Matt Stoller — The Bailouts for the Rich Are Why America Is So Screwed Right Now

Comparison of the way Bush and Obama handled the 2008 crisis with now Hoover and Roosevelt handled the crisis that led to the Great Depression.

Vice
The Bailouts for the Rich Are Why America Is So Screwed Right Now

Matt Stoller

David Glasner — Hayek, Deflation and Nihilism

At least Hayek later admitted he was wrong about deflation being useful in breaking rigidities.

Uneasy Money

Hayek, Deflation and Nihilism
David Glasner

David Glasner — How not to Win Friends and Influence People

Some history, some economics, some politics and some ideology. Covers a lot of ground.

Uneasy Money
How not to Win Friends and Influence People
David Glasner | Economist at the Federal Trade Commission

Dirk Ehnts — Income inequality and the Great Depression II

More than five years ago (actually, six) I had wondered whether it is a coincidence that inequality in the US hit a peak in 1929 and 2007. While I did not have time to follow-up on this with an academic paper, Christian Belabed of the IMK just did. Here is his abstract:

econoblog 101
Income inequality and the Great Depression II
Dirk Ehnts | Lecturer at Bard College Berlin

Brad DeLong — Depression’s Advocates

Back in the early days of the ongoing economic crisis, I had a line in my talks that sometimes got applause, usually got a laugh, and always gave people a reason for optimism. Given the experience of Europe and the United States in the 1930s, I would say, policymakers would not make the same mistakes as their predecessors did during the Great Depression. This time, we would make new, different, and, one hoped, lesser mistakes.

Unfortunately, that prediction turned out to be wrong. Not only have policymakers in the eurozone insisted on repeating the blunders of the 1930s; they are poised to repeat them in a more brutal, more exaggerated, and more extended fashion. I did not see that coming.…

What was that about doing the same thing and expecting a different result?

Project Syndicate
Depression’s Advocates
Brad DeLong | Professor of Economics, UCAL Berkeley

Mikhail Khazin — The global recession will exceed the Great Depression by 2.5 times

Rising regionalism in response to global economic contraction owing to rising debt/income ratio as households cannot finance effective demand.

Fort Russ
Khazin: The global recession will exceed the Great Depression by 2.5 times
Mikhail Khazin
Translated by Kristina Rus

Original in Russian: Mikhail Khazin | Izborsky Club

Robert Skidelsky — Messed-Up Macro

Economics is a science? Really?

Model, model, who's got the (right) model?

Project Syndicate
Messed-Up Macro
Robert Skidelsky, Professor Emeritus of Political Economy at Warwick University and a fellow of the British Academy in history and economics, is a member of the British House of Lords
ht Brad DeLong

Brad DeLong — When Do We Start Calling This “The Greater Depression”?

When we hit the second leg down.

WCEG — The Equitablog
When Do We Start Calling This “The Greater Depression”?
Brad DeLong

Jonathan Larson — Is the Fed REALLY out of bullets—Eccles and Depression history

How Marriner Eccles saved America By Laraine Blackham And Steve Blackham, Published January 15, 2011

real economics
Is the Fed REALLY out of bullets—Eccles and Depression history
Jonathan Larson

James Hamilton — Who anticipated the Great Depression?

Interesting paper on Gustav Cassel's disagreement with the view of Keynes that fiscal policy was needed to pull out of the Great Depression rather than monetary policy.

[Cassel] viewed Keynes' treatment of interest as being driven by liquidity preference as "a most astonishing step backward" because "the determination of the rate of interest as a scarcity price paid for the use of capital occupies, and must continue to occupy, a central position in the general theory of price formation," with liquidity being a secondary concern (p. 440).26

Cassel (1931, p. 443) rejected the idea of spending on public works as a depression remedy: "[C]onsidering what governments have done and still do to deter private investment by high and arbitrary taxation, by all sorts of restrictions, national and international, and by bad monetary policy, it is, to say the least of it, curious that such mistakes should be exploited as a ground for widening the functions of governments as entrepreneurs."27 Instead, central banks should provide enough money to prevent disturbances, arising from the hoarding of cash, from interfering with stable prices and full employment. If the monetary authorities acted to ensure stable prices and full employment, "there would be no room for the mass of dilettante proposals to cure an imaginary illness of the economy by those highly artificial forms of money for which Keynes has expressed his most inappropriate sympathy."

It would seem that ZIRP and QE 1, 2, and 3 disconfirm Cassel's theory, unless it be argued that the Fed was too stingy with creating reserve balances. We are over five years into this and while the banks were rescued from insolvency by extraordinary forbearance, the US, UK, and EZ economies are stuck in the doldrums with the highest levels of long term unemployment since the Great Depression. Monetary policy, even extraordinary measures, do not work, unless the central banks can find another rabbit to pull out of their hats that does better. Let's put this myth to bed once and for all.

Econobrowser
Who anticipated the Great Depression?
James Hamilton

Lord Keynes — Mises’s Explanation of the Great Depression: A Critique

Relevant today because the debate between market fundamentalists and Keynesians is still very much alive.

Social Democracy for the 21st Century: A Post Keynesian Perspective
Mises’s Explanation of the Great Depression: A Critique
Lord Keynes

circuit —Deficit spending got the US out the Great Depression: Paul Samuelson on helicopter money

Great Paul Samuelson quote. He actually got it.

Fictional Reserve Barking
Deficit spending got the US out the Great Depression: Paul Samuelson on helicopter money
circuit

Dan Kervick — Market Myths and the Real Drivers of American Progress

Dan does the numbers to show that market fundamentalism is a hoax and the real driver of US prosperity has been cooperation among all factors and led by government.

Rugged Egalitarianism
Market Myths and the Real Drivers of American Progress
Dan Kervick
(crossposted at New Economic Perspectives)

Dirk Ehnts — Irving Fisher on the Great Depression

“Finally the Government stepped in and itself went deeply into debt with the banks. [Fisher]” Instead, the news today are rather showing us the opposite, as the NY Times reports in this headline:

U.S. Government Shuts Down in Budget Impasse

One wonders why politicians would actively sabotage the national economy and make the cake smaller. Either they are ignorant – but I hardly believe that – or there are some people who will gain and some that will lose from this. This is probably about distribution.

Ya think?

econoblog101
Irving Fisher on the Great Depression
Dirk Ehnts | Berlin School for Economics and Law

Dallas Fed — How Bad Was It? The Costs and Consequences of the 2007–09 Financial Crisis

Abstract 

The 2007-09 Financial crisis was associated with a huge loss of economic output and financial wealth, psychological consequences and skill atrophy from extended unemployment, an increase in government intervention, and other significant costs. Assuming the financial crisis is to blame for these associated ills, an estimate of its cost is needed to weigh against the cost of policies intended to prevent similar episodes. We conservatively estimate that 40 to 90 percent of one year's output ($6 trillion to $14 trillion, the equivalent of $50,000 to $120,000 for every U.S. household) was foregone due to the 2007-09 recession. We also provide several alternative measures of lost consumption, national trauma, and other negative consequences of the worst recession since the 1930s. This more comprehensive evaluation of factors suggests that what the U.S. gave up as a result of the crisis is likely greater than the value of one year's output.

Dallas Fed Staff Papers (July 2013)
How Bad Was It? The Costs and Consequences of the 2007–09 Financial Crisis
Tyler Atkinson, David Luttrell and Harvey Rosenblum

Unlearning Economics — Milton Friedman’s Distortions, Part II

Conclusion

Milton Friedman’s academic contributions do not stand up to scrutiny. Friedman seemed to be prepared to conjure up neat, ad hoc explanations for certain phenomena, simply asserting facts and leaving it for others to see if they were true or not, which they usually weren’t. He selectively interpreted his own data, exaggerating or plain misrepresenting it in order to make his point. Furthermore, his methods should be unsurprising given his incoherent methodology, which allowed him to dodge empirical evidence on the grounds of an ill-defined ‘predictive success’, something which sadly never materialised. In almost any other discipline, Friedman’s attempts at ‘science’ would have been laughed out of the room. Serious economists should distance themselves from both him and his contributions.

Unlearning Economics
Milton Friedman’s Distortions, Part II

Dirk Ehnts — M2 developments in the euro area (2003-2011)

The big question in Europe: is the collapse of the economies of Greece, Spain and Ireland caused by a decline in the monetary aggregate M2, or is the economic decline causing M2 to fall? I would argue the latter, as lenders frantically try to pay off existing back and new borrowing is very low. Not everybody agrees with that. Here is Milton Friedman and Anna Schwartz....

econoblog101
M2 developments in the euro area (2003-2011)
Dirk Ehnts | Berlin School of Economics and Law

Mark Thoma — 'The Hangover Theory' [Paul Krugman]

Moralizing versus math. Paul Krugman did the math at the time of the Asian crisis and got it right. So why is he resistant to MMT now?

Economist's View

'The Hangover Theory'

Mark Thoma

Brad DeLong calls depression

...my conclusion is that I should stop calling the current episode the Lesser Depression. Yes, its shape is different from that of the Great Depression; but, so far at least, there is no reason to rank it any lower in the hierarchy of macroeconomic disasters.

Project Syndicate
Let it Bleed?
J. Bradford DeLong | Professor of Economics, University of California at Berkeley and a research associate at the National Bureau for Economic Research

Galbraith on the Great Depression and the 'Great Recession'

A new interview with Jamie Galbraith (and also Leo Panitch), on the possibilities of a New 'New Deal' (part II here). Not much of chance, by the way. Part of the story is that the New Deal was fundamental in institution building, and these very institutions saved us from a crisis similar to the Depression, creating less of a perceived need for continuous reform.

Naked Keynesianism
Galbraith on the Great Depression and the 'Great Recession'
Matias Vernengo | Associate Professor of Economics, University of Utah