Archive for November, 2011

IMF must heed G-20 Decisions

November 30, 2011 2 comments

from Kevin P. Gallagher

The G20 meeting in Cannes earlier this month was derailed by the pressing eurozone crisis. Actors were disappointed if they were looking for concrete action on global imbalances and the food crisis, let alone the new global monetary system that French President Nicolas Sarkozy boasted would be the goal of the summit when he first took the helm as host. But behind the scenes, the G20 actually delivered on a set of “coherent conclusions” on the management of speculative capital flows in emerging markets that should not be overlooked, especially by the International Monetary Fund (IMF). Read more…

United States of economic insecurity (charts)

November 29, 2011 2 comments

from David Ruccio

Almost half of all Americans, or 45 percent of the U.S. population , do not earn enough to cover their basic expenses. They live in a state of economic insecurity.

A new report by Wider Opportunities for Women [pdf] documents the extent to which large numbers of Americans—including those who played by the rules and managed to find jobs, form household, and raise children—are living on the edge. They simply do not earn enough to pay ever-increasing housing, food, health care, and other expenses. Read more…

Time to Retake Politics from the One Percent in Both Political Parties

November 29, 2011 8 comments

from Dean Baker

The country is still celebrating the inability of the supercommittee to cut Social Security and Medicare, but it is important to move on from this victory to retake control of the political debate from the 1 percent. As it stands, the 1 percent are insisting that the country genuflect over the non-problem of the budget deficit, at a time when tens of millions of workers are unemployed or underemployed, millions of people are facing the loss of their homes and tens of millions of baby boomers are approaching retirement with little other than their Social Security to support them. Read more…

Breaking (up the Euro) news. Eurzone housing market might be crashing

November 28, 2011 2 comments

from Merijn Knibbe

Today, the European Central Bank published new data on M3 money growth in the Euro Zone

The data are entirely consistent with: DISASTER LOOMS Read more…

No, no, no. Ireland is, alas, not an austerity role model (charts).

November 28, 2011 7 comments

from Merijn Knibbe

The European Central Bank (ECB) is very concerned about its ‘credibility’. But shouldn’t that at the very least mean that members of the board know what they are talking about? Jurgen Stak, still a member, was clearly not aware of basic facts when he stated that Ireland is a role model for austerity. But is it? Do suffering and frugality and disempowering labor lead to export success and economic growth, as Mr. Stark indicated in a speech in Ireland this week Read more…

The failure of mainstream economics

November 27, 2011 16 comments

David Ruccio

Mainstream economists failed, with respect to the economic crisis, on three counts: they failed to predict the crisis, they didn’t even include the possibility of a crisis in their theories, and they didn’t know what to do once it happened.

Personally, I don’t put a lot of stock in prediction. But they do. And that’s because, as an excuse for the lack of realism in the assumptions of their theory, they claim all that matters is their models correctly predict the future trajectory of the economy. Read more…

The Supercommittee of the One Percent Goes Down in Flames

November 26, 2011 9 comments

from Dean Baker

Congress gave us a wonderful Thanksgiving present when we got word that the supercommitee was hanging up its capes. While many in the media were pushing the story of a dysfunctional Congress that could not get anything done, the exact opposite was true. The supercommittee was about finding a backdoor way to cut Social Security and Medicare, and create enough cover that Congress could get away with it.

It is important to remember the basic facts about the budget and the economy. Contrary to the conventional wisdom in Washington, it is easy to show (by looking at the website of the Congressional Budget Office) that we do not have a chronic deficit problem. In 2007, prior to the collapse of the housing bubble and the resulting economic downturn, the deficit was just 1.2 percent of GDP. Read more…

“The cohort of professors who broke the back of the American dream”

November 25, 2011 11 comments

Adbusters #99 Jan/Feb 2012 carries a hard-hitting article on “financial kickbacks” to big names in the economics profession.  Here are some quotes.   

US academic superstars played leading roles in the 2008 financial collapse. . . .  Backing every policy decision leading to Lehman Brother’s bankruptcy in 2008 and the $700 billion public bailout was a team of prestigious Harvard and Columbia economists all on the payroll of corrupt financial institutions.  None of these academic offenders Read more…

Euro break-up beckons

November 25, 2011 1 comment

from Peter Radford

It’s a holiday here in the US so we can all sit back and watch the slow motion dance towards the break-up of the Euro while we ponder our own ineptitude. An ineptitude that, fortunately, we can take a day’s break from.

Why talk of the end of the Euro?

Because of the spectacle that unfolded in Germany this week. A regular small sale of German bonds was significantly undersubscribed. Only two thirds of the offering was taken up, meaning that the German central bank had to buy the rest for secondary sales over the next few days. Read more…

Politics Matter

November 23, 2011 3 comments

from John Schmitt

In a new CEPR report (pdf), Alexandra Mitukiewicz and I argue that the national political environment, not globalization or technology, is the most important factor driving long-run changes in unionization rates in the United States and other rich economies.

Since 1980, changes in union coverage (the share of the workforce covered by a collective bargaining agreement) are strongly correlated with a country’s postwar political tradition. Read more…

The Supercommittee should go really big and turn against The One Percent

November 23, 2011 4 comments

from Dean Baker

It looks the supercommittee is about to throw in the towel. Since the potential deals that had been discussed would have meant large cuts to Social Security, Medicare and other programs that the 99 percent depend upon, we should all be thankful.

In the world of the 1 percent that the supercommittee types inhabit, the big villains in the U.S. economy are not the rich who are pulling down an ever-larger share of national income, but rather the country’s older workers.  Read more…

The great Spanish job machine… (charts)

November 22, 2011 3 comments

from Merijn Knibbe

Is Mario Draghi, banker in Frankfurt, right when he, implicitly, describes for instance the Spanish labor market as sclerotic and not able to create jobs:

“National economic policies are equally responsible for restoring and maintaining financial stability. Solid public finances and structural reforms – which lay the basis for competitiveness, sustainable growth and job creation – are two of the essential elements”?

Not really.  In fact, for some decades the Spanish job market has been the most dynamic of the entire EZ. Read more…

Time for an Alexander Hamilton moment?

November 21, 2011 2 comments

from Anne Mayhew

Perhaps what the technocrats of Europe need is an “Alexander Hamilton moment,” in which they reflect upon the proposals that Hamilton made when the newly formed United States was faced with massive debts left from the revolutionary war.  The debts were those of the Continental Congress and of the states and Hamilton boldly proposed that the financially strapped new nation “refund” all of these debts, which had greatly depreciated in exchange value, and that they be refunded at full face value.  Read more…

Technocrats, Ethics, and Radical Economics

November 21, 2011 14 comments

from Peter Radford

Right at this moment the lives of hundreds of millions of people, or at least their immediate economic prospects, are in the hands of a narrowing number of technocrats and politicians. That the technocrats have been given control in two Euro Zone countries is an affront to democracy. That the technocrats are, by and large, economists, does not bode well. Read more…

Hoping against HOPE

November 20, 2011 13 comments

from Susan Feiner

If you thought that the major journal in economics devoted to economic thought (History of Political Economy or HOPE) was devoted to thinking about the thoughts of the great thinkers in economics, you’d of thought wrong.

Big sigh.

The latest issue of the journal arrived in yesterday’s mail. Cracked it open eagerly, hoping against HOPE, I scanned the TOC. Read more…

Punishment and reward in economics

November 20, 2011 6 comments

from David Ruccio

The discipline of economics has an extraordinary system of punishments and rewards, which is regulated by a combination of external surveillance and internal monitoring.

Some mainstream economists (like Alan S. Blinder and David Card [ht: sg]) are severely punished for stepping just a bit out of line, like arguing that some jobs will be lost as a result of external trade or that minimum jobs do not cause unemployment. Read more…

Inflation Targeting and the Crisis

November 19, 2011 3 comments

from Jim Stanford

Many long-held tenets of neoclassical orthodoxy have fallen by the wayside in the past 3 years, but perhaps one of the biggest dominos that is at least teetering precariously (if not fully tipped over) is the consensus that inflation targeting should be the exclusive focus of monetary policy.

The policy was closely associated with the so-called “New Consensus in Macroeconomics” — the premature and presumptuous claim that rational-expectations-augmented analysis had produced the “end of history” in macroeconomics (analogous to Francis Fukuyama’s preposterous claim about global politics).  The idea was that by anchoring inflation expectations at the target, the central bank minimizes the extent to which monetary conditions interfere with the normal efficient operations of the real economy, thus promoting in the long-run stronger real behaviour (including intertemporal behaviour, like savings and investment), which might be affected by fluctuating or inaccurate expectations of future prices. Read more…

Will the euro be destroyed by ideologues?

November 18, 2011 4 comments

from Dean Baker

We could be living through the last days of the euro. That is not a happy thought. While there were many negative aspects to the rules governing the European Central Bank and the eurozone economies, no one can want to see the economic chaos that will almost certainly follow the collapse of the euro. Read more…

Inflation and von Mises

November 17, 2011 4 comments

from Peter Radford

Yesterday I speculated that the decline in the cost of basic goods like gasoline was a contributory cause of the uptick in retail sales in October. Today’s consumer price report supports that notion.

The headline rate of inflation, the consumer price index, declined 0.1% last month bringing the rate for the last twelve months down to 3.5%. That’s a large decline in the annual rate – in September it had been 3.9%. In contrast, the more important “core” rate, which strips out volatile items such as gasoline and food, rose 0.1% and has risen 2.1% over the last year. The biggest factor behind the decline in the headline rate was a 2.0% drop in energy prices, while food prices rose, but only a slim 0.1%. Read more…

Divide and rule

November 17, 2011 2 comments

from Grazia Ietto-Gillies

Two now familiar sights on our TV screens. First sight: Merkel and Sarkozy standing together on an international podium and giving us their deliberations about another country. Second sight: the Prime Minister of the country deliberated on returning meekly home with a 30+ page homework to do. We know of meetings between Merkel and Sarkozy but we never hear of meetings between the leaders of the loser countries. Read more…