Category Archives: Macroeconomic policy

QE Forever?

Ambrose Evans-Pritchard, in a provocative column, argues that the monetary authorities are not going retreating from QE, and that might not be a bad thing. But in its current form, it probably is.

Euro-da-Fé

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

(Brussels) Nonplussed by this week’s unemployment report showing the Eurozone jobless rate rising to an unprecedented 12%, members of the European Parliament and Europe’s national governments pressed ahead on Wednesday with passage of a stringent new package of austerity measures. Dubbed “hyperaustérité” or “Übersparpolitik” by its backers, the new program of ruthless cuts and social demolition promises to deliver even higher levels of joblessness, misery and hopelessness than has been achieved so far by earlier rounds of austerity.

Bill Greider on Why Paul Krugman Was So Wrong

A good piece in the Nation by Bill Greider, which focuses on Krugman’s long standing support of free trade, and how, contrary to his predictions, the results were not positive for ordinary American workers.

Richard Alford: Fed Policy – Old Wine in New Bottles

Yves here. This is an important post, in that it describes how the Fed, despite the unconventional look of some of its measures, is using more extreme variants of traditional policy approaches, and why that is not such a hot idea.

Michael Hudson Explains How Deficit Hysterics Target the Wrong Type of Debt

I was at the Atlantic Economy conference the week before last, and Michael Hudson got in one of the best quips: “Helicopter Ben has taken off and has been dropping money all over Wall Street. But he hasn’t dropped any on Main Street.” He has an informative talk with Paul Jay of Real News Network on why the fixation on public debt is wrongheaded, and we should worry about private debt instead.

Will Cyprus Be Contained? (Updated)

In March 2007, Fed chairman Ben Bernanke said that he thought the impact of losses on subprime mortgages was likely to be contained. It took five months for events to start proving him wrong. August 2007 marked the onset of the first acute phase of the global financial crisis, when the asset backed commercial paper market seized up.

Last week, in a press conference, Bernanke indicated that he thought the likelihood of the crisis in Cyprus having larger ramifications was limited, and avoided using the “c” word. But the message was similar to that of March 2007.

So are we likely to see the sort of delay between the assessment and the onset of trouble, as we did in 2007, or is Cyprus a nothingburger, as the Troika and many investors contend?

Bill Black: O’Donnell Thinks Krugman is “A Lonely Voice Opposing Austerity” Because he Listens to MSNBC

By Bill Black, the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. Jointly posted with New Economic Perspectives

MSNBC persists in running a pro-austerity line by falsely presenting Paul Krugman as a isolated opponent of economic malpractice.

Jeff Madrick: CBO’s Lack of Independence Means We Need a Shadow CBO

Yves here. The Congressional Budget Office is widely depicted in the media as “nonpartisan” and therefore above reproach. It’s time to treat that view as outdated. Like the Fed, the CBO continues to profess its independence but is in fact an aggressive promoter of neoliberal policies. We discussed at some length how Fed economists savaged its health care cost model, which is the driver of budget hysteria.

Jeff Madrick describes even more problems with CBO forecasts, and how they have become so significant that the public needs a shadow CBO to challenge the often-flawed official projections.

Steve Keen: Krugman Doesn’t Understand IS-LM (Part I)

By Steve Keen, professor of economics & finance at the University of Western Sydney and author of Debunking Economics and the blog Debtwatch. Professor Keen has invented a simple way to build monetary models of the economy, and he’s raising funds via Kickstarter to pay programmers to develop he software, which he’s calling Minsky. He’s raised over $50,000 already, but as much as $1 million is needed to pay for 10,000 hours of programming time to fully develop the program. Please pledge support now at Minsky campaign: http://kck.st/XhKtdX.

Krugman describes himself as a “sorta-kinda New Keynesian”, and explains in his book End This Depression NOW! that New Keynesian macroeconomics evolved in reaction to the failure of the new classical approach to “explain the basic facts of recessions”…..

J.D. Alt: Our Fiscal Anorexia

Yves here. This post is useful in that it suggests short, simple ways to debunk the idea that deficit cutting is a good thing and to make the argument politically palatable. The trouble some readers will have is in positing that Obama is interested in policies that are good for middle class Americans, as opposed to his wealthy backers.

Philip Pilkington: Hyperinflation! The Libertarian Fantasy That Never Occurs

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

While it is probably true that no one has ever gone broke underestimating the intelligence of the public, it is also true that many who try to turn a profit from stupidity often become the victims of their own nonsense. As we have discussed previously, the fear industry that has grown up since 2008 – mainly centred on the gold market – is a manifestation of this dynamic.