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Richard A. Werner

Richard A. Werner

Richard A. Werner is Professor of International Banking at the University of Southampton and author of New Paradigm in Macroeconomics.

Articles by Richard A. Werner

EU Basics – Your Guide to the UK Referendum on EU Membership

June 21, 2016

By
Professor Richard A. Werner, D.Phil. (Oxon)
20 June 2016
The British people should be clear about just what they will be voting on at the EU referendum this Thursday. What does it actually mean to stay in the EU? What does it mean to exit?
Concerning the second question, the dominant issue in the debate has been the question whether there will be a significant negative economic impact on the UK from exiting the EU. Prime Minister David Cameron, together with the heads of the IMF, the OECD and various EU agencies have given dire warnings that economic growth will drop, the fiscal position will deteriorate, the currency will weaken and UK exports will decline precipitously. George Osborne, the chancellor of the exchequer has threatened to cut pensions if pensioners dare to vote for exit. But what are the facts?
I have been trained in international and monetary economics at the London School of Economics and have a doctorate from the University of Oxford in economics. I have studied such issues for several decades. I have also recently tested, using advanced quantitative techniques, the question of the size of impact on GDP from entry to or exit from the EU or the eurozone. The conclusion is that this makes no difference to economic growth, and everyone who claims the opposite is not guided by the facts.

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Is Germany to blame for the European mess?

May 25, 2016

I have recently been asked a few questions about the role of German current account surpluses in the problems encountered in Europe and in particular the eurozone. Below are the questions and the answers.
Is the German current account surplus sustainable?
Yes and no. The German current account surplus is not sustainable in the long-run. It has been too large for too long – reflecting the substantial and one-sided net delivery of real goods and services, produced through the work of German businesses and individuals, to the rest of the world, without the Germans in aggregate receiving equal compensation in real goods and services from the world. It is indeed surprising that Germany has collectively been willing to deliver abroad against credit for decades, accepting promises to pay from increasingly and unsustainably indebted borrowers in return for the delivery of the valuable fruits of their labour. Perhaps yet another of the many ingenious ways through which Germans insist on making up for their sins? The gold that they had earned – prudently – from their exports in the early post-war era is held abroad without the prospect of ever getting repatriated fully. But the majority of payments has been in the form of promises to pay in any case.

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„Negative“ Interest Rates and the War on Cash

February 8, 2016

The talking heads featured on the corporate mainstream media have started to disseminate the idea that cash is a barbarous relic and needs to be abolished. Central bankers have been particularly articulate, such as former IMF staffers Kenneth Rogoff and Peter Bofinger, or current Bank of England spokesman Andrew Haldane.
Among the reasons why cash suddenly needs to be abolished are the usual arguments, such as that criminals may be using cash, or that electronic money is more ‘efficient’. Some media even claim that people are annoyed in queues when someone pays with the more cumbersome cash, instead of the faster plastic money. The truth is of course the opposite, although the recent introduction of contactless debit cards in the UK, which only need to be waived at the card terminal for payment, have speeded up the payment of petty transactions compared to the usually much longer processing time for debit cards compared to cash.
Another reason given in favour of abolishing cash is the argument that this will facilitate bank bail-ins, as agreed at the Seoul G20 summit in 2010: if people can move money out of the banks into cash, it is not possible to steal their money to bail out the banks.

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What should be done about Greece – and what is likely to happen

July 10, 2015

10 July 2015
By Richard A. Werner
Will Greece default or exit from the euro, or both? First, I will describe the best course of action, then what I think will happen. The two are not the same: In Europe, policy actions have diverged from the optimal course of action for most of the last two decades.
Consider first the 1990s. Like many economists, at the time I pointed out that the plans by the eurocrats to introduce a single currency were thoroughly misguided: monetary policy is the most powerful policy arm, and there is no reason why any government should amputate it. As I argued then, historically the German D-Mark had been strengthening since its introduction in 1948 against the currencies of its neighbours, and this reflected – and compensated for – increased German competitiveness. Their weakening currencies allowed German trade partners to keep their export industries in business and their workers employed. By introducing a single currency, future revaluations of the German currency were disallowed. This amounted to a de facto future devaluation of German purchasing power, revaluation of the currencies of the other European countries, and hence would render non-German economies less and less able to compete against German exports over time.

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