Category Archives: The dismal science

Nikkei Disses Third Dose of Abenomics, Falls Nearly 4%

The financial media and investors were waiting tonight for Prime Minister Abe’s latest announcement on the extreme economic sport known as Abenomics. But his new installment dashed hopes, and after a short-lived rally, the Nikkei is down over 3%. But after the wild ride since May 22, when the Japanese index plunged 7.3%, a 3% decline is coming to look almost like normal daily volatility. (Well, now that it’s down nearly 4%, it might be a beast of a different color).

Yanis Varoufakis: Mixed Messages from the IMF

Yves here. Note how the need to pretend Deutsche Bank is not undercapitalized, mentioned in passing in this post, is playing into policy.

An interview by Yanis Varoufakis, Professor of Economics at the University of Athens, with Tomas Hirst of Pieria. Cross posted from Yanis Varoufakis’ blog.

Philip Pilkington: Paul Krugman and the Fatherless Keynesians

By Philip Pilkington, a writer and research assistant at Kingston University in London. You can follow him on Twitter @pilkingtonphil

Some decades ago the British economist Joan Robinson – one of John Maynard Keynes’ most brilliant students who helped him with the original draft of his General Theory – half-jokingly referred to some of her colleagues as “Bastard Keynesians”. These colleagues were mostly American Keynesians, but there were a few British Bastard Keynesians too – such as John Hicks, who invented the now famous ISLM diagram. What Robinson was trying to say was that these so-called Keynesians were fatherless in the sense that they should not be recognised as legitimately belonging to the Keynesian family. The Bastard Keynesians, in turn, generally assumed that this criticism implied some sort of Keynesian fundamentalism on the part of the British school.

Such a misinterpretation exists to this day. The second and third generation Bastard Keynesians – which include many of those who generally collect under the title “New Keynesian” – have reinforced this criticism.

Richard Alford: The “Dutch Disease” and Once and Future Economic Crises in the US

By Richard Alford, a former New York Fed economist. Since then, he has worked in the financial industry as a trading floor economist and strategist on both the sell side and the buy side.

The term Dutch Disease refers to negative macro-economic effects on a country of a boom in commodity exports or other developments that result in large capital inflows. It may be that the Dutch Disease contributed to the recent US recession and that the prospective energy-led US economic recovery could amount to nothing more than another bout of the Dutch Disease.

Steve Keen: Is QE Quantitatively Irrelevant?

Yves here. Some readers still equate quantitative easing with “printing money”, and Keen’s post explains what (little) QE actually does and does not accomplish.

The Case for 4% Inflation

Yves here. Some readers are likely to recoil at the idea that more inflation might be a good thing. But the flip side is that economists are still fighting the war of the 1970s.

Dan Kervick: Reserve Balance Misconceptions

Yves here. While it may seem a bit unfair to make an example of Mark Thoma, since the statement he makes about bank reserves is conventional, Kervick’s post is a useful reminder of why this sort of thinking is misleading.

Richard Alford: The Problem of Central Banks With Multiple Goals and Few Tools

By Richard Alford, a former New York Fed economist. Since then, he has worked in the financial industry as a trading floor economist and strategist on both the sell side and the buy side.

Current monetary policymakers (largely economists) have designed and employed macroeconomic models and a policy framework that allow only one goal for central banks: price stability. They did not solve the problem of how to allocate scare resources (in this case limited policy tools) in pursuit of competing ends, e.g., stable prices, full employment, sustainable growth, financial stability, external balance.

The Limits of Governing Budgetary Policies by Rules

By Daniela Schwarzer, who heads the research unit European Integration at the German Institute for International and Security Affairs, Stiftung Wissenschaft und Politik (SWP) in Berlin. Cross posted from Triple Crisis

The European squabble over budgetary austerity reached a new peak a good week ago when a document drafted by leading representatives of the French Socialist Party, which reportedly had been seen by Elysée officials close to President Hollande, personally attacked German Chancellor Angela Merkel. Less mediatized, but more telling about the nature of the governance problems facing the euro area, are the statements made by Finance Minister Pierre Moscovici this weekend.

Philip Pilkington: Homosexuality Leading Cause of Economic Crisis, Harvard’s Niall Ferguson Reports

By Philip Pilkington, a writer and research assistant at Kingston University in London. You can follow him on Twitter @pilkingtonphil

Over the weekend a leading member of the pro-austerity crowd came out with what is probably their most ludicrous argument yet.

Yanis Varoufakis: Macroeconomic Experiments: Abenomics Versus Euro-Austerity

By Yanis Varoufakis, a professor of economics at the University of Athens. Originally posted at Australian Broadcast Corporation’s The Drum

In the long, unending wake of the global financial crisis, desperate governments and central banks are trying their hand at experimental economic policy mixes. Japan and the eurozone offer a glimpse of how radically different anti-crisis experiments can be.

Nathan Tankus: Centralized Planning in the United States

By Nathan Tankus, a student and research assistant at the University of Ottawa. You can follow him on Twitter at @NathanTankus

Discussions of centralized planning in the West often take it for granted that the Soviet Union and similar social systems are the only ones with centralized planning. This is a basic (albeit ideological) confusion that results from the belief that markets and centralized planning are incompatible. This is not the case

Secret “Free Trade” Negotiations Will Gut Regulations, Further Enrich Multinationals and Big Financial Firms

It’s a sign of the times that a reputable economist, Dean Baker, can use the word “corruption” in the headline of an article describing two major trade deals under negotiation and no one bats an eye.