Austerity: the way out is the way in. Common sense.

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Austerity and Growth are not contradictory.  Austerity can be benificial for public finances consolidation. Austerity and the roads ahead.

 

 Austerity ! Austerity ! What the hell is behind that persistent crying, G20’s and EU’s meetings after meetings ? Fear ? Weakness ? Lack of courage of reforms ? Misgovernment ? institutional building blocages ? Or simply overconformity to an ancient paradigma : macroeconomics or orthodoxia ?

Just focus on macroeconomics and think about how Western Civilisation’s supremacy of Theory to which the Real World must conform at, adjust or either be banned from the civilisation in the sense the West has codified it.

Such a conception considers any existing situation and others to come to enter the preexisting frame, by all means, eventhough the new situation is antinomic to the frame or, worst, dismissed it. Theory is the supreme Master and can not be in dispute. Red flags are planted everywhere to guarantee that applications are fitting the general pattern.

This is how macroeconomics parameters were build up and indeed their necessity is not in question here. What is at stake is their inability to reframe or reshape at the speed of the real world’s moving. Right now, we are witnessing the emergency of a New World – multipolarized : US, Asia, Russia, Emergency, Eurozone, European Union, Arab States, London particular status inside the E.U and Germany in the eurozone or China in Asia. You may also add to this picture, the sub-regional groups including OPEP, Americas, Asia-Pacific Alliance, Canada-US trade (Alena), the next US-EU axis announced by president Obama in his State of Union, African Union and their Bank of Development in creation to deal with their crucial underdevelopment agenda, Arab League, etc…

 

Roads ahead

 

Once you state all this and in accordance with a no one way exit out of the crisis, we may also suggest the complementary point reconsidering the other process of thinking : instead of reflecting upside down to trickle down the wealth, may be we should reverse the process upside down, while maintaining the Cape. Issues like minimum wages, maximum wages, the gap between the two spots, how wealth is redistributed, track of hoarded funds use, wealth redistribution inside Social Justice policies and the Red flag of Tax evasion along with the increase or at least the alignment of tax percentage proportionnaly to the earnings (the issue is still opposing President Obama and the GOP inside the Sequester) ; all these become much more important than monetary, fiscal and banking reforms that are polluating the debate to Growth or Wealth and Jobs creation overloading it with too much complexity and technocratic thinking.

In other words, we strongly need a barometer on a scale in salaries and on tax percentage and a much more clearer picture of what the wealthy people of the World bring in and take out of the System so as to figure out where those systemic imbalances are originated.

 

How can the IMF help this new ridance ?

First we agree with those two assesments on the press conference stating that : « There is no single bullet that will get us to normal growth and so normality with regard to jobs ».

Quotes.

From MR. THARMAN – Thank you very much. First, apologies for keeping you waiting.We have had a very good meeting of minds over the last two days in our various IMFC sessions. I would say that there are a few common strands to the discussions, and a common mission that everyone advocated.

First, there was a very strong desire to see us focus individually in our own countries, as well as collectively, to focus on getting growth back to normal, and in fact raising potential output growth in the global economy. And a very strong desire to see a return to some normality in jobs, to reduce the still very high levels of unemployment in the advanced economies, and to create new jobs in the emerging economies. So, growth and jobs were a very strong focus of our discussions.

We’re not fully passed the crisis, but if I compare it to the meetings a year ago, there was a much stronger focus on growth and jobs over the last two days.

There was also a strong and common recognition that achieving growth and jobs cannot rest on one policy alone. There is no single bullet that will get us to normal growth and so normality with regard to jobs. In particular, around the table, amongst all my colleagues, there was a very strong view that we had to place greater emphasis on structural reforms to create jobs, as well as to boost productivity. There also had to be a stronger emphasis on credibility in medium-term fiscal consolidation. That is the second strategy.

Quote again from Mrs. Lagarde.

QUESTION : I have a question for the Managing Director about the spillover effects on emerging markets. From yesterday’s G-20 statement we can see that advanced countries are intending to extend their monetary easing. I wonder if IMF or G-20 countries will take any further measures to better monitor the spillover effects to address emerging country concerns ?

MS LAGARDE – One view that was generally shared amongst the group was that under current circumstances the monetary easing or the unconventional monetary policies that we observed particularly out of the advanced economies is appropriate, not in and of itself, not in isolation, but as Chairman Tharman just indicated, as a composition of the mix, so that was a statement number one. Then you have this double concern, one that there is more of it, and what will be the consequences, what will be the spillover effects for all economies, not only emerging market economies, but all those that offer the yields, if you will, for capital to flow there, and to be invested, and the second fear, which is exactly the opposite of that one, is what happens when it stops and what is the exit route and how smoothly does that happen ? So, the IMF will be doing some additional work to review the consequences of unconventional monetary policy, we call it UMP now, and what will be the consequences of the variety of exit and what will be the good exit, as opposed to the more unpleasant exit for all members.

 

Bottom up

 

Remarks over QE are convincing. Once you’ve said it, two others problems come up in mind :

Mix messages. The QE is intended to give some breathing to the economies short of liquidities when banks are not willing to lend. It is either banks lending or QE – the ECB is doing the same as the Fed by the way – How is it the IMF agrees with this for the ECB and are opposing it for the US ?

Another mix message came recently from Olivier Blanchard speaking with Quest. He advocated a choc of confidence from the people to restart spending as a precondition for businesses recovery leading to jobs creation for instance or more activities which in turn would encourage banks to lend. The spiraling positive effect has delivered two possible interpretations :
The Austeritarians = people against austerity intrepretated it as a sign of condemnation of the austerity responsible, according to them, French President on top of the contestation, for the slowdown of the recovery. The Reformists considered it quite differently : they put emphasis on good governance and equity sentiment of the people. Two opposite rationales. Apparently, the IMF was targeting Austerity, if their position towards London is a proof for it. Previously, the IMF position was intransigeance calls for structural reforms.

We don’t know yet what to think about those mix messages. This is the first point.

The second questioning about the IMF is the silence over the minimum wage and the skyrocketing salaries perceived by leaders of the World institutions and those leading countries. At a certain point, we have to admit that Minimum wage for instance is not a result of simple math between a job and its productivity, as Chancelor Merkel put it. What about the real cost of a decent living and the trajectory of inflation ?

Demanding China and Germany to boost their internal demands deals with those two problems : the minimum wage increase and how and where the money of the wealthiest goes. Development, public services and infrastrutures also count. Trade also.

Silence again of the IMF over the perilous issue of tax havens evasion. The poor can not be the eternal and solely variable adjustment to the World Economic Governance and Administration failing the rule of law again and again and the Democratic promise. All those things are still out there vampirising the global recovery and wellfare programs. Needly to talk about decent wages and the markets jobs. Here London is also convicted.

Last but not least, may we recall our leaders that part of serving the people is not rewardable ; here we’re landing into Ethical unchartered territories the IMF is not yet tackling boldly and frankly. But it is not too late to remedy that.

CNN’s Excerpt. Financial Times via CNN. Growth but How ? Leading economies promise to boost growth.

From. Lance Chambers in the CNN Forum.

Too much wealth held in the hands of too few, too many people after too few jobs and I don’t believe that the picture will really improve in the long term. We have limited resources and we cannot continue to grow at the level we have been and, in the future, I believe that average Quality-of-Life will start to drop unless science & technology can make massive strides in improving productivity.

The problem with too much wealth in the hands of too few is that they spend their money in ways that do not employ many people. How many does it take to put a great diamond ring on a woman’s finger, or how many to buy and sell their stocks and bonds, etc. ? Their wealth does not ’trickle down’ and help large masses of people all it does is dry up money supply and when governments attempt to inject more money into the economy (quantitative easing) it is these people who inflame the populous to prevent it because is reduces the value of their horded funds – the more money in the economy the lower that value of the currency.

I assume having called with me the fact checks emphazising my beliefs. The contradictory statements would take care for themselves. This is an open debate and Sorry I’ve to take side. Hopefully it is the good option. I’m totally persuade of that. French course is a high showcase driving my total conviction.

Where have you ever heard about a country asking to the others for help to get out of the problems they have created themselves poorly ruling their country to the brink of collapsing. Meanwhile, they are firmly opposing any sacrifices from their greedy politicians and elites. This is a country never seen elsewhere in the World enjoying scandalous wealth inside for its State executives and leaders of political partis along with the upper class of rich and plethoric parliamentaries and huge overstaffed public administrations enjoying permanent and full job for 40 years (as workers and pensionnaires) and demanding shamelessly to Germany to help them and support all this garbages inside a banking Union.

The answer should invariably be : first clean your mess.

And the same country is asking to ease Austerity. For what purpose ? More indebtness ? More improductivity ? More abysses ? Commenting this folly is just above any brain. It is madness, cupidity and deep rooted corruption. Another topic the IMF should tackle powerfully.

What about corruption in countries asking to ease Austerity.

CNN Quest. Video. Olivier Blanchard responding to Quest at Quest means Business.

IMF Press Conference. Transcript.

Austerity. The case for London.

Fatal illusion from the Austeritarians (in French).

 

 

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