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Juncker's €300 Billion Plan is "Funny Money"
I was rather amused yesterday with a post by Pater Tenebrarum on the Acting Man blog: EU Planning to Spend Money It Doesn’t Have.
Pater is of course correct, and we will return to his article in a moment.
First, consider this headline from El Economista: France calls for a New Deal with 'real' investment: 300 Billion plan is "funny money".
€80 Billion in "Real Money" Requested
There is no need to translate excerpts from El Economista because the Financial Times has essentially the same story in France warns EU investment fund will flop without ‘real money’.
France says the EU must inject up to €80bn of “real money” into the flagging European economy, warning that a big investment plan being drawn up in Brussels risks flopping if enough hard cash is not used to stimulate demand."New Deal" With Overseer
Jean-Claude Juncker, the new head of the European Commission, is next week expected to unveil a €300bn investment programme for the next three years aimed at boosting growth through infrastructure and other projects.
Emmanuel Macron, France’s economy minister said “I’m convinced we need real money and we need to use it in an effective way.”
He proposed a new independent entity to oversee what some are calling a “New Deal”. The overseer would increase the fund’s firepower by raising debt on the markets to fund investments in projects such as fibre optic networks and renewable energy. It would also set up panels of European experts to select projects after a competitive process.
EU officials briefed on Mr Juncker’s plan said there was unlikely to be any new money. Instead, only existing public resources will be used, with the hope that this will attract private capital to bolster the fund.
Mr Macron insists the changes will win parliamentary approval. “We have 10 per cent unemployment, 25 per cent youth unemployment. What is the alternative solution? Spend more money that we don’t have? It’s not conceivable. It’s a real leftwing package, it’s a package for the outsiders, it is aimed at restoring equal opportunities.”
Mr Macron spoke frankly of past “fake” reforms in France. He says “real” reforms are now the pre-requisite for a matching stimulus from European partners. “It is our job to create a momentum [for the stimulus package]. And our reform package is key because this is how we can be demanding in return.”
It's important to note that everyone now recognizes Jean-Claude Juncker as a liar and charlatan. They just cannot say so in such a harsh manner. It would not be politically correct.
Yet, the notion that an overseer would do anything other than waste more money is preposterous. In fact the entire "New Deal" thesis is preposterous.
Instead of taking money and redistributing it, complete with overseers, I have a better idea.
Don't collect the taxes in the first place! Let people spend it on what they want, not wasteful government projects where some bureaucrat picks an inane pet project with zero economic merit (except to his buddy who gets the contract) and an overseer (and his staff) that takes a cut of the graft.
Pater said essentially the same thing in his conclusion ...
In reality, these spending programs are simply slightly more elaborate and sophisticated versions of Keynesian ditch digging. They make precisely as much sense. If European politicians really want to help to spur economic growth, they must bid adieu to the notion that economies can be “jump-started” by spending on undertakings that are mainly characterized by their inability to produce a return. What is instead needed is a repeal of the ubiquitous red tape hampering entrepreneurs, lower taxes and less government involvement in the market economy.Multiplier Effect
Top-down investment decrees are bound to do more harm than good in the end. The urge of local governments in Spain to build a new airport in every two-bit town during the boom has left the landscape dotted with a number of large mute witnesses attesting to this.
There is no "overseer" on the planet who won't get in bed with politicians wanting to waste money on pet projects. An overseer will not "multiply" a damn thing except waste!
Nothing Times Nothing is Nothing
"Real Money" has to come from somewhere, via taxes. Overseers don't add "firepower" they take a piece of the pie, even IF they are well-intentioned.
The Financial Times described Macron, as France’s new "youthful" economy minister, and "a relentlessly cheerful figure".
Macron replaced the "fiery leftist Arnaud Montebourg".
Will Macron provide as much reporting comedy as Montebourg? I highly doubt it, but he is off to a good start. And in his honor, I offer a musical tribute.
Nothing From Nothing
Link if video does not play: Billy Preston - Nothing From Nothing.
Mike "Mish" Shedlock