Category Archives: Economic fundamentals

Satyajit Das: The European Debt Crisis Redux

By Satyajit Das, derivatives expert and the author of Extreme Money: The Masters of the Universe and the Cult of Risk Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives – Revised Edition (2006 and 2010). Jointly posted with Roubini Global Economics

The half-life of solutions to Europe’s debt problem is getting ever shorter.

Recent hopes have relied on the ostensible success of the European Central Bank’s (“ECB”) LTRO – Long Term Refinancing Operation, more appropriately termed the Lourdes Treatment and Resuscitation Option.

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.

The ECB is on Mars

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 http://www.macrobusiness.com.au/2012/04/spain-has-only-denial/“>MacroBusiness.

Overnight the president of the European Central Bank, Mario Draghi, gave a speech to the Hearing at the Committee on Economic and Monetary Affairs of the European Parliament. The speech was not particularly out of line with what Mr Draghi usually says…

Daniel Alpert: Earth to Paul Krugman

By Daniel Alpert, the founding Managing Partner of Westwood Capital. Cross posted from EconoMonitor

This past Sunday, Paul Krugman penned a screed in the New York Times Magazine (entitled, somewhat unflatteringly in my opinion, “Earth to Ben Bernanke”) that expanded on the content of an ongoing debate in the economics blogosphere over the contents of the mind of Federal Reserve Board Chairman Ben Bernanke.

Professor Krugman has posited for months now that Bernanke has come up short…..

Top Experts Diss Housing Market Bullishness, Foresee Protracted Headwinds

The housing bulls seem unable to contain themselves. Today, in a prominently featured Bloomberg story, “Sales of New U.S. Homes Exceeded Estimates in March,” experts cheerily discuss a “firming” housing market and call for a bottom this year. Funny how these predictions for a real estate recovery seem to be a moving target.

The Hidden Bank Time Bomb: Interest Rate Risk

At the Atlantic Economy Summit in Washington last month, Sheila Bair fielded a question about the just-released results of the latest bank stress tests. The former FDIC chief took pains to point out that they were an improvement over earlier iterations by virtue of keying off a truly dire economic scenario, but then ticked off a number of ways in which they fell short.

Stephan Ewald: What Hypocrites Are Working at the ECB?

Yves here. While hypocrisy is hardly uncommon in official circles, it is supposed to be kept well out of public view.

Philip Pilkington: MMT, Functional Finance and Dirigisme – Sketch of an Alternative Economic Approach for Developing Economies

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

I expect to see the State, which is in a position to calculate the marginal efficiency of capital-goods on long views and on the basis of the general social advantage, taking an ever greater responsibility for directly organizing investment.

– John Maynard Keynes

Dan Kervick: Contra Krugman, Why Increasing Inflation is Not Likely to Increase Employment

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

Paul Krugman argues in a recent New York Times column that right-wing critics of Ben Bernanke and his colleagues are trying to bully the Fed into a misguided obsession with inflation, and that “the truth is that we’d be better off if the Fed paid less attention to inflation and more attention to unemployment. Indeed, a bit more inflation would be a good thing, not a bad thing.”

Krugman is absolutely right to lament conservative pundits’ and politicians’ obsessions with inflation when tens of millions of Americans are languishing in unemployment, with all of the personal, social and economic misery and waste that unemployment entails. But his argument, which assumes that the Fed can boost employment by engineering higher inflation, is problematic.

Finance as Wealth Transfer Mechanism: An Interview with James Galbraith

James Kenneth Galbraith is currently a professor at the Lyndon B. Johnson School of Public Affairs and at the Department of Government, University of Texas at Austin. He is also a Senior Scholar with the Levy Economics Institute of Bard College. His latest book is ‘Inequality and Instability: A Study of the World Economy Just Before the Great Crisis’ (also available on Kindle).

Interview conducted by Philip Pilkington.

Philip Pilkington: Let’s start with the obvious question that the book raises. Namely, why studies on inequality have, until this point, been so poor. You point out in the book that the studies that have been done have been competently researched but that they simply don’t have access to the correct types of data etc. Could you talk a little about this (without getting too technical, of course) and maybe speculate a little about why this important issue has been sidetracked by the economic profession?