The recent 40 percent jump in the value of the Swiss Franc will have some effects similar to those of deflation where it seems to be taking hold, including Japan and much of Europe. When a currency increases in value, foreign debts in those currencies become more of a burden. The New York Times brings it home with the story of households in Poland and other European countries who have some foreign debt of their own—mortgages whose payments are suddenly much higher in their own currency, after the Swiss National Bank (the Swiss counterpart to the ECB and the Fed) stopped using foreign-currency operations to peg its currency against the Euro. In fact, the FT reports that mortgages in the Swiss currency make up 37 percent of Polish home loans. The Swiss decision was encouraged by a European Central Bank that is getting ready to push long-term interest rates down further through its own program of quantitative easing (QE). Instead of printing more Francs to buy Euro and other currency, the Swiss National Bank (SNB) allowed the Franc to rise in one big move, abandoning its peg to the depreciating Euro. This move will increase import demand in Switzerland from Poland and other European producers. But as always with a sudden devaluation, foreign-currency debtors suffer from a so-called currency mismatch problem as the amount of debt rises in terms of the things that they sell to make a living, including hours of labor.

Exchange rate pegs are difficult to maintain for an extended period, especially in relatively poor countries, as changing economic conditions cause misalignments in exchange rates. One reason not to institute a peg is the instability that can ensue when it is abandoned, and this instability can cause penury for debtors, including governments. A second bad policy is interest rates that that need to be reduced generally by the monetary policy authorities where possible. One policy approach is to target help at the debtors themselves, particularly households and countries that must be helped up to maintain autonomy. The latter include Greece, for which our Greek macro team recently suggested an interest-payment moratorium. Sometimes, a reduction in the amount owed, or principal, is in order, as it was —and probably still is—for many subprime and Alt-A (mid-range credit rating) borrowers affected by the US mortgage crisis. Eastern European countries debated converting Swiss mortgages into domestic-currency debts at a higher-than-market domestic exchange rate. A slightly less-targeted form of help is to implement jobs programs of various types and to hold the line on public-sector wages. But when unemployment and other economic indicators suggest stagnation if anything, such targeted policy stimulus helps, yet it has only an indirect impact on private investment, overall economic growth, and unmet infrastructure, poverty-reduction, and pension needs.

The ECB is smart to implement QE, given high rates of unemployment in almost every country in the Eurozone. The SNB may even be smart to allow its currency to rise, given strong economic performance. And by the same token, if the Polish government can broadly raise spending, increasing resources for budget items that encourage economic growth and inflation is under control (2 percent—one common benchmark—is rather low for a target, especially given high unemployment), it should do so. Monetary stimulus might also form part of the picture. With such a move, the government would take steps in the same direction as the ECB and the Japanese government, recognizing the threat of  debt deflation.

Generally, the a combination of the three types of policy outlined here would work effectively in many countries with high unemployment, weak growth, and large amounts of bad private-sector debt. Targeted help for borrowers can take many forms, but writing off a portion of the principal, with the central bank’s help, if necessary, is often the only way to avert widespread private-sector bankruptcies. In contrast, broad measures might include, for example, devaluations of the domestic currency, investments in infrastructure and R&D, wide-ranging open-market purchases, tax cuts, and other available measures to spur all sectors of the economy. Third, universal measures—programs available to all who meet eligibility criteria—would include Social Security and its counterparts in affected countries. (An employer-of-last resort, or ELR, program would fit within both universal and targeted categories.) It is more risky rather than less not to maintain such programs during a crisis.

With Syriza in the driver’s seat, Greece now has some hope for the end to austerity imposed by Germany and the troika.

Here’s a good short piece in the New York Times by C. J. Polychroniou, a research associate and policy fellow at the Levy Economics Institute. As he explains, what Syriza wants is no more—and no less—radical than what the USA did in the 1930s to deal with its Great Depression: “the bulk of Syriza’s economic program for addressing the catastrophic crisis in Greece, which has evolved into a humanitarian crisis, is inspired by President Franklin D. Roosevelt’s New Deal programs.”

The official press is reacting in horror! Oh the horror of bringing Democracy and Pinko policies into the Officially Neoliberal EMU regime! C.J. continues:

“Interestingly, the task for the implementation of the employment program has been assigned to a colleague of mine at the Levy Institute, Rania Antonopoulos, who has been appointed deputy minister of Labor and Social Solidarity under a Syriza-led government.”

Yes, Senior Scholar Rania Antonopoulos is director of the Gender Equality and the Economy program at the Levy Institute, specializing in macro-micro linkages of gender and economics, international competition, and globalization; job guarantee policies and their macroeconomic and employment impacts; social protection and poverty reduction; and the implications of paid and unpaid work on poverty indicators. She was one of the founders of “Economists for Full Employment” and has been a long-time supporter of the job guarantee.

And so, two Levy scholars have moved into government this month—Rania in Greece and Stephanie Kelton in Washington. What will the world come to?

Dean Baker, everyone’s favorite progressive economist (mine, too), has an interesting take on our unemployment problem: Give more paid vacations.

The idea is that if all the employed work less, employers will need to hire the unemployed to produce what the already employed won’t be producing while sunning themselves on Florida’s beaches.

Look, I’m all for shorter workweeks. It is ridiculous that labor’s push somehow got stuck a century ago at the 40-hour workweek in the USA. Employed Americans work more hours per year than just about any other workforce on the planet.

But, as Joan Robinson once declared, the only thing worse than working as a wage slave is to be unemployed. Just ask the Italians, who now have the highest unemployment rate since they started keeping records. Thanks to the EMU and German fiscal rectitude!

I see shorter work days and more paid vacations as a progressive goal to humanize the work place. More time to enjoy one’s family, recreation, and the arts. More time for self-improvement and community involvement. More time for our wage slaves to enjoy the life of leisure long pursued by the leisure classes.

However, last on my list of arguments for a shorter workweek would be the claim that it will create more jobs for the unemployed. continue reading…

Here are the keynote addresses delivered by James Galbraith (“The End of Normal”) and Robert Skidelsky (“The Future of Work”) at the 12th International Post Keynesian Conference (more videos from the conference can be found here):

Pavlina Tcherneva was interviewed on the Real News Network about what’s behind the numbers in her chart (below) showing the increasingly inequitable distribution of income growth in US economic expansions–and what we can do about it.

Related: “Growth for Whom?“

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)

The chart above documents another striking feature of the impact of the recession on Greece.

The Hellenic Statistical Authority (ElStat) has recently released the new quarterly data on employment and the labor force, which includes a measure of the population aged 15 or more (Table 1). While the series published in the previous release exhibited a stable upward trend (reported in green in the chart), the new estimates show that population peaked at 9.437 million at the end of 2008, and then started declining, reaching 9.296 million in the first quarter of this year, i.e. it went back to its 2004 level. (The reasons for the change in the series are due to ElStat incorporating the latest census data: details are available in the ElStat web site).

As ElStat does not publish an up-to-date measure of net migration, we assume this could be measured by the distance between the pre-crisis population trend and the actual values. We therefore computed a simple linear trend on the 2001-2008 data, which shows that population would have now been at 9.686 million, had the previous trend continued. The difference between this value and the population reported for the first quarter of 2014 is thus approximately 390,000 people (4 percent).

ElStat makes available the detail by age groups (Table 2), reported in our second chart, which shows that younger Greeks are declining steadily in number – a trend which is common to many developed countries who chose to reduce the average number of kids per family – while the number of older people is steadily increasing – again a trend common to many countries, linked to longer life expectancy. Summing up the 15-29 groups to the 45+ groups, we find that the decline in the younger population accelerated after 2007, compensating the increase in the number of Greeks aged 45 and over, so that the inverted U-shape of the population in our first chart can largely be attributed to the decline in Greek residents aged 30-44, who are now 2.442 million against a peak of 2.544 million at the end of 2008.

We have no complete information to know if this decrease is due to Greeks in this age cohort migrating abroad, or to a smaller number of immigrants. However, the OECD migration database contains some (incomplete) statistics on immigrants by country (the figures largely under-estimate total migration, as some major European countries such as France and Italy do not report any figures to the OECD).

As the next chart shows, and how it should be expected looking at the respective unemployment rates, the main destination of Greek emigrants is Germany, and the number of migrants has almost doubled from 2010 to 2011 (the last available year).

The other portion of the fall in population is given by migrants to Greece, which have fallen from 65.3 thousands in 2005 to 33.3 thousands in 2010 and 23.2 thousands in 2011.

It is to be expected that migration of Greeks abroad, and the decline in immigrants to Greece, continued on the same paths after 2011, given the size of the unemployment rate in Greece (still at 26.8 percent in March 2014, seasonally adjusted). Using the economists’ jargon, this is another loss of human capital for the Greek economy which will make a recovery more difficult. And, in addition, balance of payments statistics published from the Bank of Greece do not show any improvements in payments made from abroad which could be related to migrants’ remittances: both the compensation of employees received by Greece from abroad, and current transfers to the private sector have actually declined since the beginning of the crisis.

Pavlina Tcherneva participated in a conference on youth unemployment at Middlebury College and shared her ideas for a youth employment safety net (beginning at 38:45):