I have already discussed last month why I think the desperate attempts by Europe to get China and other Asian and BRIC countries to bail out the weak sovereign borrowers is absurd, but the topic has become so important in the past two weeks, at least judging by the number of calls I have received … Read more
The euro zone periphery was a sideshow. This stuff with Italy is the real deal. With yields at 6.7% and rising, it’s game over for the euro zone. The extend and pretend stuff ain’t gonna work.And if you are an investor, this is the moment of truth. Everything – every asset class – depends on … Read more
In an commendable effort to contribute to solve the Nation’s crisis, Mr Melani, a private Italian citizen, bought some space on the Corriere della Sera to launch a national appeal “for Italians to buy Italian government bonds”. In order to evaluate the patriotic appeal, it is useful to remember a few facts. According to the … Read more
I recall a presentation on China at the Asia Society on the eve of the financial crisis, in which an economist commented on China’s extremely low interest rate on deposits (less than 1%) versus its markedly higher inflation rate, and commented that that was a recipe for hyperinflation. Well, that hasn’t been and is unlikely … Read more
There has been much made of having the Fed target nominal GDP growth and employ monetary actions to achieve growth without regard to the component thereof derived from inflation. The concept was the subject of an op-ed recently by former Chairwoman of the President’s Council of Economic Advisors, Christine Romer, in which Romer challenged the … Read more
In a recent post, Daniel Alpert enlists Milton Friedman as an ally against the newly popular (but not new) idea of targeting nominal GDP. On the contrary, I see NGDP targeting as the natural heir to monetarist policy prescriptions of the 1960s and 70s. If we look at the textbook version of monetarism, the point … Read more
Current bond market pricing implies a 6.17% yield on a 10-yr Italian government bond, or 430 basis points (%/100) over a like German government bond. I’d call this distressed levels for Italian debt, especially for an economy that is very likely contracting as we speak. Today Mark Thoma points us to Kash Mansori’s article on … Read more
Let’s start with some humor in last week’s surprise announcements at the Inflation Report. There were some quite funny tweets right after the Central Bank announced that it had two interest rates, the policy rate and the overnight lending rate, i.e. that the policy rate would now move in a band between these two rates. … Read more
If you had any doubts about the intent of the Eurobailouts, the latest news should settle them. The game plan was to severely limit Greek sovereignity and assert the primacy of creditor rights, even if they came at the expense of democracy. Greece, as we described in a post earlier, threatened to blow up the … Read more
L. Randall Wray, University of Missouri, Kansas City, USA Plenary Talk, 15th Conference of the Research Network Macroeconomics and Macroeconomic Policies, Berlin Germany, 28 October 2011 It is commonplace to link Neoclassical economics to 18th or 19th century physics with its notion of equilibrium, of a pendulum once disturbed eventually coming to rest. Likewise, an … Read more