- Links for 06-30-15
- Fed Watch: Events Continue to Conspire Against the Fed
- Stiglitz: Troika has 'Kind of Criminal Responsibility'
- 'The Stimulative Effect of Redistribution'
- 'U.S. Income Inequality Persists Amid Overall Growth in 2014'
- Paul Krugman: Greece Over the Brink
Posted: 30 Jun 2015 12:06 AM PDT
Posted: 29 Jun 2015 03:00 PM PDT
Posted: 29 Jun 2015 11:21 AM PDT
Joseph Stiglitz to Greece's Creditors: Abandon Austerity Or Face Global Fallout: ... "They have criminal responsibility," he says of the so-called troika of financial institutions that bailed out the Greek economy in 2010, namely the International Monetary Fund, the European Commission and the European Central Bank. "It's a kind of criminal responsibility for causing a major recession," Stiglitz tells TIME in a phone interview.
Along with a growing number of the world's most influential economists, Stiglitz has begun to urge the troika to forgive Greece's debt – estimated to be worth close to $300 billion in bailouts – and to offer the stimulus money that two successive Greek governments have been requesting.
Failure to do so, Stiglitz argues, would not only worsen the recession in Greece – already deeper and more prolonged than the Great Depression in the U.S. – it would also wreck the credibility of Europe's common currency, the euro, and put the global economy at risk of contagion. ...
Posted: 29 Jun 2015 11:03 AM PDT
Bart Hobijn and Alexander Nussbacher in the SF Fed's Economic Letter:
The Stimulative Effect of Redistribution, by Bart Hobijn and Alexander Nussbacher: The idea of taking from the rich and giving to the poor goes back long before the legend of Robin Hood. This kind of redistribution sounds desirable out of a sense of fairness. However, economists often judge a policy less on whether it is fair, and more in terms of whether it is efficient or inefficient, as well as whether it stimulates or slows economic activity.
In this Economic Letter we evaluate the stimulative effect of redistributing income from rich to poor households in a few distinct steps. We first provide a simple back-of-the-envelope calculation of the potential stimulus from redistributive policies. We then review the two main assumptions behind this policy prescription. We argue that the stimulative impact of such policies is likely to be lower than the simple calculation suggests. ...
Posted: 29 Jun 2015 09:34 AM PDT
U.S. income inequality persists amid overall growth in 2014, by Emmanuel Saez, WCEG: Income inequality in the United States grew more acute in 2014, yet the bottom 99 percent of income earners registered the best real income growth (after factoring in inflation) in 15 years. The latest data from the U.S. Internal Revenue Service show that incomes for the bottom 99 percent of families grew by 3.3 percent over 2013 levels, the best annual growth rate since 1999. But incomes for those families in the top 1 percent of earners grew even faster, by 10.8 percent, over the same period. ...
More broadly, the top 1 percent of families captured 58 percent of total real income growth per family from 2009 to 2014, with the bottom 99 percent of families reaping only 42 percent. ...
The higher tax rates for top U.S. income earners enacted in 2013 as part of the Obama Administration and Congress' federal budget deal seem to have had only a fleeting impact on the outsized accumulation of pre-tax income by families in the top 1 percent and 0.1 percent of income earners.
To be sure, there was a shifting of income among high-income earners ... as these wealthy families sought to avoid the higher rates enacted in 2013. This adjustment created a spike in the share of top incomes accumulated by the very wealthy in 2012 followed by a trough in 2013. By 2014, however, top incomes shares were back to their upward trajectory. This suggests that the higher tax rates starting in 2013, while not negligible, will not be sufficient by themselves to curb the enormous increase in pre-tax income concentration that has taken place in the United States since the 1970s.
Posted: 29 Jun 2015 08:10 AM PDT
Just say no:
Greece Over the Brink, by Paul Krugman, Commentary, NY Times: It has been obvious for some time that the creation of the euro was a terrible mistake. Europe never had the preconditions for a successful single currency....
Leaving a currency union is, however, a much harder and more frightening decision than never entering in the first place...
But the situation in Greece has now reached what looks like a point of no return. Banks are temporarily closed and the government has imposed capital controls... It seems highly likely that the government will soon have to start paying pensions and wages in scrip, in effect creating a parallel currency. And next week the country will hold a referendum on whether to accept the demands of the "troika" ... for yet more austerity.
Greece should vote "no," and the Greek government should be ready, if necessary, to leave the euro.
To understand why I say this, you need to realize that most ... of what you've heard about Greek profligacy and irresponsibility is false. Yes, the Greek government was spending beyond its means in the late 2000s. But ... all the austerity measures ... been more than enough to eliminate the original deficit and turn it into a large surplus.
So why didn't this happen? Because the Greek economy collapsed, largely as a result of those very austerity measures, dragging revenues down with it.
And this collapse, in turn, had a lot to do with the euro, which trapped Greece in an economic straitjacket. Cases of successful austerity ... typically involve large currency devaluations... But Greece, without its own currency, didn't have that option. ...
It's easy to get lost in the details, but the essential point now is that Greece has been presented with a take-it-or-leave-it offer that is effectively indistinguishable from the policies of the past five years. ...
Don't be taken in by claims that troika officials are just technocrats explaining to the ignorant Greeks what must be done. These supposed technocrats are in fact fantasists who have disregarded everything we know about macroeconomics, and have been wrong every step of the way. This isn't about analysis, it's about power — the power of the creditors to pull the plug on the Greek economy, which persists as long as euro exit is considered unthinkable.
So it's time to put an end to this unthinkability. Otherwise Greece will face endless austerity, and a depression with no hint of an end.
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