I was intrigued to read this in yesterday's CapX email briefing, to which I subscribe. I believe that knowing what those I disagree with are saying is important.
Ministers may still be denying that there will be a border between Great Britain and Northern Ireland on 1 January, but the reality is that there will be. It is also the case that measures to control it are being put in place. CapX, which has been pro-Brexit, realises this. And it has noticed the cost. That cost was always going to exist. It does undermine the Good Friday Agreement. And it seems no one knew or cared about that when proposing Brexit. Now we are left an international outcast as a consequence.
Of course, that is also true because of Brexit as a whole.
And it's also true that external trade is now going to be far more complex, and so costly.
And still no one can explain any of the gains.
Some on the right-wing of politics are now beginning to see this.
How long before the clamour for a return to the EU, for all its faults, becomes overwhelming, I wonder?
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The EU should insist on no re-entry for a decade and en-act everything that has happened in that decade first.
Sorry – what does that mean?
Slightly off topic, but having a healthy debate with a neighbour about MMT.
In the Eurozone. Germany for example. Is Germany a currency user (like local government) as the ECB creates all the Euros?
Does this mean that the German treasury only finances government expenditure through taxation and bonds as it can’t ask its central bank to pay the governments bills by creating new money?
Good question
The reality is that the ECB does buy government bonds and does so in more enlightened ways now so that in effect most eurozone countries can now do QE, in effect
But there are ECB constraints do they have much less monetary sovereignty than the UK and EU states with their own currency
But does Germany have to tax/sell bonds to finance it’s expenditure as it doesn’t have it’s own sovereign currency.
Does the German Treasury instruct the German Central Bank to pay the government’s bills as UK government does over here?
How does a country without its own currency finance itself?
The EU works by tacit consent
The ECB cooperates with country central banks to achieve something like local QE and Germany benefits greatly
But I would never recommend the arrangement and even if we rejoin we will never need to be part of it
Looking at the polling my view is that the main pressures will come from Scotland and Northern Ireland. The supply chain chaos in Northern Ireland is worse than that discussed by CapX. Unless there is a 12th hour deal, the reality is that Northern Ireland will be subsumed economically by Eire, with unification eventually inevitable. Similarly the “independence can’t be worse than the Tories” movement in Scotland will mean a re-invigorated SNP next May. Emotion there will press forward for re-admission into the EU.
This leaves England and Wales in a new LB (Little Britain). I am dubious that the emotional views of many there will allow for any buyers remorse to set in, even over the medium term.
In my household, this clamour started the day after the referendumb.
Elsewhere it will take time or may indeed never happen as the online abuse has led so many people astray and it will continue to do so – look at the bullshit surrounding Covid.
The pro-EU movement can only beat this by fighting fire with fire.
Can they do that?
“How long…… ”
It will depend who’s hurting. Whether they have any political clout.
I noted that Caroline Lucas on Any Questions last week, didn’t directly answer a question about rejoining the EU. I think it is time for moderate MPs and public figures to question why we are going ahead with this gross stupidity.
All they have to say is “remind me, why are we doing this?”
But, friends have suggested that we have to leave in order to value what we have given up. I guess that is true. Logic has no part; emotion rules.
Can anyone really believe they would have us back?
Even if the others agreed, France would definitely veto it.
Just like deja vu all over again!
This one is way beyond me… but irresistible.
Even as England’s population appears to have turned Remain, England’s Remain parties have re-oriented for Brexit. How quickly could they turn again? As for the climbing down to be done for re-entry, that won’t be easy. England’s media would fill with “EU done us wrong” stories to take the edge off public pressure for re-entry, saving fragile political egos from risking wicked EU rebuffs. Someone will demand the original terms as a minimum. I wouldn’t blame the EU for laughing till London sobers up.
And if an independent Scotland were to get there first, or choose EFTA instead…
Imagine a reunited Ireland doing well in the EU…
Then again, while NI and Scotland are still in the UK, are their pro-EU voices likely to help? I don’t think it’s a given they would.
The UK has been unable to decide what relationship it wants with Europe since at least the Second World War, preferring to stand alone, or with the US, or the Empire or the Commonwealth. I expect that state of affairs to continue for some time.
* Attlee declined an invitation to join the negotiations in 1950 that led to the formation of the European Coal and Steel Community in 1952, which he condemned as undemocratic, and he also wanted to keep control of our coal and steel.
* Then we signed an Association Agreement in 1955.
* Under Eden, we decided against joining the negotiations in 1956 to join the nascent EEC.
* Instead, after Suez, the UK was a founder member of EFTA in 1960.
* De Gaulle famously said “non” when MacMillan tried to join the EEC in 1961, so we had to plough our own furrow outside for a decade.
* He was not around to say “non” when we decided Europe was more important than the Commonwealth in 1972.
The fact is, the UK are a small island of about 70 million people off the coast of Europe. It makes little sense to turn our backs and hide ourselves away in a walled garden. The wheel of history will turn again, but I would guess not for a decade or two, and perhaps by increments. For example, the four EFTA states are all outside the Customs Union, but in the Single Market and Schengen. If (or rather when) we eventually rejoin the EU, assuming they’ll have us, we will struggle to persuade them to give us a good a deal as we had before we left this year.
The last is absolutely true
I had been a staunch EU remainer until around a year ago when I began to learn about MMT and the importance of monetary sovereignty.
I now realise that members of the EU (including those not in the Eurozone) do not have monetary sovereignty because a) controls on the flow of capital across borders are prohibited and b) Article 123 of the TFEU prohibits direct monetary financing of government expenditure by a central bank.
Are not both of these issues critical tools for the operation of fiscal policy from an MMT position? This does not seem to have had much public debate over the last four years, which puzzles me.
Jeff
Total nonsense
Sweden does QE
Denmark could, and so on
They have monetary sovereignty
Your argument makes no sense
The EU restrictions are now straw men as far as a country like the U.K. and those I mention are concerned
Richard
Richard.
But haven’t Sweden and Denmark retained their own currency and don’t use the Euro.
Is the Euro a failed currency and a hindrance to those who have signed up to it as well as to adopting MMT?
If the UK did rejoin the EU, should we join the Eurozone?
The U.K. would be obliged to join the euro one day if rejoin8ng
Just as Sweden is obliged to. Only Denmark has an opt out
Sweden has not created the environment in which rejoining is legally possible and no one cares
The U.K. would follow the precedent and never join the euro
So, we still expect to be in the EU but on our own terms?
The direction of travel for the EU is greater integration. It’s what the majority of members have signed up for. We won’t all the benefits but without all the commitment.
If we are committed to the EU then why not join the Euro? (I know the answer to that
UK half in, half out. God, they must be so bored of us!
Haven’t we been here before?
(Never mind that integration requires an erosion of direct democracy.)
Connie
You are playing stereotypes
Please don’t
The EU responds to change and few organisations are as flexible as it can be
The U.K. would get no favours but to presume the EU is a glib, static monolith is wrong
Richard
I don’t see the EU as static or a monolith.
It has constantly evolved.
Common Market, EEC, EU…….but the direction of travel is closer integration.
Political as well as economic. It has to be, for it to work.
In a single market a single currency makes perfect sense. If you have a single currency, then you need political integration as well.
But that political integration comes at a price. That price is an erosion of representative democracy.
It just look at both sides of the argument and see the same thing.
Boris and the ERG want “their cake and eat it” but so does the remain side.
Who on this blog is actually promoting integrated into the EU to the same level as France or Germany? I haven’t seen any comment that doesn’t expect a “special” arrangement if we remained in the EU.
We want all the benefits but without the commitment whether it’s remain or leave.
God, we all think we are so special and deserve something different to everyone else.
For what it is worth, 19 of the 29 EU member states have adopted the Euro. Of the rest:
* Bulgaria and Croatia both recently (July 2020) joined the ERM, but were already firmly pegged to the euro and before that to the DM. All being well, they should be eligible to adopt the euro in 2022 – perhaps January 2023.
* Despite meeting all (or almost all) the necessary economic criteria (unlike some of the countries that were permitted to join) Denmark has an opt-out on adopting the euro, but it has voluntarily chosen to peg the krone to the euro through the ERM.
The others have no opt out, and the expected position is clear (converge and join the euro) but this is far from a monolithic bloc. I think all five float freely.
* Sweden has done little to move towards adopting the euro since joining the EU in 1995; indeed, it even voted in 2003 to remain outside the ERM, despite it being obliged to converge. The opinion polls are consistently against it, and there is currently no prospect of a second referendum being held let alone passing.
* The Czech Republic, Hungary, Poland, and Romania, all remain outside the ERM. Romania is working toward meeting the criteria to join, but it remains years away. The other three seem set firmly against. As far as I can see the EU is not beating them up about it, but rather letting the economics speak for themselves.
In other words, it’s a free for all
Andrew.
Thanks for that info on who is in and out and half in/out of the Euro.
Being in the ERM is one step removed from full Euro membership, but, as Stephanie Kelton points out in The Deficit Myth page 124, pegging a currency to another (that you don’t control) can cause fiscal deficit funding issues. (As the UK government found out when we crashed out of the ERM)
Pegging is not required
In fact, it is a recipe for disaster
Floating is required
Agree with plenty of the posters above except these who believe the EU and the Euro cannot be fiat – as was shown months ago when they magicked hundreds of billions of it over a tense weekend.
Of course we will rejoin.
BrexShit (BS) wasn’t and isn’t about not wanting to be part of all the best things about the EU.
Single Market, Schengen, Reseach, Education, Energy security etc
Nobody wants to have to go through passport control and not keep their UK bank accounts because they live in the EU.
The HardBS, is and always has been about the imposition of the Level Playing Field (LPF) and rule of Law equally by ALL members as the EU matures.
HBS has always been about retaining laissez fair behaviour of the Ancient City and its part in the worldwide fraud of tax evasion, money laundering and do what they like buccaneering and pirateerinng , including for many of the aristo Europeans.
HBS is the great escape from the legal ‘contracts’ willingly entered into in the 70’s with eyes wide open and a commitment to working towards the future the EU is now and is still evolving towards.
A non HBS is only possible with a ‘compromise’ by the EU to let us off the LPF that is required by all others.
We are now even dangling our compromise – the Fishes – in front of them in a last minute gamble to hand the whole lot to the EU in exchange for not having to play on the same LPF as everyone else under the same Laws (CJEU) as everyone else.
The great Kipper betrayal as it would become known as.
if the EU could be persuaded to act on greed. (I think they won’t even with the moles in their midst)
The perfidious English oafs and toffs still believe the EU can be bought off with all the fishes.
They really underestimated the superior judo skills of Mutti and the great visionaries and functionaries who know what the greatest prize they are forging towards.
Yes they will have us back – but it will be on the same terms as everyone else. No vetos. No rebates. All 4 freedoms. And the CJEU as the top arbitrator.
But certainly not with a ‘Singapore on Thames’ parked 20 miles off their coast.
No matter what jiggery pokery planned after a HBS to let us rejoin by our masters.
(Sorry for length i always mean to just maje a simple quick comment…)
Brevity can be over-rated
When the consequences of Brexit become apparent, and they will be bad if we get some kind of ‘deal’, and terrible if we don’t, those among the UK population who aren’t completely stupid will probably want a return to the EU. This will include some Leavers who will realise they were lied to, or have the courage to admit they were wrong. I suspect the corruption and ineptitude of Johnson’s regime will contribute to this feeling.
But, as others above have pointed out, would the EU want us after the disgraceful way so many British (or should that be English?) politicians have behaved? The EU has (and still is) shown/showing incredible patience with all the lies, claptrap, insults and arrogance displayed by the UK side for years, but they want Brexit well and truly settled so they can get on with a number of pressing issues they face.
If we asked to rejoin, we’d have to show we are fully signed up to the EU’s ideals of economic and political integration. No more opt outs, and re-entry on the EU’s terms, not ours. Rather like the ‘deal’ that will hopefully be struck soon that will, if one is agreed, be very much on the EU’s terms, given it’s strength, vastly superior negociating skills and, frankly, the fact that it’s politicians are not a pack of stupid kids.
I’m not sure if Jeff or Vinnie’s points were answered. If a country has adopted the Euro as its currency, has it given up its own monetary sovereignty? If so, can a country without its own monetary sovereignty then operate fiscal policy following the principles of MMT? This particular discussion seems to have been derailed to one of greater Euro integration/ requirement to adopt the Euro should the UK reapply, but I would be interested in your response Richard.
Answer, yes
And, no, because the ECB is now accommodating this
So is it constrained? Yes
But is fiscal policy impossible? No
The ECB buys euro government debt
So fiscal policy a country that has adopted the Euro and that want to follow the principles of MMT will have some constraints on introduction of MMT within that country because of ECB sovereignty of the Euro?
Does it follow that to optimise the benefit of adopting MMT, the ECB would have to embrace it in its entirety? If so, do you have any insight into the ECB’s position is with regard to MMT?
It does strike me that adopting MMT for Euro using countries may actually be at the behest of the ECB. Does that make adoption of MMT fiscal policy by Euro using countries even more unlikely?
Central bankers are, it is fair to9 say, in denial on MMT right now – even if they actually do it
S.Natio says:
November 12 2020 at 5:26 pm
I’m not sure if Jeff or Vinnie’s points were answered. If a country has adopted the Euro as its currency, has it given up its own monetary sovereignty? If so, can a country without its own monetary sovereignty then operate fiscal policy following the principles of MMT? This particular discussion seems to have been derailed to one of greater Euro integration/ requirement to adopt the Euro should the UK reapply, but I would be interested in your response Richard.
Richard Murphy says:
November 12 2020 at 9:21 pm
Answer, yes
And, no, because the ECB is now accommodating this
So is it constrained? Yes
But is fiscal policy impossible? No
The ECB buys euro government debt
My question was not about QE. ALL member states of the EU ( – NOT just those who adopt the Euro ) are prohibited from two things :
a) imposing controls on the flow of capital in/out of the country and b) direct monetary financing (DMF), alternatively known as “monetising the debt”, whereby a central bank creates money and “lends” it directly to the government to spend without ever requiring “repayment”.
Lets say a radical government come to power in the UK with a serious commitment to redistribution of wealth (OK, I know!) . There would be a massive flight of capital out of the country. Capital controls could deal with that.
And DMF? In Richard’s post of Nov 10th “Why we need Green Bonds” he says
“It is possible that all government borrowing could instead, for example, be from a bank and not be financed by gilt issues. And it is also possible that the bank making the loan could be the Bank of England. And that also creates the possibility that the loan need not have interest charged on it because the Bank of England is, after all, owned by the government. It could then simply lend to itself at a zero interest rate.
This, I stress, could be done. It isn’t. That’s because of paranoia that this would lead to excessive borrowing and so inflation, and you might think that is simply a neoliberal political imposition to prevent socially-minded government seeking to meet the needs of society and you may well be right. But I stress, it is possible.”
If DMF as a counter to neoliberal imposition of bond sales “may well be right” and currently possible (the Ways and Means Account?) , then even if we think Bonds are a great idea, shouldn’t we guard our option of DMF ? In 2015 in his paper for the IMF (available online) , Adair Turner says
“We should therefore accept monetary finance as an available tool to deal with the problems of severe debt overhang. We should recognise indeed that there can be circumstances, such as those Japan now faces, where it may be the only feasible way to deal with existing debts. And if there really is a significant “secular stagnation” threat, we may have to consider the use of monetary finance not merely as a one off emergency measure but as a normal policy tool.”
I am questioning therefore, whether rejoining the EU will compromise our new-found monetary sovereignty, so beloved of MMT. Perhaps there would be compensations. I await enlightenment.
DMF happens every day
That is what QE is
The EU always finds a work around
And re capital flight – where to, and to what effect? With what evidence? It’s often threatened but does not happen
S. Natio.
I think Stephanie Kelton answers this question in The Deficit Myth.
Page 124.
Most sensible commentators (ie not the Torygraph, Express etc) suggest that it would take up to 5 years for an independent Scotland to rejoin the EU. And Scotland is a country which, by and large, is favourably disposed to the EU and is unlikely to to argue that it needs both cake and to eat the cake.
The UK, or more likely, England is not well disposed towards Europe. A great many of its political class has had a deep antipathy towards continental Europe, for several centuries. The Tories in particular have been highly sceptical and the referendum was (mis)conceived by Cameron-the-stupid as finishing off the extreme Tory sceptics. In fact the exact opposite occurred and Cameron is now history.
England/UK rejoining the EU will of course be the easiest treaty in history, mostly because England/UK will hold all the cards and thus the previous opt-outs plus some more of that lovely cake will be demanded and accepted by a chastened EU.
Of course by the time England/UK realises that rejoining the EU is the only way it can save its precarious economic, social and political skin (10 years?) the EU will have moved on and there will be new treaty obligations to sign up to and the EU will may well demand that the UK clean up the City/tax havens/money laundering and other practices inimical to democracy, fairness and the rule of law. UK politicians at the time will realise that the cake is now stale and mouldy and that perhaps “cauld kail and parritch” is at least palatable (ask the Scots), but even then how many more years will it take to gain accession and will every state in the EU welcome the return of a neighbour that’s been nothing but trouble whether in or out and not try to delay?
S. Natio.
Sorry, I have avoided wading into the whole Brexit bun fight up until now, but find the hypocrisy on both sides quite draining, and let my guard down!
Regarding the Euro, it is interesting how it effects the ideas in MMT.
I’m still not clear if a country like Germany, has to tax and borrow to finance it’s expenditure because it doesn’t create the currency?
MMT doesn’t seem to describe what happens in Germany, Fance, Holland, Spain, Italy etc.
Greece’s problems have often be explained as it not having its own currency.
Those countries have what Stephanie Kelton calls reduced monetary sovereignty
That will always be the case, although in the EIU soft power helps overcome this
Richard Murphy says:
November 13 2020 at 12:42 pm
DMF happens every day
That is what QE is
The EU always finds a work around
And re capital flight — where to, and to what effect? With what evidence? It’s often threatened but does not happen
1.OK, I take the point about capital flight, but can you forsee NO credible circumstances where capital controls would be an important tool?
2. If “everyone” is now ignoring Treaty Article 123 re monetary financing, aren’t we being rather hypocritical to criticise Johnson for wanting to break international law “in a limited and specific” way?
1. Yes, but we can live without it
2. No. This is an agreed procedure, internationally
Jeff.
Just re-reading The Deficit Myth. Stephanie Kelton.
Page 124 gives a brief description of how Eurozone countries finance their fiscal deficits.
Yes, but she doesn’t talk about the position of member states who are not members of the Eurozone. And she doesnt talk about QE , OVF/DMF and how Article 123 is now, apparantly, in the bin.
Members of the EU without the euro have monetary sovereignty