So the robots take over the social function of providing most everything in the two layers at the base of Maslow’s hierarchy of needs, physiology and safety. Food, water, shelter, warmth; security, stability (for example). We’ve got robot houses, robot servants, robot cars, robot malls, robot servants, robot baristas, robot Walmart greeters, robot drivers, robot security guards, robot financial advisors, robots to make robots….
Read more...People have no money. So there’s no aggregate demand. So there’s no recovery.
Read more...Although less prevalently talked about today many economists assume that while the central bank has control over the short-term rate of interest, the long-term rate of interest is set by the market. When Post-Keynesians make the case that when a country issues its own sovereign currency the rate of interest is controlled by the central bank and that the government never faces a financing constraint some economists deny this and point to the long-term rate of interest which they claim is under the control of the market. They say that if market participants decide to put the squeeze on the government they can raise the long-term rate of interest.
Read more...I have long complained that the likes of Paul Krugman have grossly misinterpreted the meaning of the term ‘liquidity trap’. These economists seem to think that we are currently in a liquidity trap despite the fact that yields on bonds are extremely low across the board.
Read more...One widely accepted nostrum is that falling birth rates, particularly when accompanied by rising life spans, are bad for economic growth and therefore bad generally. The assumption is that a shrinking pool of 20 to 65 year olds will be forced to support a larger and larger cohort of unproductive citizens, namely, the aged. That vision, of young people hostage to parasitic elders, is also one of the foundations of boomer hate, which is actively stoked by major Republican party funder Stan Druckenmiller, who has been touring college campuses to sell the false notion that Social Security and other social safety nets for the elderly are bad for them.
That picture is at odds with what is actually happening in advanced economies.
Read more...Even though there has been a big uptick in news stories on rising economic inequality, and more chatter among economists about the idea that high levels of inequality are associated with lower growth, much of the messaging has come from the Democrats desperate to use the one dog whistle that might rally their badly abused base. Even though inequality has risen under Obama, thanks to policies that favored rescuing banks and enriching the medical-industrial complex over helping ordinary citizens, the Democrats are all too willing to rely on their perceived lesser-evilism relative to the Republicans. After all, it was only Romney’s billionaire warts that kept Obama from what would otherwise have been a well-deserved 2012 defeat.
But while the Administration has been pushing inequality as a useful campaign theme (the signal was inviting Thomas Piketty to meet with Treasury Secretary Jack Lew), in parallel, it also appears that some of the expressions of concern about inequality among the policy classes are genuine.
Read more...n the movie “Groundhog Day,” a television weatherman, played by Bill Murray, awakes every morning at 6:00 to relive the same day. A similar sense of déjà vu has pervaded economic forecasting since the global economic crisis began a half-decade ago. Yet policymakers remain convinced that the economic-growth model that prevailed during the pre-crisis years is still their best guide, at least in the near future.
There are good reasons, beyond the repeated forecast failures, to doubt that assumption.
Read more...Our Mission Oriented Finance conference explores how to direct funding toward what Hyman Minsky called “the capital development of the economy”, broadly defined to include private investment, public infrastructure, and human development. (See more here.)
But to understand how, we need to understand what money is and why it matters. After all, finance is the process of getting money into the hands of those who will spend it.
Read more...Part S in the Insider’s Economic Dictionary
S-curve: The typical shape of growth in nature, such as human beings whose height tapers off as they reach maturity. They also typify most business cycles, which taper off after an upswing as employment, raw-materials and resource limits are approached and wages and commodity prices rise, slowing profits. The demand for specific products likewise tapers off as markets become saturated. Meanwhile, the fact that financial claims and debts tend to grow at compound interest means that financial dynamics tend to outrun the S-curve of production and consumption, creating business crises which end the upswing.
Read more...Monetarism is a hoary old myth that does its damage in two distinct ways. The first is that, piggybacking on Milton Friedman’s personality, basically an entire generation of economists are actually monetarist in their practical thinking. Greg Mankiw once remarked that New Keynesianism should more accurately be called New Monetarism and a glance at the actual pronouncements of even the more self-critical the New Keynesians shows this beyond a shadow of a doubt.
Read more...Yves here. Robert Heilbroner described economics as the study of how society resources itself. It’s hard to think of a resourcing issue more basic than food. Not surprisingly, food and the means of producing it were the source of traditional wealth (the so-called landed aristocracy). Similarly, expropriation of rights that yeoman farmers had enjoyed, such as hunting rights and access to common pasture land, were the main devices that early industrialists used to end the farmers’ self-sufficiency and force them to sell their labor as a condition of survival. Even though similar land grabs are justified now under the idea that large-scale farming is more efficient than cultivation by smaller operators, Tim Wise contends that evidence is not conclusive, particularly in emerging economies.
Read more...Tom Palley has written a blog post politely requesting that Paul Krugman might give a bit of recognition to non-mainstream contributors to economics. It would be nice to see this happen but I doubt that it will (although Palley is getting a bit of blog play out of it which is nice). Anyway, I note that in the post he links to a discussion him and Krugman had regarding the Phillips Curve. Before I get to the arguments put forward here let us examine the Phillips Curve in some detail.
Read more...This week marks the 100th anniversary of a nearly forgotten yet critical moment in global finance. As the looming outbreak of World War I appeared more and more imminent when Austria made an ultimatum to Serbia in the last week of July 1914, the resulting fear in global markets set off a massive financial panic. Investors, fearing unpaid debts, pulled out of stocks and bonds in a scramble for cash, which at this point in history meant gold. The London Stock Exchange reacted by closing on July 31 and staying closed for five straight months. The U.S. stock exchange, which witnessed a mass dumping of securities by European investors in exchange for gold to finance the war, would also close on the same day, for about four months. Britain declared war while on a bank holiday. Over 50 countries experienced some form of asset depletion or bank run. Here’s an incredible statistic: “For six weeks during August and early September every stock exchange in the world was closed, with the exception of New Zealand, Tokyo and the Denver Colorado Mining Exchange.”
Read more...Yesterday when I published my post on Krugman and the vulgar Keynesians not understanding the meaning to the term ‘liquidity trap’ I came to realise that many readers — both sympathetic and hostile — do not really understand the Keynesian theory of financial markets. I then realised that this was actually quite understandable given that it is not much discussed today (with some notable exceptions such as Jan Kregel and Minskyians like Randall Wray).
Read more...I came across a very amusing piece from Krugman in 2010. The piece is entitled ‘Nobody Understands the Liquidity Trap‘. Actually, Krugman might have a point — if we include him in the ‘everybody’ that does not understand the liquidity trap and thus conclude that he, and all those that listen to him, do not understand the liquidity trap.
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