1,721,253 research outputs found
"The Return of Big Government--Policy Advice for President Obama"
Full text linkIn the current global financial crisis, economists and policymakers have reembraced Big Government as a means of preventing the reoccurrence of a debt-deflation depression. The danger, however, is that policy may not downsize finance and replace money manager capitalism. According to Senior Scholar L. Randall Wray, we need a permanently larger fiscal presence, with more public services. His advice to President Obama is to discard all of former Treasury Secretary Paulson's actions. Wray believes that we can afford any necessary spending and bailouts, and that these actions will not burden our grandchildren.
"More Pain, No Gain: Breaux Plan Slashes Social Security Benefits Unnecessarily"
Full text linkNeither the Breaux plan nor President Clinton's proposal for "saving" Social Security promises much gain, but the Breaux plan, unlike the president's proposal, would inflict real pain in the form of reduced benefits.
"Is Keynesianism Institutionalist?: An Irreverent Overview of the History of Money from the Beginning of the Beginning to the Present"
Full text linkThis paper poses that the one commonality between institutionalist thought and Keynesianism (as presented in his General Theory) was money. Tracing the origins and uses of money, the myth of the development of money as a medium of exchange is dispelled and replaced with money used as evidence of debt, specifically, government debt. This paper was presented as the Presidential Address to the 1998 Association for Institutionalist Thought conference. As such, the paper should be taken in the same spirit as the [in]famous neoclassical Robinson Crusoe story, or Paul Samuelson's story of the evolution of money. The only significant change that has been made is to add several endnotes that will make some of the references more clear; this might make the piece more accessible for students.
"Deficit Hysteria Redux? Why We Should Stop Worrying About U.S. Government Deficits"
Full text linkThis brief by Yeva Nersisyan and Senior Scholar L. Randall Wray argues that deficits do not burden future generations with debt, nor do they crowd out private spending. The authors base their conclusions on the premise that a sovereign nation with its own currency cannot become insolvent, and that government financing is unlike that of a household or firm. Moreover, they observe that automatic stabilizers, not government bailouts and the stimulus package, have prevented the U.S. economic contraction from devolving into another Great Depression. The authors dispense with unsubstantiated concerns about deficits and debts, noting that they mask the real issue: the unwillingness of deficit hawks to allow government to work for the good of the people.
"The Case for Rate Hikes: Did the Fed Prematurely Raise Rates?"
Full text linkFrom this paper's Preface, by Dr. Dimitri B. Papadimitriou, President: For a time, the Federal Open Market Committee (FOMC) seemed to have learned from the mistakes of the past. Instead of taking good economic performance as a sign of incipient inflation, Chairman Alan Greenspan kept interest rates relatively low in the late 1990s, even as unemployment plummeted.Many commentators worried that the FOMC's unusually easy stance would usher in a period of runaway inflation, but inflation stayed in the 2 to 3 percent range. Now, with scant evidence of an inflationary threat, Greenspan and his committee seem intent on raising interest rates. Greenspan argues that the current anemic expansion is "self-sustaining" and no longer needs the support of low interest rates. In this new brief, Levy Institute Senior Scholar L. Randall Wray evaluates the Fed's concern about a coming inflation and its decision to begin raising interest rates. He begins with an examination of key market developments that might signal inflation.Most economists worry about inflation when labor markets begin to tighten and employees gain the bargaining power necessary to demand pay raises.Wray marshals an array of evidence demonstrating that workers can only wish for such conditions. The economy has created no net new jobs since the beginning of the current presidential term. To match the 64.4 percent proportion of adults who held jobs during the Clinton era, the economy would have to generate four million new positions. It is clear that the job market will not be a source of inflation any more than it was during the Clinton boom.
"Financial Markets Meltdown: What Can We Learn from Minsky"
Full text linkAccording to this new Public Policy Brief by Senior Scholar L. Randall Wray, the current crisis in financial markets can be traced back to securitization (the "originate and distribute" model), leverage, the demise of relationship-based banking, and the dizzying array of extremely complex instruments that--quite literally--only a handful understand.
"The Fed and the New Monetary Consensus: The Case for Rate Hikes, Part Two"
Full text linkFrom this paper's Preface, by Dr. Dimitri B. Papadimitriou, President: In Public Policy Brief No. 79, L. Randall Wray wrote about the Federal Reserve’s recent interest rate hikes that "the most charitable interpretation of the Fed’s policy change is that it appears to be premature."Wray marshaled a convincing array of data on payrolls, employment-to-population ratios, and other labor market indicators to show "that the current recovery has not yet attained the degree of labor market tightness that was common in previous recoveries," and therefore that the threat of inflation was minimal. Hence, the Fed, in raising rates, was unnecessarily jeopardizing the economy’s weak recovery. In this new brief, we learn about the flaws in the Fed’s thinking that have led to its frequent policy mistakes.Wray traces several strands of current central bank thinking back to their roots in the Fed’s internal discussions in the mid-1990s. Transcripts of these discussions have recently been released, a development that has yielded some disturbing and telling insights about the way in which monetary policy is formed. The situation of 1994 closely parallels that of current times. Unemployment was clearly above its lowest sustainable level, and inflation was low. Still, the Federal Open Market Committee (FOMC) and its chairman, Alan Greenspan, believed that interest rates had to be raised to keep prices in check. As it turned out, inflation stayed low, even as unemployment sank to levels previously believed to be inflationary. The Fed’s interest rate hikes proved to be unnecessary at best and counterproductive at worst. Not only is the current economic environment reminiscent of 1994, but so are contemporary justifications for recessionary policies.Wray lists six tenets of policy making common to both periods: transparency, gradualism, activism, low inflation as the only official goal, surreptitious targeting of distributional variables, and the neutral rate as the policy instrument to achieve these goals. The Fed would not be eager to espouse some of these principles publicly, but they were all discussed in committee meetings, as the recently released transcripts make clear—and there is no reason to think the Fed has changed its philosophy. Wray shows that this philosophy is convoluted. Fed officials claim that they are attempting to reach a neutral interest rate that neither provokes inflation nor causes recession. But they also say that they will not know the level of the neutral rate until they reach it. Little can be gained by pursuing such a chimerical goal. Moreover, even when the interest rate was far below its supposedly neutral level, the economy seemed to be free of inflation. Finally, the Fed seems to have painted itself into a corner by promising in advance a gradual series of interest rate increases. It is small wonder that the press finds the Fed’s public statements to be somewhat confusing and cryptic. The Fed transcripts shed light on the events of 1994 and those of the present day. I think that it is time for a new approach to monetary policy; this brief shows why.
"The Ownership Society: Social Security Is Only the Beginning"
Full text linkFrom this paper's Preface, by Dr. Dimitri B. Papadimitriou, President: As his new term begins, President Bush has been trying to focus his domestic agenda on what he calls the Òownership society,Ó a sweeping vision of an America in which more citizens would hold significant assets and be free to make their own choices about providing for their health care and retirement, and educating their children. L. Randall Wray, who has written for the Levy Institute on many topics, evaluates the premises and logic of this program in this new public policy brief. Wray points out that much of the history of the Western world since the advent of liberalism has been marked by a gradual rise in the power of those who lack property. Some of the milestones in this progression include universal suffrage, regulation of business, and progressive taxation. BushÕs ownership society proposals, according to Wray, would result in a partial reversal of the progress of the last 250 years. The reason is that, while BushÕs plans would undoubtedly increase the choices and power of those who have property, they would fail to democratize ownership. Many gains to the wealthy would come at the expense of the poor, the sick, and the elderly. Consider, for example, the condition of the nationÕs private pension system. Increasingly, firms are switching from defined-benefit to definedcontribution plans. This development would seem on its surface to favor the establishment of a new class of stockholders, empowered and holding a larger stake in the system. But, as Wray demonstrates, retirement accounts and other assets just do not add up to a substantial amount for most Americans. This means that most citizens have much to lose indeed from attacks on Social Security and the erosion of the traditional pension system. Much as the safety net for the poor has largely vanished since the Reagan years, the bread-and-butter benefits and rights of the middle class are now threatened by the ownership-society agenda. To many, the claim made by Republicans that all should take responsibility for their wellbeing rings true. But it is important to keep in mind the real alternative to public benefits for the middle class: a society in which success would depend largely upon luck, inheritances, or charity. A society that forces individuals to read their future in their Microsoft Money files inevitably creates a class of nonowners who are insecure and lack independent means. Ironically, this runs up against the aims of those who sincerely hope for a world in which more have the opportunity to become rich: moving upward often brings some setbacks along the way, which might be fatal in a world of reduced bankruptcy protection, disability and medical benefits, and educational aid.
"It's Time to Rein In the Fed"
Full text linkScott Fullwiler and Senior Scholar L. Randall Wray review the roles of the Federal Reserve and the Treasury in the context of quantitative easing, and find that the financial crisis has highlighted the limited oversight of Congress and the limited transparency of the Fed. And since a Fed promise is ultimately a Treasury promise that carries the full faith and credit of the US government, the question is whether the Fed should be able to commit the public purse in times of national crisis.
"The Commodities Market Bubble: Money Manager Capitalism and the Financialization of Commodities"
Full text linkMoney manager capitalism--characterized by highly leveraged funds seeking maximum returns in an environment that systematically underprices risk--has resulted in a series of boom-and-bust cycles in equities, real estate, and commodities. Because subsequent cycles have been increasingly damaging to the broader economy, we are now at the point where we are experiencing the most severe financial crisis since the Great Depression. Hasty interventions (bailouts) by Congress, the Treasury, and the Federal Reserve are attempting to keep the financial industry solvent, in the belief that government inaction would result in a prolonged recession. In this new public policy brief, Senior Scholar L. Randall Wray shows how money manager capitalism (financialization) has destabilized one asset class after another. He concludes that policymakers must fundamentally change the structure of our economic system, break the cycle of booms and busts, and reduce the influence of managed money--as well as prevent the next speculative boom in yet another asset class.
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