Blog

Back in the early 2000s, financial market participants would wisecrack that unlikely events that should happen once in 10,000 years were occurring every month. We know where that led—to the Global Financial Crisis. Everything crashed. The Fed had to spend and lend $29 trillion to bail out the world’s financial system. It took economies a decade to recover. Today we read in the press that the frequencies of floods, droughts, glaciers melting, coral bleaching, heat records, severe hurricanes, and tornadoes have all jumped outside several standard deviations of the possible. Even aside from the threat to life and limb, the risk to property is becoming uninsurable and the coming hit to finance is unbearable. The evidence that we face immense and complex challenges related to climate catastrophe is overwhelming. Not in the near future, but now. And, yet, with the second coming of Trump, the USA is undoing the few positive steps that have been taken over the past couple of decades. There is no need to recount the details here—Trump’s attack on anything that smells of greening is in the news every day. Any talk of “environmental sustainability” is subversive, cancelled, and scrubbed off government and corporate websites. The reception that Trump received on his recent trip to Scotland reminded me of a documentary that I reviewed back in… Read More

On July 19, 2025, the Seminar on Modern Monetary Theory and the Launch of New Macroeconomics was held in the main hall of the Mingde Building (明德楼) at Renmin University （人民大学）of China. The event was jointly hosted by the School of Economics at Renmin University, the Central Compilation and Translation Press, and the Ministry of Education’s “101 Project” virtual teaching and research office for economic history and history of economic thought, with co-organization by the School of Economics at Beijing Institute of Technology. Over 40 scholars, experts, and students from more than 10 universities and research institutions—including Renmin University, Peking University, the Party School of the Central Committee of CPC (National Academy of Governance), Beijing Institute of Technology, Capital University of Economics and Business, Chinese Academy of Sciences, Chinese Academy of Social Sciences, University of Chinese Academy of Social Sciences, Central University of Finance and Economics, Nankai University, Tianjin University of Finance and Economics, and Nanjing University of Posts and Telecommunications, as well as the Agricultural Bank of China and China Construction Bank—participated in the event. The discussions centered around Modern Monetary Theory (MMT) and current issues in the Chinese economy. First Session: Book Launch The book launch was chaired by Professor Fan Zhiyong, Deputy Party Secretary of the School of Economics at Renmin University and professor of macroeconomics. Opening… Read More

Attempts to undermine Social Security have been ongoing since its enactment in 1935. As the Social Security Administration projects trust fund insolvency by 2033 and Congress looks for deep spending cuts, the pressure is mounting for Social Security benefit cutbacks, despite promises from President Trump and House Speaker Johnson not to reduce benefits. While extending the full retirement age is a focus for benefit cutbacks, some are advocating for a form of privatization (i.e., individual accounts). Elon Musk’s reference to Social Security as a Ponzi scheme only serves to undermine the current system and give weight to this ill-conceived idea. As a former consulting actuary, consultant to the Office of Personnel Management (OPM) during the 1980s studying replacement plans for the Civil Service Retirement System with the private sector in mind, and a consultant to and observer of many corporations’ revisions of defined benefit pension plans in favor 401(k) savings or hybrid individual account (“cash balance”) plans, I have not observed a single instance when the motivation for program change was to increase benefits for employees. The goal was always to reduce the sponsor cost and/or shift the investment risk to employees. The reason is simple: replacing all or a portion of a defined benefit program with an individual account plan (without substantially increasing employer cost) shifts financial burden and… Read More

On June 16, 2025, I will welcome colleagues and friends to the 32nd Annual Conference of the Levy Economics Institute—our first in-person gathering since the pandemic, convening at a moment of extraordinary economic upheaval. The challenges before us are among the most consequential in a century: a global trade order in disarray, deepening economic insecurity for working families, a financial sector growing more complex and opaque, and the urgent need for climate finance and new development paradigms. We are navigating yet another phase of global economic turmoil—one that demands the bold, innovative thinking the Levy Institute has championed for decades. The Levy Impact Our research on financial instability became the definitive analysis during and after the Global Financial Crisis. More recently, our work on modern money and public finance reshaped debates around the necessary—and unprecedented—fiscal responses to the COVID crisis. Our job guarantee proposal has influenced global policy discussions, offering a viable alternative to means-tested welfare and punitive “workfare” systems. Despite the post-COVID rebound, deep structural fissures in the American economy persist, fueling voter discontent and reshaping political landscapes. Against this backdrop, this year’s conference examines four critical themes: The evolution—and vulnerabilities—of the financial sector since the Global Financial Crisis, including climate finance and emergent risks through a Minskyan lens; The promise and limits of crisis response tools, assessing fiscal/monetary… Read More

Our eminent French economist colleague, Edwin Le Héron, passed away on 23 April 2025 in Bordeaux. A professor at Sciences Po Bordeaux since 1987, he was the founder and long-standing president of the Association pour le Développement des Études Keynésiennes (ADEK), established in 2000. ADEK has brought together French-speaking post-keynesian economists and organized major international post-keynesian conferences in Dijon, Grenoble, and Lille. A committed Keynesian, Edwin Le Héron collaborated with Alain Barrère in the 1980s and played a pivotal role in advancing pluralism in French academic economics. He consistently supported the recruitment and integration of heterodox economists. He was a member of the Board of Directors of both the Association Française d’Économie Politique (AFEP) and the collective “Économistes Atterrés.” In recognition of his academic and civic contributions, he was named Chevalier de la Légion d’honneur – one of the highest honors awarded by the French Government – in 2017. He served on the editorial boards of the Brazilian Journal of Political Economy, the European Journal of Economics and Economic Policies, and Économie Appliquée. He was also an associate editor of the Journal of Post Keynesian Economics. Edwin Le Héron played a central role in the theoretical debate surrounding the endogenous money hypothesis in the 1990s, helping to reconcile it with Keynes’s notion of liquidity preference. This led to a pragmatic… Read More

According to my vita, my first paper for the Levy Economics Institute, “Unemployment, Inflation, and the Job Structure,” was first published almost exactly thirty years ago, in May 1995.[1]  It was a categorical dissent from the micro-market framework, dominant then and still, of mainstream economics. The abstract reads: In this working paper, James K. Galbraith rejects the analytical construct within which many economists currently operate – that is, the construct in which, in the extreme, macroeconomic behavior is identical to the behavior reflected in microeconomic demand and supply curves.  He rejects it on the theoretical and practical grounds microeconomic categories (supply, demand, prices, quantities) “have little bearing on important policy questions.” The markets that have a bearing on policy either are asset markets (for which the rules are dramatically different from those for flow markets) or are not really markets at all, but rather a set of deeply structural social relations. I mention this not to exaggerate my role but to illustrate how the Levy Institute has nurtured, over four decades since its founding in 1986, critical alternatives to the entrenched 18th century worldview of academic economics. Over the years, Levy has offered a home to major intellects otherwise shunned – Hyman Minsky, Wynne Godley, Jan Kregel. It has fostered entire movements that would otherwise have had little institutional foothold… Read More

What if Household Production is recognized as a necessity? Imagine if unpaid work done at home—cooking, cleaning, childcare, eldercare[1]—were recognized as part of basic needs as, for example, a minimal quantity of food and clothing? Would it change how much poverty we find? An upcoming study by the Levy Economics Institute suggests it absolutely would. The study augments the traditional poverty line by considering the minimal time required for unpaid work. Families that do not have enough available time to set aside for unpaid work requirements will have to purchase market substitutes to maintain a budget reflected in the traditional poverty line. Adding the cost of such market substitutes to the standard poverty line results in a time-adjusted poverty line which underpins our flagship metric the Levy Institute Measure of Time and Income Poverty (LIMTIP). Through a series of studies, we have developed LIMTIP estimates for Argentina (2005), Chile (2006), Ghana (2012–13), Korea (2009), Mexico (2008), Tanzania (2011–12), Turkey (2006), Ethiopia (2015), and South Africa (2015).   We estimate LIMTIP for the United States for the first time and the measure reveals that poverty in the U.S. is far more widespread than conventional, official poverty measures suggest, and in fact exposes inequality across multiple dimensions: gender, race, class, and family structure.   What is Time Poverty — and Why Does… Read More

There has been a lot of discussion about the birthright citizenship clause of the 14th Amendment recently. But there is another little-known clause that says that “the validity of the public debt of the United States, authorized by law … shall not be questioned.” In this Roundtable discussion, Institute President Pavlina R. Tcherneva discussed how COVID relief was the most recent teachable moment about how the government pays for any federal program. The US embarked on wartime-level spending in just 12 months under both Republican and Democratic administrations and clearly demonstrated that the US government is self-financing and does not depend on borrowing or wealthy taxpayers to fund its expenditures. Elon Musk’s discovery of the so-called “magic money computers” shone light on how the US financial architecture was designed precisely to give the government monopoly powers over the issue of the currency, to ensure its solvency, and to guarantee the full faith and credit of its debts. Government payments are typically made via electronic means by issuing electronic payments on an as-needed basis, yes ex nihilo or “out of nothing”. As a practical matter, it is virtually impossible for the government to run out of cash. The drastic federal cuts by DOGE are politically motivated and have nothing to do with US government solvency. Discussion starts at 1h04min:

Originally appeared on Levy-affiliated project, the Economic Democracy Initiative. The spectacular government spending post-2008 and post-2020 appeared to upend the neoliberal logic of the past decades, enabling bold public action and opening the door to a more just and democratic social order. Specific policy choices stamped out this opportunity. These pivotal moments did, however, point to policy levers that can facilitate a breakthrough.   It was widely believed that the Great Financial Crisis damaged the core ideology of neoliberalism, and some hold that the response to COVID-19 finished the job. This view is mistaken. Instead, the extraordinary measures that pulled the global economy from the brink in both episodes not only revived neoliberalism, but also consolidated it. To see why, one needs to look at the nature of modern money and the use and abuse of public finance.  The 2008 crisis did shake the economics profession. Mainstream equilibrium models do not account for the role of money and finance and had failed to predict it. Hamlet without the Prince is how Jan Kregel described this state of affairs a few decades earlier. Studying a market economy without its principal actor – money – was a farce. Meanwhile heterodox traditions, drawing on Keynes’s seminal work on money, were able to explain the crisis and the chronic failures of capitalism: mass unemployment,… Read More

The taxpayer narrative is pervasive. It is present in the budgeting process, in the framing of government policies and in daily political life. Issues and debates about the public purpose are all cast in terms of the financials. The first thing asked about a proposed spending policy is “how are we going to pay for it?” and the first question for a proposed tax policy is “how much money will it raise?” A spending proposal that is not budget neutral is dead in Congress. A tax policy that is not expected to generate much revenue is irrelevant, one that generates less revenues than expected is a failure. Examples abound. Senator Warren’s Ultra-Millionaire Tax proposal starts with the correct premise that there is a very high and growing wealth inequality in the United States. She proposes to set a 2% tax on the wealth of households with $50 million or more in net worth. However, the effectiveness of the policy is not judged in terms of its ability to reduce wealth inequality but rather in terms of its revenue generating capacity: “this small tax on roughly 75,000 households will bring in $3.75 trillion in revenue over a ten-year period.” The impending Social Security insolvency is relentlessly pounded on the population, with proposed financial solutions to “save it” ranging from putting money… Read More

Otmar Issing can look back on a long and consequential central banking career. Even in his retirement he is still living the part, evaluating whether his successors at the European Central Bank are pursuing stability-oriented monetary policies to his liking. His most recent critique (“‘Living in a fantasy’: euro’s founding father rebukes ECB over inflation response” https://www.ft.com/content/145b6795-2d21-48c6-984b-4b05d121ba16) shows him on the wrong side of events and debates about sound monetary policy, again. Mr. Issing spent an eight-year stint at the Bundesbank as chief economist of Germany’s legendary central bank and retired guardian of European monetary affairs. Misled by M3 overshots that were the result of the Buba’s own rate hikes inverting the yield curve, Buba kept on hiking until it crashed newly unified Germany, and the ERM too. Recession-caused fiscal troubles then saw Mr. Issing’s Buba cheerleading pressures for fiscal austerity. These involved hikes in indirect taxes and administered prices that were distorting headline inflation upwards and delaying Buba easing (see https://www.levyinstitute.org/publications/on-the-burdenr-of-german-unification). The ensuing malaise in Europe was so pronounced that it almost prevented Mr. Issing from becoming a founding father of the euro. But the euro got lucky, courtesy of a last-minute push from America’s dot-com boom. And so Mr. Issing got his chance as the ECB’s influential first chief economist. Unfortunately, lessons from Germany’s debacle ten years earlier… Read More

Omicron is a reminder that the COVID-19 pandemic is still not over. This ongoing health crisis should act as a trigger for greater investments in public health in India. Public spending on health by the union government is still below 1 percent of GDP, though the estimate has increased from 0.2 percent of GDP in 2020–21 (revised estimates) to 0.4 percent of GDP in 2021–22 (budget estimates). Strengthening investments in the healthcare sector is crucial at this juncture, as another lockdown can accentuate the current humanitarian crisis and deepen economic disruptions. In India, the lockdown was announced on March 24, 2020 by invoking the National Disaster Management Act of 2005. As per the Seventh Schedule of the Constitution, healthcare is addressed at the state-level while interstate migration and interstate quarantine are in the Union List (entries 28 and 81), that is, responsibilities of the central government. While the lockdown helped to flatten the curve, an almost irreversible economic disruption resulted in many sectors. The National Statistics Office released the advance GDP estimates January 7, 2022, revealing that in the financial year 2021–22 (FY 22), India’s GDP growth rate will be 9.2 percent. In FY 21 it was 7.3 percent. However, this growth estimate is lower than that published by Reserve Bank of India (RBI) in December 2021, which was 9.5 percent…. Read More