The inescapable trilemma of the world economy. “The End of Democracy, not the end of History”. @scientificecon @jbhearn @financialeyes @JoeBlob20 @Lloyd__Evans #ConquestofDough #CovidPurpose #BlackWednesday

he impossible trinity (also known as the trilemma) is a concept in international economics which states that it is impossible to have all three of the following at the same time:

a fixed foreign exchange rate
free capital movement (absence of capital controls)
an independent monetary policy
It is both a hypothesis based on the uncovered interest rate parity condition, and a finding from empirical studies where governments that have tried to simultaneously pursue all three goals have failed. The concept was developed independently by both John Marcus Fleming in 1962 and Robert Alexander Mundell in different articles between 1960 and 1963.[1]

https://en.wikipedia.org/wiki/Black_Wednesday

Black Wednesday occurred on 16 September 1992 when the British government was forced to withdraw the pound sterling from the European Exchange Rate Mechanism (ERM), after a failed attempt to keep the pound above the lower currency exchange limit mandated by the ERM. At that time, the United Kingdom held the Presidency of the European Communities.

In 1997, the UK Treasury estimated the cost of Black Wednesday at £3.14 billion,[1] which was revised to £3.3 billion in 2005, following documents released under the Freedom of Information Act (earlier estimates placed losses at a much higher range of £13–27 billion).[2] Trading losses in August and September made up a minority of the losses (estimated at £800 million) and the majority of the loss to the central bank arose from non-realised profits of a potential devaluation. Treasury papers suggested that if the government had maintained $24 billion foreign currency reserves and the pound had fallen by the same amount, the UK could have made a £2.4 billion profit on the pound sterling’s devaluation.[3][4]

The crisis damaged the credibility of the Second Major ministry in handling of economic matters. The ruling Conservative Party suffered a landslide defeat five years later at the 1997 United Kingdom general election and did not return to power until 2010. The rebounding of the British economy in the years after Black Wednesday led to a reassessment of the legacy of the crisis, as the Major government’s adoption of an inflation targeting policy as an alternative to the ERM set the foundation for a prospering economy in the years prior to the Financial crisis of 2007–2008, and the British public turned increasingly Eurosceptic.[5][6]

https://rodrik.typepad.com/dani_rodriks_weblog/2007/06/the-inescapable.html

https://drodrik.scholar.harvard.edu/files/dani-rodrik/files/putting_global_governance_in_its_place.pdf

Putting Global Governance in Its Place
Dani Rodrik
Greater interdependence is often taken to require more global governance, but the logic requires scrutiny. Cross-border spillovers do not always call for international rules. The canonical cases for global governance are based on two sets of circumstances: global commons and
“beggar-thy-neighbor” (BTN) policies. The world economy is not a global commons (outside of climate change), and much of our current discussions deal with policies that are not
true BTNs. Some of these are beggar-thyself policies; others may produce domestic benefits,
addressing real market distortions or legitimate social objectives. The case for global governance in such policies, I will argue, is very weak, and possibly outweighed by the risk that
global oversight or regulation would backfire. While these policy domains are certainly rife
with failures, such failures arise not from weaknesses of global governance, but from failures
of national governance and cannot be fixed through international agreements or multilateral
cooperation. I advocate a mode of global governance that I call “democracy-enhancing global
governance,” to be distinguished from “globalization-enhancing global governance.”
JEL Codes: F53, F55
Keywords: global governance, beggar-thy-neighbor.

Constructing A New Global Order:
A Project Framing Document
Dani Rodrik and Stephen Walt1
Revised, September 2020
Background
The existing global political-economic order has been ruptured by a number of recent trends. On
the political side, declining U.S. power (both hard and soft), the return of multipolarity, and,
most importantly, the rise of China as an increasingly important geopolitical player beyond East
Asia has upended a global system previously dominated by the United States and its allies. On
the economic side, financial crises, creeping protectionism, the backlash against globalization,
concerns about surrender of sovereignty to trade agreements or (in the case of Europe) to
regional integration arrangements, and increasing tensions with China on a multitude of trade
and investment fronts has undermined the post-1990 model of hyper-globalization. The “end of
history” consensus that sustained the liberal international order following the fall of the Berlin
Wall has been shattered not only by China’s authoritarian practices and its state-directed
economic model, but by the rise of ethno-nationalist populist movements in the U.S., Western
Europe, and many middle powers. Although Trump’s unilateral actions, contempt for
international organizations, and confrontational approach to China have accelerated these trends,
he is as much a symptom and reflection of the undercurrents destabilizing our present
arrangements as an independent cause.
Covid19 is deepening fault lines in the global landscape even more. The retreat from hyperglobalization has turned into a leitmotif, as governments talk about bringing supply chains home
and the economic conflict with China deepens. At the same time, the crisis has highlighted how
woefully inadequate our present global arrangements are in providing for global public goods
such as fighting health pandemics or addressing climate change.
How should governments respond to these accumulating tensions? Is it possible to reconstruct a
workable global political-economic order? And if so, what principles should underpin it?


http://www.jamesashleymorrison.com/files/MorrisonUnholyTrinityPrecis.pdf
An Unholy Trinity: The Influence of John Locke, Adam Smith, and John Maynard Keynes
on Britain’s Three Great Transformations
James Ashley Morrison
Middlebury College
August 2011
Policymakers have long appreciated that global market forces impose significant
constraints on their capacity to influence domestic market conditions. The infamous
“Unholy Trinity,” for instance, does not allow the monetary authority to retain control
over the domestic price level while simultaneously allowing capital mobility and
maintaining stable exchange rates. More recently, scholars have recovered the insight that
trade policy can be used to address the unholy trinity. But this, of course, introduces a
variety of other trade-offs. In the modern age, there have been several “great
transformations” in the strategies policymakers used to manage the relationship between
domestic and global markets. In the seventeenth and eighteenth centuries, the
mercantilists embraced fixed exchange rates and open capital markets but heavily
intervened in trade and commerce. Beginning in the late eighteenth century, laissez-faire
liberals began to dismantle the mercantile system of trade management. In the interwar
period, the new liberals pursued monetary policy autonomy through exchange rate
flexibility and capital controls rather than commercial management.

A Monetary Revolution: John Locke and the Creation of England’s Fixed Exchange Rate Regime J. A. Morrison Middlebury College October 2008

The decision by Parliament in the winter of 1696 to repair its deteriorated coinageat its original weight—rather than to devalue the new coins—marked the first steptowards the creation of the international gold standard. In the four preceding centuries,the official weight of the English shilling alone had been adjusted more than a dozentimes. The number of grains of silver in newly minted shillings was steadily reducedfrom a high of 264 in the fourteenth century to just 86 in the seventeenth.1 As far back asthe records indicated, England had maintained an exchange rate regime that wasrecognized as adjustable. All contemporaries agreed, the Royal Mint could and didregularly adjust England’s exchange rate.2 In January of 1696, however, English policymakers elected to restore the clippedcoins to their original weights. The “Great Recoinage” of 1696-1700 followed in whichthe bulk of English coin was reminted according to the weight and standard that had beenin place since the reign of Elizabeth I a century before. In choosing to restore the coins,English policymakers consciously abandoned the adjustable exchange rate of the past infavor of a new commitment to a fixed exchange rate regime. Restoring the coin, however,would create considerable transition costs, particularly given that much of the publicexpected—and had even counted on—devaluation. English policymakers recognized,however, that maintaining the standard in the face of such short-term costs would both seta precedent for future policy and send a strong signal of their firm resolve to maintain theexchange rate in all circumstances.1 John Locke, Further Considerations Concerning Raising the Value of Money, ed. P. H. Kelly, Locke onMoney (Oxford: Clarendon Press, 1991), 459.2 William Lowndes, A Report Containing an Essay for the Amendment of the Silver Coins (London: 1695),56.

The 1925 Return to Gold: Keynes and MrChurchill’s Economic Crisis
James Ashley Morrison
Middlebury College
APSA 2009
The following is an exerpt from my book manuscript An Unholy Trinity: The Influence of Locke,
Smith, and Keynes in British Foreign Economic Policy. I have included some introductory
material to contextualize the chapter. Please do not cite without obtaining permission.

Henry Kissinger, A World Restored: Metternich, Castlereagh and the Problems of Peace, 1812-1822 (1957)
´´There are at least two forces at work against which the tragic hero of the statesman struggles. The first is “the problem of legitimizing a policy within a governmental apparatus;” an issue Kissinger calls a “problem of bureaucratic rationality” (Kissinger 2013, 326). While the making of policy is defined by contingency and flexibility, bureaucracies of government measure success in terms of calculability and safety, characteristics uncommonly associated with the messy process of policymaking (Kissinger 2013, 326 – 327).´´

Chapter 3—Europe’s Shift to the Twentieth Century.
While Europe’s traits were diffusing outward to the non-European world, Europe was
also undergoing profound changes and facing difficult choices at home. These choices
were associated with drastic changes, in some cases we might say reversals, of Europe’s
point of view. These changes may be examined under eight headings. The nineteenth
century was marked by
(1) belief in the innate goodness of man;
(2) secularism;
(3) belief in progress;
(4) liberalism;
(5) capitalism;
(6) faith in science;
(7) democracy;
(8) nationalism. In general, these eight factors went along together in the nineteenth century.
They were generally regarded as being compatible with one another; the friends of one
were generally the friends of the others; the enemies of one were generally the
enemies of the rest.
Metternich and De Maistre were generally opposed to all eight;
Thomas Jefferson and John Stuart Mill were generally in favor of all eight..

Globalisation Un-Entangled. (A FOUND POEM, CIPHER OF GLOBALISM )


A TRILOGY IN FOUR PARTS.

USURY HELL´S FUEL MANS OPPRESSOR

BOURGOISE RESOLUTION AND

GLOBALISATION UN ENTANGLED.
the idea before it was clothed in words
heard in minds, as uttered thought
the communication of arranged ideas
Thoughts lifting mist from the poet´s page.
To set the stage, not in the round
but, to see the scene in the sphere
Which actors will the playwright lay
on the page´s narrative to steer.
Which course to meet
who to set upon the bridge
For strength of Bulls Wall Street
of Bears & onion domes upon our chart
A heroes pride found in Britannia’s isles
Monks ´´sans humilite´´ fane ease
Like Pope we find our actors
´´All, all alike, find reason on their side´´
mais par impatience de souffrir
On the present discontents, Burke opined
Putin ,Trump and Farage set courses un-entangled
Junker , Merkel, Call for straight ahead.
Few are the partisans of departed tyranny
of Globalism or Nationalism which be the tyrant?
Yet passions are deceiving someone,
so near 50 years behindhand a hero fell.
“On this day, the day of March
in my opinion´´, is the end of the
United States of America
as the land of the free
and the home of the brave.”
Eliza with Rogerian inscrutability
hears the confession of the mal-contents
A mirror held up before cosmetic application
Globalisation and Internationalism confused
despotism´s nature is to abhor any say
save that of its own momentary pleasure;
it annihilates all intermediate situations
between boundless strength on its own part,
and total debility on the part of the people.
Our education can be Our? our, government.
Our reason can be our Judge, of the rivals;
Globalism, Authority, coercion and competition.
or Nationalism, Internationalism, Cooperation.
Are we to have free will and democracy
Will we have determined authority
A struggle of ideals an ancient quarrel
Parmenides or Heraclitus navigators both

If centuries be epochs with peculiar discretion

19th, 20th, 21st a behind hand review
19th innate goodness of man, nationalism
20th Fallen man Calvinist rule, Globalism.
For the 21st partisans for patronage

QED.