tag:blogger.com,1999:blog-8764541874043694159.post249249694394705022..comments2024-03-28T12:23:39.665+00:00Comments on Coppola Comment: Reframing Reinhart & RogoffFrances Coppolahttp://www.blogger.com/profile/09399390283774592713noreply@blogger.comBlogger14125tag:blogger.com,1999:blog-8764541874043694159.post-1591562222053605362013-04-23T11:17:59.362+01:002013-04-23T11:17:59.362+01:00I understand the argument against austerity, but w...I understand the argument against austerity, but what alternative strategy do you propose? An increase in short/medium term public expenditure? Can sustainable growth be manufactured like this? Bowles-Simpson report in US also pointed towards austerity as the answer. Should their work be disregarded too?Matt Bird - Investment Bloghttps://www.blogger.com/profile/18164706201439776224noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-3827193391109031132013-04-20T12:35:43.794+01:002013-04-20T12:35:43.794+01:00I absolutely agree. Those are far more meaningful ...I absolutely agree. Those are far more meaningful metrics. Particularly the interest cover. Frances Coppolahttps://www.blogger.com/profile/09399390283774592713noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-58646464031434116662013-04-20T12:29:24.324+01:002013-04-20T12:29:24.324+01:00Some rough and ready thought on the metrics:
Woul...Some rough and ready thought on the metrics:<br /><br />Would not interest cover, ie annual tax revenue/annual interest payments, be a more meaningful metric to assess a government's "solvency"?<br /><br />Secondly, would it not make more sense to use the ratio of govt net borrowings in the year to government spending in the year ?<br /><br />Both these metrics compare a flow to a flowAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-81367333203983798752013-04-19T22:15:21.633+01:002013-04-19T22:15:21.633+01:00"The economics world is aghast"
But not..."The economics world is aghast"<br /><br />But not it seems, MMT scholars. Please see Wray & Nersisyan's 2010 paper: <br /><br />"Does Excessive Sovereign Debt Really Hurt Growth? A Critique of This Time Is Different, by Reinhart and Rogoff"<br />http://www.levyinstitute.org/pubs/wp_603.pdf<br /><br />Referring back to that earlier critique in his blog on R&R this week, Randy Wray reminded us(without recourse to any econometrics at all!) that their thesis is, in essence, simply illogical garbage ... <br /><br />"Here’s the bigger problem highlighted by Yeva and Me: they do not know what they are talking about. Sovereign countries that issue their own floating currency cannot be forced into involuntary default no matter what the debt ratio."Stephennoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-69772999498903306532013-04-19T21:26:02.472+01:002013-04-19T21:26:02.472+01:00An elegant debunking as usual. Frances for Chance...An elegant debunking as usual. Frances for Chancellor!<br /><br />But what about the original referees and publishers (National Bureau of Economic Research - a private foundation)? Are they not jointly culpable? The schoolboy/girl Excel error is unpardonable but that is only partly responsible for the casual misinterpretation, which is economics 101 level.<br /><br />John@TheMoneyPrinciplehttp://www.themoneyprinciple.co.uknoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-48143606962997717052013-04-19T17:53:20.099+01:002013-04-19T17:53:20.099+01:00Anon,
You ask whether printing money “wouldn'...Anon,<br /><br />You ask whether printing money “wouldn't . . . cause inflation to rise?” The answer is that debt and money are very similar, so there is not much difference inflation-wise between having government print money rather than borrow (or “print” debt). But to the extent that money printing is more stimulatory and inflationary, the solution when going for a particular amount of stimulus and adopting the print option rather than the borrow option is to print a bit less than whatever amount would have been borrowed, had one gone for the borrow option.<br />Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-22261263262513320472013-04-19T15:47:45.848+01:002013-04-19T15:47:45.848+01:00I like that idea. Make the bankers pay the dole.
I...I like that idea. Make the bankers pay the dole.<br />It's worth discussion at the very least.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-21943701455460601482013-04-19T13:39:57.842+01:002013-04-19T13:39:57.842+01:00"This again is something of a no-brainer: the..."This again is something of a no-brainer: the more money you extract from the private sector through higher taxes and/or spending cuts, the less money the private sector will have for spending and investment. "<br /><br />That depends if the private sector was intent on saving that money in excess of investment.<br /><br />In which case taxing away that extra saving may have little effect.<br /><br />Removing an amount of tax relief on pension contributions would be one example.<br /><br />NeilWhttps://www.blogger.com/profile/11565959939525324309noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-31596756458126978642013-04-19T13:25:13.461+01:002013-04-19T13:25:13.461+01:00Thank you Frances, crystal clear as usual :-)Thank you Frances, crystal clear as usual :-)Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-72465877410838073062013-04-19T11:47:40.022+01:002013-04-19T11:47:40.022+01:00Of course anyone with half a brain has been saying...Of course anyone with half a brain has been saying since the crisis that what is required is growth.<br />The 2.2% growth the paper links with 90% debt/GDP ratio would be very welcome!<br /><br />As Danny Blanchflower says SMEs are crucial to this, and he isn't wrong.<br />The Panacea is linking banker and bank taxes to the performance of the economy.<br />The easiest link would be unemployment level.<br /><br />Dynamically set banker's top-rate income tax to ten times the unemployment rate would have seen it rise from ~50% in 2008 to around 80%-83% recently.<br />In a bid to reduce their income tax, I think that SMEs would see honestly priced finance; this would lead to an immediate and sustained drop in unemployment and increase in GDP. A virtuous circle then forms with the financial sector then tied to the real economy like a sheep savaging dog tied to a burly ram.<br /><br />The bank-levy? Simple: the cost to the state of Jobseekers Allowance, about £6bn a year just now.<br />www.bailoutswindle.comHarry Alffahttps://www.blogger.com/profile/12373844683436620254noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-33264802472457423632013-04-19T08:44:20.535+01:002013-04-19T08:44:20.535+01:00thanks. I have replied to Ralph's comment. I h...thanks. I have replied to Ralph's comment. I hope this clarifies things for you. Frances Coppolahttps://www.blogger.com/profile/09399390283774592713noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-82918239163402731782013-04-19T08:43:19.257+01:002013-04-19T08:43:19.257+01:001) The standard definition of a recession is two s...1) The standard definition of a recession is two successive quarters of negative growth. Negative is not zero. <br /><br />2) "Econometric" and "economic" are not the same thing. Many people may have questioned R&R's economics. But there don't seem to have been any econometrics. Which is what I said. <br /><br />3) I refer you to my final paragraph, and the associated link, where I point out that govt debt and money are pretty much the same thing. Deficits always require an increase in something, and that something is either debt or money. That is basic maths. Frances Coppolahttps://www.blogger.com/profile/09399390283774592713noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-29813187056355813022013-04-19T07:58:00.148+01:002013-04-19T07:58:00.148+01:00Perhaps I'm stupid but in above quibble 3., it...Perhaps I'm stupid but in above quibble 3., it is stated "a deficit does not necessarily involve any increase in the debt at all." and then it is stated "a deficit can be funded either by increased debt or simply printing money." hmm... Aren't both ways an increase in debt? And wouldn't the latter method cause inflation to rise? Someone please explain. We go from the clear blog to the obscure comment! Scratches head....<br /><br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-21570524834906870052013-04-19T06:33:38.429+01:002013-04-19T06:33:38.429+01:00Basically agree, bar a few quibbles as follows.
1...Basically agree, bar a few quibbles as follows.<br /><br />1. Para starting “First, public debt…”: the idea that the debt/GDP ratio will change much because an economy contracts in a recession is a new one on me. First, some recessions involve no GDP contraction at all – i.e. they just involve an absence of growth. Second, even if GDP contraction IS INVOLVED, it’s normally no more than 5% or so. So the maximum deterioration in the debt/GDP ratio you’re likely to get from the above cause is about 5%, which is insignificant.<br /><br />2. “even more astounded that until Dube, no-one appears to have done any serious econometric analysis to confirm the direction of causation..” I’m not sure about that: it was blindingly obvious to large numbers of us long ago (MMTers in particular) that Rogoff and like-minded persons have no grasp of economic theory. As to “econometrics”, I don’t attach much importance to including maths in economics. Rogoff employed plenty of maths – and look at the result.<br /><br />3. One point missing from the above article is that a deficit does not necessarily involve any increase in the debt at all. As Keynes pointed out, a deficit can be funded either by increased debt or simply by printing money. Milton Friedman also advocated a system under which there is never any government debt. Warren Mosler advocates likewise. I agree with them.<br /><br />Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.com