Originally posted at morganist economics. Copyright © 2020 Peter James Rhys Morgan. I have submitted a letter to the Finance Minister of Australia Senator the Hon Mathias Cormann, on Wednesday 12th February 2020, along with the books 'Modern Applied Macroeconomics', 'Euro Crisis', 'Alternative Economics' and 'Economic Growth'. I explain how I have developed a new school of economic thought that has been used extensively and worked successfully in the United Kingdom. See below link for post. https://morganisteconomics.blogspot.com/2020/02/letter-to-finance-minister-of-australia.html To: Department of Finance One Canberra Avenue FORREST ACT 2603 AUSTRALIA To: The Finance Minister of Australia Senator the Hon Mathias Cormann. Regarding: New School of Economic Thought. Wednesday, 12th February 2020. I am an independent economist who develops new tools and policies to enable progress. I am located in the United Kingdom where my school of economic thought has been adopted and used extensively by the government over the last decade. Since the British government have applied my macroeconomic policies they have adhered to the set economic targets better than any other period of time that I am aware of. Economic growth has been very close to the 2% annual target and inflation has remained within acceptable boundaries throughout the period. My work uses altering pension contributions to increase or decrease rates of consumption and impact aggregate prices. Pension saving reforms have been introduced to decrease inflation when prices have exceeded targets and to stimulate growth when deflation and low economic growth have been present. The technique appears to work well and has enabled large treasury cost efficiencies to be made. The pension saving process has been optimized, creating further cost efficiencies and providing a new framework to control the annually set economic targets. I have written four books that put forward my new school of economic thought, 'Morganist Economics', which are enclosed in the parcel with this letter. In the book 'Modern Applied Macroeconomics', there is evidence of the successful application of my work on page 135. A letter from the former Chancellor of the Exchequer stating his appreciation for the work and his intention to use my pension reforms is also included in the book on page 139. The book was formerly a paper that was used to such a degree that it has changed economic practice. I was successful in predicting the United Kingdom would withdraw from the European Union in the book 'Euro Crisis', which has been influential in Europe and helped significantly in the negotiations throughout Brexit. My most recently published book is 'Economic Growth In a Highly Constrained Environment', which puts forward new techniques to stimulate economic growth when both monetary and fiscal policy are constrained. The books are aimed at giving politicians alternative options that avoid introducing hard hitting policies and consequences. Kind Regards. Peter James Rhys Morgan.
Your ideas regarding pension investment regulation as a means to controlling demand and thus regulating inflation are of some interest to me. But that is not why i am responding here. It is this below that you have written. Although I agree that you have identified a key symptom of what afflicts the EU monetary 'union' -- I place 'union' in parentheses for a reason, vide infra, it seems your analysis misses the root cause of the problem. I admit, I have not read your book, so perhaps there you remedy what I see as a defect. I am also taking this opportunity to comment on your suggested means of identifying countries suitable for outside investment. To wit: The research was conducted during the Euro Crisis and is evaluated in the book 'Euro Crisis - Aggregate Demand Control is European Single Currency Weakness'. The data used in the book predicted that certain countries in the European Union would fall into economic and financial difficulty, which they later did. The book also accurately predicted the United Kingdom would withdraw from the European Union, as a result of financial burdens put upon taxpayers in Britain deriving from the failing European Union member states debt defaults. Annual government income surpluses and deficits are used in the 'Morganist National Investment Analysis' MNIA to evaluate government spending patterns. Reviewing excesses of income or increases in borrowing over a long period of time can identify the success of an economy or the need for a government to invest in its economy to stimulate growth. The model collects the net annual surpluses or deficits of government income for a nation over a set time period, the cumulated total, mean average and standard deviation are then calculated. The minimum and maximum surplus or deficit over the time period are also shown in the model, so the extent of the change in a government's income or borrowing can be seen. If the economy is in surplus throughout the period it is seen as being strong, indicating investment in the nation would be a stabilising factor in a portfolio. I'll make a few comments, and then , if you are so inclined , your response would be welcome. I believe you've skipped over the root cause of difficulties in the EU economy when you wrote, 'Euro Crisis - Aggregate Demand Control is European Single Currency Weakness'. As a statement of fact I don't see anything wrong with your opinion. It is not, however, the adoption of a single currency, per se, that is the root problem, but rather the failure to adopt a true monetary union within the Euro currency countries. And of course within the European Economic Union there is not even a single currency. Without a true monetary union, it will be impossible to efficiently regulate aggregate demand. Germany has resisted adoption of the Euro Bond, and Great Britain has resisted the adoption of the Euro itself. Until there is a true monetary union, the ECB will be forced to operate with one hand tied behind its back, so to speak. And this is only the tip of the iceberg so far as problems created by the present arrangement. Also needed is a unified pension system! Of course, I am glossing over a myriad of problems that must be overcome to achieve such a union. For example, there is unacceptable corruption in some members. But these are all soluble problems so long as there is an incentive, and thus the will, to do so. Without a Eurobond the economically lagging States, e.g., the PIGs, must borrow at higher rates than the robust States, when just opposite is needed. When George Soros spoke in Frankfurt three Februaries ago, he said Germany must either agree to the Euro Bond or leave the EU. He was right to say that! Now, with regard to evaluation of national spending patterns as a tool for evaluating the stability of an economy and thus its suitability for investment, I have a few more comments to offer. Your idea is perhaps not without merit as it applies to certain countries, particularly those that regularly run trade surpluses and also offer reliable economic data. However many nations do not run trade surpluses. Even those that do could fall into economic difficulties were they for long to run surpluses in their national budgets. For some countries the best they they may be able to do is balance their budget. For still other nations with rapidly growing economies and/or populations, consistent deficits are essential! Deficits that can not be justified based on some combination of growth in GDP, population and investment should be the only concern. A country that is growing economically that does not run at least small deficits and particularly one that runs surpluses will soon starve their economies of savings and infrastructure investment and are likely to suffer crippling deflation. Your measurement is too simplistic to be useful. It will produce safety of investment, but low returns. I much prefer a more robust measure which takes into account an aggregate measure of deficits relative to GDP. And too, I want to pay attention to where the excess money left in the economy is going. There should be a "sweetspot" here, where one maximizes the risk adjusted return.
The model is more sophisticated than you think, it evaluates the mean average and standard deviation as well. This gives information into the reliance of the economy to borrow when in the downturn period of the business cycle. The higher the standard deviation the more movement in the borrowing pattern, mix this with high government debt and it is evidence the economy requires government intervention in the form of government spending. This suggests the free market economy in that country is not capable to generating economic growth naturally and necessitates fiscal stimulus. This is strong sign not to invest in the free market activity of that nation. The model has been proven to work the article 'A Tip On National Investment Analysis' provides evidence of it see below. http://morganisteconomics.blogspot....-analysis.html?q=a+tip+on+national+investment In terms of the book Euro Crisis there is a lot of other information in the book as to why the Euro Crisis happened. It chronicles the failures of the EC, Eurostat and ECB that led to the crisis. It then explains the failings in the economic model that prevent further effective control of the economy and then puts forward some new suggestions of how to do it in the back of the book. The three suggestions are aggregate demand control through pension reform/control, liquidity efficiency and demand fortification. Many of these techniques have been applied effectively in the United Kingdom and to some degree in the failing EU member states, who I have help significantly over the last decade. My school of economic thought has been applied and proven to work.
I looked for hard data. I did not find any on your blog. Perhaps it exists in your book, which I am not inclined to buy, as I remain quite skeptical of your method for evaluating economies. (The link in your blog does not work for me.) I would change my mind if either I became convinced your reasoning was sound or you had data over at least twenty years to support your method. I am suspicious that it applies differently to countries with independent monetary policy than to countries within the European Monetary Union, which do not have free, independent reign over monetary policy. One rather obvious difficulty is that for countries without a statutory requirement that deficits must be borrowed, which is many countries, I believe. Debt is not necessarily directly linked to deficits. Regardless, in terms of synchronization, most countries with independent monetary policy nowadays regularly spend before they earn or borrow. We have all had to change our thinking since 1971. Perhaps there are some who have not yet realized that most countries can spend in deficit without borrowing, if they choose to. Sovereign bonds do not serve all the same purposes they once did. Since modern money is in effect backed by productivity, I would think that what matters most is the amount of money, and how much is inside money and how much is outside, in relation to productivity. Getting those numbers down requires a true specialist in reading consolidated Treasury and Central Bank Books.
Below is the article you could not get to through the link. Original source morganist economics copyright (C) Peter Morgan 2020. http://morganisteconomics.blogspot....-analysis.html?q=a+tip+on+national+investment A tip on National Investment Analysis. Peter Morgan. Saturday, 12 November 2011 05:46 One of the main areas in macroeconomic analysis is the long term prediction of economic growth on a national level. It is done for many reasons, such as a guide to see which countries sovereign debt products are safest or which country provides the economic stability to enable free market enterprises to flourish. There are many methods of doing national investment analysis that provide a benchmark on the best countries for long term growth and safe returns. As an economist I have developed my own methodology to analyse where the best investment opportunities reside on a national level. I therefore call the method the Morganist National Investment Analysis or MNIA. In this model I first find out the long term sovereign debt surpluses or deficits and then calculate the mean average over the last decade or two, if possible. This shows the level of dependence on outside investment each country has. Then I calculate the standard deviation of the borrowing over the same period to show the volatility. So why is this useful? Well, if there is high debt and a high standard deviation over that period it shows there is a period when the government had to borrow a lot more than at other times. This indicates two things. The first is the country is following some kind of business cycle, which can then help an investor estimate each country’s business cycle with a closer analysis of the debt levels over the period measured. The second is the country has to borrow in the downturn period of the business cycle, which indicates that either the country’s domestic economy is reliant on fiscal stimulus to enable growth in the downturn period or that the boom period was created through outside investment. Either way a country with both high debt and a high standard deviation is an alarm bell to an investor. Does it work? In my recent book on the Euro Crisis I used the method to predict which countries would be next to default. I stated that Latvia, Lithuania, Hungary, Malta, Poland, Slovenia and Slovakia would have a sovereign debt increase in proportion to their GDPs and may require intervention from outside sources. A recent article states that Olli Rehn, the European Commissioner for economic and monetary affairs, has issued a warning that Belgium, Cyprus, Hungary, Malta and Poland are on the brink of recession (RTE, 2011). Although my prediction did not include Belgium, its concern is mainly down to the problems with Dexia, which is a large owner of Greek debt. As a result I would suggest that Latvia, Lithuania, Slovenia and Slovakia could be added to the list.
I was able to access the above on your blog, however your blog has a link to additional information, presumably your book itself, that does not work for me. I would still like to see actual data demonstrating the validity of your method. Here is a statement of yours I find troubling because it belies a lack of knowledge about the standard method modern nations with their own currencies used to combat recessions. The second [indication] is the country has to borrow in the downturn period of the business cycle, which indicates that either the country’s domestic economy is reliant on fiscal stimulus to enable growth in the downturn period period or that the boom period was created through outside investment. You are an economist, so you are aware that all capitalist countries go through business cycles, without known exception. This was something Keynes dwelt on in the General Theory. He believed, as do virtually all modern economists, that business cycles are unavoidable in capitalist economics. The idea that economies left alone will spontaneously seek equilibrium and harmlessly wring out excesses has been thoroughly discredited. What happens in practice is that irrational markets become more irrational, and recessions get worse. Consequently, all capitalist economies are reliant on fiscal stimulus to enable growth in downturn periods. Otherwise downturns will get worse before they get better and the recovery will take a long time even after all excesses have been wrung out of the economy. A country that doesn't borrow, i.e., spend in deficit, in a down turn is acting unwisely. Any exception to this would be quite unusual. A country that does not do this is mismanaging its economy and you certainly would not want to invest in such a country. It is clear to me now that you have intermingled countries that have independent control over their currencies , e.g., Poland, with those that don't , e.g. Greece. The latter will typically have a much harder time recovering from severe recessions than the former.
You mean the link in the article 'A Tip On National Investment Analysis'. I think it is the article below. http://www.rte.ie/news/2011/1110/eurozone-business.html If it is the supporting data to the book it is at the link below. It is at the bottom of the page in the Scribd document. https://morganisteconomics.blogspot.com/p/euro-crisis.html No the free market can take an economy out of recession without any government intervention. There are many ways an economy can grow without government spending. This is point I am making the free markets in the countries with high government debt in the downturn periods lack this free market economic recovery process. There are many ways the free market can generate growth in an economy, firstly producing better goods that consumers are more interested in buying, secondly finding efficiencies in their production methods that reduce operating costs boosting productions, thirdly funding themselves in other ways such as equity or borrowing against their own pension funds. Then there is the velocity of money and how this can be altered or increased to stimulate growth. After that you can do a lot with pension policy to stimulate growth rather than borrow money, that is more governmental but still it can be done. An example of this is shown below in the link. http://morganisteconomics.blogspot.com/2019/03/pension-pumping.html?q=pension+pumping