September 4th, 2015
August’s Employment Report showed the unemployment rate fell to 5.1 percent and creation of 173,000 new jobs. Predictably, the decline in the unemployment rate has triggered calls for higher interest rates from Wall Street Hawks on grounds that higher core inflation is just around the corner. That is the same call we heard when the unemployment rate was much higher, and it is the same call we heard in the past two business cycles.
Federal Reserve policymakers should ignore the Hawks and stop being afraid of tight labor markets. In a market economy, that is the way workers get a raise. There is no reason for the Fed to rock the boat and risk confiscating the raise working families have waited for so long. That is the message this Labor Day weekend. Read the rest of this entry »
August 12th, 2015
An interview with Andrew Mazzone, President of the Board of Trustees, Henry George School of Social Science [VIEW HERE].
August 7th, 2015
This paper examines the major competing interpretations of the economic crisis in the US and explains the rebound of neoliberal orthodoxy. It shows how US policymakers acted to stabilize and save the economy, but failed to change the underlying neoliberal economic policy model. That failure explains the emergence of stagnation, which is likely to endure. Current economic conditions in the US smack of the mid-1990s. The 1990s expansion proved unsustainable and so will the current modest expansion. However, this time it is unlikely to be followed by financial crisis because of the balance sheet cleaning that took place during the last crisis. [READ MORE]
July 2nd, 2015
June’s Employment Report showed the economy continued to edge forward, driven by momentum. But the numbers were softer than expected. That should provide a clear yellow flag to those Federal Reserve policymakers who have expressed impatience to raise interest rates.
Though the headline unemployment rate fell to 5.3 percent, that decline masks underlying weakening of conditions. The fall in the unemployment rate is fully explained by a fall in labor force participation, and job creation was on the weaker side.
The economy created 223,000 jobs, which is below the twelve month average of 250,000. Furthermore, April and May job creation numbers were revised down by 60,000.
This relative weakness is also reflected in average hourly wages which were unchanged. A strong labor market should produce sustained wage gains significantly above inflation, but we have not yet seen that.
There are solid reasons for these mixed conditions. The strong dollar is encouraging imports and discouraging manufacturing job creation. Budget austerity continues to strangle public sector investment and public sector job creation. The strong dollar and budget austerity are policy failures we can, should and must fix.
June 8th, 2015
This paper examines several mainstream explanations of the financial crisis and stagnation and the role they attribute to income inequality. Those explanations are contrasted with a structural Keynesian explanation. The role of income inequality differs substantially, giving rise to different policy recommendations. That highlights the critical importance of economic theory. Theory shapes the way we understand the world, thereby shaping how we respond to it. The theoretical narrative we adopt therefore implicitly shapes policy. That observation applies forcefully to the issue of income inequality, the financial crisis and stagnation, making it critical we get the story right. [READ MORE]
May 20th, 2015
Hillary Clinton does not want to talk about past economic controversies. And it is easy to understand why. There is much that is troubling. But let’s not go along with her wishes. You can learn a lot by studying recent history and even more by watching how politicians react to that history. Read the rest of this entry »
May 12th, 2015
April’s Employment Report showed a gain of 223,000 jobs and a further one-tenth percent decline in the unemployment rate to 5.4 percent. The good news is the report shows the economy continues to nudge forward and create jobs for newcomers into the labor force. The bad news is the economy is not growing fast enough to raise wages. Read the rest of this entry »
March 11th, 2015
February’s employment report showed a gain of 295,00 jobs and a decline in the unemployment rate to 5.5 percent. The report is another in a string of strong employment reports, but it also contains depressingly familiar news about weak wage growth and millions of workers still short of work.
Read the rest of this entry »
January 27th, 2015
The Federal Reserve is a hugely powerful institution whose policies ramify with enormous effect throughout the economy. In the wake of the Great Recession, monetary policy focused on quantitative easing. Now, there is talk of normalizing monetary policy and interest rates. That conversation is important, but it is also too narrow and keeps policy locked into a failed status quo. There is need for a larger conversation regarding the entire framework for monetary policy and how central banks can contribute to shared prosperity. It is doubtful the US can achieve shared prosperity without the policy cooperation of the Fed. That makes understanding the Federal Reserve, the policy issues and institutional challenges, of critical importance. [READ MORE]
November 25th, 2014
Inspired by the work of Doctors Without Borders (Médecins Sans Frontières), I have recently started a project called Economists Without Borders (Economistes Sans Frontières). Its purpose is to inoculate the global economy against the virus of neoliberalism. Last week, I had two difficult “missions” to Vienna and Warsaw.
In Vienna, I confronted an outbreak of the neoliberal globalization – free trade strain of the virus. Without doubt, this is the most virulent and dangerous of all strains. People who get infected become blind to all evidence, deaf to all argument and prone to intellectual condescension. Massachusetts Avenue in Washington DC is a hot zone of infection. The bad news is that if you are over forty and infected it is doubtful you can be cured. However, younger patients have a chance of recovery. Here is the anti-viral I prescribed titled “The Theory of Global Imbalances: Mainstream Economics vs. Structural Keynesianism”.
In Warsaw, I confronted an outbreak of Milton Friedmanism which is one of the oldest strains of neoliberal virus. Friedmanism is a gateway virus that weakens defenses against other neoliberal strains and younger minds are particularly susceptible to it. The good news is that if diagnosed early there is a good chance of recovery. However, if treatment is delayed, intellectual ossification and closed-mindedness sets in. This ossification is almost always associated with inflation obsessive compulsive disorder and austerity fever. Here is the treatment I recommend titled “Milton Friedman’s Economics and Political Economy: An Old Keynesian Critique”.