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This looks like a large part of the ‘portfolio shifting’ that’s been going on out of a variety of ‘fears’. And it is my suspicion that those who are shifting euro assets to other currencies largely have euro liabilities to fund over time. This means they are getting themselves ‘out of balance’ which is another way to say they have gone ‘short euro’ and at some point will be back to cover: Record Capital Outflows Push Euro Toward Parity With Dollar By Mike Bird Dec 21 (WSJ) —...

Next year we’ll witness the hundreth anniversary of the Russian Revolution. Here a link from the Marginal Revolution blog. Below a letter by Pjotr Aleksejevitsj Prpotkin, a leading anarchist and one of the keenest scientific minds of the decades around 1900, to Vladimit Iljitsj Lenin. Note that he wrote this as early as March 1920, note also that at this time a civil war not completely unlike the present turmoil in Syria was raging in Russia. Read especially the last part. From Selected...

This is persistent, strong euro medicine that ‘absorbs’ the portfolio selling that’s been going on for over 2 years. And the lack of inflation and tight fiscal policy tell me it will persist until currencies adjust sufficiently to shift the balance: Euro Area Current Account Eurozone’s current account surplus rose to €32.8 billion in October 2016 from €30.9 billion in the same month a year earlier. The services surplus widened to €8.2 billion (from €2.4 billion a year...

New paperback from WEA BooksNarrative Fixation in Economics by Edward Fullbrook Here are the book’s various Amazon pages: United States $20, Brazil, Canada, France, Germany,  India,  Italy,  Japan,  Mexico,  Spain,  United Kingdom £15 ContentsPreface Chapter 1: The narrative pluralism of physics Chapter 2: Intersubjective reality, intrasubjective theory Chapter 3: Concealed ideology Chapter 4: From the natural to the social Chapter 5: Narrative rationality Chapter 6: What is the...

Oké. I’m a teacher. So, I’m primed and educated to be an arrogant nitpicker. But let’s make the best of a this dire situation and trash the work of Ferdinando Giugliano and Christian Odendahl who defile the language of scientific economics. Which is not just a mistake but a dangerous act which might cause misunderstandings and destructive economic policies. On the website of the Centre for European Reform they state about Italy: “But Italy mostly has itself to blame. The abysmal...

from David Ruccio Where does all the surplus in the U.S. economy go? Well, a large chunk of it is captured by the top 1 percent, whose share of national income almost doubled between 1970 and 2014—from 11 percent to 20.2 percent. Equally interesting is the composition of that growing share of national income, which we can decompose thanks to new data from Thomas Piketty, Emmanuel Saez, and Gabriel Zucman. One way of making sense of the way the top 1 percent manages to capture a...

Less than the expected 55.2 as weakness in the services sector continues, and as post election hopes fade: Highlights Growth in new orders, though still near a 12-month high, has slowed so far this month, pulling down the flash services PMI for December by more than 1 point to 53.4. But, given the comparison with November’s unusual strength in new orders, the slowing is deceptive. Other readings in the report are clearly favorable including a gain in backlogs that has...

Are neoclassical macro models post-truth? It might very well be. The ‘workhorse’ neoclassical macro  ‘DSGE’ models used by for instance central banks state that lower real wages will solve unemployment, largely because these lower wages will entice ‘marginal’ workers, like the elderly and women to leave the labor force (read this, by Lawrence Christiano, Mathias Trabandt and Karl Walentin (2011). Less workers, unemployment solved! But does this also happen? Ehhmmm…no (graph2). After...

from David Ruccio Neil Irwin is right: “Poor and working-class Americans have fallen behind over the last generation, receiving few of the gains of an expanding economy.” So, he wants to devise a tax plan to change that. The problem is, Irwin only looks at raising the income of the bottom 20 percent of families to where they would be if they shared equally in the gains since 1979.  So what would it all cost? The Tax Policy Center crunched the numbers: The policy would deplete federal...

Wednesday’s decision by the Federal Reserve to raise interest rates is unwelcome and unnecessary. As admitted in its statement, investment remains soft, growth is only moderate, and inflation expectations are little changed. Moreover, the economy confronts financial headwinds from the recent jump in long term interest rates and an even stronger dollar. The Federal Reserve seems [...]