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Crowding In and the Paradox of Thrift -- Krugman praises Blanchard and the IMF research department. He too has rediscovered, but it was a few years back in his case, the accelerator. No word from him on why then all IMF policy advice is based on supply side reforms and why Blanchard thinks the priority in the US is fiscal consolidation. My take here. Note that here you have the typical organized hypocrisy story, the research department says reasonable things (accelerator), while the policy advice continues to be the same.

The economist's manifesto -- Tim Harford ask economists for policy advice. Often a terrible idea. Proposals are to abolish national insurance entirely (in my view the worst of all proposals) and replace it with higher rates of income tax, increase property taxes, to spend more on urban development, and R&D and infrastructure. Wren-Lewis proposes a rule for monetization of fiscal deficits when interests rates are at the zero bound. Not too bad.

What Causes Recessions? -- Noah Smith gives the traditional New Keynesian answer, shocks and price rigidities. No mention of endogenous cycles, meaning those that result from the normal functioning of the system. On that go here.


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There will be a lot of postmortems for the European Union (EU) after Brexit. Many will suggest that this was a victory against the neoliberal policies of the European Union. See, for example, the first three paragraphs of Paul Mason's column here. And it is true, large contingents of working class people, that have suffered with 'free-market' economics, voted for leaving the union. The union, rightly or wrongly, has been seen as undemocratic and responsible for the economics woes of Europe.

The problem is that while it is true that the EU leaders have been part of the problem and have pursued the neoliberal policies within the framework of the union, sometimes with treaties like the Fiscal Compact, it is far from clear that Brexit and the possible demise of the union, if the fever spreads to France, Germany and other countries with their populations demanding their own referenda, will lead to the abandonment of neoliberal policies. Aust…

A brief note on Venezuela and the turn to the right in Latin America

So besides the coup in Brazil (which was all but confirmed by the last revelations, if you had any doubts), and the electoral victory of Macri in Argentina, the crisis in Venezuela is reaching a critical level, and it would not be surprising if the Maduro administration is recalled, even though right now the referendum is not scheduled yet.

The economy in Venezuela has collapsed (GDP has fallen by about 14% or so in the last two years), inflation has accelerated (to three digit levels; 450% or so according to the IMF), there are shortages of essential goods, recurrent energy blackouts, and all of these aggravated by persistent violence. Contrary to what the press suggests, these events are not new or specific to left of center governments. Similar events occurred in the late 1980s, in the infamous Caracazo, when the fall in oil prices caused an external crisis, inflation, and food shortages, which eventually, after the announcement of a neoliberal economic package that included the i…