Paul Jay: In China in June, leaders of the Chinese Communist Party said that it’s time for workers’ wages to go up. And there’s been a lot of discussion about whether China’s actually restructuring its economy to try to boost domestic demand. Certainly in what leaders say in other parts of the world they […]
Geography Archives: Japan
Bolivia: Social Tensions Erupt
Recent scenes of roadblocks, strikes, and even the dynamiting of a vice-minister’s home in the Bolivian department (administrative district) of Potosi, reminiscent of the days of previous neoliberal governments, have left many asking themselves what is really going on in the “new” Bolivia of indigenous President Evo Morales. Since July 29, the city of Potosi, […]
Can You Recruit Your Republican Friend to Oppose the Permanent War?
Campaigning for the Democratic Presidential nomination in 2008, Senator Barack Obama said: “I don’t want to just end the war, but I want to end the mindset that got us into war in the first place.” But as Andrew Bacevich notes in his new book, Washington Rules: America’s Path to Permanent War, as President, Barack […]
Debt and GDP Growth: Reinhart and Rogoff, One More Time
Our friends at the Economic Policy Institute have already done a pretty good job burying the claim from Reinhart-Rogoff that high ratios of debt to GDP will lead to lower growth, but in DC, no bad theory stays dead for long. With that in mind, let’s throw a little more dirt on the grave. The […]
Economic Recovery for the Few
Where is this elusive recovery? The banks, some say, have “recovered.” Yet they remain dependent on Washington, they do not make the loans needed for a general recovery, and many medium and small banks keep collapsing. The stock market shows no recovery. The Dow index was 14,000 in late 2007 when capitalism hit the fan, […]
Export Dependence and Sustainability of Growth in China and the East Asian Production Network
Excerpt: [T]he conventional growth accounting based on the national income identity does not provide an adequate framework for assessing the contribution of components of demand to growth. The standard exports/GDP ratio overestimates the income (value-added) generated by exports because it ignores the foreign (import) contents of exports, which tend to be particularly high in […]
Greece and the IMF: Who Exactly Is Being Saved?
Excerpt: Importantly, the initial collapse and following standstill in economic activity and nominal levels of GDP is also extremely bad news for the strategy of fiscal consolidation itself. On the one hand, to keep on servicing interest payments (see above), nominal debt will continue to go up. On the other hand, nominal GDP goes […]
Kenneth Rogoff Is Wrong on Debt and Deficits
In much of the world, including the United States and Europe, a debate is taking place about whether the government’s first responsibility should be to reduce unemployment — which is at elevated levels — or to reduce government deficits and debt. Many of the arguments for deficit reduction are simplistic, based on ignorance, or ideologically-based. […]
Alternatives to Fiscal Austerity in Spain
Executive Summary: This paper looks at the planned austerity measures in Spain, the rationale for the spending cuts and tax increases, likely outcomes for future debt-to-GDP ratios, and the probable results of alternative policies. It is widely believed that Spain got into trouble because of the over-expansion of government spending. However, during the economic expansion […]
The Fed Can Just Hold Mortgage-Backed Securities, Reducing Interest Burdens
The NYT portrayed the Fed as facing a serious dilemma in dealing with its portfolio of mortgage-backed securities (MBS). It argued that it can either start selling them now and risk slowing the economy or wait until the economy has recovered more and risk losing money by selling them in a higher inflation environment. There […]
The Myth of Conflict-Free Diamonds
The issue of “blood diamonds” has once again made the news: Farai Maguwu, Director of Zimbabwe’s Mutare-based Centre for Research and Development (CRD), languishes under the long arm of Zimbabwe’s laws on alleged charges related to his research on Zimbabwe’s Marange mines. According to a confidential 44-page report produced by investigators mandated by the Kimberley […]
The Merkel Model Spreads to Japan
The European public debt crisis, artificially created by the puritan obtuseness of German Chancellor Angela Merkel, has spread to even Japan. In fact, Naoto Kan, the new prime minister, mentioned Greece in a speech in which he claimed to fear the collapse of the Japanese economy under a heavy public debt equal to 230 percent […]
Oil Makes Its Own Laws: Self-regulation and Flags of Convenience
The system under which offshore drilling rigs, and now oil tankers, operate was set up at the end of the second world war to ensure that the US was supplied with the cheapest possible oil without having to consider, or pay for, the consequences. The offshore drilling company Transocean celebrated the explosion on the Deepwater […]
The Dollar Question: Where Are We?
The global crisis has led some to question the dollar’s place as the dominant currency. This column discusses three camps in the literature: those advocating a new synthetic global currency, those arguing that a new reserve currency will emerge, and those suggesting a return to sharing the role. It concludes that talk of the […]
Sanctions against Iran and the Next War
In his History of the Peloponnesian War, Thucydides relates how Pericles, in the fifth century BC, imposed economic sanctions against the city of Megara, which had allied itself with Sparta. Athens prohibited trade with this city state and sent a message: if Megara did not break its alliance with Sparta, it would be punished. Megara […]
Capitalism’s Self-Destructive Spontaneity
Under the Gold Standard the values of different currencies were fixed in terms of gold, which meant that the exchange rates between those currencies were fixed. Exchange rate movements therefore could not be used to enlarge net exports and hence domestic employment. At the same time governments were committed to the principle of “sound finance”, […]
United against Us, Divided among Themselves: Toronto and European Assault on Living Standards
Martin Wolf described it as “a bloodbath.” The Financial Times editorial called it a “chilling read.” Britain’s budget is one of austerity, the likes of which has not been seen in generations. A 25 per cent cut in public spending; a quarter of a million or more public sector jobs to be slashed. It […]
Robert Samuelson: Economics Is Hard
That seems to be the main point of Robert Samuelson’s column today. It might be a bit easier with a bit more careful thought. For example, Samuelson tells readers that the debt burdens of major countries are rapidly approaching “financial and psychological limits” that prevent further fiscal stimulus. He then cites the 92 percent debt […]
The Great China Currency Debate: For Workers or Speculators?
Everyone is talking about China’s currency, it seems. Amidst months of building tension, there is an apparent consensus among most economists, the financial press, and leading economic policy makers in the West that the renminbi is hugely undervalued, making China’s exports unfairly competitive. The global imbalances created by such ‘mercantilist’ and ‘protectionist’ exchange rate strategies, […]
You Can’t Eat a Collateralized Debt Obligation: Why Money Doesn’t Make the World Go Round
The global financial crisis that began in 2007 was clearly about money, credit, and finance. For mainstream economists and politicians — from neoliberals like John B. Taylor at Stanford and Tony Abbott, through pragmatists like Barack Obama and Australian prime minister Kevin Rudd, to Keynesians and social democrats like Paul Krugman at Princeton and John […]
