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[iframe width=”427″ height=”240″ src=”https://www.youtube.com/embed/EOFjduXU9N8?;start=1289″ frameborder=”0″ allowfullscreen></iframe]   Related: “Euroland’s Original Sin” (pdf)

Bloomberg just published an article focused on the rise of Modern Money Theory (MMT), featuring comments by Senior Scholar Randall Wray: The 20-something-year-old doctrine, on the fringes of economic thought, is getting a hearing with an unconventional take on government spending in nations with their own currency. Such countries, the MMTers argue, face no risk of fiscal crisis. They may owe debts in, say, dollars or yen — but they’re also the monopoly creators of dollars or yen, so can always meet their obligations. For the same reason, they don’t need to finance spending by collecting taxes, or even selling bonds. […] No one’s saying there are no limits. Real resources can be a constraint — how much labor is available to build that road? Taxes are an essential tool, to ensure demand for the currency and cool the economy if it overheats. But the MMTers argue there’s plenty of room to spend without triggering inflation.

These are not happy times for Europe. Ukraine, Russia, and rising anti-democratic influences in Hungary and Poland represent latent threats at the European Union’s eastern front. The prospect of Brexit is a more acute one at its western front. After letting loose manifold conflicting forces that continue shaping internal politics in many EU countries and setting them on collision course with their partners, the refugee situation appears to be on the verge of bestowing another humanitarian crisis on the union’s most vulnerable and unfortunate member: Greece. Never mind the Catalan question: it almost appears minor by comparison, but actually represents yet another fundamental challenge to the European project. “Misfortune seldom comes alone,” a German saying goes; the nation that is increasingly pulling the strings in European affairs but appears at risk of alienating itself even more so than its partners while doing it. Considering all this, the European political authorities may almost be forgiven for having lost sight of the smoldering crisis of the euro, the union’s flagship endeavor that was meant to foster prosperity and political union – but turned out to deliver quite the opposite. One key player, the European Central Bank (ECB), does not wish to partake in the peculiar mix of denial and delusion about the state of the euro. As the specter of deflation and… Read More

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The eurozone has been in crisis since 2008. By the end of 2015 domestic demand was still 3 percent below its pre-crisis peak. Throughout, the European Central Bank (ECB) has acted as the eurozone’s prime crisis manager.  As capital flows reversed and inter-bank lending seized up, the ECB provided emergency liquidity to keep banking systems afloat. However, for legal and political reasons, the ECB was restrained in supporting sovereign debt. But, given that there are close linkages between banks and sovereigns, supporting only one party in the duo proved insufficient. From 2011–2012, interest rate differentials between eurozone members soared and credit dried up, as the risk of default on national debt and currency redenomination became investors’ foremost concern. In the end, Mario Draghi’s famous promise to “do what it takes” calmed the markets – at least for now. The ECB’s monetary policy course was rather less helpful. The ECB is legendary for its reluctance to ease interest rates in the face of downside risks, and it even prematurely hiked rates in 2011. And so it took the ECB until the summer of 2014 to finally contemplate unconventional monetary policy measures to counter deflation risks, which were by then acute. Meanwhile, the ECB has indeed adopted a negative interest rate policy, pushing short-term money market rates below zero. It has also… Read More

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Servaas Storm means well. He is alarmed that the eurozone’s official strategy of “internal devaluation” might do more harm than good by unnecessarily forcing countries that have lost their competitiveness into deflation (see here, here, and here). This is a very real concern indeed and Storm should be applauded for raging against the colossal folly that is wrecking Europe. Unfortunately, Storm goes astray in seemingly dismissing any role for unit labor cost competitiveness and German wage moderation in causing the still unresolved eurozone crisis in the first place. Referring to bits and pieces of evidence derived from mostly partial-equilibrium empirics of one type or another, Storm fails to notice that no coherent macroeconomic analysis of the eurozone crisis emerges unless German wage moderation gets assigned a prominent role in the play. At the heart of the whole confusion is Storm’s attempt to attribute to those who emphasize German wage moderation as a key causal factor in the eurozone crisis the view that “expenditure switching” would explain 100 percent of the eurozone’s internal current account imbalances (and related balance sheet troubles). This would be a very peculiar view indeed – and I am not aware of anyone who actually holds it. Certainly the proponents of the “wage moderation hypothesis” that I know, including those who responded to Storm’s “critical analysis” (see… Read More

The deadline to apply for this year’s Hyman P. Minsky Summer Seminar is approaching: Organized by the Levy Economics Institute of Bard College with support from the Ford Foundation Levy Institute Blithewood Annandale-on-Hudson, New York June 10–18, 2016 The seventh Minsky Summer Seminar will be held at the Levy Economics Institute in June 2016. The annual Summer Seminar provides a rigorous discussion of both the theoretical and applied aspects of Minsky’s economics, with an examination of meaningful prescriptive policies relevant to the current economic and financial crisis. Organized by Jan Kregel, Dimitri B. Papadimitriou, and L. Randall Wray, the Seminar program is geared toward graduate students and those at the beginning of their academic or professional careers. The teaching staff includes well-known economists concentrating on and expanding Minsky’s work. Applications may be made to Kathleen Mullaly at the Levy Institute ([email protected]), and should include a current curriculum vitae. Admission to the Summer Seminar includes provision of room and board on the Bard College campus. Due to limited space availability, the deadline for applications is March 1, 2016. A user name and password are required for the Summer Seminar webpage; participating students may log in by clicking here.

Senior Scholar Nancy Folbre was interviewed by Woman’s Work on the wage gap and women’s underrepresentation in economics: Folbre: [M]arket logic doesn’t apply to care of dependents, a more traditionally feminine obligation. Children, the sick, and the frail elderly don’t fit the preconditions for consumer sovereignty in market exchange. Most care of dependents takes place outside the market. Women generally take more responsibility for this care than men do. … The whole concept of concern for other people or interdependent utilities or obligations for other people, these are largely absent from the market paradigm. The textbook assumption is that participants in the market don’t care about other people, they have independent preferences. They are basically making decisions based on prices and income. It’s a very narrow, stripped down characterization. In some instances, it may be accurate. But a lot of the work that women, in particular, do doesn’t involve impersonal transactions. We live in a world shaped by a moral division of labor that is highly gendered. Read the rest here.

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