April’s Employment Report showed a gain of 223,000 jobs and a further one-tenth percent decline in the unemployment rate to 5.4 percent. The good news is the report shows the economy continues to nudge forward and create jobs for newcomers into the labor force. The bad news is the economy is not growing fast enough to raise wages. (more…)
Archive for the ‘U.S. Policy’ Category
More Jobs, Flat Wages: Trade and the Trade Deficit Continue to Hurt Us
Tuesday, May 12th, 2015More Jobs, Still Weak Wage Growth: The Federal Reserve Must Wait
Wednesday, March 11th, 2015February’s employment report showed a gain of 295,00 jobs and a decline in the unemployment rate to 5.5 percent. The report is another in a string of strong employment reports, but it also contains depressingly familiar news about weak wage growth and millions of workers still short of work.
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The Federal Reserve and Shared Prosperity: A Guide to the Policy Issues and Institutional Challenges
Tuesday, January 27th, 2015The Federal Reserve is a hugely powerful institution whose policies ramify with enormous effect throughout the economy. In the wake of the Great Recession, monetary policy focused on quantitative easing. Now, there is talk of normalizing monetary policy and interest rates. That conversation is important, but it is also too narrow and keeps policy locked into a failed status quo. There is need for a larger conversation regarding the entire framework for monetary policy and how central banks can contribute to shared prosperity. It is doubtful the US can achieve shared prosperity without the policy cooperation of the Fed. That makes understanding the Federal Reserve, the policy issues and institutional challenges, of critical importance. [READ MORE]
The theory of global imbalances: mainstream economics vs. structural Keynesianism
Thursday, August 7th, 2014Prior to the 2008 financial crisis there was much debate about global trade imbalances. Prima facie, the imbalances seem a significant problem. However, acknowledging that would question mainstream economics’ celebratory stance toward globalization. That tension prompted an array of explanations which explained the imbalances while retaining the claim that globalization is economically beneficial. This paper surveys those new theories. It contrasts them with the structural Keynesian explanation that views the imbalances as an inevitable consequence of neoliberal globalization. The paper also describes how globalization created a political economy that supported the system despite its proclivity to generate trade imbalances. [READ MORE]
Monetary policy after quantitative easing: The case for asset based reserve requirements (ABRR)
Wednesday, April 9th, 2014This paper critiques the Federal Reserve’s quantitative easing (QE) exit strategy which aims to deactivate excess liquidity via higher interest rates on reserves. That is equivalent to giving banks a tax cut at the public’s expense. It also risks domestic and international financial market turmoil. The paper proposes an alternative exit strategy based on ABRR which avoids the adverse fiscal and financial market impacts of higher interest rates. ABRR also increase the number of monetary policy instruments which can permanently improve policy. This is especially beneficial for euro zone countries. Furthermore, ABRR yield fiscal benefits via increased seignorage and can shrink a financial sector that is too large.
Explaining Stagnation: Why it Matters
Monday, February 24th, 2014Larry Summers (HERE) and Paul Krugman (HERE) have recently identified the phenomenon of stagnation. Given that they are giants in today’s economic policy conversation, their views have naturally received enormous attention. That attention is very welcome because the issue is so important. However, there is also a danger that their dominance risks crowding out other explanations of stagnation, thereby short-circuiting debate.
Krugman has long emphasized the liquidity trap – zero lower bound to interest rates which supposedly prevents spending from reaching a level sufficient for full employment. Summers has added to this story by saying we have been in the throes of stagnation for a long while, but that has been obscured by years of serial asset price bubbles. (more…)
New Book: Restoring Shared Prosperity: a Policy Agenda from Leading Keynesian Economists
Friday, December 20th, 2013
Edited by Thomas I. Palley and Gustav A. Horn. The economic recovery in the US since the Great Recession has remained sub-par and beset by persistent fear it might weaken again. Even if that is avoided, the most likely outcome is continued weak growth, accompanied by high unemployment and historically high levels of income inequality. In Europe, the recovery from the Great Recession has been even worse, with the euro zone beset by an unresolved euro crisis that has already contributed to a double-dip recession in the region. This book offers an alternative agenda for shared prosperity to that on offer from mainstream economists. The thinking is rooted in the Keynesian analytic tradition, which has been substantially vindicated by events. However, pure Keynesian macroeconomic analysis is supplemented by a focus on the institutions and policy interventions needed for an economy to generate productive full employment with contained income inequality. Such a perspective can be termed “structural Keynesianism”. These are critical times and the public deserves an open debate that does not arbitrarily or ideologically lock out alternative perspectives and policy ideas. The book contains a collection of essays that offer a credible policy program for shared prosperity, rooted in a clear narrative that cuts through the economic confusions that currently bedevil debate.
Contributions by Richard L Trumka, Thomas I Palley, Gustav A. Horn, Andreas Botsch, Josh Bivens, Achim Truger, Jared Bernstein, Robert Pollin, Dean Baker, Gerald Epstein, Damon Silvers, Jennifer Taub, Silke Tober, Jan Priewe, John Schmidt, Heidi Shierholz, William E Spriggs, Eckhard Hein, Heiner Flassbeck, Gerhard Bosch, Michael Dauderstädt
The book is available for $7.52 at AMAZON.COM
The Next Federal Reserve Chairperson
Monday, July 29th, 2013Some months ago it became known that Federal Reserve Chairman Ben Bernanke was likely to step down as the end of his second term of appointment drew near. Initially, Federal Reserve Vice-Chair Janet Yellen appeared the favorite to succeed Bernanke, but now it seems as though Larry Summers has become the Obama administration’s preferred candidate. Summers’ candidacy raises grave political and policy concerns. (more…)
Coordinate Currencies or Stagnate
Wednesday, July 10th, 2013The global economy needs exchange rate coordination now. Absent that, the world is likely to be increasingly afflicted by exchange rate fluctuations and policy acrimony. These are bound to undermine the economic recovery and increase the likelihood of stagnation.
In 2010, Brazilian Finance Minister Guido Mantega warned of the possibility of “currency wars”, as countries sought to devalue their exchange rates to gain competitive advantage. (more…)
Putting Finance Back in the Box
Monday, February 18th, 2013Financial sector reform has been at the center of the post-crisis policy debate but, so far, discussion and legislative action has been almost exclusively about issues of “stability” and preventing a repeat of the crisis.
However, just as important, if not more so, is the effect of financial markets on “equity” and economic “efficiency”. Yet here, the reform debate has been almost totally silent. By restricting the debate to stability, the economic winners have been able to shut down the case for deeper systemic reform. (more…)