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Can you Spare a Few Trillion?
Most governments in advanced economies have been unable to deliver on debt sustainability for the last decades. In some cases increasing spending is not matched by their ability to find additional...
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Cyclical Zombies
Stephen Roach argues in this article that the "current medicine being applied to America's economy" is wrong. The real disease is a "protracted balance-sheet recession that has turned a generation of...
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Underestimating Fiscal Policy Multipliers
The October edition of the IMF World Economic Outlook is out with very strong warnings about risks to growth (full report can be found at the IMF web site). In Chapter 1 there is a nice analysis about...
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Coordinated Fiscal Contraction
The new issue of the IMF fiscal policy monitor is out. As usual, a great reading to understand the state of fiscal policy in the world. There are many issues I could highlight from the report but here...
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Semantics and the Debt Burden
Does government debt impose a burden on future generations? A relevant question given the high current government debt levels to which most people will answer with a clear "yes": we are spending today...
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Ignorance as an excuse
Via Greg Mankiw I read a response to the argument by Peter Diamond and Emmanuel Saez that the top marginal tax rate in the US should be raised to about 73%. I do not want to enter into the substance of...
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The wrong benchmark for tax rates
The New York Times presents a comparison of average tax rates since 1980 to make the argument that most taxpayers in the US face lower taxes today that back in 1980. Greg Mankiw does not like the fact...
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Planning for (fiscal) miracles
The debate in the US about how to deal with the "fiscal cliff" has produced a counterproposal by the Republicans on how to avert a crisis. The proposal is criticized by many because of its lack of...
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The defeat of the Euro bond vigilantes?
Paul Krugman has written many blog posts downplaying the fears of a sudden increase in US government bond interest rates (what he calls the invisible bond vigilantes). Despite continuous warnings by...
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A narrow definition of supply
Economic debates are many times portrayed as a fight between economists who think that demand defficiency is the main cause of economic crisis and those who believe that what really matters is the...
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The confusing identity once again
One of the first concepts taught in any macroeconomics course is the identity that links the financial balance of the private sector, the financial balance of the government and the current account...
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Lack of progress in Macroeconomics
In today's Financial Times, an article by Jeffrey Sachs presents all kinds of arguments to conclude that Keynesian economists have been wrong during the crisis, that fiscal and monetary policy tools...
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The Euro-model scare tactics
Regularly The Wall Street Journal writes an opinion article about the failure of the European economic model. A bloated welfare state, high taxes, heavily-regulated labor markets have led to a...
View ArticleDoomsday, gold and the Bundesbank
Noah Smith has a great blog post on the obsession with gold as a store of value or as an investment strategy. I fully share his views on gold and in particular about the arguments made by those who see...
View ArticleCelebrating negative growth
GDP growth during the last quarter of 2012 turned negative in the US (-0.1%) and this came as a surprise to many. Looking at the different components of GDP, the biggest decline happened in government...
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The Euro depression
As we wait for the results of the Italian election, Europe is heading for yet another period of uncertainty. Governments in key countries (Italy, Spain, Greece, France,...) do not have the support to...
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Dove or Hawk? Bernanke's record
In yesterday's testimony at the U.S. Senate Ben Bernanke was accused of policies that could potentially generate high inflation. Senator Corker accused the Fed Chairman of nor being concerned enough...
View ArticleBill Gross on the Big Mac and QE
These are good days for someone who teaches macroeconomics, because it is easy to find articles that misrepresent the basic concepts we teach in class - this always motivates our students who now feel...
View ArticleCyprus: between hope and panic
The Eurogroup announcement on Saturday of an agreement with the Cypriot authorities for a macroeconomic adjustment program came with a big surprise. The agreement involves a controversial...
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Gross Mistake
In a couple of recent posts Paul Krugman reminds us that interpreting data on debt as a sign of excessive spending and living beyond our means is incorrect. I have made this point before when looking...
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