Articles By: Guest Author

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Why Understanding Money Matters in Greece

Why Understanding Money Matters in Greece

As Greece staggers under the weight of a depression exceeding that of the 1930s in the US, it appears difficult to see a way forward from what is becoming increasingly a Ponzi financed, extend and pretend, “bailout” scheme. In fact, there are much more creative and effective ways to solve some of the macrofinancial dilemmas that Greece is facing, and without Greece having to exit the euro. But these solutions challenge many existing economic paradigms, including the concept of “money” itself.

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Tax Anticipation Notes: A Timely Alternative Financing Instrument for Greece

Tax Anticipation Notes: A Timely Alternative Financing Instrument for Greece

The recent election of an explicitly anti-austerity party in Greece has upset the prevailing policy consensus in the eurozone, and raised a number of issues that have remained ignored or suppressed in policy circles. Expansionary fiscal consolidations have proven largely elusive. The difficulty of achieving GDP growth while reaching primary fiscal surplus targets is very evident in Greece. Avoiding rapidly escalating government debt to GDP ratios has consequently proven very challenging. Even if the arithmetic of avoiding a debt trap can be made to work, the rise of opposition parties in the eurozone suggests there are indeed political limits to fiscal consolidation. The Ponzi like nature of requesting new loans in order to service prior debt obligations, especially while nominal incomes are falling, is a third issue that Syriza has raised, and it is one that informed their opening position of rejecting any extension of the current bailout program.

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Home prices since 1870: No price like home

Home prices since 1870: No price like home

House price fluctuations take centre stage in recent macroeconomic debates, but little is known about their long-run evolution. This column presents new house price indices for 14 advanced economies since 1870. Real house prices display a pronounced hockey-stick pattern over the past 140 years. They stayed constant from the 19th to the mid-20th century, but rose strongly in the second half of the 20th century. Sharply increasing land prices, not construction costs, were the key driver of this trend.

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The roots of the Italian stagnation

The roots of the Italian stagnation

It’s currently very trendy in Italy to blame Angela Merkel, Mario Monti, and austerity measures for the current recession. This column argues that while the severity of the downturn is clearly a cyclical phenomenon, the inability of the country to grow out of it is the legacy of more than a decade of a lack of reforms in credit, product and labour markets. This lack of reform has suffocated innovation and productivity growth, resulting in wage dynamics that are completely decoupled from labour productivity and demand conditions.

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Deleveraging, What Deleveraging? The 16th Geneva Report on the World Economy

Deleveraging, What Deleveraging? The 16th Geneva Report on the World Economy

The world has not yet begun to deleverage its crisis-linked borrowing. Global debt-to-GDP is breaking new highs in ways that hinder recovery in mature economies and threaten new crisis in emerging nations – especially China. This column introduces the latest Geneva Report on the World Economy. It argues that the policy path to less volatile debt dynamics is a narrow one, and it is already clear that developed economies must expect prolonged low growth or another crisis along the way.

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Is the ECB doing QE?

Is the ECB doing QE?

Last week, the ECB announced that it would begin purchasing securities backed by bank lending to households and firms. Whereas markets and the media have generally greeted this announcement with enthusiasm, this column identifies reasons for caution. Other central banks’ quantitative easing programmes have involved purchasing fixed amounts of securities according to a published schedule. In contrast, the ECB’s new policy is demand-driven, and will only be effective if it breaks the vicious circle of recession and negative credit growth.

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A Limited Central Bank

A Limited Central Bank

We posted this in November, but are re–posting now because it is relevant. Hat tip goes to Barry Ritholtz who published it over at the Big Picture recently. Also see two previous posts on this site from November related to this one, based on earlier commentary by Philadelphia Fed President Charles Plosser: The Limits of Monetary Policy, Part 1 and […]

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The euro crisis: Muddling through, or on the way to a more perfect euro union?

The euro crisis: Muddling through, or on the way to a more perfect euro union?

After a promising first decade, the Eurozone faced a severe crisis. This column looks at the Eurozone’s short history through the lens of an evolutionary approach to forming new institutions. German dominance has allowed the euro to achieve a number of design objectives, and this may continue if Germany does not shirk its responsibilities. Germany’s resilience and dominant size within the EU may explain its ‘muddling through’ approach to the Eurozone crisis. Greater mobility of labour and lower mobility of under-regulated capital may be the costly ‘second best’ adjustment until the arrival of more mature Eurozone institutions.

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Repairing the transmission of monetary policy through asset-backed securitisation

Repairing the transmission of monetary policy through asset-backed securitisation

By Markus K Brunnermeier and Yuliy Sannikov This post originally appeared on Vox and represents what this site believes is a very likely action the ECB could take for monetary easing later this week. Eurozone monetary policy transmission is broken. A key aspect of this is the failure of credit to get to small and medium enterprises, and consumers. This […]

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How money matters: The Old Lady fails to get an “A”

How money matters: The Old Lady fails to get an “A”

Andrea Terzi Dr. Terzi is a Professor of Economics at Franklin University Switzerland and a Research Associate with the Levy Economics Institute of Bard College. One thing’s for sure: The financial crisis has dealt a deadly blow to what was until recently considered the state-of-the-art of monetary policy. Just compare the 1992 edition of Modern Money Mechanics, published by the […]

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Proactive fiscal tightening damages income growth

Proactive fiscal tightening damages income growth

While the credit expansion/savings reduction needs to continue to grow to support GDP growth, the credit expansion/savings reduction doesn’t need to ‘spike up’ proactively as it does when the fiscal tightening is proactive.

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Political connections in turbulent times

Political connections in turbulent times

By Daron Acemoglu, Simon Johnson, Amir Kermani, James Kwak, Todd Mitton This post was originally published at Vox. Political connections affect economic outcomes in emerging markets. This column discusses new evidence showing that something similar goes on in the US. Over the ten trading days following the announcement of Timothy Geithner as Treasury Secretary, financial firms with a connection to […]

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