Hudson nails it down.
Europe’s three needs: a debt write-down, a real central bank, and a more efficient tax system
Brussels Talk, Madariaga College, Governing Globalisation in a World Economy in Transition, June 27, 2012
What can Europe learn from the United States?
First, the United States – like Canada, England and China – have central banks that do what central banks outside of Europe were created to do: finance the budget deficit directly.
I have found that it is hard to explain to continental Europe just how different the English-speaking countries are in this respect. There is a prejudice here that central bank financing of a domestic spending deficit by government is inflationary. This is nonsense, as demonstrated by recent U.S. experience: the largest money creation in American history has gone hand in hand with debt deflation.
By Edward Harrison of Credit Writedowns.
I think this video is worth watching because Keen gets to the heart of the issues with the standard approach toeconomics. He says that banks, money and debt are front and center in reality as we now see after the crisis. Consequently, they should also be integral in economic models. I have made exactly the same criticisms in the past. See my piece on the origins of the next crisis which is holding up well in the two years since I wrote it.
For me, the bottom line here is that the crisis is really not over. We need authoritative people like Blinder telling us we’ve got it wrong if we are to have a reasonable chance of getting out of this unscathed. I lobe that kind of stuff – more please! My fear is that the debt and banking problems re-assert themselves in the next downturn to cause significant economic damage. And since I am predicting this is what is likely to occur, it’s not just a worry, it’s something more than that.
Jurgen Stark’s speech on Monetary Policy.
The road to virtue
The road to virtue between globalisation and monetary policy was built on two inter-related premises. First, that the process of globalisation itself was largely irreversible. And second, that the by-products of such a process complemented improvements in monetary policymaking such that the battles of yesteryear had been decisively won in a durable manner and the new challenges appeared to be manageable. The relationship between monetary policy and globalisation could thus be best described as one which was both symbiotic in nature and mutually beneficial. I will review these arguments in turn.
The perceived inevitability of globalisation
First, asserting the irreversibility of globalisation in the midst of a systemic crisis such as the one we are currently experiencing may seem far-fetched. However, if one were to look back at the enthusiasm which prevailed in both the economics and international relations fields during the early 1990s, this appeared as an inescapable conclusion. The growth of world merchandise export volumes had already consistently outpaced that of real GDP for decades , while the world stock of outward FDI had dramatically increased in the period from 1980-1990 . These favourable trends looked set to receive a further boost on account of the expected integration of central and eastern European economies as well as the states of the former Soviet Union and China into the mainstream of the world economy. Many observers therefore agreed with Francis Fukuyama that this marked ‘the end of history’ .
Guest Post by World Complex.
Today we look at the monthly change in net foreign purchases of US long-term securities. Data comes from the US Treasury site. By net foreign purchases they mean the difference between foreign purchases of US long-dated securities and US purchases of foreign securities.
What I found most surprising is the negative bias. In this chart, a negative number means US purchases of foreign long-dated securities exceeds foreign purchases of US long-dated securities. We note the negative bias becomes quite pronounced beginning in the early ’90s (wasn’t this the era of the US strong dollar policy?)