May 2012

What’s Wrong with the Eurozone?

As the crisis grows worse by the week, Paul de Grauwe has a few answers. In his working paper titled "The Governance of a Fragile Eurozone" De Grauwe suggests that the nature of Europe’s currency union means that financial markets can force eurozone countries’ sovereigns into default, something that is unlikely to happen with countries that control their own currencies. Read more

Director's Chair: John Mauldin - The European Debt Endgame

In this five-part INET “From the Director’s Chair” interview, INET Executive Director Robert Johnson talks with financial commentator John Mauldin about Mauldin’s new book Endgame: The End of the Debt Supercycle and How It Changes Everything.

Mauldin says that we’re facing “a fundamental restructuring in Europe.” And what’s more, “it’s not just Greece.”  Mauldin suggests that Europe faces three fundamental problems: sovereign debt, insolvent banks, and trade imbalances. “All three have to be solved for Europe to be made workable,” he says.

Can Europe save itself?

 

Part 1 - The European Debt Endgame

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All in the Family: Why Greece Can’t Cut Ties with Europe

“The important question for Europe now is how it sees itself,” says Irish economist and INET grantee Stephen Kinsella in Read more

INET Spotlight - Credit is What Credit Does: Finance and Economic Growth Uncoupled

Contrary to conventional wisdom economics is not about money.

“The cutting edge models have no banking sectors at all,” says Dutch economist and INET grantee Dirk Bezemer. “Models that central banks use have no banks. Just let that sink in.”

Bezemer has conducted a careful analysis of the financial sector that provides a much-needed change from the usual macroeconomic models. In his recent presentation at INET Berlin, Bezemer gave an in-depth explanation of how to create a socially useful financial system. Read more

A challenge to dollar domination?

 

FT Alphaville uses a Lord of the Rings metaphor to describe the state of global currencies.

“One reserve currency to rule them all.”

But in the wake of a new working paper from Berry Eichengreen and co-authors Livia Chitu and Arnaud J. Mehl, the blog is asking, “But does it need to be this way?” Read more

Stephen Kinsella: A “nutter in a balloon” gives you perspective

Stephen Kinsella has some advice for economists: “Sometimes, all you need is a nutter in a balloon to change your perspective. And perspective is everything.”

Using Nobel prize winning physicist Victor Hess’s famous hot-air balloon trip as a model, INET grantee Kinsella takes readers through the different levels of the European crisis, from the ground-level view of banks and the private sector up through the “10,000 feet” panorama of supranational institutions and global superpowers. Read more

Johnson OECD Op-Ed Calls For Financial Architecture Fix

What’s wrong with our economic recovery?

In his new op-ed in the OECD Observer, INET Executive Director Robert Johnson cuts right to the chase. We’ve got our economics wrong.

“Our economic thinking has been revealed to be unsound in recent years,” Johnson writes. “In fact, it has been distorted by the overwhelming power of vested interests in the financial sector. This is now quite evident.” Read more

Sen Warns of Europe’s Well-Meaning Mistakes

“If proof were needed of the maxim that the road to hell is paved with good intentions, the economic crisis in Europe provides it.”

So says Nobel laureate and INET Advisory Board member Amartya Sen in his recent New York Times op ed.

The current austerity policy in Europe may be well-intentioned, Sen writes, but it’s interfering with “a more urgent priority…the preservation of a Democratic Europe.” Read more

China’s RMB Exodus

As we watch the slow-motion dissolution of the Greek and Spanish banking systems, and possibly the euro zone itself, tremors are being felt elsewhere in the global financial system.

For example, the FT Alphaville blog has a post on the emerging dollar shortage in China, where capital outflows are growing at a time when capital inflows are drying up. Read more

Director's Chair: Jeff Sachs - The Price of Civilization

From the Director’s Chair: INET Executive Director Robert Johnson talks with Jeffrey Sachs about Sachs’s book The Price of Civilization: Reawakening American Virtue and Prosperity. Read more