Or at least for now, is what Deborah James says. Note that the contentious paragraph on UNCTAD's mandate that the US State Department didn't like reads tha UNCTAD would:
"continue, as a contribution to the work of the UN, research and analysis on the prospects of, and impact on, developing countries in matters of trade and development, in light of the global economic and financial crisis."Yep, that is unacceptable indeed. After all you ask, what crisis?
By Thomas Palley
Marshall McLuhan, the famed philosopher of media, wrote: “we shape our tools and they in turn shape us”. His insight also applies to the economy which is shaped by economic policy derived from economic ideas, and it is the theme of my recent book which argues the global economic crisis is the product of flawed policies derived from flawed ideas.
Broadly speaking, there exist three different perspectives on the crisis. Perspective 1 is the hard-core neoliberal position, which can be labelled the “government failure hypothesis”. In the U.S. it is identified with the Republican Party and the Chicago school of economics. Perspective 2 is the soft-core neoliberal position, which can be labelled the “market failure hypothesis”. It is identified with the Obama administration, half of the Democratic Party, and the MIT economics departments. In Europe it is identified with Third Way politics. Perspective 3 is the progressive position which can be labelled the “destruction of shared prosperity hypothesis”. It is identified with the other half of the Democratic Party and the labour movement, but it has no standing within major economics departments owing to their suppression of alternatives to orthodox theory.
Read the rest here.
"The U.S. economy today is confronted with the prospect of extended stagnation. This book explores why. Thomas I. Palley argues that the Great Recession and the destruction of shared prosperity is due to flawed economic policy over the past thirty years. One flaw was the growth model adopted after 1980 that relied on debt and asset price inflation to fuel growth instead of wages. The second flaw was the model of globalization that created an economic gash. Financial deregulation and the house price bubble kept the economy going by making ever more credit available. As the economy cannibalized itself by undercutting income distribution and accumulating debt, it needed larger speculative bubbles to grow. That process ended when the housing bubble burst. The earlier post–World War II economic model based on rising middle-class incomes has been dismantled, while the new neoliberal model has imploded. Absent a change of policy paradigm, the logical next step is stagnation. The political challenge we face now is how to achieve paradigm change."You can read a larger excerpt here. Tom correctly puts the roots of the crisis on policy decisions, that led to debt-driven fragile consumption bubbles, with weakening labor institutions and stagnating income, and suggests that solutions must go beyond expansionary macroeconomic policies (even if those help). This is Keynesian economics at its best, and it emphasizes that economic ideas did play an important role in getting us into this crisis, and will need to play one if we do get out. As noted by Jamie Galbraith:
"In the depths of the Great Depression, John Maynard Keynes wrote that 'nothing is required, and nothing will avail, except a little clear thinking.' Thomas Palley here renews that message for our time."It's a must read.
From Triplecrisis:
Gary Gorton and Andrew Metrick have just produced a survey on the vast literature on what happened during the last financial crisis (and to a lesser extent why it did) titled “Getting Up To Speed on the Financial Crisis,” to be published by the Journal of Economic Literature. They used only 16 documents, between papers from ‘top journals,’ reports and speeches and congressional testimonies. It must be noted that the objective of the review is to provide “a one-weekend-reader’s guide” to the crisis.Read the rest here.
The biggest problem with their paper is not the limited number of documents reviewed, which seem to be fairly representative of conventional views on the financial crisis, but the limitations of what the mainstream of the profession knows about the crisis, and worse, what the profession clearly does not know it does not know, the unknown unknowns, so to speak. And that is why ignoring heterodox and progressive contributions has been very harmful for the profession.
There was plenty of finger pointing last Tuesday morning as WNYC's talk show host Brian Lehrer led a spirited discussion with a live audience on the subject of "Occupy New York." The most contentious topics were accountability for U.S. income disparity, and the causes of our financial crisis. Former New York governor Eliot Spitzer accused the Federal Reserve of lack of oversight; New York Federal Reserve Deputy Chairwoman Kathryn Wylde blamed international economic pressures; and Occupy Wall Street protester Jesse LaGreca blamed a non-representative democracy.
Yet despite their bickering, the panelists agreed that the income disparity in America is unacceptable; that the economy needs to improve; and that accountability is lacking. Amid the rapid-fire disagreements, there was a common struggle to grapple with the complex, systemic causes of our country's wobbly moment.
In an effort to poke a hole in LaGreca's arguments, business columnist Greg David asked, "What does accountability mean to you?" It's a fair question. Accountability is often vaunted as the unimpeachable principle missing from our country's response to recurring recessions and the widening income gap. And when we look at past bailouts of "black swan" level crashes and the moral hazard inherent in having institutions that are "too big to fail," it's clear that our system of accountability needs to be reconfigured. But how? In the heat of the debate, LaGreca defined accountability as investigations of bankers and corporate leaders, rather than a more global approach.
When Lehrer drew out LaGreca on the decision-making process underway at Occupy Wall Street, it became clear that LaGreca envisions the movement as a testing ground for a new form of accountable government. LaGreca is looking for a unicameral legislature (similar to Occupy Wall Street's General Assembly) where a 51 percent majority would be enough to pass a bill, thus ending the filibuster. He wants to eliminate political parties entirely and convert our system into a direct democracy.
With such a system, LaGreca contends, we would cut out the problems of campaign finance, party platforms, and special interests that stand in the way of true democratic consensus. Without party platforms or corporate interests to consider, he says, leaders would be accountable to their voters. With this new idea on the table, the meaning of accountability and its place in society has shifted.
LaGreca's plan is idealistic, and maybe impractical. Still, while parsing blame is a necessary step towards injecting accountability into the political-economic climate of the United States, it is clearly insufficient. We need more of the big-picture discussion that Lehrer was able to spark on Tuesday in order to truly confront and deal with the systemic lack of accountability.
[PHOTO CREDIT: Timothy Krause (CC).]
Pedro da Costa, from Reuters, in their Macroscope blog, says that:
"No, that is not a typo in the headline. Greece has long been the focal point of Europe’s crisis. It was the first country to reveal some cracks in a monetary union that lacks a fiscal authority to back it. Indeed, Greek politics were dominating the headlines on Friday, with news that the prime minister had survived a confidence vote in parliament restoring a momentary sense of calm to a still very dramatic situation.The rest of the post here. I can't but agree with him, in particular taking in consideration the expert he cites.
However, Greece’s actual debt load is only large relative to its own small and struggling economy. In the larger context of the euro zone, the actual amount of debt being haggled over is rather puny."
"the odds of a double dip over the coming year are uncomfortably high, perhaps as high as 50%."
"the thoughtlessness of the debt deal—notably its failure to tackle any of the real sources of America’s fiscal problems, such as entitlement spending—raises a bigger worry."
“She brings to the Bank an extensive background in the financial industry and a demonstrated record of leadership, innovation, and integrity.”Yep, she does. She was Lehman’s Global Head of Market Risk Management. She does have experience with bankrupting institutions!
Jamie Galbraith paints a grim picture of the short lived infatuation with Keynes in policy circles after the crisis. He says:
"In the high crisis just two years back, the cult of John Maynard Keynes saw a dramatic revival. Deficits were acceptable, stimulus plans became law, books entitled Return of the Master and The Keynes Solution rushed into print. Enthusiasts spoke of a “new New Deal.” Today, although the economy has not recovered, and although unemployment remains near 9 percent, none of this remains.He suggests that the reasons are not associated to the radicalism of Keynes' ideas, but to the fact that there is no economist with the kind of influence that Keynes had back then. In his words:
Barack Obama declined to become a third Roosevelt. His Bernard Baruch proved to be Robert Rubin. There is no Wagner in the Senate, no Eccles or Currie at the Federal Reserve. The agencies that harbored Leon Henderson and the young John Kenneth Galbraith do not exist. If Keynes were alive today and came to visit, one wonders who in official Washington would see him.
The new dawn of the Keynesian idea has gone dark."
"It wasn’t that he taught that that thrift is a vice, or that savings are pathological, that deficits are helpful, that debt is necessary, that interest rates should be kept low, that the economy should be run at full employment for the good of all. It wasn’t even his reference at the end of The General Theory to the 'euthanasia of the rentier.'In other words, Immelt and business types are behind economic policy, and Summers is less influential than Keynes was. Not sure I agree with this one. Keynes wasn't that influential during the 1920s and 1930s, in neither side of the Atlantic. And the likes of Baruch, Currie, Eccles, and Wagner, responded more to common sense than to Keynes theories. Further, Summers is part of the problem (even if he gets that we need more stimulus), because he was instrumental in the process of deregulation. I think the main problem in the US is that Democrats are now, and since Carter (reinforced by Clinton), the other party for business. There is no people's party, somebody for higher wages, strong unions, and full employment. In that context, Keynes' ideas had no real chance.
No, it was the fact that Keynesian policy required Keynes. And if Keynes were in charge, then the captains of industry could not be. Larry Summers is not Keynes. But he did give the impression, for a while, of running the show. This was a fatal error. It was the impression of making policy that business and the Tea Party could not stand. A better policy would not have been better liked.
With Jeffrey Immelt, we now have a business face and no economic policy at all. The president has learned. Whether it will save him be remains to be seen. A full government of business people would be much more authentic."
You expect the IMF, and other conservative institutions and economists, to come up with the same old sound finance stuff. It is more distressing when Dr. Doom (as Nouriel Roubini is known among his friends) says, on an otherwise reasonable column (subscription required) about the likely break up of the eurozone, that interest rate convergence led to "a reckless lack of discipline in countries such as Greece and Portugal." The point is that at least in these two countries the problem was fiscal, and not the euro, the lack of competitiveness and speculative bubbles.
(...) was built on a satanic derivative structure called the CDO-squared. A normal CDO is a giant pool of loans that are chopped up and layered into different "tranches": the prime or AAA level, the BBB or "mezzanine" level, and finally the equity or "toxic waste" level. Banks had no trouble finding investors for the AAA pieces, which involve betting on the safest borrowers in the pool. And there were usually investors willing to make higher-odds bets on the crack addicts and no-documentation immigrants at the potentially lucrative bottom of the pool. But the unsexy BBB parts of the pool were hard to sell, and the banks didn't want to be stuck holding all of these risky pieces. So what did they do? They took all the extra unsold pieces, threw them in a big box, and repeated the original "tranching" process all over again. What originally were all BBB pieces were diced up and divided anew — and, presto, you suddenly had new AAA securities and new toxic-waste securities.The other thing, is that there is plenty of evidence in the Levin Report is more than enough to indite several managers at Goldman, in particular, Daniel Sparks, the head of the mortgage division, that lied under oath, when he claimed that they did not expect the securities that they were betting against were going to be downgraded.
1) How long will inflation expectations remain anchored?
2) How long will the bond market trust the United States?
3) How long will it take for the economy’s wounds to heal?The reply to the first (I changed the order) is pretty good, in part because it dismisses the whole exaggeration about the role of expectations (what people think you think they might think will actually happen). Also, and more importantly Dean emphasizes that wages have been subdued (to say the least; and one might add with unemployment at this level and years of weakened unions no chance of recovery anytime soon), and the only source of inflationary pressures are higher commodity prices. He elegantly puts aside Mankiw's nonsense about the credibility of the Fed.
"The idea being pushed by many in policy circles that at some point the bond markets will lose faith in the ability of the U.S. government to pay its debts is absurd on its face. This would be like saying that if I issued iou's, that were payable in my iou's, that the markets would be worried about my ability to meet my commitments."It is, in fact, a very common idea, even in progressive circles, as I noted in my previous post. Mankiw's notion that a day of reckoning for US debt is inevitable is disingenuous, which seems to be a pattern in certain mainstream circles.
Here are Jamie Galbraith's remarks on April 15 in New York at the Levy Economics Institute's 20th annual Hyman Minsky conference. The topic was financial fraud.
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