Marshall Auerback Marshall Auerback is Senior Fellow at the Roosevelt Institute. He has 28 years of experience in the investment management business, currently serving as a consulting strategist for RAB Capital Plc and economic consultant to PIMCO, the world’s largest bond fund management group. He is also a fellow of the Economists for Peace and Security. From 1983-1987, he was an investment manager at GT Management (Asia) Limited in Hong Kong, where he focused on the markets of Hong Kong, the ASEAN countries (Singapore, Malaysia, the Philippines, Indonesia, and Thailand), New Zealand and Australia. From 1988-91, Mr. Auerback was based in Tokyo, where his Pacific Rim expertise was broadened to include the Japanese stock market. From 1992-95, Mr. Auerback worked in New York for the Tiedemann Investment Group, where he ran an emerging markets hedge fund. From 1996-99, he worked as an international economics strategist for Veneroso Associates, which provided macroeconomic strategy to a number of leading institutional investors. From 1999-2002, he managed the Prudent Global Fixed Income Fund for David W. Tice & Associates, an investment management firm, and assisted with the management of the Prudent Bear Fund. Mr. Auerback graduated magna cum laude in English and philosophy from Queen’s University in 1981 and received a law degree from Corpus Christi College, Oxford University, in 1983.

Surprise, Surprise! Ben Bernanke Discovers the ‘Paradox of Thrift’ (Sort Of)

When consumers are trying to save, the government must step in to create growth.  That’s going to require smart and imaginative fiscal policy.

That “central bankers alone cannot solve the world’s economic problems” was the most extraordinary concession to come out of the mouth of Federal Reserve Chairman Ben Bernanke during last Friday’s speech at the Jackson Hole Economic Symposium.

Of course, he’s right, but, rather than acknowledging that fiscal policy is the most effective counter-stabilisation tool available to national governments, Bernanke still trumpets the idea that monetary policy is the only game in town. Despite huge efforts by the Fed to stimulate…

The Real Lesson from the Great Depression: Fiscal Policy Works!

New Attacks on FDR’s New Deal Fueled by Old - and Discredited - Ideology

If the US government had a dollar every time someone proclaimed to learn the lessons of the Great Depression, we probably wouldn’t have a budget deficit. Usually, these debates turn on the question of fiscal policy and whether in fact, FDR’s New Deal had a discernable role in generating recovery. “Fiscal austerians” have done much to dismiss the economic achievements of the New Deal, some even suggesting that FDR’s fiscal policies worsened the crisis.

For a brief period during 2008, the views of neo-liberals like Alan Greenspan and…

The Real Waste: Unemployment

“Wasteful” government spending should be of little concern compared to the ongoing jobs crisis.

Joe Stiglitz was interviewed recently on the ABC national current affairs show 7.30 Report. It’s an excellent interview, which discusses the utility of fiscal policy. You can read the full transcript to see what he said or watch an extended version of the segment.

Money quote:

Interviewer: I’m not sure how much you know about Australia’s stimulus packages in response to the crisis, but to the extent that you do, how did the quality of Australia’s stimulus compare with that in the US and elsewhere, in terms of its effectiveness?

JOSEPH STIGLITZ:…

The Myth of the “Credibility of Markets”

It is time to distinguish between the truths and the myths propagated by Wall Street.

A few days ago, I wrote a piece suggesting that President Obama’s attack on the proposed GOP threat to Social Security masked a more fundamental threat posed by members of his own party.  Sadly, this analysis appears to be confirmed today in Mike Allen’s politico playbook:

“–ADMINISTRATION MINDMELD: The virtue of action on Social Security is that it demonstrates the ability to begin to affect the long-run deficits. Social Security isn’t the biggest contributor to the problem - that’s still health-care costs. But it could help a little…

Deficit Chicken Littles Miss Another Doomsday Deadline

China is dumping Treasuries and interest rates remain low.  Will the doomsayers see the error of their ways?

In a post titled “China Cuts US Treasury Holdings By Record Amount,” Mike Norman makes the excellent observation that while China is moving its money out of Treasuries, interest rates are hitting record lows.  In other words, the sky still isn’t falling.  So, Mike wonders, “Where is the Debt/Doomsday crowd?”  He rightly concludes that “They’re nowhere to be found because they can’t explain this. This is a ‘gut punch’ to them. Their whole theory is out the window.  They just don’t understand or…

Which Party Poses the Real Risk to Social Security’s Future?

Hint: it’s not Republicans.

Social Security remains one of the greatest achievements of the Democratic Party since its creation 75 years ago. Although Republicans have historically fulminated against the program (Ronald Reagan once likened it as something akin to “socialism”), they have actually made little headway in touching this sacred “third rail” in American politics. President Bush pushed for partial privatization of the program in 2005, but the proposal gained no policy traction (even within his own party) because Social Security continues to be hugely popular with American voters. It’s a universal program that benefits all Americans, not a government handout to a…

Welcome to the World of the “New Normal”, UK Style

Calling high unemployment the “new normal” is a lazy way to cover up poor fiscal policy.

We are now starting to see the economic impact of the ‘new normal’ in practice, as Paul Krugman outlined the other day.   Having been bullied into adopting austerity measures apparently thinking they will help their economies grow, it is beginning to dawn on many “Austerian” governments that their embrace of hair shirt economics is beginning to undermine growth.

Exhibit A is the United Kingdom.  The NY Times gave an account of British towns “reeling” from the implementation of nationwide expenditure cuts of some $130 billion introduced in last…

The Real Reason Banks Aren’t Lending

Banks won’t lend until the American people are creditworthy again — and that takes full employment.

Our Treasury Secretary has conceded that it is still a “tough economy” for most Americans, and warned it’s possible the unemployment rate will go up for a couple of months before it comes down. Given the constellation of recent economic data that has come out, Tim Geithner is probably correct.

The US economy is showing signs of slowing, as the fiscal stimulus is dissipating and spending contractions at the state and local government level increasingly undermine the injections from the federal sphere. Worse, it appears that much…

Will Criminals Exploit Cap and Trade?

Cap and trade promises to be a broken system, easy to exploit.

The story below is certainly not surprising, but it is yet another strong illustration as to why the carbon trading proposals embodied in the Obama Administration’s cap and trade proposals are misguided. Money laundering is very easy when you have an opaque pricing structure with little in the way of regulatory protections. It’s the environmental equivalent of credit default swaps. Worse, the cap and trade system doesn’t work.

The European model introduced a quantity-based (capped) carbon trading system (CTS) with offsets. And, as Bill Mitchell has pointed out, Phase I…

The Summer(s) of Our Discontent

Larry Summers’s misguided approach to deficits and surpluses could strangle our long-term vitality.

Virtually every profile on Larry Summers tells us that he is one of the most brilliant economists of his generation, celebrated for having allegedly helped to create the boom of the 1990s.  Statistical maven at age 10, the youngest tenured professor at Harvard, chief economist of the World Bank, this is a man whom the French would surely call “un homme serieux”.

But after reading his latest defense of President Obama’s fiscal policy in Monday’s Financial Times - “America’s Sensible Stance on Recovery” - one wonders.   Only Robert Rubin and Alan Greenspan…