Category Archives: Dan Kervick

By Dan Kervick

Lacy Hunt reports on three recent academic studies indicating that the Fed’s unconventional asset purchasing programs have failed. Antonio Fatas is “sympathetic to the argument that Quantitative Easing has had a limited effect on GDP growth”, but takes issue with some parts of Hunt’s analysis, and argues that the way Hunt analyzes the relationship between reserves and the money multiplier “is not consistent with the conclusions reached about the lack of effectiveness of monetary policy actions.” I believe there are problems with both Hunt’s analysis and Fatas’s analysis of that analysis. My best guess is that QE has had negligible macroeconomic effects. But some of the considerations Hunt and Fatas adduce in attempting to evaluate that question are red herrings, and don’t get us closer to an answer.

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By Dan Kervick

A dogma can be a very powerful thing. When dogma is sufficiently powerful, the people in its grip can lose sight of who they are, where they have come from, and how they got from the place where they started to the place they now occupy. Americans during the past few decades have been in the grip of an especially strong dogma, the dogma of Market Fundamentalism. Falling in with the preachers and zealots of this charismatic sect, they have convinced themselves that their once lofty economic place in the world was primarily due to an American preference for miniscule government coupled with the visionary leadership of free-wheeling entrepreneurial heroes, latter-day secular saints who were able to set the economic agenda and pursue it unencumbered by regulatory ties. For some Americans, this mythic free enterprise utopia, bestridden by business titans, represents the very essence of American freedom. And so the free market faithful have pursued a neoliberal political agenda in order to see to it that the tablets of this magnificent ancestral wisdom are carried down unbroken into the present all-too-errant age.

But the creed is bunk. It is a fictive concoction filled with tales of an imagined past that never existed. And yet, the more enthusiastically the apostles of Market Fundamentalism have attempted to put the spurious creed into practice, the further they have taken us away from historical truth and the real-world sources of our actual prosperity. We need to drop the totemic legends and look that real history squarely in the face, so we can remember who we really are.

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By Dan Kervick

It is being reported that the President will nominate Janet Yellen to be the next Chair of the Federal Reserve Board of Governors. Yellen was the obvious candidate all along, and it’s a very good thing that Obama’s earlier preference for Lawrence Summers, a key architect of the deregulated neoliberal regime of the 80’s and 90’s that helped bring us the financial collapse of 2008, was vigorously shot down by critics. The most important challenges for the next Fed chief will be in the area of financial system regulation, and despite the efforts by some of Summers’s closest friends and colleagues to give him a rush makeover as a born-again regulator, Summers was clearly not the right person for the job.

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By Dan Kervick

James K. Galbraith presents a summing up of the recent public debate over President Obama’s consideration of Lawrence Summers to replace Ben Bernanke as Fed Chair.  These are the key observations:

Summers drew immediate fire, mostly from liberals. Some were from Harvard, where, as president, he’d alienated many faculty with, among other things, his ill-chosen remarks about women and his handling of a U.S. government lawsuit over dealings between Harvard and Russia. Some foes focused on his time at Treasury under Bill Clinton, when the Glass-Steagall law regulating banks was repealed and the Commodity Futures Modernization Act, which outlawed regulation of derivatives, was passed. Some judged him for his income from Wall Street, including his huge speaking fees and the money he made working for a hedge fund. And his abrasive personality and bruising personal style didn’t make him many liberal friends.

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By Dan Kervick

The UN Conference on Trade and Development released its 2013 report on September 12, and it is both an invigorating read and a welcome break from the stagnant and conservative thinking that dominates most US economic discussion. The full report can be downloaded from the UNCTAD website, and a much shorter overview of the report is also available.

You can also listen to this podcast of a public event at the London School of Economics marking the release of the report last Thursday. The Podcast features Richard Kozul-Wright, who heads the unit on Economic Integration and Cooperation Among Developing Countries at UNCTAD, and Robert Wade, professor of Political Economy and Development in the Department of International Development at LSE.

Here is an UNCTAD synopsis of the report’s main messages.  I have highlighted the remarks that struck me as most important:

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By Dan Kervick

It was deeply gratifying to learn today that Lawrence Summers has withdrawn his name from consideration for Chair of the Federal Reserve Board of Governors. Summers was a key architect of the late 20th century neoliberal economic system that failed catastrophically in 2007 and 2008, and he was implicated in some of the most notorious regulatory misjudgments of that era. There is no evidence that Summers has substantially altered the economic philosophy that animated him when he was helping to design and implement that system, so if he had acceded to the job of Fed Chief he would have been well-positioned to block stronger financial regulation and extend the unreconstructed regime of too-big-to-fail banks, loose rules, hegemonic financial sector growth and systemic financial instability that he helped create.

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By Dan Kervick

The government released a disappointing August jobs report today. And unfortunately, the hype and misinformation surrounding the Fed’s quantitative easing program has created a perverse situation in the capital markets which may contribute to sustaining that job market stagnation for some time.

For several months now, we have seen the establishment of an entrenched pattern in which investors routinely respond to a bad jobs reports with bullish behavior and respond to a good jobs reports with bearish behavior. Bad jobs news is treated as good news for investors; good jobs news is treated as bad news for investors. Why in the world would they respond in this way? Because in a classic case of the madness of crowds driven by misinformation and disinformation, the markets have convinced themselves that the fate of the world now depends on whether or not the Fed will choose either to continue or “taper” its quantitative easing program in the near term.

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