balance of payments

Spanish Banks, Banco de España & TARGET2

15 May 2012

In two big operations in December and February, the Eurosystem lent around €1tn to banks in the Euro Area: (click to expand, source: ECB) Spanish banks it seems borrowed around €315bn (gross) as per the recently the Banco de España released statistic Financing In The Eurosystem (April 2012): (click to expand) Due to the continuing capital flight out [...]

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The Monetary Economics Of Sovereign Government Rating

4 May 2012

If a government (outside monetary unions) can make a draft at the central bank, why do rating agencies rate governments’ creditworthiness? In this post, I will attempt to describe the dynamics of defaults and restructurings by going through some monetary economics of open economies. Carmen Reinhart and Kenneth Rogoff wrote a book in 2009 titled This [...]

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I Like Martin Wolf

14 April 2012

Updated: 14 April 2012 at 3:30pm GMT (Chart added) Martin Wolf has just written an article on FT: Why the Bundesbank is wrong questioning the arguments made by Jens Weidmann, president of the Bundesbank. (This speech: Rebalancing Europe). This chart is interesting: (click to enlarge) Wolf says: Arguably, the crucial step is to agree on the nature of [...]

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Debt Sustainability

29 March 2012

In a recent paper, Bradford DeLong and Lawrence Summers suggest that a fiscal expansion can be useful to bring an economy from a depressed state (!). The rough idea being that a relaxation of fiscal policy leads to a higher output and the increase in economic activity leads to a stabilization of public debt/gdp ratio. [...]

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Exorbitant Privilege

18 March 2012

My last post was on U.S. net income payments from abroad and how it continues to be in the favour of the United States. The late Wynne Godley had been analyzing this since 1994. In an article titled U.S. Trade Deficits: The Recovery’s Dark Side?, written with William Milberg, he had a section called “Foreign indebtedness and the [...]

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The Curious Case Of U.S. Net Income Payments From Abroad

14 March 2012

The world economy has grown over the last so many years with the United States acting as the importer of the last resort. However, the U.S. current account deficit acts to bleed the circular flow of national income and weakens demand in the States. The nation still grew because of a huge lending boom. Today, [...]

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Balance Of Payments: Part 1

8 March 2012

This is the first part of a series of posts I intend to write on the “rest of the world” accounts in National Accounts. This blog is about looking at economies from the point of view of National Accounts, Cambridge Keynesianism and Horizontalism. While various descriptions of balance of payments exist, most of them simply [...]

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Martin Wolf Pays A Generous Tribute To Anthony Thirlwall

20 February 2012

Readers of this blog will notice how I attach special importance to the balance of payments in telling the story of how economies work. In a recent blog post Can one have balance of payments crises in a currency union? at FT, Martin Wolf refers to the work of Anthony Thirlwall – who has made great contributions to the [...]

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Imbalances Looking For A Policy

14 February 2012

… and not Infernal Muddles Readers of this blog may be aware of my fanhood for Wynne Godley and the title of this post is from a paper by him from 2004, although it was US-centric. This post is on imbalances in the Euro Area. Wynne had not only always foreseen crises, but also knew [...]

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Kaldorians

30 January 2012

In an article (obituary), Nicholas Kaldor, 12 May 1908-30 September 1986, Geoff Harcourt said: Nicholas Kaldor’ resembled Keynes more than any other twentieth-century economist because of the breadth of his interests, his wide-ranging contributions to theory, his insistence that theory must serve policy, his periods as an adviser to governments, his fellowship at King’s and, of course, his membership of the [...]

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