A spreadsheet version of the IS/MY model (alternative to IS/LM model) — Dirk Ehnts

I hope that this model will be taken up by more colleagues as it is very clear now that the IS/LM model “does not work”. If you make it more realistic by saying that investment does not depend on the rate of interest (vertical IS curve) and that the central bank determines the interest rate (horizontal LM curve), then you will have wasted 3-4 lectures to explain the goods market (IS curve) and the money market (LM curve) only to conclude that both do not matter in practice. It is only a small step from there to conclude that teaching the IS/LM model is a waste of time. You might just say that “demand determines supply, which determines employment” and that “government spending and private investment, which both do not depend on the rate of interest, increase demand”. Your students will easily get it and you save 3-4 lectures for something else, like my IS/MY model.

Bravo! A big step in the right direction in teaching Econ 101. And it is not just Econ 101, Paul Krugman has basically stated that he uses the IS/LM as his macroeconomic lens.

econoblog 101
A spreadsheet version of the IS/MY model (alternative to IS/LM model)
Dirk Ehnts | Lecturer at Bard College Berlin, research assistant at the Technical University of Chemnitz, and spokesperson of the board of Pufendorf-Gesellschaft eV in Berlin

Ramanan — Alan Shipman: Wynne Godley, A Biography

Alan Shipman has written a biography of Wynne Godley! Palgrave Macmillan site for the book, or Google Books

I dind't know this was even in the pipeline.

The Case for Concerted Action

Alan Shipman: Wynne Godley, A Biography
V. Ramanan

Gennaro Zezza and Francesco Zezza — On the Design of Empirical Stock-Flow-Consistent Models

While the literature on theoretical macroeconomic models adopting the stock-flow-consistent (SFC) approach is flourishing, few contributions cover the methodology for building a SFC empirical model for a whole country. Most contributions simply try to feed national accounting data into a theoretical model inspired by Wynne Godley and Marc Lavoie (2007), albeit with different degrees of complexity.

In this paper we argue instead that the structure of an empirical SFC model should start from a careful analysis of the specificities of a country’s sectoral balance sheets and flow of funds data, given the relevant research question to be addressed. We illustrate our arguments with examples for Greece, Italy, and Ecuador.

We also provide some suggestions on how to consistently use the financial and nonfinancial accounts of institutional sectors, showing the link between SFC accounting structures and national accounting rules.

Levy Economics Institute
On the Design of Empirical Stock-Flow-Consistent Models

Gennaro Zezza and Francesco Zezza

Lars P. Syll — Wynne Godley on what it means for a nation not to have its own currency

Another keeper Godley quote. His prediction of a deflationary bias is coming true — in spades. 

Lars P. Syll’s Blog
Wynne Godley on what it means for a nation not to have its own currency
Lars P. Syll | Professor, Malmo University

See also

The Case for Concerted Action
Noam Chomsky On Propaganda And Indoctrination
V. Ramanan

Lars P. Syll — Wynne Godley — the man who saw through the euro

My comment there:

While the EZ certainly should scrap the euro as a failed experiment, which was really an attempt to impose neoliberalism, elite control and corporate totalitarianism on Europe, doing so will not solve the problem, since it is only part of the problem.

The underlying problem is capitalism in the sense that "capitalism" means favoring capital formation and accumulation over the other factors of production — labor (people) and land (environment) — because "growth" and "efficiency."

Capitalism has morphed into monopoly capitalism for a variety of reasons. Economies of scale allow some firms to dominate markets, for example, and the larger the firm, the more political power it can wield in capturing government. Market prices do not reflect true price in terms of actual cost owing to socialization of externalities. Rising asymmetry stifles competition and destroys the foundation of economic liberalism that is used to justify capitalism on the basis of marginalism (just deserts and all that).

In addition, social, political and economic liberalism are incompatible based on the current assumptions and institutional arrangements. Transnational corporate totalitarianism, which is the goal of neoliberalism, is incompatible with democracy, for example.

This system is no longer working and this is becoming more and more obvious. First, the great leveling as capital flows across borders and the developed world sinks while the emerging word rises, but with the elites taking the major share. Secondly, climate change is forcing a reconsideration of both unlimited growth and socializing the costs of externalities.

Marx famously observed that a mode of production that determines the relations of production doesn't change until its potential has been reached. Well, it seems that the world is getting close to that point. As Olivier Blanchard recently tweeted, what comes after capitalism?

Lars P. Syll’s Blog
Wynne Godley — the man who saw through the euro
Lars P. Syll | Professor, Malmo University

See also

Resillience
Stability without Growth: Keynes in an Age of Climate Breakdown

Jason Hickel

Ramanan — Rare Wynne Godley Video Clips

You might be aware of the hour-long Wynne Godley’s interview with Alan Mcfarlane from 2008 titled, Interview On The Life And Work Of Wynne Godley. But there’s a 90-second clip and a 19-second clip I found from 1993 on Getty Images with the descriptions….

Thanks for sharing.

The Case for Concerted Action
Rare Wynne Godley Video Clips
V. Ramanan

Alan Longbon — Good News: The U.S. Government Runs A $100B Deficit In October 2018, The Private Sector Runs A $100B Surplus

Summary

• The US budget deficit is $100 billion in October 2018; this is a net expansion of income and savings in the private sector and explains the rebound in markets.
• The good news is that dollars are being added to the economy by the Federal government, allowing the private sector to post a $100 billion surplus.
• Private credit growth has rebounded this month and made a $17B contribution to aggregate demand and fiscal flows.

Republican president and Republican Congress. Bring on the stimulus (denied Obama)! "Reagan proved that deficits don't matter.…" — Dick Cheney (2004)

Fed reaction response: Raise interest rates (without realizing that the addded interest payments are also stimulative and higher interest is a price rise).

Seeking Alpha
Good News: The U.S. Government Runs A $100B Deficit In October 2018, The Private Sector Runs A $100B Surplus

Alan Longbon 

Alan Longbon — China Sectoral Flow Investment Assessment

China moving toward fiscal austerity?

Seeking Alpha
China Sectoral Flow Investment Assessment

Alan Longbon

Alan Longbon — Good News: U.S. Government Posts A $75 Billion Deficit For June 2018

• The US budget deficit is USD 75 billion in June 2018; this is a net add of income to the private sector and allows it to grow.
• The good news is that dollars are being added to the economy by the Federal government, and it grows the economy.
• Further net inflows are expected for the rest of the year from the Federal government and private credit growth.
• Private credit growth has so far added $36 billion to the net money supply; last year, it was only $23 billion. At this rate, it could total $100 billion for the year....

Alan Longbon schools his readers in Godley's monetary economics.

Seeking Alpha
Good News: U.S. Government Posts A $75 Billion Deficit For June 2018

Alan Longbon

Steve Keen — Brussels-Rome war: EU holds back Italy’s anti-euro tide for now

The first battle in the war between Brussels and Rome has thus been won by Brussels: I have little doubt that Mattarella was lobbied very strongly by EU figures to block Savona, because he is capable of developing the real weapon that Five Star/Northern League could bring to bear against the euro – the “mini-BOT.” Named in reference to Italy’s “buoni ordinario del tesoro,” which are short-term government bonds, these would be government-issued notes valued at between €1 and €500, which would be issued to people and companies owed tax refunds by the government. These, in turn, would be valid for paying taxes, buying train tickets, getting petrol at government-owned fuel stations, and so on.

These sidestep the euro’s monopoly as legal tender in the eurozone because a vendor does not have to accept these if they are tendered in an exchange. But they can be accepted, perhaps at a discount to face value, and thereby become an alternative means of payment to the euro.

This is a weapon that Greece prepared, but never used, because Yanis Varoufakis, in what he describes in Adults in the Room as “Mea Maxima Culpa” (“my most grievous fault”) decided to leave the decision to Alexis Tsipras. Tsipras demurred, and the result was a Greek tragedy.

An alternative-means-of-payment is a much more cogent weapon in Italy’s hands than it would have been in Greece’s. Italy’s economy is six times larger than Greece’s and average salaries are almost double (though per-capita income has fallen substantially since the global financial crisis); its economy, particularly in the north, is an industrial powerhouse; and its climate supports a huge range of agricultural products. Much more of what Italians need to buy can be purchased from other Italians than was ever feasible for Greece (the only categorical exception is oil). The mini-BOT could really free Italy from the stranglehold of the euro.…

Much more. Worth a read.

Brussels will seek to blame the anti-euro rebels, but the real villains of this crisis are the euro itself and the Maastricht Treaty. As the rebel British economist Wynne Godley stated back in 1992 when the Treaty was signed:

“If a country or region has no power to devalue, and if it is not the beneficiary of a system of fiscal equalization, then there is nothing to stop it suffering a process of cumulative and terminal decline leading, in the end, to emigration as the only alternative to poverty or starvation.” (Wynne Godley, ‘Maastricht and All That’ London Review of Books, October 1992)

Of course, another option is "populist" revolt. If a genuine left can't rise to the occasion, Mussolini anyone?

RT
Brussels-Rome war: EU holds back Italy’s anti-euro tide for now

Steve Keen | Professor and Head Of School Of Economics, History & Politics, Kingston University, London

Alan Longbon — Good News: The CBO Reports The Federal Government Deficit Will Be Larger Than First Thought And Go On For Decades

Summary

• Contrary to mainstream opinion the CBO report is a positive result.
• The CBO finds that higher deficits will lead to higher and faster GDP growth and employment.
• The governement deficit is the private sector surplus and while the private sector balance remains positive and grows the likelihood of a stock market crash or recession is low.

The purpose of this report is to show the finding of the latest CBO about the Federal deficit is a good thing and should be celebrated. To produce this report an analysis of the national accounts will be used and a sectoral balance model constructed after the work of British economist Professor Wynne Godley.

First a quick review of the newly released Congressional Budget Office report.…

MMT-friendly.

Seeking Alpha
Good News: The CBO Reports The Federal Government Deficit Will Be Larger Than First Thought And Go On For DecadesAlan Longbon

Ramanan — Wynne Godley And Non-selective Protectionism

Extensive Godley quote from 1995 paper and more.

The Case for Concerted Action
Wynne Godley And Non-selective Protectionism
V. Ramanan

Dirk Ehnts — “Those who love Europe should be able to criticize Europe”

Pertinent Wynne Godley quote. (The headline quote is Macron.)

econoblog 101
“Those who love Europe should be able to criticize Europe”
Dirk Ehnts | Lecturer at Bard College Berlin

Tom Streithorst — The Radical Left-Wing Theory That the Government Has Unlimited Money

Everyone knows governments need to tax before they can spend. What Modern Monetary Theory presupposes is, maybe they don't.

Surprisingly decent article on MMT considering the dismissive headline. Covers most of the bases.

Vice
The Radical Left-Wing Theory That the Government Has Unlimited Money

Tom Streithorst
ht Ralph Musgrave

Ramanan — A Short Biography Of Robert Neild

Robert Neild was an associate of Wynne Godley in the Cambridge Economic Policy Group.

Keeper Godley quote, too.

The Case for Concerted Action
A Short Biography Of Robert Neild
V. Ramanan

Steve Roth — Why Economists Don’t Know How to Think about Wealth (or Profits)

MMT, SFC, NIPA, FFA, etc. Must-read.

Longish and detailed. Weekend reading.

Angry Bear
Why Economists Don’t Know How to Think about Wealth (or Profits)

Steve Roth

originally published at Evonomics 2016

Economic Growth And Private Sector Debt Levels: Lessons (Not Yet?) Learned — Investment Cycle Engine, Inc

Summary

• High private sector debt/GDP ratios will continue to hamper US economic growth.
• Mainstream macroeconomic models by design ignore the financial cycle and do not provide any insights about the financial cycle.
• Macroeconomic models should have macroeconomic foundations and incorporate financial stability considerations.

Good post based on a Post Keynesian analysis. But doesn't mention either Hyman Minsky, whose financial instability hypothesis explains the financial cycle, or MMT, which would bolster his argument. However, I understand the scope of posts at blogs is limited, so he had to make choices, and overall the post is well done the way he sets it up.

Seeking Alpha
Economic Growth And Private Sector Debt Levels: Lessons (Not Yet?) Learned
Investment Cycle Engine, Inc

Ramanan — Francis Cripps And Marc Lavoie’s Biography Of Wynne Godley

There’s a new book, The Palgrave Companion To Cambridge Economics which features among other things biographies of Wynne Godley, Joan Robinson and Nicholas Kaldor and other notable Cambridge economists. Wynne Godley’s biography—Wynne Godley (1926-2010)—is by his closest collaborators – Francis Cripps and Marc Lavoie (pp. 929-953)….

The Case for Concerted Action
Francis Cripps And Marc Lavoie’s Biography Of Wynne Godley
V. Ramanan

Jo Michell — Thoughts on the NAIRU

If you are following this.

Critical Macro Finance

Thoughts on the NAIRU
Jo Michell

Jason Smith — Qualitative economics done right, part 1

Steve Keen, Wynne Godley, SFC, MMT mentioned.

Information Transfer Economics
Qualitative economics done right, part 1
Jason Smith