Category: Economics
Do Deficits Matter? Foreign Lending to the Treasury
By L. Randall Wray Deficit hawks raise three objections to persistent federal government budget deficits: a) they pose a solvency risk that could force to government default on its debt; b) they pose an inflation, or even a hyperinflation, risk; and c) they impose a burden on our grandkids, who will have to pay interest
Rosenberg on the cause of the next secular uptrend in inflation or hyperinflationary shock
David Rosenberg is bullish on bonds. And the reasoning for his bullishness has a lot to do with the deleveraging and excess capacity which the bursting of the credit bubble has brought into view. In this sense, his views on inflation are actually rather similar to modern monetary theory advocates. In his daily letter to
James Montier does MMT
It seems that a lot of analysts have caught onto the MMT framework popularized by the late economist Wynne Godley and made topical in this downturn by Rob Parenteau of the Richebacher Letter. We have seen Martin Wolf use Godley and Parenteau’s financial sector balance approach to dissect both the Japanese and European macro-economy. More
Voodoo That I Don’t Do
If you want to cut taxes and say you prefer them to increased spending, fine. But let’s not act like tax cuts reduce the deficit. They don’t. When I say economists and policy makers abuse economic ideology for political purposes, this is what I’m talking about. Hat tip Andrew Samwick
Deficits Do Matter, But Not the Way You Think
By L. Randall Wray, Professor of Economics at the University of Missouri-Kansas City, Research Director with the Center for Full Employment and Price Stability and Senior Research Scholar at The Levy Economics Institute. In recent months, a form of mass hysteria has swept the country as fear of “unsustainable” budget deficits replaced the earlier concern
Do sovereign debt ratios matter?
By Michael Pettis In the past few weeks I have been getting a lot of questions about serial sovereign defaults and how to predict which countries will or won’t suspend debt payments or otherwise get into trouble. The most common question is whether or not there is a threshold of debt (measured, say, against total
The Debt Supercycle
By John Mauldin. I have been writing about The End Game for some time now. And writing a book of the same title. Consequently, I have been thinking a lot about how the credit crisis evolved into the sovereign debt crisis, and how it all ends. Today we explore a few musings I have had
Misunderstanding Modern Monetary Theory
Paul Krugman wrote a post today regarding MMT called "I Would Do Anything For Stimulus, But I Won’t Do That (Wonkish)." The gist of Krugman’s post was to refute Modern Monetary Theory’s view on money and deficits. Krugman writes: Right now, the real policy debate is whether we need fiscal austerity even with the economy
Macroeconomics, Representative Agents and Demographics (wonkish)
Upon first reading what I am pasting below, my thesis councillor briskly claimed that this particular piece of text represented a malignant tumor that had to be surgically removed if the patient (in this case, my master’s thesis) were to make it alive. I agreed with him back then and I still do, but I
Why Ricardian Equivalence Is Nonsense
By Marshall Auerback and Edward Harrison. Marshall’s view Ed has asked me to deal specifically with the issue of Ricardian equivalence, the theorem used by anti-government proponents to argue that fiscal deficits are counterproductive and that cutting deficits in the middle of a recession will actually be good for the economy. It suggests that when
Chile’s Economy – Steady as She Goes
BBC’s travel program Fast Track had a story about how Santiago has been working hard since the earthquake to (re)build its position as a cool global city. I have never been to Santiago (let alone Chile) so I cannot say whether there is any position to rebuild or whether Santiago isn’t simply moving up and
A reduction in both fiscal and monetary stimulus
I have argued that both fiscal and monetary stimulus would be withdrawn sooner than most people expected. Here’s how I put it in March (emphasis added): I expect the following to occur: Public pressure to withdraw monetary and fiscal stimulus will work and stimulus will be reduced quicker than many anticipate – beginning sometime in