The Central Bank of Venezuela recently reported an inflation rate for May of 6.9 6.1 percent, equivalent to an annualized rate of more than 100 percent. Does this mean that Venezuela is on the brink of hyperinflation? A quick look at the relevant economic concepts suggests that hyperinflation is in fact a real danger. What … Read more
A lot of you know Warren Mosler as the MMT guy. He was the first one to understand the “monetary operations”–the coordination between the Fed and Treasury–and thus to recognize that sovereign treasuries really do not “borrow” back their own currency in order to spend. Bond sales by Treasury or by Fed are “a reserve … Read more
There are many ways to define rebalancing within the euro area: relative prices, trade, productivity, unit labor costs, etc. I’d argue that one could see it in the employment data as well, although it will take a long time to work its way through. Basically, Spaniards should move to Germany and vice versa to enjoy … Read more
Last week’s convergence report from the European Commission gave Latvia the green light to become the eighteenth member of the eurozone as of next January. “The eurozone is again a club with a queue–not at the exit but at the entrance,” crowed Herman Van Rompuy, president of the European Council. “Joining the eurozone will foster … Read more
I’ve already mentioned Hyman Minsky’s new book on what he called the “employer of last resort” proposal. Philip Pilkington has a very nice post up at the Guardian: http://www.guardian.co.uk/commentisfree/2013/jun/07/labour-jobs-guarantee Philip rightly connects Minsky’s better-known concerns about instability to his jobs program. Reaching full employment through the employer of last resort program would also enhance financial … Read more
Acquisition of Smithfield Foods by Shuanghui The Chinese firm, Shuanghui International has offered to buy the major pork producer, Smithfield Foods. The major shareholders of Smithfield, including Continental Grain, favor the offer, and the offer has been structured to appeal to current employees and management. The prospective owner promises no closing or relocation of present … Read more
The “shock therapy” of front-loaded, “ambitious” fiscal consolidation plans, also known in Europe as “austerity”, hinges on the credibility approach. In this approach, governments are urged to announce and implement large fiscal adjustments that are rewarded with lower interest rate (e.g. Corsetti et al. (2010)). This is crucial. Even though austerity may have short-run negative … Read more
The run-up in gold prices in recent years – from $800 per ounce in early 2009 to above $1,900 in the fall of 2011 – had all the features of a bubble. And now, like all asset-price surges that are divorced from the fundamentals of supply and demand, the gold bubble is deflating. At the … Read more
There is every sign that the new Chinese leadership is contemplating a major round of economic reform comparable to that when Zhu Rongji took China into the WTOmore than a decade ago. China’s accession to the WTO had a profound effect on the global trading and economic system. As China’s markets were opened up, Chinese and … Read more
Americans have long seen small businesses as the heart and soul of their economy, but small firms have not fared well in recent years. Corporations, in contrast, seem to be on a roll, with profits and stock prices soaring to record highs. Is small business really in decline, and if so, what should we do … Read more