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Public Policy Brief No. 85
The Fallacy of the Revised Bretton Woods Hypothesis
The stability of the international financial system is in doubt. Analysis of the system has focused mainly on the sustainability of financing the American trade deficit and has failed to understand the microeconomics of transactions within the system. According to this brief by Thomas I. Palley, the international financial system is unsustainable for reasons of […]
Working Paper No. 453
The Minskyan System, Part II
This is the second part of a three-part analysis of the Minskyan framework. It studies in detail the dynamics at the root of the endogenous financial weakening of capitalist economic systems. This part combines the properties presented in part I with other important concepts, such as the paradox of leverage and conventional expectations, to explain […]
Working Paper No. 452
The Minskyan System, Part I
This is the first part of a three-part analysis of the Minskyan framework. Via an extensive review of the literature, this paper looks at 12 essential elements necessary to get a good understanding of Minsky’s theory, and argues that those elements are central to comprehend how a monetary production economy works. This paper also shows […]
Public Policy Brief Highlight No. 85
The Fallacy of the Revised Bretton Woods Hypothesis
The stability of the international financial system is in doubt. Analysis of the system has focused mainly on the sustainability of financing the American trade deficit and has failed to understand the microeconomics of transactions within the system. According to this brief by Thomas I. Palley, the international financial system is unsustainable for reasons of […]
US economy and the deficit predicament
Copyright 2006 The Financial Times Limited (London, England) Wednesday, May 30, 2006; Financial Times; USA Edition; Letters to the Editor Sir, Martin Feldstein (“The falling dollar sets a test for Asia and Europe”, May 26) provides a good account of the problems caused by global imbalances [which closely resembles, in its structure, the analysis contained in many […]
Working Paper No. 451
Time and Money
Time and money are basic commodities in the utility function and are substitutes in real terms. To a certain extent, having time and money is a matter of either/or, depending on individual preferences and budget constraints. However, satisfaction with time and satisfaction with money are typically complements, i.e., individuals tend to be equally satisfied with […]
Working Paper No. 450
Extending Minsky’s Classifications of Fragility to Government and the Open Economy
Minsky’s classification of fragility according to hedge, speculative, and Ponzi positions is well-known. He wrote about fragile positions of individual firms and of the economy as a whole, with the economy transitioning naturally from a robust financial structure (dominated by hedge units) to a fragile structure (dominated by speculative units). In most of Minsky’s writing, […]
Working Paper No. 449
The Temporal Welfare State: A Cross-national Comparison
Welfare states contribute to people’s well-being in many different ways. Bringing all these contributions under a common metric is tricky. Here we propose doing so through the notion of “temporal autonomy”: the freedom to spend one’s time as one pleases, outside the necessities of everyday life. Using surveys from five countries (the United States, Australia, […]
Working Paper No. 448
Gibson’s Paradox II
The Gibson paradox, long observed by economists and named by John Maynard Keynes (1936), is a positive relationship between the interest rate and the price level. This paper explains the relationship by means of interest-rate, cost-push inflation. In the model, spending is driven in part by changes in the rate of interest, and the central […]
Public Policy Brief No. 84
Can Basel II Enhance Financial Stability?
Even as the United States enjoys an economic expansion, there is an undercurrent of concern among economic analysts who follow financial markets. Some feel that the expansion of the credit derivatives markets poses the threat of a crisis similar to the Long-Term Capital Management debacle of 1998. Credit derivatives allow banks to share risks with […]
Strategic Analysis
Can the Growth in the US Current Account Deficit Be Sustained?
Can the growth in the current account deficit be sustained? How does the flow of deficits feed the stock of debt? How will the burden of servicing this debt affect future deficits and economic growth? President Dimitri B. Papadimitriou and Research Scholars Edward Chilcote and Gennaro Zezza address these and other questions in a new […]
Summary No. 2
Summary Spring 2006
The latest Strategic Analysis by the Institute’s Macro-Modeling Team suggests that much of the recent growth in GDP can be attributed to house price appreciation and private sector borrowing. However, rising house prices have not improved the equity position of households. INSTITUTE RESEARCH Program: The State of the US and World Economies, and Strategic […]