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The first collection of essays by Jan Kregel, focusing on the role of finance in development and growth, has just been made available through Anthem (edited by Rainer Kattel). From the foreword by G. C. Harcourt: As I wrote in my remarks when Jan and I were the co-recipients of the 2011 Veblen Commons Award, “I regard Jan as the best all-round general economist alive” (Journal of Economic Issues, XLV, June 2011, 261). I have been nagging him for years to bring out a volume (preferably volumes) of his essays for surely, in his case, the whole is greater than the sum of the parts, splendid though each part is. … Jan is steeped in the history of our subject. He has an intimate knowledge and understanding of the work of past greats and the relevance of their contributions to their times and ours. Jan has an especially deep understanding of the nature of money and finance, and of the institutions associated with them and of the indissoluble relationship between them and the real economy, whether in developed or developing economies. He couples this with a flair for designing humane, realistic policies, in the process bringing out clearly the shortcomings of existing institutions and policies in a wide variety of settings.

There’s growing pressure on Germany to spend more to support Europe – and for good reason. But it’s proving to be a hard sell to the country’s leaders. Germany’s budget is balanced and the government insists that its current policy stance is the best it can do – for itself, the eurozone and the world at large. The government’s mantra is that a balanced budget inspires confidence, which in turn propels growth. That’s not actually happening of course, as is plainly visible for anyone to see, yet the ongoing stagnation and sense of crisis felt across the eurozone have only encouraged the German government to repeat its flawed logic. The rest of the world is not amused, especially eurozone members that have been at the receiving end of Germany’s economic policy wisdom and have been more actively pushing against its gospel of austerity of late. For much of the time since the euro was launched in 1999, Germany has depended on foreign purchases of its exports for its own meager growth, particularly when domestic demand stagnated for much of the 2000s, just as it does today. But Europe’s biggest country has not been willing to return the favor, as public and private investment remain severely depressed. Even as the government has just cut its own growth forecast for this year… Read More

by Felipe Rezende If you’ve been tracking the news on Brazil’s presidential election, you already knew that incumbent Rousseff will face Neves in a runoff election for Brazil’s presidency on October 26th. The tight election reflects the perception of a downward trend of the nation’s economic outlook augmented by news that Brazil’s economy has fallen into recession in the first and second quarters of 2014. This really isn’t looking like the election the Workers’ Party expected. Brazil’s unemployment rate has hit record lows, real incomes have increased, bank credit has roughly doubled since 2002, it has accumulated US$ 376 billion of reserves as of October 2014 and it has lifted the external constraint. The poverty rate and income inequality have sharply declined due to government policy and social inclusion programs, it has lifted 36 million out of extreme poverty since 2002. Moreover, the resilience and stability of Brazil’s economic and financial systems have received attention as they navigated relatively smoothly through the 2007-2008 global financial crisis. Brazil’s response to the largest failure of capitalism since the Great Depression included a series of measures to boost domestic demand. So, what happened? The reason is fairly obvious, in the aftermath of the global financial meltdown, policy makers misdiagnosed the magnitude of the crisis, the changing circumstances because of it, and ended up… Read More

This chart, a version of which Pavlina Tcherneva posted on Twitter, has been getting a lot of attention (e. g., NYTimes, Vox, NPR, WaPo, Slate, Moyers & Co.). The chart shows, for each postwar economic recovery in the United States (trough to peak), the share of income growth going to the bottom 90 percent and top 10 percent of the income distribution. And the trend is unmistakable. This is how Tcherneva puts it in a new One-Pager: “For the vast majority of people in the United States, economic growth has become little more than a statistical sideshow.” This is a picture of an economy that has been broken for some time; well before the cartoonish result in the last partial expansion (during that 2009-12 period, the top 10 percent received 116 percent of the income growth [possible because the bottom 90 percent saw their incomes drop] — and the top 1 percent alone captured 95 percent of the gains). But Tcherneva also has a particular view of how we can change our policies to help solve this problem. She writes about two ways of improving the income distribution through public policy: “One is to work within existing structures and reallocate income through various income redistribution schemes after income has been earned. The other is to change the very way income is earned from the outset.” The way we… Read More

Pavlina Tcherneva was interviewed on the Real News Network about what’s behind the numbers in her chart (below) showing the increasingly inequitable distribution of income growth in US economic expansions–and what we can do about it. [iframe width=”456″ height=”300″ src=”//www.youtube.com/embed/lRZmQZIWDyw” frameborder=”0″ allowfullscreen></iframe]   Related: “Growth for Whom?“

From Dimitri Papadimitriou today in New Geography: Will Lindsay Lohan Save Greece? It’s September, but island beaches from the Aegeans to Zante are still buzzing in Greece. Mykonos has been the summer’s Go-To spot for superstars and supermodels; the mainland and cities are also seeing the British and Europeans coming back. Greece’s reemergence on the tourist circuit and the celebrity-watch sites has brought travel revenue, which accounted for 12 billion euros through April, actually above the previous peak in 2008. And, based on arrivals, the national tourism agency predicts that visitors will account for 13 billion euros this year. So did the appearance of Lindsay Lohan and friends in the Greek isles signify, as one newspaper put it, a template for Greece’s economic recovery? It didn’t. It’s even still possible that Greece’s economic troubles have yet to hit bottom — no one really knows. There is one definite, though. Even with a dramatic increase in its significant tourism industry, the dance floor under Greece’s summer parties has been resting on a breathtakingly shaky foundation. Read the rest here. The supporting research mentioned in the piece is from the Levy Institute’s latest strategic analysis: “Will Tourism Save Greece?“

The 12th International Post Keynesian conference, cosponsored by the University of Missouri–Kansas City, Journal of Post Keynesian Economics, and Levy Institute, with support from the Ford Foundation, begins this evening at UMKC with a keynote by Bruce Greenwald. The full schedule for the conference can be accessed here. If you can’t attend, portions of the event will be livestreamed at this link, beginning tonight at 7pm EST with Greenwald’s talk. Here is the livestreaming schedule*: *All times below listed in Eastern Standard* Wednesday, 7:00-9:00pm: Bruce Greenwald, “Value Investing and the Mis-measures of Modern Portfolio Theory” Thursday, 6:45-8:30pm: Panel: “What Should We Have Learned from the Global Crisis (But Failed To)?” (with Bruce Greenwald, Lord Robert Skidelsky, and Steve Kraske) Friday, 6:45-8:15pm: James Galbraith, “The End of Normal” Saturday, 12:45-2:00pm: Lord Robert Skidelsky, “The Future of Work” Saturday, 8:00pm: Lord Robert Skidelsky, “Economics After The Crash: What Should Students Be Taught?”

Co-organized by the Levy Economics Institute of Bard College and Economia Civile with support from the Ford Foundation Megaron Athens International Conference Centre Athens, Greece November 21–22, 2014 On November 21 and 22, the Levy Economics Institute of Bard College will hold its second annual conference at the Megaron Athens International Conference Centre in Athens, Greece. Co-organized by the Levy Institute and Economia Civile, the conference will focus on the continuing debate surrounding the eurozone’s systemic instability; proposals for banking union; regulation and supervision of financial institutions; monetary, fiscal, and trade policy in Europe, and the spillover effects for the US and the global economy; the impact of austerity policies on US and European markets; and the sustainability of government deficits and debt. To register, click here. Participants George Argitis, Professor of Economics, University of Athens; Scientific Director, Institute of Labour, GSEE Emilios Avgouleas, Chair, International Banking Law and Finance, University of Edinburgh Elga Bartsch, European Chief Economist, Morgan Stanley Marek Belka, Governor, National Bank of Poland Peter Bofinger, Member of the German Council of Economic Experts; Professor of Monetary Policy and International Economics, University of Würzburg; Research Fellow, Centre for Economic Policy Research Carlos da Silva Costa, Governor, Bank of Portugal Stanley Fischer, Vice Chair, US Federal Reserve System* Richard W. Fisher, President and CEO, Federal Reserve Bank of… Read More

People in Scotland are heading to the polls today to decide the question of secession. One of the major policy questions for an independent Scotland is whether the country should attempt to keep the pound. As many have now begun to appreciate — with a little help from the eurozone spectacle — this would likely be a big mistake. In “Euroland’s Original Sin,” Dimitri Papadimitriou and L. Randall Wray explained why a separation between fiscal and monetary sovereignty — when countries do not issue their own currency yet retain responsibility for fiscal policy — is the root of the problem in the eurozone. Any country with this setup will face budgetary constraints to which currency-issuing nations are not subject; the kind of constraints that can generate a sovereign debt crisis if, for instance, the country’s fiscal authority is forced to handle the fallout from a large banking crisis. This is a drum that many people affiliated with the Levy Institute have been banging for some time (well before the eurozone fell into its current mess). Recently, both Paul Krugman and Martin Wolf  have written columns in which they make similar arguments in the context of Scottish independence (and the SNP’s ostensible plan to retain the pound). Philip Pilkington wrote a policy brief a few months ago in which he also argued, with the aid of an analysis of Scotland’s financial balances, that retaining the pound would leave… Read More

The following clips are from the Mission-Oriented Finance for Innovation conference held in London, organized by Mariana Mazzucato as part of a research project with L. Randall Wray on “Financing Innovation.” L. Randall Wray, “Financing the Capital Development of the Economy: A Keynes-Schumpeter-Minsky Synthesis” (slides) [iframe width=”512″ height=”288″ src=”//www.youtube.com/embed/Uo2XzWsniqM?feature=player_detailpage” frameborder=”0″ allowfullscreen></iframe]   Pavlina Tcherneva, “Full Employment, Value Creation and the Public Purpose” (slides) [iframe width=”512″ height=”306″ src=”//www.youtube.com/embed/17RCIeH4enU?start=737″ frameborder=”0″ allowfullscreen></iframe]

  [WolframCDF source=”http://multiplier-effect.org/files/2014/09/alternative-fiscal-policies.cdf” width=”397″ height=”448″ altimage=”https://www.levyinstitute.org//wp-content/uploads/2014/09/alternative-fiscal-policies.png” altimagewidth=”397″ altimageheight=”448″] Here is a new Wolfram CDF, which I have constructed based on a macro model. The assumptions behind the model–other than the exact parameter values–are loosely stated in this list: 1) industries dominated by a handful of firms, rather than perfect competition 2) production technology that requires capital and labor inputs 3) chronic underemployment and less-than-full capacity utilization (percent of capital stock in use at a given time) 4) sovereign money and a policy-determined interest rate 5) two groups of households, only one of which has money to save 6) net investment a function of the profit and capacity utilization rates 7) budget deficits offset by the issuance of treasury bills and sovereign money 8) a government that employs workers to produce free public services 9) a fiscal policy rule with (a) a balanced budget target (labeled “0” in the CDF above) or (b) public production and capacity utilization targets (labeled “1” in the CDF above) 10) nonlinear functions that result in endogenous cycles in this figure for some parameter values and policy functions (try different parameter values with policy rule “1” for example) 11) gradual adjustment of public and private-sector output toward levels indicated by one of the two fiscal policy rules and output demand, respectively. The arrows in the CDF… Read More

It has been pretty clear since at least the spring of this year that the ECB was keen to see the euro weakening. At the time the euro stood near to $1.40. Policymakers in a number of euro area member states issued calls for a more competitive exchange rate, directing barely hidden criticisms in this regard at the ECB. The ECB itself ever more forcefully asserted that international factors, including euro strength, were largely responsible as the bank’s price stability misses got ever crasser. Either through direct references to the euro’s exchange rate expressing discomfort about its strengthening, or by highlighting that the prospective monetary policy stances on either side of the Atlantic were on diverging paths, inviting the markets to bet on the dollar and against the euro, Mr. Draghi applied his magic in talking the euro down. The latest package of ECB easing measures introduced in early June steered the euro overnight rate closer to zero, raising the euro’s attractiveness as a funding currency for carry trades. All along Mr. Draghi has held out the prospect of some kind of quantitative easing even beyond the credit easing measures promised to be unleashed in the fall. As inflation has declined even more and the so-called recovery stalled once again, the beggaring for a weaker euro has brought some visible… Read More