What Economics Doesn’t Talk About

Whenever I tell people that I’m studying economics they usually ask me how to solve the recession or what to do about the banks. Each time I’m embarrassed over the fact that we have never even mentioned these issues in lectures. In my course I have basically been taught that the free market is the most efficient and best system in the world and trouble always results when it is interfered with. In my textbooks recessions are not mentioned, they do not happen. There is no explanation of unemployment, the biggest issue of our times. There is no mention of profit, the heart of capitalism. Nor do they talk about banks or money or advertising or how systems are guided by power relations. No mention is made of poverty, in effect ignoring three-quarters of the world.
Continue reading “What Economics Doesn’t Talk About”

Balance Sheet Recession

There are many questions about this current recession. Why did the economy decline so much? Why are most economies stagnating? Why has low interest rates and quantitative easing not lead to recovery? I recently read Richard Koo’s The Holy Grail Of Macroeconomics which answers these questions. I found it deeply insightful, not only for its explanation of the current recession and the Great Depression but also because it was written before the crisis even happened. Koo accurately describes out current mess, what’s wrong and what we have to do to fix it. Continue reading “Balance Sheet Recession”

The Irish Housing Bubble And Bust

The recent housing bubble in Ireland defied the laws of economics. Supply and demand rose simultaneously, the market rose to absurd heights before crashing to unheard of lows. It went from an extreme of being able to sell a house no matter how high the price, to one where you can’t sell a house no matter how low you drop the price. According to everything I have been taught about economics, this could not happen. Textbooks are useless in understanding the bubble. According to them the price is always right, that left alone the free market will make everyone better off. Bubbles or recessions don’t happen. Any exceptions are temporary; it’s not possible for a decade of boom to be replaced by a decade of bust. But that is what has happened. Continue reading “The Irish Housing Bubble And Bust”

The Fool’s Gold Standard

Having money linked to a Gold Standard is an idea that almost every economist opposes. It is described as the economic equivalent of creationism and a major cause of the Great Depression. It is ignored by policymakers and no country has one anymore. Yet there is some support for it on the internet. It is one of Ron Paul’s main ideas in his campaign for the Presidency and is supported to some extent by Paul Ryan. The Republican platform promises a commission to consider reintroducing it. So what is a Gold Standard and why is it so bad? Continue reading “The Fool’s Gold Standard”

The Truth About Spending And The Stimulus

Republicans regularly criticise Obama’s stimulus plan, claiming it was an ineffectual waste of money. The internet is full of people arguing it failed to work, that unemployment is still high and growth is low. However what few people realise is that the stimulus did work. Without unemployment would be higher and growth lower. In fact the only problem is that it was too small to solve the greatest crisis since the Great Depression. Continue reading “The Truth About Spending And The Stimulus”

Government Did Not Cause The Recession

We are in the midst of the worst recession since the Great Depression. Economists and commentators alike are united in blaming the banks and the lack of restraint on them for driving us over the cliff. Yet there is a myth common on the internet that it was the government that caused the recession. Allegedly it was the government that forced the banks to lend extra and fueled the boom. There are three parts to this argument. It is claimed the government caused the recession by guaranteeing to bail out banks if they got in trouble, by forcing banks to lend more through the Community Reinvestment Act, Fannie Mae and Freddie Mac and by keeping interest rates artificially low. These arguments are unable to explain the timing of the crisis, its magnitude and the fact that it’s global effect. These claims simply do not stand up. Continue reading “Government Did Not Cause The Recession”

John Maynard Keynes Quotes

Keynes is one of the most famous economists of all time and the one whose ideas will get us out of this recession. So here is a collection of some of his best quotes.

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The boom, not the slump, is the right time for austerity at the Treasury.

Look after unemployment and the Budget will look after itself

In the long run we are all dead. Continue reading “John Maynard Keynes Quotes”

Macro Over Micro

Economics is divided into two sections, micro (focusing on individuals) and macro (focusing on the whole economy). However in universities the emphasis is heavily on micro to the extent that macro is often seen as simply micro on a larger scale. This is fundamentally wrong and ignores several points.

This focus ignores the fact that the best option for the individual is not always the best option for society as a whole. Continue reading “Macro Over Micro”

Nationalise The Banks

Recently I was sitting in my economics lecture trying to figure out what to do about the banks so that we never have another financial crisis. After much thought, I came to the conclusion that banks are too important to be left to the bankers. The only way to avoid future financial crisis and massive bank bailouts is to nationalise the banks. Now I’m no out-and-out Communist driven by ideology alone. I don’t believe in one size fits all, in that everything should be privatised or nationalised, rather it depends upon the situation. Listen to my explanation with an open mind and you might find a certain logic in this seemingly drastic proposal. Continue reading “Nationalise The Banks”

New Dawn or More of the Same?

This time last year there was a political earthquake that changed the shape of Irish politics. Fianna Fail suffered the worst defeat in its history and lost its dominance over Irish politics. The political system in place since 1932 was destroyed. Fine Gael, Labour and Sinn Fein made enormous and unprecedented gains, while the losses suffered by Fianna Fail and the Green Party were so great many commentators questioned if they would survive. A Fine-Gael-Labour coalition was formed with the largest majority in history. One year on, how has the new government fared? Has it redefined the way politics operate or is it simply a case of new faces, same old story? Continue reading “New Dawn or More of the Same?”