Category Archives: Macroeconomic policy

Why You Should Stop Worrying About Central Bank Losses

Yves here. I guarantee this post will make some readers’ heads explode. It also explains why Germany would benefit from OMT.

Yanis Varoufakis: Occupying the Closure of Greek Public TV (Journalists at BBC, ABC, and CBC, Take Note). Updated

For those of us who grew up in the Greece of the neo-fascist colonels, nothing can stir up painful memories like a modern act of totalitarianism. When the television screen froze last night, an hour before midnight, as if some sinister power from beyond had pressed a hideous pause button, I was suddenly transported to the 60s and early 70s when a disruption in television or radio output was a sure sign that another coup d’ etat was in the offing. The only difference was that last night the screen just froze; with journalists still appearing tantalisingly close to finishing their sentence. At least the colonels had the good sense of pasting a picture of the Greek flag, accompanied by military tunes…

Richard Alford: Trust in Economists?

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 greatest deception men suffer is from their own opinions.

The supreme misfortune is when theory outstrips performance.

Leonardo da Vinci
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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.

IMF Rethinks Sovereign Defaults, Again

By Delusional Economics, who is determined to cleanse the daily flow of vested interests propaganda to produce a balanced counterpoint. Cross posted from MacroBusiness

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.

David Dayen: FSOC Annual Report Shows Continued Interest in Austerity Bargain Over Reducing Financial System

With Jack Lew now installed at Treasury, I decided to take a look at the annual report of the Financial Stability Oversight Council (FSOC), the Dodd-Frank creation that’s supposed to monitor systemic risk. We already know the leanings of the not-so-new regime at Treasury: they think Dodd-Frank worked to secure a more stable financial system, an opinion reiterated Tuesday at a Senate Banking Committee hearing.

Dan Kervick: Did the House of Representatives Just (Unintentionally) Eliminate the Debt Ceiling?

My fellow NEP blogger Joe Firestone wrote recently about House Resolution 807, the Full Faith and Credit Act, which was passed on May 9th by the US House of Representatives. The supposed purpose of the act is to prevent default on the public debt as a result of the debt ceiling… But if I am not mistaken, this act would provide the Secretary of the Treasury with the power to meet all US spending obligations, and effectively eliminate the debt ceiling as a serious political and operational consideration going forward.

Nathaniel Cline and Nathan Tankus: Fiscal Systems, Organizational Capacity, and Crisis: A Political Balance of Payments Approach

In the preface to the forthcoming Festschrift to Alain Parguez, Mosler argues that in the mid 1990s he thought, “the theory of the monetary circuit was correct to the point of being entirely beyond dispute”. However, he also argues that the theory “could be further enhanced by starting from the beginning”. This beginning for Mosler was of course why the workers accepted the units of a currency as payment for their labor services. His answer (which is quite well known among heterodox economists by now) was that imposed debts denominated in that unit of account, give it’s units value; in other words taxes.

This is an important part of the story, but we would argue it is in fact not the beginning. The true beginning to the circuit is the question of where people and organizations gain the ability to tax.

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.

Jack Lew’s Nose is Getting So Long He Needs a Hacksaw

Jack Lew really needs to get better at lying in public. So far, he’s making a hash of it.