Finance

Neoclassical economics dismisses the role of money and the state in the economy. Keynes scholar Robert Skidlesky says it’s time for a re-evaluation.

What did societies and politicians learn from the crash? What have been theoretical achievements in orthodox and heterodox economic thinking since then? Where do we go from here?

The current international monetary system is costly, unfair, and risky. “Economic nationalism” and deregulation in the U.S. will make it worse. A multilateral alternative is needed.

The YSI Economics of Innovation, Economic Development and Africa Working Groups, in partnership with Global Network for Economics of Learning, Innovation and Competence Building Systems (GLOBELICS), Globelics Alumni, are organizing the 1st GLOBELICS Pre-Conference for Young Scholars entitled ‘Financing of Innovation and Infrastructure for Development’.

Reactions to the size of the proposed plan rely on discredited assumptions and betray a fundamental misunderstanding of economic growth—and austerity 

“We don’t look after each other at all,” says Jeffrey Sachs on America today

Ten years after the crisis, financial regulation leaves taxpayers holding the bag for banks’ safety net.

This paper concerns itself with the joint effect of implicit subsidies that are built into the US housing-finance system and financial safety net.

“You never want a serious crisis to go to waste. …This crisis provides the opportunity for us to do things that you could not before.” This YSI Webinar and Reading Group aims to contribute to the historicization of the Global Financial Crisis of 2008 and its repercussions.

Back in 2008, a critical opportunity was missed when the burden of post-crisis adjustment was tilted heavily in favor of creditors relative to debtors. The result was not only prolonged stagnation, but also the Republican Party’s embrace of demagogic populism and the election of Donald Trump.

A financial industry safety net enriches bankers and their shareholders — at our expense

George Soros and Rob Johnson Discuss the Causes and Consequences of the 2008 Financial Crisis

Ten years after Lehman Brothers’ collapse, the Wall Street casino is running amok

In 2008 a global financial meltdown was just barely contained. But Adam Tooze says that the crisis of confidence has had long aftershocks

Distracted by the perceived threat of a Chinese savings glut, mainstream macroeconomists missed the writing on the wall of the 2008 crisis

Both before 2008 and today, there’s a disturbing tendency in Washington to not take mortgage fraud seriously

Despite disparate policy beliefs, MMT and orthodox macro rely on many of the same theoretical foundations

10 years later, Nobel laureate George Akerlof says the walls within economics need to come down

Ten years ago, the financial crisis washed away faith and trust in economics as a guide to social prosperity. Filling a void is difficult. We are still hard at work. 

It’s not just Turkey­—from India to Indonesia, external financial liabilities are a looming threat

In China, the government uses the purses strings of state-owned enterprises to control social unrest

Using datasets on transactions within business groups and social sentiment in China, I show that state-owned enterprises (SOEs) use internal funds to address social unrest, complying with the government’s political goals.

The anthropologist David Graeber has argued that as much as 30% of all work is performed in “bullshit jobs,” which are unnecessary to produce truly valuable goods and services but arise from competition for income and status. But the deeper problem is that more and more economic activity performs a merely distributive function.

INET Global Commissioner Peter Bofinger breaks down cryptocurrencies, and why they’re actually far from “anonymous”

State-issued digital money may avoid some pitfalls of cryptocurrency, but it’s no financial panacea

Dennis Kelleher of Better Markets explains how we can stop the financial industry from gaming Washington

To understand the rise of the League and 5 Star Movement, look at economic indicators

This paper explains how hedge-fund activists are exerting power over corporate resourceallocation far in excess of the actual voting power of their shareholdings.

Places hit hardest by austerity cuts were more likely to vote for UKIP and Leave

James Galbraith says academic economics is in need of radical reform

Clear rules and sound principles for debt restructuring would level the playing field between developing countries and creditors

The social and medical sciences depend on randomised control trials – though they face more assumptions and biases than commonly thought.

Was Martin Luther King a socialist? New book may surprise you.

This three-day summer academy and annual meeting of the Finance, Law, and Economics Working Group aims to bring together graduate students and young professionals pursuing careers in international economic law. By learning from prominent academics and practitioners in the field, participants will develop the fundamental skills to handle multi-jurisdictional and interdisciplinary issues, while broadening their networks. After successful attendance, YSI FLE will issue the corresponding certificates.

Matias Vernengo explains how economic crises reveal the nakedness of neoliberal policies

Fast Company covers Michael Greenberger’s paper for INET on how banks evade regulation of credit default swaps

YSI is hosting sessions at the 2018 STOREP conference.

Fred Block says capitalism is not an unchanging monolith—which means we can make it better

When politics is defined in terms of “populism” vs. “the mainstream,” the possibility for real economic reform is diminished.

70 years ago today, Edward A. Tenenbaum helped pull off an astounding feat—successfully reforming Germany’s currency after World War II

Michael Greenberger says unregulated credit default swaps could take down the economy—and taxpayers—again

By evading regulation of credit default swaps, the major U.S. banks put taxpayers—and the entire economy—at risk

Converting an Obscure Agency Footnote into an “At Will” Nullification of Dodd-Frank’s Regulation of the Multi-Trillion Dollar Financial Swaps Market

In a complex world, we’ll experience more “black swans”, and the things that standard economic models assumed away will matter much more.

A change in macroeconomic policies will not be sufficient to set Argentina on a path of inclusive and sustained economic development. But, as last month’s currency scare showed, abandoning the approach adopted by President Mauricio Macri’s administration at the end of 2015 is a necessary step.

In “celebration” of the late Pete Peterson’s 92nd birthday (see guest list), an excerpt from 19th Century historian Lord Macaulay’s History of England, on hundreds of years of unwarranted panic about government debt.

The “dean of short sellers” says bitcoin is the last thing he’d want to own in the event of a catastrophe.

In a memo for the G20, INET calls for changes to the evaluation of economic research to ensure that economic theory—and policy—is more rigorous, innovative, and in service to society. 

Introducing INET’s body of work on dysfunctions in research evaluation, Rob Johnson shows how breaking academic conformity is vital for the economics profession—and the economy itself.

Has the global financial crisis of 2007 had a visible impact on the economics profession?

With growth fueled by an increase in debt, Argentina is facing an uncertain economic future, despite investors’ generally rosy view. The government of Mauricio Macri has options to address the country’s macroeconomic risks, but none of them will be free of tough choices.

Newspapers consistently underplay wide public support for higher taxes on businesses and the wealthy

Over the last four decades, Americans have consistently told pollsters that they favor higher taxes on business and the wealthy, even as tax policy has moved sharply in the other direction.

The BRICS countries—Brazil, Russia, India, China, and South Africa—play a crucial and growing role in the world economy. Sanjay Reddy kicks off our series exploring shifting social and economic dynamics within these countries, and what they mean for the global economy.    

The INET YSI Financial Stability working group (WG) is organising a workshop as part of the Rethinking Finance Conference in Oslo at the Norwegian Business School BI on April 14th, 2018.

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What 200 Years of Government Interventions in Financial Markets Can Tell Us

As the U.S. Congress works to undo financial regulation, INET reflects on the lessons of the Bear Stearns bailout

From the Archives: In the wake of the Bear Stearns bailout in 2008, INET Research Director Tom Ferguson and President Rob Johnson say taxpayers rescuing banks are owed their due: “If the public is going to pay for [bailouts]… it should also get paid back for them.”

Unregulated, speculative lending markets nearly brought down the global financial system 10 years ago. Now, Western banks are exporting this failed model to the developing world.

Ten years ago when Bear Stearns crashed, the Fed decided to bail out first, ask questions later. It was a mistake that set a bad precedent.

Banks are pushing for deregulation and roll backs of Dodd-Frank’s regular check-ups on their financial health. We should be worried. 

In the face of  laissez-faire capitalism at home and resurgent nationalism across the globe, INET offers an innovative look at the causes of—and solutions for—the problems that ail a fissuring world economy.

The objective of the conference is to exchange perspectives on the risks posed by financial networks, and the role these networks play in the well-functioning of the real economy. 

Banks have long had undue influence in society. But with the rapid expansion of a financial sector that transforms all debts and assets into tradable commodities, we are faced with something far worse: financial markets with an only abstract, inflated, and destabilizing relationship with the real economy. To prevent another crisis, finance must be domesticated and turned into a useful servant of society. 

Contrary to the neoclassical model’s assumptions, shifts in aggregate demand have persistent effects on GDP

The prevailing wisdom that aggregate demand ‘shocks’ determine short-run cyclical fluctuations around a supply-determined equilibrium growth rate and an associated equilibrium unemployment rate (or NAIRU) has been called into question by various streams of literature in the last decades. Specifically, a recently revived literature on hysteresis finds significant persistence in the effects of recessions and negative aggregate demand shocks (Blanchard et al. 2015; Martin et al. 2015).

Over the next year, the Bitcoin price could double, soar tenfold, or collapse by 95% or more, and no economic analysis can help predict where in that range it will lie. Like other cryptocurrencies, Bitcoin serves no useful economic purpose, though in macroeconomic terms, such currencies probably also do little harm.

The U.S. presidential election of 2016 featured frontal challenges to the political establishments of both parties and perhaps the most shocking election upset in American history.

Note: As of March 2019, the Imperfect Knowledge Economics(IKE) Program has been re-launched as the INET Program on Knightian Uncertainty Economics (KUE). Please see the KUE page for updates on this body of work.

Contrary to conventional wisdom, government stimulus can improve the health of the economy for years after, without inflationary side effects 

Forget the myth of a savings glut causing near-zero interest rates. We have a shortage of aggregate demand, and only public spending and raising wages will change that.

Summers discusses inequality, the GOP tax plan, and our economic future

Servaas Storm’s commentary on the papers presented at the secular stagnation conference.

Inequality isn’t driven by taxes—it’s driven by the power of capital in relation to workers

The past 30 years has witnessed a worldwide decrease in real interest rates. We demonstrate that a large part of the fall in interest rates can be explained by changes in demography, which are as the result of a sudden fall in fertility rates across all of the advanced economies in the early 1970s.

We examine the hypothesis that the slowdown in productivity following the Great Recession was in significant part an endogenous response to the contraction in demand that induced the downturn.

The concern that an economy could experience persistent, and in some sense unusual, weakness goes back to Keynes’s General Theory and led Alvin Hansen to coin the term “secular stagnation.”

This paper shows that aging has positive effect on output growth per capital at positive interest rates, due to capital deepening.

We provide a Keynesian growth theory in which pessimistic expectations can lead to very persistent, or even permanent, slumps characterized by high unemployment and weak growth.

I have read the various conference papers and am struck by the fact that many use the (omnipresent New-Keynesian) model of an aggregate loanable funds market to diagnose secular stagnation and investigate possible remedies.

This paper answers fundamental questions that have preoccupied modern economic thought since the 18th century.

Long-term real interest rates across the world are low, having fallen by about 450 basis points (bps) over the past thirty years.

This paper replaces an earlier version of a paper released in 2014 under the title “A Model of Secular Stagnation.”

Distinguished Scholars Including Larry Summers and Adair Turner Present Evidence of the Trend and Policy Solutions

A discussion with Steven M. Fazzari, INET Grantee and the Bert A. & Jeanette L. Lynch Distinguished Professor of Economics, Washington University.

The World Economic Roundtable seeks to help the business, investment, and policy communities understand ongoing changes in the world economy and to promote a discussion of ideas that can advance the goal of a widely shared global prosperity.

Are regulatory interventions delayed reactions to market failures or can regulators proactively pre-empt corporate misbehavior?

The Implications of Xi’s Belt and Road Initiative for China and the World Economy

The 2008 financial crisis was a shock to faith in entirely free financial markets. But the neoliberal assumptions underlying the previously dominant “Washington Consensus” continue to inform much Western commentary on China’s economy.

The Young Scholars Initiative will be hosting a group of young scholars to attend the meetings and discussions in and around UNCTAD International Debt Management Conference of 2017.

The 21 FMM conference of the The Macroeconomic Policy Institute (IMK) will take place in Berlin on 9-11 November 2017.

How Germany, the EU and the economics field itself suffer from myopia—and what we can do about it

Not just an American dilemma: is political money in dual economies the biggest problem of all?

One might think of the satisfied consensus reigning in macroeconomics before the financial crisis (and still relatively entrenched) as evidence of “Groupthink” in a “Divided State”

The consensus that reigned in macroeconomics before the financial crisis has come under renewed attack.