Post Keynesian Conference Goes Live Tonight

Michael Stephens | September 24, 2014

The 12th International Post Keynesian conference, cosponsored by the University of MissouriKansas City, Journal of Post Keynesian Economics, and Levy Institute, with support from the Ford Foundation, begins this evening at UMKC with a keynote by Bruce Greenwald. The full schedule for the conference can be accessed here.

If you can’t attend, portions of the event will be livestreamed at this link, beginning tonight at 7pm EST with Greenwald’s talk. Here is the livestreaming schedule*:

*All times below listed in Eastern Standard*

Wednesday, 7:00-9:00pm: Bruce Greenwald, “Value Investing and the Mis-measures of Modern Portfolio Theory”

Thursday, 6:45-8:30pm: Panel: “What Should We Have Learned from the Global Crisis (But Failed To)?” (with Bruce Greenwald, Lord Robert Skidelsky, and Steve Kraske)

Friday, 6:45-8:15pm: James Galbraith, “The End of Normal”

Saturday, 12:45-2:00pm: Lord Robert Skidelsky, “The Future of Work”

Saturday, 8:00pm: Lord Robert Skidelsky, “Economics After The Crash: What Should Students Be Taught?”


Europe at the Crossroads: A Union of Austerity or Growth Convergence?

Michael Stephens | September 19, 2014

Co-organized by the Levy Economics Institute of Bard College and Economia Civile with support from the Ford Foundation

Megaron Athens International Conference Centre
Athens, Greece
November 21–22, 2014

On November 21 and 22, the Levy Economics Institute of Bard College will hold its second annual conference at the Megaron Athens International Conference Centre in Athens, Greece. Co-organized by the Levy Institute and Economia Civile, the conference will focus on the continuing debate surrounding the eurozone’s systemic instability; proposals for banking union; regulation and supervision of financial institutions; monetary, fiscal, and trade policy in Europe, and the spillover effects for the US and the global economy; the impact of austerity policies on US and European markets; and the sustainability of government deficits and debt.

To register, click here.


George Argitis, Professor of Economics, University of Athens; Scientific Director, Institute of Labour, GSEE

Emilios Avgouleas, Chair, International Banking Law and Finance, University of Edinburgh

Elga Bartsch, European Chief Economist, Morgan Stanley

Marek Belka, Governor, National Bank of Poland

Peter Bofinger, Member of the German Council of Economic Experts; Professor of Monetary Policy and International Economics, University of Würzburg; Research Fellow, Centre for Economic Policy Research

Carlos da Silva Costa, Governor, Bank of Portugal

Stanley Fischer, Vice Chair, US Federal Reserve System*

Richard W. Fisher, President and CEO, Federal Reserve Bank of Dallas*

Heiner Flassbeck, formerly Director, Division on Globalization and Development Strategies, UNCTAD, and Deputy Finance Minister, Germany

Eckhard Hein, Research Associate, Levy Institute; Professor of Economics, Berlin School of Economics and Law; Adjunct Professor of Economics, Carl von Ossietzky University Oldenburg

Stuart Holland, Professor, University of Coimbra

Patrick Honohan, Governor, Central Bank of Ireland

Lex Hoogduin, Professor of Economics and Business, University of Groningen

Joanna Kakissis, Correspondent, NPR and PRI, Athens

Stephen Kinsella, Lecturer in Economics, Kemmy Business School, University of Limerick

Jan Kregel, Senior Scholar, Levy Institute; Professor of Finance and Development, Tallinn University of Technology

Roberto Lavagna, formerly Minister of Economy and Production, Argentina*

Panagiotis Liargovas, Director of the Budget Office, Greek Parliament; Jean Monnet Chair in European Integration and Policies, University of Peloponnese

Lubomír Lízal, Member of the Board, Czech National Bank

Gyorgy Matolcsy, Governor, National Bank of Hungary*

Michalis Nikiforos, Research Scholar, Levy Institute

Dimitri B. Papadimitriou, President, Levy Institute

Sarah Bloom Raskin, Deputy Secretary, US Department of the Treasury*

Engelbert Stockhammer, Professor of Economics, Kingston University

Mihai Tănăsescu, Vice President, European Investment Bank

Andrea Terzi, Professor of Economics and Coordinator of the Mecpoc Project, Franklin University Switzerland

Mario Tonveronachi, Professor of Financial Systems, University of Siena

Raymond Torres, Director, Research Department, International Labour Organization



Options for an Independent Scotland

Michael Stephens | September 18, 2014

People in Scotland are heading to the polls today to decide the question of secession. One of the major policy questions for an independent Scotland is whether the country should attempt to keep the pound. As many have now begun to appreciate — with a little help from the eurozone spectacle — this would likely be a big mistake.

In “Euroland’s Original Sin,” Dimitri Papadimitriou and L. Randall Wray explained why a separation between fiscal and monetary sovereignty — when countries do not issue their own currency yet retain responsibility for fiscal policy — is the root of the problem in the eurozone. Any country with this setup will face budgetary constraints to which currency-issuing nations are not subject; the kind of constraints that can generate a sovereign debt crisis if, for instance, the country’s fiscal authority is forced to handle the fallout from a large banking crisis. This is a drum that many people affiliated with the Levy Institute have been banging for some time (well before the eurozone fell into its current mess).

Recently, both Paul Krugman and Martin Wolf  have written columns in which they make similar arguments in the context of Scottish independence (and the SNP’s ostensible plan to retain the pound). Philip Pilkington wrote a policy brief a few months ago in which he also argued, with the aid of an analysis of Scotland’s financial balances, that retaining the pound would leave the country open to a eurozone-periphery-style crisis. Pilkington’s story focuses on Scotland’s reliance on oil and gas revenues and the particular instability that could be generated, for a currency-using (vs. issuing) Scotland, by oil price fluctuations.

Although Pilkington suggests it might make sense to retain the pound in the short run (during which time he advocates the use of “tax-backed bonds” to limit instability, a proposal Pilkington originally developed with Warren Mosler [see here and here] for the eurozone), he argues that Scotland ultimately needs to move toward issuing its own freely-floating currency. The question is how to move from the first to the second phase with a minimum of disruption. The policy brief thus lays out a “dual currency” transition plan for Scotland: continue reading…


Mission-Oriented Finance (Video)

Michael Stephens | September 10, 2014

The following clips are from the Mission-Oriented Finance for Innovation conference held in London, organized by Mariana Mazzucato as part of a research project with L. Randall Wray on “Financing Innovation.”

L. Randall Wray, “Financing the Capital Development of the Economy: A Keynes-Schumpeter-Minsky Synthesis” (slides)


Pavlina Tcherneva, “Full Employment, Value Creation and the Public Purpose” (slides)


Can Fiscal Policy Stabilize the Economy?

Greg Hannsgen |

Download site for CDF reader program
[WolframCDF source=”” width=”468″ height=”458″ altimage=”” altimagewidth=”468″ altimageheight=”427″]

Here is a new Wolfram CDF, which I have constructed based on a macro model. The assumptions behind the model–other than the exact parameter values–are loosely stated in this list:

1) industries dominated by a handful of firms, rather than perfect competition
2) production technology that requires capital and labor inputs
3) chronic underemployment and less-than-full capacity utilization (percent of capital stock in use at a given time)
4) sovereign money and a policy-determined interest rate
5) two groups of households, only one of which has money to save
6) net investment a function of the profit and capacity utilization rates
7) budget deficits offset by the issuance of treasury bills and sovereign money
8) a government that employs workers to produce free public services
9) a fiscal policy rule with (a) a balanced budget target (labeled “0” in the CDF above) or (b) public production and capacity utilization targets (labeled “1” in the CDF above)
10) nonlinear functions that result in endogenous cycles in this figure for some parameter values and policy functions (try different parameter values with policy rule “1” for example)
11) gradual adjustment of public and private-sector output toward levels indicated by one of the two fiscal policy rules and output demand, respectively.

The arrows in the CDF show directions of movement in 2D space, where the two axes represent public production (horizontal) and capacity utilization (vertical). We got a different look at the same model in this previous post. In this new CDF, I have tried to improve on the realism of the parameter values. Here is a link to the download site at Wolfram for the needed CDFPlayer software.

The most serious omissions in the model above, by the way, are a foreign sector, a mechanism by which the broad price level can change over time, and commercial bank deposits and loans. As mentioned before, I am working on adding these and other new features to a larger version of the model depicted above for the upcoming International Post Keynesian Conference in Kansas City later this month. Any macroeconomic model, of course, is only an abstract and simplified version of a real economy. But the bottom line is that (1) guiding fiscal policy with a balanced-budget target leads to instability in all cases, while (2) the output-stabilizing fiscal rule generates a business cycle of varying size or convergence to a point.


Is the Eurozone Turning into Germany?

Jörg Bibow | September 8, 2014

It has been pretty clear since at least the spring of this year that the ECB was keen to see the euro weakening. At the time the euro stood near to $1.40. Policymakers in a number of euro area member states issued calls for a more competitive exchange rate, directing barely hidden criticisms in this regard at the ECB.

The ECB itself ever more forcefully asserted that international factors, including euro strength, were largely responsible as the bank’s price stability misses got ever crasser. Either through direct references to the euro’s exchange rate expressing discomfort about its strengthening, or by highlighting that the prospective monetary policy stances on either side of the Atlantic were on diverging paths, inviting the markets to bet on the dollar and against the euro, Mr. Draghi applied his magic in talking the euro down.

The latest package of ECB easing measures introduced in early June steered the euro overnight rate closer to zero, raising the euro’s attractiveness as a funding currency for carry trades. All along Mr. Draghi has held out the prospect of some kind of quantitative easing even beyond the credit easing measures promised to be unleashed in the fall. As inflation has declined even more and the so-called recovery stalled once again, the beggaring for a weaker euro has brought some visible success: in late August the euro was approaching the $1.30 mark.

Should the Euro Weaken?

Should the euro have weakened, should it weaken even more? The euro area as a whole, which is the relevant entity here, does not lack international competitiveness. Most common measures suggest that the euro is valued about right in its recent range. Certainly the euro area’s soaring current account surplus together with inflation close to zero – and lower than in competing economies – suggest otherwise. Are the world economy and global trade booming and overheating so that more relief through even bigger euro area export surpluses might seem warranted and welcome?

Quite the opposite. continue reading…


Greece, Rock Bottom, and Co-operative Banking

Michael Stephens | August 29, 2014

In a recent interview, C. J. Polychroniou asked Dimitri Papadimitriou about the idea that Greece is on the verge of economic recovery:

Both the International Monetary Fund (IMF) and the European Commission (EC), in their assessments of the performance of the Greek economy, appear more optimistic on the future of Greece because of the deceleration of the negative growth and a very slight decline of the unemployment rate, even though this was due to using statistics based on the new census that has resulted in demographic adjustments, and not due to growth in employment.

An artificial positive sign on Greece that indicates nothing about Greece’s economic condition, yet it was celebrated as a sign of recovery, was the primary budget surplus and “going back to the financial markets” for a new issue of bonds. The budget surplus was achieved at the cost of creating many damaged lives. On the other hand, going back to the markets was purely a public relations exercise, since the interest cost of almost 5 percent of the new bonds was much higher than that paid on the bailout funds. Moreover, the bonds were implicitly guaranteed by the ECB because they could be used as collateral to the ECB for lower-cost bank borrowing. Finally, the demand for these bonds reflected the current state of excess global liquidity available and not because investors considered Greek bonds as a good risk. The latter is in concert with the well-known adage in Wall Street that at times of “excess liquidity, even turkeys can fly.” All in all, even if the economy were to have hit bottom, this does not necessarily mean it is out of the woods and to a better outlook for its future.

In another segment, Polychroniou and Papadimitriou discussed a recent Levy Institute report that features a proposal to reform and expand co-operative banking in Greece:

Greek banks remain fragile and undercapitalized, thus unable to help the economy recover. A recent Levy Economics Institute publication strongly endorses co-operative banking for Greece as a much-needed alternative financing model for start‐up and existing small enterprises and as an all-important poverty policy alternative. Does the American experience with co-operative banking support this recommendation for Greece?

In the United States, there are no co-operative banks per se. There are what we call Credit Unions and Community Development Banks. Credit Unions have been established throughout the United States and are very successful and mostly unaffected by the subprime financial crisis of 2007-09. They were originally established to serve customers who possessed some common characteristic, i.e. employees of a large organization such as the UN, or big business – IBM – or a locality, Hudson Valley in upstate New York and so on. By now depositors do not need to share a common characteristic. The present credit unions are not very big and serve their local customers since they are geographically focused. Community development banks are very similar and provide banking services to individuals and businesses with limited credit history, such as start-up businesses, firms in agricultural and remote regions, or to inner cities that big banks do not find it profitable to extend their services to. They are doing quite well serving the interests of the unbanked.

Co-operative banks are mostly a European phenomenon and some have become very important in their respective countries and quite large. Others continue their mission of providing services, especially depository and lending functions, to people and areas that large banks shy away from. The most successful are in Germany. There is serious interest from these German co-operative banks to establish their model and operation in Greece. We don’t really need them. We can establish the Greek co-operative bank system very much different than the one we now have, which did not perform well all the time. Our proposal for cooperative banking in Greece incorporates a strong regulatory and supervisory structure, fully transparent, guided by a strong and professional board that will serve the liquidity needs not in the form of “red loans” (κόκκιναδάνεια), but to promote regional entrepreneurship. These banks would contribute to restarting the engine of economic growth, especially within the European framework of the social economy. It has been shown that the large systemic banks in Greece are still in the process of strengthening their balance sheets and have created the credit crunch I mentioned earlier.

Read the rest of the interview here.

Related: “Co-operative Banking in Greece: A Proposal for Rural Reinvestment and Urban Entrepreneurship” (pdf)

See also this policy brief from 1993, co-authored by Hyman Minsky, Dimitri Papadimitriou, Ronnie Phillips, and L. Randall Wray: “Community Development Banking: A Proposal to Establish a Nationwide System of Community Development Banks” (pdf)


Direct Job Creation and Greece’s Debt Trap

Michael Stephens | August 28, 2014

Dimitri Papadimitriou, after noting the ongoing failure of austerity policies in Greece, shares the results of a recent study led by Rania Antonopoulos on the effects of implementing direct job creation programs of various sizes in the beleaguered country. In one scenario, a 300,000-job program (in the low-to-medium-sized range of the  policy options examined) would have reduced the ranks of the unemployed, once the likely multiplier effects are taken into account, by 30 percent if the program had been implemented in 2012, and GDP would have been increased by 4 percent. And the cost?

To run this impressive game-changer, Greece would have to net spend a little over 1 percent of its GDP. That’s a relatively modest stimulus. Other nations, when faced with hard times that didn’t come close to the distress in Greece today, have launched stimulus programs that were far larger. Germany and Brazil invested 4 percent of GDP, the U.S. 5 percent, and China invested 13 percent of GDP.

The program could feasibly be funded by a dedicated EU employment fund, the issuance of special-purpose tax-backed zero coupon bonds, or a temporary suspension of sovereign debt interest payments. Even if the government borrowed the funds, the debt-to-GDP ratio, the measure of health most important to European leadership and financial markets, would improve.

In case you didn’t catch that: investing in a direct job creation program of this size, even if it were funded by increased borrowing (not the best approach, according the authors), would still actually reduce the size of Greece’s public debt relative to its economy — something troika policy has so far failed to accomplish — because the economy would be growing faster than the debt. And the bigger the program, the greater the debt-ratio-reduction effect: had Greece implemented a 550,000-job program in 2012, its debt-to-GDP ratio would have declined by 9 percentage points — all in the course of reducing unemployment in Greece by nearly two-thirds.

Read the rest of Papadimitriou’s article here.

For the study in question, see: “Responding to the Unemployment Challenge: A Job Guarantee Proposal for Greece


12th International Post Keynesian Conference

L. Randall Wray | August 27, 2014

Update: see here for the complete conference schedule.

There is still time to register for our upcoming Post Keynesian conference at the University of Missouri-Kansas City. Unfortunately, the program is full so we cannot accept paper proposals. However, there is still space for participants.

The registration is very affordable, and includes all dinners and special events, some of which are listed below. For more information regarding registration, contact Avi Baranes:



Kansas City, Missouri
September 25–27, 2014

Cosponsored by the University of Missouri–Kansas City, Journal of Post Keynesian Economics, and Levy Economics Institute of Bard College, with support from the Ford Foundation


List of special events:

Sept 24, Wed night 6:30-9:00 p.m.: Pre-Conference Presentation by Professor Bruce Greenwald

Described as “the guru to wall street gurus,” Dr. Bruce Greenwald, the Robert Heilbrunn Professorship of Finance and Asset Management at Columbia Business School will kick off the event with a pre-conference lecture on “Value Investing and the Mismeasure of Modern Portfolio Theory,” Wednesday September 24th, 6pm. His lecture is free and is open to the public.

Sept 25,Thurs 5:30—7:30 p.m.: Moderated Panel Discussion

What Should We Have Learned from the Global Crisis (But Failed To Learn)?

1) Bruce Greenwald
2) Lord Robert Skidelsky, Keynes’s Biographer
Moderator: Steve Kraske

Sept 26, Fri 4:00—5:15 p.m.: Special Session in Honor of Paul Davidson

Money and the Real World

Moderator: Mathew Forstater

Raconteur: Paul Davidson

Sept 26, Fri 5:30—7:00 p.m.: James K. Galbraith Keynote Presentation

Sept 27, Sat 11:45—1:00 p.m.: Lunch, Student Union. Lord Robert Skidelsky Keynote: “The Future of Work”

Sept 27, Sat 5:45—9:00 p.m.: Conference Dinner and Celebration of Post Keynesian Economics

-A Celebration of Post Keynesian Economics: M.E. Sharpe and the Journal of Post Keynesian Economics, Past, Present, Future
-The International Post Keynesian Workshop: Trieste, the University of Tennessee, and the University of Missouri-Kansas City
-Lord Robert Skidelsky Keynote: “Economics After the Crash: What Should Students Be Taught?”


Last Update on Greek GDP

Gennaro Zezza | August 24, 2014

ElStat, the Greek statistical institute, has recently published a flash estimate for GDP in the second quarter of 2014. In current euro prices, GDP keeps falling by 2.5% against the same quarter of 2013. We already know many will claim this as a success of the austerity plans, since the fall is now slower than in previous quarters … but output is still falling.

It is also interesting to note that the flash estimate has also revised GDP in the first quarter of 2014, lowering it by 1% against the previous GDP estimate (see chart). The revision is larger on the current price GDP, against constant price GDP, which implies that the new estimate of the fall in prices is larger than it was.
Our last analysis of the Greek economy is available here