Category Archives: Macroeconomic policy

Jeffrey Sommers/Michael Hudson: Latvia, the Austerians’ Potemkin Village

Yves here. I’m dwelling on the spectacular failure of Latvia in part because readers like the writings of Michael Hudson, but more important, because a major push is on to reimage the implosion of that economy as some sort of success, not unlike the claims the Chicago Boys made for their efforts in Chile. It also doesn’t hurt that this account, which is a considerably expanded version of a recent Financial Times op-ed, is vivid and pointed.

By Jeffery Sommers and Michael Hudson, a associate professor at the University of Wisconsin-Milwaukee and distinguished professor at the University of Missouri-Kansas City respectively, who have both advised members of Latvia’s government on alternatives to austerity. They are also contributors to the forthcoming book by Routledge Press: The Contradictions of Austerity: The Socio-Economic Costs of the Neoliberal Baltic Model. Cross posted from Counterpunch by permission of the authors

Austerity’s advocates are declaring victory with Latvia’s battle against the European economic crisis and advocating it as the model for Greece & Spain to emulate. Curiously, Latvians have been declaring this “win” by exiting their country.

Can the Fed Really Do More?

By Stephanie Kelton, Associate Professor of Economics at the University of Missouri-Kansas City. Cross posted from New Economic Perspectives.

I’ve grown increasingly frustrated by the near universal cry for more action from the Fed. My friend and fellow blogger Marshall Auerback has quipped that it’s as if every mainstream progressive received the same White House memo. I imagine it looked something like this:

New Directions in Monetary Economics: An Interview with Marc Lavoie – Part II

Marc Lavoie is a professor in the Department of Economics at the University of Ottawa. He is the author of numerous books on post-Keynesian economics. His latest work ‘Monetary Economics’, written with the late Wynne Godley, is now available in paperback from Amazon.com.

Interview conducted by Philip Pilkington. Part I of this interview can be found here

Philip Pilkington: If you don’t mind I’d like to move onto some more practical issues. The models set out in the book lead to some very different conclusions than the mainstream models as far as the effects of macroeconomic policy go. This has enormously important implications for both policymakers and people working in the financial markets.

The Crisis Shifts to Italy

By Delusional Economics, who is horrified at the state of economic commentary in Australia and is determined to cleanse the daily flow of vested interests propaganda to produce a balanced counterpoint. Cross posted from MacroBusiness.

As we head towards Greece’s weekend election, rumoured to be celebrated by the locals by moving ever larger sums of money elsewhere, the Eurozone appears to be seriously straining under the constant pressure of its ongoing crisis.

Philip Pilkington: Budget Hawk Socialism – Why Calls for Balanced Budgets Lay the Path for Socialism

By Philip Pilkington, a writer and journalist based in Dublin, Ireland. You can follow him on Twitter at @pilkingtonphil

What the bourgeoisie therefore produces, above all, are its own grave-diggers. Its fall and the victory of the proletariat are equally inevitable.

– Karl Marx and Friedrich Engels ‘The Communist Manifesto’

Calls for balanced budgets in the present environment have long appeared somewhat confused, of that we have had little doubt for some time now as balanced budgets seem to exacerbate the problems they target rather than solve them and may lead to higher debt-to-GDP levels due to the reduction in real economic growth that they lead to.

Europe’s Problems Multiply

Yves here. Notice how someone in the officialdom actually said “There is no alternative”. Nothing like being explicit.

By Delusional Economics, who is horrified at the state of economic commentary in Australia and is determined to cleanse the daily flow of vested interests propaganda to produce a balanced counterpoint. Cross posted from MacroBusiness.

Overnight, Greek Leftist leader, Alexis Tsipras, gave up on his attempts, or at least pretence of them, to form government. The gauntlet has now been handed to PASOK leader, Evangelos Venizelos, who again has 3 days to attempt the same.

Marshall Auerback: Spain is the New Greece

By Marshall Auerback, a hedge fund manager and portfolio strategist. Cross posted from New Economic Perspectives

Spain has become the new Greece. Actually, in many respects Spain is now worse than Greece.

Will the Fiscal Cliff Eat the Recovery, Such as It Is?

Lately, the US has been winning the investment beauty contest among Cinderella’s ugly sisters. Europe’s addiction to austerity, rolling rescues, and inability to address internal imbalances means at best a wild ride and at worst a crisis resurgence. China still has its perennial fans, but long-standing bears like Jim Chanos have been joined more recently by Marc Faber, who foresees 3% growth, which is tantamount to a recession. Japan is struggling with a mile high currency. The US, by comparison, does not look too bad.

Or does it? One of the lurking worries in the background is the so-called fiscal cliff.

Pavlina Tcherneva: No, Mr. Krugman, Bernanke’s Conundrum is Completely Different

By Pavlina Tcherneva, Assistant Professor of Economics at Franklin and Marshall College, Research Scholar at The Levy Economics Institute, and Senior Research Associate at the Center for Full Employment and Price Stability. Cross posted from New Economic Perspectives

Our mainstream colleagues keep banging their heads against the wall. “Why, oh why wouldn’t Chairman Bernanke do more to rescue the economy?” Today Paul Krugman took on this question again, arguing that Chairman Bernanke should listen to Professor Bernanke who had far more sensible ideas about rescuing an economy from a deflationary environment, as seen in his research on Japan during the 90s.

Krugman revisits a 2000 paper by then professor Bernanke, which many of us have scrutinized before, titled “Japanese Monetary Policy: A Case of Self-Induced Paralysis?” Krugman faults Bernanke for not following his own advice…..

The difference is that, unlike Paul Krugman, I actually read Bernanke’s paper from start to finish.

Dan Kervick: Beware of Rule by Central Banks

By Dan Kervick, who does research in decision theory and analytic metaphysics. Cross posted from New Economic Perspectives

The recent exchange on the nature of banking among Paul Krugman, Scott Fullwiler, Steve Keen and others has been feisty and instructive. But some readers might be left wondering whether the whole exercise is too wonky by half. The anatomical details of banking systems might be juicy and interesting for the academics who like to dissect those systems and dig deep into their entrails. But how significant are the details for practical questions of public policy? They are in fact very significant.

Money, the financial system and the Federal Reserve

Edward Harrison here. We seem to be moving forward with this discussion on monetary policy, banking, and reserves. Things seemed to be veering wildly off track but I have seen a huge number of good comments in the last 24 hours. Now, John Carney does a good job of summarising some of the initial forays […]