What Can We Learn From Greece's Success In Cutting Wages And Prices?

Yves Mersch, who is a member of the executive board at the European Central Bank, praised Greece's efforts at deflating wages and prices by imposing necessary, but painful, austerity.  He correctly argued that since Greece is in a monetary union, exports cannot be increased by currency devaluation; exports can only be increased by wage and price deflation.  This article raises questions about the effectiveness of wage and price deflation on export led economic growth in Greece.

Nominal wages have decreased by 23%, and real wages have fallen by 27.8% since their peak in the first quarter of 2010.  Imports have declined as a result of the decline in wages, but non-oil exports have been flat over this period.  Greece has improved its current account, but it has not been able to export its way out of recession.  Growth in exports have been well below the wage induced decline in domestic demand.

Why Protests In The Ukraine Are Picking Up Steam

Over 300,000 protesters marched against the repression of smaller protests over the government's rejection of a trade treaty with Europe.  This article and the comments that follow provide more background on the issues in Ukraine.

Is Japan Getting Ready For A Low Growth Future?

Popular opinion in Japan is against the use of nuclear energy.  Japan's macroeconomic policies, however, are geared to revive Japan's stalled economy.  The growth strategy, however, hinges on nuclear energy.  The conflict between energy policy and the growth strategy may signal the end of Japan as a high growth economy.

Where Have All The Savings Been Invested?

Antonio Fatas shows us that the increased savings have not been invested in developed countries.  Investment has slowed down in developed countries even with low interest rates that have been made possible by high savings rates.  Investment has grown, however, in emerging markets.  Their share of global investment has been increasing.  That must be where the best investment opportunities exist.

The Netherlands Has Fallen Into The Austerity Trap

Simon Wren-Lewis is puzzled by the political support from center-right and center-left political parties for austerity in The Netherlands.  OECD has lowered its growth forecast for 2014 to zero and it expects disinflation in 2014 and 2015 to well below the 2% target.  Unemployment was only 4.3% in 2011 but OECD forecasts an increase to 8.1% in 2015.   This is not good economic news and it is a predictable result of austerity measures in The Netherlands.  Austerity is imposed to reduce budget deficits and it leads to higher budget deficits as a result of slower economic growth caused by austerity measures.  It is a vicious cycle but politicians in The Netherlands, like politicians in the UK believe that they will not be taken seriously if they propose the use of fiscal policy to promote growth.

Ten Photos Of What Pittsburg Pa. Looked Like Before Smoke Control

The government intervened into the marketplace and changed Pittsburg.  This is what it looked like when the coal and steel industry acted on its own behalf.

Wall Street Is Up To Its Old Tricks That Triggered The Financial Crisis

The Dodd-Frank bill was created by Congress to prevent another financial crisis like the last crisis.  Some of the key elements in the bill have been weakened by extensive lobbying efforts in Washington.  Now they can package mortgages with only a 5% down payments into mortgage backed securities that they sell to investors.  Furthermore, they are no longer required to hold a 5% interest in the mortgages that they put into the MBS's that they produce.  The SEC has also decided that it will not determine which rating agency will be used by the banks to rate each MBS.  The rating agencies will have an incentive to provide AAA ratings in order to secure profitable business from the banks.  The banks also want the government to guarantee the MBS's.  Taxpayers will take the hit for any defaults.