University economics teaching isn't an education: it's a £9,000 lobotomy
Economics took a battering after the financial crisis, but faculties are refusing to teach alternative views. It’s as if there’s only one way to run an economy
Aditya Chakrabortty, The Guardian, Friday 9 May 2014
2) Steve Keen: The ECB’s Eurozone Medicine is Nonsense
Posted on September 13, 2014 by Yves Smith
“You’ve just made your morning coffee, and look up in horror as you realise that the gas burner has set your kitchen ablaze. So you take decisive action: you pour your coffee on the floor.
Such is the real impact of the European Central Bank’s latest attempt to revive the European economy…
I’ll say that again, this time quoting the Bank of England:
As with the relationship between deposits and loans, the relationship between reserves and loans typically operates in the reverse way to that described in some economics textbooks. Banks first decide how much to lend depending on the profitable lending opportunities available to them … It is these lending decisions that determine how many bank deposits are created by the banking system. The amount of bank deposits in turn influences how much central bank money banks want to hold in reserve …, which is then, in normal times, supplied on demand by the Bank of England.
To summarise the Bank of England — and to repeat myself — reserves are irrelevant to bank lending. They only exist so that one bank can settle its accounts with another, and banks keep these accounts as low as they can manage. So charging private banks a trivial interest rate on their trivial reserve accounts is about as effective at stimulating an economy as pouring your coffee on the floor is at stopping a kitchen fire. If this is the best that the ECB can manage, then Great Depression levels of unemployment in Europe will persist.”
3) Taxes and Growth
The argument that income tax cuts raise growth is repeated so often that it is sometimes taken as gospel. However, theory, evidence, and simulation studies tell a different and more complicated story. Tax cuts offer the potential to raise economic growth by improving incentives to work, save, and invest. But they also create income effects that reduce the need to engage in productive economic activity, and they may subsidize old capital, which provides windfall gains to asset holders that undermine incentives for new activity.
The effects of tax cuts on growth are completely uncertain.”