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The corrosive social and economic effects of what have now become ‘normal’ unemployment levels require new solutions, and trade without full employment exacerbates the problem. Global unemployment is expected to surpass 200 million people for the first time on record by the end of 2017, according a recent ILO study, and limitations of official statistics suggest that the problem is much larger. As conventional measures increasingly fail to produce tight labor markets and jobless recoveries become the norm, economists grapple with this new reality by calling it secular stagnation and by adjusting upwards the rates of unemployment deemed ‘natural’ — but the human, social and economic costs of this growing problem are rarely considered in economic modeling. The Problem: A Global Unemployment Epidemic Mainstream economic theory considers some level of unemployment to be ‘natural’ (i.e., unresponsive to policy remedies without creating some other problem like inflation), but it largely ignores the harsh human, environmental, and economic costs of unemployment. In fact, some of the best work on this question comes from disciplines outside of economics. It’s not hyperbole to note, for example, that unemployment kills. Literally. Research shows that one in five suicides is related to unemployment, and joblessness causes 32–37 percent excess mortality for men. And while for women the impact is less clear, we know that there are… Read More

This is apparently the latest cover of Time magazine: The idea that the US government or the nation as a whole is “insolvent” has an undying appeal. The fear of (or yearning for) some manner of budget crisis has waned somewhat over the last couple of years (one hopes this is due to the fact that most people alive today have never lived through a period in which the deficit has shrunk so rapidly), but stories like this will never go away. The 25th Minsky conference wrapped up recently (video of all the speakers is posted here), and in one of the sessions Stephanie Kelton delivered a presentation in which she argued that, in contrast to almost any other area of policy, there is one issue on which Democrats and Republicans agree: a public debt crisis is looming. In addition to some disagreement over when the crisis will strike (hawks: yesterday; doves: in a decade or so), they differ merely on the question of how to solve this perceived problem: by cutting spending or raising revenue. This broader moment of bipartisan consensus, Kelton argued, is tarnished only by being wrong. Among her efforts to dispel the appeal of the debt crisis narrative, Kelton pointed out that US government deficits are the mirror image of non-government surpluses (domestic private sector surpluses plus current account deficits), with a nod to what Goldman Sachs’ Jan Hatzius once described as “the world’s most important chart.” The upshot, she… Read More

The big political story in Brazil is the potential impeachment of President Dilma Rousseff (Brazil’s lower house of congress voted in favor of impeachment; the motion now moves to the senate for consideration). To get an idea of how messy this situation is, note that the man leading the impeachment attempt, Speaker of the House Eduardo Cunha, is facing 184 years in prison for his role in the Petrobras corruption scandal. (In the NYTimes‘ Room for Debate series, Laura Carvalho describes the impeachment process as a parliamentary coup. See also Felipe Rezende’s critical take on the charges for which Rousseff is ostensibly being impeached: violation of the Fiscal Responsibility Law.) All of this is happening against the backdrop of a multi-faceted economic crisis. Here’s Fernando Cardim de Carvalho’s summary of the situation from his latest policy note: Brazilian real GDP is estimated to have contracted 3.8 percent in 2015. Meanwhile, annual inflation reached 10.7 percent in 2015 … The overnight cost of bank reserves in the interbank market (SELIC) is currently 14.25 percent. The exchange rate to the US dollar is around R$4, a 50 percent increase over a year ago. Fiscal space for implementing recovery policies is practically nonexistent, with fiscal deficits reaching 10.3 percent of GDP … Unemployment has been growing rapidly and the outlook for 2016 is not promising, to say the least, with the International Monetary Fund (IMF 2016) projecting a further contraction in… Read More

Audio from the 25th Annual Minsky Conference will be broadcast live. Listen here beginning tomorrow at 9am. Tuesday, April 12 9:00−9:15 a.m. Welcome and Introduction Dimitri B. Papadimitriou, President, Levy Institute 9:15−10:30 a.m. Session 1. GLOBAL FRAGILITY AND EMERGING MARKETS OUTLOOK MODERATOR: Theo Francis, Special Writer, The Wall Street Journal SPEAKER: Jan Kregel, Director of Research, Levy Institute; Professor, Tallinn University of Technology Fernando J. Cardim de Carvalho, Senior Scholar, Levy Institute; Emeritus Professor of Economics, Federal University of Rio de Janeiro 10:30 a.m. − 12:30 p.m. Session 2. COMMODITIES AND DERIVATIVES REGULATION MODERATOR: Izabella Kaminska, Journalist, Financial Times SPEAKERS: Robert A. Johnson, President, Institute for New Economic Thinking; Senior Fellow and Director, Franklin and Eleanor Roosevelt Institute Michael Masters, Founder and Chairman of the Board, Better Markets 12:30−2:15 p.m. Lunch SPEAKER: Robert J. Barbera, Codirector, Center for Financial Economics, The Johns Hopkins University “Six Degrees of Separation: Why the Fed’s Strategy of Precautionary Unemployment Is Nutty” 2:15−4:45 p.m. Session 3. IS THE CURRENT CREDIT STRUCTURE CONDUCIVE TO FINANCIALLY STABLE RECOVERY? MODERATOR: Jesse Eisinger, Senior Reporter, ProPublica SPEAKERS: Henry Kaufman, President, Henry Kaufman & Company, Inc. Richard Berner, Director, Office of Financial Research, US Department of the Treasury Martin L. Leibowitz, Managing Director, Morgan Stanley Albert M. Wojnilower, Economic Consultant, Craig Drill Capital 4:45−6:45 p.m. Session 4. MINSKY, INEQUALITY, AND THE MONETARY/FISCAL POLICY OUTLOOK… Read More

This is the first of a series of blog posts on the Brazilian crisis by Felipe Rezende.   There are two major crises Brazil’s President Dilma Rousseff is facing: one is a political crisis and the other is Brazil’s sharpest recession in 25 years. Brazil’s Political Crisis The political crisis has two main pillars: a) a vast corruption scandal (with evidence of a kickback scheme funneling billions of dollars from state-run firms and, more recently, in a massive data leak over possible tax evasion, Brazilian politicians linked to offshore companies in the Panama Papers); and b) impeachment proceedings to move forward against President Dilma Rousseff. The Federal Court of Accounts (TCU) announced in 2015 that it had rejected the accounts of Rousseff’s administration for the year 2014. In a unanimous vote, the TCU ruled Dilma Rousseff’s government manipulated its accounts in 2014 to “disguise fiscal deficits” as she campaigned for re-election. The allegation is that Ms. Rousseff manipulated Brazil’s account books to hide a growing fiscal deficit. The argument is that the federal government borrowed money from public banks (which is forbidden by the Fiscal Responsibility Law) to pay for social programs. So, they argued she allegedly committed an administrative crime. Once we understand how the government spends and what bonds are for, then we can analyze TCU’s decision. The… Read More

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The preliminary program has been posted for the 25th Annual Hyman Minsky Conference, being held April 12-13 here at Blithewood on the Bard College campus. The deadline for registration is April 1st. Tuesday, April 12 8:30−9:00 a.m. Registration 9:00−9:15 a.m. Welcome and Introduction Dimitri B. Papadimitriou, President, Levy Institute 9:15−10:30 a.m. Session 1. GLOBAL FRAGILITY AND EMERGING MARKETS OUTLOOK MODERATOR: Theo Francis, Special Writer, The Wall Street Journal SPEAKER: Jan Kregel, Senior Scholar, Levy Institute; Professor, Tallinn University of Technology Fernando J. Cardim de Carvalho, Senior Scholar, Levy Institute; Emeritus Professor of Economics, Federal University of Rio de Janeiro 10:30 a.m. − 12:30 p.m. Session 2. COMMODITIES AND DERIVATIVES REGULATION MODERATOR: Izabella Kaminska, Journalist, Financial Times SPEAKERS: Michael Greenberger, Professor, School of Law, and Director, Center for Health and Homeland Security, The University of Maryland Robert A. Johnson, President, Institute for New Economic Thinking; Senior Fellow and Director, Franklin and Eleanor Roosevelt Institute Michael Masters, Founder and Chairman of the Board, Better Markets 12:30−2:15 p.m. Lunch SPEAKER: Robert J. Barbera, Codirector, Center for Financial Economics, The Johns Hopkins University “Six Degrees of Separation: Why the Fed’s Strategy of Precautionary Unemployment Is Nutty” 2:15−4:45 p.m. Session 3. IS THE CURRENT CREDIT STRUCTURE CONDUCIVE TO FINANCIALLY STABLE RECOVERY? MODERATOR: TBD SPEAKERS: Henry Kaufman, President, Henry Kaufman & Company, Inc. Richard Berner, Director, Office of Financial Research, US… Read More

[iframe width=”427″ height=”240″ src=”https://www.youtube.com/embed/EOFjduXU9N8?;start=1289″ frameborder=”0″ allowfullscreen></iframe]   Related: “Euroland’s Original Sin” (pdf)

Bloomberg just published an article focused on the rise of Modern Money Theory (MMT), featuring comments by Senior Scholar Randall Wray: The 20-something-year-old doctrine, on the fringes of economic thought, is getting a hearing with an unconventional take on government spending in nations with their own currency. Such countries, the MMTers argue, face no risk of fiscal crisis. They may owe debts in, say, dollars or yen — but they’re also the monopoly creators of dollars or yen, so can always meet their obligations. For the same reason, they don’t need to finance spending by collecting taxes, or even selling bonds. […] No one’s saying there are no limits. Real resources can be a constraint — how much labor is available to build that road? Taxes are an essential tool, to ensure demand for the currency and cool the economy if it overheats. But the MMTers argue there’s plenty of room to spend without triggering inflation.

These are not happy times for Europe. Ukraine, Russia, and rising anti-democratic influences in Hungary and Poland represent latent threats at the European Union’s eastern front. The prospect of Brexit is a more acute one at its western front. After letting loose manifold conflicting forces that continue shaping internal politics in many EU countries and setting them on collision course with their partners, the refugee situation appears to be on the verge of bestowing another humanitarian crisis on the union’s most vulnerable and unfortunate member: Greece. Never mind the Catalan question: it almost appears minor by comparison, but actually represents yet another fundamental challenge to the European project. “Misfortune seldom comes alone,” a German saying goes; the nation that is increasingly pulling the strings in European affairs but appears at risk of alienating itself even more so than its partners while doing it. Considering all this, the European political authorities may almost be forgiven for having lost sight of the smoldering crisis of the euro, the union’s flagship endeavor that was meant to foster prosperity and political union – but turned out to deliver quite the opposite. One key player, the European Central Bank (ECB), does not wish to partake in the peculiar mix of denial and delusion about the state of the euro. As the specter of deflation and… Read More

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