Not strange at all. Sure, there’d be political economy conflict in 🇪🇺 over XR levels/pegs. It absolutely would’ve offered relief for 🇬🇷, now <13 years> into a Great Depression+ w/ no end in sight. We <still> don’t fully appreciate the epic, unresolved disaster of the EZ crisis.
The 🇪🇺 made a desert and declared victory:
Everything that was true about the Eurozone in 2015 remains true and unresolved in 2021. That EMU has survived six years does not mean it will survive forever, especially as long as all of the alternatives to devaluation remain politically infeasible.…
So no, the really strange phenomenon is that 🇪🇺 is still pretending that comprehensive debt relief, serious fiscal union, & other policies that would make the EZ sustainable w/o EMS redux can continue to be kicked forever down the road, & that the bill will never come due.
It’s all happening again. We’re at the equivalent of 2010-11, pretending that things will be fine in a year or two because of a $750B Recovery Plan that is woefully inadequate, and because Mario Draghi is now PM. Lost Decade II-III looms for 🇬🇷. Lost Decade IV looms for 🇮🇹.
There are plenty of options to ensure the long-run sustainability of the EZ w/o -exits or EMS redux. But 🇪🇺 is again choosing “none of the above,” & the results will be sadly & tragically predictable over the next years. Maybe it’ll be enough again. YMMV.…

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More from @mcopelov

4 Apr
When (Hoover) Institutions show you who they are, over and over again, believe them
Maybe platforming Niall Ferguson on currency and debt issues in 2021 is something that ostensibly serious media outlets want to reconsider? 🤔
Read 4 tweets
3 Apr
Sigh. It’s a month, so apparently we’re doing this again.

No, the dollars hegemony is not looking fragile.


As @michaelxpettis notes, this isn’t going to happen anytime soon because this would be disastrous for 🇨🇳 ‘s growth model, financial stability, etc. As he also notes, this is literally the same article written about the yen and the Euro in years past.

As promised, here is your link to the @BIS_org report detailing the dollar’s unprecedentedly extensive centrality in global finance. This isn’t going to markedly change anytime soon, & certainly not going to lead the dollar to lose “nearly half its weight” as a reserve currency.
Read 7 tweets
1 Apr
Media, please take note. Every article should include both this information and information on real interest rates for the entire US Treasury yield curve.
"Biden's infrastructure plan will cost 1% of GDP over the next decade at a real interest rate of -0.6%" is the proper framing. Or perhaps "the productivity & growth gains from this alone, coupled w/ the negative real interest rates, will reduce federal debt levels by 2031."
Read 4 tweets
29 Mar
"we no longer have a political party devoted to fiscal conservatism"

The party spending now to avoid another Lost Decade will end up overseeing debt-to-GDP reduction via growth & investment by 2028, & the media will still be offering this both sides/govt-as-household nonsense.
"as Brian Riedl of the Manhattan Institute warns, even a small rise in rates “could bring a full-scale debt crisis.”

No, it won't. That's not how this works. That's not how any of this works:…
What does one mean by a debt crisis? A sudden stop? An inability to borrow? To pay? Hyperinflation? There's neither a model nor empirical evidence of this in modern US history. The US had no problem borrowing, spending or servicing debt even at the peak of the oil/Volcker shocks. Image
Read 5 tweets
18 Mar
I broadly agree w/ Kelton's conclusions re: debt & inflation for the US ().

But I confess, I remain puzzled by the need for/novelty of MMT. You get to exactly the same conclusions w/ standard open-economy macro for countries w/ floating exchange rates.
That the austerians & deficit hacks won the debate for so long is not a problem w/ economic theory. It's problem of politics & the media listening to the wrong economists. They could have listened to @paulkrugman or @martinwolf_ or @sjwrenlewis instead.

Or any number of Federal Reserve chairs in the last 15 years.

Read 5 tweets
18 Mar
No, it's not back to the 1960s. No, serious people aren't saying "debt doesn't matter and there are no effective supply constraints." Yes, global capital flows, the international monetary system, history, & data are completely missing again.

Each of these pieces fails to take into account the 🇺🇸position in an era of unprecedented global finance & dollar hegemony. If you want to claim folks are ignoring debt sustainability & "supply constraints," you need to actually assess those seriously:…
We're not 🇬🇷 or 🇮🇹. We're not even 🇯🇵. The reason people are saying "debt doesn't matter & there are no effective supply constraints" is that, at debt/GDP of 100% (or even 200%), the 🇺🇸is not remotely near them. They surely exist, but you can't even see them over the horizon.
Read 10 tweets

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