"Deficit Hysteria Redux? Why We Should Stop Worrying About U.S. Government Deficits"

This brief by Yeva Nersisyan and Senior Scholar L. Randall Wray argues that deficits do not burden future generations with debt, nor do they crowd out private spending. The authors base their conclusions on the premise that a sovereign nation with its own currency cannot become insolvent, and that government financing is unlike that of a household or firm. Moreover, they observe that automatic stabilizers, not government bailouts and the stimulus package, have prevented the U.S. economic contraction from devolving into another Great Depression. The authors dispense with unsubstantiated concerns about deficits and debts, noting that they mask the real issue: the unwillingness of deficit hawks to allow government to work for the good of the people.

"The Global Financial Crisis and the Shift to Shadow Banking"

While most economists agree that the world is facing the worst economic crisis since the Great Depression, there is little agreement as to what caused it. Some have argued that the financial instability we are witnessing is due to irrational exuberance of market participants, fraud, greed, too much regulation, et cetera. However, some Post Keynesian economists following Hyman P. Minsky have argued that this is a systemic problem, a result of internal market processes that allowed fragility to build over time. In this paper we focus on the shift to the "shadow banking system" and the creation of what Minsky called the money manager phase of capitalism. In this system, rapid growth of leverage and financial layering allowed the financial sector to claim an ever-rising proportion of national income—what is sometimes called "financialization"—as the financial system evolved from hedge to speculative and, finally, to a Ponzi scheme. The policy response to the financial crisis in the United States and elsewhere has largely been an attempt to rescue money manager capitalism. Moreover, in the case of the United States. the bailout policy has contributed to further concentration of the financial sector, increasing dangers. We believe that the policies directed at saving the system are doomed to fail—and that alternative policies should be adopted. The effective solution should come in the way of downsizing the financial sector by two-thirds or more, and effecting fundamental modifications.Institutional Investors; Financial Crisis; Financialization; Money Managers; Financial Concentration; Shadow Banking; Subprime Mortgages; Securitized Mortgages

"Does Excessive Sovereign Debt Really Hurt Growth? A Critique of This Time Is Different, by Reinhart and Rogoff"

The worst global downturn since the Great Depression has caused ballooning budget deficits in most nations, as tax revenues collapse and governments bail out financial institutions and attempt countercyclical fiscal policy. With notable exceptions, most economists accept the desirability of expansion of deficits over the short term but fear possible long-term effects. There are a number of theoretical arguments that lead to the conclusion that higher government debt ratios might depress growth. There are other arguments related to more immediate effects of debt on inflation and national solvency. Research conducted by Carmen Reinhart and Kenneth Rogoff is frequently cited to demonstrate the negative impacts of public debt on economic growth and financial stability. In this paper we critically examine their work. We distinguish between a nation that operates with its own floating exchange rate and nonconvertible (sovereign) currency, and a nation that does not. We argue that Reinhart and Rogoff’s results are not relevant to the case of the United States.Government Debt; Government Deficit; Sovereign Default; Reinhart and Rogoff; Economic Growth; Inflation; Modern Money

"The Trouble with Pensions: Toward an Alternative Public Policy to Support Retirement"

Pension funds have taken a big hit during the current financial crisis, with losses in the trillions of dollars. In addition, both private and public pensions are experiencing significant funding shortfalls, as is the government-run Pension Benefit Guaranty Corporation, which insures the defined-benefit pension plans of private American companies. Yeva Nersisyan and Senior Scholar L. Randall Wray argue that the employment-based pension system is highly problematic, since the strategy for managing pension funds leads to excessive cost and risk in an effort to achieve above-average returns. The average fund manager, however, will only achieve the risk-free return. The authors therefore advocate expanding Social Security and encouraging private and public pensions to invest only in safe (risk-free) Treasury bonds--which, on average, will beat the net returns on risky assets.

The Dynamics of Charges Induced by a Charged Particle Traversing a Dielectric Slab

We studied the dynamics of surfacea and wake charges induced by a charged particle traversing a dielectric slab. It is shown that after the crossing of the slab first boundary, the induced on the slab surface charge (image charge) is transformed into the wake charge, which overflows to the second boundary when the particle crosses it. It is also shown, that the polarization of the slab is of an oscillatory nature, and the net induced charge in a slab remains zero at all stages of the motion.Comment: 12 pages, 1 figur

Spectrum of surface-mode contributions to the excitation probability for electron beam interacting with sharp-edged dielectric wedges

The interaction of a nonrelativistic charged particle beam, travelling parallel to the surface of a sharp-edged dielectric wedge is analyzed. The general expressions for excitation probability are obtained for a beam moving along the direction of a symmetry axis, either outside or inside the dielectric wedge. The dielectric function of the medium is assumed to be isotropic, and numerical results are given for the materials of experimental interest.Comment: LaTeX 2.09, 15 pages, 10 figure

A number-conserving linear response study of low-velocity ion stopping in a collisional magnetized classical plasma

The results of a theoretical investigation on the low-velocity stopping power of the ions moving in a magnetized collisional plasma are presented. The stopping power for an ion is calculated employing linear response theory using the dielectric function approach. The collisions, which leads to a damping of the excitations in the plasma, is taken into account through a number-conserving relaxation time approximation in the linear response function. In order to highlight the effects of collisions and magnetic field we present a comparison of our analytical and numerical results obtained for a nonzero damping or magnetic field with those for a vanishing damping or magnetic field. It is shown that the collisions remove the anomalous friction obtained previously [Nersisyan et al., Phys. Rev. E 61, 7022 (2000)] for the collisionless magnetized plasmas at low ion velocities. One of major objectives of this study is to compare and contrast our theoretical results with those obtained through a novel diffusion formulation based on Dufty-Berkovsky relation evaluated in magnetized one-component plasma models framed on target ions and electrons.Comment: Submitted to Phys. Rev. E, 17 pages, 4 figure