Poor Mary

You really do want to read the comments section here.

Mary Honeyball gets a right talking to from the citizenry.

More euro economics

It’s worth noting that this is from a very sneior and very well respected economist. And that he’s been saying these things since at least 1992.

These proponents of the single currency said that a single currency was needed to facilitate trade and that a single currency would promote efficiency by permitting price comparisons. EMU advocates in Britain argued that these economic gains were worth the political sacrifices � the loss of sovereignty over monetary affairs and over other economic policies that would result from joining the EMU. But Britain already had the free trade advantages of being a member of the European Union. I argued that there were in effect no net economic gains � more likely a net economic loss — to compensate Britain for the political costs of joining the Economic and Monetary Union. Certainly there is nothing in economic theory or in historic experience to suggest that international trade requires a single currency. The argument that one market requires one money was the kind of political slogan that frankly bothered me as an economist. I was also not impressed by the idea that a single currency would facilitate price competition that would improve market efficiency. The housewife in Madrid buys her bread locally. So knowing what bread costs in Berlin or Rome is irrelevant. The industrial buyer who may already shop for steel or chemicals in different national markets could easily compare prices stated in different currencies with the help of a pocket calculator. In contrast, the economic costs of a single currency are very real. A single currency means a single monetary policy and a single exchange rate. A single monetary policy for a group of heterogeneous countries that experience different shocks cannot be optimal � the problem is that, when it comes to monetary policy, one size cannot fit all. If monetary policy has to consider unemployment as well as inflation, the average cyclical unemployment rate will be higher with a single currency. A single currency also means that a country that experiences an increased trade deficit caused by a reduced demand for its export products cannot be helped by a natural � i.e. automatic — exchange rate adjustment.

It’s worth reading the whole thing.

Free speech and all that.

So our own Godfrey Bloom organises a conference on the thorny subject of smoking. Yes, all sorts of people have all sorts of views on the subject.

That’s what we have democracy for, so that we have a peaceful means of coming to a compromise between people and their very different views. And of course a key part of the system is that people are able, if not actively encouraged, to express those different views so that they can be taken into account when making said compromise.

Not, it appears, in the EU though. A decent overview is here.

Quite simply, because at this conference views which are not approved might be promoted, the conference was cancelled. By the authorities. By the Parliament authorities.

That is, the talking shop where compromises are reached is not willing to allow even the premises to be used to express non-compliant views.

Can we leave yet?

Ireland and the euro

An excellent piece here on what membership of the euro has done to Irealnd. And would have done to us if we had been stupid enough to enter it:

Yes, Britain is losing 2,500 jobs a day and home repossessions have nearly doubled in a year. And indeed British banks are on death-watch, the economy is likely to shrink by almost three percent this year, and the high streets are desolate. Savers are being robbed of interest, and industry is in despair.

Still, I can offer you one light in the darkness. Just look across to Ireland and see how much worse things would be now if Britain had joined the euro.

What we have in Ireland is Exhibit A in the case against the United Kingdom ever surrendering sterling to Europe.

Ireland has been in the euro since it was launched ten years ago. During those ten years, the euro and its European Central Bank turned a healthy, growing Irish economy of the 1990s into a fake-boom economy of property bubbles, consumer debt and reckless bankers.

Now it has all crashed. The Irish are facing perhaps a decade of stagnation and high tax.

In 1997, Ireland was lauded on the front cover of the Economist as ‘Europe’s shining light.’ After ten years in the euro - with no control over its interest rates, and no influence over its exchange rates - Ireland now has the second worse economy in the EU, second only to Latvia.

Thank goodness we didn’t join, eh? And let’s make sure we don’t make that mistake in the future, either, shall we?

The butter mountain is back

The European Commission has announced plans to artificially boost prices by buying up 139,000 tonnes of diary products at a cost to the public purse of £237 million.

Oh joy. We thought we’d got rid of that nonsense, didn’t we? But no:

Export subsidies and EU food stocks were last used in 2007 and the Commission last year tried to scrap such payments, a reform that was blocked by France and Germany.

Thanks guys.

So, in the middle of a recession, the EU is taking the tax money from our pockets, making us poorer, and using it to make food more expensive, making us poorer again. How to beat the bad times, make the citizenry poorer twice over. Sheesh.

Can we leave yet?

It’s not democracy so much

It’s the rule of law that’s important.

Yes, yes, I know, democracy is important, we do need to have a system in which we can decide who we’re going to hire to go and run the difficult things for us. And as Churchill pointed out, democracy is the worst of these except for all the others.

But the rule of law is even more important than that.

There was widespread anger last week when it emerged that the Government was planning to exempt MPs’ expenses from Freedom of Information legislation.

They are the people that have been democratically elected to write the laws so we can’t complain too much about their writing a law. However, this bit:

The measure would be applied retrospectively, thus blocking the publication of the receipts.

That’s the truly awful thing.

Leave aside all the arguments about whether we should see receipts, whether we shouldn’t. The law as it is right now says that, after various court cases, we can see them. To retrospectively change the law is to change the law as it was then, not just as it will be going into the future.

The danger is, of course, that we’ve a long standing idea that you can only be charged with a crime if that thing was indeed a crime when you did it. This is one of the great protections we have from the possible vindictiveness of those who have been elected. That they can’t turn around and make something we’ve already done illegal after the fact.

Something which all seems to have escaped the current government.

You what?

I’m not sure I understand this.

Employees should still accrue paid days off even if they are unable to work, the judgement said, because their rights and job benefits cannot be dependent on how well they are.

They must also be allowed to take time off that they built up while ill the previous year, and receive a payment in lieu of days off if they leave a job having been unable to take their full complement of paid leave.

The European Court of Justice declared: “A worker does not lose his right to paid annual leave which he has been unable to exercise because of sickness. He must be compensated for his annual leave not taken.

“The entitlement to annual leave of a worker on sick leave duly granted cannot be made subject to the obligation actually to have worked in the course of the leave year laid down by a member state.”

Seriously? I get holiday pay when I’ve been off sick?

Might we not think that this is a tad de trop? Has the EU decided that I should get a bonus for not turning up to work as well? Maybe I should get my lunch allowance for not having lunch? Or my train ticket paid for when I don’t commute?

Blimey, why don’t we go to a simpler system. One where people decide amongst themselves the terms upon which they’ll work and which they’ll be employed?

More on the euro

We’ve got intellectual pygmies like Will Hutton telling us that we should join the euro:

Will Hutton, journalist and executive vice chair of the Work Foundation and co-compiler of the report, argues that failure to enter the Euro would risk ‘endemic inflation’.

The we’ve got real intellectuals like the most recent Nobel Laureate in Economics, Paul Krugman.

So what can Spain do? It needs to become more competitive — but it can’t have a devaluation, because it’s a euro country. So the only alternative is wage cuts, which are desperately hard to achieve (and create big problems for debtors.)

Contrary to what everyone seemed to be saying even a few weeks ago, being a member of the eurozone doesn’t immunize countries against crisis. In Spain’s case (and Italy’s, and Ireland’s, and Greece’s) the euro may well be making things worse.

And Britain’s plunging pound, unpopular though it is, may turn out to have been a very good thing.

So who are you going to believe? A two bit journalist or someone recently awarded the highest accolade in the intellectual world?

Toughie that one, isn’t it?

Quite right Ambrose

Real interest rates of minus 2pc set by Frankfurt for German needs led to a Spanish property bubble of fearsome scale. Construction rose to 16pc of GDP, trumping the British and US bubble by large margins. Spanish companies tapped the euro capital markets as if there was tomorrow. Reliance on foreign borrowing reached 10pc of GDP, among the world’s highest. Wages went up and up. The result is a current account deficit that is also 10pc of GDP.

Interest rates were too low for Spain (and Ireland etc) in the boom times. Now they’re too high in the bad times. But much more than that we know of two ways which a country can use to get out of these bad times. The first is to lower interest rates and thus devalue the currency. But if you’re in a single currency like the euro of course you cannot do that. The second way is to have wage deflation in that country.

That means falling wages….not just falling wages in real terms (ie, accounting for inflation) but falling wages in nominal terms (that is, the actual amount of cash people gets must fall). Now this is indeed possible: but I’m not sure that I can think of any democratic society that has managed to reduce nominal wages. At least, not without a great deal of rioting in the streets.

Spain has to claw back 20pc to 30pc against a stern German that will not inflate. Therefore, Spain must deflate. It must embark on a 1930s policy of draconian wage cuts.

It remains to be seen whether this will be tolerated by a democracy. Brussels expects Spanish unemployment to reach 19pc – or 4.5m people – by late next year. This is a depression.

This is an effect of the euro. No, it’s not a side effect nor was it unseen. It’s a direct effect of, if you’re going to have one currency then you also have to have one interest rate, and it was predicted. Indeed, it’s the sort of thing that even I, not an economist, was predicting back in the 1990s.

Thank goodness we didn’t in fact join and let this be a lesson to those arguing that we should. If it’s not an optimal currency area then a single currency just doesn’t work.

Anne Frank and Danny Finkelstein

Please do go and read this.

Read it all.

It’s almost unbearably sad and massively enraging. You certainly wouldn’t want to be a holocaust denier anywhere around someone who had just read that.

Do make sure to read the very last line.