Greece As Massive Street Protests Bring Economy To A Fresh Halt

November 12, 2015

“Social Explosion” Begins In Greece As Massive Street Protests Bring Economy To A Fresh Halt

One thing that became abundantly clear after Alexis Tsipras sold out the Greek referendum “no” back in the summer after a weekend of “mental waterboarding” in Brussels was that the public’s perception of the once “revolutionary” leader would never be the same. And make no mistake, that’s exactly what Berlin, Brussels, and the IMF wanted.

By turning the screws on the Greek banking sector and bringing the country to the brink of ruin, the troika indicated its willingness to “punish” recalcitrant politicians who pursue anti-austerity policies. On the one hand, countries have an obligation to pay back what they owe, but on the other, the subversion of the democratic process by using the purse string to effect political change is a rather disconcerting phenomenon and we expect we’ll see it again with regard to the Socialists in Portugal.

After a month of infighting within Syriza Tsipras did manage to consolidate the party and win a snap election but he’s not the man he was – or at least not outwardly. He’s obligated to still to the draconian terms of the bailout and that means he is a shadow of his former self ideologically. As we’ve said before, that doesn’t bode well for societal stability.

On Thursday, we get the first shot across the social upheaval bow as the same voters who once came out in force to champion Tsipras and Syriza are staging massive protests and walkouts. Here’s Bloomberg:

As Greek workers took to the streets in protest on Thursday, Alexis Tsipras was for the first time on the other side of the divide.

…click on the above link to read the rest of the article…

Ex-World Bank chief economist exposes “failure” of austerity, deregulation

November 12, 2015

Ex-World Bank chief economist exposes “failure” of austerity, deregulation

Joseph Stiglitz, a senior OECD expert, slams OECD’s own policies to prevent global slowdown

In a little-known speech at the United Nations University, renowned Nobel Prize-winning economist Joseph Stiglitz criticised Western approaches to addressing the global economic crisis for being obsessed with market solutions that cannot work.

His remarks were made just two months before the Organisation for Economic Cooperation and Development (OECD) issued its latest forecast of a “deeply concerning” slowdown in global trade, which the group says has dropped perilously close to levels “associated with global recession.”

The OECD’s chief economist, Catherine Mann, said that: “Policy actions are already being implemented that will help to address the weak underlying trends.”

Professor Stiglitz of Columbia University, who chairs the High-Level Expert Group on the Measurement of Economic Performance and Social Progress (HLEG) at the OECD, contradicted this reassuring promise in his UN University address in September.

Describing standard neoclassical and behavioural models of economics as “wrong” on the basis of new advances in economic research, Stiglitz blamed ongoing economic stagnation on the so-called “Washington Consensus” — a set of neoliberal policies advocated most strongly by the US and Britain.

The Washington Consensus (WC) consists of a string of interlinked policies requiring reductions in public spending; rampant deregulation to reduce restrictions on banks, corporations and other financial actors; extensive privatisation of social and public services; and liberalisation based on reducing taxes, tariffs and non-tarrif barriers to trade.

All this is believed to drive growth and enhance the distribution of wealth.

In reality, as Stiglitz told an audience at the UN University’s World Institute for Development Economics Research, it has done the opposite.

Thirty years ago, he said, “the focus was on limiting the role of the government — getting it out of the way…

…click on the above link to read the rest of the article…

Is the Troika About to Lose Control of South-Western Europe?

November 12, 2015

Is the Troika About to Lose Control of South-Western Europe?

The Price of “Austerity”

Passos Coelho, who was until Tuesday Prime Minister of Portugal, knew “what to do.” After signing along the dotted line for a €78 billion bailout he embraced the Troika’s austerity agenda with abandon. Public spending was slashed, taxes were hiked, wages were cut, and a whole gamut of public assets and services were privatized.

As they say in Brussels these days, no pain, no gain. After four years of excruciating belt-tightening, Portugal was apparently back on the mend, despite its public debt almost doubling since 2008. Its economy had been through the grinder but it had come out the other end in much leaner shape. The public deficit had shrunk from 11% in 2011 to 3% today.

Unemployment had also fallen, and kept falling month after month, to the point where it was getting monotonous. Until two months ago, that is, when it shot back up over 14%. Then came the bomb shell: the country’s Ministry of Statistics announced in a rare moment of candor that unemployment, in an “extended sense,” was actually around 22%. As Deutsche Welle reports, the Portuguese government had been doctoring the figures to keep the European institutions (i.e. the Troika) happy:

European politicians prefer lower unemployment figures rather than higher ones, and as a consequence, there are now unemployment figures in “narrower” and “extended” senses. Mostly, the headline figures reported are the lower, “narrower” ones.

Flimsy Façade

In other words, in the real world Portugal has almost identical depression-era levels of unemployment as Spain. Its government is just more skilled at masking the grimness of its economic reality.

However, hiding a decidedly grim reality with a flimsy façade of doctored numbers may work on international investors and rating agencies – at least for a while – but it doesn’t work on those who have to live in that grim reality. And at election time that can be a serious setback.

When Coelho’s governing coalition received only 38% of the vote in last month’s elections, the game was as good as up, especially when it became clear that three parties on the left — the so-called “triple left” — had won an absolute majority and seemed willing to form a coalition.

Visualizing The Demise Of The Once Mighty Euro

October 16, 2015

Visualizing The Demise Of The Once Mighty Euro

The European Union has always been primarily a political project. The idea of the union was to take peoples that had long and complicated histories, and to place them in a situation where they must work together and shed their differences in order to achieve success.

From the political angle, it can be argued that this objective has been achieved. War and conflict within Western and Central Europe has mostly been stymied. Considering the continent’s lengthy history in these areas, this is great news.

However, it’s particularly the countries that adopted the euro as common currency that put themselves into a more precarious economic position. The problem is simple: countries maintain certain political and fiscal responsibilities, but do not control the fate of their common currency.

The result is that eurozone politicians have very different fiscal policies, but don’t have the flexibility of monetary policy to help accompany them. Some countries are trying to spend their way out of trouble, while others are maintaining strict austerity. Either way, the European Central Bank (ECB) controls the plight of the currency and can make unilateral decisions that have a big impact on every country. For example, in the beginning of June 2015, the ECB announced the minimum of a $1.14 trillion quantitative easing program that will add new currency units that together are larger than the economies of Ireland, Greece, Portugal, Finland, Luxembourg, and Slovenia combined.

There has been an array of other problems plaguing the eurozone as well. The most notable of these was that Greece was admitted into the monetary union in the first place after fudging numbers on the Greek economy. Even though Greece makes up about 2% of the overall eurozone, the country has been in constant trouble that has threatened to undermine the entire union. (For a primer on this, read The Origin of the Greek Crisis)

…click on the above link to read the rest of the article…

Austerity Good or Bad?

October 12, 2015

Austerity Good or Bad?

QUESTION: Martin,

The ‘Austerity’ argument seems a bit confusing.

Surely, “Austerity” means reducing the size of Government and is an understanding that we can’t keep funding zillions of civil/public servants and on the other is a reduction of the Social Security Bill – healthcare, social benefits, the cost of the un and underemployed etc – both of which seem to be excellent objectives unless you are in one of the groups affected. Isn’t it impossible to return to or have a vibrant economy unless and until these objectives are achieved?

ANSWER: The problem with austerity carried out in the fashion is they are turning off the spigot, which is ending Marxist/Socialism, but they are continuing to service the debt and to accomplish that they hunt the rich and raise taxes, then agree to exchange all info and in the process you cause capital to hoard and not invest. So you are not really ending socialism, you are moving more toward totalitarianism.

So we will get these riots for they are not just people who receive, these are the people who cannot find a job because nobody is creating them with deflation. We have to look at both sides and this is why our proposal is to eliminate taxation at the federal level to unwind this mess from both directions.

So there is more to this than just reducing social programs. Doing that raising taxes to still service debts you end you with taxation without representation for the current workforce must then pay for spending that they never received anything in return.

Austerity or Hyperinflation. Which is the Precursor to Revolution?

October 5, 2015

Austerity or Hyperinflation. Which is the Precursor to Revolution?

QUESTION: Mr, Armstrong;

I recently read an article claiming to be a case study that it was somehow the French hyperinflation that led to the revolution. It seems that as you say they are again mixing facts to support a rise in gold with hyperinflation. I am a collector of French monetary history and the paper money came after the revolution not before. Unquestionably, there was austerity prior to the revolution and that seems to be repeating in Europe once again. Would you care to comment on this issue for it seems they are distorting history once again to sell gold.

Your debut here in Paris was super. It has really made some impact starting a discussion.

ANSWER: Yes you are correct. The French hyperinflation came after the French Revolution for they defaulted on their national debts accumulated by the crown and then confiscated the property of the Catholic Church to try to back their post-revolutionary currency. The nation went into hyperinflation because the revolution defaulted on all prior debt and they were then hunting the rich, taking everything they had, and beheaded them. This was not an atmosphere that promotes CONFIDENCE.

These people try to claim the hyperinflation is caused by paper money rather than revolution which results in hunting the rich. The German hyperinflation was the same sequence. It was a communist revolution in 1918 which also defaulted on the national debt of the prior government. It is not the paper money, it is the default that distinguishes both hyperinflation events for CONFIDENCE simply collapses and the economy implodes. By attributing this to “fiat” paper they then assume that we must go into hyperinflation simply because we too have paper money. That is just an unsupported analysis which distorts the entire sequence of events. This analysis is highly dangerous and amounts to consumer fraud.

…click on the above link to read the rest of the article…

A Hapless Brazil Incurs Massive Losses On FX Swaps Amid Currency Carnage

October 2, 2015

A Hapless Brazil Incurs Massive Losses On FX Swaps Amid Currency Carnage

As we’ve documented extensively of late, a host of idiosyncratic political factors have served to exacerbate what was already a very, very bad situation for emerging markets.

This dynamic is most readily apparent in Brazil and Turkey, and although Ankara probably has a leg up in the race for “most at risk from domestic turmoil”, Brazil isn’t far behind as President Dilma Rousseff battles abysmal approval ratings and a recalcitrant Congress in an effort to shore up the country’s finances by convincing lawmakers to sign off on much needed austerity measures.

Meanwhile, a confluence of exogenous shocks that include slumping commodity prices, depressed Chinese demand, the PBoC yuan devaluation, and the threat of an imminent Fed hike have conspired with country-specific political turmoil to send the BRL plunging and that, in turn, has put Copom in what former Treasury secretary Carlos Kawall calls “crisis mode.”

Of course crises are often costly to combat, especially when you’re an emerging market in the current environment and when it comes to Brazil, the use of alternative measures (like effectively selling dollars in the futures market) to avoid FX reserve liquidation is now weighing heavily on the fiscal outlook. As Goldman noted earlier this week on the heels of the latest monthly budget data, “the overall fiscal deficit is tracking at a disquieting 9.2% of GDP, driven in part by the surging net interest bill, which was exacerbated by the large losses on the central bank stock of Dollar-swaps.” Here’s what Capital Economics had to say after an emergency swaps auction was called by Copom in a desperate attempt to shore up the BRL last week:

…click on the above link to read the rest of the article…

Peak Oil Ass-Backwards (part 3): Forget Austerity and Grexit – it’s Time for a Gretaway!

October 1, 2015

“Taaaaake myyyyyy moneeeeey! Pleeeeeease!”

So here we are on this precipice of sorts, staring upon the twilight of the industrial economy due to peaking energy supplies and thus peaking credit supplies (as explained in part 2 of this 3-part series).

Simply put, being on the peak oil plateau, and with fossil fuel supplies in general reaching their limits (and getting more expensive to extract), there’s going to increasingly be less and less of the stuff to go around. This means one of two things, the first being that what’s left gets spread around thinner and thinner between all the participants. However, since people of the West (and especially those in the richer parts) have become quite used to their energy-intensive lifestyles and seem to have zero intention of giving them up, this likely implies the implementation of the second approach: cut back on – if not cut off – the fuel supplies to people and nations on the lower rungs of industrial civilization. That way, as the fossil fuel pie continues to shrink, those on the higher rungs don’t have to reduce their share too drastically. In effect, this allows for those in the upper echelons of contemporary civilization to hold on to their Nyet-Flix feeds and iGizmos just a bit longer, until the triaging inevitably hits them as well and/or the bottom just completely falls out.

This triaging can be accomplished in more than one way, but for the time being two methods stand out as the most popular. The first is what we know as austerity – cuts are made upon people’s pensions, hours, welfare cheques, whatever, so that they have less credit (read: money) to buy and indulge in the spoils of industrialization. Unfortunately, living in this modern world of ours means that the basic necessities of life (such as food) also often fall under the umbrella of industrialization, so being triaged can entail much more than an inconvenient loss of iGizmos.

…click on the above link to read the rest of the article…

Whitewashing the IMF’s Destructive Role in Greece

August 31, 2015

Whitewashing the IMF’s Destructive Role in Greece

This autumn may see anti-austerity coalitions gain power in Portugal, Spain and Italy, while Marine le Pen’s National Front in France presses for outright withdrawal from the eurozone. These countries face a common problem: how to resist the economic devastation that the European Central Bank (ECB), European Council and IMF “troika” has inflicted on Greece and is now intending to do the same to southern Europe.

To resist the depression and debt deflation that the troika seeks to deepen, one needs to bear in mind the dynamics that make the IMF un-reformable. Its destructive role in Greece provides an object lesson for how southern Europe must shun its horde of ideologues, as Third World countries learned to avoid it by May 2013, the year that Turkey capped the world’s extrication from IMF “advice.” Already in 2008, Turkey’s prime minister Recep Tayyip Erdogan announced: “We cannot darken our future by bowing to the wishes of the IMF.”[1]Greek voters have now said the same thing.

To soften resistance to the IMF’s austerity demands, a public relations drive is being mounted to rehabilitate the myth that the Fund can act as an honest broker mediating between anti-labor finance ministers and the PIIGS – Portugal, Italy, Ireland, Greece and Spain. On Friday, August 28, three Reuters reporters published a long “think piece” trying to show that the IMF is changing and that its head, Christine Lagarde, has seen the light and seeks to promote real debt relief.[2]

The timing of this report seems significant. The IMF got “back in business” in 2010 when its head, Dominique Strauss-Kahn, overrode its staff and many Board members in order to join the troika and shift the country’s bad debt from French and German bankers onto the Greek people. That is the story I tell in Killing the Host, whichCounterPunch published in an e-version last week. (The hard-printand Kindle versions are now available on Amazon.)

…click on the above link to read the rest of the article…

Co-operatives Need to Confront Climate Chaos

August 30, 2015

Co-operatives Need to Confront Climate Chaos

The challenges for 2015 are the same ones we’ve failed as a movement to find solutions to, or even act on, for a very long time: climate change and the neoliberal politics of austerity. The co-operative movement needs to work internationally to stop oil companies extracting, and governments and corporations burning fossil fuels for profit, and it should be a part of the international campaign against rich elites profiting from wrecking the climate.

We need to incorporate other conceptions of what a strike can be and co-operatives…need to be a part of this conversation.

The co-operative movement should use COP21 this December in Paris, an important milestone in the international negotiating process, as something to put their energy towards; they should support the call which I’ve made for a climate strike here. Co-ops should close doors and shopfronts and walkout on the streets as part of a solidarity strike for the climate, the theory of which I’ve detailed in this blogpost. In practice there needs to be support for those aiming to disrupt extraction sites, production sites and transportation systems of corporations and the states that support them. Where possible we should work with workers in other industries who are prepared to go on strike. However, climate change has been defined by automation and the nature of work in the extraction industry has changed, with workers becoming harder to organise as a result. Additionally, the legal terrain for this form of action is yet uncharted and seems unlikely to be voted through by many rank and file, meaning that at least in Europe extraction and production are unlikely to be stopped by strike action in December. We need to incorporate other conceptions of what a strike can be and co-operatives, as social organisations ostensibly providing for their communities, necessarily need to be a part of this conversation.

…click on the above link to read the rest of the article…

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