By Joe Firestone
If the President’s budget were enacted by Congress, and OMB’s projections over the next decade hold, it would almost certainly mean economic stagnation punctuated by recession over the next decade. Would it also mean austerity, however? Let’s see.
The Sector Financial Balances (SFB) model is an accounting identity, and these are always true by definition alone. The SFB model says:
Domestic Private Balance + Domestic Government Balance + Foreign Balance = 0.
Posted in Joe Firestone
Tagged austerity, budget plans, budget projections, debt and deficits, macroeconomic austerity, microeconomic austerity, MMT, modern money theory, President's 2015 budget, Scott Fullwiler, Sector Financial Balances, Stephanie Kelton
By William K. Black
(Cross posted at Benzinga.com)
The New York Times Incompetence in Macroeconomic Reporting (IMR) Award
I have written repeatedly about the New York Times’ needs to create a prize in incompetence in macroeconomic reporting (IMR) and suggested that the paper award the IMR prize to its reporters. I suggested that the prize consist of a two hour lunch with Paul Krugman in which he will provide them with a remedial lecture on why austerity is an economically illiterate response to a recession.
NYT columns discussing austerity, particularly in the eurozone, demonstrate that its reporters religiously avoid reading Krugman’s scores of columns on austerity. As always on this subject, I want to make express that I don’t insist that the reporters agree with economics. It is fine for reporters to state that economics has known for 75 years that austerity is a self-destructive response to a recession but that some economists disagree. It is fine for the reporter to explain why he agrees with the austerian economists. It is not acceptable journalism to ignore the dominant economic view, 75 years of supporting events, and the empirical studies by austerians (the IMF) finding that fiscal changes have more powerful effects on the economy consistent with the dominant theory. It is not acceptable journalism to ignore unemployment and inequality and the role of austerity in increasing both. I end by expanding on Krugman’s column about a tragic financial media meme by discussing three related memes that are causing great harm.
NEP’s Bill Black appears on TheRealNews.com. The discussion is about the new budget deal and the fact that it secures austerity policies and fails to extend unemployment benefits. (Bill appears at the 8:00 minute mark).
By Rob Parenteau
First of all, if a government stops having its own currency, it doesn’t just give up ‘control over monetary policy’…If a government does not have its own central bank on which it can draw cheques freely, its expenditures can be financed only by borrowing in the open market, in competition with businesses, and this may prove excessively expensive or even impossible, particularly under ‘conditions of extreme urgency’…The danger then is that the budgetary restraint to which governments are individually committed will impart a disinflationary bias that locks Europe as a whole into a depression it is powerless to lift.
So wrote the late Wynne Godley in his August 1997 Observer article, “Curried Emu”. The design flaws in the euro were, in fact, that evident even before the launch – at least to those economists willing to take the career risk of employing heterodox economic analysis. Wynne’s early and prescient diagnosis may have come closest to identifying the ultimate flaw in the design of the eurozone – a near theological conviction that relative price adjustments in unfettered markets are a sufficiently strong force to drive economies back onto full employment growth paths.
By William K. Black
Ms. Calmes is the New York Times’ White House correspondent. Readers who follow finance and fraud may recall her as the object of an epic dismantling in Naked Capitalism. The subject there was Calmes’ dismissive review of Neill Barofsky’s (SIGTARP) book’s criticism of Timothy Geithner.
Calmes is back and writing about economics in an article entitled: “A Dirty Secret Lurks in the Struggle Over a Fiscal ‘Grand Bargain.’”