Bracing for the Bust C.P. Chandrasekhar

The message from the October meetings of the International Monetary Fund (IMF) and the World Bank, which normally exude optimism, is glum. In January this year, the IMF noted that “the cyclical upswing under way since mid-2016” was growing stronger, contributing to “the broadest synchronised global growth upsurge since 2010”. It now feels that while “the global economic expansion remains strong”, it has “become less balanced and with more downside risks”. This does not just mean that one more sighting of the “green shoots of recovery” is proving to be premature. Given the IMF’s predilection for underplaying bad news, it…

Debtors’ Crisis or Creditors’ Crisis? Who Pays for the European Sovereign and Subprime Mortgage Losses? Jan Kregel

In the context of the eurozone’s sovereign debt crisis and the US subprime mortgage crisis, this article looks at the question of how the losses ought to be distributed between borrowers and lenders in cases of debt resolution. The author points out that it is unlikely that debtors can fully bear the losses in a debt resolution. It is argued that the behavior and policy of creditors is just as important a factor to consider in assessing the situation. debtors_crisis (Download the full text in PDF format)

From the Failure of Europe to Possible Growth in the Real Economy Sergio Cesaratto and Lanfranco Turci

The initial enthusiasm of the financial markets over the last European summit was short lived as the new ''kick down the can, grand plan'' to solve the crisis was agreed upon. To bolster the market, the remnants of the famous EFSF 440 billions Euros - which, never forget, was also provided by the periphery countries it was supposed ''to save'' - should be used to leverage new instruments aimed at forming a potential of, say, 1 trillion euros. The idea is to insure 20% of the newly issued sovereign debt of risk countries and to create special purpose vehicles (SPVs)…

Japanese Economic Recovery and the Macroeconomic Policy Mix Sukanya Bose

Japanese macroeconomic policy during the prolonged depression of the 1990s has been the reverse of what Keynes had recommended as the anti-deflationary strategy. The paper explores the three main pillars of macroeconomic policy for the Japanese economy in the recent years: financial policy, fiscal policy and monetary policy. japanese_recovery (Download the full text in PDF format)

Can the US continue to rule the World Economy? Jayati Ghosh

Historically, international capitalism has tended to thrive more when one clear power has established its hegemony over the world economy. There have been at least two major phases when this was indisputably true: the period of the Gold Standard in the late 19th and early 20th centuries, when Britain was the economic superpower; and the two decades after the Second World War in the mid-20th century of the Bretton Woods-dollar standard, when the United States ruled the roost. In both of these periods, the ability of the major power to control the broad pattern of international trade and capital flows…