Topics in International Macroeconomics

Instructor: Yanis Varoufakis

Unique Number: 63735
Day & Time: T 6:00 pm -9:00 pm
Room: SRH 3.355/314

Course description

“The economic health of every country is a proper matter of concern to all its neighbours, near and far.” FDR, 1944, at the opening of the Bretton Woods conference. Since FDR uttered these famous words, the global economy has become integrated to an extent that banking crises, debt crises, trade imbalances, rapid capital flows, currency ‘wars’, etc. can only be understood, and addressed, at a global level.

This course will focus on central macroeconomic issues of a global reach. A list of topics to be presented and discussed, with indicative readings, follows:

Week 1. Can public debt be too low (or too high)?

Reading: Tony Aspromourgos (2013). ‘Keynes, Lerner and Public Debt’, mimeo, University of Sydney

Week 2. Did the Fed cause the 2008 global financial crisis?

Reading: Yanis Varoufakis (2013). ‘United States Monetary Policy in the post-Bretton Woods Era: Did it cause the Crash of 2008?’, mimeo, University of Texas at Austin

Week 3: Inflation targeting versus permanently zero real interest rates

Reading: Tony Aspromourgos (2013). ‘Can (and should) monetary policy pursue a zero real interest rate, permanently?’, mimeo, University of Sydney 

Week 4: Has Western Capitalism fallen into the trap of secular stagnation?

Reading/video: Lawrence Summers IMF presentation, click here for the transcript; Martin Wolf’s FT article; Mario Seccareccia on “Larry Summers, secular stagnation and the crisis of the new consensus model”, click here; and Carmen M. Reinhart and Kenneth S. Rogoff,  December 2013 IMF paper entitled “Financial and Sovereign Debt Crises: Some Lessons Learned and Those Forgotten

Week 5: Debt and Income Dynamics

Reading: Jan Toporowski (2013). ‘Two principles of debt and national income dynamics in a pure credit economy’, mimeo, SOAS, University of London 

Week 6: The Third World Debt Crisis: 1970s and beyond

Reading: Eric Toussaint and Damien Millet (2010). Debt, the IMF and the World Bank, New York: Monthly Review Press; Chapters 2,3,4,5,6,7&9

Week 7: The Dollar’s Extraordinary Privilege

Reading: Barry Eichengreen (2011). Exorbitant Privilege: The rise and fall of the dollar, Oxford UP

Week 8: The macroeconomics of NAFTA

Reading: To be advised 

Week 9: The macroeconomics of ASEAN

Reading: To be advised

Week 10: Inequality and its effects on macroeconomic stability

Reading: James Galbraith (2013). Inequality and instability, Oxford University Press

Week 11: Bitcoin and the dream of apolitical money

Reading: Yanis Varoufakis (2013). ‘Bitcoin and the dangerous fantasy of apolitical money’, mimeo, University of Texas; plus the ECB paper entitled ‘Virtual Currency Schemes

Course assessment

Students will be graded for their presentation (20%), a long essay (40%) and a take home examination (40%).

Important note on Academic Integrity

Students are expected to respect the LBJ School’s standards regarding academic dishonesty. You owe it to yourself, your fellow students, and the institution to maintain the highest standards of integrity and ethical behavior. A discussion of academic integrity, including definitions of plagiarism and unauthorized collaboration, as well as helpful information on citations, note taking, and paraphrasing, can be found at the web page of the:

The University has also established disciplinary procedures and penalty guidelines for academic dishonesty, especially Sec. 11.304 in Appendix C of the Institutional Rules on Student Services and Activities section in UT’s General Information Catalog.

One thought on “Topics in International Macroeconomics

  1. Re: “Week 1. Can public debt be too low (or too high)?” and the accompanying reading:

    “As Lerner said …, Keynes retracted his characterization of Lerner’s ideas as ‘humbug.’ According to Lerner, ‘in reading … [The Economics of Control] later, at leisure, … [Keynes] found the logic less escapable and the resistances more obvious’ … Keynes admitted to being at least a closet Lernerian in a letter to Lerner (September 1944) congratulating him on The Economics of Control. Keynes wrote:

    I have marked with particular satisfaction and profit three pairs of chapters-chap. 20 and 21, chap. 24 and 25 [where Lerner had discussed functional finance], chap. 28 and 29. Here is the kernel of yourself. It is very original and grand stuff. I shall have to try when I get back to hold a seminar for the heads of the Treasury on Functional Finance. It will be very hard going-probably impossible. I shall have to temper its austerity where I can. I think I shall ask them to let me hold a seminar of their sons instead, agreeing beforehand that, if I can convince the boys, they will take it from me that it is so!

    It was not only in this letter that Keynes retracted his initial remarks about Functional Finance. In 1945, when Keynes again visited the United States, he repeated his praise of Lerner at another Federal Reserve Seminar. In this meeting Keynes spoke in glowing terms of Lerner’s contribution and ‘without any provocation, he held forth a panegyric on Functional Finance’ … Later that evening, at a dinner Alvin Hansen had arranged for Keynes, Lerner and Keynes had another exchange which is also worth noting. Lerner approached Keynes and asked: ‘Mr. Keynes, why don’t we forget all this business of fiscal policy, public debt and all those things, and have some printing presses.’ Keynes, after looking around the room to see that no newspaper reporters could hear, replied: ‘It’s the art of statesmanship to tell lies but they must be plausible lies.’”

    David Colander, “Was Keynes a Keynesian or a Lernerian?” Journal of Economic Literature 22.4 (1984): p. 1574.

    In an open letter to Roosevelt (1943) Keynes said “public authority must be called in aid to create additional current incomes through the expenditure of borrowed or printed money.” (see 4th para) at:

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