A new post by David Fields, long time contributor to this blog. From his post:
At its most fundamental level, housing is more than a market segment or policy, it is a social relation that serves as the kernel of human survival, which can have profound consequences for the actors involved, the actions they take, and the outcomes that follow. As such, housing provides a set of meanings and values, a material form of emotional, cultural, political and economic significance. It is an institution that points to polyvalent higher order social arrangements that involve both patterns of social mobility and symbolic systems that infuse human activity with a powerful essence. Housing insecurity, therefore, is not a just a means of financial dispossession, but an ontological crisis concerning

For those in Bogota next Tuesday. I’ll link to the live stream, which I think will be available.

This week, Thursday at 10am, at the Facultad de Estudios Superiores (FES) Acatlán, Mexico for those around. Organized by Teresa Santos López and with my good friend Ignacio Perrotini.

Kevin Gallagher and Matías VernengoAlberto Fernández and his running mate, former president Cristina Fernández de Kirchner, have won the election in Argentina amid a real danger that the country’s economy will collapse. Outgoing president Mauricio Macri and the transitioning Mr Fernández should work closely with the IMF to put the fragile economy back on a path to stability and sustainable growth.Read rest here.

I’ll be in Santa Fé (Argentina, not New Mexico) next week, talking about the challenges ahead, in a particularly important time for the country.For those around that want to register go here.

Franklin Serrano and Vivian Garrido (Guest bloggers)When the Brazilian economy was growing with low unemployment rates and reducing income inequality, it was said that “businessmen have never made so much money” and, at the same time, the business community’s discontent with the government was increasing. On the other hand, in the current situation of semi-stagnation that followed from a deep recession, the entrepreneurs of both real and financial sectors declare their unrestricted support to the current government, despite the daily mess and shame of various government members and the bad economic conditions. We believe that, in order to understand both this apparent paradox and the very tendency of the Brazilian economy to stagnate, it is useful to clarify some basic theoretical

Simple Math, Macri + IMF = Poverty
The Argentine economy is on the verge of another default less than two decades after the last one, in 2002. The forthcoming elections, in October 27, will most likely bring back the Kirchnerist opposition back to power, and they will have to negotiate with the International Monetary Fund (IMF), that has the power to prevent a crisis.Argentina has a long and turbulent history with the IMF that dates back to the country’s entry in the organization in 1956 and to the first loan that was received the following year, after the military coup that brought down the Peronist government in 1955. Since then, the country has been an adept user of IMF resources, ranking among the countries that signed the most agreements. The loan of approximately $57 billion,

Thirlwall and McCombie

The new issue of ROKE is out. Three papers are freely downloadable (linked below). Check it out!Thirlwall’s law at 40 by Esteban Pérez Caldentey and Matías VernengoWhy Thirlwall’s law is not a tautology: more on the debate over the law by J.S.L. McCombieThoughts on the balance-of-payments-constrained growth after 40 years by A.P. Thirlwall

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Full transcript of the short interview here. Paper was linked before. Note that we say that Functional Finance does apply to developing countries, but that the insistence of the advantages of flexible exchange rates, as opposed to managed regimes with capital controls, are not correct.

So the RWER has a whole issue on Modern Money Theory (MMT). I haven’t read the whole thing yet (barely started). At nay rate on that later. Whole issue can be downloaded here. Enjoy!

Paper has been published as a PERI Working Paper.From the abstract:

Functional finance is only one of the elements of Modern Money Theory (MMT). Chartal money, endogenous money and an Employer of Last Resort Program (ELR) or Job Guarantee (JG) are often the other elements. We are here interested fundamentally with the functional finance aspects which are central for any discussion of fiscal policy and have received more attention recently. We discuss both the limitations of functional finance for developing countries that have a sovereign currency, but are forced to borrow in foreign currency and that might face a balance of payments (BOP) constraint. We also analyze the limits of a country borrowing in its own currency, because there is no formal possibility of default when it can

By Sunanda Sen
(Former Professor, Jawaharlal Nehru University; Guest Blogger)That the Indian economy is currently experiencing a slowdown is more than evident, both with the deliberations in different private circles and with official statements signalling a series of remedial measures , mostly focused on the ailing financial sector! However, as we point out, the ailing Indian economy has concerns that go beyond flagging GDP growth and the ailing financial sector. Downturn in the economy 
As for the downturn, the country’s GDP growth rate has plunged into a low of 5% in the first quarter of the current financial year 2019-20 .The drop has been accompanied by a sharp deceleration in the manufacturing output and a sluggish growth of output in agriculture. Matching both, ‘consumption

Esteban Pérez Caldentey has just published a new book on Roy Harrod for the collection edited by Anthony Thirlwall. From the description:
This landmark book describes and analyzes the original contributions Sir Roy Harrod made to fields including microeconomics, macroeconomics, international trade and finance, growth theory, trade cycle analysis and economic methodology. Harrod’s prolific writings reflect an astounding and unique intellectual capacity, and a wide range of interests. He became Keynes´ biographer and wrote a volume on inductive logic. At the policy level, Harrod played a central role in the formulation of the Keynes´ Clearing Union plan for international monetary reform. He also actively participated in British politics and government and gained recognition as an expert

Argentina’s peso depreciated significantly after the primary elections last month, with the clear victory of the opposition. The crisis has come full circle now with the re-imposition of capital controls, and with the default on domestic bonds, the latter a puzzling and clearly unnecessary measure, since it was in domestic currency (Standard & Poor’s says it’s a selective default, whatever that means, and Fitch called it a restricted default). So here a few things that might be useful to understand what is going on.So how did we get here? As I noticed recently here, the collapse has nothing to do with fiscal problems. They hardly ever do, since the debt that matters is the one in foreign currency. First, let’s clarify what were the problems that Macri faced in December of 2015, at the

No pressure!

By Thomas Palley (guest blogger)The case for central bank independence is built on an intellectual two-step. Step one argues there is a problem of inflation prone government. Step two argues independence is the solution to that problem. This paper challenges that case and shows it is based on false politics and economics. The paper argues central bank independence is a product of neoliberal economics and aims to institutionalize neoliberal interests. As regards economics, independence rests on a controversial construction of macroeconomics and also fails according to its own microeconomic logic. That failure applies to both goal independence and operational independence. It is a myth to think a government can set goals for the central bank and then leave it to the bank

I’ll be in Mexico, with a group of distinguished local economists for this event. In Spanish, but very likely it will be streamed. Will post more about it.

I was interviewed yesterday about the situation in the country (Cítrica Radio, Siempre Es Hoy). Interview was cut short as a result of a bad connection. The audio of the part of the program I appear is here.

For those in the New York City area, I’ll give a talk at my alma mater on Modern Monetary Theory in the Tropics. Meaning really developing countries (including some in temperate areas).The seminar will take place on Tuesday, September 17, from 4 to 6 pm, at the New School campus close to Union Square (6E 16th St #1009). The department goal, I’ve been told, is to bring together graduate students and faculty, but, if tradition is worth something, others will be also welcome.

About the New School Econ Dept read this. About MMT see this and this, but there is more on the blog if you search.

As noted before, Larry Summers argues that Post Keynesians and original Keynesians (arguably Keynes and those close to him) did not think in terms of imperfections. The op-ed version of the Tweets here. He says, on the topic of secular stagnation and the lower zero bound that:
This formulation of the secular stagnation view is closely related to the economist Thomas Palley’s recent critique of “zero lower bound economics”: negative interest rates may not remedy Keynesian unemployment. More generally, in moving toward the secular stagnation view, we have come to agree with the point long stressed by writers in the post-Keynesian (or, perhaps more accurately, original Keynesian) tradition: the role of particular frictions and rigidities in underpinning economic fluctuations should be

My interview on the Argentinean crisis with Javier Lewkowicz from Página/12 is available here. In Spanish, though.

On of the issues between more mainstream Keynesians and their more heterodox counterparts is whether frictions are central for Keynesian results or not. Since the Neoclassical Synthesis the conventional view is that some rigidity or friction was behind the problems of unemployment, be that the liquidity trap (the Keynesian case with the flat LM, since Hicks 1937), the rigidity of wages (since Modigliani 1944), or some other coordination problem (mostly in the New Keynesian literature).In this recent thread (worth reading all) Summers (as shown above) notes that posties might have been right on emphasizing the fundament issue of effective demand. That of course is closer to what Keynes himself would have thought. The paper he cites, by Tom Palley, co-editor of the Review of Keynesian

The inverted yield curve, as it is well-known, indicates a forthcoming recession. I used it last year to suggest that the recession was not in the near horizon. The conventional explanation follows Wicksellian ideas (see this old post). In the Wicksellian story, one can think of the 10 year bond rate as a proxy for the natural rate of interest, and the Fed Funds for the monetary or banking rate. Hence, whenever the short-term rate (Fed Funds) is above the long-term one, it would be reasonable to assume that borrowing short-term is a bad idea, there is not enough borrowing, and investment falls short of savings. Lower investment would be the cause of the recession, and of deflationary forces.Graph below show the difference between the 10-year bond rate and the Fed Funds, which I have

Geoff Schneider sent a reminder that the deadline (9/4) for the ICAPE call for papers, for the San Diego conference next January 5 and 6, is just a couple of weeks away. See details for submitting a paper, panel or workshop proposal. in the following link. The main topic is Policy, Politics and Pluralism: Pluralistic economics for the post-Trump era.
As we approach the 2020 elections, it is an opportune time for heterodox economists to articulate their vision for modern economic policies that would better serve the interests of people and the environment. Already, heterodox ideas are gaining traction, from Modern Monetary Theory to the Green New Deal. Possible topics are:

What key theoretical and empirical issues should contemporary economists be confronting?
What are the best

Table of contents of the next issue of the Review of Keynesian EconomicsThirlwall’s law at 40
Esteban Pérez Caldentey and Matías VernengoWhy Thirlwall’s law is not a tautology: more on the debate over the law
J.S.L. McCombie Endogenous growth, capital accumulation and Thirlwall’s dynamics: the case of Latin America
Ignacio Perrotini-Hernández and Juan Alberto Vázquez-MuñozThirlwall’s law and the terms of trade: a parsimonious extension of the balance-of-payments-constrained growth model
Esteban Pérez Caldentey and Juan Carlos Moreno-BridThirlwall’s law, external debt sustainability, and the balance-of-payments-constrained level and growth rates of output
Gustavo Bhering, Franklin Serrano and Fabio FreitasGrowth transitions and the balance-of-payments constraint
Excellent Mhlongo and

The Argentinean primary elections, which are very peculiar and take place all at once with all parties, were last Sunday. The primaries made some sense when the Peronist party was all divided and that allowed the main candidate to proceed, but with the move of Cristina Kirchner to the vice-presidential spot next to Alberto Fernández, and the unification of a good part of Peronism (in particular Sergio Massa), the primaries become essentially an anticipated election. And Peronism won resoundingly, with 47 percent of the votes, considerably more than the 32 percent the neoliberal Mauricio Macri obtained.After the election there was a run on the peso, with a depreciation of almost 30 percent, and no significant intervention from the Central Bank. To add to the problems, Macri, the incumbent

Last summer readings

The issue of class conflict and its relation to accumulation of capital was central for classical political economists of the surplus approach. That tradition has survived in political science mostly through the work of Marxist authors. And in many recent discussions of the Brazilian crisis, that started with the 2013 protests, the 2015 turn in economic policy (the so-called New Economic Matrix), the 2016 mediatic/parliamentary coup against Dilma, and the 2018 unlawful jailing of Lula and fraudulent elections of Bolsonaro, the theme of class and the role of the bourgeoisie has been widely discussed.The book by Armando Boito Jr. (pictured above) is, perhaps, the best of those that analyze the role of class alliances and the anti-PT (anti-Workers’ Party) backlash

Thirty pieces of silver

As they discuss the new candidate for the International Monetary Fund (IMF), and it seems that the lead candidate for Lagarde’s position is the former Dutch finance minister Jeroen Dijsselbloem, a pro-austerity member of the Labor Party (which I guess is at least nominally on the left), it is worth reading the new CEPR report on the possible effects of IMF programs in Latin America, more specifically the one in Ecuador, now that the country has been brought back into the fold of well-behaved nations (after expelling Assange from their London embassy, in the post-Correa period).From the abstract:
This report examines Ecuador’s March 2019 agreement with the International Monetary Fund (IMF) and finds that Ecuador is likely to have lower GDP per capita, higher

The theory of value and distribution is at the heart of economics. To be clear, when I say that it is at the center, it means that discussions of almost any topic in economics, in one way or another, depend on a certain theoretical position about the theory of value and distribution. However, most economists have no clue about it, about the centrality of value. Not only they don’t understand the original and now infamous labor theory of value (LTV), that dominated between Petty and Ricardo (and Adam Smith too, even though that tends to surprise and puzzle most economists),* but also they misunderstand the dominant marginalist paradigm. Some economists actually think that you don’t need a theory of value at all, and some don’t even understand that they use a conventional (some vulgar form

From original draft by Thirlwall

Thirlwall’s seminal paper on the balance of payments (BOP) constrained growth is forty years old. Paul Davidson once referred to the BOP constrained growth as a positive Post Keynesian contribution to economics. The Review of Keynesian Economics (ROKE) will publish soon a special issue with many well-known contributors to the literature, and with a paper by Thirlwall himself.The idea built on the Kaldorian supermultiplier model (Kaldor mark II), and with a few simplifying assumptions, it showed that economic growth depends on the rate of growth of exports divided by the the income elasticity of demand for imports. A very similar idea, as Thirlwall knew, was developed by Raúl Prebisch and Latin American Structuralists. The model, contrary to the

Gabriel Aidar and Julia Braga (Guest Bloggers)

We have, in our new paper, gone back to the old pull-push debate on determinants of capital inflows to emerging markets, to look at the behavior of country risk premium spreads. Our Principal Component Analysis of the country-risk spread series of ten emerging economies from 1999 to 2019 revealed that 86% of the total volatility of the original series can be represented by only two components, suggesting the prevalence of common factors in determining country risk. This evidence, reinforced by the correlation of the first major component with global liquidity indicators, corroborates our hypothesis that the sovereign risk trend is driven by external factors, in line with the push literature. This is clearly shown in the graph below that