Monday, May 27, 2013

Merijn Knibbe — Another note on Reinhart and Rogoff (and Reinhart): Great Stagnations do exist. Like great expansions.

The discussion about the Reinhart (and Reinhart) and Rogoff (RRR) articles is flaring up again: they (in fact: probably Carmen Reinhart – the style is much more evenhanded, understanding and mature than what I’ve read of Rogoff) have finally written a coherent, systematic defence. Look here. It is important to discuss this because of the importance of their main finding:

monetary economies have been inherently unstable during (at least) the last 200 years, because of endogenous forces related to, among other things, money and debt.

This clearly shows that the ’General Equilibrium’ characteristics of modern economies, assumed by main stream economists and a cornerstone of the main economic models, are not general at all. Debts and credit are totally endogenous to our economies and they are dangerous – surely when the main creditors and money creators, the banks, are unbridled. Alas, the whole discussion does not focus on such emergent properties of monetary economies but on the relation between growth and (public) debt. And RRR do not do a good job when it comes to this relation.
Real-World Economics Review Blog
Another note on Reinhart and Rogoff (and Reinhart): Great Stagnations do exist. Like great expansions.
Merijn Knibbe


2 comments:

F. Beard said...

monetary economies have been inherently unstable during (at least) the last 200 years, because of endogenous forces related to, among other things, money and debt. R&R

Yes. PRIVATE debt, as Professor Steve Keen points out, not sovereign debt.

Of course, sovereign debt has problems of its own since it is a form of "corporate welfare" (Professor Bill Mitchell words) but it is private debt that drives the boom-bust cycle, at least in monetarily sovereign countries.

Ralph Musgrave said...

“monetary economies have been inherently unstable during (at least) the last 200 years..” That’s not exactly the revelation of the century.

Walter Bagehot pointed to the boom/bust phenomenon 150 years ago. And they had a credit crunch in Ancient Rome. Tell me something new.