Archive for June, 2011

Great western slumps. Canada, USA, EU.

June 30, 2011 3 comments

from Merijn Knibbe

Paul Krugman, the main spokesman for flexible monetary policies to combat the GFC, leads us to Pierre Fortin who published a graph on Canadian employment during ‘The Great Canadian slump, 1990-1995’. And it looks soooo familiar…. (graph 1). According to Fortin, the dismal 1990-1995 developments in Canada were caused by structural Canadian monetary rigidities. More flexible monetary policies in the USA led to a much less severe crisis and much faster recovery in the USA. Once that crisis was overcome, these flexible monetary policies of course also led to the run up of the dotcom crisis and even the housing crisis as well as undue  mega subsidies to the banks and (in my view) an army and war bubble and a tax cut bubble…. Read more…

50 U.S. Health Care Statistics

June 29, 2011 3 comments

 I found this and a bit more at  Draw your own conclusions.

#1 What the United States spent on health care in 2009 was greater than the entire GDP of Great Britain.

#2 According to the Bureau of Economic Analysis, health care costs accounted for just 9.5% of all personal consumption back in 1980.  Today they account for approximately 16.3%Read more…

Right to rent: Will the Obama administration finally fix housing?

June 29, 2011 4 comments

from Dean Baker

The concept of “right to rent” has been floating around Washington for almost four years. Under this proposal , foreclosed homeowners would be allowed to remain in their house as renters paying the market rent, for a substantial period of time (e.g. five years) following a foreclosure.  While several bills have been introduced in Congress, President Obama may now have a new opportunity to take the lead on this issue.  Read more…

Greece: Odds and Ends

June 28, 2011 3 comments

from Peter Radford

The deluge of news and opinions on the Greek crisis has surely exhausted all the options. I don’t intend to add much more. But I do want to say:

  1. Piling on more pain is useless. A default is both inevitable and desirable. Inevitable because austerity will push the Greek economy down and could easily create a volatile political situation which would overwhelm the limited sensibilities of traditional economics. Read more…

Internal versus external devaluation: two examples.

June 25, 2011 9 comments

from Merijn Knibbe

Nowadays, progressive economists want economies to be flexible, while conservative economies plead for rigidity. When it comes to exchange rates. When it comes to labor markets, the positions are, often, radically different. But the progressive economists are right. Wages are sticky by nature – and they already were that way back in the eighteenth and nineteenth century. It’s not a modern phenomenon. They don’t go down easily. Flexible exchange rates are a much better, faster and more effective way to decrease labor costs and enhance the internal and external competitive position of an economy than Danish ‘flexicurity’, Baltic ‘internal devaluation’ or other ways to increase unemployment and therewith decrease labor costs. And they also enable a country to weather grave economic disturbances… Read more…

American Crisis Part Two

June 24, 2011 8 comments

from Peter Radford

The first part of our crisis was the one caused by years of neglect, deregulation, complacency, bad economic theory, rising income inequality, wage stagnation, political ineptitude, rotten management of business, over-indebtedness, and post cold war drift. Did I leave anything out? Oh yes: multiple wars we decided to pay for not with cash, but with debt.

All this pre-dates our incumbent president. All of it.

He is blameless for its creation. He is not blameless for its lack of solution. Read more…

“The Plutonomy Symposium “, Citigroup

June 23, 2011 3 comments

Here is the copy from the cover of a 64 page report on plutonomy issued by Citigroup 0n 29 Spetember 2006.  

The Global Investigator

The Plutonomy Symposium — Rising Tides Lifting Yachts

Time to re-commit to plutonomy stocks – Binge on Bling.  Read more…

When did the IMF learn about the economy?

June 23, 2011 3 comments

from Dean Baker

That’s what people around the world should have been asking when the IMF presented its latest assessment of the fiscal and economic prospects for nations around the world last week. Much of the world remains mired in the worst downturn since the Great Depression; a downturn that the IMF totally missed, as noted by the IMF’s own Independent Evaluation Office.

This was not a minor mistake; this was a horrendous failing. It’s comparable to the surgeon amputating the wrong leg or leaving his operating tools inside the patient. This is the sort of incredible mess-up that most people lose their jobs over and likely never find work again in the same field.  Read more…

Greek protesters are better economists than the European authorities

June 22, 2011 14 comments

from Mark Weisbrot

Imagine that in the worst year of our recent recession, the United States government decided to reduce its federal budget deficit by more than $800 billion dollars – cutting spending and raising taxes to meet this goal.  Imagine that, as a result of these measures, the economy worsened and unemployment soared to more than 16 percent, and then the president pledged another $400 billion in spending cuts and tax increases this year. What do you think would be the public reaction?

It would probably be similar to what we are seeing in Greece today, including mass demonstrations and riots, because that is what the Greek government has done.  Read more…

Bank capital: more please

from Peter Radford

Our banks remain chronically undercapitalized. That is to say they run on too narrow a cushion of equity capital that can be extinguished by losses before they have to be bailed out or allowed to fail. There seem to be two causes for this. Read more…

Cambridge excludes Keynesians from conference on Keynes.

June 20, 2011 10 comments

By Ann Pettifor

Director, Prime (Policy Research in Macroeconomics)

Like Catholics organising a conference on Protestantism and excluding Protestants, the Cambridge organisers of a conference  to ‘celebrate the 75th anniversary of the publication of Keynes’s General Theory of Employment, Interest and Money’, have excluded Keynes scholars. By contrast, most of those who will address the conference subscribe to the ‘classical’ theory that Keynes thought he had defeated. Read more…

What about capital controls on outflows?

from Kevin P. Gallagher and Stephanie Griffith-Jones

In the wake of the financial crisis, Western economists and policy-makers are to be applauded for recognizing that financial globalization has its limits and that capital controls may be necessary for emerging and developing nations to defend their economies from volatile capital flows.   Most of the discussion to date has focused on controls on capital inflows, but could there be a role for controls on outflows as well?  Read more…

from November 2010: Citigroup attempts to disappear its Plutonomy Report #2

June 20, 2011 16 comments

Because this post from November 2010 on this blog has been viewed 8,000 times this morning, I am reposting it here.  I was told a few minutes ago that the reports are available (for the time being) here and here.

Citigroup attempts to disappear its Plutonomy Report #2
November 11, 2010 

from Edward Fullbrook

In 2005 and 2006 Citigroup issued two now notorious but highly significant reports for the exclusive use of its richest clients.  The first, from October 16, 2005, was “Plutonomy: Buying Luxury, Explaining Global Imbalance”. This 35 page report begins:  Read more…

Floating and pegged exchange rates – or Polish succes against Baltic failure.

June 20, 2011 1 comment

from Jesse Frederik and Merijn Knibbe

´ The International Monetary Fund had privately suggested a devaluation in Latvia to help cushion the blow, but this was overruled by the European Union on grounds that most of the country’s corporate and mortgage debt is in foreign currencies.’
Ambrose Evans-Pritchard, The Telegraph, August 10, 2009.

Small as they are, the tiny Baltic economies Lithuania, Estonia and Latvia are important – as ‘internal devaluation’ in these countries seems to be the ‘role model’ for comparable policies in Greece and Spain and whatever. What is to be learned from their experience? Read more…

US employment – population ratios for 3 age groups : chart of the day

June 19, 2011 Leave a comment

The quote and the chart below come from the Realitybase journal article  American youth: Digitally skilled and unemployable.

The employment-population ratio for 16-24 year-olds started declining in 2000—just as we were all getting computerized and networked. Meanwhile the employment-population ratio for those 55 and older has been increasing since 1993. In the Great Recession, youth employment has been devastated and mature worker employment has hardly been affected at all. If these trends are being driven by skills, conventional wisdom must be wrong about what skills are needed and the importance of education. More likely, it hasn’t been a skills story but one about the advantages of incumbency and the need of older workers to keep working as retirement benefits have declined. Read more…

Greece: a new low

June 18, 2011 13 comments

from Peter Radford

Count me among those who expect Greece to default on its debt. I see no viable alternative. The Greek experience is unique. Other troubled Euro zone nations are less culpable for their demise. At least from a distance it is well known that Greece has a major problem with aspects of modern society: for one thing its citizenry seem to think they can cheat endlessly on their taxes, and yet still benefit from some of the most generous government programs in the entire world. Getting something for nothing has become a national pastime. That would be fun and quite fitting for a small marginal banana republic. It is not at all fitting when you are tethered to the German mother ship.  Read more…

Meanwhile, in Europe… (16). Employment (and the ECB)

June 17, 2011 3 comments

from Merijn Knibbe

Eurostat has published new data on employment (2011, first quarter):

  • Employment: up, albeit at a dismal rate (+0,3% year on year; 0,0% quarter on quarter).
  • Austerity countries do bad, except for the UK with its floating exchange rate. Latvia and Estonia do quite well when we look at last year, not when we look at a somewhat longer period.
  • Large differences between countries   Read more…

Historic Fog

June 17, 2011 5 comments

from Peter Radford


The numbers are just horrible. We in the United States have wandered off into the desert and will not return for years. Here’s why:

  • Household debt is still way too high. It is well down from its peak of about 130% of disposable incomes, and is now “only” 115%. But that compares with an average of around 75% for the last few decades of the last century. Something tells me that we are still retrenching furiously. That undermines aggregate demand. That is why underemployment is a feature of the economy we will not eliminate any time soon. Read more…

Honey, they shrunk our share

June 17, 2011 6 comments

from David Ruccio

two charts  Read more…

Retail Sales Falter – Significant?

June 15, 2011 4 comments

from Peter Radford

Yesterday’s report on retail sales in the US is one of those we all have to squint at in order to get a good understanding of its importance. On its face the news was not good: sales fell 0.2% in May. That was the first decline in eleven months and so it marks the end of a steady upward climb. To put that into perspective retail sales in May were 7.7% higher than a year ago. But a decline within a supposed recovery is never a strong sign, and coming, as it does, alongside a string of weak to poor news we would be excused for fearing the worst. Read more…