Europe « Thomas Palley

Archive for the ‘Europe’ Category

More on the spurious victory claims of MMT

Wednesday, July 25th, 2012

Led by Randy Wray (see this and this), supporters of so-called Modern Monetary Theory (MMT) are declaring that they were the first to identify the problems of the euro and that MMT has now proved itself to be the correct approach to monetary theory.

As regards these two claims, permit me to quote the following:

“5.3 Will capital still be able to veto policy?
…First, financial capital may still be able to discipline governments through the bond market. Thus, if financial capital dislikes the stance of national fiscal policy, there could be a sell-off of government bonds and a shift into bonds of other countries. This would drive up the cost of government borrowing, thereby putting a break on fiscal policy (Palley, 1997, p.155-156).” (more…)

Posted in Economics, Europe, Political Economy, U.S. Policy | 2 Comments »

The euro lacks a government banker, not a lender of last resort

Monday, December 19th, 2011

In his novel, The Jungle, the American muckraking author Upton Sinclair wrote about the horrendous work and sanitary conditions in the Chicago meat packing industry of the early 20th century. It is sometimes said Sinclair aimed for the heart but hit the stomach. That is because he aimed for progressive social and economic change but instead prompted the founding of the Food and Drug Administration. (more…)

Posted in Economics, Europe, Political Economy | No Comments »

Euro Bonds Are Not Enough: Eurozone Countries Need a Government Banker

Tuesday, September 6th, 2011

The eurozone’s public finance crisis continues to fester, reflecting both political and intellectual failure. The intellectual failure is the crisis has been interpreted exclusively as a debt crisis when it is also a central bank design crisis resulting from the euro’s flawed architecture. The flaw is the inability of eurozone governments to harness the central bank’s power to assist government finances. This systemic weakness explains why U.S. and U.K. government bonds are weathering the storm, whereas Spain confronts default rumors despite having roughly similar debt and deficit profiles. (more…)

Posted in Economics, Europe | 1 Comment »

Europe’s debt crisis and Keynes’ green cheese solution

Wednesday, May 26th, 2010

The great German physicist Max Planck remarked that “Science advances one funeral at a time.” The situation is worse in economics which is subject to regress, as happened when the valuable but imperfect insights of Keynesianism were supplanted by the ideological blinkers of neoliberalism. (more…)

Posted in Economics, Europe | 1 Comment »

Euroland Is Being Crucified Upon Its Own Cross of Gold

Thursday, March 18th, 2010

The last quarter of the 19th century witnessed a period of sustained global deflation. In the 1896 US presidential election, William Jennings Bryan famously attacked the gold standard as the cause of deflation, declaring “You shall not press upon the brow of labor this crown of thorns. You shall not crucify mankind upon a cross of gold.” (more…)

Posted in Europe | 4 Comments »

Letter to the Queen: Why No One Predicted the Crisis

Thursday, July 30th, 2009

Her Majesty The Queen
Buckingham Palace
London
SW1A 1AA
29 July 2009
MADAM,

In response to your question why no one predicted the crisis you have recently received a letter from Professors Tim Besley and Peter Hennessy, sent on behalf of the British Academy. They claim economists’ failure to foresee the crisis was the result of a “failure of the collective imagination.” That claim is tendentious and will mislead you. (more…)

Posted in Economics, Europe, Globalization, Political Economy | 27 Comments »

Demythologizing Central Bankers and the Great Moderation

Wednesday, April 2nd, 2008

It is often said that the winners get to write history, which matters because the way we tell history frames our understandings. What is true for general history also holds for economic history, and the way we tell economic history affects our expectations and aspirations for the economy. (more…)

Posted in Economics, Europe, Political Economy, U.S. Policy | 5 Comments »

Exchange Rates: There is a Better Way

Wednesday, October 31st, 2007

The world economy is poorly served by the current system of exchange rates. That system has contributed to todayâ€™s global financial imbalances, which are widely viewed as posing significant economic risk. These imbalances have also created political tensions between countries over how to adjust them, and within countries over job losses. Exchange rates matter more than ever under globalization, which means the world needs a better system. (more…)

Posted in China, Economics, Europe, Globalization, U.S. Policy | 4 Comments »

Triangular Trouble: the Euro, the Dollar and the Renminbi

Monday, October 15th, 2007

For the last several years the euro has been appreciating steadily against the U.S. dollar. Given the Chinese renminbi and other East Asian currencies are pegged to the dollar that means the euro has been appreciating steadily against all. This spells trouble for Euroland, and it suggests European policymakers should join with the U.S. to address the global problem of under-valued currencies. (more…)

Posted in China, Economics, Europe, Globalization, U.S. Policy | 2 Comments »

Replace Europeâ€™s Growth and Stability Pact with Market Discipline and Democracy

Monday, October 30th, 2006

As part of the euroâ€™s introduction, European governments agreed to constrain their budget policies through the Growth and Stability Pact. Though euphemistically termed the â€œgrowth and stabilityâ€ pact, it in fact delivers neither. Moreover, owing to the constraints the pact places on national economic sovereignty, it risks contributing to political strains that threaten to undermine support for the euro. For these reasons, it is time to abandon the pact. In its place, Europe should let democracy and financial markets arbitrate the long-term viability of government fiscal policies. (more…)