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BlogWhat Happens if We Don’t Raise the Debt Ceiling? A Stock-Flow Analysis
October 10, 2013 Some commentators and members of Congress have insisted that failing to raise the debt ceiling would not necessarily require defaulting on the national debt. The theory is that Treasury could prioritize payments to bond holders while defaulting only on commitments to other payees (say, Social Security recipients). Most of the discussion of what might happen [...] Blog -
Policy Note No. 9A New “Lehman Moment,” or Something Worse?
October 10, 2013 The United States entered the second week of a government shutdown on Monday, with no end to the deadlock in sight. The cost to the government of a similar shutdown...more Publication -
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Reorienting Fiscal Policy and Understanding Currency Sovereignty
October 10, 2013 From Mariana Mazzucato’s “Rethinking the State” video series: Pavlina Tcherneva discusses the implications of the Great Financial Crisis of 2007 for employment outcomes and fiscal policy. She argues that the current view of Keynesian fiscal policies is based on a misreading of Keynes. Simply boosting demand — through what should be understood as trickle-down fiscal [...] Blog -
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Flash from the Past: Why QE2 Wouldn’t Save Our Sinking Ship
October 09, 2013 Here’s a piece I published in HuffPost back on Oct 18, 2010. A flash from the past – three years ago – predicting that QE2 would prove to be as impotent as QE1 had been. And here we are, folks. No recovery in sight–at least once you get off Wall Street. We’re now set–yet again [...] Blog -
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Why Greece Can’t Wait for the Long Run
October 08, 2013 The policies Greece has been implementing as part of the price for its two bailouts are not working the way we were told they would. That’s pretty clear if you look at the troika’s endlessly downgraded projections for key economic indicators. Here, for instance, is actual Greek unemployment, compared to a series of troika projections [...] Blog -
Working Paper No. 777A Simple Model of Income, Aggregate Demand, and the Process of Credit Creation by Private Banks
October 07, 2013 This paper presents a small macroeconomic model describing the main mechanisms of the process of credit creation by the private banking system. The model is composed of a core unit—where...more Publication -
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An Incomplete Defense of UK Austerity
October 06, 2013 Kenneth Rogoff placed an editorial in Wednesday’s Financial Times defending the Cameron government’s austerity policies as a kind of insurance against the possibility of investor flight from UK government debt. He concedes that the specific form of austerity that was implemented in the UK was ill-advised — public investments in infrastructure, he says, can be [...] Blog -
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Post-Keynesians in Paradise
October 03, 2013 We’ve just returned from Rio de Janeiro, where the Levy Institute held a conference cosponsored by the Multidisciplinary Institute for Development and Strategies (MINDS), supported by the Ford Foundation. The two day conference dealt with global financial governance, financial reregulation, and development challenges in a Minskyan context — a lot of discussion of the regulation [...] Blog -
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The GOP Lost the Election but Is Winning Fiscal Policy
October 03, 2013 Congressional Republicans may or may not suffer politically from the government shutdown and upcoming debt ceiling fight, but in terms of policy they have already secured a significant and lopsided victory in the battle over the budget, whether they realize it or not. Repeal of the Affordable Care Act seems pretty unlikely (not just because [...] Blog -
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Are Structural Reforms the Cure for Southern Europe?
September 30, 2013 I have recently signed the “Economists’ Warning” on the situation in the eurozone, which states that It is essential to realise that if the European authorities continue with policies of austerity and rely on structural reforms alone to restore balance, the fate of the euro will be sealed. The Economists’ Warning was published by the [...] Blog -
Working Paper No. 776
Δημοσιονομική πολιτική και επανεξισορρόπηση στην ευρωζώνη
September 30, 2013 Το «φρένο χρέους» στη Γερμανία θεωρείται επιτυχημένη πολιτική και ως εκ τούτου λειτουργεί ως πρότυπο για τη ζώνη του ευρώ και το λεγόμενο «δημοσιονομικό σύμφωνο». Στην παρούσα εργασία ασκούμε έντονη...more Publication -
Working Paper No. 776
Fiscal Policy and Rebalancing in the Euro Area
September 30, 2013 The German debt brake is often regarded as a great success story, and has therefore served as a role model for the Euro area and its fiscal compact. In this...more Publication -
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Euroland’s “Recovery” – Three Cheers for Dr Schäuble!
September 30, 2013 (first appeared in Social Europe) Never miss a party – especially one you’ve been desperately waiting for for so long. This much the authorities in Europe’s currency union clearly understand. As soon as Eurostat had released its first estimate for GDP growth in the spring quarter in mid August (1st estimate here), which was missing [...] Blog -
Working Paper No. 775
Wage and Profit-led Growth
September 26, 2013 We argue that a fundamental difference between Post-Keynesian approaches to economic growth lies in their treatment of investment. Kaleckian-Robinsonian models postulate an investment function dependent on the accelerator and profitability....more Publication -
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Does the Fed Have the Tools to Achieve its Dual Mandate?
September 25, 2013 Stephanie Kelton recently sat down with L. Randall Wray to discuss, among other things, the news that the Federal Reserve will refrain for the time being from tapering its asset purchases (QE). Wray took the occasion to elaborate on his view that quantitative easing is ineffective as economic stimulus and that — given the tools [...] Blog -
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Money as Effect
September 24, 2013 Regarding spurious policy arguments about “excessive growth of the money stock”: Ed Dolan posts helpfully to Economonitor on the more realistic approach suggested by the theory of endogenous money. In particular, I took note of the following passage, which brings up a point that I wrote about recently: “Formally, a model that includes a minimum [...] Blog -
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The IMF’s Puzzling Current Account Projections
September 23, 2013 The following table has been computed using data from the latest (April 2013) IMF World Economic Outlook database, with IMF estimates starting in 2013 for most countries. In my view, these projections are based on heroic assumptions and wishful thinking. The eurozone is supposed to improve its position, even though the current account balance of [...] Blog -
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Another Way of Reading the CBO Report
September 20, 2013 On Tuesday, the Congressional Budget Office released its new projections (pdf) for the long-term budget. A Bloomberg article titled “CBO Says Short-Term Deficit Cut Won’t Avert Fiscal Crisis” provided a fairly typical summary: [F]ederal spending will rise from 22 percent of GDP in 2012 to 26 percent in 2038 … The deficit [currently 3.9 percent [...] Blog -
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The Euro: Can’t Live With It … ?
September 19, 2013 As a member of the eurozone, Greece does not control its own currency and therefore cannot devalue said currency in an effort to promote an export-led recovery. Instead, Greece is stuck with the troika’s strategy of internal devaluation: seeking export growth through reducing unit labor costs (wages). As Dimitri Papadimitriou, Michalis Nikiforos, and Gennaro Zezza [...] Blog -
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Fiscal Sadism in Greece
September 17, 2013 In case you missed it, what with all the celebrating going on in the eurozone over the incredible success of austerity policies, the unemployment rate in Greece is now at 27.9 percent and the country is likely on its way to a third bailout. C. J. Polychroniou argues in a new one-pager that offering Greece [...] Blog -
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Janet Yellen on Bubbles and Minsky Meltdowns
September 17, 2013 Back in 2009, Janet Yellen delivered a speech at the Levy Institute’s Minsky conference that explained how the financial crisis had changed her views about the role of central banks in handling financial instability. At the time she was the head of the San Francisco Fed. The focus of her 2009 remarks was the question [...] Blog -
One-Pager No. 42Έξω ο Κέυνς ο φριντμανικός, μέσα ο Κέυνς του Μίνσκι
September 16, 2013 Ίσως το πιο σοβαρό και καταδικάσιμο παράπτωμα που διέπραξαν οι καθεστωτικοί οικονομολόγοι την περίοδο 1988-2008 ήταν να επανεξετάσουν, βήμα προς βήμα, την πορεία του Keynes από το 1924 μέχρι το...more Publication -
One-Pager No. 42
Exit Keynes the Friedmanite, Enter Minsky’s Keynes
September 16, 2013 Perhaps the most indictable offense that mainstream economists committed, from 1988 through 2008, was to retrace Keynes’s path of discovery from 1924 (A Tract on Monetary Reform) through 1936 (The...more Publication -
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Panics in India
September 16, 2013 (The following was written by Sunanda Sen and first appeared at TripleCrisis) A panic of unprecedented order has struck the crisis-ridden Indian economy. It brings to the fore the question of what led to this massive downturn, especially when the country was touted, not long back, as one of the high-growth emerging economies of Asia. [...] Blog