Ramanan — Sergio Cesaratto On TARGET2 Balances [v. Marc Lavoie]

Ramanan agrees with Cesaratto over Lavoie on the Eurocrisis being a balance of payments crisis.

The ECB alone cannot resolve the crisis. Attempts to boost domestic demand with fiscal policy will bring higher imbalances within the Euro Area. The Euro Area needs a central government with high powers to tax and spend. Regional imbalances will be kept in check via fiscal transfers and regional policies of the government. And the powers of the government won’t be limited with this. There are many other things such as wages which need to be coordinated at the federal level, for example. Euro Area balance-of-payments cannot be neglected.

The Case of Concerted Action
Sergio Cesaratto On TARGET2 Balances
Ramanan

Matias Vernengo — Greece on the verge

I discussed to a great extent the debate between Sergio Cesaratto and Marc Lavoie on the nature of the European crisis, that is, whether it is a balance of payments crisis or a monetary sovereignty one.

Cesaratto argues that a balance-of-payment crisis is possible in a currency union, and that the financial crisis of the Eurozone is indeed such a balance-of-payment crisis....

Yet, as noted by Lavoie, the Eurozone crisis seems to have been caused instead mainly as the result of an initial banking problem, which transformed itself into a public debt problem. In other words, the currency issue, and the functioning of the monetary union seem to be at the core of the crisis, not a balance of payments one....

My argument, discussed briefly here before, is that the Cesaratto and Lavoie hypotheses are one and the same. The balance of payments and the monetary sovereignty views of the European crisis are two sides of the same coin.....

Naked Keynesianism
Greece on the verge
Matias Vernengo | Associate Professor of Economics, Bucknell University

Clint Balligner — Modern Monetary Theory & International Trade

Warren Mosler said in reply to Prof. Cesaratto here at MNE.

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 PM

But 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.

Those who economists or otherwise up on the material can come to their own conclusions.

Clint Balligner
Modern Monetary Theory & International Trade
clintballinger

Lord Keynes — Some Serious Criticism of MMT

There is serious debate to be had here, not because of any hostility to MMT (indeed I personally regard MMT with sympathy as a more radical form of Post Keynesianism), but in the spirit of constructive criticism.

Read it at Social Democracy for the 21st Century
Some Serious Criticism of MMT

by "Lord Keynes"

About that the post of Sergio Cesaratto, “The Spurious Victory of MMT,” at  Naked Keynesianism, linked to recently here at MNE.

Lord Keynes provides a Bill Mitchell quote that addresses this objection.