Credit Writedowns Sat 2010-05-22 20:55 EDT

MMT: Yes Virginia, There is a Difference Between Greece and the US

Marshall Auerback

...The cries of the deficit hawks grow louder: Repent all ye fiscal profligates, before the ``day of reckoning'' comes. Let's dial down the Biblical hysteria a wee bit while there's still time for rational debate. The market's recent response to the intensifying pressures in the euro zone suggests that investors are beginning to differentiate between countries that are sovereign issuers of currency, such as the US or Japan, and non-sovereign issuers, such as Greece or any other nations in the euro zone...That the US has the reserve currency is an irrelevant consideration here. The key distinction remains user vs. creator. The euro zone nations are part of the former; Canada, Australia, the UK, Japan and the US are representatives of the latter...Using ``PIIGS'' countries as analogues to the US or the UK, as Rogoff, Ferguson and countless other commentators do, is wrong. Their faulty analysis comes as a result of the deficit critics' failure to distinguish between the monetary arrangements of sovereign and non-sovereign nations. Any sovereign government (none within the EMU enjoy that status any longer) can deal with a collapse in revenue and an increase in outlays from a financial perspective without invoking the sort of deadlocks that are now crippling the EMU zone...Trying to engineer a reduction in the deficit via austerity programs (or freezes or whatever else one might like to call them) at a time when private spending is still insufficient to maintain adequate real GDP growth is a recipe for disaster. It will increase the deficit...

credit writedowns; different; Greece; MMT; Virginia.

Wed 2010-05-19 11:56 EDT

billy blog >> Blog Archive >> When you've got friends like this ... Part 3

...how limiting the so-called progressive policy input has become. One could characterise it as submissive and defeatist. But the main thing I find problematic is that its compliance is based on faulty understandings of the way the monetary system operates and the opportunities that a sovereign government has to advance well-being. Progressives today seem to be falling for the myth that the financial markets are now the de facto governments of our nations and what they want they should get. It becomes a self-reinforcing perspective and will only deepen the malaise facing the world...When the neo-liberals cry about the burdens of the public deficits that the future generations will have to bear they are talking nonsense. The actual burden we are leaving for our children and their children is the dead-weight losses of real income and the opportunities that that income would have provided them...

Billy Blog; blogs Archive; friends; Part 3.

Sun 2009-09-20 14:12 EDT

America's Exhausted Paradigm: Macroeconomic Causes of the Financial Crisis and Great Recession | The New America Foundation

Thomas Palley

This report traces the roots of the current financial crisis to a faulty U.S. macroeconomic paradigm. One flaw in this paradigm was the neo-liberal growth model adopted after 1980 that relied on debt and asset price inflation to drive demand. A second flaw was the model of U.S. engagement with the global economy that created a triple economic hemorrhage of spending on imports, manufacturing job losses, and off-shoring of investment. Deregulation and financial excess are important parts of the story, but they are not the ultimate cause of the crisis. Instead, they facilitated the housing bubble and are actually part of the neo-liberal model, their function being to fuel demand growth based on debt and asset price inflation. The old post-World War II growth model based on rising middle-class incomes has been dismantled, while the new neo-liberal growth model has imploded. The United States needs a new economic paradigm and a new growth model, but as yet this challenge has received little attention from policymakers or economists.

America's Exhausted Paradigm; Financial Crisis; Great Recession; Macroeconomic Causes; New America Foundation.