Consider the travails of the euro-area in terms of the macroeconomic policy trilemma (1/). Here is the framework: i. Balance of payments trouble when external credit dries up (sudden stop) ==> solvency threat via banking system and sovereign debt via lender-of-last-resort / contingent debt. ii. Maintenance of the existing monetary order (the system of irrevocably […]
Category Archives: Uncategorized
Framework for understanding the euro-area crisis
As a macro framework for analysis, consider the travails of the euro-area in terms of the macroeconomic policy trilemma (1/). Here is the framework: i. Balance of payments trouble when external credit dries up (sudden stop) ==> solvency threat via banking system and sovereign debt via lender-of-last-resort / contingent debt. ii. Maintenance of the existing […]
Intelligence squared debate: On the role of government in a recession.
The website is http://intelligencesquaredus.org/. Nouriel Roubini comes out very well in this. Thank God he is on this panel. Laura Tyson engages with the supply-siders on their own terms — “the government must balance its books, just like households do” (I am paraphrasing). The job of a well-trained and well-historied economist is to explain exactly the falsity […]
Update on euro-area periphery adjustment
Greece Ireland Italy Portugal Spain Inflation (HICP)Feb 2011 4.2 0.9 2.1 3.5 3.4 Labour costs2010q4 -6.6 -3.1 1.8 4.2* -0.8 REER (BIS)Jan 2011 -0.8 -5.9 -4.5 -1.5 -2.6 sources: Eurostat; national authorities. all figures are percent y/y* 2011q1. Note:euro (vs usd) change Jan2011/Jan2010 is -4.0%.euro (NEER; BIS) change Jan2011/Jan2010 is -7.8%. Since this issue is […]
USA risk: Alert – Fed could surprise markets with further easing in 2011
My article on the prospect of an unexpected Fed easing in 2011H2 is now available on the EIU ViewsWire.
Central bank orthodoxy is under threat
My new article on QE is freely available from the Economist Intelligence Unit’s “Views Wire”: Central bank orthodoxy is under threat.
Four points against the conventional wisdom
1. Eurozone breakup is bullish. The conventional wisdom sees eurozone breakup as calamitous. This view has even been supported by scholars who should know better. In my private discussions with “2nd tier” scholars (i.e. people well below the radar), our only conclusion is that these high-profile scholars are trapped. They’re in a predicament familiar to […]
Reconsidering the American strip mall
This image and the text that follows are taken from Erik Hancock’s proposal to the Terreform ONE design competition for creating productive green space in cities, sponsored by the City of New York Parks and Recreation office and the American Society of Landscape Architects. This part of his proposal is called ‘Reconsidering the American strip mall‘ […]
Risk of unilateral default/devaluation (crude but intriguing)
Indicator Change between 2009 and 2010, % row variable proxy Greece Ireland Italy Portugal Spain a Growth outlook real-effective exchange rate* -0.3 -6.9 -3.6 -2.5 -2.7 b Primary budget primary budget/GDP** 6.3 -2.0 0.1 2.0 2.4 c Continent liabilities house prices*** -4.3 -15 -0.3 1.6 -1.0 d Political pressure unemployment rate** 3.0 1.1 0.4 0.8 […]
Tripe
USA: Real-effective exchange rate I’m just astonished at the tripe which passes for sensible economic commentary right now. Take the WSJ 2011 outlook piece from 26 December. It ran in my city’s paper as part of a regular WSJ mini-edition, as it no doubt does in many city papers across the country. The author tells […]