The July Report highlights the Institute’s annual Minsky conference, held April 16–17, 2009, at the Ford Foundation in New York City. Over 150 top policymakers, economists, and analysts gathered to offer their insights into the extraordinary challenges posed by the current global crisis, with topics ranging from financial market reregulation to the rehabilitation of mortgage financing to the institutional shape of the future financial system.

CONFERENCE

• 18th Annual Hyman P. Minsky Conference on the State of the US and World Economies: Meeting the Challenges of Financial Crisis

NEW STRATEGIC ANALYSES

• A “People First” Strategy: Credit Cannot Flow When There Are No Creditworthy Borrowers or Profitable Projects
• Recent Rise in Federal Government and Federal Reserve Liabilities: Antidote to a Speculative Hangover

NEW PUBLIC POLICY BRIEF

• It’s That “Vision” Thing: Why the Bailouts Aren’t Working, and Why a New Financial System Is Needed

NEW POLICY NOTES

• What Role for Central Banks in View of the Current Crisis?
• An Assessment of the Credit Crisis Solutions
• A Crisis in Coordination and Competence
• A Proposal for a Federal Employment Reserve Authority
• The “Unintended Consequences” Game
• “Enforced Indebtedness” and Capital Adequacy Requirements

NEW WORKING PAPERS

• Background Considerations to a Regulation of the US Financial System: Third Time a Charm? Or Strike Three?
• Managing the Impact of Volatility in International Capital Markets in an Uncertain World
• Labor-market Performance in the OECD: An Assessment of Recent Evidence
• The Social and Economic Importance of Full Employment
• The Return of the State: The New Investment Paradigm
• The Current Economic and Financial Crisis: A Gender Perspective
• Whither New Consensus Macroeconomics? The Role of Government and Fiscal Policy in Modern Macroeconomics
• New Consensus Macroeconomics: A Critical Appraisal
• Housing Inequality in the United States: A Decomposition Analysis of Racial and Ethnic Disparities in Homeownership
• Caste and Wealth Inequality in India

LEVY INSTITUTE NEWS

• Event: Conference on Employment Guarantee Policies
• Events: Conference and Seminar on Gender and the Global Economic Crisis

PUBLICATIONS AND PRESENTATIONS

• Publications and Presentations by Levy Institute Scholars
• Recent Levy Institute Publications

Download Volume 19, No. 3 PDF (776.50 KB)

A Collaborative Project of the United Nations Development Programme, Regional Bureau for Latin America and the Caribbean (RBLAC), and the Bureau for Development Policy (BDP), in Partnership with The Levy Economics Institute.

The Levy Economics Institute, Blithewood, Annandale-on-Hudson, New York
June 22–23, 2009.

With poverty, inequality, and unemployment trending upward worldwide, job creation, especially for marginalized populations, is urgently needed. By mobilizing unused domestic labor resources, direct job creation can become an engine of pro-poor growth while also promoting gender equality and meeting social inclusion targets—key international development goals. Public works projects, employment guarantees, and employment of last resort strategies can play a crucial role in reducing unemployment and poverty, ameliorating distress migration and delivering physical infrastructure and social services in ways that particularly benefit underserved communities.

On June 22 and 23, The Levy Economics Institute, in partnership with the United Nations Development Programme (UNDP), convened an international conference to present the merits and challenges of public job creation programs as a constitutive component of an economic recovery strategy. Titled “Employment Guarantee Policies: Responding to the Current Economic Crisis and Contributing to Long-Term Development,” the conference was held at Blithewood, the Institute’s main research and conference facility, on the campus of Bard College in Annandale-on-Hudson, New York. More than 30 top policy advisers, members of government organizations, academics, and international development specialists met to analyze and exchange views on various public employment initiatives, drawing on existing research and the outcomes of country-level programs in South Africa, Argentina, India, Iran, and Chile.

Download Conference Proceedings, June 22–23, 2009 PDF (566.53 KB)

A Collaborative Project of the United Nations Development Programme, Regional Bureau for Latin America and the Caribbean (RBLAC), and the Bureau for Development Policy (BDP), in Partnership with The Levy Economics Institute

On June 22 and 23, The Levy Economics Institute, in partnership with the United Nations Development Programme (UNDP), convened an international conference to present the merits and challenges of public job creation programs as a constitutive component of an economic recovery strategy. Titled “Employment Guarantee Policies: Responding to the Current Economic Crisis and Contributing to Long-Term Development,” the conference was held at Blithewood, the Institute’s main research and conference facility, on the campus of Bard College in Annandale-on-Hudson, New York. More than 30 top policy advisers, members of government organizations, academics, and international development specialists met to analyze and exchange views on various public employment initiatives, drawing on existing research and the outcomes of country-level programs in South Africa, Argentina, India, Iran, and Chile.

There is broad consensus that the prospects for the domestic economy have become dire, requiring extensive government intervention. In a new Strategic Analysis highlighted in the current issue of the Report, Levy scholars take a more skeptical view of the effectiveness of the policy prescriptions currently on offer—and argue that the global economy must be run in an entirely new way. 

NEW STRATEGIC ANALYSES

• Prospects for the United States and the World: A Crisis that Conventional Remedies Cannot Resolve
• Flow of Funds Figures Show the Largest Drop in Household Borrowing in the Last 40 Years

NEW PUBLIC POLICY BRIEFS

• After the Bust: The Outlook for Macroeconomics and Macroeconomic Policy
• The Case Against Intergenerational Accounting: The Accounting Campaign Against Social Security and Medicare
• The Return of Big Government: Policy Advice to President Obama

NEW POLICY NOTE

• Obama’s Job Creation Promise: A Modest Proposal to Guarantee That He Meets and Exceeds Expectations

NEW LIMEW REPORTS

• Postwar Trends in Economic Well-Being in the United States, 1959–2004
• What Are the Long-Term Trends in Intergroup Economic Disparities?

NEW WORKING PAPERS

• Small Is Beautiful: Evidence of an Inverse Relationship between Farm Size and Yield in Turkey
• Hypothetical Integration in a Social Accounting Matrix and Fixed-price Multiplier Analysis
• Insuring Against Private Capital Flows: Is It Worth the Premium? What Are the Alternatives?
• Macroeconomic Imbalances in the United States and Their Impact on the International Financial System
• Financial Stability: The Significance and Distinctiveness of Islamic Banking in Malaysia
• Long-Term Trends in the Levy Institute Measure of Economic Well-Being (LIMEW), United States, 1959–2004

LEVY INSTITUTE NEWS

• 2008 Economists for Peace and Security Conference
• 18th Annual Hyman P. Minsky Conference

PUBLICATIONS AND PRESENTATIONS

• Publications and Presentations by Levy Institute Scholars
• Recent Levy Institute Publications

Download Volume 19, No. 2 PDF (255.38 KB)

The Federal Reserve’s response to the current financial crisis has been praised because it introduced a zero interest rate policy more rapidly than the Bank of Japan (during the Japanese crisis of the 1990s) and embraced massive “quantitative easing.” However, despite vast capital injections, the banking system is not lending in support of the private sector.

Senior Scholar Jan Kregel compares the current situation with the Great Depression, and finds an absence of New Deal measures and institutions in the current rescue packages. The lessons of the Great Depression suggest that any successful policy requires fundamental structural reform, an understanding of how the financial system failed, and the introduction of a new financial structure (in a short space of time) that is designed to correct these failures. The current crisis could have been avoided if increased household consumption had been financed through wage increases, says Kregel, and if financial institutions had used their earnings to augment bank capital rather than bonuses.

Download Public Policy Brief Highlights No. 100A, 2009 PDF (132.41 KB)

A conference organized by The Levy Economics Institute of Bard College with support from the Ford Foundation.

On April 16 and 17, 2009, top policymakers, economists, and analysts gathered at the Ford Foundation’s headquarters in New York City to offer their insights and policy guidelines on the extraordinary challenges posed by the global financial crisis. Topics included current conditions and forecasts; macro policy proposals by the Obama administration and others; the rehabilitation of mortgage financing and the banks; financial market reregulation; proposals to limit foreclosures and modify servicing agreements; regulation of alternative financial products (derivatives and credit default swaps); the institutional shape of the future financial system; and international responses to the crisis.

A conference organized by The Levy Economics Institute of Bard College with support from the Ford Foundation.

On April 16 and 17, more than 150 policymakers, economists, and analysts from government, industry, and academia gathered at the NYC headquarters of the Ford Foundation for the Levy Institute’s annual Minsky conference on the state of the US and world economies. This year’s conference focused on the extraordinary challenges posed by the current global financial crisis. Topics included current conditions and forecasts, macro policy proposals by the Obama administration and others, the rehabilitation of mortgage financing and the banks, financial market reregulation, proposals to limit foreclosures and modify servicing agreements, regulation of alternative financial products (derivatives and credit default swaps), the institutional shape of the future financial system, and international responses to the crisis.

Download Conference Proceedings, April 16–17, 2009 PDF (978.29 KB)

This issue of the Summary begins with a Strategic Analysis by the Levy Institute’s Macro-Modeling Team, along with a review of the latest Federal Reserve flow-of-funds data. The authors foresee a steep rise in the private sector balance and an abrupt fall in GDP in the United States, with employment rising to 10 percent in 2010; moreover, they say, the unprecedented drop in interest rates may not be effective in reactivating standard lending practices. What’s needed in order to achieve balanced growth and full employment? A drastic change in the institutions responsible for running the world economy—one that would involve placing far less than total reliance on market forces.

INSTITUTE RESEARCH

Program: The State of the US and World Economies

Strategic Analysis

• WYNNE GODLEY, DIMITRI B. PAPADIMITRIOU, and GENNARO ZEZZA, Prospects for the United States and the World: A Crisis That Conventional Remedies Cannot Resolve
• GENNARO ZEZZA, Flow of Funds Figures Show the Largest Drop in Household Borrowing in the Last 40 Years

Program: The Distribution of Income and Wealth

Levy Institute Measure of Economic Well-Being

• EDWARD N. WOLFF, AJIT ZACHARIAS, and THOMAS MASTERSON, Postwar Trends in Economic Well-Being in the United States, 1959–2004
• THOMAS MASTERSON, EDWARD N. WOLFF, and AJIT ZACHARIAS, What Are the Long-Term Trends in Intergroup Economic Disparities?
• EDWARD N. WOLFF, AJIT ZACHARIAS, and THOMAS MASTERSON, Long-Term Trends in the Levy Institute Measure of Economic Well-Being (LIMEW), United States, 1959–2004

Program: Monetary Policy and Financial Structure

• THOMAS I. PALLEY, After the Bust: The Outlook for Macroeconomics and Macroeconomic Policy
• JAMES K. GALBRAITH, L. RANDALL WRAY, and WARREN MOSLER, The Case Against Intergenerational Accounting: The Accounting Campaign Against Social Security and Medicare
• L. RANDALL WRAY, The Return of Big Government: Policy Advice for President Obama
• JÖRG BIBOW, Insuring Against Private Capital Flows: Is It Worth the Premium? What Are the Alternatives?
• JULIA S. PERELSTEIN, Macroeconomic Imbalances in the United States and Their Impact on the International Financial System
• EWA KARWOWSKI, Financial Stability: The Significance and Distinctiveness of Islamic Banking in Malaysia

Program: Employment Policy and Labor Markets

• PAVLINA R. TCHERNEVA, Obama’s Job Creation Promise: A Modest Proposal to Guarantee That He Meets and Exceeds Expectations
• KIJONG KIM, Hypothetical Integration in a Social Accounting Matrix and Fixed-price Multiplier Analysis

Program: Economic Policy for the 21st Century

• FATMA GÜL ÜNAL, Small is Beautiful: Evidence of an Inverse Relationship between Farm Size and Yield in Turkey

INSTITUTE NEWS

• Upcoming Event: 18th Annual Hyman P. Minsky Conference, April 16–17

PUBLICATIONS AND PRESENTATIONS

• Publications and Presentations by Levy Institute Scholars

Download Volume 18, No. 2 PDF (250.89 KB)

In the current global financial crisis, economists and policymakers have reembraced Big Government as a means of preventing the reoccurrence of a debt-deflation depression. The danger, however, is that policy may not downsize finance and replace money manager capitalism. According to Senior Scholar L. Randall Wray, we need a permanently larger fiscal presence, with more public services. His advice to President Obama is to discard all of former Treasury Secretary Paulson’s actions. Wray believes that we can afford any necessary spending and bailouts, and that these actions will not burden our grandchildren.

Download Public Policy Brief Highlights No. 99A, 2009 PDF (144.84 KB)

The Federal Accounting Standards Advisory Board (FASAB) has proposed subjecting the entire federal budget to “intergenerational accounting”—which purports to calculate the debt burden our generation will leave for future generations—and is soliciting comments on the recommendations of its two “exposure drafts.” The authors of this brief find that intergenerational accounting is a deeply flawed and unsound concept that should play no role in federal government budgeting, and that arguments based on this concept do not support a case for cutting Social Security or Medicare.

The FASAB exposure drafts have not made a persuasive argument about basic matters of accounting, say the authors. Federal budget accounting should not follow the same procedures adopted by households or business firms because the government operates in the public interest, with the power to tax and issue money. There is no evidence, nor any economic theory, behind the proposition that government spending needs to match receipts. Social Security and Medicare spending need not be politically constrained by tax receipts—there cannot be any “underfunding.” What matters is the overall fiscal stance of the government, not the stance attributed to one part of the budget.

Download Public Policy Brief Highlights No. 98A, 2008 PDF (154.70 KB)

This issue of the Report opens with Senior Scholar L. Randall Wray’s new Public Policy Brief on money market capitalism (financialization), which has resulted in a series of boom-and-bust cycles in equities, real estate, and, most recently, commodities. Wray maintains that policymakers must fundamentally change the structure of our economic system in order to break this damaging cycle and reduce the influence of managed money.

NEW PUBLIC POLICY BRIEF

• The Commodities Market Bubble: Money Manager Capitalism and the Financialization of Commodities

NEW POLICY NOTES

• A Simple Proposal to Resolve the Disruption of Counterparty Risk in Short-Term Credit Markets
• Will the Paulson Bailout Produce the Basis for Another Minsky Moment?
• Time to Bail Out: Alternatives to the Bush-Paulson Plan

NEW WORKING PAPERS

• Macroeconomics Meets Hyman P. Minsky: The Financial Theory of Investment
• Inflation Targeting in Brazil
• Promoting Equality Through an Employment of Last Resort Policy
• Do the Innovations in a Monetary VAR Have Finite Variances?
• Minsky and Economic Policy: “Keynesianism” All Over Again?
• On Democratizing Financial Turmoil: A Minskyan Analysis of the Subprime Crisis
• Excess Capital and Liquidity Management
• An Empirical Analysis of Gender Bias in Education Spending in Paraguay

LEVY INSTITUTE NEWS

• Conference: Economists for Peace and Security
• Upcoming Event: The 18th Annual Hyman P. Minsky Conference

PUBLICATIONS AND PRESENTATIONS

• Publications and Presentations by Levy Institute Scholars
• Recent Levy Institute Publications

Download Volume 19, No. 1 PDF (613.61 KB)

“Change” was the buzzword of the Obama campaign, in response to a political agenda precipitated by financial turmoil and a global economic crisis. According to Research Associate Thomas Palley, the neoliberal economic policy paradigm underlying that agenda must itself change if there is to be a successful policy response to the crisis. Mainstream economic theory remains unreformed, says Palley, and he warns of a return to failed policies if a deep crisis is averted. Since Post Keynesians accurately predicted that the US economy would implode from within, there is an opportunity for Post Keynesian economics to replace neoliberalism with a more successful approach.

Palley notes that there is significant disagreement among economic paradigms about how to ensure full employment and shared prosperity. A salient feature of the neoliberal economy is the disconnect between wages and productivity growth. Workers are boxed in on all sides by globalization, labor market flexibility, inflation concerns, and a belief in “small government” that has eroded economic rights and government services. Financialization, the economic foundation of neoliberalism, serves the interests of financial markets and top management. Thus, reversing the neoliberal paradigm will require a policy agenda that addresses financialization and ensures that financial markets and firms are more closely aligned with the greater public interest.

Download Public Policy Brief Highlights No. 97A, 2009 PDF (309.68 KB)

Recent attempts by the Treasury and the Federal Reserve to counter the worst financial and economic crisis since the Great Depression have brought into question the role of the government and the effectiveness of its rescue package. Levy Institute scholars foresee an extended period of stagnation and possibly deflation if the government does not take a more active part in terms of fiscal policy, direct homeowner relief, and regulatory system reform.

INSTITUTE RESEARCH

Program: Monetary Policy and Financial Structure

• L. RANDALL WRAY, What’s a Central Bank to Do? Policy Response to the Current Crisis
• JAN KREGEL, A Simple Proposal to Resolve the Disruption of Counterparty Risk in Short-Term Credit Markets
• JAN KREGEL, Will the Paulson Bailout Produce the Basis for Another Minsky Moment?
• DIMITRI B. PAPADIMITRIOU and L. RANDALL WRAY, Time to Bail Out: Alternatives to the Bush-Paulson Plan
• PEDRO NICOLACI DA COSTA, Shaky Foundations: Policy Lessons from America’s Historic Housing Crash
• L. RANDALL WRAY, The Commodities Market Bubble: Money Manager Capitalism and the Financialization of Commodities
• L. RANDALL WRAY and ÉRIC TYMOIGNE, Macroeconomics Meets Hyman P. Minsky: The Financial Theory of Investment
• PHILIP ARESTIS, LUIZ FERNANDO DE PAULA, and FERNANDO FERRARI-FILHO, Inflation Targeting in Brazil
• ÉRIC TYMOIGNE, Minsky and Economic Policy: “Keynesianism” All Over Again?
• LUISA FERNANDEZ, FADHEL KABOUB, and ZDRAVKA TODOROVA, On Democratizing Financial Turmoil: A Minskyan Analysis of the Subprime Crisis
• JAN TOPOROWSKI, Excess Capital and Liquidity Management

Program: Gender Equality and the Economy

• ZAHRA KARIMI, The Effects of International Trade on Gender Inequality: Women Carpet Weavers of Iran
• RANIA ANTONOPOULOS, The Unpaid Care Work–Paid Work Connection
• THOMAS MASTERSON, An Empirical Analysis of Gender Bias in Education Spending in Paraguay

Program: Employment Policy and Labor Markets

• PAVLINA R. TCHERNEVA, Keynes’s Approach to Full Employment: Aggregate or Targeted Demand?
• DIMITRI B. PAPADIMITRIOU, Promoting Equality Through an Employment of Last Resort Policy

Program: Economic Policy for the 21st Century

Explorations in Theory and Empirical Analysis

• GREG HANNSGEN, Do the Innovations in a Monetary VAR Have Finite Variances?

INSTITUTE NEWS

• New Research Scholar
• New Research Associates
• Conference: The Financial Crisis, the US Economy, and International Security in the New Administration
• Research Grants
• Upcoming Event: The 18th Annual Hyman P. Minsky Conference

PUBLICATIONS AND PRESENTATIONS

• Publications and Presentations by Levy Institute Scholars
• Recent Levy Institute Publications

Download Volume 18, No. 1 PDF (668.80 KB)

In a new public policy brief, Senior Scholar L. Randall Wray shows how money manager capitalism—characterized by highly leveraged funds seeking maximum returns in an environment that systematically underprices risk—has destabilized one asset class after another, with commodities being simply the latest. Policymakers must fundamentally change the structure of our economic system and reduce the influence of managed money, Wray argues, in order to break the speculative boom-and-bust cycle.

Download Public Policy Brief Highlights No. 96A, 2008 PDF (251.42 KB)

Recent experience has bolstered the view that asset prices must come under the central bank’s purview in order for the economy to retain some semblance of stability. However, in a new Public Policy Brief, Pedro Nicolaci da Costa argues that attitude changes among regulators will be even more important than shifts in mandate in ensuring that regulators like the Federal Reserve do their jobs properly. In a related Policy Note, Senior Scholar L. Randall Wray examines the Fed’s unsuccessful efforts to curtail the widening financial crisis in the United States, and outlines an alternative framework for monetary policy formation.

NEW PUBLIC POLICY BRIEF

• Shaky Foundations: Policy Lessons from America’s Historic Housing Crash

NEW POLICY NOTE

• What’s a Central Bank to Do? Policy Response to the Current Crisis

NEW WORKING PAPERS

• Deficient Public Infrastructure and Private Costs: Evidence from a Time-use Survey for theWater Sector in India
• The Keynesian Roots of Stock-flow Consistent Macroeconomic Models: Peering Over the Edge of the Short Period
• The Buffett Plan for Reducing the Trade Deficit
• The Return of Fiscal Policy: Can the New Developments in the New Economic Consensus Be Reconciled with the Post Keynesian View?
• The Effects of International Trade on Gender Inequality:Women CarpetWeavers of Iran The Unpaid CareWork–PaidWork Connection
• Keynes’s Approach to Full Employment: Aggregate or Targeted Demand?

LEVY INSTITUTE NEWS

• New Research Scholar
• New Research Grants

PUBLICATIONS AND PRESENTATIONS

• Publications and Presentations by Levy Institute Scholars
• Recent Levy Institute Publications

Download Volume 18, No. 4 PDF (490.82 KB)

This latest issue of the Summary includes an overview of the Institute’s annual Minsky conference, which focused on the current economic crisis in the United States, its effects on the world economy, and possible solutions. Also featured is a new Strategic Analysis that challenges the notion that a stimulus package larger than the one approved by Congress last winter is unnecessary and potentially inflationary.

 

Contents:

 

INSTITUTE RESEARCH

Program: The State of the US and World Economies

• THE 17TH ANNUAL HYMAN P. MINSKY CONFERENCE: Credit, Markets, and the Real Economy: Is the Financial System Working?
• Strategic Analysis
  DIMITRI B. PAPADIMITRIOU, GREG HANNSGEN, and GENNARO ZEZZA, Fiscal Stimulus: Is More Needed?
• DIMITRI B. PAPADIMITRIOU, GREG HANNSGEN, and GENNARO ZEZZA, The Buffett Plan for Reducing the Trade Deficit
• ANTONIO CARLOS MACEDO E SILVA and CLAUDIO H. DOS SANTOS, The Keynesian Roots of Stock-flow Consistent Macroeconomic Models: Peering Over the Edge of the Short Period

Program: Monetary Policy and Financial Structure

• JAMES K. GALBRAITH, The Collapse of Monetarism and the Irrelevance of the New Monetary Consensus
• HYMAN P. MINSKY, Securitization (Preface and Afterword by L. Randall Wray)
• L. RANDALL WRAY, Financial Markets Meltdown: What Can We Learn from Minsky?
• JAN KREGEL, Changes in the US Financial System and the Subprime Crisis
• J�RG BIBOW, The International Monetary (Non-)Order and the "Global Capital Flows Paradox"
• MICHAEL MAH-HUI LIM, Old Wine in a New Bottle: Subprime Mortgage Crisis—Causes and Consequences
• JAN KREGEL, The Discrete Charm of the Washington Consensus

Program: The Distribution of Income and Wealth

• Levy Institute Measure of Economic Well-Being
  HYUNSUB KUM and THOMAS MASTERSON, Statistical Matching Using Propensity Scores: Theory and Application to the Levy Institute Measure of Economic Well-Being

Program: Gender Equality and the Economy

• LEKHA S. CHAKRABORTY, Deficient Public Infrastructure and Private Costs: Evidence from a Time-use Survey for the Water Sector in India

Program: Employment Policy and Labor Markets

• DANIEL KOSTZER, Argentina: A Case Study on the Plan Jefes y Jefas de Hogar Desocupados, or the Employment Road to Economic Recovery
• PAVLINA R. TCHERNEVA, The Return of Fiscal Policy: Can the New Developments in the New Economic Consensus Be Reconciled with the Post Keynesian View?

Program: Economic Policy for the 21st Century

• Explorations in Theory and Empirical Analysis
  GREG HANNSGEN, Can Robbery and Other Theft Help to Explain the Textbook Currency-demand Puzzle? Two Dreadful Models of Money Demand with an Endogenous Probability of Crime

INSTITUTE NEWS

• Special Lecture: Joseph E. Stiglitz on the Costs of the Iraq War

PUBLICATIONS AND PRESENTATIONS

• Publications and Presentations by Levy Institute Scholars
• Recent Levy Institute Publications

Download Volume 17, No. 3 PDF (2.80 MB)

Treasury Secretary Henry Paulson’s latest plan for tackling the housing-centered credit crisis involves giving the Federal Reserve vast new authority to regulate investment banks, not just depository institutions. However, news analyst Pedro Nicolaci da Costa argues that attitude changes among regulators will be even more important than shifts in mandate in ensuring that regulators like the Fed do their jobs properly.

Download Public Policy Brief Highlights No. 95A, 2008 PDF (119.27 KB)

This issue of the Report  highlights the Institute’s annual Minsky conference, which this year focused on credit, markets, and the real economy, and the fiscal policies needed to counter recession. A new Strategic Analysis argues in favor of a fiscal stimulus much larger than the $150 million currently allocated, and that it should apply over a longer period—especially if the slowdown proves longer than expected.

Contents:

CONFERENCE

• 17th Annual Hyman P. Minsky Conference on the State of the US and World Economies:
  Credit, Markets, and the Real Economy: Is the Financial System Working?

NEW STRATEGIC ANALYSIS

• Fiscal Stimulus: Is More Needed?

NEW PUBLIC POLICY BRIEF

• Financial Markets Meltdown: What Can We Learn from Minsky?

NEW WORKING PAPERS

• Can Robbery and Other Theft Help Explain the Textbook Currency-demand Puzzle? Two Dreadful Models of Money Demand with an Endogenous Probability of Crime
• Changes in the US Financial System and the Subprime Crisis
• The International Monetary (Non-)Order and the “Global Capital Flows Paradox”
• Old Wine in a New Bottle: Subprime Mortgage Crisis—Causes and Consequences
• The Discrete Charm of the Washington Consensus
• Argentina: A Case Study on the Plan Jefes y Jefas de Hogar Desocupados,
  or the Employment Road to Economic Recovery
• Statistical Matching Using Propensity Scores: Theory and Application to
  the Levy Institute Measure of Economic Well-Being

PUBLICATIONS AND PRESENTATIONS

• Publications and Presentations by Levy Institute Scholars
• Recent Levy Institute Publications

Download Volume 18, No. 3 PDF (1.24 MB)

The focus of this year’s conference was the current economic and financial crisis in the United States and its effects on the world economy. Topics included the causes and consequences of the "Minsky moment"; the impact of the credit crunch on the economic and financial market outlook; dislocations and policy options; margins of safety, systemic risk, and the American subprime mortgage market; financial markets regulation-reregulation; the inefficiency of computer-driven markets; currency market fluctuations; and exchange rate misalignment.

The conference was held April 17–18, 2008, at the Levy Institute’s research and conference center at Blithewood, on the campus of Bard College, Annandale-on-Hudson, New York.

In April 2008, top policymakers, economists, and analysts from government, industry, and academia gathered at the Levy Institute’s research and conference facility in Annandale-on-Hudson, New York, to present their insights about the American economy and the financial sector in the context of Minsky’s economic theories. Participants discussed Minsky’s financial instability hypothesis and the ability of monetary policy to stabilize financial markets and the economy, as well as the role of the Federal Reserve and its ability to function as a systemic lender of last resort. Speakers frequently compared events in the 1930s (the New Deal era) to the present, and they considered the prospect of another debt deflation rivaling the Great Depression. They also examined today’s complex and fragile financial system (e.g., the advent of securitization) and potential solutions to the mortgage crisis. Other related topics included the timing, cause, and length of recession; the nature and effectiveness of proposed economic stimulus packages; regulatory failures and the reformulation of policy; and the deleveraging process and potential financial losses.

Download Conference Proceedings, April 17–18, 2008 PDF (960.01 KB)

According to Senior Scholar L. Randall Wray, the current crisis in financial
markets can be traced back to securitization (the “originate and distribute” model),
leverage, the demise of relationship-based banking, and a dizzying array of extremely
complex instruments that—quite literally—only a handful understand.

Download PDF (231.05 KB)

According to Senior Scholar L. Randall Wray, the current crisis in financial
markets can be traced back to securitization (the “originate and distribute” model),
leverage, the demise of relationship-based banking, and a dizzying array of extremely
complex instruments that—quite literally—only a handful understand.

Download PDF (231.05 KB)

According to Senior Scholar L. Randall Wray, the current crisis in financial markets can be traced back to securitization (the “originate and distribute” model), leverage, the demise of relationship-based banking, and a dizzying array of extremely complex instruments that—quite literally—only a handful understand.

Download Public Policy Brief Highlights No. 94A, 2008 PDF (231.05 KB)

Throughout 2006–07, the Levy Institute continued to make significant contributions to the public policy discussions on many economic issues. In addition to organizing conferences, workshops, and lectures with distinguished representatives of the academy, the business community, and government, the Levy Institute used its wide range of print and online publications to disseminate information about, and foster debate on, numerous policy issues.

Download Biennial Report, 2006–2007 PDF (1.64 MB)