Category Archives: The dismal science

Rajiv Sethi: The CORE Project on Teaching Economics

I like the CORE slogan: “Teaching economics as if the last three decades had happened.”

The ECB as Enabler: Doubles Down on Failed Monetary Policies

The ECB took a few surprise measures on Thursday mainly as a signal that central banks are willing to Do Something, even when sort of somethings they can do are at best unproductive. But the weak tea of lowering the benchmark rate by 10 basis points to 0.05% and announced it would be implementing a watered-down version of QE, in which it will start buying asset backed securities and covered bonds nevertheless pleased investors initially. bu the enthusiasm proved to be short lived; in the US, the modest stock market lift in the morning had gone into reverse by the close of trading. The announcement did produce one tangible positive outcome for the flagging European economy, which was to lower the value of the euro.

J.D. Alt: Bank Dollars & Sovereign Spending

Why do so many people—including the authors of most economics textbooks—believe the U.S. banking system creates the U.S. dollars we earn and spend and pay our taxes with?

Philip Pilkington: Economists – An Anthropological View

Yves here. While Pilkington is a bit leisurely in setting the stage for his anthropological take on the economics tribe, rest assured that the post is both amusing and instructive.

Ballooning Finance: How Financial Innovation Produces Overgrowth and Busts

Yves here. It’s a welcome surprise to see economists devise a model that delivers generally sensible results. Here, three economists looked at how financial innovation leads to an bloated financial sector as well as greatly increasing the risk of meltdown.

Philip Pilkington: Taxation, Government Spending, the National Debt and MMT

The other day my friend Rohan Grey — a lawyer and one of the key organisers behind the excellent Modern Money Network (bringing Post-Keynesian economics to Columbia Law School, yes please!) — directed me to an absolutely fascinating piece of writing. It is called ‘Taxes For Revenue Are Obsolete’ and it was written in 1945 by Beardsley Ruml. Ruml was the director of the New York Federal Reserve Bank from 1937-1947 and also worked on issues of taxation at the Treasury during the war.

Blogs Review: The Forever Recession

As the recovery takes hold in the US, Europe appears stuck in a never-ending slump. With the ECB systematically undershooting its inflation target and recent signs that inflation expectations could become de-anchored, the bulk of commentators in the blogosphere are again calling for more monetary actions. Noticeably, some have completely lost hope in the ability of the European institutions to turn this situation around and are now calling for countries to simply break away from the EMU trap.

Utopian Robotics

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….

Deconstructing Fed Vice Chair Stanley Fischer on the Disappointing Global Recovery

People have no money. So there’s no aggregate demand. So there’s no recovery.

Does the Central Bank Control Long-Term Interest Rates? A Glance at Operation Twist

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.

Philip Pilkington: Financial Times Contributors Understand ‘Liquidity Trap’ Better Than Neo-Keynesians Like Krugman

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.

Elites Finally Starting to Get that Inequality is Messing Up Growth

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.

The Global Economy’s Groundhog Day

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.