This 1000 word article is the third in a series of posts on Re-Reading Keynes. It traces the impact of Keynesian theories on the 20th century, as necessary background knowledge for a contextual and historically situated study of Keynes. It was published in Express Tribune on 4 Nov 2016. The Global Financial Crisis (GFC) has… Read More P3: Impact of Keynes
I am planning a sequence of posts on re-reading Keynes, where I will try to go through the General Theory. This first post explains my motivations for re-reading Keynes. As always, my primary motive is self-education; this will force me to go through the book again — I first read it in my first year… Read More P1: Reading Keynes
The Global Financial Crisis of 2007 has led to a renewed interest in Keynesian theories. In particular, Krugman in “The Return of Depression Economics” argued that Keynesian ideas remain relevant to understanding contemporary recessions. To motivate this, he has used a real world example of the Capitol Hill Baby-Sitting Cooperative (BSC). According to an analysis by… Read More Monetary Paradoxes of Baby-Sitting Cooperatives
We are used to thinking that there is progress in knowledge. As we gain experience, the collective wisdom of mankind increases. The story of economics in the twentieth century provides the most amazing example of the opposite: How precious knowledge of vital importance for the welfare of humanity was gained and then lost. Many studies… Read More Creating Full Employment
Many leading economists have come to agree with Nobel Laureate Stiglitz that modern economic theory represents the triumph of ideology over science. One of the core victories of ideology is the famous Quantity Theory of Money (QTM). The QTM teaches us that money is veil – it only affects prices, and has no real effect… Read More The Veil of Money
While money and banking plays an extremely important role in the economy, economics textbooks teach the opposite. According to the quantity theory of money (QTM), money plays no role in the economy at all; it is a veil which covers the workings of the real economy. An increase or decrease in the money supply will… Read More The Swiss Referendum on Sovereign Money
reprinted from Express Tribune, 8th June 2015 {bit.ly/AZHunt} We live in a world awash with money. Not only can the banks create 20 times more money than the amount they receive as deposits, but an enormous shadow banking system has come into existence which creates massive amounts of credit without any regulatory restrictions. At a… Read More Speculative Financial Attacks
A near perfect graphical illustration of the power of economic theory is provided by the following graph; copied from RWER Blog The impact of the roaring 20’s can be seen clearly as the shares of the bottom 90% drop steadily from 20% to around 13%, while the shares of the top 0.1% shoot up. The… Read More The Power of Economic Theory: Graphically Illustrated
The Great Depression of 1929, and now the Great Recession following the Global Financial Crisis, poses several puzzles for economists. One is them is the sudden and severe drop in aggregate demand. This leads firms to curtail production, and therefore reduces demand for factors of production, most importantly labor. Why does aggregate demand fall, and… Read More Why does Aggregate Demand Collapse?
The recent American financial crisis is an example of how the financial institutions encouraged speculation dependent on future housing prices, the future price of securitized assets and the renewal of lending operations. This behaviour was sustainable until housing prices began dropping and the previous risky lending led to a great number of foreclosures. As housing… Read More Financial crises: conventions, speculation and instability
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