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Michael Gerrard

Andrew Sabin Professor of Professional Practice

"The energy system in the U.S. is undergoing its most profound transformation in decades..."

 
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Posted on 5/13/2013

Professor Olati Johnson is following the Prop. 8 case up before SCOTUS, but perhaps not for the reasons you'd think.

 
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Posted on 2/26/2013
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Benjamin L. Liebman

Robert L. Lieff Professor of Law; Director of the Center for Chinese Legal Studies

"The Bo Xilai case has widely been viewed in China as a victory for those pushing for further legal reforms..."

 
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Posted on 12/1/2012
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Alex Raskolnikov

Charles Evans Gerber Professor of Law; Co-Chair, Charles E. Gerber Transactional Studies Program

"We may avoid the fiscal cliff, but the fiscal pain is unavoidable..."

 
5 Comments
On November 28, 2012 at 3:43 PM, Rohan wrote:

What warrant do you have for the claim that we cannot continue to run trillion dollar deficits and that fiscal pain is unavoidable? The US, unlike Greece, has a sovereign currency. A nation with a sovereign currency, virtually no foreign denominated debt, and a floating exchange rate does not face the same bond-vigilante concerns as a nation like Greece. The Greek analogy is completely inapplicable, because the financial constraints of a non-sovereign currency are inapplicable to a sovereign currency. Greece has the financial constraints of California or Massachusetts, not the US, Canada or the UK. The real comparison to look to is Japan. Large debt:gdp ratio, persistantly high deficits, and they are suffering from deflation and have some of the lowest interest rates in the world.

On December 01, 2012 at 2:47 PM, Rohan wrote:

Why do you think we need fiscal pain? A US government debt is default risk-free, like a dollar bill. The difference is the interest rate, which is a policy variable controlled by the central bank. Bonds functions like a savings account at the federal reserve rather than like a private debt, and have value post-1971 only as a reserve-drain operation to enable the CB to hit its target interest rate. That is why QE is not leading to high inflation - it is merely an asset swap, and in fact reduces net financial assets in the private sector by removing interest income from investors and pension funds, etc. But the government could continue QE indefinitely, and then retire the debt once it's held by the CB. Not fiscal pain necessary. Then, to deal with the Japan issue, it could inject non-interest bearing debt (i.e. US Notes) and use them to employ people in direct public employment, non-profits, or in entrepreneurial models like the one proposed here: http://www.levyinstitute.org/files/download.php?file=pn_12_02.pdf&pubid=1508 Japan's problem is that the fiscal deficit is too small to deal with the private sector's desire to save, not that it is too large.

On November 30, 2012 at 11:34 AM, JG HELLER Private Wealth wrote:

Rohan's comment is right in regards to a comparison to Japan. If we do not take action on the rising debit (fiscal pain), then we face a future like Japan...no growth, lost decades not years and no obvious way out. Our currency might be ok, interest rates might stay low, but unemployment also might stay high for years and we will no longer be the engine of growth for the world that we have been in the past.

On January 18, 2013 at 6:34 PM, Jose Amoros wrote:

Dr. Duffy, you seriously need to reconsider this statement "a robust majority of 61 percent opted for statehood." That is not the case. One needs to consider the whole of the plesbicite and why there were abstention in the second part. Those numbers added that way are really a statistical fiction.

On January 30, 2013 at 5:08 PM, Peter Basilevsky wrote:

“The US, unlike Greece, has a sovereign currency. A nation with a sovereign currency, virtually no foreign denominated debt, and a floating exchange rate does not face the same bond-vigilante concerns as a nation like Greece.” The notion that a country can run unlimited deficits in perpetuo verges on the silly. Even before the advent of globalization you have had numerous examples of countries who have tried this, either knowingly or involuntarily, while hoping to avoid disastrous economic consequences. For example, you had the WWI reparation payments triggering Weimar Germany’s hyper-inflation and in more recent memory you had the example of Argentina. In both cases they faced “bond-vigilante concerns” (Argentina now for the second time, cf. NML Capital Ltd., et. al. vs. The Republic of Argentina currently in the Second Cir. Ct. of Appeals). Were we completely self-sufficient and not running a consistent trade deficit there might be some merit to the thought although there are other potential consequences such as misallocation of resources and black markets and you have the Soviet Union as an example of the down side to trying to run a totally closed economy. The first thing that happens is that the currency depreciates which prompts capital flight which typically results in exchange controls (i. e., there goes the floating exchange rate out the window). The fact is that if we want to continue to buy tomatoes from Mexico, cars from Japan, jeans from China and basket ball shoes from Viet Nam and we have to borrow money to pay for them in increasingly worthless currency our creditors will simply refuse to continue lending or, alternatively and more likely, charge much more for our privilege of borrowing from them. Erskine Bowles has recently pointed out that we currently are paying about $250 to $300 billion in interest on our government debt at a time when interest on 10 year notes is hovering around 1.8%, the lowest ever based on the Fed’s efforts to artificially depress rates. Were interest rates simply to revert to their normal historical rates of 4-5% we will be paying $650-$700 billion annually (at current debt levels). One doesn’t need to be a mathematician to see what effect that would have on the disposable federal budget (not counting ripple effects throughout the economy). By the way, with $4 trillion on its balance sheet (and growing) the Fed isn’t necessarily in a position to continue to fund government debt unless you contemplate an inter-governmental Dawes Plan, e.g., simply reneging (“cancelling”) on the debt, in which case, if I was a Mexican tomato farmer I would ask to be paid in gold. As the old Asian proverb goes, there is no such thing as an iron rice bowl or in terms that may be more familiar, a “free lunch”.

Posted on 11/28/2012
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David Pozen

Associate Professor of Law

"It was recently reported that the Obama administration has been working to develop a 'drone-warfare rulebook'..."

 
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Posted on 11/26/2012

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