A CRISE financeira global que ora avassala o planeta, entre outras coisas, desvelou a precariedade das previsões econômicas. Já escrevi em outra parte, a propósito da crise asiática de 1997/98, que a reputação dos economistas e o prestígio de sua arte de antecipar tendências variam na mesma direção dos ciclos do velho, resistente, mas talvez nem tão surpreendente capitalismo.
Quando os negócios vão bem, dizia então, as previsões mais otimistas são ultrapassadas por resultados formidáveis. É a festança dos consultores: o noticiário da mídia não consegue oferecer espaço suficiente para os profetas e os oráculos da prosperidade eterna. Na era da informação, a coisa é ainda pior: em tempo real, os meios eletrônicos regurgitam uma fauna variada de palpiteiros e adivinhões. Todos -ou, pelo menos, a maioria- tratam de insuflar a bolha de otimismo.
Naquela ocasião, chamei a atenção para as agruras de um renomado economista dos idos de 1929. Às vésperas do crash da Bolsa de Nova York, Irving Fisher declarou -extasiado diante das promessas de crescimento sem fim- que os preços das ações ainda estavam baixos. Fisher quebrou a cara, mas nem por isso foi punido com a expulsão da seleta galeria dos grandes. Os jovens economistas de hoje aprenderiam muito com suas contribuições ao estudo dos processos de deflação de dívidas, fenômeno que sói ocorrer nos momentos de reversão das etapas turbinadas por expectativas eufóricas e crédito abundante.
Daqueles tempos a esta parte, é mais fácil um camelo passar pelo buraco da agulha do que encontrar um estudante de economia que tenha lido Fisher ou, pelo menos, ouvido alguma notícia sobre sua obra. Esse solene desprezo pelos estudos clássicos sobre os ciclos e as crises do capitalismo é a moda nos círculos acadêmicos americanizados do planeta.
As novas teorias, aquelas que constituem hoje a chamada corrente principal do pensamento econômico, estão mais comprometidas em demonstrar que é improvável ocorrer o fenômeno que os velhos economistas investigavam. No rol dos malditos estão, entre tantos, Keynes, Schumpeter, Mitchell, Kalecki, Minsky.
Mas -é bom repetir- as façanhas do velho e nem sempre surpreendente capitalismo (pródigo em cra- shes e pânicos) lançaram no torvelinho da descrença as arrogâncias e as certezas dos sabichões. Mas, para quem não sabe de seus prodígios, a fé não só é capaz de mover montanhas como tem força para negar a realidade. Ainda recentemente, o jornal "Valor Econômico" publicou uma excelente reportagem sobre as diferentes visões e estruturas analíticas que porfiam no campo da chamada ciência triste. A turma da corrente dominante retrucou com impropérios aos questionamentos de sua sabedoria e respeitabilidade.
Um jovem crente indignado escreveu que o jornal "confessou" sua adesão ao pluralismo.
Imagino que, se vivesse na era da Inquisição, o jovem estudioso da produção de riquezas mandaria à fogueira as obras e os seus autores heréticos.
LUIZ GONZAGA BELLUZZO, 66, é professor titular de Economia da Unicamp (Universidade Estadual de Campinas).Foi chefe da Secretaria Especial de Assuntos Econômicos do Ministério da Fazenda (governo Sarney) e secretário de Ciência e Tecnologia do Estado de São Paulo (governo Quércia).
Why capitalism fails
The man who saw the meltdown coming had another troubling insight: it will happen again
By Stephen Mihm
Globe Correspondent / September 13, 2009
Since the global financial system started unraveling in dramatic fashion two years ago, distinguished economists have suffered a crisis of their own. Ivy League professors who had trumpeted the dawn of a new era of stability have scrambled to explain how, exactly, the worst financial crisis since the Great Depression had ambushed their entire profession. ... ... .... ... .... ...
My own memories of the Phelps/Lucas administration
My own memories are similar to Paul Krugman's, but with one important difference. This is the bit I remember differently:
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Grande Depressão completa 80 anos e ainda intriga economistas e historiadores, que veem semelhanças entre 1929 e a crise atual -resposta mais eficiente dos governos hoje, contudo, evitou estagnação - Folha, 24-10-2009
... ... .... .... ... vários textos sobre o tema
School for Scoundrels
By PAUL KRUGMAN
Published: August 6, 2009
Last October, Alan Greenspan — who had spent years assuring investors that all was well with the American financial system — declared himself to be in a state of “shocked disbelief.” After all, the best and brightest had assured him our financial system was sound: “In recent decades, a vast risk management and pricing system has evolved, combining the best insights of mathematicians and finance experts supported by major advances in computer and communications technology. . . . The whole intellectual edifice, however, collapsed in the summer of last year.”
THE MYTH OF THE RATIONAL MARKET
A History of Risk, Reward, and Delusion on Wall Street.By Justin Fox
By 382 pp. Harper Business/HarperCollins Publishers. $27.99
Warren Buffett, George Soros, Paul Volcker, and the Maelstrom of Markets
By Charles R. Morris
199 pp. PublicAffairs. $23.95
Justin Fox’s “Myth of the Rational Market” brilliantly tells the story of how that edifice was built — and why so few were willing to acknowledge that it was a house built on sand.
Do we really need yet another book about the financial crisis? Yes, we do — because this one is different. Instead of focusing on the errors and abuses of the bankers, Fox, the business and economics columnist for Time magazine, tells the story of the professors who enabled those abuses under the banner of the financial theory known as the efficient-market hypothesis. Fox’s book is not an idle exercise in intellectual history, which makes it a must-read for anyone who wants to understand the mess we’re in. Wall Street bought the ideas of the efficient-market theorists, in many cases literally: professors were lavishly paid to design complex financial strategies. And these strategies played a crucial role in the catastrophe that has now overtaken the world economy.
Up Front: Paul Krugman (August 9, 2009)Excerpt: ‘The Myth of the Rational Market’ (August 9, 2009)
Times Topics: Credit Crisis — The Essentials
This journey to disaster began with a beautiful idea. Until 1952, finance theory, such as it was, consisted of a set of wise observations and rules of thumb, without any overarching framework. But in that year Harry Markowitz, a graduate student at the University of Chicago, gave finance theory a new, hard-edged clarity by equating the concept of risk — previously a vague term for potential losses — with the mathematical concept of variance.
Markowitz’s model told investors what they should do, rather than predicting what they actually do. But by the mid-1960s other theorists had taken the next step, analyzing financial markets on the assumption that investors actually behaved the way Markowitz’s model said they should. The result was an intellectually elegant theory of stock prices — the so-called Capital Asset Pricing Model, or CAPM (pronounced “cap-em”). CAPM is a deeply seductive theory, and it’s hard to overemphasize how thoroughly it took over thinking about finance, not just in business schools but on Wall Street.
Markowitz would eventually share a Nobel in economic science with William Sharpe, who played a key role in developing CAPM, and Merton Miller, another central figure in the development of modern financial theory. Long before then, however, the innovative idea had hardened into a dogma.
One of the great things about Fox’s writing is that he brings to it a real understanding of the sociology of the academic world. Above all, he gets the way in which one’s career, reputation, even sense of self-worth can end up being defined by a particular intellectual approach, so that supporters of the approach start to resemble fervent political activists — or members of a cult. In the case of finance theory, it happened especially fast: by the early 1960s Miller began a class at the University of Chicago’s business school by drawing a line down the middle of the blackboard. On one side he wrote M&M, for “Modigliani-Miller” — that is, the new, mathematicized, CAPM approach to finance. On the other he wrote T — for “Them,” meaning the old, informal approach.
In this sense, efficient-market acolytes were like any other academic movement. But unlike, say, deconstructionist literary theorists, finance professors had an enormous impact on the business world — and, not incidentally, some of them made a lot of money in the process.
This may seem strange, since CAPM and the broader work it inspired were based on the assumption that investors make mathematically optimal investment decisions with the information at their disposal. As a result, Eugene Fama, of Chicago’s business school, wrote, “actual market prices are, on the basis of all available information, best estimates of intrinsic values.” Fama called a market with this virtue an “efficient market” — and argued that the data showed that real-world financial markets are, in fact, efficient, or very nearly so. But if the markets are already getting it right, who needs finance professors?
In fact, however, Wall Street was eager to hire “rocket scientists,” especially after Fischer Black and Myron Scholes, working at M.I.T.’s Sloan School, came up with a formula that seemingly solved the puzzle of how to value options — contracts that give investors the right to buy or sell assets at predetermined prices. The quintessential collaboration between big money and academic superstars was the hedge fund Long-Term Capital Management, whose partners included Scholes and Robert Merton, with whom Scholes shared another finance Nobel. L.T.C.M. eventually imploded, nearly taking the world economy down with it. But efficient-markets theory retained its hold on financial thought.
All along, there were critical voices. Robert Shiller, who has become famous for predicting both the Internet crash and the housing bust, first made his mark by casting statistical doubt on the evidence for efficient markets. Lawrence Summers, now a senior official in the Obama administration, began a paper on financial markets thus: “THERE ARE IDIOTS. Look around.” And a whole counterculture emerged in the form of “behavioral finance,” which argued that investors are irrational in predictable ways. But the sheer scope and sweep of the efficient markets hypothesis — not to mention the fact that so many people devoted their careers to it — allowed it to brush off most of these challenges.
Of course, there have always been men of affairs wise enough to see past the current dogma. In “The Sages,” Charles R. Morris profiles three of them: George Soros, Warren Buffett and Paul Volcker.
Morris, the author of “The Trillion Dollar Meltdown,” doesn’t have much patience with economic theory, and it shows; I almost gave up on the book after Morris managed, in the space of just a few pages, to thoroughly misrepresent the ideas of both John Maynard Keynes and Milton Friedman. But the book comes to life with its personal profiles, especially the surprisingly endearing portrait of Warren Buffett as a young man.
Do the lives of the sages carry useful lessons for the rest of us? Soros doesn’t really seem to have a method, except that of being smarter than anyone else. Buffett does have a method — figure out what a company is really worth, and buy it if you can get it cheap — but it’s not a method that would work for anyone without his gifts. And Volcker’s main asset is his implacable integrity, which most mortals would find hard to match.
Indeed, I came away from reading these books wondering if their shared underlying premise — that the current crisis will put an end to Panglossian views of financial markets — is right. Fox points out that academic belief in the perfection of financial markets survived the 1987 stock market crash and the bursting of the Internet bubble. Why should the reaction to the latest catastrophe be any different? In fact, what I hear from my finance professor friends is that there’s a lot less soul-searching under way than you might expect. And Wall Street’s appetite for complex strategies that sound clever — and can be sold to credulous investors — survived L.T.C.M.’s debacle; why can’t it survive this crisis, too?
My guess is that the myth of the rational market — a myth that is beautiful, comforting and, above all, lucrative — isn’t going away anytime soon.
Paul Krugman, an Op-Ed columnist for The Times, is the author of “The Return of Depression Economics and the Crisis of 2008.”
"The Invincible Markets Hypothesis"
There are two versions of the efficient markets hypothesis, a strong version and a weak version. According to the strong version prices accurately reflect the underlying intrinsic value of financial assets, but the weak version only requires that prices be unpredictable, they don't have to accurately reflect fundamental values.
The strong version is, well, too strong and it seems clear that this condition is not satisfied in asset markets, at least not on a continuous basis. The weak version, however, does have support (though even here there is not universal agreement). The distinction between the strong and weak versions, and the assertion that the weak version holds even if the strong version does not, is often used as a defense of the efficient markets hypothesis.
Rajiv Sethi asks a good question. If the strong version of the efficient markets hypothesis does not hold, in what sense does satisfying the weaker form constitute "efficiency"? He argues that "it makes little sense to say that markets are efficient, even if they are essentially unpredictable in the short run. In light of this, he proposes a new name for the weak form of the hypothesis:
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¿Cómo pudieron equivocarse tanto los economistas?
How Did Economists Get It So Wrong?
How Did Economists Get It So Wrong?
September 5, 2009, 4:22 pm — Updated: 9:05 am -->
A few notes on my magazine article
So my big state-of-economics piece is out. Just a few notes, since I have to get to bed early: we have 27 miles over hills to do tomorrow.
I. MISTAKING BEAUTY FOR TRUTH
It’s hard to believe now, but not long ago economists were congratulating themselves over the success of their field. Those successes — or so they believed — were both theoretical and practical, leading to a golden era for the profession. On the theoretical side, they thought that they had resolved their internal disputes. Thus, in a 2008 paper titled “The State of Macro” (that is, macroeconomics, the study of big-picture issues like recessions), Olivier Blanchard of M.I.T., now the chief economist at the International Monetary Fund, declared that “the state of macro is good.” The battles of yesteryear, he said, were over, and there had been a “broad convergence of vision.” And in the real world, economists believed they had things under control: the “central problem of depression-prevention has been solved,” declared Robert Lucas of the University of Chicago in his 2003 presidential address to the American Economic Association. In 2004, Ben Bernanke, a former Princeton professor who is now the chairman of the Federal Reserve Board, celebrated the Great Moderation in economic performance over the previous two decades, which he attributed in part to improved economic policy making. 8págs.
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Justin Fox Friday, September 4, 2009 at 6:51 am
9 Comments • Trackback (3) • economics, economy, efficient market
Economics and Its Discontents
Saturday, September 12, 2009 Pretence and Economic Knowledge
The Failure of Economists to Account for Complexity
Testimony of David Colander submitted to the Congress of the United States, House Science and Technology Committee, for the Hearing on “The Risks of Financial Modeling: VaR and the Economic Meltdown,” September 10, 2009
Beyond Krugman's Morality Tale
Monday, September 7, 2009 Is Macroeconomics Relevant?
Sep 17, 2009
"Did Economists Ever Get it Right?"
Antonio Fatás on the state of macroeconomics:
Did Economists Ever Get it Right?, by Antonio Fatás, Commentary, MorningStar (originally): Paul Krugman has written a nice essay on the NY Times about How did economists get it wrong?. Other economists have written on the same topic: Eichengreen, Lane, Thoma, DeLong.
Special Issue on the Financial Crisis
CONTENTS OF THE SPECIAL ISSUE ON THE FINANCIAL CRISIS (click here for abstracts):
*Daron Acemoglu and David Colander, et al.: Why the Economists Got It Wrong
*Viral V. Acharya and Matthew Richardson: Playing by the Basel Rules
*Amar Bhidé: A Disaster Waiting to Happen
*Jeffrey Friedman: A Crisis of Politics, Not Economics
*Steven Gjerstad and Vernon L. Smith: 1929 and 2008.
*Juliusz Jablecki and Mateusz Machaj: The Regulated Meltdown
*Joseph E. Stiglitz: Who Killed the American Economy?
*John B. Taylor: Monetary and Other Policy Errors
*Peter J. Wallison: The Government Did It
*Peter J. Wallison: Credit Default Swaps Did Not Do It
*Lawrence J. White: The Credit Rating Agencies’ Legally Protected Oligopoly
Nesta terça-feira, 15 de setembro, o prof. Luiz Carlos Delorme Prado (IE/UFRJ) fala sobre “A Economia Política da Grande Depressão da Década de 1930 nos EUA: Visões da crise e política econômica, semelhanças e diferenças com a crise atual”.
3 Questions: Robert Solow on the struggle ahead
The MIT Nobel laureate explains why we need more economic stimulus — and more innovation.
Peter Dizikes, MIT News Office
Duas resenhas do recém-publicado livro de Richard Posner sobre a crise financeira americana - de Robert Solow, em The New York Review of Books, e de Jonathan Rauch, em The New York Times.
Fatos estilizados do crescimento
Charles Jones e Paul Romer descrevem, neste artigo, os "novos" fatos estilizados do crescimento, identificados pela vasta literatura empírica sobre crescimento econômico, produzida a partir de meados dos anos 80:
"Fluxos crescentes de bens, recursos financeiros, pessoas e idéias têm aumentado a extensão do mercado para trabalhadores e consumidores".
"Há milhares de anos, o crescimento da população e da renda per capita tem se acelerado, passando de praticamente zero para as taxas relativamente altas observadas no último século".
"A variação nas taxas de crescimento da renda per capita aumenta com a distancia em relação à fronteira tecnológica".
"Diferenças na quantidade de insumos explicam menos da metade das grandes diferenças de renda per capita entre os países".
"O capital humano por trabalhador está crescendo rapidamente em todo o mundo".
"A quantidade crescente de capital humano em relação ao trabalho não qualificado não tem sido acompanhada por um declínio sustentado no seu preço relativo".
Nathan Nunn faz uma ampla revisão da literatura empírica que examina os efeitos de longo prazo de eventos históricos sobre o nível atual de desenvolvimento econômico dos países, neste NBER Working Paper.
Economists, economics, and the crisis
Luigi Spaventa, 12 August 2009
This column outlines tough questions about economics and economists raised by the global crisis.
"Dark Age in Macroeconomics?"
This is Nick Rowe (it's in response to Paul Krugman and follows up on one of Nick's previous posts):
Dark Age in Macroeconomics? A History of Taught approach, by Nick Rowe: (Or maybe the title should be: "Notes from the Phelps/Lucas Administration"; or "Notes to supplement our fading memories of the late 1970's".)
Is this a Dark Age in macroeconomics? In other words, have we collectively forgotten some (important) stuff that we used to understand?
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What's Wrong with Macroeconomics?
Some recent contributions to "what's wrong with macroeconomics?":
Nick Rowe: John Cochrane, Paul Krugman, and Say's Law, again
Brad Delong: In Which Nick Rowe Says John Cochrane Commits "Small But important" Errors...
Free Exchange: Which caricature do you prefer?
Mario Rizzo: The Great Moderation in Macroeconomics
Vernon Smith and David Colander: Causes of the Crisis
Robert Gordon: Is Modern Macro or 1978-era Macro More Relevant to the Understanding of the Current Economic Crisis? [introduction posted below]
David Warsh: Economics and Its Discontents [posted below]
Paul Krugman: Freshwater Rage [posted below]
Update Brad DeLong: More Musings on the Total Intellectual Train Wreck that is Today's Chicago School...
Update Free Exchange: What the economists aren't explaining
Update Barkley Rosser: How Seriously Wrong John Cochrane Is
Paul Krugman: How Did Economists Get It So Wrong?
Barry Eichengreen: The Last Temptation of Risk
Philip Lane: Economists and the Crisis
David Altig: Economists got it wrong, but why?
John Cochrane: How did Paul Krugman get it so Wrong?
David Laidler: Lucas, Keynes, and the Crisis
Mark Thoma "The Great Multiplier Debate"
Antonio Fatas and Ilian Mihov: Did economists ever get it right?
The Economist: Lucas Roundtable (Lucas)
The Economist: What went wrong with economics
The Economist: The other-wordly philosophers
The Economist: Efficiency and beyond
Cosmic Variance: Mistaking Beauty for Truth
Mark Gertler: The State of Macroeconomics (scroll down)
Willem Buiter The unfortunate uselessness of most ’state of the art’ academic monetary economics
Mark Thoma "The Unfortunate Uselessness of Most 'State of the Art' Academic Monetary Economics"
Tim Harford Are those who sweat the big stuff in meltdown?
Francesco Caselli: Economists are actively engaged in seeking remedies to the crisis
Mark Thoma Macroeconomic Meltdown?
Daniel Kahneman: Irrational everything
Mark Thoma: Are Macroeconomic Models Useful?
Roman Frydman: Mathematical Formalism in Economics
Dani Rodrik: Blame economists, not economics
Mark Thoma The State of Macroeconomics (scroll down)
George Waters: "Equilibrium and Meltdown"
Paul Krugman and Roman Frydman: "The Gratuitous Ignorance of Many of our Economists"
Mark Thoma: Can Econometricians Tell Us which Macroeconomic Model is Best?
David Colander, Hans Föllmer, Armin Haas, Michael Goldberg, Katarina Juselius, Alan Kirman, and Thomas Lux The Financial Crisis and the Systemic Failure of Academic Economics
Kenneth Arrow: Risky business
[This list is incomplete, so please add any I've missed in comments.]
Posted by Mark Thoma on Monday, September 14, 2009 at 11:25 AM in Economics, Macroeconomics, Methodology Permalink Comments (8)
In the Long Run - books about keynes
By JUSTIN FOX
Published: October 30, 2009
We have just lived through an age in which economists were our most influential moral philosophers. The results haven’t been great. “The main moral compass we now have is a thin and degraded notion of economic welfare, measured in terms of quantity of goods,” Robert Skidelsky writes. Lately we’ve been failing even by that impoverished measure. The time certainly seems ripe for an overthrow of the economists. ... ... ... ... ... ... .... .... .... .... .... ... .... .... ... ... ... .... ... ..
Keynes' Uncertainty Principle
By Joseph Lawler on 10.6.09 @ 6:07AM
Off the Shelf
An Old Master, Back in Fashion
By DEVIN LEONARD
Published: October 31, 2009
BY the time he died in 1946, the economist John Maynard Keynes had become that rarest of creatures in his profession: a celebrity. The most powerful leaders in the free world subscribed to his theory that markets were driven by emotions and that in moments of crisis, governments could calm investors by doling out stimulus money.
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In the Long Run
By JUSTIN FOX
Brief introductions to the life and theories of the economist John Maynard Keynes from Peter Clarke and Robert Skidelsky. November 1, 2009
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The Years of Magical Thinking
By PAUL M. BARRETT
The Times’s Peter S. Goodman shows how economists and plutocrats fell dangerously in love with free markets. October 11, 2009
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The Old Economist, Relevant Amid the Rubble
By DWIGHT GARNER
An attempt to translate and update John Maynard Keynes’s ideas for a sleek, turbulent era, from the author of a magisterial three-volume biography of the economist. September 18, 2009
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Capitalism’s Fault Lines
By JONATHAN RAUCH
Richard A. Posner argues that “the antics of crooks and fools” are not to blame for the financial crisis, but rather flaws in the system itself.
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Volume 56, Number 12 · July 16, 2009
The World Finance Crisis & the American Mission
By Robert Skidelsky
Fixing Global Finance
by Martin Wolf
Johns Hopkins University Press, 230 pp., $24.95
By common consent, we have been living through the greatest economic downturn since World War II. It originated, as we all know, in a collapse of the banking system, and the first attempts to understand the resulting economic crisis focused on the reasons for bank failures. The banks, it was said, had failed to "manage" the new "risks" posed by financial innovation. Alan Greenspan's statement that the cause of the crisis was the "underpricing of risk worldwide" was the most succinct expression of this view. Particular attention was paid to the role of the American subprime mortgage market as the source of the so-called "toxic" assets that had come to dominate bank balance sheets. Early remedies for the crisis concentrated on bailing out or refinancing the banks, so that they could start lending again. These were followed by "stimulus packages," both monetary and fiscal, to revive the real economy.
Now that we are—or may be—over the worst of the crisis, attention has partly switched to trying to understand its deeper causes. The two most popular explanations to have emerged are the "money glut" and the "saving glut" theories. The first blames the crisis on loose fiscal and monetary policy, which enabled Americans to live beyond their means. In particular, Greenspan, chairman of the Federal Reserve in the critical years until his retirement in early 2006, used low interest rates to keep money too cheap for too long, thus allowing the housing bubble to get pumped up till it burst.
The second explanation sees cheap money in the US as a response to a "global saving glut" originating in East Asia and the Middle East. The "exorbitant privilege" enjoyed by the US dollar as the world's key currency allowed the US to pursue a fiscal and monetary policy that pushed domestic demand for goods and services well beyond domestic output, thereby absorbing the foreign savings hurled at it. The trouble was that foreign, and particularly Chinese, "investment" in the US economy, which in recent years has taken the form of buying US Treasury bonds, failed to create a corresponding flow of American tradable goods and services with which to repay the borrowing. As a result, America's domestic and foreign debt just went on increasing. In the technical jargon, both the US current account deficit and its debt-financed housing boom were unsustainable: it was unclear whether the dollar or the housing bubble would collapse first.
Concern about the US current account deficit—the excess of expenditures over receipts in a country's balance of payments—long preceded the financial crisis. By 2005, it had already ballooned to 5 percent of GDP. How had this happened? The conservative explanation was that the US monetary and fiscal authorities had provided Americans with the money to make payments to foreigners for imports far in excess of the payments they received from foreigners for exports. This "spending beyond your means" is the classic road to ruin, for households as well as for countries. In the case of households, it is normally brought to an end by a notice from your bank or credit card company saying that you have reached your credit limit or your account has been frozen. In the case of countries, it is normally ended by the refusal of other countries to lend the profligate country the means to continue its spending spree. The puzzle, though, was why the countries with surpluses continued to pour their hard-earned savings into the debt-ridden American economy.
In a notable lecture in 2005, Ben Bernanke, about to become chairman of the Federal Reserve, gave the answer. At first, he said, it was because the US was a highly productive economy. But following the financial crisis of 1997–1998, East Asian countries had deliberately started accumulating foreign exchange reserves to guard against another flight of capital similar to what they had just suffered or observed. To accumulate reserves they had to run current account surpluses, by earning more in exports than they spent on imports. This tied in with their policy of undervaluing their currencies against the dollar in order to maintain export-led growth.
After the collapse of the dot-com boom in 2000, the US became a much less desirable place for direct foreign investment. So East Asian countries, especially China, started to buy US Treasury bonds. They adopted aggressive policies of buying large quantities of dollars and resisting market pressure for appreciation of their currencies. Investing their dollars in US securities was a way of segregating their dollar purchases from the domestic money supply, thereby preventing domestic price increases that would have eroded their export competitiveness. Like other economists at the time, Bernanke saw considerable merit in the arrangement: it enabled emerging and developing countries to reduce their foreign debts, stabilize their currencies, and reduce the risk of financial crises. Without US willingness to act as a "consumer of last resort," the global savings glut would exert a huge deflationary pressure on the world economy.
But Bernanke also pointed out three snags in the situation. First, for developing countries to be lending large net sums to mature industrial countries with abundant capital was undesirable: the flow should be going the other way—to countries with a capital shortage. Second, much of the inflow of capital to the US went not into improving productivity but into the housing sector and consumption. Third, the arrangement depressed US exports, encouraging instead the parts of the economy that produce nontraded goods and services, such as the financial industry. Yet to repay its foreign creditors, the US needed healthy export industries. A fall in the dollar was, therefore, needed to shrink the nontradable economy relative to the export sector. Nevertheless, Bernanke concluded, "fundamentally, I see no reason why the whole process [of rebalancing] should not proceed smoothly."
This was the standard view before the present crisis broke. Martin Wolf, the world's most respected financial columnist—mainly for the Financial Times—published a book in 2004 called Why Globalization Works. He saw globalization as a mighty engine for ending global poverty, and was scornful of arguments against it, most of which he dismissed as lacking professional competence. He pointed to the huge success of China in reducing extreme poverty (people living on less than $1 a day). He saw no problem arising from the macroeconomic imbalances that resulted from lopsided trade. As he wrote:
The pattern of surpluses and deficits will create difficulties only to the extent that the intermediation of the flows from the savings-surplus to the savings-deficit countries does not work smoothly.... But no insuperable difficulty should arise. If some people [Asians] wish to spend less than they earn today, then others need to be encouraged to spend more.
As late as mid-2007, he thought that the possibility that "huge calamities" could be generated by world financial markets "looks remote."
His message just two months later was very different:
Nothing that has happened has been a product of Fed folly alone. Its monetary policy may have been loose too long. The regulators may also have been asleep. But neither point is the heart of the matter.... Today's credit crisis...is also a symptom of an unbalanced world economy.
Wolf more recently argued that the accumulation of dollar reserves by China and other East Asian countries that have maintained undervalued exchange rates against the dollar explains the low long-term interest rates and monetary easing of the US in the 2000s. Cheap money, he writes, had "encouraged an orgy of financial innovation, borrowing and spending" that created housing bubbles:
High-income countries with elastic credit systems and households willing to take on rising debt levels offset the massive surplus savings in the rest of the world. The lax monetary policies facilitated this excess spending, while the housing bubble was the vehicle through which it worked.
Wolf's most recent book, Fixing Global Finance, marks a turning point in his worldview. Written in 2007, just before the first signs of the current financial crisis were starting to register, it explains how unprecedented macroeconomic imbalances have repeatedly created the preconditions for financial crises over the last three decades. It offers the reader a chance to test Wolf's predictions and prescriptions a few months after they were made.
Wolf's main argument is that the microeconomics of finance is intimately intertwined with the nature of the global macroeconomy. If the latter is not sound, the former will not be sound either. His eight chapters take us through a detailed account of the role of exchange rate regimes—i.e., policies used to maintain currencies at a desired level against the dollar—and their influence on balance of payments and, ultimately, on the availability and use of credit in domestic economies.
It was the large macroeconomic effects of financial crises in emerging markets in the 1990s that enabled America to become what Wolf calls the "borrower and spender of last resort." There were four steps toward these crises: mismanaged liberalization (and globalization), run-up to currency crisis, currency crisis, and, finally, full financial crisis. South Korea offers a good example. During the 1990s, in order to qualify for OECD membership, South Korea had been liberalizing its exchange controls and credit markets. Spurred by their government to keep growing, large Korean companies and banks started borrowing abroad despite dwindling profits. Rising foreign interest rates undermined their creditworthiness and increased the cost of servicing their debt. They therefore needed to borrow even more—but now under worse conditions. This led to a general skepticism among foreign lenders. Whether solvent or not, Korean companies were faced by an ever-worsening credit situation.
Under these conditions of uncertainty, Koreans and other foreigners started selling the domestic currency, which therefore plummeted in value and triggered a currency crisis. This is when the full financial crisis of the 1990s really got going. With a devalued domestic currency, neither private nor public institutions could afford to take out new loans in foreign currencies, and the old ones could not be repaid. Interest rates soared and insolvent companies were wiped out, bringing solvent banks down with them. "Domestic credit seizes up. Inflation surges as the currency tumbles. The economy falls into a deep recession." Partly because of similarity of circumstances and partly because of contagion effects, this was the fate of most East Asian economies in 1997–1998.
During the three decades preced- ing 1997, financial crises were always followed by periods of large inflows of capital into emerging market economies ranging from East Asia to Latin America, as foreign investors shrugged off their losses and cheerfully started lending again. However, East Asian countries realized that being a net importer of capital comes at huge cost when their domestic currency faces devaluation. Thus, at the end of the 1990s, most emerging economies simply said "enough." No longer would they run current account deficits; instead they would keep their currencies artificially low—but stable—to facilitate export-led growth and become net exporters of capital.
To prevent inflows of capital from private foreign interests and banks from jeopardizing this policy, the governments of these countries have since been accumulating huge foreign-denominated reserves. In particular, they have been hoarding dollars. As Wolf puts it:
In essence, this is government recycling of money earned through the current account and money received from private sector capital flows: the emerging market economies are...smoking capital, but not inhaling.
This set the stage for unprecedented global imbalances. There can be no net exporter of capital without a net importer of capital. And if the net exporters happen to include countries such as China, you need a really big economy to absorb that capital. Enter the United States.
What follows in Wolf's account is largely a rehash of Bernanke's 2005 lecture. Wolf explains the "saving glut"/"money glut" debate, which is also an argument about the conduct of US macroeconomic policy in the years leading up to the bank crash of 2008. The official view of the Federal Reserve was that the existence of a "global saving glut" required the US to step forward as the superborrower to rescue the world from a recession. The "money glut" view holds that the direction of causality was quite the opposite: US monetary excess brought about low interest rates, which sparked a rapid growth in credit while reducing the willingness of American households to invest. This then resulted in trade deficits that weakened the dollar. To preserve competitiveness, East Asian governments were forced to embark on open-ended foreign currency intervention.
Thus, in the "money glut" view it was excessive US spending that led to excessive saving in emerging markets and not the other way around. Wolf prefers the "saving glut" to the "money glut" explanation. As he puts it:
Many blame the United States' predicament on the policies of the Federal Reserve and lax regulation of the financial system. These arguments are not without merit, but they are exaggerated.
Wolf's book is overloaded with diagrams and tables to back up this argument. The very density of the material may obscure the reader's understanding of the causal mechanisms by which "surplus Chinese saving" became "excessive American spending." Evidently, Americans didn't directly spend Chinese savings. The US dollars earned by Chinese exporters weren't being borrowed by American firms and households: they were being borrowed by China's central bank, which then hoarded or segregated them to keep them out of the domestic money supply and to keep the exchange rate low.
The story goes somewhat like this. Instead of having to borrow from the American public to finance its fiscal deficit, the US government could borrow Chinese savings by issuing Treasury bonds that were bought by the Chinese. Therefore federal deficits did not raise the cost of domestic borrowing, which they would have done had the government had to borrow American savings rather than selling debt to China. If the economy is working to capacity, the more governments borrow, the less private investors borrow. This is called "crowding out." With Chinese savings available, the US government could run a deficit without crowding out private spending. This allowed the Fed to establish a much lower funds rate—the rate at which banks borrow from the Fed and one another—than it would otherwise have been able to do, helped in this by the downward pressure on prices exerted by the import of cheap Chinese goods produced by cheap Chinese labor. Cheap money, in turn, enabled banks to expand their deposits and their loans to customers more than they could otherwise have done. In short, it was via their impact on the financing of the federal deficit that Chinese savings made it possible for the US consumer to go on a spending spree.
Provided that the Chinese were prepared to go on lending money to the US, why was this position unsustainable? Wolf suggests the answer when he remarks that the glut of savings by the Chinese might be better thought of as an "investment dearth" in the United States. This echoes Alan Greenspan's finding that cheap money hardly raised the level of US investment. A key indicator of this, as Greenspan put it, was
the dramatic swing in corporations' use of their internal cash flow...from fixed investment to buybacks of company stock and cash disbursed to shareholders.
The lack of opportunities for profitable investment determined the pattern of American spending. Americans borrowed not to invest in new machines but to speculate in houses and mergers and acquisitions. The resulting growth in paper wealth triggered a consumption boom. The situation was unsustainable because no new resources were being created with which to pay back either domestic or foreign borrowing.
This much was apparent to Wolf by 2007. But he took the view that to take any action to correct this enormous imbalance between China and the US risked upsetting the delicate, if unsound, mechanism that was keeping the world economy afloat. Indeed, he remarked:
As I write these words in August 2007, there seems to be good reason to welcome the global imbalances...: the world economy is growing strongly and in a more balanced way than in previous years, as demand picks up across the globe; the developing world is also performing well, particularly in Asia; and the world has not experienced a significant financial crisis in emerging markets since 2001.
Yet the name Wolf gives to his fifth chapter—"Calm before a Storm"—provides a hint of coming trouble.
In fact the present financial meltdown is producing the market-led adjustment that has eluded policymakers. Willy-nilly Americans are having to spend less and save more; the decline of Chinese export markets forces China to shift its growth emphasis to domestic development; the weakening of the American economy has produced an automatic decline in the relative value of the dollar against other currencies. But unless these market-led adjustments to acute crisis become conscious policy choices in both China and the US, the global imbalances will recreate themselves and we will limp out of this crisis into the next. Crisis always enlarges the possibility for reform. Wolf's prescriptions for rebalancing the world economy are still relevant: emerging market economies need to spend more and save less, and mature market economies need to spend less and save more. This would automatically right the listing ship. But how is this to be done?
In line with the "saving glut" hypothesis, Wolf argues that it is up to the Chinese and other East Asian countries to take steps to eliminate the excess savings they have created. This is in their own self-interest. The Chinese save and invest almost 50 percent of their GDP. Wolf claims that they get very poor return for their frugality. Chinese employment has hardly grown, because investment in export-led growth is highly capital-intensive: in 2005, the excess capacity in China's steel industry was 120 million tons—more than the annual production of Japan, the world's second-largest producer. Moreover, there are political risks in channeling current account surpluses into foreign reserves instead of greater consumption, improved health care, and infrastructure. This is particularly the case when the nominal returns on dollar debt are as low as they have been in the last few years.
Emerging-market governments should pursue expansionary fiscal policies to stir more private demand since, if the provision of public goods improves, private actors will have less of an incentive to keep up their current rates of precautionary savings. Emerging-market governments should also undertake financial reforms to enable them to raise funds in their own currencies—the only way to avoid the exchange rate problem that frequently caused crises in the past. The best way to achieve this is to develop markets in emerging economies for bonds denominated in the local currency. Unless these domestic credit markets are developed, emerging-market governments will be unwilling to run deficits, since the only funding now available—mostly in dollar-denominated instruments—exposes them to the risk of being unable to service their debts if the exchange rate fluctuates.
Another element in the East Asian adjustment should be a move to more flexible exchange rates, though Wolf recognizes that floating exchange rates are an obstacle to securing net capital flows from rich to poor countries. Global reform is necessary alongside domestic reform. Wolf ends with a raft of small but useful ideas for reforming the World Bank, regional development banks, and the International Monetary Fund (IMF). The IMF must be better at delivering technical assistance, surveillance, coordination of macroeconomic policies and exchange rates, and crisis management. It must reform its system of representation and resume its role as a credible lender during economic crises. The decision by the G-20 in April to expand the IMF's special drawing rights (SDRs) available to its members by $250 billion is an important step in this direction. Fred Bergsten, director of Washington's Peterson Institute for International Economics, argues that this opens the door to China's proposal to create a new global reserve currency to replace the dollar. But the door is only slightly ajar. What will ensure the general acceptability of the SDRs as reserves? And how will their issue be regulated? These questions have hardly been discussed.
Despite the density of its argument and its skepticism about the possibility of reform in the short term, Wolf's book offers important pointers to the way ahead. But his story is only half-told. He has very little to say about America's responsibility for both creating and ending the system of global imbalances. For the fact is that the present system has suited the United States—specifically the power holders in the United States—just as much as it has those in China. The phrase "it has enabled the Americans to live beyond their means" is too vague to be useful. One needs to ask: which Americans? Certainly many middle- and low-income American households have been given opportunities to borrow beyond their means.
But secondly, the American–Chinese symbiosis has been excellent for US business profits. American businessmen have been complicit in Chinese "super-competitiveness" by arranging for manufacturing jobs to be moved to China from the US in order to cut costs. The decline in US manufacturing and the growth in nontradable services, and the financial operations that secured this restructuring, have enabled financiers and businessmen to earn huge profits that should have been shared with their workers. Morally, the financial community has been living well beyond its means. But perhaps above all, by getting other countries to finance its imperial pretensions, the US government has been able to live beyond its means. Wolf refers in several places to the "exorbitant privilege" of the US dollar, but omits entirely to discuss the political benefits that this privilege buys.
This points to the main weakness of Fixing Global Finance: the lack of a historical perspective. The history of the overprivileged dollar, after all, goes all the way back to the 1960s. Its roots lie in the failure of John Maynard Keynes's plan for a Clearing Union, which he worked out during World War II. The Keynes plan was specifically designed to prevent creditor countries from hoarding reserves by trading at undervalued currencies. If they did not spend their surpluses, the surpluses would be confiscated and redistributed among debtor countries. In this way a global balance between saving and investment would be secured through a balanced trade position, which would in turn allow fixed, but adjustable, exchange rates.
The Bretton Woods agreement of 1944 adopted the proposal for fixed but adjustable rates, but failed to provide a remedy against countries with trade surpluses accumulating, or hoarding, reserves. In practice, the problem was solved by the United States taking the place of nineteenth-century Britain as the chief supplier of foreign investment funds. The outflow of American savings helped reconstruct Europe after the war, and kept global demand buoyant throughout the Bretton Woods era. The dollar replaced gold as the world's chief reserve currency. This allowed the US to print dollars to cover its growing trade deficit. The arrangement suited both the Europeans and the United States, because it not only enabled the Europeans to export to America at undervalued exchange rates, but it also covered the cost of America defending Western Europe and non-Chinese East Asia against communism. In other words, the "exorbitant privilege" of the dollar allowed the US to pursue an imperial mission that, in the era of the cold war, was greatly to the satisfaction of its partners and allies.
The privileged position of the dollar survived the collapse of the Bretton Woods regime of fixed-exchange rates in 1971. In theory, the resulting system of floating exchange rates removes the need for any reserves at all, since adjustment of current account imbalances was supposed to be automatic. But the need for reserves unexpectedly survived, mainly to guard against speculative movements of short-term investment—"hot money"—that could drive exchange rates away from their equilibrium values. Starting in the 1990s, East Asian governments unilaterally erected a "Bretton Woods II," linking their currencies to the dollar, and holding their reserves in dollars. This reproduced both the benefits and faults of Bretton Woods I: it avoided global deflation, but undermined the long-run credibility of the dollar as the global reserve currency.
The new arrangement allowed the United States to continue to enjoy the political benefits of "seigniorage"—the right to acquire real resources through the printing of money. The "free" resources were not just unpaid-for imported consumer goods but the ability to deploy large military forces overseas without having to tax its own citizens to do so. Every historian knows that a hegemonic currency is part of an imperial system of political relations. Americans acquiesced in the unbalanced economic relations initiated by East Asian governments in their undervaluation of their currencies because they ensured the persistence of unbalanced political relations.
A willingness by the US government to end macroeconomic imbalances thus depends on its willingness to accept a much more plural world—one in which other centers of power in Europe, China, Japan, Latin America, and the Middle East assume responsibility for their own security, and in which the rules of the game for a world order that can preserve the peace while effectively tackling the challenges posed by terrorism, climate change, and abuse of human rights are negotiated and not imposed. Whether, even under Obama, the US is willing to accept such a political rebalancing of the world is far from obvious. It will require a huge mental realignment in the United States. The financial crash has disclosed the need for an economic realignment. But it will not happen until the US renounces its imperial mission.
—June 17, 2009
Alan Greenspan, The Age of Turbulence: Adventures in a New World (Penguin, 2008), p. 507.
Yale University Press, 2004.
"Risks and Rewards of Today's Unshackled Global Finance," Financial Times, June 26, 2007.
"The Federal Reserve Must Prolong the Party," Financial Times, August 21, 2007.
"Asia's Revenge," Financial Times, October 8, 2008.
Fred Bergsten, "Beijing's Currency Idea Needs to Be Taken Seriously," Financial Times, April 9, 2009.
Volume 51, Number 1 · January 15, 2004
The Story of a BubbleBy William D. Nordhaus
The Fabulous Decade: Macroeconomic Lessons from the 1990s
by Alan S. Blinder and Janet L. Yellen
Century Foundation Press, 105 pp., $13.95 (paper)
The Roaring Nineties: A New History of the World's Most Prosperous Decade
by Joseph E. Stiglitz
Norton, 379 pp., $25.95
For our purposes, the "fabulous Nineties" can be bracketed by two major political events. The fall of the Berlin Wall on November 9, 1989, marked the end of the cold war and the beginning of a period of geopolitical optimism. The Soviet empire disintegrated, the great powers unified Germany, and Europe began its movement to a common currency. The end of the period came on September 11, 2001, when the age of terrorism began, and the security anxieties of the cold war were replaced by altogether different ones.
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Recuperação já começou, mas os perigos persistem
"Já começou a recuperação", segundo faz pensar o início de um artigo de Olivier Blanchard, economista-chefe do Fundo Monetário Internacional, que será publicado na edição de setembro da revista do organismo, "Finance & Development".Mas o restante do artigo, intitulado "Apoiar o crescimento mundial", contradiz o otimismo que essa primeira frase poderia provocar no leitor.Com efeito, Blanchard salienta que "o mundo não vive uma recessão comum". A economia mundial não vai recuperar tão cedo seus índices de crescimento anteriores, pois a oferta e a demanda continuarão afetadas pelos traumas destes dois últimos anos.Vejamos o caso da demanda. "As previsões anunciam agora que, inclusive nas economias avançadas, o crescimento será positivo nos próximos trimestres", afirma o autor. "Mas há alguns fatores que se opõem a isso: o crescimento não terá a força necessária para reduzir o desemprego, que alcançará seu ponto máximo durante o próximo ano.""Essas previsões de crescimento se baseiam na combinação de uma reativação orçamentária e de um reabastecimento das empresas, mais que em um forte consumo privado e em gastos de investimento fixo", acrescenta. "Cedo ou tarde será preciso suspender o estímulo orçamentário e se acabará o reabastecimento."Portanto, Blanchard acredita que é hora de reequilibrar os comportamentos macroeconômicos dos atores mundiais. Por um lado, o gasto público deve ceder lugar à demanda privada, pois seu aumento faria o índice de endividamento dos países do Grupo dos 20 passar para mais de 100% de seu Produto Interno Bruto. Por outro lado, é preciso fomentar o ressurgimento atual do índice de poupança nos EUA (atualmente 5%, à diferença de 0% em 2007) - implica uma redução do consumo das famílias americanas (3 pontos a menos na relação consumo-PIB) -, a fim de aumentar suas exportações.Simetricamente, a China deve aumentar seu consumo interno, oferecendo a sua população uma proteção social que lhe dê garantias e a faça abandonar seu excepcional índice de poupança por precaução. Esse duplo fenômeno reduziria os colossais excedentes chineses e o não menos formidável déficit americano.Dito de outro modo, os EUA devem poupar e exportar muito mais que hoje. O resto do mundo, especialmente a Ásia e, é claro, Japão, Europa, com Alemanha na cabeça, devem frear suas exportações. Isso representa uma reavaliação das moedas asiáticas em relação ao dólar.O autor não tem muitas ilusões. "Essas reformas estruturais são politicamente difíceis", reconhece. "Seus efeitos não se farão sentir rapidamente. Com toda probabilidade, o processo será longo; em todo caso, longo demais para consolidar a recuperação antes de vários anos."O que aconteceria se essas medidas terapêuticas não fossem aplicadas? "Podemos imaginar vários cenários", responde Blanchard. "A reativação orçamentária poderia se deter e a recuperação dos EUA seria muito frágil. Ou o déficit poderia ser excessivamente prolongado e desembocar em uma dívida insustentável, provocando dúvidas sobre as obrigações do Tesouro dos EUA e o dólar e causando uma importante fuga de capitais dos EUA."Sua conclusão tem tons de advertência. "Poderia ocorrer uma depreciação do dólar, mas de maneira descontrolada, que levaria a uma nova fase de instabilidade e de grande incerteza, o que por sua vez faria a recuperação abortar." Para informação dos que tentam adivinhar o futuro.Tradução: Luiz Roberto Mendes Gonçalves
Sep 21, 2009
"Economists Need to Study Bubbles"
Robert Shiller says economists and their models need to take bubbles seriously (compare Dani Rodrik's "Blame Economists, not Economics"):
Economists need to study bubbles, reinvent models, by Robert Shiller, Commentary, Project Syndicate: The widespread failure of economists to forecast the financial crisis ... has much to do with faulty models. This lack of sound models meant that economic policymakers and central bankers received no warning of what was to come. ...
[T]he current financial crisis was driven by speculative bubbles in the housing market, the stock market, energy and other commodities markets. ... You won’t find the word “bubble,” however, in most economics treatises or textbooks. Likewise, a search of working papers produced by central banks and economics departments in recent years yields few instances of “bubbles” even being mentioned. Indeed, the idea that bubbles exist has become so disreputable ... that bringing them up in an economics seminar is like bringing up astrology to a group of astronomers.
» Continue reading ""Economists Need to Study Bubbles""
Posted by Mark Thoma on Monday, September 21, 2009 at 03:33 PM in Economics, Macroeconomics, Methodology Permalink Comments (9)
Déme su dinero, pero no me controleANTÓN COSTAS 03/03/2009
Crisis: ¿no será la distribución de la riqueza?
JUSTO ZAMBRANA 24/04/2009
Leer en tiempos de crisis
Los libros gozan de buena salud en plena recesión. Pero ¿deben limitarse a ofrecer una forma barata de ocio y evasión privados? No. Leer es el paso del yo al nosotros, clave en la forja de una identidad colectiva
MANUEL FERNÁNDEZ-CUESTA 13/03/2009
REPORTAJE: EN PORTADA - Reportaje
Pistas para entender el derrumbe
CLAUDI PÉREZ y ALEJANDRO BOLAÑOS 06/06/2009
Is it Models or the Economists? Statement by David Colander
September 21, 2009
"You won't get gun control by disarming law-abiding citizens. There's only one way to get real gun control: disarm the thugs and the criminals, lock them up, and if you don't actually throw away the key, at least lose it for a long time... It's a nasty truth, but those who seek to inflict harm are not fazed by gun controllers. I happen to know this from personal experience."
Ronald Reagan, 1983
First, two housekeeping notes. IRA co-founder Christopher Whalen and Josh Rosner of Graham-Fisher & Co. are making a presentation to the New York Chapter of the Risk Management Association on Wednesday, September 23, 2009. Click the hyperlink for details: http://www.rmany.org/vcart/mtgreg.asp On Friday of this week, Whalen will be participating in the twelfth annual International Banking Conference at the Federal Reserve Bank of Chicago. Our panel is Session VI: "How to Make Regulators and Government More Accountable: Regulatory Governance and Agency Design." We are looking forward to an interesting discussion with Edward J. Kane, Boston College Michael Klein, formerly with The World Bank, and Ross Levine, Brown University. When we appeared before the House Science and Technology Committee last month, the final witness, David Colander of Middlebury College, was easily the most interesting speaker of the day. He addressed the financial crisis from the perspective of how models or really just one model has developed in the economics community due to a lack of diversity and rigor in basic economic research. He also addressed the monopoly that these economists exercise on new research and publication, and thus tenure, in universities. Dr. Colander challenged the Committee to change the way in which the National Science Foundation allocates funds for grants to support economic research and suggested other reforms to the economics profession that would restore some semblance of scientific discipline to a community that is deeply involved with the formulation of national policy. Dr. Colander's testimony is reproduced below with his permission. We included two footnotes in italics. His text plus other attachments are available in the full testimony on the committee web site.
Testimony of David ColanderSubmitted to the Congress of the United States, House Science and Technology Committeefor the Hearing: "The Risks of Financial Modeling: VaR and the Economic Meltdown." September 10, 2009
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Annals of Economics
The real reason that capitalism is so crash-prone.
by John Cassidy
October 5, 2009
On June 10, 2000, Queen Elizabeth II opened the high-tech Millennium Bridge, which traverses the River Thames from the Tate Modern to St. Paul’s Cathedral. Thousands of people lined up to walk across the new structure, which consisted of a narrow aluminum footbridge surrounded by steel balustrades projecting out at obtuse angles. Within minutes of the official opening, the footway started to tilt and sway alarmingly, forcing some of the pedestrians to cling to the side rails. Some reported feeling seasick. The authorities shut the bridge, claiming that too many people were using it. The next day, the bridge reopened with strict limits on the number of pedestrians, but it began to shake again. Two days after it had opened, with the source of the wobble still a mystery, the bridge was closed for an indefinite period.
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Oct 25, 2009
"The Roots of Protectionism in the Great Depression"
Lessons from the Great Depression:
Wall Street, the Depression and the Lords of Finance
By FLOYD NORRIS
Published: December 24, 2009
Crisis brings out the best in some people, or so it is said. It certainly produced some excellent books this year.
What follows is my list of six for 2009, books that I found informative and enjoyable this year. Three of the books cover aspects of financial history, including one on the greatest capitalists ever and two on the era that led to the Great Depression. The other three deal with how economics went astray.
It is not necessarily a best of 2009 list, in part because it purposely excludes books by my colleagues at The New York Times. But all are books I recommend with enthusiasm.
The books are discussed in alphabetical order, by author.
Crescimento em meio a dívidasKENNETH ROGOFFCARMEN REINHARTDO "FINANCIAL TIMES"
À medida que o nível de endividamento dos governos explode depois da crise financeira, cresce a incerteza quanto ao momento certo para suspender as extraordinárias medidas de estímulo fiscal em vigor hoje. ... .... ... ... .... ...
By CHRISTINA D. ROMER
Published: December 17, 2011
RECESSIONS after financial crises are long and severe, and the subsequent recoveries are protracted. That is the bold conclusion of“This Time Is Different,” the book by Carmen Reinhart and Kenneth Rogoff, and it has become conventional wisdom. .... ....
Um bom livro sobre a criseLuiz Gonzaga Belluzo02/02/2010
A crise financeira desatou um movimento de críticas ao paradigma dominante na teoria econômica. Se a memória não falha, acho que já tratei nesta coluna do texto do biógrafo de Keynes, Robert Skidelsky, "The Return of the Master". No gênero, o jornalista inglês John Cassidy escreveu o livro "How Markets Fail", que merece mais do que um fim de semana dedicado à leitura. Nele o autor combina erudição, simplicidade e sobretudo capacidade de situar as teorias em seu ambiente histórico, social e político, o que torna a crítica mais consistente e afasta as tentações das manobras pseudocientíficas que o sociólogo americano Wright Mills chamava de "empirismo abstrato".
Cassidy começa com Adam Smith, celebrado fundador da Economia Política que, na Teoria dos Sentimentos Morais pretendia "provar que, anteriormente a qualquer lei ou instituição positiva, a mente estava dotada naturalmente da faculdade que permitia distinguir, em certas ações e afeições, as qualidades do certo, do louvável e do virtuoso e, em outras, aquelas do errado, do condenável e do vicioso...." É por meio da razão que descobrimos essas regras gerais de justiça que regulam nossas ações.
Na "Riqueza das Nações", Smith derivou a propensão para a troca a partir das inclinações naturais do indivíduo. Naquele "estado rude e primitivo da sociedade", a troca de mercadorias decorreria da disposição benevolente dos indivíduos ao relacionamento com o "outro". Os produtores privados de mercadorias, ao buscar o seu interesse, "constituem" a sociedade. Smith busca afirmar a autonomia da sociedade econômica em relação ao Estado sublinhando o caráter natural e "espontâneo" das relações fundadas no autointeresse coordenado pela sabedoria providencial e impessoal da Mão Invisível. Smith, diz Cassidy, recomendava restrições à liberdade para a operação dos bancos, "que podem colocar em perigo a segurança de toda a sociedade e, por isso, devem ser disciplinados pelas leis dos governos, desde os mais livres aos mais despóticos."
Ao longo do século XIX, a economia tomou como paradigma a imponente construção da mecânica clássica e como paradigma moral o utilitarismo da filosofia radical do final do século XVIII. O homo oeconomicus, dotado de conhecimento perfeito, busca maximizar sua utilidade ou os seus ganhos diante das restrições de recursos que lhe são impostas pela natureza ou pelo estado da técnica. Essa metafísica da corrente dominante supõe uma ontologia do econômico que postula certa concepção do modo de ser, uma visão da estrutura e das conexões da sociedade. Para esse paradigma, a sociedade onde se desenvolve a ação econômica é constituída mediante a agregação dos indivíduos, articulados entre si por nexos externos e não necessários.
Os modelos de equilíbrio geral, com informação perfeita e mercados competitivos para todas as datas e contingências, são replicantes do Demônio de Laplace. Em seu pecado original de orgulho iluminista, o deus-mercado se pretende "uma inteligência que abarcaria, na mesma fórmula, os movimentos dos maiores corpos do universo e do menor átomo: para ele nada seria incerto e o futuro e o passado estariam sempre presentes sob seus olhos."
Cassidy mostra com clareza e simplicidade que nos anos 70, o "nobelizado" Robert Lucas juntou o suposto das expectativas racionais ao modelo de equilíbrio geral para reintroduzir, na contramão da Revolução Keynesiana, o Demônio de Laplace no universo da moderna teoria econômica. Com esse movimento, Lucas expulsou do paraíso da respeitabilidade acadêmica as ideias keynesianas de incerteza e de instabilidade da economia capitalista.
A propósito de capitalismo, John Cassidy ironiza a concepção "lucasiana" da sociedade e da economia: "Ele criou um capitalismo sem capitalistas, em que as empresas são meras abstrações que transformam insumos em produtos". Nesse capitalismo sem capitalistas, Lucas adotou a teoria dos mercados eficientes para o conjunto da economia. Eugene Fama e outros estenderam tal hipótese para os mercados financeiros. "Lucas assumiu que os mercados de bens, de trabalho, todo e qualquer mercado, eram igualmente eficientes."
A suposição fundamental das teorias novo-clássicas, com expectativas racionais, assegura que a estrutura do sistema econômico no futuro já está determinada agora. Isso porque a função de probabilidades que governou a economia no passado tem a mesma distribuição que a governa no presente e a governará no futuro.
Cassidy discorda. Para ele, a ação econômica numa sociedade capitalista é definida pelo caráter crucial das antecipações do grupo social que detêm o controle da riqueza e que deve decidir o seu uso a partir do critério da vantagem privada. Os planos privados de utilização da riqueza são racionais do ponto de vista individual, mas o turbilhão de ações egoístas, ao modificar irremediavelmente as circunstâncias em que as decisões foram concebidas, pode levar a um processo cumulativo de erros.
Cito Cassidy: "A ideia de que o comportamento racional do investidor pode levar a um resultado coletivamente irracional - um bolha, por exemplo - é tão antiga quanto a famosa South Sea Bubble de 1720. Muitos investidores sabiam que as informações sobre os ganhos do comércio entre a Espanha e a América Latina eram exageradas e as empresas que lançavam ações no mercado de Londres eram fraudulentas."
Nos mercados financeiros, as decisões são comandadas por impulsos, medos e súbitas mudanças no estado de expectativas. Os investidores e os senhores da finança têm a faculdade de usar o poder conferido pelo controle do dinheiro e do crédito para beneficiar o conjunto da sociedade ou simplesmente entregar-se ao "amor do dinheiro" e à proteção patrimonial, produzindo crises e desigualdade.
Luiz Gonzaga de Mello Belluzzo, ex-secretário de Política Econômica do Ministério da Fazenda, e professor titular do Instituto de Economia da Unicamp, escreve mensalmente às terças-feiras.
The Global Crisis and the Governance of Power in Finance
Gary A. Dymski
This paper argues that resolving the global crisis of financial systems depends on recognizing and responding to the considerable, multi-dimensional power accumulated by the very financial firms whose dysfunctionality helped create that crisis in the first place. The existing rhetoric of financial regulation which focuses attention on problems of mechanism design, fails to take into account the presence and implications of systemic power in the system. But unless the debate over financial regulation is broadened, decades of sub-par growth and excessive financial exploitation lie ahead.
May 18, 2010.
The European Union and the euro: Game, set and mismatch http://econ.st/uQZ6XD Morte moeda: http://tl.gd/eoh2d5 ### BCE:
O italiano germânico À frente do BCE, Mario Draghi une uma biografia de tecnocrática austeridade às (cont)
O roteiro catastrófico da morte da moeda Por Diego Viana | De São Paulo Analistas de bancos internacionais (cont)
‘O mundo já ingressou na segunda fase da crise’O economista francês Gérard Duménil é autor de vários livros e ensaios sobre o capitalismo contemporâneo. Este ano publicou, em parceria com Dominique Lévy, o livro The crisis of neoliberalism (Harvard University Press, 2011). Duménil esteve na Unicamp para uma palestra sobre a crise atual no Centro de Estudos Marxistas (Cemarx) no âmbito do programa de
pós-graduação em ciência política do Instituto de Filosofia e Ciências Humanas (IFCH) da Unicamp. Na ocasião, concedeu a entrevista que segue ao cientista político Armando Boito Júnior, professor titular do IFCH entrevista
The future of finance - THE ECONOMIST
LEVIATHAN OF LAST RESORT
State subsidies and guarantees are once again corroding the financial sector and creating new dangers
The slumps that shaped modern finance
CRISE VAI DURAR MAIS DE DEZ ANOS, afirma economista [Duménil]
Por Vanessa Jurgenfeld | De São Paulo
Para Gérard Duménil, esse prazo longo, maior do que em crises no passado, deve-se ao fato de não ser possível ver saída para Europa e EUA, que têm problemas com o significativo aumento da dívida pública
Jornal VALOR ECONÔMICO, 16-04-2014