This currency crisis story might have some relation to the current debate between Marc Lavoie and Sergio Cesaratto on whether the European crisis should be seen as a a monetary sovereignty problem (Marc) or balance of payments crisis (Sergio). Both would agree that the crisis is not the result of fiscal problems, as described above.....Naked Keynesianism
FT: Russia is solvent and fully able to pay its debts. The threat of default - sovereign, public, and private - does not exist.
- Former Russian Central Banker says overall strategy of floating and devaluing the ruble is sound
- Identifies errors by the Central Bank as the primary cause of the ruble crash
The plunging ruble is a signal for the Russian economy to adapt to new conditions, Russia’s Central Bank Chair Elvira Nabiullina said, following the surprise midnight decision to hike the key interest rate to 17 percent.…
“We must learn to live in a new reality, to focus more on our own resources to finance projects and give import substitution a chance,” the bank chief said in a televised address Tuesday.…
Nabiullina said that the Central Bank has special tools not to restrict development and growth within Russia, citing finance of investment projects, and small and medium-sized business and commodity exports as target industries.RT
The Bank of International Settlements has warned that contrary to the reassuring words of “analysts” everywhere, emerging markets are vulnerable to a liquidity squeeze and it has identified the mechanism of why:Tighter global integration of markets increase risk of contagion.
Now some analysts, like Gavyn Davies, remain relatively sanguine, pointing out the the emerging markets crisis of the later 1990s produced only short-term disruption in advanced economies. That considerably underplays the dodged bullet of the LTCM bailout. But more important, as reader Scott has stressed, emerging markets were just over 30% of global GDP then versus roughly 50% now. It’s hard to imagine that if half of the world’s economies are in mild to severe distress that the rest of the world will get off scot free.Naked Capitalism
In the runup to the global financial crisis, George Magnus, who was then chief economist at UBS, was one of the most insightful commentators and was early to call how bad things might get. He’s best known for coining the term “Minsky moment” in early 2007, which he described as when “lenders become increasingly cautious or restrictive, and when it isn’t only over-leveraged structures that encounter financing difficulties . . The risks of systemic economic contraction and asset depreciation become all too vivid.”
Magnus returns and does not find much reason to be optimistic. In a comment today at the Financial Times, he discusses Turkey’s economic and political situation in some detail, and then discusses the potential for continued, widespread upheaval:Naked Capitalism
I am now using Friday’s blog space to provide draft versions of the Modern Monetary Theory textbook that I am writing with my colleague and friend Randy Wray. We expect to complete the text during 2013 (to be ready in draft form for second semester teaching). Comments are always welcome. Remember this is a textbook aimed at undergraduate students and so the writing will be different from my usual blog free-for-all. Note also that the text I post is just the work I am doing by way of the first draft so the material posted will not represent the complete text. Further it will change once the two of us have edited it.
Previous parts:
▪ Case Study – British IMF loan 1976 – Part 1
▪ Case Study – British IMF loan 1976 – Part 2
Case Study – The British IMF loan in 1976
[CONTINUING - NOTE I AM PIECING THIS TOGETHER FROM A RANGE OF PRIMARY HISTORICAL DOCUMENTS AND IT IS VERY TIME CONSUMING. THE TASK IS TO DISTILL THE MASSIVE DETAIL AVAILABLE IN THE VARIOUS OFFICIAL DOCUMENTS TO PROVIDE AN ADEQUATE BACKGROUND TO WHAT HAPPENED IN THE MID 1970s. WITHOUT THAT BACKGROUND ERRONEOUS CONCLUSIONS ARE EASY TO MAKE]
Post War Period to the 1976 crisisBill Mitchell – billy blog
Broadly speaking, there are three types of economic crisis: banking crises and panics, credit frictions and market freezes, and currency crises. This column argues that features from these types of crises have been at work and interacted with each other to shape the events of the last few years. From an extensive review of literature on these issues, it’s clear that the biggest challenge policymakers and economists face is in developing integrative models that better describing contemporary economic realities.VOX.eu
I’ve taken some criticism — particularly from advocates of modern monetary theory and sectoral balances and all that — for using total debt rather than just private debt in my work....
Governments controlling their own currencies are likely to continue to defy the prescriptions of the modern monetary theorists for years to come. And that means that expansionary increases in government debt relative to the underlying economy will continue to be a prelude to contractionary deleveraging, just as is the case with the private sector. All debt matters.azizonomics
in a monetary union like the US or EU, for purposes of this analysis the only kind of regional problem you can have is an unemployment problem. In other words, if there happens to be full employment in all regions there's no problem, regardless of what the inter regional trade numbers happen to be. If there is unemployment, it's a problem whether related to trade or not, and subject to the same adjustments regardless of source. When some regions are at full employment it can be problematic to simply increase aggregate demand at the macro level to sustain full employment in all regions. Should that be the case the 'answer' becomes 'fiscal transfers' where the central govt. directs public spending to the areas of high unemployment. While this works well to sustain full employment throughout the region, it's unfortunately misunderstood as a transfer of wealth to the areas of high unemployment from the taxpayers of the low unemployment regions. In fact, while it's an addition of nominal wealth to the high unemployment regions, the production and exportation of public goods and services to other members of the union is in fact a reduction of real terms of trade for the high unemployment regions doing the production relative to the low unemployment regions doing the consumption, as exports are real costs and imports real benefits. So while fiscal transfers for the production of public goods and services that serve the entire union are commonly presumed to be benefits to the high unemployment regions and costs to the low unemployment regions, in real terms the reverse is almost always the case. October 12, 2012 4:52 PMBut this may be moot at this point. Here is Prof. Cesratto at MNE:
NEW: Things have changed in the meanwhile. Stephanie Kelton has showed great understanding for us, and I believe that her feeling is shared also by other MMTs. We are thinking about having an event together in Rome during her visit to Italy (with Auerbach and Mosler). Even if we shall not be able to organize it, the very fact that we tried is very encouraging.I have not heard the outcome of this, but the MMT economists are doing their best to iron out differences with other PKE economists over issues like this so that they can present a concerted front against neoclassicism and the "Keynesian" neoclassical synthesis. However, there are at present still some disagreements as far as I can see.
Ahmadinejad says "enemies have reduced oil sales" after rial loses more than a quarter of its value over the past week.Al Jazeera
