The Hyman P. Minsky Summer Seminar will provide a rigorous discussion of both theoretical and applied aspects of Minsky’s economics, with an examination of meaningful prescriptive policies relevant to the current economic and financial crisis.

Application deadline: March 31, 2010. For more information, visit www.levy.org.

After unprecedented efforts by the Federal Reserve (Fed) and Congress, and the adoption of “big government” policies, the financial system is more stable but the official unemployment level is 10.2 percent—and rising. According to President Dimitri B. Papadimitriou and Research Scholars Greg Hannsgen and Gennaro Zezza, the nascent recovery is still very fragile, so a good policymaking strategy will require a clear assessment of U.S. economic prospects over the medium term (i.e., six years).

The authors review the three key financial balances of the U.S. economy with a focus on the current account balance. Since market forces may not achieve an orderly dollar devaluation, they favor a multilateral agreement between the Fed and the central banks of major surplus countries. Failure to do so could lead to adverse consequences, such as a sudden collapse of the dollar and a return to financial fragility. Moreover, some loosening of fiscal policy is required if there is to be any progress toward full employment. And global imbalances are yet another reason to support the development of alternative energy sources.

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Senior Scholar Jan Kregel identifies a number of problems associated with bank size, such as market concentration, interconnectedness, and global competitiveness. Moreover, the “Brandeis problem” relates to an inherent conflict of interest associated with multifunctional banking that produces fraudulent, anticompetitive behavior.

According to Kregel, multifunctional banking is the leading source of financial crisis, while large bank size contributes to contagion and systemic risk. Thus, the current thrust of government regulatory reform is inadequate, resolving large banks will not solve the problems, and past solutions may be inappropriate in reforming the financial system.

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On the 10th anniversary of the euro, the European economy was in free fall and speculation about the imminent breakup of Euroland was rampant. According to Research Associate Jörg Bibow, Europe was not a victim of external shocks but of its own contributions toward the buildup of internal and global imbalances, including beggar-thy-neighbor policies that the euro was meant to ban forever.

Bibow advocates that the current policy regime, which is based on legacies such as the Maastricht Treaty, should be discarded if Europe is to improve its economic performance. Euroland must depart from Bundesbank mythology and the price stability policy agenda associated with its mercantilist past, and take steps toward minding its domestic demand and creating a fiscal union to back the euro.

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The Summary, published three times a year, is aimed primarily at an academic audience. It updates current Levy Institute research, with synopses of new publications, special features on continuing research projects, accounts of professional presentations by the research staff, and an overview of Levy Institute events.

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