Economic Policy
Two Men in a (Jackson) Hole – and One is still digging
There has been considerable coverage of Ben Bernanke’s speech to the annual central bankers’ bash at Jackson Hole on Friday. A number of US commentators have criticised his reticence to commit to more decisive stimulus (Paul Krugman, Dean Baker); the Financial Times called it ‘vapid’. There was much less coverage of ECB President Trichet’s address [...]
Warning: Why Cheaper Money won’t mean more Jobs
Can the Fed rescue the economy by making money even cheaper than it already is? A debate is being played out in the Fed about whether it should return to so-called “quantitative easing” – buying more mortgage-backed securities, Treasury bills, and other bonds – in order to lower the cost of capital still further. The [...]
Growth in a Buddhist Economy
I have just returned from Bhutan, the Himalayan kingdom of unmatched natural beauty, cultural richness, and inspiring self-reflection. From the kingdom’s uniqueness now arises a set of economic and social questions that are of pressing interest for the entire world. Bhutan’s rugged geography fostered the rise of a hardy population of farmers and herdsmen, and [...]
Why Growth is Good
Economic growth is slowing in the United States. It’s also slowing in Japan, France, Britain, Italy, Spain, and Canada. It’s even slowing in China. And it’s likely to be slowing soon in Germany. If governments keep hacking away at their budgets while consumers almost everywhere are becoming more cautious about spending, global demand will shrink [...]
Angela Merkel: The World’s ‘Most Valuable Leader’
Forget Barack Obama. Forget the Hu Jintao/Wen Jiaboa duo, or David Cameron or Vladimir Putin. Germany’s Chancellor Angela Merkel is the world’s most important leader. The latest report showing Germany’s economy growing at a blistering annual rate of nearly 9%, well into recovery from a US-made economic collapse, is just further evidence of the obvious. Despite [...]
The Case for Public Investment
The fiscal crises now besetting several OECD countries risk replaying the long agony of over-indebtedness in Africa. In Africa the process was directly overseen by the IMF. Its model of debt sustainability implicitly assumed that public investment was entirely unproductive: this was the implication of the absence from the model of any link between public [...]
The Crisis Down Under
The Great Recession of 2008 reached the farthest corners of the earth. Here in Australia, they refer to it as the GFC – the global financial crisis. Kevin Rudd, who was prime minister when the crisis struck, put in place one of the best-designed Keynesian stimulus packages of any country in the world. He realized [...]
Running a permanent Fiscal Deficit?
Recently, The Independent ran a tabloid-style headline warning that the true UK net debt-GDP ratio was not 60% but a colossal 285%, a figure that includes new ONS estimates of future state pension and off-balance PFI obligations. Why is this misleading? Because if we count a stream of future obligations in the stock of current [...]
John Stewart Mill vs. the European Central Bank
One of the dirty secrets of economics is that there is no such thing as “economic theory.” There is simply no set of bedrock principles on which one can base calculations that illuminate real-world economic outcomes. We should bear in mind this constraint on economic knowledge as the global drive for fiscal austerity shifts into [...]
Economic Governance in Europe: A Change of Course only after ramming the Ice
The European Commission recently announced proposals to enhance economic policy coordination and strengthen EU economic governance (here). They start from the right premise: ‘the crisis has shown that they [economic policy coordination instruments] have not been used to the full and that there are gaps in the current governance system’. Concrete measures are proposed, all [...]
Europe’s Federalism Debate Revived
This issue is of persistent concern for investors worldwide. Holders of European government bonds believed that they knew what they had bought. Sure, there was no such thing as a eurozone sovereign security. But German, French, Spanish, and even Greek bonds all carried roughly the same interest rate, so they were deemed equivalent. Investors now [...]
The “Stimulus Debate” and the Golden Rule of Mountain Climbing
The global macroeconomy is at a juncture; some economists argue for continued fiscal stimulus to avoid a double dip recession while others argue for fiscal prudence. In this column, one of the world’s leading macroeconomists argues for continued stimulus combined with a plan to ensure long-run sustainability by reforming the funding of pension liabilities. The [...]
