With Wall Street beset by a crisis of confidence and the mortgage-backed securities market seizing up, there is urgent need for an immediate emergency Federal Reserve interest rate cut. This sudden need has also revealed how today’s financial system places monetary policy in bondage to markets. That system has evolved over the past twenty-five years with the Fed’s approval, and the current crisis starkly reveals need for reform. Read the rest of this entry »
Market Bondage
August 16th, 2007Marginal Productivity Theory and the Mainstream
June 7th, 2007In an earlier discussion on the state of orthodox economics hosted by TPM Café, I posted an article excavating the microeconomic foundations of neo-classical economics. In that article I wrote:
“There is one place that even orthodox lefties dare not go. That untouchable place is marginal product theory of income distribution, which basically says that competitive markets ensure that people are paid their contribution to production. This theory provides both a justification and an explanation of income distribution.” Read the rest of this entry »
The Profit vs. Country Dilemma
June 5th, 2007Vladimir Ilyich Ulyanov, alias Lenin, was the leader of the 1917 Bolshevik revolution in Russia. One of his best known quotes is “The capitalists will sell us the rope with which we will hang them.†Today, Lenin must be chuckling in his Moscow mausoleum as he watches US business dealings with China. Read the rest of this entry »
R.I.P. Trade Promotion Authority
May 29th, 2007Trade promotion authority (TPA) – formerly known as fast-track negotiating authority – is set to expire on June 30, 2007. As a result, the Bush Administration and business interests are now lobbying Congress for its renewal. However, there are strong reasons to not just let TPA temporarily lapse, but also to permanently bury it. Read the rest of this entry »
Beyond Red and Blue
May 18th, 2007It is widely recognized that the debacle in Iraq has contributed importantly to disenchantment with the Bush administration and Republican Party. However, less recognized is the potential long-term political impact of Iraq, which has opened the door to moving beyond the red state – blue state division that has marked US politics for the past generation. That in turn could create a lasting progressive majority. Read the rest of this entry »
Globalization Lock-in: What Should Be Done?
May 14th, 2007“Lock-in†is a concept developed by economic historians to describe how economies get tied in to using inefficient technologies. It also applies to institutions as economies and societies can get locked into sub-optimal institutional arrangements. This has relevance for globalization where the arrangements governing trade and the global economy may be sub-optimal, posing problems of how to change them. The economics of lock-in helps understand the problem and suggests how to solve it. Read the rest of this entry »
US – China Trade: Pay Now or Pay More Later
May 6th, 2007After several years of patient negotiation, the US appears embarked on a harder stance in dealing with its China trade deficit. In Congress there is talk of veto-proof legislation addressing China’s under-valuation of its currency, while the Bush Administration has imposed tariffs on coated paper products to offset Chinese subsidies. Behind this shift is a dawning recognition that China is unwilling to reduce its surplus, and that reduces the policy choice to one of “pay now or pay more laterâ€. Read the rest of this entry »
The Case Against Inflation Targeting
April 19th, 2007A few months ago the Federal Reserve seemed to be inexorably moving toward adopting an inflation targeting policy regime. Fed Chairman Ben Bernanke is known to support such a framework having co-authored several articles and books on the subject. Moreover, his institutional hand had been strengthened by Frederic Mishkin’s appointment as Vice-Chairman of the Fed, Mishkin being one of Bernanke’s co-authors. Read the rest of this entry »
Real IMF Reform: Carpe Diem
April 10th, 2007The International Monetary Fund (IMF) has been the focus of extended debate and criticism, yet reform has been hard to come by. Now, owing to changes in the global economy, the issue of reform has forced itself onto the official agenda. The Fund’s management has responded with its own reform proposals, but they are too narrow. Instead, the IMF should be pressured to adopt bolder reform that incorporates missing social concerns into its mission. Read the rest of this entry »
Global Financial Imbalances: The Japan Factor
April 2nd, 2007Over the past several years, much attention has focused on the role of China’s trade surplus in creating today’s global financial imbalances. With so much attention devoted to China, little attention has been paid to the role of Japan’s policy of near-zero interest rates that has also contributed to these imbalances. With global financial uncertainty rising, it is time for Japan to decisively abandon this policy. Read the rest of this entry »