More Right-Wing Nonsense

I really should avoid reading what he says as this blog might become simply a responding to the imposter Cranmer blog, which I don't want it to be. But he is the epitome of the right-wing Christian that needs to be countered. Not with left-wing nonsense but with some simple economic facts.

So today Cranmer goes on about Portugal, which looks set to have to accept an EU bailout package. It's one of Cranmer's favourite topics, the Eurozone.

He tends to spout the usual stuff about how because various parts of the PIGS consortium (Portugal, Ireland, Greece, Spain) are in the Eurozone, they can't change interest rates to deal with domestic problems and hence let the currency in their country depreciate (careful non-use of the word devalue there).

As usual, it's the EU that is the bad guy in all of this. It's not, by any means, the same bankers all around the world that acted on the moral hazard created the world over by the "too big to fail" mantra that caused the Portuguese mess. Nope, the EU is entirely to blame. But that's an aside.

Cranmer goes on in usual right-wing style, about economic sovereignty, which apparently Portugal surrendered to the EU. By sovereignty he means ability to make decisions on one's own without interference from outside one's borders.

But what is he proposing instead? Does the UK have sovereignty? Does Japan? Does the US even? Probably the only country that has sovereignty in the world is the one that shuts itself out of all global financial movements, notably North Korea.

Because simple economic relationships like covered and uncovered interest rate parity make it abundantly clear that in a world of free capital markets, interest rates in any country are not determined within that country alone - if that country wishes to maintain a steady exchange rate. In other words, had Portugal still its own currency, then had it decided to cut interest rates (in a sovereignty manner) to respond to this crisis then like the UK, it would have seen a dramatic currency depreciation (we've lost 25% in two years).

Now, you may say, that's just great. Imports more expensive, exports cheaper, the trade balance will improve and we'll head towards an export led recovery. But that didn't happen for the UK. The problem is that any country is heavily dependent on all its trading partners in such a strategy: To export, you need buyers, and if those buyers aren't there (as they generally aren't right now since few economies are growing strongly) then you are in trouble. You still have a stagnating economy, and worse still, you have higher inflation from those higher import prices - just what the UK has.

Yet again, and I've repeatedly made this point whenever Cranmer, as the representative of wrong-headed right-wing Christianity, spouts on the EU and the PIGS, it's just not that simple. It's a globally inter-dependent world Had Portugal been out of the Eurozone (and even the EU), there is no guarantee it would have avoided this. The blatantly obvious case in point here is Iceland. Need I really say any more? At least Portugal has a chair at the table in the ECB, which is more than it had before joining when it simply followed Germany.

I just wish anti-EU right-wing Christians would stop using bogus arguments that just don't stack up to try and support their prejudices. The only way any country can recover sovereignty is to cut itself off from the rest of the world and go for autarky - and I think we all know the general, not particularly pleasant, results of that...