Money multipliers – the stock of money divided by a measure of base money (generally reserves plus currency in circulation) – are dwindling to fractions of what they used to be. FT Alphaville draws our attention to this fact on the Euro area (EA) using SocGen’s analysis. The money multiplier is a representation of how … Read more
The continuing crisis has spawned inappropriate and unsustainable policy responses in the United States, Japan and the Eurozone. Conventional policy responses cannot simultaneously address debt problems and return these economies to strong growth and full employment. The central issue for policy makers today is the following: if, because of fiscal policy constraints, it is decided … Read more
From an article by myself and Jeffry Frieden in the newly released Foreign Policy: [We need] inflation — just enough to reduce the debt burden to more manageable levels, which probably means in the 4 to 6 percent range for several years. The Fed could accomplish this by adopting a flexible inflation target, one pegged … Read more
Over the holidays, a debate broke out in the blogosphere about the so-called job guarantee idea that the MMT folks have bandied about. I call this controversial idea “Unemployment Insurance for the 21st Century“, something I first addressed in 2009, based on a post by Randall Wray.My view: a job guarantee will never happen in … Read more
Vladimir Putin’s decision to return to the presidency has touched off a wave of protests in Russia. The motives behind the protests are partly social and political (see this recent post), but economics also plays a role in Putin’s fading popularity. It is far from clear that the present regime will be able to continue … Read more
A new year has arrived and that can only mean one thing: forecasts. Lots of ‘em. There’s something about a fresh calendar that promotes prognostication in ample quantities. Predicting is still hard, even if supply exceeds demand. But like a highway accident, we can’t avert our eyes. Adjust your expectations accordingly. “In the end the … Read more
Things in Spain are never exactly what they seem to be. This is a painful lesson that even Angela Merkel must have learnt in recent days, especially since she put her credibility so much on the line in backing the country’s deficit reduction efforts. “Spain has really done its homework and I think it is … Read more
My one-man committee has met and made a decision: The award for best economics news story of the year goes to Jim Yardley of The New York Times for an article titled “In One Slum, Misery, Work, Politics and Hope,” published in the December 29 issue. It is a story about Dharavi, Mumbai’s most famous … Read more
Many take as fact that the current pattern of global imbalances — large and persistent trade deficits and surpluses across different parts of the world, eventually unsustainable — is due to China and the rest of East Asia consuming too little and saving too much. Since the global economy is a closed trading system, trade … Read more
“What’s happened is that, almost overnight, we’ve switched from democracy in real-property recording to oligarchy in real-property recording. There was no court case behind this, no statute from Congress or the state legislatures. It was accomplished in a private corporate decision. The banks just did it.” -Christopher Peterson, a law professor at the University of … Read more