Tag Archives: political economy

Greece and Loans

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There is a kerfuffle going on just now among Greece, the IMF, Germany—mostly between Germany and the IMF.  The IMF wants to freeze interest rates on Greece’s loans for the next 30-40 years—so that Greece can pay up.  Germany is demurring from this, saying that’s not paying, that’s just delaying things.  Of course, the IMF is saying this about other nations’ loans; the IMF isn’t a current participant in them.

But there’s a misunderstanding at the center of the kerfuffle, and it has nothing to do with fixed interest rates or their duration.

[German Chancellor Angela Merkel] and many of her lawmakers believe that, without the IMF, the eurozone wouldn’t be able to enforce rigorous fiscal and economic overhauls in Greece in return for loans.

That might be difficult with the present round.  However, Germany, nor any of its fellow eurozone participants are obligated to loan to Greece, especially if the latter defaults on the current round.  The example of not lending further would be a valuable object lesson.

Of course, that also would take less timidity than Merkel, et al., are showing presently with their demand for IMF cover: on a default, Greece might leave the eurozone, and Europe is very much afraid of that.

A Good Reason to Leave

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The International Monetary Fund said a British vote to leave the European Union could have significant and negative effects on the UK economy, the latest contribution by an international institution to the fierce debate over Britain’s future in Europe.

If the IMF thinks it’s a bad idea, it’s probably a pretty good idea.

More seriously, the IMF is making its assessment on this basis:

…a vote in the June 23 referendum to leave the EU could “precipitate a protracted period of heightened uncertainty, leading to financial market volatility and a hit to output.”

The uncertainty and ensuing volatility and output hit are non sequiturs.  Of course there’ll be turmoil during the transition.  There’s turmoil in any major transition.  That’s not a reason to do or not to do anything.  The reason, the valid reason to do or not come solely from the new régime post-transition, when things have stabilized again.  For the IMF to obfuscate like this is for the IMF to show itself unserious.

Long-term costs could be substantial?  This is purely speculative, at least as much so as the other side’s claims that long-term gains could be substantial.  And, frankly, the gains are more likely than the costs.  For one thing, the decisions leading to gains or costs will be solely those of the Brits, and not anything imposed on them by an extranational body that is not focused exclusively on what’s good for Great Britain.  For another thing, the Brits will lose the costs of a bureaucracy that depends badly on not just consensus within a single Parliament, but on consensus across nations that don’t share the same values regarding social, political, or monetary philosophy.

And Great Britain will be able to go back to a free market economy of its own devising, and not be straitjacketed by the social democratic economies of the continent.

British Sovereignty and British Exit from the EU

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Chatham House, The Royal Institute of International Affairs, has a paper out claiming that Great Britain’s perceived need to go out from the EU in order to preserve its sovereignty is “misguided.”

It’s possible to see the misguided perception of Chatham House from the Executive Summary of its paper.

  • The question of sovereignty lies at the heart of the UK’s upcoming EU referendum. …
  • This ignores the fact that successive British governments have chosen to pool aspects of the country’s sovereign power in the EU in order to achieve national objectives that they could not have achieved on their own, such as creating the single market, enlarging the EU, constraining Iran’s nuclear programme, and helping to design an ambitious EU climate change strategy.

And yet creating a (European) single market or enlarging the EU have nothing at all to do with British sovereignty, even were these things on the whole useful to Great Britain.  In many respects the former would be, but it can be accomplished as well with the Brits outside.  And, of course, joining an extra-national organization and one that is granted authority over (some of) a nation’s domestic affairs can only come at the expense of the nation’s sovereignty.

Then, too, the EU has done nothing to constrain Iran’s nuclear program, weapons or peaceful.  The “agreement” that President Barack Obama (D) got with Iran—over France’s strong objections and over Great Britain’s tepid objections—has instead formalized Iran’s ability to develop and field nuclear weapons.

The EU’s climate change strategy, ambitious or not, can only work to the detriment of Great Britain, damaging as that strategy is to the national economies of the EU constituents, especially given that there is very little human involvement in climate change, for all the economic benefits accruing to climate change pseudo-scientists.

  • Apart from EU immigration, the British government still determines the vast majority of policy over every issue of greatest concern to British voters—including health, education, pensions, welfare, monetary policy, defence and border security. The arguments for leaving also ignore the fact that the UK controls more than 98 per cent of its public expenditure.

Apart from EU immigration….  No sovereignty question here.  Mm, mm.  Nor is that 2% of public expenditure dictated by that extra-national body.  Nossir.

  • The British economy has prospered in the EU. The UK boasts higher economic growth and lower unemployment than most major developed economies. …

Carefully elided in this is that Great Britain is not in the eurozone.  How much better could the Brits’ economy be were they completely gone from the EU?  Hopefully, we’ll find out.

  • [T]he UK would be excluded from the process of EU rule-writing, making it a less attractive location for foreign investment.

This doesn’t follow at all.  Great Britain also would be free to write its own rules, making it a far more attractive location, absent the EU’s heavily bureaucratized system, a system that’s also heavily anti-competitive.

And so on.  But RTWT.

FDA and Funding

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Moves in Congress to link billions of dollars in new medical research funding to revised standards for drug and medical-device approvals are troubling some public-health experts, who say the combination makes it too easy for lawmakers to support lower patient-safety standards.

This is a cynical distortion of the situation.  With the FDA’s suppression of Sarepta, a drug that has helped—a lot—boys with Duchenne Muscular Dystrophy and that, so far, has shown no deleterious side effects standing as a shining example, of course it’s necessary for Congress to exercise its power and authority of the purse string to bring an out of control, scleroticlly bureaucratic agency to heel.

National Security and Economic Relations with the PRC

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The Fiscal Times had a thought.

There is an emerging danger that rivalry for strategic influence in the western Pacific will damage trade and investment relations.

As if this is a bad thing.  “rivalry for strategic influence in the Western Pacific” is a euphemism for the PRC’s seizure and occupation of the South China Sea and the islands in it, and the PRC’s terraforming of many of those islands and subsequent construction of military bases on them.

The only reason for the grab and the military build up is to intimidate the other nations rimming the Sea, nations who are, variously, our trading partners, our friends, and potentially our allies—and friends.  The PRC’s goal is to drive us out of the Sea, which can only damage our trade and investment relations with the region as a whole.

Our economic relations with the PRC do not need to come at the expense of any of that.