As we watch the slow-motion dissolution of the Greek and Spanish banking systems, and possibly the euro zone itself, tremors are being felt elsewhere in the global financial system. For example, the FT Alphaville blog has a post on the emerging dollar shortage in China, where capital outflows are growing at a time when capital inflows are drying up. China is stuck with “a huge pile of Treasuries it can’t openly liquidate for fear of sending the wrong signal to the Treasury market,...

From the Director’s Chair: INET Executive Director Robert Johnson talks with Jeffrey Sachs about Sachs’s book The Price of Civilization: Reawakening American Virtue and Prosperity. Sachs doesn’t view 2008 as just another business-cycle crash “It’s something deeper than that,” he says. “And its roots go back several decades.” Sachs examines the last 30 years in American history and suggests that US politics offered up a major misdiagnosis that...

On the Money View, Perry Mehrling reviews Lance Taylor's book Maynard's Revenge: The Collapse of Free Market Economics. Mehrling suggests that Keynes had it right: "The economy itself is a constantly changing and evolving entity, which means that individuals face epistemic problems of uncertainty, not just risk. In a world like that, historico-institutional methods provide a kind of knowledge that mathematico-statistical methods simply cannot, knowledge to inform individual...

INET Executive Director Robert Johnson delivered a keynote address at the OECD Forum in Paris today. In anticipation of the conference, Johnson wrote an op-ed for French newspaper Les Echos on reforming the financial sector. Quoting Nobel Laureate and INET Advisory Board member Joseph Stiglitz, Johnson reminds readers that, “Academic economists played a big role in causing the crisis. Their models were overly simplified, distorted, and left out the most important aspects.”...

In the wake of INET’s conference in Berlin, Executive Director Robert Johnson poses a profound question during this interview with the German foundation Stiftverband. Who does the economist serve: powerful interests or society? The answer seems clear-cut. Economists today primarily serve the needs of powerful interests at the expense of society in general. But why? To answer this, Johnson peals back the surface of overt corruption to explain how the problem goes far beyond that. It was...

Mathematician Michael Edesess has a dose of reality for economists. “Economics pretends to be mathematics, but it is not mathematics,” he says. “There is a major difference. No mathematician uses a term in a formula, or a statement of a theorem, unless that term has first been defined with excruciating precision.” And while economists may think they’ve defined terms like “aggregate demand” or “economic growth,” Edesess suggests they talk to...

Last week, INET gathered with important members of the economics community to celebrate the publication of news books by Joseph Stiglitz, a member of INET’s Advisory Board, and his wife, Anya Schiffrin. Attendees at the book party were treated to an assortment of wine, sushi, and intriguing conversation on the rooftop of Schiffrin’s parents’ Upper West Side apartment. Schiffrin, who edited the newly released From Cairo To Wall Street: Voices from the Global Spring, spoke...

“While it's incredibly difficult to get a regulatory reform passed, it's far easier – and more profitable to politicians – to kill it. So says Matt Taibbi, in his audacious new article in Rolling Stone called, “How Wall Street Killed Financial Reform.” In it, Taibbi examines how cash from the financial industry swamped elected officials and regulators and thwarted any efforts to create meaningful financial reform. While the details are appalling,...

You can’t control what you don’t understand. Just take a look at the financial sector. Despite the trauma of the 2008 financial crisis, the opacity of the financial sector and the oblique way decisions about financial risk are handled by institutions have remained central problems for the global economy. With this in mind, INET Grantee Edward Kane offers some new thinking on how to measure systemic risk in the financial sector.  In a paper Kane authored with Armen Hovakimian...

What has been driving the worldwide growth of inequality, both within and between countries? Jamie Galbraith has an idea: “Surely financial policies strike me as a very plausible culprit.” In his INET Berlin presentation that looks at his comprehensive study of global inequality – which Galbraith expertly explored in his recent book Inequality and Instability: A Study of the World Economy Just Before the Great Crisis – Galbraith shows that there is “rising...