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On Saturday, Daniel Alpert delivered the closing remarks at the Levy Institute’s Hyman P. Minsky Summer Seminar: Minsky had the rarely seen ability to stand back from all he had learned—even at times from his own mentors—and not only see and articulate what was misunderstood, what wasn’t working, but also to explain why conventional wisdom is often not always all that wise and why markets often proceed in delusional fashion.  And by this I mean not merely the often irrational animal spirits of markets, nor the Keynes’ casino, nor his beauty contest, but an almost collective agreement to ignore the most obvious of fact-pictures staring right back at us.  And often, to ignore them because they force consideration of exogenous variables that aren’t readily incorporated into existing mainstream models, to ignore them because they are too heterodox to be considered by those who have invested their lives work in developing and interpreting mainstream theory, or to overlook them because they involve understanding the often obtuse complexities of actual market operations that go beyond ivory tower theories of market behavior. Read Alpert’s full remarks here.

These two interview segments, with Marshall Auerback and Edward Harrison (at 23mins), feature some basic discussion of Hyman Minsky and his view of financial crises: [iframe width=”427″ height=”255″ src=”http://www.youtube.com/embed/ppjeupTYPz4?feature=player_detailpage&start=895″ frameborder=”0″ allowfullscreen></iframe]  

This is another short post on MMT, a sort of follow-up to my post from a couple of days ago. There was an interesting response to various comments on my piece, which was posted up on Mike Norman’s website. We got the typical: “oh you MMTers always want to consolidate the Fed and Treasury, but really the Fed is a private institution that is not a part of government,” and “in reality the Treasury cannot spend unless the Fed will allow it to spend, otherwise it must get tax revenue before it can spend,” and hence “really, government spending is constrained by its revenue, just like a household or firm.” In reality, what MMT has shown—from the very beginning of the creation of the approach—is that you can consolidate or deconsolidate and the balance sheets end up in exactly the same place. The MMT logic holds no matter how you do it: government creates a money of account, imposes a tax in that unit, spends currency denominated in the unit, and collects taxes paid in its own currency. And, of course, the Fed is not a private institution but rather is a creature of Congress and no more independent of government than is the Treasury, the DOD, the DOT, or the IRS. The Fed is normally allowed to set the overnight interest rate… Read More

Ann Pettifor, “Out of thin air — Why banks must be allowed to create money” “In his regular column, Martin Wolf called for private banks to be stripped of their power to create money. Wolf’s proposals are radical, and would give a small committee – independent of the state – a monopoly on money creation. … Furthermore, Wolf argues, private commercial banks would only be allowed to: ‘…loan money actually invested by customers. They would be stopped from creating such accounts out of thin air and so would become the intermediaries that many wrongly believe they now are.’ Because I am a vocal critic of the private finance sector, many assume that I would agree with Wolf and Positive Money on nationalising money creation. Not so. I have no objection to the nationalisation of banks. But nationalising banks is a different proposition from nationalising (and centralising) money creation in the hands of a small ‘independent committee’. Indeed, the notion to my mind is preposterous. It is an approach reminiscent of the misguided and failed monetarist policy prescriptions for controlling the money supply in the 1980s. Second, the proposal that only money already saved should be made available for lending assumes that money exists as a consequence of economic activity, and equals savings. But that is to get things the wrong way around.” Related: Jan Kregel, “Minsky and the Narrow Banking Proposal: No Solution for Financial Reform” Jayati Ghosh, “Locking… Read More

Horatio:  He waxes desperate with imagination. Marcellus:  Let’s follow. ‘Tis not fit thus to obey him. Horatio:  Have after. To what issue will this come? Marcellus:  Something is rotten in the state of Denmark. Horatio:  Heaven will direct it. Marcellus:  Nay, let’s follow him.  Hamlet Act 1, scene 4 Marcellus is right, the Fish of Finance is rotting from the head down. It stinks. As Hamlet remarked earlier in the play, Denmark is “an unweeded garden” of “things rank and gross in nature” (Act 1, scene 2). The ghost of the dead king appears to Hamlet, beckoning him to follow. In scene 5, the ghost tells Hamlet just how rotten things really are. Denmark, is of course Wall Street or London. Far more rotten than anyone can imagine. In the aftermath of the Great Recession, we all wax “desperate with imagination,” looking for explanation. For solution. For retribution! The financial system is rotten. Our banking regulators and supervisors failed us in the run-up to the crisis, they failed us in the response to the crisis, and they are failing us in the reform that we expected in the aftermath of the crisis. Heaven will not save us, either. The Invisible Hand is impotent. Just wait for Scene 5! In times like these, we thrash about, desperate for ideas, for imagination,… Read More

From Columbia University’s Heyman Center for the Humanities: [iframe src=”http://player.vimeo.com/video/99560896″ width=”450″ height=”253″ frameborder=”0″ webkitallowfullscreen mozallowfullscreen allowfullscreen></iframe> <p><a href=”http://vimeo.com/99560896″>Highlights: Joseph Stiglitz, James K. Galbraith, and Branko Milanovic on “Global Inequality”</a> from <a href=”http://vimeo.com/heymancenter”>Heyman Center/Society of Fellows</a> on <a href=”https://vimeo.com”>Vimeo</a>.</p]

Contemporary capitalism is characterized by a political economy which revolves around finance capital, is based on a savage form of free market fundamentalism, and thrives on a wave of globalizing processes and global financial networks that have produced global economic oligarchies with the capacity to influence the shaping of policymaking across nations. As a result, contemporary advanced capitalist societies are plagued by dangerous levels of income and wealth inequality, mass unemployment, rising poverty rates, social polarization, and collapsing social provisions. Furthermore, democracy and the social contract are under constant attack by the current system and there is an ongoing pressure by the corporate and financial elite to convert all public goods and services into private goods and services. The rising inequality in advanced capitalist countries is well documented. Most recently, Thomas Piketty’s publishing sensation Capital in the Twentieth-First Century, translated into English and published by Harvard University Press, provides massive data showing a widening gap between the rich and the poor, thus questioning not only the claim that the capitalist economy works for all but also underscoring the point of how dangerous the current system is to democracy itself. Indeed, a few years ago, Larry M. Bartels’s Unequal Democracy: The Political Economy of the New Gilded Age, published by Princeton University Press, pointed to the same gap between the rich and… Read More

The chart above documents another striking feature of the impact of the recession on Greece. The Hellenic Statistical Authority (ElStat) has recently released the new quarterly data on employment and the labor force, which includes a measure of the population aged 15 or more (Table 1). While the series published in the previous release exhibited a stable upward trend (reported in green in the chart), the new estimates show that population peaked at 9.437 million at the end of 2008, and then started declining, reaching 9.296 million in the first quarter of this year, i.e. it went back to its 2004 level. (The reasons for the change in the series are due to ElStat incorporating the latest census data: details are available in the ElStat web site). As ElStat does not publish an up-to-date measure of net migration, we assume this could be measured by the distance between the pre-crisis population trend and the actual values. We therefore computed a simple linear trend on the 2001-2008 data, which shows that population would have now been at 9.686 million, had the previous trend continued. The difference between this value and the population reported for the first quarter of 2014 is thus approximately 390,000 people (4 percent). ElStat makes available the detail by age groups (Table 2), reported in our second chart,… Read More