Master Macroeconomics: A Guide to Policies and Principles
Macroeconomics is the study of the economy as a whole and its broad trends and interactions with general economic factors. It focuses on the economy’s performance, such as inflation, unemployment, interest rates, economic growth, business cycles, foreign exchange rates, international trade, and balance of payments. Macroeconomics is important, especially for governments because it helps them ... Read more
The Geithner-Summers Plan Is Worse Than You Think
The Geithner-And-Summers Plan (GASP) to buy toxic assets from the banks is rightly scorned as an unnecessary give-away by virtually every independent economist who has looked at it. Its only friends are the Wall Street firms it is designed to bail out. In an earlier article, one of us (Sachs, FT, March 23) described the ... Read more
How Globalization Helped Decreasing Inflation
Globalization in the form of increasing international trade increases competition both within and across countries. This increase in competition has put pressure on prices, which slowed inflation. Globalization therefore helps to explain the “Global Disinflation”, the phenomenon of decreasing inflation levels, in the last 20 years. From 1990 to present, tariff rates around the world ... Read more
Aging Demographics to Crunch Global Growth
Yves here. I don’t mean to make an object lesson of the author of this piece, van Onselen, since the point he is making, about demographics as a driver of growth, is valid from the vantage point he is taking (that of investment time horizons, which by nature are comparatively short). But this perspective is simultaneously frustrating ... Read more
A Primer on Minsky
My paper “Instability in Financial Markets: Sources and Remedies” for the INET conference “Paradigm Lost: Rethinking Economics and Politics“, to be held in Berlin on April 12-14, is now available via the INET website. If you’d like to download it, you can get it either from my INET page, or from a link on the ... Read more
Overt Money Financing of Fiscal Deficits: Navigating Article 123 of the Lisbon Treaty
This column finds that current monetary and fiscal policies are misplaced and are largely impotent. It is argued that greater coordination between monetary and fiscal policy could provide substantial policy synergies needed to stimulate economic growth without increasing public debt. Practical policy options are reviewed. Current austerity and quantitative easing policies are proving ineffective in ... Read more
The Global Economy’s Shifting Center of Gravity
In the current policy debate on whether China, India, and the rest of Asia can continue to grow without a return to international markets of the US consumer—or, indeed, the opposite whether those national-economies will from now form the engine of growth for the global economy—compelling empirical evidence has been relatively scarce. This posting seeks ... Read more
The G-20 and the Ill-Fated Charge of the Light Brigade
The just concluded G-20 meeting in Australia repeats many themes and patterns set at earlier G-20 meetings. Those at the Australian Treasury who planned this year’s G-20 economic policy strategy have shown little macroeconomic policy imagination. By adding to the supply-side structural reform plans identified in earlier G-20 meetings (but not fully implemented), and failing ... Read more
Is the Bull Market in Housing a Bubble?
The answer depends on your definition of “bubble”… and the market under the microscope. “House prices differ widely across OECD countries, both with respect to recent changes and to valuation levels,” the OECD advises in a report on residential real estate around the world. Measured by the recent price-to-income ratio (a measure of affordability) relative to its ... Read more
To the G-20: It Is Demand Deficiency, Not Supply
The Eurozone countries and Japan are now falling back into recession/depression and deflation, and their public debt levels are grossly excessive, and still rising. The deepening economic crisis in these two large economic blocks could have serious implications for other G-20 countries, as aggregate demand is already weak globally. Nonetheless, based on the advice of ... Read more