To Fix or To Float, that is the question. MMT argues that a sovereign government that issues its own “nonconvertible” currency cannot become insolvent in terms of its own currency. It cannot be forced into involuntary default on its obligations denominated in its own currency. It can “afford” to buy anything for sale that is … Read more
Some quarter of a century ago I wrote a paper that presented Minsky’s approach to money, linking it to his Financial Instability Hypothesis. The paper was rejected by one of the heterodox journals, because a referee took particular issue with my use of the new word “securitize” adopted from Minsky to describe the packaging of … Read more
The Euro zone continues to expand, in spite of the debt problems of some members. Latvia introduced the euro on January 1, 2014 and Lithuania is on track to adopt the euro a year later. Leaders of Poland are now contemplating when to introduce the euro and Marek Belka, head of the Central Bank of Poland, … Read more
You all remember the Reinhart and Rogoff claim that debt ratios above 90% lead to slow economic growth. As Yeva Nersisyan and I showed in 2010, their results are crap. (see here http://www.levyinstitute.org/publications/?docid=1273) I’m pretty sure that the Reinhart and Rogoff “study” is the worst empirical research ever undertaken. They simply lumped together data of … Read more
There is an interesting debate going on in Western capitals over financial support for Ukraine. The possibility of political change, coupled with Russia’s decision to suspend disbursements on its $12 billion financial package, has created an opening for meaningful economic reforms and renewed ties with global financial bodies. There are compelling political arguments for the West to … Read more
At 6.9 percent yoy, December industrial production (IP) came in much higher than expectations of 4.9 percent. Part of this is base effect; in fact, working day and seasonally-adjusted industrial production was unchanged over the previous month. However, machinery and equipment, which Turkey economists use as a leading indicator of investment, surged (red is yoy, … Read more
The current banking union framework remains far from ideal if the currency union dimension is taken into account. While decisions so far have been focusing on the moral hazard of banks, these measures fail to solve an additional market failure in the Euro area caused by the moral hazard of governments competing on funding costs, … Read more
One month ago, I discussed some major risks to a slight upturn in the global economic scenario for 2014. Among those risks, concerns with the growth slowdown and challenges with shadow banking in China have already come to the fore as the Chinese Year of the Horse approached its inauguration last Friday. Higher perceived risks … Read more
By William K. Black On January 19, 2014 I posted a column entitled “Deflation: The Failed Macroeconomic Paradigm Plumbs New Depths of Self-Parody” that discussed the insanity of the Eurozone’s approach to “the threat of deflation.” The EU’s troika cannot understand that deflation is produced by inadequate demand and that the way to prevent it is to use … Read more
LAGOS – The financial turmoil that hit emerging-market economies last spring, following the US Federal Reserve’s “taper tantrum” over its quantitative-easing (QE) policy, has returned with a vengeance. This time, the trigger was a confluence of several events: a currency crisis in Argentina, where the authorities stopped intervening in the forex markets to prevent the … Read more