Sumner on Greece's New Leftist Government

     He actually has praise for the new self-declared radical leftist Greek government which he says has actually announced an NGDP target. 

    "Back in 2008 you rarely heard economists talk about nominal GDP.  Now it’s the hot new idea in monetary policy targeting. But that’s not all, we are also seeing more interest in nominal GDP-linked assets.  Most famously, Robert Shiller has proposed “trills,” which would be assets with a value linked to one trillionth of nominal GDP. They could be used to hedge against aggregate nominal income risk. I’ve proposed nominal GDP futures markets, which are probably more accurately termed “prediction markets.” And now we have the new Greek government talking about NGDP-linked government debt:

Greece’s radical new government unveiled proposals on Monday for ending the confrontation with its creditors by swapping outstanding debt for new growth-linked bonds, running a permanent budget surplus and targeting wealthy tax-evaders.

Yanis Varoufakis, the new finance minister, outlined the plan in the wake of a dramatic week in which the government’s first moves rattled its eurozone partners and rekindled fears about the country’s chances of staying in the currency union.

After meeting Mr Varoufakis in London, George Osborne, the UK chancellor of the exchequer, described the stand-off between Greece and the eurozone as the “greatest risk to the global economy”.

Attempting to sound an emollient note, Mr Varoufakis told the Financial Times the government would no longer call for a headline write-off of Greece’s €315bn foreign debt. Rather it would request a “menu of debt swaps” to ease the burden, including two types of new bonds.

The first type, indexed to nominal economic growth, would replace European rescue loans, and the second, which he termed “perpetual bonds”, would replace European Central Bank-owned Greek bonds.

.  .  .

“What I’ll say to our partners is that we are putting together a combination of a primary budget surplus and a reform agenda,” Mr Varoufakis, a leftwing academic economist and prolific blogger, said.

   A former blogger becomes a finance minister and proposes NGDP-linked bonds. What a crazy world we live in!

     http://www.themoneyillusion.com/?p=28563#comments

    I don't know if Yaroufakis is aware he's going Market Monetarist-or if he's even aware of what MM is-but as I've said Sumner's proposed move from an inflation target to an NGDP target is the side of the coin that attracts the Left in general-it's the carrot for liberals. 

    http://diaryofarepublicanhater.blogspot.com/2015/01/morgan-warstler-on-sumners-wicked-evil.html

    Again the 2 sides of the MM coin are 

    1. NGDP targeting

    2. Monetary offset

   Basically number 1 appeals to liberals, number 2 to conservatives. Where I am critical of Sumner it's mostly for 2 of course, though, what I see as his rather problematic way of arguing or 2 makes me wonder if I shouldn't be more skeptical of 1 as well. I've neither endorsed nor rejected 1 out of hand though I see that many liberals have been more positive on it than I am willing to be at least yet. I find it interesting and yes it's an intuitive idea but certainly it's not like intuitiveness is a proof of truth or that no intuitive ideas are ever wrong like Friedman's money supply rule. 

    Sumner at Econlog has more on Greece:

    "Over the past 6 years I've repeatedly warned that monetary policy is the Achilles heel of the right. Perhaps the most famous example was the US during the 1920s, where small government policies under Harding and Coolidge were ruined by tight money under Hoover. Tight money that was strongly supported by conservative economists. That opened the door to a left-wing government full of counterproductive statist ideas such as the NIRA, the Wagner Act, minimum wage laws, and one really good idea--monetary stimulus."

      "Now it just so happens that in the short run cyclical factors dominate structural factors (except in the most extreme cases.) Although the recovery from the Great Depression took longer than it should have (8 years), growth rates were pretty high, and things looked good in a relative sense, especially given the abysmal performance of the economy during the early 1929-33 period. The left got credit."

      "Exactly the same dynamic played out in Argentina, just replace 1929-33 with 1998-2002. Argentina also saw a cyclical recovery under a new left-wing government, despite really bad statist policies. It is only recently, more than a decade later, that the heavy price for economic mismanagement by the left is becoming apparent. Greece is far and away the Western European country that most resembles Argentina, right down to the dysfunctional electorate and extremely low levels of civic trust. So will Greece repeat the pattern of Argentina? My guess is that it will almost certainly do so to some extent. The new government will probably be viewed as relatively successful, even if it does a poor job in an absolute sense."

     http://econlog.econlib.org/archives/2015/02/a_few_thoughts_1.html

     So the Right has to become MM then it can win. This has always been his clarion call-to conservatives not liberals. Sumner shows that on austerity he never sees enough blood to satisfy him. He wants the ECB to double down on demands from Greece. 

     "In a logical world the troika would go into the negotiations demanding concessions from Greece. After all, the earlier debt forgiveness was conditional on painful structural reforms. Now that Syriza has abandoned those reforms, the troika should offer less aid, demand more debt repayment. Instead they seem likely to reward this bad behavior with even more concessions, which would be basically telling the Spaniards that they'd be fools not to elect Podemos."

     By his own admission its actually the ECB's terrible monetary policy that has given rise to Far Right and Far Left wing governments so why would the ECB have any right to punish Greece here? Isn't the Greek election in a sense the ECB's 'punishment'? 

    One thing that never changes: Sumner is the leading advocate for more and more austerity. It's like the No Real Scotsman argument-if austerity brings pain it's only because it wasn't deep enough. He thinks the new Greek govt is 'more radical than you can believe' yet anyone that doesn't believe in austerity is too radical to engage in a conversation in his narrow understanding of the world.

     He also has a rather perverse understanding of recent racial dynamics in the US,

    "More broadly, I see the rise of extremists on the left and right as the end of the European Dream. Here's an analogy that may or may not be useful. In the 1960s, America had a dream of a color-blind society. We passed civil rights laws. But it never happened, and at some point over the next few decades the dream was quietly abandoned. In recent years blacks have been falling further and further behind whites, and it's is now more or less accepted that the problem won't be fixed in the foreseeable future. Oh sure, the left still talks about the curative powers to Head Start, but I can't believe anyone really thinks it would make much of a difference. In Europe, there was also a dream that people would stop thinking in nationalistic terms, and start thinking of themselves as "Europeans." Now it's back to victims and villains. Like many black, Hispanic and Native Americans in the US, people on the southern and eastern periphery of Europe increasingly think of themselves as victims of an unjust system. In contrast, rich countries in the north and west of Europe increasingly "blame the victim" and see "cultural problems" that seem almost intractable."

   He tried to cover his ass by saying that it may or may not be useful which is just as well as it sure wasn't useful. Ironically, he is probably way too pessimistic about race relations in America which are certainly light years ahead of the 60s. It's true there is still too much economic inequality harming minorities but socially speaking obviously things are better than the age of Segregation. We do have a Black President. He seems to think that all Black and Latino people think they're victims which is in itself extremely offensive and condescending. 

    He seems to think that all that is ever needed to fix any problem are right wing structural reforms. Maybe Lincoln shouldn't have bothered to free the slaves but just deregulated the cotton business for slave owners and cut their taxes. At some point this would have obviously benefited slaves more than their freedom.