Job creation is once again at the forefront of policy action, and President Obama must be far more audacious in this regard, says Research Associate Pavlina R. Tcherneva. She proposes an amendment to the Obama stimulus plan whereby the government serves as employer of last resort, since a job guarantee can reduce the unemployment rate drastically and immediately. This policy represents a genuine bottom-up approach to the recovery that offers employment opportunities to all, including minorities and women, and creates jobs and valuable work at a much smaller price.

Fiscal policy is executed in a manner completely opposite from what John Maynard Keynes had in mind, and we have an opportune moment to set fiscal policy straight, says Tcherneva. Counting on the private sector to generate the desired job growth is a far too lengthy and sluggish road to recovery. Moreover, a job guarantee is entirely consistent with all of the objectives of Obama’s plan.

“Change” was the buzzword of the U.S. presidential campaign, in response to a political agenda precipitated by financial turmoil and a global economic crisis. According to Research Associate Thomas I. Palley, the neoliberal economic policy paradigm underlying the current agenda must itself change if there is to be a successful policy response to the crisis. However, there are profound political, intellectual, and sociological obstacles to such change.

The ideology of the economics profession—mainstream economic theory—remains unreformed, says Palley, and he warns of a return to failed policies if a deep crisis is averted. Since Post Keynesians accurately predicted that the U.S. economy would implode from within, there is an opportunity for Post Keynesian economics to replace neoliberalism with a more successful approach.

The Levy Institute Measure of Economic Well-Being (LIMEW) is a more comprehensive measure than either gross money income or extended income because it includes estimates of public consumption and household production, as well as the long-run benefits of wealth ownership. As a result, it provides a picture of economic well-being in the United States that is very different from the official measures.

The authors find that median household well-being grew rather sluggishly over the 1959–2004 period compared to the annual growth rate of per capita GDP. They note the crucial role of net government expenditures, and therefore call for the Obama administration’s fiscal stimulus package to improve the broader economic well-being of the poor and the middle class, while also creating jobs.

This paper breaks new ground in the analysis of financial instability in the United States. It shows how instability links with macroeconomic imbalances and inflation in the U.S. economy, and identifies the key structural features that describe the dynamics of an international financial system dependent on the U.S. trade deficit.

Author Julia S. Perelstein accounts for the global integration of capital markets by analyzing the relationship between U.S. trade imbalances and global financial markets. She concludes that the 2007–08 financial crisis was a consequence of the U.S. trade deficit, that there is global financial dependence on the United States when dollars are reinvested in U.S. capital markets (thus creating excess liquidity and sequential bubbles relating to housing and commodities), and that U.S. macroeconomic imbalances cannot be resolved without affecting the rest of the world.

Islamic banking prohibits interest and collateral while adhering to the idea that banks should channel funds toward productive investment. Profit is generated by primary and secondary modes of Islamic finance (e.g., profit-sharing arrangements such as partnerships and equity participation). Its perceived superiority to conventional banking is derived from its morality, social welfare dimension, and greater stability.

The author reveals the dynamic interaction between the Islamic and non-Islamic economy in Malaysia, and extends the theories of financialization and excess capitalization to emerging markets. Using a flow-of-funds approach in line with Hyman P. Minsky’s methodology, she finds a financial business cycle where domestic firms have been overcapitalized. She also finds that Islamic banking contributes to asset inflation by channeling surplus funds from the corporate to the household sector.