Two short clips from Lawrence Summers talk at the ASSA meeting in San Diego. So he first says that secular stagnation is more plausible now than before. He sees that it can be explained as a shift of the IS curve backwards. His IS has a somewhat
marginalist foundation, with a natural rate, and a fairly conventional
story for investment. Of course, the negative shift has bee compensated by some sort of stimulus, that is now weaker. I would say a smaller multiplier that affects the slope of the IS would make more sense.
[embedded content]
And he does say in the next clip that the IS is steeper, and the LM is flat, or that we are in a liquidity trap. Again, I think it’s not really that, and simply a policy decision of the Fed, inevitable given the circumstances, perhaps.
[embedded

Ritual and prestige among the Institutionalists

Jamie got the Veblen-Commons award, something his father received back in 1976. I introduced him, and as expected discussed a bit his contributions to economics, and the understanding of institutions. His most important contributions are on the field of inequality, and the work he has done with the University of Texas Inequality Project (UTIP).There are many contributions that Jamie and UTIP have made. His use of the UNIDO payroll data, that he noted in his Godley-Tobin Lecture, has significant advantages over tax records and household survey data, and provides a different picture of global inequality. His use of the Theil decomposition is also original and provides new insights on inequality. And there is the more important

Here we edited with Esteban Pérez and Miguel Torres some unpublished manuscripts from Prebisch related to the Federal Reserve missions, led by Robert Triffin, to the Dominican Republic and Paraguay, in which he emphasizes the need of capital controls in peripheral countries that did NOT have the key hegemonic currency. There is also a discussion of Keynes and White’s plans for Bretton Woods, which were partially published before. In Spanish. Happy New Year!

The government in Argentina has less than two weeks at this point. It is too early to pass judgment. But we can look at the legacy of the Macri administration, and indicate a few things about the current strategy. A paper I have just received from Fabian Amico, that will soon be published in Circus, will be invaluable for my very brief comments here (the new issue of Circus and his paper will eventually be linked here, in Spanish).The first thing that should be evident is that the 4 years of the Macri administration, that were supposed to restore economic growth, something that had faltered since 2011, essentially as a result of an external constraint, were a failure. Using IMF data, the average GDP growth in the period was -0.2 percent. Yep, negative. Amico uses a local activity index

By Thomas PalleyI could not get this op-ed (written November 6, 2019) published as it was a mix of too dull & didactic, and too partisan or not partisan enough. Anyway, in the wake of the election, I think it was analytically spot on so I have decided to post it. Also, it makes clear the very special circumstances of the UK election. It is a gross distortion to extrapolate from the UK to the US. Unfortunately, that is exactly what elite US media (e.g. New York Times) and neoliberal Democrats are now doing. Opinion polls are predicting the Conservative Party will romp home in the UK’s upcoming general election. Unfortunately, given the party’s current extremist inclinations, that stands to transform the UK into a neoliberal hot zone and also dissolve the UK within a decade.The costs of a

[embedded content]
My interview (in Spanish) on central banks, development and some moderate optimism about the forthcoming Argentinian government of Alberto Fernández.

Paul Adolph Volcker (1927-2019)

Paul Volcker has passed away, and many obits (NYTimes here) and blog posts will be published in the next couple of days. Most likely, the majority will suggest how Carter appointed him to bring down inflation, a courageous decision, that might have costed him the election, and how Volcker went on to stabilize the so-called Great Inflation. Volcker was the head of the New York Fed from 1975 to 1979, before he was appointed chairman of the Fed in that year. He can be seen as the anti-Marriner Eccles, the first chairman properly speaking, and Roosevelt’s central banker. Volcker was the quintessential Monetarist central banker, and his tenure is symbolic of the rise of Neoliberalism,* as much as Eccles’ tenure was the symbol of the New Deal social

Alberto Fernández, who will assume as the next president in less than two weeks, has said he will not accept the next tranche of US$ 11billion that were part of the US$ 57 billion deal signed by the outgoing Macri administration. Many progressives see this as a good sign, in particular given the history of the IMF with Argentina. I’ve emphasized, against a lot of heterodox discussion on the subject, that the IMF remains essentially unchanged when it comes to policy prescriptions. So I do get the point.Note, however, that the best argument for not using it, is NOT the fact that this would increase the leverage with the IMF. It would hardly do that. It’s kind of a slap on their face. The leverage comes from the fact that the IMF did commit a huge amount of money, and presumably they

Should have posted this a while ago. I had a conversation with the World Bank economist above on how much of the problems of Venezuela are the result of the embargo. Here a paper by Francisco Rodríguez. Worth reading.

[embedded content]
Old clip from C-SPAN. It’s still worth watching. Strong critique of the failures of the IMF and neoliberal policies in leading to the crisis. We know now that the subsequent bubble pushed the major crisis for another 10 years.

The next issue of the Review of Keynesian Economics with Bob Rowthorn’s Godley-Tobin Lecture and papers by Barry Eichengreen, Steve Fazzari, Peter Bofinger and Bob Dimand, among others is coming soon.

Radio show in Spanish at the website of Universidad Nacional de Colombia. In Spanish of course. A short summary of one of my talks at the conference last week. Thanks to Diego Guerrero and Óscar Morillo.

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

[embedded content]
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.