Integration, spurious convergence, and financial fragility: a post-Keynesian interpretation of the Spanish crisis

Here is to another crisis like this one!

Paper co-authored with Esteban Pérez that was a Levy Institute working paper is published. From the abstract:

The Spanish crisis is generally portrayed as resulting from excessive spending
by households associated to a housing bubble and/or an excessive welfare spending beyond
the economic possibilities of the country. We put forward a different hypothesis. We argue
that the Spanish crisis resulted, in the main, from a widening deficit position in the non-
financial corporate sector and a declining trend in profitability under a regime of financial
liberalization and loose and unregulated lending practices.

Full paper available here.

Ending austerity policies to open a new time in Europe

Stop praying and change your vote!

The management of the economic crisis has had devastating consequences for our country, as well as for the eurozone as a whole. The fiscal austerity and wage reduction policies imposed over the last few years have unnecessarily prolonged the recession across the continent and generated deep social fractures by increasing economic and social inequalities.

Fiscal austerity and wage reduction policies have led us to a lost decade. Across the Eurozone, we haven’t yet regained pre-crisis level of per capita income, and in Spain this indicator is still 5% below its 2007 level. In our country, only one in three jobs lost during the crisis has been recovered, job precariousness has aggravated, and 29% of the population lives at risk of poverty or social exclusion.

Read full manifesto against austerity here. I'm number 50 of more than 177 signatories.

A Post-Keynesian Interpretation of the Spanish Crisis

New paper with Esteban Pérez published by the Levy Economics Institute.

From the abstract:

The Spanish crisis is generally portrayed as resulting from excessive spending by households, associated with a housing bubble and/or excessive welfare spending beyond the economic possibilities of the country. We put forward a different hypothesis. We argue that the Spanish crisis resulted, in the main, from a widening deficit position in the nonfinancial corporate sector—the most important explanatory factor behind the country’s rising external imbalance— and a declining trend in profitability under a regime of financial liberalization and loose and unregulated lending practices. This paper argues that the central cause of the crisis is related to the nonfinancial corporate sector’s increasingly fragile financial position, which originated from the financial convergence that followed adoption of the euro.

Read it here.