Diego Maradona (1960-2020): Some Bittersweet Reflections

November 27th, 2020

Maradona was more than just an extraordinary footballer. He was also a complicated social icon. That further distinguishes him from other footballers, though Pele also has some of that… and it is great to see young footballers like Marcus Rashford taking up that mantle.

He was both rewarded by and terribly exploited by the system. The system treated him like a “race horse”. They wanted him to play at all cost and pumped him with drugs. They did not care about the physical and psychological costs to him. That contributed to his addiction. Maybe he would have gotten there on his own owing to personality reasons, but the addictive pain-killers they fed him sure gave him a healthy shove in that direction.

He came from great poverty, from a shanty town. He never hid that and insisted on keeping the connection. I’m told he had tattoos of Fidel Castro and Che Guevara. He also had a relationship with the Pope (Francisco, not Benedict XVI or John Paul II). That politics speaks well of him, even if it was not carried through with the consistency of an intellectual or political activist.

As for the “Hand of God” goal, it obviously sits badly with England supporters. But in a way it fits with Maradona’s personality and social icon standing – a sort of roguish Robin Hood’s goal. I’ve come to accept it and even enjoy it.

Did you know that in Argentina, before inflation made them irrelevant, they used to call the 10 (diez) peso note a “Diego”? That is how much people loved him.

What’s wrong with modern money theory (MMT): macro and political economic restraints on deficit financed fiscal policy

October 21st, 2020

The essential claim of MMT is sovereign currency issuing governments, with flexible exchange rates and without foreign currency debt, are financially unconstrained. This paper analyzes the macroeconomic arguments behind that claim and shows they are suspect. MMT underestimates the economic costs and exaggerate the capabilities of deficit financed fiscal policy. Those analytic shortcomings render it poor economics. However, MMT’s claim that sovereign governments are financially unconstrained is proving a popular political polemic. That is because current distressed economic conditions have generated political resistance to fiscal austerity, and MMT fits the moment by countering the neoliberal polemic that government lacks fiscal space because it is akin to a household.
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Obamacare With a Public Option: Fool Me Twice Shame on Me

March 3rd, 2020

There is an old saying “Fool me once shame on you, fool me twice shame on me.” That saying is relevant for the current healthcare debate in which former Vice-President Biden and elite Democrats are touting a reheated version of Obamacare with a public option. It is a case of trying to fool the American public twice.

Adding an Obamacare public option will not solve the healthcare problem. Worse yet, it misses an historic opportunity to heal the festering wound of healthcare via a single-payer system as proposed by Senator Bernie Sanders.

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Bernie Sanders: Nothing to Fear Except Fear Itself

February 18th, 2020

“The only thing we have to fear is fear itself.” Eighty-seven years ago those were the words of Franklin Delano Roosevelt in his 1933 inaugural speech. Today, they resonate with Senator Bernie Sanders’ presidential campaign, which confronts a barrage of attack aimed at frightening away voters.

Fear is the enemy of change and the friend of hate. That is why both sides of the political establishment are now running a full-blown campaign of fear-mongering against Sanders.

The Democratic Party establishment likes the economy the way it is and wants to prevent change. Donald Trump and the Republicans have made themselves the party of hate. Both therefore have an interest in promoting fear, which explains the strange overlap in their attacks on Sanders.

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Do current times vindicate Keynes and is New Keynesian macroeconomics Keynesian?

February 8th, 2020

Thomas I. Palley, Esteban Pérez Caldentey, and Matias Vernengo, Review of Keynesian Economics, January 2020.

Professor Robert Rowthorn delivered the second annual Godley-Tobin lecture in New York City on March 1, 2019. The title of his lecture was “Keynesian economics: back from the dead?” and it is published in this issue of the Review of Keynesian Economics. The lecture was attended by a large audience and the Question & Answer session provoked a stimulating discussion. Prompted by that discussion, we thought it would be interesting to invite some leading (Keynesian-leaning) economists to independently address Professor Rowthorn’s lecture topic. This symposium is the outcome of that invitation.

We are living in a time which many believe has a distinctly Keynesian character. That is captured in the belief that many economies appear to suffer from aggregate demand shortage or, at least, a proclivity to demand shortage. It is also captured in the revival of the concept of “economic stagnation” which was an idea that had much traction in the 1930s and 1940s, but then fell away in the 1950s with the post-war boom and the non-reappearance of depression-like conditions.

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A Stock Market Boom is Not the Basis of Shared Prosperity

January 22nd, 2020

The US is currently enjoying another stock market boom which, if history is any guide, also stands to end in a bust. In the meantime, the boom is having a politically toxic effect by lending support to Donald Trump and obscuring the case for reversing the neoliberal economic paradigm.

For four decades the US economy has been trapped in a “Groundhog Day” cycle in which policy engineered new stock market booms cover the tracks of previous busts. But though each new boom ameliorates, it does not recuperate the prior damage done to income distribution and shared prosperity. Now, that cycle is in full swing again, clouding understanding of the economic problem and giving voters reason not to rock the boat for fear of losing what little they have. READ MORE

The economics of negative interest rates: editors’ introduction

December 19th, 2019

Thomas Palley, Louis-Philippe Rochon, Guillaume Vallet , Review of Keynesian Economics, April 2019.

The Great Recession (2008/9) triggered by the financial crisis of 2008 has had considerable impact on the conduct of monetary policy. Before the recession, monetary policy was largely based on a New Consensus-type macroeconomic model and it targeted inflation via a Taylor interest rate rule. The belief was that policy engineered changes in real interest rates had strong and predictable effects on output and inflation.

Based on that understanding, in the immediate wake of the financial crisis, central banks were quick to lower their policy interest rate to zero or near-zero. The expectation was for a speedy and robust V-shaped recovery, an expectation which was reflected in Federal Reserve Chairman Ben Bernanke’s comments in March 2009 about seeing “green shoots” of economic recovery.

When that V-shaped recovery failed to materialize, expectations shifted to a U-shaped recovery, and then in turn morphed into L-shaped recovery and talk of secular stagnation. READ MORE

A Conservative win will create a neoliberal hot zone and dissolve the UK: here’s how to stop it

December 15th, 2019

I could not get this op-ed (written November 6, 2019) published as it was a mix of too dull & didactic, and too partisan or not partisan enough. Anyway, in the wake of the election, I think it was analytically spot on so I have decided to post it. Also, it makes clear the very special circumstances of the UK election. It is a gross distortion to extrapolate from the UK to the US. Unfortunately, that is exactly what elite US media (e.g. New York Times) and neoliberal Democrats are now doing.

Opinion polls are predicting the Conservative Party will romp home in the UK’s upcoming general election. Unfortunately, given the party’s current extremist inclinations, that stands to transform the UK into a neoliberal hot zone and also dissolve the UK within a decade.

The costs of a Conservative win

A Conservative majority government will quickly implement a Brexit that inflicts significant economic and political injury. Additionally, it will double-down on neoliberalism which has already done so much damage.

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Central Bank Independence: A Rigged Debate Based on False Politics and Economics

September 7th, 2019

The case for central bank independence is built on an intellectual two-step. Step one argues there is a problem of inflation prone government. Step two argues independence is the solution to that problem. This paper challenges that case and shows it is based on false politics and economics. The paper argues central bank independence is a product of neoliberal economics and aims to institutionalize neoliberal interests. As regards economics, independence rests on a controversial construction of macroeconomics and also fails according to its own microeconomic logic. That failure applies to both goal independence and operational independence. It is a myth to think a government can set goals for the central bank and then leave it to the bank to impartially and neutrally operationalize those goals. Democratic countries may still decide to implement central bank independence, but that decision is a political one with non-neutral economic and political consequences. It is a grave misrepresentation to claim independence solves a fundamental public interest economic problem, and economists make themselves accomplices by claiming it does. [READ MORE]

The Fallacy of the Natural Rate of Interest and Zero Lower Bound Economics: Why Negative Interest Rates May not Remedy Keynesian Unemployment

May 9th, 2019

This paper provides a critique of zero lower bound (ZLB) economics which has become the new orthodoxy for explaining stagnation. ZLB economics is an extension of pre-Keynesian economics which attributes macroeconomic dysfunction to rigidities and market imperfections. The ZLB is the latest rigidity in that pre-Keynesian tradition. The paper argues negative nominal interest rates, even if feasible, may be unable to remedy Keynesian demand shortage unemployment, and might even aggravate the problem. That is because there exist non-reproduced assets whose return dominates that of investment, and saving may also increase in response to negative rates. Consequently, there may be no natural rate of interest. READ MORE