wynne godley

Sovereignty In The Euro Area

18 May 2012

Nouriel Roubini tweets about Trichet’s plan to save the Euro Zone and wonders about sovereignty: Trichet proposes EU’s full takeover of fiscal policy of bankrupt countries. It totally undermines national sovereignty reut.rs/JXuawK — Nouriel Roubini (@Nouriel) May 18, 2012 Two things: My guess is Trichet’s plan involves a Euro Area institution setting fiscal policy. Trichet’s plan [...]

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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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Debt Monetization

22 April 2012

Let us take the public sector budget equation: G – T = ΔH + ΔB Inspired by Milton Friedman’s popularity in the 1970s and the 80s, most textbooks and journal articles incorrectly claim that the central bank “controls” the money stock (such as M0, M1, M2 etc). Simultaneously they also claim – rightly – that the central [...]

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Seven Unsustainable Processes – Original

18 April 2012

Of all the economists, Wynne Godley had the rarest of rare ability to model and imagine the economic dynamics of the whole world. “… a full macroeconomic model in his head, which, by some sort of subconscious process, he computed.” as his obituary from FT said. In the recent INET conference paper, Dirk Bezemer discusses Wynne [...]

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G&L’s Monetary Economics – Second Edition

15 April 2012

I got my copy of Monetary Economics by Wynne Godley and Marc Lavoie yesterday. I know some people were waiting for the second edition of the book, and had postponed their purchase to get the newer edition – so they can get it now! There aren’t any changes in this edition – except for correction [...]

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Open Mouth Operations

5 April 2012

In the previous post Is Paul Krugman A Verticalist?, I discussed the confusions economists and market commentators have on open market operations. Even top economists such as Krugman suffer from confusions on central banking and monetary matters. I also mentioned the work of Alfred Eichner on bringing out more clarity on the defensive nature of [...]

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More National Accounts: Consumption Of Fixed Capital

29 March 2012

In one of my recent posts, Saving Net Of Investment, I went into gross saving versus saving net of consumption of fixed capital. I showed how depreciation – or more appropriately, consumption of fixed capital – is treated in the flow of funds accounts. Since the transactions flow matrix is a powerful tool for visualizing [...]

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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 Un-Godley Private Sector Deficit

24 February 2012

Economists worry too much about the government’s deficit although they seem to not know about the private sector deficit. Goldman Sachs’ chief economist Jan Hatzius came to know about the sectoral balances approach and called the difference between United States’ private expenditure and income in “The Un-Godley Private Sector Deficit”. He later included the sectoral balances [...]

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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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