Author Archives: Mitch Green

The Dutch Left’s Embrace of the Austerity Suicide Pact: It’s Necessary for the Children!

Posted on April 30, 2012 | 16 comments

By William K. Black

A remarkable, and terrible, thing has just taken place in the Netherlands of which few Americans are aware.  The ruling Dutch political coalition collapsed when the ultra-right wing party (the Freedom Party, led by Geert Wilders) refused to support its coalition partners’ austerity package (calling for tax increases and reduced government expenditures).  Wilders is best known for his opposition to Islamic immigrants but is developing a new following based on his Euro skepticism. The core parties of the governing coalition were Mark Rutte’s VVD party and the Christian Democrats (CDA).

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MMP Blog 48: IS THE JOB GUARANTEE NECESSARY?

Posted on April 29, 2012 | 92 comments

By L. Randall Wray

Over the past 11 months, or so, we have examined Modern Money Theory. This is the proper paradigm for analyzing all modern countries that use their own currency.

Some have wondered whether we can separate MMT from the Job Guarantee (JG): can one accept MMT while rejecting the JG?

To be honest, I find this to be a rather strange question. We have a modern theory of Bubonic Plague. Until medical science developed a theory of disease that can be caused by microbes too small to be seen with the naked eye, all sorts of explanations of the cause of the Plague were offered. The most popular was “bad air”. The preventative measures offered (quarantine of affected individuals, evacuation of cities, burning of the property of the deceased), and improvement of public sanitation actually were quite effective—indeed, in the richer countries the plague was almost banished even before the “germ” theory of disease was ever developed. (To be sure, there were false starts—such as killing cats, that had helped keep rats in check!)

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Spain is the New Greece

Posted on April 29, 2012 | 13 comments

By Marshall Auerback

Nearly one Spaniard in four is unemployed, according to data released on Friday, as the country’s economic and financial predicament prompted a government minister to talk of a “crisis of enormous proportions”.The data from the National Statistics Institute showed 367,000 people lost their jobs in the first three months of the year. At this pace, Spanish job losses are equivalent to 1 million per month in the United States. That means more than 5.6m Spaniards or 24.4 per cent of the workforce are unemployed, close to a record high set in 1994.

Spain has become the new Greece. Actually, in many respects Spain is now worse than Greece. The Spanish unemployment rate is already so high and unlike Athens, Madrid has made no headway in reducing its public debt levels (whereas the Greeks are close to running a primary fiscal surplus at which point they could leave and turn the problem back on to Brussels). Moreover, Spain has a huge private debt burden that is twice that of Greece.

Although I have warned on these pages before that Spain’s austerity program was leading the country to disaster, my reaction to this economic catastrophe has been one of amazement. Just take a look at this employment data

Spain First Quarter Unemployment: Summary (Table)
2012-04-27 07:00:00.13 GMT

1Q Quarterly Yearly
2012 Net Change QoQ % Net Change YoY%
Both Sexes
Over 16s 38,493.70 -14.5 -0.04% -18.4 -0.05%
Active Workforce 23,072.80 -8.4 -0.04% 10.9 0.05%
Employed 17,433.20 -374.3 -2.10% -718.5 -3.96%
Unemployed 5,639.50 365.9 6.94% 729.4 14.85%
Inactive 15,420.90 -6.1 -0.04% -29.3 -0.19%
Activity Rate 59.94% 0.00% n/a 0.06% n/a
Unemployment Rate 24.44% 1.59% n/a 3.15% n/a
16 to 64 30,606.00 -52.5 -0.17% -171.4 -0.56%
Activity Rate 74.87% 0.13% n/a 0.44% n/a
Unemployment Rate 24.59% 1.59% n/a 3.17% n/a
Employment Rate 56.47% -1.09% n/a -2.03% n/a

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Responses to MMP Blog #47: The JG / ELR and Real World Experience

Posted on April 25, 2012 | 23 comments

By L. Randall Wray

Before we get underway, I have two appeals.

Appeal #1: About twenty years ago Don Roper and Ric Holt created the PKT (Post Keynesian Theory) internet discussion group. It was the first such group I’d ever come across. All the “top” heterodox economists participated. The discussions were interesting and important. You might still be able to access some of them.

However, the list was destroyed by frackers.

I won’t go into all the details but here is the basic problem. Every couple of weeks some pseudo Austrian would come along with the free market /anti government ideology posts. That was not really the problem—which was two-fold. First these people had no understanding of heterodox economics—they never read previous posts and were congenitally lazy (and, it appears, dense).

Further, they had no interest in learning anything. They were selling, not buying. They were self-appointed evangelists for the Austrian cause. Now, in truth they had no understanding of Austrian economics, either—which is why they were pseudo. I gather they spent most of their time in their mothers’ basements alternating between (how shall we put this?—as delicately as possible!) fracking themselves and fracking progressive discussion groups.

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No, Mr. Krugman, Bernanke’s Conundrum is Completely Different

Posted on April 25, 2012 | 23 comments

By Pavlina R. Tcherneva

Our mainstream colleagues keep banging their heads against the wall. “Why, oh why wouldn’t Chairman Bernanke do more to rescue the economy?” Today Paul Krugman took on this question again, arguing that Chairman Bernanke should listen to Professor Bernanke who had far more sensible ideas about rescuing an economy from a deflationary environment, as seen in his research on Japan during the 90s.

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Productivity, The Miracle of Compound Interest, and Poverty

Posted on April 24, 2012 | 11 comments

By Michael Hudson
This is a re-working of my second talk at the Rimini MMT conference, as heard on Guns and Butter.

Suppose you were alive back in 1945 and were told about all the new technology that would be invented between then and now: the computers and internet, mobile phones and other consumer electronics, faster and cheaper air travel, super trains and even outer space exploration, higher gas mileage on the ground, plastics, medical breakthroughs and science in general. You would have imagined what nearly all futurists expected: that we would be living in a life of leisure society by this time. Rising productivity would raise wages and living standards, enabling people to work shorter hours under more relaxed and less pressured workplace conditions.

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Mankiw’s Ode to the Governmental Competition that Made Romney Wealthy

Posted on April 24, 2012 | 5 comments

By William K. Black
(Cross-posted from Benzinga.com)

This is the second part of my discussion of N. Gregory Mankiw’s column asserting that governmental competition is desirable for the same reason that private competition is.  Mankiw was Chairman of President Bush’s Council of Economic Advisors from 2003-2005.  He was one of the principal architects of the perverse incentive structures that proved so criminogenic and drove the ongoing financial crisis.  He gave no useful warnings of the necessity for containing the developing crisis – even after the FBI’s September 2004 warning that mortgage fraud was become “epidemic” and would cause a financial “crisis” if it were not contained.  He is now Mitt Romney’s principal economic advisor.  His column favors the “competition” argument that led him to support crippling financial regulation even as private sector competition led to endemic fraud.  Mankiw is a moral failure as well as a failed economist.  His infamous response to Akerlof and Romer’s 1993 paper (“Looting: the Economic Underworld of Bankruptcy for Profit”) was that it would be “irrational” for CEOs not to loot “their” corporations.  He ignored all of the prescient warnings we made about how accounting control fraud drove our crises and he continues to ignore those warnings and the reality of our recurrent, intensifying financial crises.  He wants the U.S. to move even more rapidly downward in the “competition in regulatory laxity” that is driving those crises.

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MMP Blog #47: The JG / ELR and Real World Experience

Posted on April 22, 2012 | 37 comments

By L. Randall Wray

There have been many job creation programs implemented around the world, some of which were narrowly targeted while others were broad-based. The American New Deal included several moderately inclusive programs such as the Civilian Conservation Corp and the Works Progress Administration. Sweden developed broad based employment programs that virtually guaranteed access to jobs.

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Simon Johnson and James Kwak’s White House Burning: Progressives in the Grip of “Hard Money” Ideology

Posted on April 21, 2012 | 20 comments

By Michael Hoexter

Michael Hoexter is an energy efficiency and renewable energy policy analyst and marketing professional located in the San Francisco Bay Area.  He is concerned that flaws in economic thinking are derailing effective policy action on climate and energy challenges.

Currently, on the world political stage, there is little discussion of an alternative progressive framework for economics that would significantly counteract the push towards fiscal austerity.  One hears now and again protests about the damage already done and yet to be done by fiscal austerity, but the public in general has little knowledge of a comprehensive alternative framework. There are signs that the Modern Monetary Theory (MMT) view is reaching a wider audience, but it is probably the case that even most well informed political insiders remain in the dark.  The public at large is exposed in both media and policy circles to two flavors of the same neoliberal economics that sees no positive leadership role or well-thought-out supporting role for government in the economy.  In the upcoming US Presidential election, the American public must choose between two candidates, superficially different, but who offer in practice weaker and stronger versions of the same approach to governing. The lack of a perceived alternative engenders apathy and cynicism in many.

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Romney’s Lead Economist Urges Policies that will Cause the Next Financial Crisis

Posted on April 16, 2012 | 26 comments

By William K. Black
(Cross-posted from Benzinga.com)

Presidential nominees of either U.S. party can secure economic advice from any economist in the world.  This makes it all the more amazing and sad that they choose economists with track records of disastrous policy advice.  Bill Clinton chose Robert Rubin, George W. Bush chose Gregory Mankiw, Obama chose Lawrence Summers, and Mitt Romney chose Mankiw.  Rubin and Summers led the Clinton administration’s efforts to gut financial regulation.  Mankiw led the efforts under Bush.  Collectively, these efforts created the criminogenic environment that produced endemic financial fraud (“green slime”).

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