Author Archive

Greek debt crisis—by the numbers – 7 charts *****

July 3, 2015 1 comment

from David Ruccio

It all started with a simple question about the Greek debt crisis: “who owes how much to whom?”

Well, as it turns out, it may be a simple question, but there’s no simple answer—at least not an answer that’s easy to formulate based on all the simple-minded reporting and background essays available in the media and from various economists.

Most of what I’ve been reading refers to “Greek debt” owed to the rest of the “Europe.” But, with a background in Latin America, I know that for the most part (unless and until the debt is officially restructured) countries don’t borrow from other countries and countries don’t owe debt to other countries.

-1x-1 Read more…

Categories: Greece

Greece and austerity policies: Where next for its economy and society?

July 3, 2015 Leave a comment

from current issue of the WEA Newsletter

By Yannis Dafermos, Marika Frangakis and Christos Tsironis, Conference Leaders

Between 20th October and 21st December 2014, the World Economic Association organised an online conference about the crisis and the austerity policies in Greece. The conference covered issues related to the social and economic effects of austerity, the 2012 haircut of the Greek public debt and the prospects of the Greek crisis. The papers of the conference, which are available here, provide valuable insights into these issues, as well as useful pointers with regard to the on-going crisis one year later. Here we recap some of the main points raised during the conference and we look into the current state of affairs. Read more…

Categories: Greece

“Finance as Warfare”, Michael Hudson’s new book

July 2, 2015 2 comments

Finance as Warfare
by Michael Hudson
Published by WEA eBooks 1 July 2015

To simple people it is indubitable that the nearest cause of the enslavement of one class of men by another is money. They know that it is possible to cause more trouble with a rouble than with a club; it is only political economy that does not want to know it.
— Leo Tolstoy, What Shall We Do Then? (1886)

The financial sector has the same objective as military conquest: to gain control of land and basic infrastructure, Cover of Finance as Warfareand collect tribute. To update von Clausewitz, finance has become war by other means. It is not necessary to conquer a country or even to own its land, natural resources and infrastructure, if its economic surplus can be taken financially. What formerly took blood and arms is now obtained by debt leverage.

The creditor’s objective is to obtain wealth by indebting populations and even governments, and forcing them to pay by relinquishing their property or its income. Direct ownership is not necessary. Fully as powerful as military force, debt pressure saves the cost of having to mount an invasion and suffer casualties. Who needs an expensive occupation against unwilling hosts when you can obtain assets willingly by financial means – as long as debt-strapped nations permit bankers and bondholders to dictate their laws and control their planning and politics?

Such financial conquest is less overtly brutal than warfare waged with guns and missiles, but its demographic effect is as lethal. For debt-strapped Greece and Latvia, creditor-imposed austerity has caused falling marriage rates, family formation and birth rates, shortening life spans, and rising suicide rates and emigration.  Read more



Categories: WEA Books

Teaching inequality: Notes on Piketty, Stiglitz and Harvey

July 2, 2015 3 comments

from Maria Alejandra Madi and the WEA Pedagogy Blog

The relevance of wealth and income inequality has been acknowledged by unorthodox writers for some time. The recent success of Piketty’s book (2014) shows that the wider public is also interested in this issue.  Piketty’s  15-year program of empirical research conducted in conjunction with other scholars analyzed  the evolution of income and wealth (which he calls capital) over the past three centuries in leading high-income countries. Among the lessons, he highlighted;  Read more…

Categories: ethics, teaching

Why we recommend a NO in the referendum – in 6 short bullet points

July 2, 2015 3 comments

from Yanis Varoufakis

  1. Negotiations have stalled because Greece’s creditors (a) refused to reduce our un-payable public debt and (b) insisted that it should be repaid ‘parametrically’ by the weakest members of our society, their children and their grandchildren
  2. The IMF, the United States’ government, many other governments around the globe, and most independent economists believe — along with us — that the debt must be restructured.
  3. The Eurogroup had previously (November 2012) conceded that the debt ought to be restructured but is refusing to commit to a debt restructure
  4. Since the announcement of the referendum, official Europe has sent signals that they are ready to discuss debt restructuring. These signals show that official Europe too would vote NO on its own ‘final’ offer.
  5. Greece will stay in the euro.  Deposits in Greece’s banks are safe.  Creditors have chosen the strategy of blackmail based on bank closures. The current impasse is due to this choice by the creditors and not by the Greek government discontinuing the negotiations or any Greek thoughts of Grexit and devaluation. Greece’s place in the Eurozone and in the European Union is non-negotiable.
  6. The future demands a proud Greece within the Eurozone and at the heart of Europe. This future demands that Greeks say a big NO on Sunday, that we stay in the Euro Area, and that, with the power vested upon us by that NO, we renegotiate Greece’s public debt as well as the distribution of burdens between the haves and the have nots.
Categories: Greece

Speculative Financial Attacks

July 1, 2015 3 comments

from Asad Zaman and the WEA Pedagogy Blog

We live in a world awash with money. Not only can the banks create 20 times more money than the amount they receive as deposits, but an enormous shadow banking system has come into existence which creates massive amounts of credit without any regulatory restrictions. At a time of the global financial crisis, the value of financial instruments was more than 10 times the world GDP. Daily trade in foreign exchange is around $4 trillion, while actual merchandise trade is only $50 billion. This huge excess clearly represents speculation and gambling, rather than currency exchange for the needs of trade.

The ways of the super-rich Lords of Finance are far beyond the ken of ordinary mortals like you and I. Winning and losing bets in millions of dollars daily are just a small part of the thrill of living. One of the important tools they use is buying on margin. This means that you can buy $50 worth of stocks or foreign currency by paying just $1. In effect, the dealer loans you the remaining $49 by using your stocks as collateral. If the stock goes up to $51, you can sell and get out with a quick 100 per cent profit on your investment. If the stock declines to $49, you again sell and get out of the market, losing your marginal payment of $1. Read more…

Categories: The Economy

Throwing Greece out of the Euro

July 1, 2015 4 comments

from Dean Baker

In response to questions from people everywhere, I will share a couple of quick thoughts on the possible departure of Greece from the euro. First, several people have raised the possibility of Greece being thrown out of the euro.

There is no way that Greece can literally be thrown out of the euro in the sense of being prohibited from using the euro. Any country has the option to use any currency it chooses. This was an issue that came up in the referendum over Scottish independence. The independence movement wanted to leave the United Kingdom but to continue to use the British pound as its currency. U.K. Prime Minister David Cameron said that the Scots could not keep the pound if they left the United Kingdom. Read more…

Categories: Greece

Are the European authorities trying to get rid of the Greek government?

June 30, 2015 5 comments

from Mark Weisbrot

It is ironic but not surprising that the European Central Bank (ECB) on Sunday decided to limit its credit to Greece by enough to force the Greek banking system to close.

This has pushed Greece closer to a more serious financial crisis than they have had in the past five years of austerity-induced depression. Why did the ECB decide to take this harsh, unnecessary, and dangerous measure now?

It seems clear that this move is in response to the Greek government’s decision to hold a referendum on whether to accept the last offer from the European authorities on conditions for continuing official lending to Greece. The financial problems and inconveniences of this week, caused by the bank holiday, are the European authorities’ way of saying, “Vote as we’ll tell you to, or we can make your lives even more miserable than we have been making them for the past five years.”

This offer included further cuts to Greek pensions, as well as regressive tax increases. As economist Paul Krugman noted, these are conditions that Prime Minister Alexis Tsipras cannot accept. “The purpose must therefore be to drive him from office,” Krugman concluded. Read more…

Categories: Greece

As it happened – Yanis Varoufakis’ intervention during the 27th June 2015 Eurogroup Meeting

June 29, 2015 11 comments

from Yanis Varoufakis

The Eurogroup Meeting of 27th June 2015 will not go down as a proud moment in Europe’s history. Ministers turned down the Greek government’s request that the Greek people should be granted a single week during which to deliver a Yes or No answer to the institutions’ proposals – proposals crucial for Greece’s future in the Eurozone. The very idea that a government would consult its people on a problematic proposal put to it by the institutions was treated with incomprehension and often with disdain bordering on contempt. I was even asked: “How do you expect common people to understand such complex issues?”. Indeed, democracy did not have a good day in yesterday’s Eurogroup meeting! But nor did European institutions. After our request was rejected, the Eurogroup President broke with the convention of unanimity (issuing a statement without my consent) and even took the dubious decision to convene a follow up meeting without the Greek minister, ostensibly to discuss the “next steps”.

Can democracy and a monetary union coexist? Or must one give way? This is the pivotal question that the Eurogroup has decided to answer by placing democracy in the too-hard basket. So far, one hopes.

Intervention by Yanis Varoufakis, 27th June 2015 Eurogroup Meeting

Colleagues,  Read more…

Categories: Greece

Information Matters?

June 18, 2015 4 comments

from Peter Radford

Sorry I have been absent here lately: I am in the middle of several projects that take priority.

Nonetheless in the course of one of those projects I have found myself immersed in the many faces of economic theory with respect to the role of government in an economy. That role appears to lurch from one extreme to the other, which leaves the impressionable outsider having to resort to their political predisposition in order to seek an answer. Economics, you see, has many answers. Some of which flatly contradict others.

So much for science.  Read more…

Categories: Uncategorized

Keenonomics, aggregate demand/change of debt, and some misleading critique

June 16, 2015 26 comments

from Egmont Kakarot-Handtke

In a recent critique of Steve Keen’s approach Severin Reissl announces: “It is also shown that many weaknesses in Keen’s argument stem from a lack of terminological clarity which originates in his interpretation of the works of Hyman Minsky.” (Reissl, 2015, Abstract)

This is true as I have shown with regard to Keen’s definition of profit (2013) but Reissl argues from an unacceptable reference point, that is, from Stützel’s version of balance mechanics. It has to be emphasized that balance mechanics is an indispensable tool of economic analysis; the crucial point is that Stützel got it not exactly right. For a start, a succinct summary of the different strands that treat the interconnection between the circular flow, the creation of credit/money, and balance mechanics is to be found in (Schmitt and Greppi, 1996).   Read more…

Categories: Uncategorized

Financial Times and Wall Street Journal look at parallel currency solution for Greece

June 16, 2015 Leave a comment

Today both the Financial Times and the Wall Street Journal are talking about the increasing possibility of a parallel currency solution for Greece.  Primary sources of this idea are four papers from the Real-World Economics Review:

Trond Andresen and Robert W. Parenteau, “A program proposal for creating a complementary currency in Greece”, real-world economics review, issue no. 71, 29 May 2015, pp. 2-10,

Alan Harvey, “Updated proposal for a complementary currency for Greece (with response to critics)”, real-world economics review, issue no. 71, 29 May 2015, pp. 12-18,

Claude Hillinger, “From TREXIT to GREXIT? – Quo vadis hellas?”, real-world economics review, issue no. 70, 20 Feb 2015, pp. 161-163,

Trond Andresen, (2013). Improved Macroeconomic Control with Electronic Money and Modern Monetary Theory, real-world economics review, issue 63,


Noah Smith is wrong on the experimental turn in empirical economics

June 15, 2015 Leave a comment

from Lars Syll

The increasing use of natural and quasi-natural experiments in economics during the last couple of decades has led Noah Smith to — on his blog Noahpinion today — triumphantly declare it as a major step on a recent path toward empirics, where instead of being a “deductive, philosophical field,” economics is now increasingly becoming  an “inductive, scientific field.”

Smith is especially apostrophizing the work of Joshua Angrist and Jörn-Steffen Pischke, so lets start with one of their later books and see if there is any real reason to share Smith’s optimism on this ’empirical turn’ in economics.

In their new book, Mastering ‘Metrics: The Path from Cause to Effect, Angrist and Pischke write: Read more…

Categories: methodology

Rational expectations — only for Gods and idiots

June 14, 2015 1 comment

from Lars Syll

56238100In a laboratory experiment  run by James Andreoni and Tymofiy Mylovanov — presented here — the researchers induced common probability priors, and then told all participants of the actions taken by the others. Their findings is very interesting, and says something rather profound on the value of the rational expectations hypothesis in standard  neoclassical economic models: Read more…

Categories: methodology

What can econometrics achieve?

June 10, 2015 Leave a comment

from Lars Syll

A popular idea in quantitative social sciences is to think of a cause (C) as something that increases the probability of its effect or outcome (O). That is:

P(O|C) > P(O|-C)

However, as is also well-known, a correlation between two variables, say A and B, does not necessarily imply that that one is a cause of the other, or the other way around, since they may both be an effect of a common cause, C.

causation-2In statistics and econometrics we usually solve this “confounder” problem by “controlling for” C, i. e. by holding C fixed. This means that we actually look at different “populations” – those in which C occurs in every case, and those in which C doesn’t occur at all. This means that knowing the value of A does not influence the probability of C [P(C|A) = P(C)]. So if there then still exist a correlation between A and B in either of these populations, there has to be some other cause operating. But if all other possible causes have been “controlled for” too, and there is still a correlation between A and B, we may safely conclude that A is a cause of B, since by “controlling for” all other possible causes, the correlation between the putative cause A and all the other possible causes (D, E,. F …) is broken.  Read more…

Categories: econometrics

Public policies, corporations and social needs: rethinking development

June 10, 2015 Leave a comment

from Maria Alejandra Madi and the WEA Pedagogy Blog

The target of economics education is the comprehension of the reality in its economic dimensions, that is to say, the understanding of the practices and ideas that support the evolution of the reproduction of material life. However, following John Kenneth Galbraith, we can say that economics is overwhelmed by an “uncorrected obsolescence”.   Consequently, each generation faces many new economic and social challenges. As Alfred Marshall wrote in the preface to his Principles of Economics, economic conditions are constantly changing and each generation looks at its own problems in its own way”.

Indeed, the current political, economic and social features of  globalization configures a rupture in relation to the Bretton Woods institutions. The contemporary institutional set up is the result of deep transformations that characterized the outcomes of the crisis of the accumulation pattern in the 1970s and 1980s.  The financialization of the global economy produced great transformations in the growth dynamics since the decisions related to investment, production and employment are increasingly subordinated to the short-term financial commitments of big corporations.  Besides, further deep structural changes have involved increasing capital mobility and the growing importance of institutional investors as managers of “financial savings”. Read more…

Categories: teaching

Issue no. 71 of the real-world economics review

June 8, 2015 Comments off

Leave comments on issue 71 here.

– Subscribers: 25,572          Subscribe here          Blog          ISSN 1755-9472
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Issue no. 71 , 28 May 2015

Download the whole issue here

Two proposals for creating a parallel currency in Greece                                                   

A program proposal for creating a complementary currency in Greece
Trond Andresen and Robert W. Parenteau          download pdf

Updated proposal for a complementary currency for Greece
Alan Harvey          download pdf

China’s communist-capitalist ecological apocalypse 
Richard Smith          download pdf

Trends in US income inequality 
Pavlina R. Tcherneva          download pdf

The market economy: Theory, ideology and reality 
C. T. Kurien          download pdf

Explaining money creation by commercial banks
Ib Ravn          download pdf

Realist Econometrics? – Nell and Errouaki’s, Rational Econometric Man 
Jamie Morgan          download pdf

Who does the state work for? – Geopolitics and global finance 
Tijo Salverda         download pdf

Leave comments on issue 71 here.

Austerity policies — prescribing rat poison for ailing economies

June 6, 2015 3 comments

from Lars Syll 

How was it possible, it has to be asked, for the basic Keynesian insights and analyses to be so badly lost in the making of European economic policies that imposed austerity? Some of the dominant figures in the financial world have had a long-standing scepticism of the economic relations on which Keynes focused which is being emended only now, with reality checks being made in observations of the penalty of the neglect of Keynesian relations …

Read more…

The Iceland plan for monetary reform

June 5, 2015 4 comments

from Asad Zaman (and the WEA Pedagogy Bog)

A long time ago, Ibn-e-Khaldoon noted the tendency of conquered nations to unthinkingly imitate the conquerors in all dimensions of life. After achieving freedom from colonization, the former colonies have tended to imitate or retain the colonial institutions, without reflecting on whether or not these institutions are suitable for them. In his classic, “Small is Beautiful,” Schumacher showed that appropriate technology for developing countries was often small and low-tech production techniques which empowered the people. Imitating the highly capital intensive and large scale industries of labor short capitalist countries is like trying to run before learning to walk. Today, large dams are being built all over the world at enormous financial and environmental costs, while smaller scale agile energy producing technologies which deliver quick results cheaply are being ignored. Similarly, we have retained colonial institutions which were designed to be top-down, hierarchical, and non-democratic; people being heavily taxed and exploited cannot be allowed to have a vote in the matter. Transiting to democratic institutions requires many reforms. For instance, the “police force” which maintains order by force, needs to be re-conceptualized as the police service, responsible for the security and protection of citizens.  Read more…

Categories: The Economy

Ditch ‘ceteris paribus’!

June 4, 2015 12 comments

from Lars Syll

When applying deductivist thinking to economics, neoclassical economists usually set up “as if” models based on a set of tight axiomatic assumptions from which consistent and precise inferences are made. The beauty of this procedure is of course that if the axiomatic premises are true, the conclusions necessarily follow. The snag is that if the models are to be relevant, we also have to argue that their precision and rigour still holds when they are applied to real-world situations. They often don’t. When addressing real economies, the idealizations necessary for the deductivist machinery to work — as e. g. IS-LM and DSGE models — simply don’t hold.
If the real world is fuzzy, vague and indeterminate, then why should our models build upon a desire to describe it as precise and predictable? The logic of idealization is a marvellous tool in mathematics and axiomatic-deductivist systems, but a poor guide for action in real-world systems, in which concepts and entities are without clear boundaries and continually interact and overlap. Read more…

Categories: methodology

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