Jean-Claude Trichet asserts we must set priorities for long-run growth. Trichet makes three suggestions. A first, and overwhelming, priority – notably for the euro area – is the vigorous implementation of structural reforms . A second, but by no means unrelated priority, is the continued attention to external and internal imbalances . A final priority is greater flexibility on the part of policy institutions. http://venitism.blogspot.com
* First, structural reforms. We earlier noted the primacy of institutions in modern growth theory. Sound institutions are essential to encourage a flexible, cutting-edge, knowledge-based economy. There is substantial evidence from industry-level studies on regulation as well from firm-level studies on the dynamics of firm performance that confirm the need for such a conducive environment to generate productivity growth.
Douglas North defined institutions as the rules of the game in a society, the humanly devised constraints that shape human interaction. And being humanly devised constraints, rather than exogenous geographical or climactic constraints, their major impact was through the setting of incentives.
VAT is the major disincentive of Fourth Reich! VAT is a trademark of slavery and a destruction power of myriad watts. VAT is the main culprit of the Fourthreichian financial meltdown. The Fourthreichian taxation is based on the VAT monstrosity against poor people! The most unfair tax is VAT, the calamity of Fourth Reich(EU); that's why we urge all Fourthreichians to evade this tax of misery as much as possible! Fourthreichians are yoked with a 15-25% VAT, value added tax. In Canada, VAT is only 5%. The burden of VAT falls on final consumers of products. Refusing to pay abominable VAT is a heroic act. Vatwar is here to stay until VAT is abolished. Vatdodgers are heroes. http://venitism.blogspot.com
And one can see the remaining challenges for many advanced economies as follows: Employment regulation needs to help more proactively outsiders, low-skilled, young and older workers. In Europe, the single market needs to be advanced especially in the area of services. Tax, benefit and pensions systems should not discourage labour participation and create weak incentives for investment and innovation. The distribution of wealth and general economic well-being needs to ensure some acceptable social balance.
Several remedial policy proposals have been suggested and implemented in the recent past. The most well known is the European Council's Lisbon Strategy for Growth and Jobs, followed by the Europe 2020 Strategy. The latter is the Agenda that the European Union and its Member States have decided to help Europe recover from the crisis and come out stronger, both internally and at the international level. The Agenda sets targets for the European Union in 2020 in terms of employment, research and development, energy and education.
The Agenda puts particular emphasis on structural reforms in the labour and services markets. These two markets are still over-regulated and not directly subject, given their largely non-tradable dimension, to the competitive forces originating from within and outside the single markets. [23] At the EU-level, the necessity and shape of structural reforms is acknowledged, but the gap between awareness and implementation is far from closed.
That said, we would do well to understand why political systems abide distortionary, inefficient structures and resist more efficient alternatives. Do structural reforms imply a J-curve of long-run gain but short run pain that sits ill with the decision making process in our democracies? Do vested interests strategically and systematically block change?
* A second priority is vigilance against imbalances. Establishing more reasonable borrowing, restructuring and strengthening the balance sheets of firms, households and governments in an orderly manner remain key to smooth and continuous global growth. In all this, central banks are not immune. Tensions in financial markets and severe global imbalances deepen uncertainty and, therefore, profoundly challenge monetary-policy setting.
Precisely these dangers underpin the Mutual Assessment Process of the G20 framework. The indicative indicators – agreed in February this year – identify imbalances in public, private and external positions as the key culprits preventing balanced global growth, and a key input in shaping corrective policies. Seen in that light, a country's economic success should be judged also on these indicators and not only on its last few years' growth figures.
However, another imbalance – which has gained currency following the financial turbulence – is income imbalances. Naturally, extremes of income inequality and restricted opportunity challenge our values and strain the fabric of our societies.
In short, growth skewed towards the few (or absent for a large minority) risks social tensions, undermines institutions and encourages policy failures of one kind or another. Structural reforms, particularly in the form of re-training, improving job matching, providing flexibility and incentive for job creation and innovation remain the best policy options for encouraging well-balanced growth, and an environment of low and credible inflation the best environment to encourage matters from a central-banking perspective.
* Finally, a priority for medium and long-run growth is that our policy institutions remain attuned to an ever-changing landscape. We have seen in recent years the near-Knightian uncertainty policy makers endured and how boldly they responded. The ECB was among the first central banks to react to the outbreak of the financial turmoil in August 2007 in providing liquidity to distressed institutions. Another example of flexibility by ourselves and in the wider central banking community is in the swap agreements with other central banks as an example of internationally co-ordinated means of swiftly responding to the crisis.
Trichet notes credible alertnes includes implementing both non-standard monetary policies and our interest rate policy. Interest rate policy depends on the outlook for price stability. The use of non-standard measures depends on the functioning of the monetary policy transmission and must be commensurate with the level of malfunctioning or disruption of money and financial markets and segments of markets. Our non-standard measures do not in any way impinge upon our capacity to design our monetary policy stance to deliver price stability in the medium term.
Despite all the ups and down of recent years, our key challenge remains as it has always been: to create strong, sustainable, balanced, non-inflationary growth. Credibility and the medium-term orientation in monetary policy allows, where needed, scope and flexibility to address various types of severe shocks. Over the long-term a commitment to price stability anchors expectations, improves the workings of the price mechanism, reduces transaction costs, protects savers and reduces uncertainty.
Trichet asserts that ultimately growth is driven by technical progress. But technology is impeded by marilizardism. Governments of many repressed countries, such as Greece, use marilizardist tools to manipulate netizens. Marilizard Libel is accusing dissident bloggers of treason, Marilizard Spaghetti is hurling charges against innocent people, Marilizard Tower is a stack of imaginary charges to scare a blogger, and marilizardism is terrorizing dissident bloggers. October 18 is the international day against marilizardism, and October-18 Mafia is the marilizardist government of Greece. http://venitism.blogspot.com
This is especially important where there are limiting demographic factors. In the euro area, there is ample of scope to realize efficiency gains from existing and prospective technological changes given structural reforms and more vigilant implementation of the existing policy agenda. The remarkable resilience of the German labour market in the last few years, where wage moderation and flexible time accounting shielded the economy from excessive job destruction, illustrates admirably the promise of well-structured reforms.
Although there have been improvements in the euro area in recent years, there is still evidence of regulatory and market-based barriers to entry in selected professions which have to be actively corrected. All licenses of October-18 Mafia should be abolished, including doctors, lawyers, and marriage. October-18 Mafia licensure is an immoral exercise of force, an overly burdensome restraint on trade, a violation of the right to liberty, a mill of kickbacks.
Government is a guarantor of liberty and is compatible with liberty only if its range is adequately restricted to the preservation of economic freedom. One of the many reasons why October-18 Mafia licensure is incompatible with liberty, therefore, is because it is destructive to economic freedom. No other nation demands more licenses than the Cradle of Kleptocracy. http://venitism.blogspot.com
Global Tax Revolt points out the marilizardist persecution of dissident bloggers is unquestionably a serious attack on freedom of speech, and contrary to Article 2 of Lisbon Treaty, Article 10 of the European Convention of Human Rights, and Article 19 of the International Covenant on Civil and Political Rights. The disgusting October-18 Mafia cannot bully the blogosphere without repercussions and blowbacks. The international civil society got a shock and awe from the brutality of the freakish October-18 Mafia on October 18, 2010. http://venitism.blogspot.com
Structural reforms – re-training, improving job matching, providing flexibility and incentives for job creation and innovation – remain the best policy options for encouraging well-balanced growth, and an environment of low and credible inflation the best environment to encourage matters from a central-banking perspective.
Likewise, alertness against savings and trade imbalances across the global economy is a fundamental concern. Such imbalances – if unchecked or conveniently rationalized away – make our entire, inter-connected economies more fragile and more risk prone. We have seen how rapidly negative financial impulses can transmit through the global economy and pull down economic activity. Alertness means alertness. Trichet has learned while discussing global imbalances and financial transmission channels that appropriate improvements in regulation and multilateral surveillance frameworks can yield large gains. We should work hard to maintain momentum. http://venitism.blogspot.com
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