On the Economy — Historical U.S. Trade Balance and Industrialization

The U.S. has run a persistent trade deficit over the past few decades, similar to much of the 19th century. The shifts in the U.S. trade balance over time seem to correspond with U.S. industrialization in a global setting, according to a recent Economic Synopses essay. 

“We hypothesize that industrialization leads to structural changes that cause a nation’s comparative advantages to change relative to those of other nations,” wrote Assistant Vice President and Economist Yi Wen and Research Associate Brian Reinbold.

“Since countries trade based on their comparative advantages, we would expect to see long-term changes to a country’s trade as it enters a new stage of development,” they added....

The interesting point from the MMT POV is that when a country is growing it needs to import more than export and runs a chronic trade deficit, meaning that the country is receiving "winning" in real terms of trade. Then, after industrialization and increasing comparative advantage in manufactures, the country begins to run chronic trade surpluses, meaning that it is saving on other countries currency one balance and "losing" in real terms of trade. Then, in the third stage, the developmental process reverses, the country runs chronic trade deficits and begins "winning" again in real terms of trade.

This is opposite the conventional interpretation of winning and losing in trade competition.

On the Economy — FRBSL
Historical U.S. Trade Balance and Industrialization

Rebecca L. Spang — MMT and Why Historians Need to Reclaim Studying Money

Good read! 

Controversy over money is nothing new in US history, since it has been a lively political issue. The arguments are not chiefly about money, although couched in terms of money, economics, and finance, but rather, politics, which involves winners and losers in the policy game. Historically, sound money advocated have been the wealthy, and functional finance people have been ordinary citizens aka "the little people" (h/t Alan Simpson).

History News Network
MMT and Why Historians Need to Reclaim Studying Money

Rebecca L. Spang | Professor of History at Indiana University where she directs the Liberal Arts and Management Program, and author of Stuff and Money in the Time of the French Revolution (Harvard University Press, 2015)

FRBNY Liberty Street Economics Blog — Crisis Chronicles

FRBNY Liberty Street Economics Blog — Crisis Chronicles

Crisis Chronicles: The Panic of 1819—America’s First Great Economic Crisis

Crisis Chronicles: The Panic of 1825 and the Most Fantastic Financial Swindle of All Time

Crisis Chronicles: The Man on the Twenty-Dollar Bill and the Panic of 1837

Crisis Chronicles–The California Gold Rush and the Gold Standard

Crisis Chronicles: Railway Mania, the Hungry Forties, and the Commercial Crisis of 1847

Crisis Chronicles: Defensive Suspension and the Panic of 1857

Crisis Chronicles: The Cotton Famine of 1862-63 and the U.S. One-Dollar Note

Crisis Chronicles: The Gold Panic of 1869, America’s First Black Friday

Crisis Chronicles: Gold, Deflation, and the Panic of 1893 Liberty Street Economics

The Final Crisis Chronicle: The Panic of 1907 and the Birth of the Fed Liberty Street Economics

Thomas Klitgaard and James Narron — Crisis Chronicles: The Long Depression and the Panic of 1873

It always seemed to come down to railroads in the 1800s. Railroads fueled much of the economic growth in the United States at that time, but they required that a great deal of upfront capital be devoted to risky projects. The panics of 1837 and 1857 can both be pinned on railroad investments that went awry, creating enough doubt about the banking system to cause pervasive bank runs. The fatal spark for the Panic of 1873 was also tied to railroad investments—a major bank financing a railroad venture announced that it would suspend withdrawals. As other banks started failing, consumers and businesses pulled back and America entered what is recorded as the country’s longest depression.…

FRBNY — Liberty Street Blog
Crisis Chronicles: The Long Depression and the Panic of 1873
Thomas Klitgaard and James Narron

Michael Hudson — How the U.S. Treasury avoided Chronic Deflation by Relinquishing Monetary Control to Wall Street

History lesson. This is a paper rather than a post.

As published in the Social Sciences Research Network

Michael-Hudson.com
How the U.S. Treasury avoided Chronic Deflation by Relinquishing Monetary Control to Wall Street

Michael Hudson | President of The Institute for the Study of Long-Term Economic Trends (ISLET), a Wall Street Financial Analyst, Distinguished Research Professor of Economics at the University of Missouri, Kansas City, and Guest Professor at Peking University

Robert Oak — Another 640,000 Drop Out of the Labor Force Causing Unemployment Rate Decline

The June employment report brings some OMG, jaw dropping, are you kidding me numbers. Over 640,000 dropped out of the labor force. As a result, the unemployment rate drops two tenths of a percentage point to 5.3%. The labor participation rate dropped by -0.3 percentage points to 62.6%. This new low of a labor participation rate has not seen since October 1977 when women and minorities were still were not in the workforce extensively. While the United States does have baby boomers entering retirement, these figures are horrific...

The Economic Populist
Another 640,000 Drop Out of the Labor Force Causing Unemployment Rate Decline
Robert Oak

Tony Wikrent — HAWB 1801 - Alexander Hamilton and Albert Gallatin - How America Was Built

Economics history of the US.

Real Economics
HAWB 1801 - Alexander Hamilton and Albert Gallatin - How America Was Built

Tony Wikrent

Michael Perelman — The Dysfunctionality of Slavery and Neoliberalism

Some US economic history.

Unsettling Economics
The Dysfunctionality of Slavery and Neoliberalism

Michael Perelman | California State University Chico

Thomas Klitgaard and James Narron — Crisis Chronicles: The Man on the Twenty-Dollar Bill and the Panic of 1837

President Andrew Jackson was a "hard money" man. He saw specie—that is, gold and silver—as real money, and considered paper money a suspicious store of value fabricated by corrupt bankers. So Jackson issued a decree that purchases of government land could only be made with gold or silver. And just as much as Jackson loved hard money, he despised the elites running the banking system, so he embarked on a crusade to abolish the Second Bank of the United States (the Bank). Both of these efforts by Jackson boosted the demand for specie and revealed the soft spots in an economy based on hard money. In this edition of Crisis Chronicles, we show how the heightened demand for specie ultimately led to the Panic of 1837, resulting in a credit crunch that pushed the economy into a depression that lasted until 1843.

FRBNY — Liberty Street Economics
Crisis Chronicles: The Man on the Twenty-Dollar Bill and the Panic of 1837

Thomas Klitgaard, vice president in the Federal Reserve Bank of New York’s Research and Statistics Group, and and James Narron, senior vice president in the Federal Reserve Bank of San Francisco’s Cash Product Office

Don Morgan and James Narron — Crisis Chronicles: The Panic of 1825 and the Most Fantastic Financial Swindle of All Time

Modern Parallels? 

It seems that the Bank [of England] eventually threw everything it had at the Panic of 1825. Does that sound familiar? The Term Auction Facility, the Commercial Paper Funding Facility, the Money Market Investor Funding Facility, and the Term Asset-Backed Securities Loan Facility are just a few of the liquidity programs that the Federal Reserve used to stem the Panic of 2008.

This 2009 blog post draws some parallels between 1825 and 2008 based on the information asymmetries that plagued the securities markets in both cases—bonds issued by far-off, fledging nations in the former case and exotic asset-backed securities in the latter. Are there other parallels between the panics of 1825 and 2008? Let us know what you think.

FRBNY — Liberty Street Economics
Crisis Chronicles: The Panic of 1825 and the Most Fantastic Financial Swindle of All Time
Don Morgan, assistant vice president in the Federal Reserve Bank of New York’s Research and Statistics Group, and James Narron, senior vice president in the Federal Reserve Bank of San Francisco’s Cash Product Office

Tony Wikrent — The Philosohy of Populist Change

Important history lesson.

And a message for MMT — There is a pressing need is for a populist alternative to economic liberalism and socialism.

The US predecessor was the Greenback Party, but it quickly lost influence after the Civil War and the resumption of the gold standard and resurgence of the predator class and economic liberalism.

Ian Welsh
The Philosohy of Populist Change

Tony Wikrent

Jon Perr — The 1 Percenters are Right: Let's Go Back to the Good Old Days

These guys haven't had it as good since McKinley.

PERRspectives
The 1 Percenters are Right: Let's Go Back to the Good Old Days
Jon Perr

Creating a History of U.S. Inflation Expectations

Central bankers closely monitor inflation expectations because they’re an important determinant of actual inflation. Treasury inflation-protected securities (TIPS) are commonly used to measure bond market inflation expectations. Unfortunately, they were only introduced in 1997, so historical data are limited. We propose a solution to this problem by using the relationship between TIPS yields and other data with a longer history to construct synthetic TIPS rates going back to 1971.

FRBNY — Liberty Street Economics
Creating a History of U.S. Inflation Expectations
Jan Groen and Menno Middeldorp