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Greg Ip had a couple of pieces on currency wars and gyrations in the Wall Street Journal last week (here and here), essentially arguing that talk about currency warfare is much beside the point and that exchange rate gyrations are merely benevolent side-effects of monetary policies that will inevitably make the whole world better off. The Financial Times had an editorial on the ECB’s QE and the euro plunge that ran along the same lines, bluntly declaring that “any criticism from outside the eurozone that the fall in the single currency will kick off a global currency war [was] misplaced.” And Bloomberg summed it all up by proclaiming that the whole currency war talk is a “load of baloney,” fearing that the currency war nonsense talk might lead to trade restrictions, which would do real harm. While the Financial Times sees no cause for alarm at all it seems, Greg Ip’s alarm bells would only go off if China were to retaliate by weakening the renminbi. So there appears to be a consensus that all is currently for the best in all possible currency worlds. As ever so often, the consensus may be seriously off track here. Consider Greg Ip’s main point, which is that monetary easing cannot do any harm by weakening a currency because it simply forces other… Read More

The negotiations over Greece’s public debt and the terms of its bailout agreement have understandably taken center stage. Behind all the twists and turns, the key consideration is that even if the public debt could be repaid through continuing with austerity policies — and there is little reason to believe it can — it would still be a mistake, for both moral and pragmatic reasons. But dealing with Greek debt and the impossible terms of the agreement signed by the previous government is just the first step in dealing with Greece’s needless humanitarian crisis. As noted, our own Rania Antonopoulos, senior scholar and director of the Levy Institute’s Gender Equality and the Economy program, has joined the new Syriza government as Deputy Minister of Labor. Particularly germane to her new role in helping to combat unemployment, Antonopoulos has done extensive research on direct job creation policies for Greece, featuring estimates of the macroeconomic and employment payoffs and the fiscal impact, as well as work on setting up systems of monitoring and evaluation. At the last Minsky conference in Athens, she spoke about the necessity for a targeted job guarantee or employer-of-last-resort proposal in the context of the perilous state of the Greek labor market, including discussion of the scale of the program, estimated macroeconomic outcomes, and potential financing: [iframe width=”480″… Read More

In this March 7th presentation, L. Randall Wray argues that the central problem in the EMU is not profligate peripheral nations, trade imbalances, or insufficient “structural reform.” The fundamental issue, which can best be framed through an understanding of money, is a flawed setup — the EMU is designed to fail. La Asociación de Economía Crítica, ATTAC, Econonuestra y FUHEM Ecosocial le invitan a la sesión “Teoría monetaria moderna: ¿Austeridad presupuestaria frente a déficits públicos?”: [iframe width=”480″ height=”270″ src=”https://www.youtube.com/embed/YxGGR62fh3k?feature=player_detailpage&start=600″ frameborder=”0″ allowfullscreen></iframe] See also “Euroland’s Original Sin”

Yesterday I participated in a press conference and gave the first of a series of lectures in Madrid on MMT and the Job Guarantee. At the press conference, Alberto Garzón announced his party’s plan to create a million jobs in a targeted JG: “IU plantea un plan de 9.600 millones para crear un millón de empleos en un año” Alberto and his brother, Eduardo, are well-versed in MMT. He emphasized that the barrier to full employment is not technical but political. If the political will exists, full employment can be achieved and sustained. MMT shows the way to understanding the policy options that are available to sovereign government. The newspaper article summarized some of the points I made, arguing that we should no longer see the finances of a government as similar to those of a household: Por su parte, Randall Wray, que ha estado presente en la presentación de la propuesta, ha rechazado las teorías que equiparan el funcionamiento del Estado con el de una familia, ya que el primero puede emitir su propia moneda y no puede quedarse sin dinero, por lo que sus opciones de gasto e inversión son diferentes y la austeridad no es la única salida posible. Esto hace plausible el trabajo garantizado, que ya se aplicó de alguna manera en los años 30 del… Read More

Is Financial Reregulation Holding Back Finance for the Global Recovery? Organized by the Levy Economics Institute of Bard College with support from the Ford Foundation The National Press Club Washington, D.C. April 15–16, 2015 The 2015 Minsky Conference will address, among other issues, the design, flaws, and current status of the Dodd-Frank Wall Street Reform Act, including implementation of the operating procedures necessary to curtail systemic risk and prevent future crises; the insistence on fiscal austerity exemplified by the recent pronouncements of the new Congress; the sustainability of the US economic recovery; monetary policy revisions and central bank independence; the deflationary pressures associated with the ongoing eurozone debt crisis and their implications for the global economy; strategies for promoting an inclusive economy and a more equitable income distribution; and regulatory challenges for emerging market economies. To register, please click here. Participants Lakshman Achuthan Co-Founder and Chief Operations Officer, Economic Cycle Research Institute Daniel Alpert Managing Partner, Westwood Capital, LLC Robert J. Barbera Co-director, Center for Financial Economics, The Johns Hopkins University Lael Brainard* Member, Board of Governors of the Federal Reserve System James Bullard President, Federal Reserve Bank of St. Louis Vítor Constâncio Vice President, European Central Bank Scott Fullwiler Professor of Economics and James A. Leach Chair in Banking and Monetary Economics, Wartburg College Michael Greenberger Professor, School of… Read More

Levy Research Associate Éric Tymoigne contributed to a debate in the Wall Street Journal over the viability of bitcoin and other cryptocurrencies. Here’s Éric: Bitcoins are an odd sort of commodity. They are not financial instruments. The value fluctuates widely, in line with changing views regarding the overall usefulness of the bitcoin payment system and the speculative manias surrounding such views. There is no financial logic behind bitcoins’ face value. In other words, if you like to gamble, this is a perfect asset. If you are looking for an alternative monetary instrument, look elsewhere. The bitcoin system has two components: the means of payment themselves, and an online ledger, called the block chain, which is a record of all bitcoins that have been created and who holds them. The ledger is the main innovation. It provides an open, decentralized, fast, cheap and supposedly secure means of completing transactions. But as an alleged alternative currency, bitcoin is unacceptable. Its volatility and lack of liquidity pose risks far beyond most traditional currencies. Read the WSJ debate and the rest of Tymoigne’s contribution here: “Do Cryptocurrencies Such as Bitcoin Have a Future?” See also Tymoigne’s earlier posts at New Economic Perspectives: “The Fair Price of a Bitcoin is Zero” “Bitcoin System: Some Additional Problems“

Another event has been added. Hope to meet Spanish followers of MMT in Madrid this week. Here are some details: [iframe src=”//www.slideshare.net/slideshow/embed_code/45294829″ width=”425″ height=”355″ frameborder=”0″ marginwidth=”0″ marginheight=”0″ scrolling=”no” style=”border:1px solid #CCC; border-width:1px; margin-bottom:5px; max-width: 100%;” allowfullscreen> </iframe> <div style=”margin-bottom:5px”> <strong> <a href=”//www.slideshare.net/UmkcEconomists/actos-de-presentacion-del-libro-de-randall-wray-2″ title=”Actos de presentación del libro de randall wray (2)” target=”_blank”>Actos de presentación del libro de randall wray (2)</a> </strong> from <strong><a href=”//www.slideshare.net/UmkcEconomists” target=”_blank”>Umkc Economists</a></strong> </div]   Press release below the fold:

If you haven’t read it already, Senior Scholar James Galbraith shared his take on the four-month Greek deal in Social Europe: there was never any chance for a loan agreement that would have wholly freed Greece’s hands. Loan agreements come with conditions. The only choices were an agreement with conditions, or no agreement and no conditions. The choice had to be made by February 28, beyond which date ECB support for the Greek banks would end. No agreement would have meant capital controls, or else bank failures, debt default, and early exit from the Euro. SYRIZA was not elected to take Greece out of Europe. Hence, in order to meet electoral commitments, the relationship between Athens and Europe had to be “extended” in some way acceptable to both. But extend what, exactly? There were two phrases at play, and neither was the vague “extend the bailout.” The phrase “extend the current programme” appeared in troika documents, implying acceptance of the existing terms and conditions. To the Greeks this was unacceptable, but the technically-more-correct “extend the loan agreement” was less problematic. The final document extends the “Master Financial Assistance Facility Agreement” which was better still. The MFFA is “underpinned by a set of commitments” but these are – technically – distinct. In short, the MFFA is extended but the commitments are to… Read More

Michalis Nikiforos, Dimitri Papadimitriou, and Gennaro Zezza, who put together the Levy Institute’s stock-flow consistent macroeconomic model and simulations for Greece, have just released a new policy note, the upshot of which is that restructuring Greece’s unsustainable public debt is a necessary but not sufficient condition for a sustained economic recovery in that country. They also point to an interesting historical precedent that ought to inform the ongoing discussion of Greece’s debt and the conditions imposed by its official creditors. The troika’s official story—about how Greece’s debt-to-GDP ratio will be brought down from its current 175 percent to 120 percent by 2022—is, as the authors put it, “wildly implausible.” The official forecasts depend upon large primary surpluses (in excess of 4 percent of GDP beginning in 2016) being accompanied by robust economic growth rates (based on, according to the official story, expanding net export surpluses and dazzling growth in private investment)—which is, the authors point out, virtually unprecedented. But even if it were possible for Greece to pay down its public debt through continuing austerity, Nikiforos, Papadimitriou, and Zezza argue that this should be opposed on both moral (with respect to consequentialist considerations and principles of fairness) and prudential grounds. In this context, they quote Keynes’s dissent regarding the terms imposed on Germany by the Treaty of Versailles; a quotation… Read More

Levy Institute President Dimitri Papadimitriou discusses the four-month extension of Greece’s bailout agreement with its eurozone partners and the mood in Athens in this interview with Kathleen Hays and Vonnie Quinn.

Update 2/28: more details here. Sorry, I’ve been very busy in recent weeks, finishing up a book on Minsky and revising my Modern Money Primer for a second edition (more on both of those projects later). Meanwhile, Lola Books is gearing up to release the Primer in Spanish next week. I’ll be in Madrid for the launch and for a series of meetings. I’ll give two presentations that are open to the public. Details are below. Hope to see our Spanish friends there! March 5, 2015 I’ll make a presentation at the Izquierda Unida economic program. This event will officially introduce MMT into Spanish politics. Location: Sede Central de CC.OO. Address: c/ Fernández de la Hoz 12, planta baja; Madrid Time :19 h. See the event flyer below. March 7, 2015 Presentation of the Primer at the ‘Association pour la Taxation des Transactions financière et l’Aide aux Citoyens’ (Association for the Taxation of Financial Transactions and Aid to Citizens) Location: Fuhem Address: c/ Duque de Sexto 40; Madrid Time: 11 h.

The New York Times made waves this week with another piece on inequality, saying that it has not risen since 2007. The article was based on this paper by GWU’s Stephen Rose. The article also suggests that expansions are not a good way of looking at trends in inequality (as I have done in the past, also covered by the NYT). Instead, one needs to look at the business cycle. It also concludes that, thankfully, because of government tax and transfer policies, inequality has not been “that bad” over the last few years and governments can clearly do something about it. So what’s wrong with this picture? Here is the graph that appeared in the NYT (I’ve reproduced it below showing only the bottom 90% and top 10% of families using the same Saez data). Now let’s reproduce the exact same graph, using the same data but excluding capital gains. The trends reverse. The bottom 90% of families have lost proportionately more than the top 10% since 2007. Now, I am not fond of excluding capital gains (I am in favor of annuitizing them), because they are very important to income dynamics, but still, without capital gains, the bottom 90% lose proportionately more (relative to the top 10%) than with them. In any case, if we include the top 1%… Read More