No deal crash out of EU looking very likely unless article 50 is extended until summer

It is now two months since I last posted on Brexit and Prime Minister May‘s so far unsuccessful strategy of getting her version of a somewhat backstop amended deal past Parliament and ready for presentation to Brussels and the EU leadership. The Prime minister has rejected Jeremy Corbyn‘s proposal of Brexit within the EU customs union as a non starter and the EU has continued to resist any effort to amend the original deal. Jeremy Corbyy and the Labour Party leadership has agreed to talks with the Prime Minister but thus far they have not led to an agreement. Those who back a second ‘‘peoples‘‘ vote now that the harsh terms and consequences of Brexit are much better understood and clarified have made some progress with Mr.Corbyn who no longer does not rule out such a vote should he have the opportunity to call one but it is still a long shot outcome perhaps because both the Labour and Conservative parties are divided on the question. The EU for its part probably would welcome such a vote on the assumption that the remain side would win a second vote.

So with less than two full months to go crashing out without a deal looks more likely. Although there is probably a solid majority of MPs from all the parties who would oppose such an outcome and would rather abandon the ‘‘game of chicken‘‘ bargaining strategy and opt for a postponement and extension of article 50.

Whatever the outcome the UK needs to broaden its trade strategy if they are not in the customs union and negotiate as many reciprocal trade agreements as are possible as well as return to Keynes style stimulation of the economy to help speed recovery from the likely negative consequences of a harsh Brexit.

Posted in Uncategorized | Leave a comment

May postpones parliamentary vote on Brexit deal. She lacks the votes to pass it.

At the very last moment, despite assurances to the contrary, Prime Minister May announced in Parliament that because she lacked the necessary votes she was postponing the vote on her painfully negotiated Brexit deal . She also announced she was embarking on a series of visits to EU leaders to see if she could win further concessions on the nature of the Irish backstop to meet the criticisms of many leavers in Parliament that it was not legally clear from the deal that the backstop could ultimately not prevent the UK from actually leaving the EU and being subject to its trade rules or on the other hand result in Northern Ireland de. facto being separated from the UK. This has been a long run problem in the negotiations and its not clear how it can be resolved. without further compromises by the EU . These are compromises that the EU negotiators and leadership have firmly rejected and today have reiterated as simply not possible. Instead they have stated that the deal on offer is‘‘ the best deal and the  only deal possible.‘‘

So it looks like May is caught in a very awkward position trapped in an agreement she cannot get passed in the current  UK Parliament and unlikely to win an election if one were to be called over Brexit. The alternative of crashing out of the EU without a deal is a worst case option that might now occur but it is very unwelcome to both business leaders and most of the public.

Posted in Brexit, Uncategorized | Tagged , | Leave a comment

Britain, Europe and the future of Brexit

This coming week, December the eleventh to be precise the United Kingdom and the European Union cross another major watershed. Prime Minister Theresa May will face a vote in Parliament on Tuesday on her proposed and already agreed to by the European leadership plan to exit the European Union and set out on its own for the first time in almost half a century in the sea of globalization and hyper competitive trade and job displacing innovation that now characterizes the world economy.

I first encountered the notion of the European common market and Britain‘s eventual role in it as a high school student in Winnipeg in 1962. I was fascinated by the notion that a noble experiment in transcending war and nationalist excesses that had led to the catastrophic war that had cost so many millions of lives and affected so many people in my own community was being constructed by democratic idealist leaders in continental Europe. I interviewed a professor at the University of Manitoba who specialized on the emerging common market and who kindly shared some of his written research with me. His name was Mark Doctoroff. When I first arrived in Britain as a visitor in 1968 the issue of Britain joining the common market was a hot topic and London already a very fashionable sophisticated capital city -not surprising since it dated back to Roman times. It was still the cultural capital of the English speaking world only equaled or bested in the eyes of some by New York .

Much has changed in the fifty years since. Mrs. Pistor‘s bed and breakfast near Victoria station vanished long ago,  the United dairy vending machine near Russell square is no longer and six old pence will get you nowhere on the underground. But Britain remains somewhat faded but still grand if not great. Ted Heath‘s government was elected over Labour‘s leader Harold Wilson in 1970 and during his term he negotiated Britain‘s entry into the common Market, the route no longer being blocked by the veto of General De Gaulle the French President. Britain‘s membership was confirmed January first, 1973. Opinion about its membership has always been divided in both the Labour Party and the Conservative party ever since.

People like Enoch Powell , originally an academic and very conservative parliamentarian in the early days were  essentially xenophobic nationalists and  very hostile to immigration. Boris Johnson and other contemporary Brexiteers are pale imitations of Powell  but they are implacable opponents of the European Union. Other tories including Theresa May seem to be reluctant opponents of membership who would, if they could, renegotiate the terms of membership. Within Labour it was the more centrist wing of the party that supported membership while somewhat strangely most of  the Left  initially opposed it because of the conservative monetarist bias of the European central bank, distrust of European technocrats  and the lack of regulation of globalization and its impact upon workers and their unions.

All of these debates and conflicts have simmered for years and they are likely to be reflected in the vote called for by the House of Commons next Tuesday which looks increasingly like May will lose.If she does there is serious talk of holding a second referendum with the hope that now the negative details of leaving are known a majority of citizens will vote to remain.

Much is in the balance whatever the outcome.

As my Latin teacher liked to point out Hic Britannia Britannia insulam est ! and yet we know in the contemporary world John Donne‘s No Man is an Island has never been truer.

No man is an island entire of itself; every man 
is a piece of the continent, a part of the main; 
if a clod be washed away by the sea, Europe 
is the less, as well as if a promontory were, as 
well as any manner of thy friends or of thine 
own were; any man's death diminishes me, 
because I am involved in mankind. 
And therefore never send to know for whom 
the bell tolls; it tolls for thee. 


Posted in Brexit, European Union and UK, Uncategorized | Tagged , , | Leave a comment

Fall economic statement is prudent document but results will need to be monitored carefully. Bank of Canada might undermine growth and lower unemployment by imprudent interest rate rises.

Canadian Finance Minister Bill Morneau has tabled a very interesting progressive Fall Economic Statement that carefully but sensibly seeks to balance the need for ongoing stimulus of the  Canadian economy with prudent economic management. He is targeting a stable -but still not low enough- unemployment rate and remains very sensibly committed to very modest stimulus deficits combined with a projected declining debt to GDP ratio over the next five years.

There will be critics who understandably question the wisdom of tax expenditures on behalf of business innovation and capital investment pointing to solid profits data for most of the business sector already in place. Furthermore a program which rewards business for innovative investments which target job creation and employment growth in a global economy needs careful monitoring to ensure that what has been promised gets delivered.

The key to the Minister‘s strategy can be found in chart 1.13 on page 23 where the projected deficit which is currently a very modest -0.9 % of GDP declines over the next few years to -0.4 % of GDP by 2023-24.At the same time the debt to GDP ratio currently at 31.4 % is projected to fall to 29.8 % by 2021-22. The government‘s very sensible rational approach to debt management and fiscal policy has been a long time time coming but it is a very welcome policy innovation and compares very favourably with the Conservative party‘s dogmatic obsession with budget balance no matter the consequences.The only potential somewhat unpredictable factors are ill trade winds from south of the border, excessive imprudent interest rate rises by the U.S. Federal Reserve and the Bank of Canada which continue to believe in the notion of inflationary expectations automatically arising even when oil prices are falling and irrational pessimism after a serious bout of irrational exuberance on the global stock markets. As usual, time will deliver the answers.

Posted in Uncategorized | Leave a comment

The Federal Reserve‘s obsession with imminent inflation – for once I agree with President Trump

President Donald Trump has done and said many negative things in the policy realm that I strongly disagree with. But on the subject of the Fed policy of restoring higher interest rates because of the supposed threat of inflation,  I must say I believe that the Fed is following the wrong policy.

It is  based on an out of date theory and President Trump is largely correct to criticize the Fed for prematurely raising the rates because of misperceived expectations about inflation automatically increasing as lower unemployment prevails for an extended period of time. It is true that the Fed has raised rates by very small amounts in an effort to return to what it calls more normal rates of interest. But its also true that that it appears to base its decision on a variant of the natural rate of unemployment and the old Wicksellian argument about the natural rate of interest. But this ignores or misunderstands and under appreciates the enormous impact of the crash of 2008 and the sharp rise in unemployment and banking fraud that followed it. Friedman‘s old argument which was based on monetarist orthodoxy has been disproven by the history of the past decade. This doesn’t mean inflation can never be a problem. But it does mean that we can expect that inflationary expectations are much less likely than in previous decades. The punch bowl of low interest rate stimulus can be left on the table somewhat longer. Furthermore the era of the revolution in information technology, developments in the energy industries and the rising educational levels of the population all contribute to keeping price rise disciplined except in special markets like real estate where the supply of stocks are constrained. There needs to be a wide ranging debate of these kind of issues and President Trump is correct to raise them. See my 2004 Adelphi University paper presentation to the Conference on Social Policy. It is posted on this web site on September 19, 2011.



Paper presented to the Conference on Social Policy as if People Matter, Adelphi

University , Garden City , New York, Nov.12, 2004. Many thanks to Helen Ginsburg and Trudy Goldberg for their kindness in including me in this very interesting conference.This paper is also a preliminary version of a chapter in my forthcoming book.


Posted in Federal Reserve, monetary policy, natural rate of unemployment, treasury view, Uncategorized | Tagged , , | 2 Comments

CAQ Sweeps to Victory with an unexpected decisive large majority in Quebec election

Once again the polls were inaccurate. The vote for the CAQ was much larger than predicted, 1.4 million votes and 37.7 % of the vote while the Liberal vote collapsed to an historic low level of just over one million votes and just 24.8 % of the vote. Given the perverse undemocratic nature of the  first past the post voting system the Liberals were reduced to 32 seats and the CAQ captured more than double that number, 74 seats. The Quebec Solidaire received 16.1% of the vote and 10 seats in the National Assembly – just 8 % of the seats, the PQ 17.1 % of the vote but only 9 seats -7.2 % of the seats. Under a proportional system the CAQ would have received 47 seats, the Liberals 31 seats, the PQ 21 seats and Quebec Solidaire 19 seats.  Instead the CAQ with a minority of the votes command a four year majority mandate.

Voter turnout was an unimpressive 66.7 % . Once again austerity as a policy was shown to be a bad political losing strategy as well as I have argued for decades a damaging and irrational policy. We shall see how much difficulty for federalism and the state of human rights and democracy the dramatic CAQ victory delivers. But clearly a more sophisticated and progressive debt management strategy might have avoided the political debacle that was delivered by the Liberal party Austerians. Perhaps out of the wreckage a new progressive realignment of  political alliances might emerge. But then again it may not and we will simply suffer repeating the mistakes of history .

Update on the results . Elections Quebec states the results as follows.

CAQ 37.4% of the vote,  74 seats with 1,509,428 votes.

PLQ 24.8 % of the vote, 32 seats with 1,001,148 votes.

QS 16.1 % of vote, 10 seats with 649,488 votes.

PQ 17.0 % of the vote 9 seats 649,488 votes

Greens PV 1.7 % , 0 seats 67,870 votes.

Conservative party 1.5 % of the vote, 0 seats 59,053 votes

NDPQ 0.57% of the vote, 0 seats , 22,863 votes.


Posted in Uncategorized | Leave a comment

Quebec election English language debate no clear winner but debate is substantive , some sharp differences emerge.

The party leaders all acquitted themselves reasonably well given the challenge of debating in English the complex problems and challenges that Quebec faces.This was more difficult for Manon Massé,the representative of Quebec Solidaire and perhaps, also at times a bit for Francois Legault.  It was revealing how the parties differed on key issues like assuring that the public sector properly reflects the minority composition of contemporary Quebec. Here the position of Massé and Lisée was notably better than that of Legault or Couillard.

Once again the issue of immigration to Quebec loomed large in a portion of the debate. Here the position of the CAQ despite Legault ’ s attempt to moderate it and explain it still remains offensive and factually impossible to implement creating a hard border between Quebec and the rest of Canada and an inevitable clash in the courts. The CAQ leader and the PQ leader had sharp effective attacks against the Liberal leader for the damaging cuts in spending they  had implemented. Legault scored well when he pointed out cutting services for children with learning difficulties and autism to balance the budget was unacceptable.The Liberal austerity obsession had inflicted damage on many vulnerable people. But Legault had no defence when it was pointed out by Couillard and the other leaders that his proposed tax cuts would undermine comparable health and education programs in the future.

There was also a good subsection of the debate which focused on the environment and climate change and the future role of hydro electricity in the province but no mention of the damage that these projects potentially could have and have had on indigenous peoples. It is difficult to argue that anyone will change their vote but it may well make people think carefully about whom they cast their vote for and which party will do the least damage in government. The CBC  poll tracker still shows the CAQ in the lead by a significant margin,  31.8 % to the Liberals 28.5% with the PQ at 21 % and Quebec Solidaire now at 14.5 % but the gap may narrow further in the coming week as voters begin to pay greater attention after the debates.There is a growing possibility of a minority government in which case the smaller nationalist but progressive parties will be in play perhaps forcing them to co-operate with progressive  federalists in the Liberal camp or reactionaries in the nationalist CAQ camp.

Hopefully anti -immigrant dog whistle politics will not play any role in the final weeks.

(The latest poll tracker numbers as of September 20th show a virtual dead heat between the CAQ at 30.9 % and the Liberals at 30.6 % The PQ are at 20.3 % and Quebec Solidaire at 14.4% with others at 3.8%.In predominantly French speaking areas the CAQ have a much bigger lead  36 % to 18 % for the Liberals with the PQ running second while the Liberals are stronger in multicultural and anglophone areas, particularly in metropolitan Montreal.The left wing nationalist party Quebec Solidaire is very popular among the 25 and under age cohort)



Posted in Montreal politics, Québec, Québec election, Uncategorized | Tagged | Leave a comment