Posted: 05 Sep 2015 12:24 AM PDT
The summary "Deflation and money" by Hiroshi Yoshikawa, Hideaki Aoyama, Yoshi Fujiwara, and Hiroshi Iyetomiof says:
Deflation and money, Vox EU: Deflation is a threat to the macroeconomy. Japan had suffered from deflation for more than a decade, and now, Europe is facing it. To combat deflation under the zero interest bound, the Bank of Japan and the European Central Bank have resorted to quantitative easing, or increasing the money supply. This column explores its effectiveness, through the application of novel methods to distinguish signals from noises.The conclusion:
...all in all, the results we obtained have confirmed that aggregate prices significantly change, either upward or downward, as the level of real output changes. The correlation between aggregate prices and money, on the other hand, is not significant. The major factors affecting aggregate prices other than the level of real economic activity are the exchange rate and the prices of raw materials represented by the price of oil. Japan suffered from deflation for more than a decade beginning at the end of the last century. More recently, Europe faces a threat of deflation. Our analysis suggests that it is difficult to combat deflation only by expanding the money supply.
Posted: 05 Sep 2015 12:15 AM PDT
Range of reactions to realism about the social world: My recent post on realism in the social realm generated quite a bit of commentary, which I'd like to address here.
Posted: 05 Sep 2015 12:06 AM PDT
Posted: 04 Sep 2015 11:17 AM PDT
The latest from Robert Reich begins with:
What Happened to the Moral Center of American Capitalism? : An economy depends fundamentally on public morality; some shared standards about what sorts of activities are impermissible because they so fundamentally violate trust that they threaten to undermine the social fabric.
It is ironic that at a time the Republican presidential candidates and state legislators are furiously focusing on private morality – what people do in their bedrooms, contraception, abortion, gay marriage – we are experiencing a far more significant crisis in public morality.
We've witnessed over the last two decades in the United States a steady decline in the willingness of people in leading positions in the private sector – on Wall Street and in large corporations especially – to maintain minimum standards of public morality. They seek the highest profits and highest compensation for themselves regardless of social consequences.
CEOs of large corporations now earn 300 times the wages of average workers. Wall Street moguls take home hundreds of millions, or more. Both groups have rigged the economic game to their benefit while pushing downward the wages of average working people.
By contrast, in the first three decades after World War II – partly because America went through that terrible war and, before that, the Great Depression – there was a sense in the business community and on Wall Street of some degree of accountability to the nation.
It wasn't talked about as social responsibility, because it was assumed to be a bedrock of how people with great economic power should behave.
CEOs did not earn more than 40 times what the typical worker earned. Profitable firms did not lay off large numbers of workers. Consumers, workers, and the community were all considered stakeholders of almost equal entitlement. The marginal income tax on the highest income earners in the 1950s was 91%. Even the effective rate, after all deductions and tax credits, was still well above 50%.
Around about the late 1970s and early 1980s, all of this changed dramatically. ...[continue]...
Posted: 04 Sep 2015 08:32 AM PDT
Job Growth Weakens in August: The rate of wage growth was under 2.0 percent for the last 3 months.
The Labor Department reported that the economy added 173,000 jobs in August, somewhat less than most predictions. However, the prior two months' numbers were revised upward by 44,000, bringing the average gain over the last three months to 221,000. The story on the household side was mixed. The unemployment rate dropped to 5.1 percent, as employment increased by 196,000. However the employment-to-population ratio (EPOP) was little changed at 59.4 percent, a number that is still three percentage points below the pre-recession peak. ...
While the drop in unemployment in the August report is encouraging, the overall report is not especially positive. There is no evidence that wage growth is accelerating and there is a real risk that employment growth is slowing. The big question is whether the 140,000 private sector job growth in August is the new trend or whether it was weakened by the strong growth in prior months.Calculated Risk:
The unemployment rate decline in August to 5.1%.
Posted: 04 Sep 2015 08:17 AM PDT
"We can learn a lot by following the dollars":
Other People's Dollars, and Their Place in Global Economics, by Paul Krugman, Commentary, NY Times: Soon after arriving here, I stopped at an A.T.M.; I needed some dollars, and all I had were dollars.
O.K., weak joke. What I needed were Australian dollars... There are actually four English-speaking countries with dollars of their own; the others are the Canadian loonie and the New Zealand kiwi. And you can learn a lot about the global economy, busting some popular monetary myths, by comparing those currencies and how they serve their economies.
All four dollar nations are, if you take the long view, highly successful economies..., we're all wealthy nations that have weathered economic storms better than most of the rest of the world. ...
So what can we learn from these dollar success stories? What myths can we bust?
First, we learn that even relatively small countries closely linked to big neighbors can maintain monetary independence..., that should have been made obvious by the example of Canada...
Second, we learn that what right-wingers call currency "debasement" ... can be a very good thing. Canada was able to combine spending cuts with strong growth in the 1990s because exports were raised by the depreciation of the loonie. Australia rode through the Asian financial crisis of 1997-98 with little damage thanks largely to a falling Aussie. In both cases times would have been much tougher if the countries had been using U.S. dollars, or worse yet been on the gold standard.
Third, we learn that people pay far too much attention to the role national currencies play in the international monetary system..., a glance at Australia shows that both positive and negative claims about the international role of the dollar are wildly exaggerated. The Aussie dollar plays no special role in the world monetary system, yet Australia has consistently attracted bigger inflows of capital relative to the size of its economy — and run proportionately bigger trade deficits — than the United States.
What's important for both capital and trade, it turns out, is whether your economy offers good investment opportunities under an umbrella of legal and political stability. Whether you control an international currency is a trivial concern by comparison.
So we can learn a lot by following the dollars... And what we learn in particular is that monetary economics should be approached pragmatically, not in terms of mystical notions of value.
Take it from those who share our language, but not our currency: There are many ways to make money work.