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Could it be that Mario Draghi is alone among the key euro authorities in recognizing that the euro crisis may not be quite over yet? Given that Mr. Draghi is also widely credited as the euro’s foremost savior, this seems more than just a little odd. Recall that, almost magically, Mr. Draghi managed to pull the euro currency union back from that yawning abyss of acute breakup scares prevailing until the summer of 2012 – and with nothing but words: the simple promise “to do whatever it takes” to keep the euro whole. As the markets have stayed calm ever since, the euro body politic has indulged in complacency. All the more so since the release of the first non-negative quarter-on-quarter GDP growth number for the spring of last year that saw the euro authorities engage in self-congratulatory shoulder-slapping, bravely declaring that the war on the euro crisis was won as their sound policies were finally starting to bear fruit. European Commission president José Manuel Barroso just added another refrain to the chorus, predicting that 2014 would bring definite change for the better to the euro community. Interestingly, as delusion and denial seems to fully absorb other euro authorities, the ECB’s president alone is taking a more clear-headed view on the actual state of affairs and prospects for the euro… Read More

Roughly a year after President Johnson used the occasion of his first State of the Union address to declare war on poverty, Hyman Minsky presented a paper on the subject at a conference in Berkeley. Here’s what he wrote: The war against poverty is a conservative rebuttal to an ancient challenge of the radicals, that capitalism necessarily generates “poverty in the midst of plenty.” This war intends to eliminate poverty by changing people, rather than the economy. Thus the emphasis, even in the Job Corps, is upon training or indoctrination to work rather than on the job and the task to be performed. However, this approach, standing by itself, cannot end poverty. All it can do is give the present poor a better chance at the jobs that exist: it can spread poverty more fairly. A necessary ingredient of any war against poverty is a program of job creation; and it has never been shown that a thorough program of job creation, taking people as they are, will not, by itself, eliminate a large part of the poverty that exists. The war against poverty cannot be taken seriously as long as the Administration and the Congress tolerate a 5 percent unemployment rate and frame monetary and fiscal policy with a target of eventually achieving a 4 percent unemployment rate. Only… Read More

Jesse Myerson created a firestorm over mainstream media with his Rolling Stone piece “Five Economic Reforms Millennials Should Be Fighting For.” I’d like to address the very first of these reforms, the Job Guarantee (JG), as Myerson references my proposal for running the program through the non-profit sector and discussed it in several interviews on Tuesday. Last month, I did a podcast with him about this program. Let me focus on some questions that keep popping up about the proposal, e.g., Josh Barro’s Business Insider piece. What is the problem? It is fundamental. It’s not just a problem of today’s deeply ailing economy. It’s permanent. There are always people willing to work, whom profit-driven firms do not wish to hire.  Even when economies are growing rapidly, there are never enough job openings for all who want to work. That number is 24.4 million people today: 10.9 million officially unemployed and 13.5 million in hidden unemployment (bls.gov). The mark of unemployment is itself an obstacle to getting a job. The average employer equates 9 months of unemployment to 4 years of lost work experience. (Eriksson and Rooth AER, 2014). And so unemployment breeds unemployability, feeding the decades-long uptrend in long-term unemployment, while the economic, political and social costs are mounting. Whenever I write about unemployment, I always stress the long run…. Read More

I just returned from the big annual meeting of economists (this time in Philly), at which we had a panel on the Job Guarantee. One of the papers on our panel was by William (Sandy) Darity and Darrick Hamilton, which demonstrated how imperative it is to implement the JG to reduce hiring discrimination in the labor market. Darrick (who presented the paper) pointed out that official unemployment rates for black Americans is chronically twice as high as that for whites; by conventional views of what constitutes Great Depression levels of unemployment, black Americans are in a Great Depression and are always suffering from at least recession levels of unemployment. Darrick pointed out that even in good times, blacks with some college education have unemployment rates higher than white high school drop-outs, and even as high as whites who’ve been incarcerated. Sandy has supported the Job Guarantee since the earliest days—he was on the first panel we ever organized on the JG (back when we were calling it Public Service Employment). While the JG will not eliminate racial discrimination in the USA, it will go a long way in helping to provide a real opportunity. The highest unemployment rates are among the young. As Sandy says, black teen high school dropouts have a 95 percent joblessness rate. You read that right…. Read More

L. Randall Wray just published a one-pager on China’s policy options from the perspective of Modern Money Theory: Since adopting a policy of gradually opening its economy more than three decades ago, China has enjoyed rapid economic growth and rising living standards for much of its population. While some argue that China might fall into the middle-income “trap,” they are underestimating the country’s ability to continue to grow at a rapid pace. It is likely that China’s growth will eventually slow, but the nation will continue on its path to join the developed high-income group—so long as the central government recognizes and uses the policy space available to it. China doesn’t necessarily need an expansion of total government spending — what it needs, Wray argues, is to “shift spending away from local governments, which have limited fiscal capacity, and toward the sovereign central government, which has more fiscal policy space.” Local government budgets, which face solvency constraints (local governments actually need to raise revenue to pay debt service), are showing signs of being over-extended — and the reality is probably even worse than the data suggest, Wray points out, given that local governments have been relying on off-balance-sheet investment vehicles. By contrast, Wray observes that China’s central government, facing no risk of insolvency, has a relatively tight budget. The logic… Read More

A new volume edited by the director of the Levy Institute’s Gender Equality and the Economy program, Rania Antonopoulos: With the full effects of the Great Recession still unfolding, this collection of essays analyses the gendered economic impacts of the crisis. The volume, from an international set of contributors, argues that gender-differentiated economic roles and responsibilities within households and markets can potentially influence the ways in which men and women are affected in times of economic crisis. Looking at the economy through a gender lens, the contributors investigate the antecedents and consequences of the ongoing crisis as well as the recovery policies adopted in selected countries. There are case studies devoted to Latin America, transition economies, China, India, South Africa, Turkey, and the USA. Topics examined include unemployment, the job-creation potential of fiscal expansion, the behavioral response of individuals whose households have experienced loss of income, social protection initiatives, food security and the environment, shedding of jobs in export-led sectors, and lessons learned thus far. From these timely contributions, students, scholars, and policymakers are certain to better understand the theoretical and empirical linkages between gender equality and macroeconomic policy in times of crisis. From the table of contents:

Dissatisfaction with the incomplete or timid nature of the 2010 Dodd-Frank financial reforms has generated interest in some alternative regulatory proposals. One alternative that’s fairly prominent in progressive circles revolves around the idea of returning to the structure of the 1933 Glass-Steagall Act. In this video, Jan Kregel explains why we can’t go back. He argues that recent proposals to revive Glass-Steagall are based on a misunderstanding of what banks do and how they make their money. [iframe width=”448″ height=”252″ src=”//www.youtube.com/embed/_jQsajnbn44?start=648″ frameborder=”0″ allowfullscreen></iframe] You can find this video and others at the Levy Institute’s new YouTube page (videos of speeches and panel discussions from two recent Levy Institute Minsky conferences, in Rio and Athens, will be made available. More to come).

Q: “Now why do you believe the US government will never, ever have a problem funding its public expenditures and deficits?” A: “Because the electricity supply to the computers that send those signals will never be cut off.” Q: “It’s that simple?” A: “Simple as that.” [iframe width=”448″ height=”252″ src=”//www.youtube.com/embed/qD3XMyNmfeY?feature=player_detailpage&start=51″ frameborder=”0″ allowfullscreen></iframe] If you want the more complicated version, Galbraith wrote a policy note a couple years back that explains why the long-term budget projections that elicit so much bipartisan anxiety are unjustifiably pessimistic with regard to the question of whether the US public debt is “sustainable” over the long term, which is to say, whether the public debt-to-GDP ratio will stabilize or continue to grow without limit. On this question, as he explains, it’s all about the relationship between the rate of economic growth and the rate of interest on government debt. If the real growth rate is greater than the real interest rate on debt, then even a small primary deficit is consistent with a debt-to-GDP ratio that stabilizes over the long term. (Paul Krugman also danced on the edge of this idea a few weeks back, as part of his meditations on “secular stagnation” and the possibility of real interest rates staying low (or negative) for the foreseeable future: “I don’t want to push this too hard,… Read More

C. J. Polychroniou: A strong case can be made that what we have been witnessing since [2007-08] is not simply a severe financial crisis centered in the developed world but the fact that today’s capitalism is simply incapable of functioning in an economic way conducive to maintaining sustainable and balanced growth. The so-called “financialization” of the economy, so prone to financial crises and meltdowns as the late Hyman Minsky has shown, cannot be understood independent of the production processes or developments in the real economy. Advanced capitalism had been facing severe structural stresses, strains and deformations — including overproduction, trade deficits, lack of job growth and elevated public and private debt levels — for quite a few decades prior to the eruption of the financial crisis of 2007-08. Indeed, the “financialization” wave — which many have labeled “casino capitalism” or “stock market capitalism” but which amounts essentially to the deregulation of giant financial entities capable of shaping and controlling the fate of national economies — began as a result of the structural problems associated with the postwar regime of capital accumulation, whose collapse in the mid-1970s threatened the growing expansion of capitalism. Thus, “financialization” does not spring out of the blue but emerges as an alternative model to the decay of the postwar regime of accumulation. Read the rest here.

The Levy Institute’s Jan Kregel and L. Randall Wray took part in a workshop at the UK House of Commons, November 25th, on “Financial Governance for Innovation and Social Inclusion,” organized by Mariana Mazzucato (SPRU) and Leonardo Burlamaqui (Ford Foundation) and hosted by Shadow Minister for the Cabinet Office, MP Chi Onwurah. Kregel and Wray’s presentations follow: [iframe width=”448″ height=”252″ src=”//www.youtube.com/embed/kqrUJWWYIUg?feature=player_embedded” frameborder=”0″ allowfullscreen></iframe]   [iframe width=”448″ height=”252″ src=”//www.youtube.com/embed/mJg04BBsz8Y?feature=player_embedded” frameborder=”0″ allowfullscreen></iframe]   The rest of the speeches from day 1 can be found here.

Amazon’s Jeff Bezos is all over the news with his statement that drones will sooner or later be delivering packages to your home. Predictably, this has generated two types of buzz: what about the inevitable mishaps, and what about the poor displaced UPS workers? For me, the first is a wee bit scary. Of course, you now have the prospect of being run over by a UPS driver whose workload has already been increased so much that he doesn’t have the time to drive carefully. With the coming of drones we’ll have to constantly scan the sky for incoming errant flights and packages falling to earth. I suppose the drones are scarier than the trucks. However, it is the second worry that is getting most of the attention: What are we going to do as robots increasingly replace human workers? That sort of apocalypse has been featured in science fiction from time immemorial. Not only do we have the worry of rising unemployment of humans, but also the growing intelligence of robots as they realize they don’t need no damn humans any more. Ahhhnold Is Baaaack! Open the Bomb Bay Doors, Hal! An interesting piece in Salon addresses these latter issues. Indeed, the title tells it all: “Amazon, Applebee’s and Google’s job-crushing drones and robot armies: They’re coming for your… Read More

The Hellenic Statistical Authority (ElStat) reports today that real GDP in the third quarter of 2013 has fallen by “only” 3 percent. More in detail, from their press release: Total final consumption expenditure recorded a decrease of 6.6% in comparison with the 3rd quarter of 2012 (Table 4). Gross fixed capital formation (GFCF) decreased by 12.6% in comparison with the 3rd quarter of 2012 (Table 4). Exports increased by 5.7% in comparison with the 3rd quarter of 2012 (Table 4). Exports of goods increased by 2.4% and exports of services increased by 8.8%. Imports increased by 2.3% in comparison with the 3rd quarter of 2012 (Table 4). Imports of goods increased by 2.6% and imports of services increased by 1.1%. (Imports will be growing with exports also because, as we have argued, a large and growing portion of Greek exports are intra-industry trade connected to oil products.) My personal guess is that these figures will be revised downwards. In the chart above we show exports of services in euros, as published by ElStat, together with the Turnover Index in Accommodation and Food Service Activities, also published by ElStat. The definition of the index given by Eurostat is as follows: “The definition of turnover is rather straightforward. It comprises basically what is invoiced by the seller. Rebates and price deductions are… Read More