Econvue Weekly Spotlight

This week we bring you some of the best discussions of the evolution of macroeconomic theories post-2008. What seemed so certain before is now being questioned at a fundamental level by leading economists. Negative interest rates, which alter rational expectations of inflation, have also provoked some of this soul searching. But will new models and new theories be any better at predicting the next crisis?

STORIES IN OUR SPOTLIGHT

1.  Rethinking Macroeconomic Theory Before the Next Crisis
Marc Lavoie 9/23/16 Institute for Economic New Thinking

Some economists have claimed that mainstream macroeconomic theory actually caused the Global Financial Crisis. Others say that in a slow growth, low inflation, negative interest rate world, old theories based upon the dynamic stochastic general equilibrium model (DSGE) just don’t apply.  Is the real key to all the distortions unprecedented income inequality? Terrific thought piece. 

2.  Cheshire Cats and New Keynesian Central Banks
Nick Rowe 9/25/16 Worthwhile Canadian Initiative

Commentary on Nick Rowe's explanation on the New Keynesian DSGE model
J. Bradford DeLong 9/25/16 bradford-delong .com

Another attempt at understanding  a New Keynesian DSGE model.  A world without bonds?

3.  EU Banking Mayhem, One Bank at a Time, Then All At Once
Wolf Richter 9/28/16 Wolf Street

Although Deutsche Bank had some good news in terms of the size of its DOJ settlement on Friday, doubts about European banks continue.

4.  Modifying the Fed’s policy framework: Does a higher inflation target beat negative interest rates?
Ben S. Bernanke 9/13/16 Brookings

It’s premature for the Fed to favor the option of raising the inflation target over the use of negative rates. (Retweeted Ben Bernanke @benbernanke) Lael Brainard also made similar remarks at a speech in Chicago. Charles Evans at the Chicago Federal Reserve Bank thinks differently, and will be speaking soon in Australia.

5.  How Does Your GDP Grow?
Gillian Tett  9/16/16 FT

Is GDP a true measure of growth in an economy that is experiencing a population decline? GDP per capita would mean that Japan's economy for example, is doing better than it seems.  This has also been mentioned in a new study by the BOJ that says the Japanese economy is really growing by 2.4%. But perhaps not-overall GDP growth is an indicator of a nation's ability to repay debt. 

6. Great Github List of Public Data Sets
Mirko Krivanek 4/19/15 Data Science Central 

Looking for some good public data sets? @DataScienceCtrl has a great list.
(Retweeted Holly Nielsen @HollyNielsen)

7. Mongolia: Living from Loan to Loan
Lucy Hornby 9/12/16 FT

In the 1930's a debt crisis in Newfoundland caused the dominion to lose its self governing status to Canada. Deja vu.

ECONVUE RESEARCH AND INSIGHTS

Data Round-Up: Real Consumption on Track for Near +3% Gain in 16Q3
Michael Lewis 09/30/16

Though results coasted in August after July’s strong start, real consumption is on track for just shy of a +3% annualized gain in 16Q3.

Payments Milestones
Collin Canright 09/26/16

Same-day ACH payments rolled out in the United States last Friday. All U.S. bank now settle payments during the business day using the 40-year-old electronic payment system.

TOE Alert: BOJ Throws in the Towel
Richard Katz 09/21/16

It is time for the BOJ to admit that monetary policy is absolutely necessary, but not sufficient, to bring back lasting inflation.

The Trump and Clinton Foundations Are Character Tests that Hillary Clinton Passes and Donald Trump Fails
Robert Shapiro 09/16/16

The questions raised about the Trump and Clinton foundations go to the character of Hillary Clinton and Donald Trump. (EconVue is non-partisan.)

What Would Einstein Do? Embedded Dilemmas in Disrupting Markets
David W. Johnson 09/28/16

It’s time for health systems “to play the new game” and “strive for value.” The “new game” requires true alignment with patients – meeting their health needs on their terms.