IndyWatch Australian Economic News Feed Archiver

Go Back:30 Days | 7 Days | 2 Days | 1 Day

IndyWatch Australian Economic News Feed Today.

Go Forward:1 Day | 2 Days | 7 Days | 30 Days

IndyWatch Australian Economic News Feed was generated at Australian News IndyWatch.

Saturday, 27 February

17:00

The Weekend Quiz – February 27-28, 2016 – answers and discussion Bill Mitchell – billy blog

Here are the answers with discussion for this week’s Weekend Quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of modern monetary theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

Question 1:

A national government which issues its own floating currency is never vulnerable for financial reasons to defaulting on its own outstanding debt.

The answer is False.

The answer would be true if the sentence had added “and only issues debt in its own currency”. In that situation, the national government can always service its debts denominated in domestic currency.

The answer is thus false because of the word “never”. In some circumstances even a government that issues its own currency and floats in on international currencyu markets is exposed to insolvency – that is, when the government borrows in foreign currencies in addition to its own currency.

It also makes no significant difference for solvency whether the debt is held domestically or by foreign holders because it is serviced in the same manner in either case – by crediting bank accounts.

The situation changes when the government issues debt in a foreign-currency. Given it does not issue that currency then it is in the same situation as a private holder of foreign-currency denominated debt.

Private sector debt obligations have to be serviced out of income, asset sales, or by further borrowing. This is why long-term servicing is enhanced by productive investments and by keeping the interest rate below the overall growth rate.

Private sector debts are always subj...

Go Back:30 Days | 7 Days | 2 Days | 1 Day

IndyWatch Australian Economic News Feed Today.

Go Forward:1 Day | 2 Days | 7 Days | 30 Days

Friday, 26 February

12:25

India’s 2016 Budget: What to Expect The Diplomat » Pacific Money

International investors will be eager for reassurance that India's 2016 budget will keep the emerging giant on track.

Wednesday, 17 February

17:53

The impossibility theorem that beguiles the Left Bill Mitchell – billy blog

Some years ago (June 27, 2007), Harvard economist Dani Rodrik outlined what he called his “impossibility theorem”, which said that “democracy, national sovereignty and global economic integration are mutually incompatible: we can combine any two of the three, but never have all three simultaneously and in full”. In his brief article – The inescapable trilemma of the world economy – he made the case that “deep economic integration required we eliminate all transaction costs … in … cross-border dealings” and that “Nation-states are a fundamental source of such transaction costs”. Ergo, if you want ‘deep’ integration then the Nation-state has to surrender. His “trilemma” guides his view of how the “international economic system” should be reformed. He think that if “want more globalization, we must either give up some democracy or some national sovereignty”. This view has been adopted by political parties as if the conceptual framework is in some way binding. The trilemma has been skillfully sold as a narrative by right-wing think tanks and others who serve the interests of capital. The so-called progressive politicians have fallen into the trap and have shifted their political parties closer and closer to their right-wing opponents, such that now it is hard to distinguish between the major parties in most nations. The reality is that while the impossibility theorem beguiles the Left – its applicability as a binding constraint on government is limited. It is as vapid as the statements made by these career politicians on both sides of politics that they serve the people.

The UK Guardian article (February 16, 2016) –...

IndyWatch Australian Economic News Feed Archiver

Go Back:30 Days | 7 Days | 2 Days | 1 Day

IndyWatch Australian Economic News Feed Today.

Go Forward:1 Day | 2 Days | 7 Days | 30 Days

IndyWatch Australian Economic News Feed was generated at Australian News IndyWatch.

Resource generated at IndyWatch using aliasfeed and rawdog