Latvia: The Demographic Price Of Procrastination

One of the things I think we can safely say about the impact of the current economic crisis is that the face of Macro Economic theory will never be the same again. Quite what the macro economics of the future will look like is too early to say, but what is clear enough is that the existing corpus has been tested and found wanting: it’s predictive capacity is very, very limited, and this is obviously a far from satisfactory situation.

Too Soon to Cry “Victory” on Latvia

“Doom-mongers” – the Economist tells us – “are licking their wounds”. And why exactly are they licking their wounds? Well for two years now (apparently) they have been telling us that “the struggle to save the lat’s peg to the euro was bound to end in tears”. As you could imagine right in the very forefront of these so called doom-mongers is to be found yours very truly (and here), and of course Nobel Economist Paul Krugman (and here).

Unemployment Rates: U.S. Versus the Rest of the World

Today Gerald F. Seib wrote an interesting article at the WSJ, Obama Invites GOP to Share Burden of Fixing U.S. In it, he says the following:

Thus, Mr. Obama, after reeling off a veritable litany of proposals focused on how to create jobs (a word that appeared 29 times in the speech), came to the heart of the political matter: Democrats’ stunning loss of a Massachusetts U.S. Senate seat means he tackles this daunting agenda one vote short of the 60 needed to stop Republicans from mounting filibusters to stop his initiatives.

Recovering Markets

At the beginning of a new year it makes sense to look both back and forward. Last year was characterised by an extraordinary recovery on the equity markets in Eastern Europe, most markets have recorded triple digit gains since their respective bottoms. The recovery should, however, be viewed with the dramatic correction in 2008 in mind.

The Myth of Nabucco: Greed, Delusion, and Geopolitics

Inside Beltwayistan, a number of Bushevik oil patch zombies still roam the recession-blasted landscape mindlessly chanting their Caspian mantra, “Happiness is multiple pipelines” – with the caveat that they flow westwards and bypass both Russia and Iran. They’ve now added a new word to their vocabulary, “Nabucco,” and worse, have bitten a number of Obama administration officials and visiting European politicians, who have joined their shuffling ranks.

Ten New Year Questions for Paul Krugman

I have an interview with Paul Krugman in today’s edition of La Vanguardia (in Spanish). Below I reproduce the English original. As will be evident, there are many topics about which Paul and I are far from being in complete agreement. But on one topic we are in complete harmony: the diffficult situation which now faces Spain, the need for internal devaluation, and the threat which continuing inaction on the part of Spain’s current leaders represents for the future of the entire Eurozone.


Edward Hugh: In your NYT article “How Did Economists Get It All So Wrong”, you state what I imagine for many is the obvious, that few economists saw our current crisis coming. The Spanish economist Luis Garicano even made himself famous for a day because he was asked by the Queen of England the very question I would now like to put to you: could you briefly explain to a Spanish public why you think this was?

Paul Krugman: I think that what happened was a combination of two things. First, the academic side of economics fell too much in love with beautiful mathematical models, which created a bias toward assuming perfect markets. (Perfect markets lead to nice math; imperfect markets are a lot messier). Second, the same forces that lead to financial bubbles – prolonged good news tends to silence the skeptics – also applied to economists. Those who rationalized the way things were going gained credibility until the day things fell apart.

Unemployment in Europe: It’s Not Just Spain

The New York Times published an article about Spain’s “soaring” unemployment rate among those aged 15-24. Across Europe and in the US, the unemployment rate for young workers surged in 2009. Labor reform is needed in Spain, which is the overall theme of the NY Times article; but the article confuses slightly the long-run phenomenon […]