Why the current crisis will be costly, long lasting, difficult to bring under control. Interpreting a multi-nature, multi-country, multi-hits shock

20 03 28

Fabio Sdogati fabio.sdogati@mip.polimi.it

In this paper we submit an interpretation, or ‘a model’, of the current crisis. We hope to shed some light on the endogenous mechanisms that are making the crisis costly both in humanitarian and economic terms, probably longer-lasting than many still imagine, or hope, and difficult to control in the absence of extreme intervention, as compared to historical, peace-time standards, by fiscal and monetary authorities the world over. Our question is: what can be said about the post-shock path of the crisis, from shock to recovery?

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ECB and the European Labour Market: “Let’s go.” “We can’t.” “Why not?” “We’re waiting for Godot.” “Let’s Tighten.” “We Can’t.” Why Not?” “We’re Waiting for Wage and Price Increases”

Fabio Sdogati

2017 08 08

“But let me [Draghi] just make clear one thing: after a long time, we are finally experiencing a robust recovery, where we only have to wait for wages and prices to move towards our objective.”

The bottom line

By announcing that waiting is all that’s left to do in order to get wage and price inflation, the ECB shows that she has no clear idea as to how profound are changes that are affecting labor markets, nor about the effects that such changes have on the supposed effectivness of monetary policy. I submit that labor markets have been transforming in such a way that the chain of links growth-> wage inflation -> price inflation, has to a large extent broken down (Germany my be a partial exception). The implication is the same I, and many others, have been drawing for years: it is fiscal stimuli that generate growth-cum-wage-rises, not monetary stimuli. (Something, to be honest, Mr. Draghi points out, in politically correct terms, at every press conference.)

I have identified two parts in the introductory statement to the July 20 ECB president’s press conference: one, which few will object to my calling boring and repetitious: I will not discuss this part; and another, which I believe to be most interesting, and will therefore discuss in some detail.

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Not the Euro Threatens Europe, but the National Governments

Italian version posted on 22 September 2016

Foreword

For weeks I have been trying to find a good way to review Joseph Stiglitz’s book, The Euro and its threat to the future of Europe. Allen Lane, Penguin Random House, 2016. Now I think I am ready, though I am not sure I am happy with it. We will see. What I know is that I want to talk about the relationship between Europe and the Euro having Stiglitz always present in my mind. I want to write about the relationship between the two because they are different things not simply because there are 28 countries making up the Union and only 19 of them adopt the Euro: they are different entities because the European Union precedes the Euro logically and historically. Thus, my basic question will be: what function does the Euro fulfil within Europe? What its role in the process of Union building –that ‘ever greater Europe that so distress our British friends lately? These are questions that, I believe, raise THE issue: why did we want the Union? And then why, in the process of building and strengthening the Union, we thought the Euro would be a good step forward, a leap, perhaps, in the right direction?

I am perfectly aware that these are very divisive issues in Europe today. Still, I hope that what I am about to write will stimulate rational thinking within a sensible debate among the people I am addressing these thoughts to, those who live the idea of Europe passionately. Not interested hearing from others, thank you.
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Labour Policies under the Brexit Regime

The Italian version was posted on 2016 10 13

Foreword

On the 23 June 2016 consultative referendum, 52% of votes went to the Brexit camp. A referendum is ‘consultative’ when it is meant to poll the voters and supply democratic institutions with the knowledge of the citizenry orientation on a particular subject. As such, a consultative referendum does not generate new legislation, whether through a further passage through the legislator or directly; nor it is a binding indication to the government to adopt actions or legislation in accord with the result of the referendum. It follows that Brexit was a choice of the Cameron Government. Everybody knows that Mr. Cameron, who had chosen to hold the referendum, has declined managing its aftermath. Mrs. Theresa May has taken over.

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Against the European Central Bank (not against the Euro): ECB has chosen not to fight for a stronger Union

“The I.M.F is Telling Europe the Euro Doesn’t Work”. So the New York Times titles an article about a hitherto ‘secret’ imf ‘public debt sustainability analysis’ through which the fund, after just six years since the beginning of the so-called ‘Greek crisis’, realizes that the debt is (beg to differ: was made to be, by the fund itself, the ecb and the european commission) unsustainable. More on this document elsewhere and back to the title of the NYT. Continue reading “Against the European Central Bank (not against the Euro): ECB has chosen not to fight for a stronger Union” →

Scenari Economici

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Tag: European Union