Pavlina Tcherneva recently participated in a hearing before a parliamentary group (La France insoumise) of France’s National Assembly on the subject of the Green New Deal and the job guarantee (the intro is in French; Tcherneva’s testimony is in English):

In this rare video from 1987 (there is very little surviving footage of Minsky discussing his work), Hyman Minsky summarizes his theory of the financial fragility at the heart of modern capitalist economies:

This was part of an event in Bogotá, Colombia (which is discussed in this working paper by Iván D. Velasquez).

The Hyman P. Minsky Summer Seminar
Levy Economics Institute of Bard College
Blithewood
Annandale-on-Hudson, N.Y.

June 7–13, 2020

The Levy Economics Institute of Bard College is pleased to announce the 11th Minsky Summer Seminar will be held from June 7–13, 2020. The Seminar will provide a rigorous discussion of both the theoretical and applied aspects of Minsky’s economics, with an examination of meaningful prescriptive policies relevant to the current economic and financial outlook. It will also provide special sessions introducing the theory and applications of Wynne Godley’s stock-flow consistent modeling methods, supported by hands-on workshops.

The Summer Seminar will be of particular interest to graduate students, recent graduates, and those at the beginning of their academic or professional careers. The teaching staff will include international economists working in the theory and policy tradition of Hyman Minsky and Wynne Godley.

Applications may be made to Kathleen Mullaly at the Levy Institute (mullaly@levy.org), and should include a letter of application and current curriculum vitae. Admission to the Summer Seminar will include provision of room and board on the Bard College campus. The registration fee for the Seminar will be $375.

Due to limited space availability, the Seminar will be limited to 30 participants; applications will be reviewed on a rolling basis starting in January 2019.

Bloomberg Businessweek‘s Cristina Lindblad and Peter Coy sat down with L. Randall Wray for an in-depth interview on Modern Monetary Theory:

We are grieved to announce that Nina Shapiro, Professor of Economics Emeritus at St. Peter’s College, passed away on March 6. Nina was one of the first Levy Institute Visiting Scholars and a major contributor to the field of post-Keynesian economics. She passed away last week at the age of 71 from complications due to cancer.

Nina was best known for her work on the post-Keynesian theory of the firm and innovation, as well as the history of economic thought and macroeconomic theory. Her work was rooted in the tradition of Marx, Keynes, Kalecki, and Steindl. She was a deeply creative thinker who connected Marxian and Marshallian ideas on competition with the macroeconomics of Keynes and Steindl. An essay published at the start of her career—“The Revolutionary Character of Post Keynesian Economics” (Journal of Economic Issues, 1977)—made an enduring case for the rejection of scarcity as the basis for economic analysis. She was a founding member of the Editorial Board of The Journal of Post-Keynesian Economics and at the time of her death was at work on a book on the theory of the firm.

Trained in the nascent political economy doctoral program of The New School for Social Research with Edward Nell, Robert Heilbroner, David Gordon, and Anwar Shaikh, she was a part of the Rutgers University Livingston College program in post-Keynesian Economics along with Paul Davidson, Alfred Eichner, Bruce Steinberg, Lourdes Beneria, Robert Guttmann, Michele Naples, and myself. One of very few women in the field of post-Keynesian economics, she was a brilliant teacher of the history of economic thought and heterodox microeconomics and mentored two generations of Rutgers graduate students in economists, including Fernando Cardim de Carvalho, William Millberg, Andrea Terzi, and Radhika Balakrishnan.

The New Keynesian monetary mainstream has brought out the big guns. Paul Krugman, Kenneth Rogoff, and Larry Summers have come out to shoot down the rising star known as “MMT,” which stands for Modern Monetary Theory. For a while, it was academically convenient to withhold paying any public attention that could foster competition in the field. Like other non-mainstream ideas in economics, MMT was simply ignored by our star mainstream economists, who are always ready and keen to lend their wisdom and advice for public action. Now that MMT has reached the public debate through arousing interest among powerful public voices, fostering political debate about available policy options, protecting the mainstream monopoly of opinion has prompted them to take aim at MMT.

The key issues in the battle of ideas between Paul Krugman (New Keynesian monetary mainstream of the IS/LM variety) and Stephanie Kelton (MMT) are out there for everyone to see (see Krugman, Feb. 12th; Kelton, Feb. 21st; Krugman, Feb. 25th; and Kelton, Mar. 4th). It is noteworthy that the two do not seem to be all too far apart regarding their preferred policy agenda. At its core, the controversy really concerns monetary theory – including the question of what kind of money and monetary economy any relevant monetary theory should theorize about. Regarding this particular battle, I will only add that Keynes, in his response to John Hicks’ (1937) IS/LM model interpretation of The General Theory, addressed the very point that Krugman and Kelton strongly disagree on.

In terms of the IS/LM model that Paul Krugman is so very fond of, increased government spending means increased government borrowing pushing against an upward-sloping LM curve that generates a rising interest rate, and hence “crowding out” of private borrowing and spending.

Remember here that the LM curve’s upward slope stems from the assumption of a given money supply apparently controlled by the central bank (Keynes preferred the notion “pool of liquidity” as provided by the banking system). When Hicks highlighted this outcome in his seminal 1937 article, Keynes responded: continue reading…

This year’s Minsky conference will be a one-day affair, featuring keynote speakers that include St. Louis Fed President James Bullard, former PIMCO chief economist Paul McCulley (now Senior Fellow at Cornell Law), and First Vice President of the Minneapolis Fed, Ron Feldman.

The Levy Institute’s Jan Kregel will be discussing reform of the eurozone system; Michalis Nikiforos will be presenting the upcoming strategic analysis for the US economy (using the Institute’s stock-flow model); and L. Randall Wray will be presenting on “Paying for a Green New Deal.”

Financial Stability, Economic Policy, and Economic Nationalism
A conference organized by the Levy Economics Institute of Bard College

Levy Economics Institute of Bard College
Blithewood
Annandale-on-Hudson, New York 12504

April 17, 2019

Registration for the conference is now open. The preliminary program is attached below the fold. Further details are available here.

continue reading…

Public interest in Modern Monetary Theory (MMT) is undergoing a new growth spurt, and progressive politicians are playing a key role in the current phase. Rep. Ocasio-Cortez recently referenced the heterodox framework to push back against the assumption that her ambitious policy proposals must, as a matter of financial necessity, be made budget-neutral (an assumption, as Brendan Greeley of the Financial Times pointed out, that is informatively selective:  “When Washington wants something … it appropriates. And so arguments about balancing budgets aren’t actually about constraints. They’re about priorities. Important programs get appropriations, full stop. Unimportant programs need to be paid for with taxes.”)

The growing interest in the MMT view of fiscal constraints does seem to be part of a broader softening of attitudes toward public debt and deficits in our policy discourse. Ken Rogoff, for example, managed to write the following in The Times yesterday:  “To be frank, it has never been remotely obvious to me why the UK should be worrying about reducing its debt–GDP burden, given modest growth, high inequality and the steady (and largely unexpected) decline in global real interest rates.” This time is, indeed, different.

L. Randall Wray recently presented in Berlin at an event marking the release of the German translation of his book Understanding Modern Money. The presentation (in English) may be seen below, including responses by Doris Neuberger and Dirk Ehnts.

Wray begins with a brief history of the development of MMT and his role in that development. He then lays out his version of the central points that constitute MMT (at 27:24).

And for those who have been following the reactions in popular media, in which the conversation has shifted to the dangers of inflation, a segment that begins at 35:05 will be of interest. Here Wray discusses his view, following his reading of Minsky, that the job guarantee is crucial for achieving full employment without generating inflationary pressures or financial instability.

A federal judge has ruled that the Trump administration’s attempt to add a citizenship question to the next (2020) decennial census is illegal. The administration has already begun the process of appealing the ruling.

One way to understand the broader context behind this proposed change is to see it as part of ongoing attempts to influence the outcome of the democratic process (efforts which include gerrymandering, voter registration purges, and so on). In this case, the addition of the citizenship question would lower response rates (that is, lead to an undercount of the population) in areas with higher proportions of immigrants — documented and undocumented. These lower response rates, in turn, could affect the apportionment of congressional seats — that is, reduce the number of seats representing those areas of the country (the undercount would also reduce the level of federal funding directed to such areas).

And as the one-pager below by Senior Scholar Joel Perlmann makes clear, the ostensible justification for this change — to obtain citizenship data in order to enforce the Voting Rights Act — is weak, when weighed against the aforementioned “side effects.”  As Perlmann points out, there are ways to obtain this data that do not undermine the integrity of the full census count. Unfortunately, the latter is most likely the entire point of this endeavor.

A Citizenship Question on the US Census: What’s New? (pdf)

by Joel Perlmann

By now most readers will know that the Trump administration and Commerce Secretary Wilbur Ross in particular have been pressing for a “reinstatement” of a question on citizenship status to the US census that will be conducted in 2020 (Commerce oversees the Census Bureau). There has been a good deal of pushback. Opponents have cogently argued that asking the question today will encourage immigrants to fear that filling out the census form will endanger their residence in the United States. This reaction is easy to understand for the undocumented, but it also applies to immigrants who have arrived through the legal processes for immigration. Many in this latter group will be unsure of how the question will be used against them and decide that the safer course is to ignore the census. Reduced census counts for immigrants, in turn, will reduce both federal aid to local areas and (especially) the number of congressional seats allocated to states with larger immigrant populations. Alone, this reduced count may not mean too much. But like other shady mechanisms for skewing representation or pruning the numbers of eligible voters, every little bit has an impact.

Still, if the citizenship question was asked in the past, why not reinstate it now? The answer turns on historical insights: the characteristics of immigration and of the census itself have changed radically in the meantime. continue reading…

(These remarks will be delivered today at the UBS European Conference in London.)

Q: These questions about deficits are usually cast as problems to be solved. You come from a different way of framing the issue, often referred to as MMT, which—at the risk of oversimplifying—says that we worry far too much about debt issuance. Can you help us understand where fears may be misplaced?

Wray: First let me say that I think the twin deficits argument is based on flawed logic.

It runs something like this: the government decides to spend too much, causing a budget deficit that competes with private borrowers, driving interest rates up. That appreciates the currency and causes a trade deficit.

The budget and trade deficits are unsustainable as both the private sector and the government sector rely on the supply of dollars lent by foreigners. At some point the Chinese and others will demand payment and/or sell out of dollars causing US rates to rise and the dollar to crash.

While that’s a simplified summary, I think it captures the main arguments.

Here’s the way I see it:

1. Overnight rates are set by the central bank; deficits raise them only if the central bank reacts to deficits by raising them.
2. Budget deficits result in net credits to bank reserves and hence put downward (not upward) pressure on overnight rates that is relieved by bond sales by the Fed and Treasury—or by paying interest on reserves. In other words, there’s no crowding out effect on rates. (Inaction lets rates fall.)
3. Budget deficits result from the nongovernment sector’s desire to net save government liabilities. So long as the nongovernment sector wants to net save government debt, the deficit is sustainable.
4. Current account deficits result from the rest of the world’s (ROW’s) desire to net save US dollar assets. So long as the ROW wants to accumulate dollars, the US trade deficit is sustainable. So there is a symmetry to the two deficits, but not the one usually supposed.
5. The US government does not borrow dollars from China. China’s net exports lead to accumulation of dollar reserves that are exchanged for higher earning Treasuries. If China did not run current account surpluses, she would not accumulate many Treasuries. All the dollars China has came from the US.
6. If the US did not run current account deficits, the Chinese and other foreigners would not accumulate many Treasuries. This shows that accumulation of Treasuries abroad has more to do with the trade deficit than with Uncle Sam’s borrowing. (Compare the US with Japan—where virtually all the Treasuries are held domestically.)
7. A sovereign government cannot run out of its own liabilities. All modern governments make and receive payments through their central banks. Government spending takes the form of a credit by the central bank to a private bank’s reserves, and a credit by the receiving bank to the account of the recipient. You cannot run out of balance sheet entries.
8. Affordability is not the question. The problem with too much government spending is that it diverts too many of the nation’s resources to the public sector—which causes inflation and leaves the private sector with too few resources.
9. So, no, I don’t worry about sovereign government debt if it is issued in domestic currency—although I do worry about inflation, and about excessive private sector debt as well as non-sovereign government debt.
10. To conclude: We’ve reversed the twin deficit logic and emphasized quantity adjustments. The twin deficits are the residuals that accommodate the desired net saving of the domestic private sector and the ROW, respectively.
11. Usually the domestic nongovernment sectors want to accumulate dollars so the only sector left to inject dollars is the US government. This means Uncle Sam runs a deficit because others want to accumulate dollars. The government also accommodates the portfolio desires of the nongovernment by swapping dollar reserves and bonds on demand.
12. Finally, if the ROW does not want dollars anymore, it can buy goods and services in the US. That will reduce the external deficit, stimulate domestic demand, and thereby reduce the fiscal deficit.