SMP: The IMF and Argentina: Same Dance, Same Results

Argentina is in trouble again. Even after a substantial aid package from the International Monetary Fund (IMF), it is struggling to service its sovereign debt. One should not be surprised: when you keep employing the same policies, you are likely to end up with similar outcomes. This, however, is not the lesson Harvard economist Ken Rogoff draws from Argentina’s experience. Instead, he calls for even more aid flows to Argentina.

Rogoff is right to criticize President Macri’s decision to cut the fiscal deficit gradually, rather than attacking the issue more forcefully early on. That strategy ultimately required Macri to seek help from the IMF. But he is wrong to characterize the Macri tax cuts and liberalization efforts as “Big Bang reforms.” The tax cut was marginal at best. And, while capital controls were lifted under Macri, more comprehensive measures of economic freedom show no significant improvements. 

Continue reading at AIER.

AIER: Nuevo “rap video”, Marx vs Mises

John Papola lo hizo de nuevo. Hace ya cerca de 10 años, Papola produjo una popular serie de "rap videos" capturando un ficticio (pero bastante preciso) debate entre Keynes y Hayek. Ahora, junto al American Institute of Economic Researach (AIER), Papola nos trae un "rap video" donde los contendientes son Mises y Marx.

El debate está contextualizado en torno al debate sobre el socialismo en Estados Unidos. Aquí el video, que parece ya estar ganando popularidad. El video posee subtítulos.

En el video los he visto a Edward Stringhan y Jeffrey Tucker. A quien más (y en que momento del video) encuentran?

Aquí los videos de Hayek vs Keynes.

La página web de "The March of History: Mises vs Marx".

AIER: Here’s What Wrong With Bernie’s Plan to Eliminate Student Loan Debt

The “populist race” in the U.S., a shown by Bernie Sanders’ the plans to eliminate student’s debt.

Senator Bernie Sanders (I-Vt.) recently announced a proposal to eliminate student loan debt. He intends to pay off a total of $1.6 trillion, while financing the expenditure with a new tax on “Wall Street speculation.” 

Student debt can be a serious burden for recent grads, especially those who fail to acquire high-paying jobs. And the intention to help those with serious financial burdens is commendable. But eliminating student loan debt would do more harm than good.

Continue reading at AIER.

AIER: What Should MMT Learn from Argentina?

The last few weeks have seen a spike in commentaries surrounding modern monetary theory (MMT). A column by Prof. Stephanie Kelton, Andres Bernal, and Greg Carlock at Huffington Post and an endorsement from Representative Alexandria Ocasio-Cortez (D-N.Y.) have triggered negative responses by a number of reputable economists. George Selgin, Larry Summers, Paul Krugman, and Ken Rogoff (just to name a few) have all expressed concerns (to put it mildly) about the implications of applying MMT.

A common thread in these (and other) responses is that it is not clear what MMT really stands for. Advocates of MMT seem to use conventional terms in unconventional ways, and that creates confusion. On top of this, what exactly MMT means changes as time goes by, thereby adding frustration to confusion.

At its core, MMT maintains that a government cannot go broke as long as it can issue its own currency. Large fiscal deficits can be paid for by “printing money” (or, more technically, monetizing deficits). Standard monetary theory maintains that such a policy causes inflation. MMT, in contrast, holds that such a policy is not inflationary, because there are idle resources.

Continue reading at AIER.

SMP Essay Contest

The Sound Money Project Essay Contest is designed to promote scholarship in monetary and macro- economics. More specifically, it aims to encourage those working at the cutting edge of the discipline to consider the monetary institutions that would reduce nominal disturbances and promote economic growth.

Prompt:
In 1971, President Richard Nixon ended convertibility, thereby eliminating the last vestiges of the gold standard. The classical gold standard, which prevailed from 1873 to 1914, had anchored inflation expectations, enabled longterm contracting, and promoted international trade. This historical experience has prompted several reconsiderations of resumption over the years, including the Gold Commission in 1980, the International Financial Institution Advisory Commission of 1998, and, more recently, calls for a Centennial Monetary Commission. What are the merits of returning to the gold standard? Is such a system feasible today?

Prizes:
First Prize $10,000
Second Prize $2,000
Third Prize $1,000

Winners will also be invited to participate in the Sound Money Project annual meeting in Great Barrington, Massachusetts.

Eligibility:
The contest is open to graduate students, post-graduates, untenured professors, and tenured professors from any discipline. Former winners and current AIER fellows are ineligible. Former entrants are eligible, but must submit new essays.

Rules:
Essays must be the sole and original work of the entrant and not previously published. They should be in the format of a scholarly article. Any standard citation format (e.g., MLA, APA, Chicago, Harvard, etc.) is acceptable. Essays may either be written specifically for the contest or arise from previous work (e.g., term papers, dissertations, research projects, etc.). Essays shorter than 4,000 words or longer than 12,000 words will not be considered. AIER-affiliated scholars are ineligible.

Submission Instructions:
Please submit your paper here.

Deadline: March 1, 2019

Go to the SMP Essay Contest websiste.

SMP: The Problem with Stable Coins

To illustrate the problem, Eichengreen offers three scenarios. In the first scenario, a cryptocurrency issuer maintains 100 percent dollar backing for coins in circulation. This is similar to how a currency board works. Since such an arrangement requires the issuer attract and hold dollars in order to expand the supply of coins, the cryptocurrency will not be subject to a speculative attack. However, this also means the issuer cannot invest those dollars since it must hold all of them to back the cryptocurrency.

Price volatility is a big problem in the crypto world. Widespread adoption is unlikely without a good monetary rule that reduces volatility. But, as Barry Eichengreen notes in a recent Project Syndicate article, stable coins like Tether, Sagacoin, and Basis have their own issues.

Unable to earn interest on the float, a cryptocurrency issuer would find it challenging to profit while holding 100 percent dollar reserves. It would also struggle to offer a competitive return and, hence, attract customers. Why would one exchange a widely used dollar for an illiquid cryptocurrency, which is harder to use and does not offer a competitive interest rate?

Continue reading at AIER.

Relanzamiento del Sound Money Project

Este noviembre se ha relanzado el Sound Money Project en el American Institute for Economic Research (AIER) bajo la dirección de William J. Luther.

Aparte de Luther y quien escribe, también habrá posts regulares de Scott Burns, James Caton, Alexander W. Salter, and Brian C. Albrecht.