Last night, the Resolution Foundation hosted a debate to launch my book, "The Case for People’s Quantitative Easing". A great panel consisting of Jagjit Chadha, Director of NIESR; Fran Boait, Executive Director of Positive Money; and James Smith, Research Director of the Resolution Foundation, debated my ideas with immense verve, ably moderated by Torsten Bell, Chief Executive of the Resolution Foundation. You can watch the debate here.In 2008, QE did a great job of supporting asset prices and preventing the disastrous deflationary spiral of the 1930s. But since then, enormous quantities of asset purchases by central banks around the world have proved unable to raise aggregate demand and kickstart growth.Although central banks didn’t do a bad job in the last recession, many of the toolsRead More »
Articles by Frances Coppola
Yesterday, the outsourcer Kier Group announced a major restructuring. The announcement makes grim reading. The company will divest or close down three of its business lines, with the loss of 1,200 full-time equivalent (FTE) jobs, half of them by the end of this month. The dividend will be suspended for two years. Kier’s share price fell on the news, closing down 17.43%.Remarkably, some analysts took the restructuring announcement as a "buy" indication, which might explain why its share price has recovered slightly today. I wouldn’t, personally. Kier is in big trouble, and has been for some time. Admittedly, Andrew Davies, its new CEO, has wasted no time in getting to grips with the company’s problems: the proposed restructuring is certainly drastic. But given how difficult theRead More »
In a lecture presented at the 2011 IMF Annual Research Conference, Hyun Song Shin of Princeton University argued that the driver of the 2007-8 financial crisis was not a global saving glut so much as a global banking glut. He highlighted the role of the European banks in inflating the credit bubble that abruptly burst at the height of the crisis, causing a string of failures of banks and other financial institutions, and economic distress around the globe. European banks borrowed large amounts of US dollars through the money markets and invested them in US asset-backed securities via the US’s shadow banking system. In effect, they acted as if they were US banks, but in Europe and therefore beyond the reach of US bank regulation. This diagram shows how it worked (the “border” is theRead More »
Eurozone inflation is in the doldrums again. After perking up to 1.7% in April, it slumped back to 1.2% in May. According to Bloomberg, this was "lower than expected". But I wonder who, apart from the ECB, really expected anything else. Core inflation has been well below target for the last five years:
(chart from Bloomberg)And although the headine HICP measure increased in 2016-18, this was mostly due to the oil price bouncing back from its 2014-15 slump:
(chart from Macrotrends)The wild swings in the energy inflation rate can be clearly seen on this chart from Eurostat:
It’s perhaps not obvious at this resolution, but the movement in headline HICP is almost entirely due to the energy price.In fact comparing the inflation and oil price charts, it is hard to see much justificationRead More »
It’s been pretty quiet in Lafferland since the Brexit referendum. All the talk has been of trade and sovereignty, not deregulation and tax cuts. But there’s nothing quite like a Tory leadership election to bring supply-siders out of hibernation. So here is Sajid Javid singing an old sweet song to attract the votes of Tory party members:
Cutting tax rates could bring in billions of extra revenue, which would mean:
More nurses 👩⚕️👨⚕️
More teachers 👩🏫👨🏫
More police 👮♂️👮♀️"I would cut [top rate] if it brings in more revenue and gives us better public services" – @sajidjavid #TeamSaj pic.twitter.com/MxVUVcI5q2
— TeamSaj (@TeamSaj) June 2, 2019
Cutting taxes for the rich in order to generate more public revenue. The Laffer curve is back.Not that it has been absent for long, really.Read More »
I can’t stop looking at this table. Mortality rates in England rose between 2011-16 for teenagers and most working-age adults under 50:
That’s bad enough. But what should give all of us pause is the reason that Public Health England (PHE) gives for rising mortality among young and middle-aged adults:
Among people aged 20-44, an increase in mortality rates from accidental poisoning had a negative effect on life expectancy between 2011 and 2016 of -0.06 years in males and -0.11 years in females….
Data from ONS indicate that in this age group, over the whole
period from 2011 to 2016, 70% of accidental poisonings were due to drug misuse and 10% were to alcohol.
PHE also notes a slight increase in male mortality rates due to cirrhosis, which is in the top 10 causes of death for men.
Last week I attended a workshop entitled "Enhancing the Bank of England Toolkit," hosted by the Progressive Economy Forum. Presented at the workshop, and underpinning most of the debate, was this report from GFC Economics and Clearpoint Advisers, which was written for the Labour Party and first issued last June. The report was widely criticised at the time, as one of its authors ruefully observed in the introduction to the presentation. Nonetheless, the authors presented it unamended.The report recommends setting a productivity target for the Bank of England in addition to its existing inflation target:
An additional target will be introduced: productivity growth of 3% per annum. The Bank of England
will be required to explain how its policies are impacting upon productivity and,
In 1795, the parish of Speen, in Berkshire, England, embarked on a radical new system of poor relief. Due to the ruinous French wars and a series of poor harvests, grain prices were rising sharply. As bread was the staple food of the poor, rising grain prices increased poverty and caused unrest. Concerned by the possibility of riots, the parish decided to provide subsistence-level income support to the working poor. The amounts paid were anchored to the price of bread. Each member of a family qualified for a payment, so the larger the family, the more they received. In effect, it was a system of in-work benefits.
Subsistence-level income support already existed for the non-working poor. The Poor Laws, first introduced in Elizabethan times, distinguished between different categories of
Sectoral balances can tell us so much about what is going on in an economy. Especially when they are expressed as a time series, as in this remarkable chart from the ECB:
Although it is a time series, this is not a rate-of-change chart. The y axis is in billions of Euros, not in percentage growth rates. But the chart nevertheless shows that Eurozone net saving has risen steadily since the financial crisis, except during the Eurozone crisis of 2011-12 when it dipped slightly.
What do we mean by "net saving"? The legend appears to conflate saving with investment, and the brief explanation at the bottom of the chart doesn’t really help. So here’s some simple algebra to sort it out.In national accounting, "saving" is the excess of income over desired consumption. For the private sector, it
A version of this post appeared on Pieria in December 2013.
In my post “The desert of plenty”, I described a world in which goods and services are so cheap to
produce that less and less capital is required for investment , and so easy to
produce that less and less labour is required to produce them. Prices therefore
go into freefall and there is a glut of both capital and labour. This is
There are two kinds of deflation. There is the “bad” kind,
where asset prices go into a tailspin and banks and businesses fail in droves,
bankrupting households and governments and resulting in massive unemployment,
poverty and social collapse. America experienced this in the Great
Depression and narrowly avoided it in the Great Recession. More recently, at least one European
This post first appeared on Pieria in November 2013.
Throughout history, humans have dreamed of plenty. They have
longed for there to be abundant supplies not only of essentials, but of
luxuries. The promise made to the Israelites wandering in the desert was that
they would eventually come to a land “flowing
with milk and honey”. And the vision of the New Jerusalem in Revelation is
Recent forecasts of forthcoming abundance, too, have focused
on the benefits. Imagine a world in which everything was so plentiful that not
only the essentials of life but the luxuries, too, were free. There would be no
need for money, because nothing could be bought or sold; and there would be no
need to work, because there would be no need for income. And if
In a recent article for the New Statesman, the economics commentator Grace Blakeley makes an extraordinary claim. Writing about the origins of the IMF, she says:
Seventy-five years have passed since these international financial institutions were created in Bretton Woods, New Hampshire, in 1944. Back then, delegates sought to tame the power of international finance, the growth of which helped to cause the 1929 Wall Street Crash and the ensuing Great Depression. JM Keynes – who led the British delegation – arrived at Bretton Woods with the aim of “euthanising” a financial elite he viewed as parasitic on productive economic activity.
I thought that Bretton Woods was about free trade and economic cooperation, not "taming the power of international finance." But I can be wrong. So I
This post was originally published on Pieria in December 2013. Since then, the idea that the long-term real equilibrium interest rate must be equal to or lower than the long-term sustainable growth rate has become much more mainstream. I am just amazed that anyone ever thought it could be otherwise. A long-term real interest rate persistently above the sustainable growth rate cannot possibly be an "equilibrium" rate. As I show in this piece, it can only be maintained through rising inequality. It is by definition ponzi and therefore unsustainable. Periodic financial crashes are inevitable in any system in which growth does not cover the interest on debt. Three years ago, Nick Rowe produced this
post describing a “weird world” – a world in which the equilibrium interest
rate is at or
My debut post at CapX develops a theme I have written about many times. Central bankers are tasked with controlling inflation, but they don’t understand it.
For the last decade, central banks in developed countries have been
pursuing policies designed to raise inflation. Quantitative easing, cheap
funding for banks, tinkering with yield curves, low and negative interest rates
– all aim to raise inflation to the ubiquitous 2% target.
Understandably, central banks’ inflation forecasts assume that their
policies will return inflation to target over the medium term. But as time goes
by, and inflation stays stubbornly low, their forecasts are becoming increasingly
difficult to believe. This does not bode well for central banks that depend
above all on credibility…..
Read on here.Related
We don’t understand inflation. Those who lived through the high inflation of the 1970s are convinced that inflation is always and everywhere caused by wage-price spirals. Germans, economic Austrians and Bitcoiners are convinced that inflation is always and everywhere caused by central bank money printing. Small-state supporters are convinced that inflation is always and everywhere caused by profligate governments borrowing and spending excessively. Hard money enthusiasts are convinced that inflation is always and everywhere caused by currency devaluation. Every school of economics has its own theory of inflation.We don’t even know what we mean by inflation. As the Cleveland Fed entertainingly discusses, inflation originally meant expansion of (paper) currency in a manner that resultedRead More »
The video blogger Crypto Eri (@sentosumosaba) thinks she has evidence that the American Bankers’ Association (ABA) wants the Federal Reserve to adopt Ripple/XRP as its cross-border settlement system. She has found a letter from the ABA which makes three requests to facilitate faster interbank settlement:A liquidity management tool
Access for chartered financial institutions
Hey hey everybody, this looks just like Ripple’s bag, doesn’t it? "You are going to see how perfectly matched XRP is to meet their request," she says.I’ve tracked down the ABA’s letter to which she refers. It responds to a Federal Reserve request for comment on proposals for actions to support interbank settlement of Faster
Payments. Faster Payments are domestic online and automated payments, not
It’s Saturday afternoon, and I have just returned from singing Evensong at Rochester Cathedral. The first reading was the dreadful story of Laban’s deceitful behaviour towards Jacob. Laban made Jacob work for seven years in return for a promise of his daughter Rachel’s hand in marriage. But at the end of the seven years, Laban palmed Jacob off with his other daughter instead, then made him work for another seven years to claim the hand of the woman he loved. This story is horrible not just because of Laban’s underhand behaviour, nor even because Laban treated his daughters as his property, but because of the damage it did to Jacob’s family. The rivalry between Rachel and her sister set up deep divisions that led to attempted murder and the disintegration of their family.Writing inRead More »
Here is a Public Service Announcement.Since @Galgitron, who I think is certifiably insane, has called for the XRP Army to deprive me of income by spamming the adverts on Forbes, I have decided to write future posts about XRP here on Coppola Comment. Moving to Coppola Comment negates accusations that I make money from posting what Ripplers call "FUD" on Forbes. Coppola Comment is widely read, but certainly doesn’t have the reach of Forbes. There are no adverts here and I don’t get paid for writing on my own blog.
I can, however, write freely and say what I really think. And I will. I have taken so much abuse from XRP supporters now that I am distinctly uninterested in soothing their aggrieved egos with gentle words. If they behave like disgusting rabid hyenas, that is what I will call
This post originally appeared on Pieria in July 2014. Roger
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.
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
disagree. I think the
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
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 aRead More »
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 andRead More »
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
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 toRead More »
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
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 otherRead More »
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 upRead More »
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 thanRead More »
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
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