Daily Archives: June 12, 2009

Why We Should Abandon the Free Market

James Galbraith’s lecture at the Schwartz Center for Economic Policy Analysis at the New School in New York.


Why Regulation Matters

James Galbraith’s lecture at the Schwartz Center for Economic Policy Analysis at the New School in New York.

Economic Growth and Public Investment

You may check James K. Galbraith’s interesting conference paper “The Macroeconomic Considerations of a Public Investment Strategy” here.
An important point is that “contrary to popular myth, U.S. economic development has never been solely the result of private investment.”
He goes on to demystify the belief that government deficits crowd out private investment and that the US federal goverment relies on foreigners to finance its spending.

“Interest Rates. Critics assert that efforts to expand the scope of the public sector will drive up interest rates and crowd out private business investment. The accusation is particularly likely to be heard when a proposal explicitly foresees the use of the credit market, deficits, and public debt to finance the expansion.
Are these fears justified? There is a two-part answer to this question, the first related to economic theory, and the second to the specific conditions facing the United States in the world credit markets. The theory of “crowding out” is based on a common misconception of the nature of savings in our economy, namely the idea that savings are a “pool,” fixed in size, from which the public and private sectors alike draw to finance their desired rates of spending. No such pool exists. Rather, what we measure as savings is created after the fact, by the spending decisions of governments and private businesses. These decisions create income; the difference between income and consumption (the latter, strongly established by habit), is savings…We can conclude, first, that there is no direct connection between federal budget deficits or surpluses and long-term interest rates.”
Financing Abroad and the Dollar: The deficit in the external accounts is the accounting counterpart—the exact equal—of the sum of public and private sector deficits in the domestic economy.
This phenomenon is often referred to as “borrowing from foreigners to finance current consumption,” but again the shorthand is misleading. When an American purchases a Japanese car, credit is created and extended by an American bank.
Rather, a bank loan made in the United States has created a dollar asset, which subsequently has been purchased by an institution (the Bank of Japan) that has no immediate use for it and merely chooses to store it in a liquid, interest- bearing form.”

The Predator State

James K. Galbraith’s new book explained.

James K. Galbraith and The Predator State

James K. Galbraith discuss his new book, “The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too.”

James K. Galbraith on the Global Financial Crisis

See below James K. Galbraith’s lecture in Dublin, June 5 2009, at the Institute for International and European Affairs, on the current economic crisis. With Q&A and a small postscript.

Financial Architecture Fundamentals

Click here to view Warren Mosler’s presentation on financial architecture fundamentals.