Monday , February 18 2019
Home / Frances Coppola
Frances Coppola

Frances Coppola

I’m Frances Coppola, writer, singer and twitterer extraordinaire. I am politically non-aligned and economically neutral (I do not regard myself as “belonging” to any particular school of economics). I do not give investment advice and I have no investments.Coppola Comment is my main blog. I am also the author of the Singing is Easy blog, where I write about singing, teaching and muscial expression, and Still Life With Paradox, which contains personal reflections on life, faith and morality.

Articles by Frances Coppola

Why labour markets don’t clear

11 days ago

This post originally appeared on Pieria in July 2014. Roger
Farmer has
a blogpost in which he shows that labour markets don’t clear.
Specifically, employment varies with the business cycle, whereas the labour
force participation rate and hours worked only show long-term secular trends.
During cyclical downturns, therefore, we must conclude that there is more
labour available than there are jobs.
New
Keynesians say that the reason for this is sticky wages.
If only nominal wages could fall enough,the market would clear and there would
be no cyclical increase in unemployment. Therefore there should be labour
market deregulation so that wages can flex with the business cycle. Roger
Farmer questions this: he argues that the market simply does not clear at any
wage.
I
disagree. I think the

Read More »

The foolishness of the old

19 days ago

Most people want government to spend more money on them than
on anyone else. This applies regardless of their tax contributions (those who
don’t pay tax often demand more than those who do). And it is completely understandable.
After all, charity begins (and when times are hard, ends) at home.
So when voters in the US were asked what the government’s
spending priorities should be, it comes as no surprise to discover that their
preferences varied by age:

As we would expect, the priorities of the young are
education and jobs, the priorities of those of working age are jobs and
benefits, while the priorities of the middle-aged and old are pensions and
associated benefits (US pensions, pensioner benefits, Medicare, disability
benefits and family support are all bracketed together as

Read More »

ECB forecasting is a joke

29 days ago

Over at Bruegel, Zsolt Darvas takes the ECB to task for systematic forecasting errors in the last five years. He shows that the ECB has persistently overestimated inflation and unemployment, and on this basis he questions the ECB’s decision to end QE in December 2018. I share his concern that the ECB has tightened too soon, though as the ECB’s QE program is seriously flawed and very damaging, I am not sorry to see the back of it.But I think that in focusing on the last five years, he has underestimated the scale of the ECB’s failure. Here is his lovely chart showing Eurozone inflation since the creation of the Euro:

The ECB’s persistently high forecasts in the last five years are painfully apparent. But what interests me is not the forecasts, but the outturns. The entire chart shows a

Read More »

The real victims of the “Rape of the National Insurance Fund”

January 10, 2019

Some things just make me furious. This post by David Hencke, for example. In it, he claims that politicians of all three main parties agreed to raise the state pension age for women to compensate for the ending of the Treasury’s contribution to the National Insurance fund. This isn’t true.Not only is it untrue, but it directly contradicts the research upon which the article relies, and dishonours the memory of a man who fought hard for pensioners’ rights.Hencke based his article on this piece by Tony Lynes, written in 2006 as a basis for a National Pensioners Convention factsheet on the National Insurance (NI) Fund. As readers of this blog will know, the NI Fund is not a pension fund. It is a clearing house for receipt of NI contributions and their disbursement to pensioners and

Read More »

The “Misérables” of the 21st Century

January 7, 2019

On Saturday, I watched Ken Loach’s 2016 film "I, Daniel Blake" for the first time. The following evening, I watched the second episode in the BBC’s adaptation of Victor Hugo’s 19th century novel "Les Misérables". And here is my unpopular opinion. I think that as a parable of the U.K. today, particularly the difficulties experienced by single parents, "Les Misérables" beats "I, Daniel Blake" hands down.
Why? Because Fantine’s story is closer to the experience of single mothers today. True, we don’t (yet) have a market for hair and teeth, and women today are much less likely to die of undiagnosed tuberculosis than they were in the 19th century. But the exorbitant cost of child care, and the fragility of employment, that were so disastrous for Fantine – these are all too often the reality

Read More »

Mental health and homelessness

December 22, 2018

I haven’t written a post for a while. I wanted everyone to read the post I wrote in November about my niece Annie’s suicide. Writing new posts drops older ones down the list, and I didn’t want her memorial post to disappear off the radar until after her funeral. Annie’s funeral was last Tuesday, 18th December, the day after her 29th birthday. Now, it is time to write again.But not yet to move on from the issues that Annie’s death highlights. This post is about the link between mental ill health and homelessness. Particularly, "street" homelessness, or in common parlance, "sleeping rough".Homelessness and rough sleeping have risen hugely in recent years. Government statistics show that between 2010-15, estimates of the number of those sleeping rough rose by 102%. This is partly due to

Read More »

A poignant Remembrance

November 22, 2018

On Remembrance Sunday, we remember those who died in war. Particularly the First World War, but also those who gave their lives fighting in subsequent wars. This year, I sang at two remembrance services in which all the music was written by people who either died in war themselves or had relatives who died. The poems of Wilfred Owen, who died one week before Armistice in November 1918, brought home poignantly to us the "pity of war".
Perhaps one day we will also honour those who did not fight but still lost their lives, and all those whose lives were ruined by war – the parents desperately trying to find out what happened to their children, the wives left to bring up children on their own, the soldiers whose mental and physical health was ruined, the villagers and townspeople whose

Read More »

Some governments really are like households

November 16, 2018

In my last post, I said that the fact that a government can buy anything that is for sale in its own currency is not sufficient to confer monetary sovereignty. A country which is dependent on essential imports, such as foodstuffs and oil, for which it must pay in dollars is not monetarily sovereign. Some people disputed this on the grounds that such a country could earn the dollars it needs through exports. So I thought I would write a post discussing how realistic this is in practice.Strictly speaking, the only country in the world that can always pay for everything it needs in its own currency is the United States. However, most developed  countries that issue their own currencies have deep and liquid FX markets that enable them to exchange their currencies freely for other

Read More »

Now state pension ages are equalised, let’s fix the real problems

November 6, 2018

Today is a day for celebration. After nearly 60 years of inequality and discrimination – originally against women, and more recently against men – the state pension age is at last the same for men and women. For one day only, both men and women will retire at 65. Tomorrow, the state pension age for both men and women will start rising again in lockstep, reaching 66 by 2020 and then to 67 and 68.I make no apology for celebrating the equalisation of pension ages. In my view this is long overdue. I have expected it all of my working life, having first discussed it when I was still at school. I never thought it was fair that my brother 14 months younger than me should receive his state pension 6 years and 4 months later than me. We both work for our livings and we have both brought up

Read More »

The myth of monetary sovereignty

November 2, 2018

How many countries can really claim to have full monetary sovereignty?

The simplistic answer is "any country which issues its own currency, has free movement of capital and a floating exchange rate." I have seen this trotted out MANY times, particularly by non-economists of the MMT persuasion. It is, unfortunately, wrong. 

This is a more complex definition from a prominent MMT economist:

1. Issues its own currency exclusively

2. Requires all taxes and related obligations to be extinguished in that currency

3. Can purchase anything that is for sale in that currency at any time it chooses, without financial constraints. That includes all idle labour

4. Its central bank sets the interest rate

5. The currency floats

6. The Government does not borrow in any currency other than

Read More »

A Budget Polemic

October 23, 2018

As Budget Day approaches, Economists for Free Trade have taken it upon themselves to give the Chancellor some advice. They have produced a "Budget for Brexit", subtitled "An Economic Report". One might expect from this that the report would contain a comprehensive set of Budget proposals with Britain’s forthcoming exit from the EU in mind, backed up by rigorous economic analysis.With this in mind, I started reading the report. There was the inevitable introduction from Patrick Minford, as usual criticising the U.K. government for disagreeing with his forecasts. Fortunately, his comments were only a little over a page in length. And remarkably, he concluded with an appeal for the Chancellor to raise public spending:
It is an extraordinary thing that economists like us feel the need

Read More »

Vítor unbound

October 8, 2018

I always find the views of former policymakers fascinating, not least because of their tendency to become much more outspoken once they are out of office. Some express much more radical views than they did while in office: Larry Summers springs to mind, and Adair Turner. Others become critical of the institutions that they ran: Mervyn King, for example.
The latest former policymaker to reveal what he really thinks is Vítor Constâncio, Vice President of the ECB from 2010 to 2018. In a fascinating lecture at the London School of Economics, he discussed the causes of the Euro crisis, the policy responses to it, and what should be done to prevent such a disaster happening again. The entire lecture is on an LSE podcast (audio only, sadly), but Vítor released four of the slides from his

Read More »

Checkmate

September 28, 2018

With only six months left to the moment when the UK leaves the EU, the Brexit end game is upon us. If there is to be a Withdrawal Agreement at all, the Northern Ireland border problem must be solved within the next couple of weeks. But at present, both sides are well dug in and showing no inclination to budge. No-deal Brexit is looking increasingly likely.Nonetheless, the game is still afoot. In Salzburg, the EU appeared to strike a mortal blow to Theresa May’s Chequers proposal. After this, surely she had to compromise on her red lines?Not a bit of it. Mrs. May is sticking to her Chequers proposal, apparently hoping that eventually the EU will blink. She remains, as ever, oblivious to the mortal damage that this would do to the EU as a political project.But agreeing a deal with the EU

Read More »

Cake and cherries

September 24, 2018

Sometimes I despair at the naivety of politicians.Theresa May’s humiliation in Salzburg was an inevitable consequence of her belief that the EU would be willing to compromise its "four freedoms" to keep her in power. To be fair, press reports since the Chequers plan have suggested that the last thing the EU wants is a change of leadership in the UK. But it was a mistake to interpret this as meaning the EU was willing to become Theresa’s poodle. Nothing could be further from the truth.
The EU has said many times that the four freedoms are not up for negotiation, and proposals that tried to keep some of them while rejecting others have all been flatly rejected. Theresa’s prized Chequers deal was weighed in the balance and found wanting the moment it hit Michel Barnier’s desk. All the

Read More »

Do you remember yesterday?

September 15, 2018

It’s ten years since the fall of Lehman Brothers. Ten
years…. but it seems much longer. I look back on the mid-2000s as if they were
a past century. Those days are gone forever, and the future is increasingly
dark and uncertain. How a single event can change the course of history…“Do you remember
yesterday, that was a hundred years ago?” cries Lucretia in Benjamin Britten’s The Rape of Lucretia, shortly before committing suicide. Lucretia’s death was the event that brought about the
fall of the Tarquin dynasty and the establishment of the Republic of Rome. A
fundamental re-ordering of Roman society was triggered by a single act of
betrayal. Tarquinius raped the wife of one of his senior generals. She committed
suicide. Appalled, the Roman army overthrew him. No doubt Tarquinius had

Read More »

Patrick Minford’s holidays

August 28, 2018

Skewering Patrick Minford has become something of an economists’ bloodsport. I admit, I have done my fair share of Minford-bashing, though I do try to stay away from trade economics. Others are much better at lampooning Minford’s antediluvian approach to trade economics than me.But when Minford starts pontificating on the effect of currency movements on the balance of trade, I can’t resist getting out the shotgun. Minford is appallingly bad on anything that involves foreign exchange. He just doesn’t seem to understand how floating exchange rates interact with trade dynamics and capital flows. So it is unsurprising that his latest venture into this complex subject is as disastrous as the last.Here is Minford, in the Express, talking about Brits and their holidays:
The mood of British

Read More »

Job guarantees for the disabled

August 28, 2018

It took me a while, but it has now dawned on me why job guarantees might be very popular in the U.S., even among the sick and disabled. The clue is in this response to a tweet from Nathan Tankus:

It’s not just a problem for the technically disabled. Health issues are the #1 reason why people miss work and lose jobs. Many are too weak or previously injured or old before their time. Until Medicare for all, JG with benefits would be a fantastic lift for many.
— Bob Spencer (@binhkhe) August 24, 2018
Here in the U.K., access to healthcare is not dependent on being gainfully employed. But in America, it is. If you aren’t working, your access to healthcare can be very limited. Thus, sick and disabled people who are unable to work can lose access to healthcare. The very people who need it

Read More »

Life after death

August 12, 2018

[embedded content]
Last Friday, I watched my father die.
It was the first time I had witnessed death in a human being, though I have seen it in animals. I will never forget what it looked like. The pallor of death is quite different from paleness due to shock or illness. Even before death arrives, the blood drains away from the face as if bleached, leaving behind something more like wax than human flesh.
Right up to the end, I knew he could hear. He tried to open his eyes when I spoke to him. He knew that my brother and I were there. I don’t know if he was in pain, but his breathing was distressed, so I asked the palliative care nurse to give him morphine. Perhaps the morphine stopped him fighting the process of death. He died shortly afterwards.
I have sung about death many times: in

Read More »

Intermezzo

July 7, 2018

No doubt you are all wondering why Coppola Comment has been quiet for the last two months. There are two reasons: the first is personal – my father is seriously ill and needs a lot of my time. But the second will I hope be music to your ears. I am writing a book.
My forthcoming book will be called "The Case For People’s QE" and will be published by Polity, probably in Spring 2019. Yes, I know, the title makes it sound as if I have gone over to the dark side. But I assure you I have not become a Corbynista. My version of "People’s QE" has a long and hallowed pedigree, running all the way from Keynes through Friedman to Willem Buiter, John Muelbauer, Paul McCulley, Zoltan Poszar and numerous other sensible people. It’s really the outcome of much of my thinking and writing over the last

Read More »

A very British disease

June 17, 2018

The desire to judge people’s motives rather than addressing their needs is a “British disease”. We have been suffering from it for hundreds of years, cycling endlessly through repeated cycles of generosity and harshness. Each cycle ends in public outrage and an abrupt reversal: but the memory eventually fades, and the disease reappears in a new form. In this post, I outline the tragic history of Britain’s repeated attempts to "categorise the poor".
For centuries, successive British social systems have
recognised that there are people who cannot work, whether because they are too
young, too old, too ill or too infirm. These people need to be provided for by
others – in the first instance families, but where family support networks
break down, support must be provided by the wider

Read More »

Velocity Matters

May 10, 2018

An accounting
identity does not indicate the direction
of causation. Not ever.
I’ve been caught out on this a few times myself, usually
when I am trying to deduce something useful from national accounting equations.
But I’m merely a writer. People actually involved in the formulation of policy
should know better.
Here’s an attempt by people who should know better to
try to infer the direction of causation from an identity. On the St. Louis
Federal Reserve’s blog site is this
post by Yi Wen and Maria Arias. It purports to show that the reason why
three rounds of QE in the US have failed to raise inflation is because the
velocity of money has collapsed. And they then come up with some reasons why
velocity has collapsed, though sadly no ideas about what to do about it.
Their argument

Read More »

Arithmetic for Austrians

April 22, 2018

This piece grew from a number of conversations with people of Austrian economic persuasion, mostly Bitcoiners and goldbugs (which these days seem mysteriously to have converged). I thought of calling this "Monetarism for goldbugs", but decided to preserve the mathematical slant of the previous pieces in this series. But it’s monetary arithmetic, of course. And as Austrians tend to obsess about "sound money", it is specifically sound monetary arithmetic. (Note: Someone has pointed out on Twitter that the arithmetic in this piece is considerably more advanced than the equations themselves suggest. If you are bit rusty on the mathematics of change, I suggest reading the first piece in this series, Calculus for Journalists). 
Inflation is complicated
As "sound money" seems to mean "no

Read More »

The Bitcoin Standard – a critical review

April 11, 2018

For over a century now, the world has lacked a genuinely international means of payment. This is partly due to decisions made at the Bretton Woods conference in 1944, when the US dollar was adopted as the principal international settlement currency, rather than John Maynard Keynes’s suggestion of an independent global currency that he called "bancor". Although the Bretton Woods gold-backed structure ended in 1971, the US dollar became ever more dominant. In 2008, the dollar’s global reach enabled an American financial crisis to spread to the entire world, causing a deep recession and long-lasting malaise. Ever since, there has been a deep longing for a more stable international financial system, one which didn’t depend on debt, wasn’t dominated by the US and was immune to political

Read More »

The EU is not a bastion of protectionism

March 15, 2018

Jamie Powell at FT Alphaville has debunked the USA’s claim to be the least protectionist trade area in the world. With the help of a couple of useful charts, he shows that it comes in a modest ninth on the list in trade-weighted terms. Go Jamie. The "victim America" narrative really needs to be stamped on, hard. America’s trade deficit is not caused by mercantilist trade policies in other countries, it is an inevitable consequence of the dominance of the dollar – and is thus a measure of America’s post-war success. But in the course of debunking the USA, Jamie also incidentally debunked the Ultra Brexiters.
The Ultras insist that the EU is a bastion of protectionism, with extremely high tariff barriers to third countries. Indeed it does have very high tariffs for some products, mostly

Read More »

The sad story of Maplin Electronics

March 7, 2018

Last week saw two high-profile corporate failures in the UK. Toys R Us finally went into administration after a stay of execution over Christmas. And private equity firm Rutland Partners pulled the plug on geeky electronics retailer Maplin. Total job losses from both failures amount to something in the region of 5,000 across the whole of the UK.
No-one was particularly surprised by the failure of Toys R Us. The company had proved slow to respond to the rise of online shopping and the trend away from large out-of-town retail outlets in favour of small local shops. In the US, Toys R Us filed for Chapter 11 bankruptcy protection (the American equivalent of administration) in September 2017. Despite the American company’s insistence that its European operations were not affected, it was

Read More »

An Alternative Brexit Polemic

February 23, 2018

You would think, wouldn’t you, that an "Alternative Brexit Economic Analysis" by four highly experienced and qualified economists would be a rigorous exercise in economic forecasting, supported by excellent econometrics and with care taken to avoid confirmation and selection bias?  A new paper from the Brexit-supporting thinktank Economists for Free Trade critiques the Government’s recent forecast that Brexit would cause a GDP loss of between 2 and 8 percent over 15 years, with the "hardest" Brexit causing the greatest loss. Or at least, that’s what the paper says it is doing. But the way it goes about it is decidedly odd for something claiming to be an "Alternative Brexit Economic Analysis". The first section of the report is an extensive discussion of the reasons why no-one should

Read More »

The misery of Mitie

February 12, 2018

The failure of Carillion has brought to light widespread moral hazard in the outsourcing sector. For years, companies that deliver crucial public services relied on expectation of government support to keep their borrowing costs low and enable them to please shareholders by giving dividends they couldn’t afford. They, and the banks and investors that funded them, assumed they were too important to fail. So when Carillion was on the brink of failure, RBS tightened the screws, clearly believing that the UK government would eventually cough up (my emphasis):
RBS….insisted that this revised arrangement "would be in place until support from [the Government] had been agreed and that the terms of this support would determine whether other uncommitted facilities with RBS would be

Read More »

Clearing out Carillion’s cupboards

January 29, 2018

Those excellent researchers at the House of Commons Library have produced a briefing paper on the Carillion collapse. It is clear, succinct and well-researched. And extremely grim.The researchers seem to have gone back through the reports & accounts to about 2009. And they conclude that Carillion was a basket case not just in the last year of its life, but from about 2011 onwards. I’ve now done the same exercise, and I agree with them. Carillion’s cupboards were virtually bare, and the little that was in them stank.This chart summarises the mess that Carillion got itself into:

We need to be a little careful with this chart, of course, since it is comparing stocks and flows. But what it shows is that a large uplift in loans in 2010-12 generated absolutely no additional net cash revenue

Read More »

The Carillion whitewash

January 20, 2018

The Carillion whitewash has begun. Carillion’s interim CEO, Keith Cochrane, is spinning the line that had banks not pulled funding, its collapse could have been
averted. And the Financial Times has
released details of a letter Carillion sent to the Government at the
beginning of January, in which it asked for short-term advances to tide it over while it underwent restructuring. Labour MP Pat McFadden has written to the Treasury
Secretary asking whether it would have been more cost-effective for the U.K. Government
to support Carillion, rather than allowing it to collapse.
This looks to me like a campaign to deflect blame from Carillion’s management to its lenders and customers. We are being led to believe that it wasn’t insolvent, it was just illiquid, and depriving it of short-term

Read More »

The Fat Controller of the Lightning Network

January 17, 2018

The geeks to whom my post on probability was addressed responded exactly as I expected. "You don’t understand the tech", they said. And they went on about network routing protocols and Dijkstra’s algorithm. Someone even sent me a spec for an onion routing protocol for the Lightning network. I read it and sighed. They had completely missed the point.
To be sure, I had made an incorrect assumption about Lightning. I assumed that Lightning devs respected property rights. It turns out that they don’t even know what property rights are, let alone respect them. They see Lightning’s pathfinding problem as entirely a technical matter. If it were, then solving it would simply involve developing algorithms to oversee the network and find the most efficient payment paths. I did mention this

Read More »