Archive

We analyze shareholders’ incentives to change the leverage of a firm that has already borrowed substantially. As a result of debt overhang, shareholders have incentives to resist reductions in leverage that make the remaining debt safer.

Budget cuts can be dangerous. Inspired by the wrenching experience in Greece, increasing attention is now being paid to the fact that austerity may fail to reduce the government deficit if the economy declines in response, as is likely in a liquidity trap (Delong and Summers 2012).

A country that produces goods of high quality at a competitive price is likely to be rewarded for its ingenuity with a trade surplus. Small countries often achieve great development success through export-led growth. At the same time, the entire economic system must be balanced.

These are truly testing times. The world economic order – capitalism – is being called into question following the Lehman crisis. The world’s best form of societal organization – democracy – is being challenged by the economic success of autocratic countries such as China and Singapore.

When the very fabric of society is threatened by prolonged austerity or a financial sector collapse, a deliberate re-structuring of debt may be necessary to restore the hopes of renewed prosperity.

After an era of vigorous expansion a downturn can reveal a large stock of debt relative to the economy’s capacity to service it.

What has been learned now that the Euro zone’s fault lines have been revealed? Where are Europe and the Euro zone today?

INET’s Berlin Conference, “Paradigm Lost: Rethinking Economics and Politics,” opened yesterday and continues to receive enthusiastic coverage from both local and international press.

Just as the agricultural share of employment has fallen from 40% in the 1920s to less than 2% of the workforce in Europe today, manufacturing’s share of employment will fall to less than 5% of employment.

While yesterday presented a number of frontrunning scientists discussing current economics and state of the economy in general, academic terms, today starts with ECB executive board member Asmussen.

Behind all the technical language and the common theme of bashing bankers, there remains the Great Divide between Germans and the rest.

Mark Thoma offers a thorough, nuanced take on Roman Frydman’s theory of Imperfect Knowledge Economics (IKE) and George Soros’s ideas on the inability of people to predict the outcomes of financial and social change, which Soros calls “fallibility” and “reflexivity.”

On my way back home from the Brandenburger Tor, I recalled that I already have been there, it must have been in 1988.