Short version — reforms Greece is being told to make, and what it's getting on debt relief. uk.businessinsider.com/greece-europea… http://t.co/eNrXu47Elc—
Mike Bird (@Birdyword) July 13, 2015
The left-wing solution to Greek bankruptcy
10 Jul 2015 Leave a comment
in applied price theory, applied welfare economics, comparative institutional analysis, constitutional political economy, currency unions, fiscal policy, global financial crisis (GFC), income redistribution, liberalism, macroeconomics, Marxist economics, Public Choice, public economics, rentseeking Tags: Eurosclerosis, expressive voting, Greece, rational ignorance, rational irrationality, sovereign default
Real and Pseudo-Financial Crises, the Chinese share market crash and Anna Schwartz
09 Jul 2015 Leave a comment
in economic history, financial economics, fiscal policy, international economics, macroeconomics, monetarism, monetary economics Tags: Anna Schwartz, bank runs, banking panics, China, contagion, evidence-based policy, financial crises, financial stability, inflation targeting, international systemic risk, Michael Bordo, monetary history, pseudo financial crises, pseudo international systemic risk
If we could take time out from the breathless journalism about the Chinese stock market, which some people may have heard of before this week, it’s crash should be seen through the lens that Anna Schwartz developed in 1987 of a pseudo financial crisis and a financial crisis.
This is why so many Chinese companies are suspended bloom.bg/1UA7TbA http://t.co/5awEt6B23u—
Bloomberg Business (@business) July 08, 2015
Her paper is written at the same time as the 1987 stock market crash. On financial crises, Anna Schwartz said:
As for those pseudo financial crises, she said:
Schwartz’s principal concern with regard to pseudo financial crisis was:
proposals to deal with pseudo-financial crises is the perpetuation of policies that promote inflation and waste of economic resources
As we are talking about the Chinese stock market, Anna Schwartz also wrote about the concepts of real systemic international risk and and pseudo international systemic risk.
Once again, and as with pseudo financial crises and real financial crises, what distinguishes real systemic international risk and pseudo international systemic risk is a threat to the payment system. The threat of bank runs, which can easily be eliminated through lender of last resort facilities:
As always it is about the security of the payments system – of avoiding bank runs, not private losses:
The lesson for the day is that when people start panicking about the economy or the stock market or international markets, don’t go to a macroeconomist for advice, go to a monetary historian. They have seen it all before.
Why Greece joined the Euro
06 Jul 2015 Leave a comment
in applied price theory, applied welfare economics, budget deficits, business cycles, comparative institutional analysis, constitutional political economy, currency unions, economic growth, economic history, Euro crisis, fiscal policy, fisheries economics, global financial crisis (GFC), international economics, macroeconomics, Public Choice, rentseeking Tags: Euro sclerosis, Greece, insurance attacks, sovereign defaults, speculative attacks
The roots of Greece’s crisis are simple. Before Greece joined the Eurozone, investors treated it as a middle-income country with poor governance — which is to say, a credit risk.
After Greece joined the Eurozone, investors thought that Greece was no longer a credit risk — they figured, if push came to shove, other Eurozone members like Germany would bail Greece out. They were wrong.
Michael Dooley put forward a theory of speculative attacks on currencies as insurance attacks on currencies for emerging markets after the East Asian financial crisis:
First generation models of speculative attacks show that apparently random speculative attacks on policy regimes can be fully consistent with rational and well-informed speculative behaviour.
Unfortunately, models driven by a conflict between exchange rate policy and other macroeconomic objectives do not seem consistent with important empirical regularities surrounding recent crises in emerging markets. This has generated considerable interest in models that associate crises with self-fulfilling shifts in private expectations.
In this paper we develop a first generation model based on an alternative policy conflict. Credit constrained governments accumulate reserve assets in order to self-insure against shocks to national consumption. Governments also insure poorly regulated domestic financial markets.
Given this policy regime, a variety of internal and external shocks generate capital inflows to emerging markets followed by successful and anticipated speculative attacks.
We argue that a common external shock generated capital inflows to emerging markets in Asia and Latin America after 1989. Country specific factors determined the timing of speculative attacks. Lending policies of industrial country governments and international organizations account for contagion, that is, a bunching of attacks over time.
His model was not within the context of a currency union but his basic theory is correct.
There are speculative attacks on a currency or a bank run after foreign markets revises their estimates of the available central bank reserves and international lines of credit to bail out the banking systems and/or foreign debt.
Michael Dooley was dealing with the emerging economies of Southeast Asia and their official lines of credit that insure their foreign exchange liabilities and domestic banking system. Greece is about lines of credit for similar purposes to other European union member states.
via 12 charts and maps that explain the Greek crisis – Vox and The Most Important Graphs of 2011 – The Atlantic.
The reason why New Zealand should rule out helping Greece!
06 Jul 2015 Leave a comment
in budget deficits, business cycles, currency unions, economic growth, Euro crisis, financial economics, fiscal policy, global financial crisis (GFC), macroeconomics Tags: bank runs, banking panics, Eurosclerosis, Germany, Greece, sovereign defaults
Greece is a tiny part of the European economies so it doesn’t matter that much to the rest of the European Union what happens to Greece. The only people will notice the sovereign default of Greece once the breathless journalism has died down are Greeks themselves as they rebuild their banking and monetary system against a background of a government run by coffee shop Marxists.
Greece in 7 charts
06 Jul 2015 3 Comments
in budget deficits, business cycles, currency unions, economic growth, Euro crisis, fiscal policy, labour economics, labour supply, macroeconomics, unemployment Tags: Eurosclerosis, Greece
The extreme economic outlier that is Greece, in 7 charts: 53eig.ht/1GMgIFU http://t.co/gb3zkgUqqJ—
(@FiveThirtyEight) July 04, 2015
John Oliver’s 3-minute explanation of Greece’s crisis
30 Jun 2015 Leave a comment
in currency unions, Euro crisis, fiscal policy Tags: Euroland, Greece, sovereign defaults
The Puerto Rican sovereign default explained
30 Jun 2015 Leave a comment
in economic growth, fiscal policy, international economic law, politics - USA, population economics Tags: ageing society, economics of immigration, Puerto Rica, sovereign defaults
Puerto Rico's debt is nearly half that of California for a population one-tenth the size on.wsj.com/1Kj5XPZ http://t.co/nM2aM8kWtP—
Nick Timiraos (@NickTimiraos) June 29, 2015
Gambling for Redemption and Self-fulfilling Debt Crises in the Eurozone
29 Jun 2015 Leave a comment
in business cycles, currency unions, economic growth, Euro crisis, fiscal policy, global financial crisis (GFC), international economic law, international economics, macroeconomics Tags: game theory, Greece, Patrick Kehoe, sovereign default
Tom Sargent keynote address Emergency Economic Summit for Greece (1 June 2015)
26 Jun 2015 Leave a comment
in comparative institutional analysis, constitutional political economy, currency unions, Euro crisis, fiscal policy, macroeconomics, monetary economics Tags: EU, Euroland, Greece, sovereign borrowing, sovereign defaults, Thomas Sargent
Who taxes average workers most out of Australia, New Zealand, the USA and UK?
23 Jun 2015 Leave a comment
in fiscal policy, macroeconomics, politics - Australia, politics - New Zealand, politics - USA, population economics, public economics Tags: Australia, British economy, New Zealand, taxation and the labour supply
Figure 1: Direct taxes on the average worker in Australia, New Zealand, USA and UK, 2001 – 2012
Source: OECD Factbook 2014
Taxes on the average worker measure the ratio between the amount of taxes paid by the worker and the employer on the country average wage and the corresponding total labour cost for the employer. This tax wedge measures the extent to which the tax system on labour income discourages employment.
The taxes included in the measure are personal income taxes, employees’ social security contributions and employers’ social security contributions. For the few countries that have them, it also includes payroll taxes. The amount of these taxes paid in relation to the employment of one average worker is expressed as a percentage of their labour cost (gross wage plus employers’ social security contributions and payroll tax).
An average worker is defined as somebody who earns the average income of full-time workers of the country concerned in Sectors B-N of the International Standard Industrial Classification (ISIC Rev. 4). The average worker is considered single without children, meaning that he or she does not receive any tax relief in respect of a spouse, unmarried partner or child.
Who is where on the Laffer curve?
20 Jun 2015 Leave a comment
in economic growth, fiscal policy, human capital, labour economics, labour supply, macroeconomics, politics - USA, public economics Tags: endogenous growth theory, EU, Eurosclerosis, laffer curve, optimal tax theory, taxation and entrepreneurship, taxation and investment, taxation and the labour supply
@asymmetricinfo paper:"How Far Are We From The Slippery Slope? The Laffer Curve Revisited" bit.ly/1HMhmqu http://t.co/D9IffNhd92—
Old Whig (@aClassicLiberal) April 20, 2015
If You’re A Keynesian Then You Must Believe The Minimum Wage Increases Unemployment
14 Jun 2015 Leave a comment
in business cycles, fiscal policy, labour economics, macroeconomics, minimum wage Tags: Bryan Caplan, economic fallacies, involuntary unemployment, Keynesian macroeconomics, methodology of economics, wage rigidity
Via If You’re A Keynesian Then You Must Believe The Minimum Wage Increases Unemployment and The Myopic Empiricism of the Minimum Wage, Bryan Caplan | EconLog | Library of Economics and Liberty.
Utopia, you are standing in it! 
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