DEBT ECONOMICS

Department of Economics University of Massachusetts Amherst Econ 397SL: Special Topics | Spring 2021 Updated: February 1, 2021

INSTRUCTOR INFORMATION MEETING TIMES

Aaron M. Medlin, M.A. (He/Him) Monday, Wednesday 2:30 PM - 3:45 PM Gordon Hall 110 Remote via Zoom 418 N. Pleasant St. Amherst, MA 01002-1735 OFFICE HOURS

Email [email protected] After class or by appointment via Zoom. Telephone (574) 532-3075

GOALS, CONTENT, AND METHODS What is the difference between a mere obligation, a sense that one ought to behave in a certain way, or even that one owes something to someone, and a debt, properly speaking? The answer is simple: money. The difference between a debt and an obligation is that a debt can be precisely quantified. This requires money. Not only is it money that makes debt possible: money and debt appear on the scene [historically] at exactly the same time. Some of the very first written documents that have come down to us are Mesopotamian tablets recording credits and debits, rations issued by temples, money owed for rent of temple lands, the value of each precisely specified in grain and silver. Some of the earliest works of moral philosophy, in turn, are reflections on what it means to imagine morality as debt—that is, in terms of money. A history of debt, then, is thus necessarily a history of money—and the easiest way to understand the role that debt has played in human society is simply to follow the forms that money has taken, and the way money has been used, across the centuries—and the arguments that inevitably ensued about what all this means. (Graeber, 2011; p. 21, emphasis added)

This course will not only be about the role of debt in the economy strictly speaking. As emphasized in the passage above by the late David Graeber (1961-2020), a history of debt is necessarily a history of money. Therefore, the practical study of debt is also necessarily a study of money and how it is created and circulates in our modern economy. You will come to learn that without debt, there is no money. As the sociologist Geoffrey Ingham once remarked, “whilst all money is credit, not all credit is money” (2013, p. 128). In this course, we will explore both credit as money, how it facilitates economic activity, the sources of its creation and distribution in the economy by the state and private financial system as well as private firms, and the ways in which excess credit creation can lead to recession and potential financial crises—the Financial Crisis of 2008 being just the most recent example of a long history of debt crises going to back to before the emergence of capitalism as an economic system. I have strived to make the approach to this course interdisciplinary, drawing on literature and methodology from historians, anthropologists, and sociologists as well as economists. To best understand debt in our modern economy, it is also important to understand how we got to the system we have. That means we will need to engage with a fair amount of economic history. In the process, we will encounter various moral and ethical questions that will emerge again and again throughout the course as we move into the more analytical and empirical approaches to debt. The economics of this course will be informed by a combination of orthodox and heterodox economic theory, as well as empirical evidence, which will explore the impact of debt and credit at both the macro and micro level—much of literature from scholars that you have likely not heard of before mainly in the

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heterodox economic traditions (e.g., Marxian, Post Keynesian). These theoretical approaches will rely heavily on balance sheet and sectoral analysis of the economy. I will also introduce you to a more advanced modeling approach than you have likely not encountered in previous courses called dynamic systems modeling which allows us to model stocks (e.g., wealth, debt, etc.) and flows (income, expenditures, credit, etc.). Do not worry, you will not be required to build these models yourself, or do extensive calculations or complex algebra, but you will be introduced to what they are, how they work, and a couple programs (InsightMaker and Minsky) you can use to create them, and, of course, how to analyze them using simulation. This course will also introduce you to several data sources (listed in this document under the section “Data Sources on Debt and System Dynamics Software”) you can use to analyze debt in the economy. Taking a sectoral approach to debt in the economy, we will examine how debt accumulates and when it can become a problem for: (1) the government sector by developing an understanding of currency issuers vs users, the role of taxes and bonds, and issues of debt sustainability; (2) household consumer debt, including mortgages, and its macroeconomic effects, with special focus on understanding the 2008 Financial Crisis and Great Recession, as well as Student loans and their impact on students, families, and the macroeconomy; and (3) corporate debt and its implications for financial stability and employment. Where relevant, we will also examine the role of debt and credit in the current coronavirus pandemic and economic crisis. The course will be structured into the following five modules:

Module 1: The Origin and History of Debt, Credit and Money Module 2: Theoretical Perspectives of Modern Money, Credit, and Crises Module 3: Macroeconomic Analysis of Debt Module 4: The Government Sector Module 5: The Private Sector: Households Module 6: The Private Sector: Non-Financial Businesses

For each module, we will have various short written assignments. These will include different formats such as a personal reflection essays on the readings and videos/films assigned. During the analytical unit of the course, module 3, you will be required to analyze actual data and simple computational models. We will cap the course with term papers for which you will be able to work in groups if desired (more on this in the next section). There will be no exams in this course.

References Greaber, David (2011). Debt: The first 5000 years, Brooklyn, NY: Melville House Publishing. Ingham, Geoffrey (2013). “Revisiting the Credit Theory of Money and Trust.” J. Pixley (ed) (2013), New Perspectives on Emotions in Finance. London: Routledge, 121-139.

EXPECTATIONS, ASSIGNMENTS AND GRADING Participation Preparation, attendance, and participation are required. Preparation and participation may be occasionally assessed by in-class questions or writing assignments that will require reading the material in advance. Participation also includes attendance and engagement in lecture. While the lectures via Zoom will be recorded, if you miss a class or lecture, for any reason, it is your responsibility to reach out to me for access to a recording as it will not be posted in Google Classroom.

Assignments Homework assignments will consist mostly of writing reflections about the readings (e.g., what stuck out to you, and questions you have about the material). I will occasionally ask you to answer specific questions about theme or subject matter of the readings. And you will write two response papers to films I will assign. We will have a couple quantitative assignments involving the construction of data and analysis of that data. Finally, you have at least one assignment working with a computational stock-flow consistent model in which you manipulate parameters and initial conditions to produce various outcomes.

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Term Paper A term paper will be due at the end of the course on May 12. You will pick out one country to study—other than the United States—for an empirical analysis of debt in using the sectoral approach and data sources that will be introduced in Module 3. Students are encouraged to work together in groups with no more than three students to a group. Groups of two are preferred, but we have an uneven number of students in the course. Each student/group should select a different country than everyone else so no two people or groups are researching the same country. The paper should be about three to five pages in length including graphs and tables. My aesthetic preference for these papers is Times New Roman font, font size 11, and single space. Reference and citation style should be American Psychological Association or APA (Click here for examples).

Term Paper Presentation Each student/group will present their research findings so far on the country they have chosen during one of the last two class sessions at the end of the term. The amount of time allotted for each presentation will depend on the number of groups we have.

Grading You will earn a grade based on your participation, writing assignments, presentations, and term paper. The breakdown of the weighting of each of these components will be as follows:

Grade component Weight Participation & attendance 20 % Assignments 40 % Term Paper Presentation 10 % Term Paper 30 % Total 100 %

Grades will be assigned according to the following schedule with no rounding. Please note that your grade depends on a fixed standard of comprehension and expression and not on comparisons to other students.

Cut-offs 93 90 87 83 80 77 73 70 60 - Grade A A- B+ B B- C+ C C- D F

Late Assignments Late assignments and term paper will not be accepted without a University sanctioned excused absence (see https://www.umass.edu/registrar/students/policies-and- practices/class-absence- policy) or an extension granted by me. To obtain an extension on any assignment, you must contact me BEFORE the assignment due date.

ACADEMIC HONESTY The integrity of the academic enterprise of any institution of higher education requires honesty in scholarship and research. Academic honesty is required of all students at the University of Massachusetts Amherst. Academic dishonesty is prohibited in all programs of the University (see https://www.umass.edu/honesty). Academic dishonesty includes but is not limited to: cheating, fabrication, plagiarism, and facilitating dishonesty. Appropriate sanctions may be imposed on any student who has committed an act of academic dishonesty. As the instructor, I will take reasonable steps to address academic misconduct. Any person who has reason to believe that a student has committed academic dishonesty should bring such information to my attention as soon as possible. Students are expected to be familiar with this policy and the commonly accepted standards of academic integrity. Ignorance of such standards is not normally sufficient evidence of lack of intent. The University’s policy on academic honesty will be rigorously enforced, and acts of cheating, plagiarism, or other forms of academic dishonesty may result in a failing grade for the entire course.

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ACCOMMODATION POLICY The University of Massachusetts Amherst is committed to providing an equal educational opportunity for all students. If you have a documented physical, psychological, or learning disability on file with Disability Services (DS), Learning Disabilities Support Services (LDSS), or Psychological Disabilities Services (PDS), you may be eligible for reasonable academic accommodations to help you succeed in this course. If you have a documented disability that requires an accommodation, please notify me within the first two weeks of the semester so that we may make appropriate arrangements. For more information, see here: https://www.umass.edu/disability.

WELCOMING AND RESPECTFUL CLASSROOM As the instructor of this course, I am committed to providing a welcoming, inclusive, respectful, and safe classroom for all participants—virtual or otherwise. Our classroom will promote respect and sensitivity concerning differences of class, religion, politics, parity, sexual orientation, gender, gender variation, or nationality and people affected by racism. Please make a commitment to respect, courtesy, and sensitivity and to work through any problems if they arise. Feel free to let your classmates and me know your preferred mode of address (name, pronoun, etc.). Economics is an intense subject that may involve political and ethical disagreement. The course will emphasize scholarly disagreement and the significant consequences of alternative choices. All views, however, will be respected, even in disagreement. The expectation and the rule are that we will engage in respectful, civil dialog throughout. If you have any questions or concerns, I urge you to contact me.

COMMUNICATION AND COURSE WEBSITE We will not be using Moodle for this course. Instead, we will be using Google Classroom for communication and course resources including reading material. To join the Google virtual classroom, use this invitation link: https://classroom.google.com/c/MjMzNjE1MDc3NzE4?cjc=5bkdzlp. Or, for instructions on how to join through your Google account, click here. Use class code: 272b7yb. Note that you must use your UMass Gmail account in order to enroll. If you attempt to use your personal Gmail account, it will not allow it. For class lectures, we will use Zoom. Used the following to Zoom for lecture on both Mondays and Tuesdays: https://umass-amherst.zoom.us/j/97827862806 or use Meeting ID 978 2786 2806 when using the Zoom phone or desktop app.

REQUIRED TEXTS Electronic excerpts of the required readings will be provided via Google Classroom, so you will not need to purchase any of the following books in order to complete the course. Note: * indicates the book is available as an audiobook on Audible or elsewhere. I find audiobooks a useful way to multitask. Debt: The First 5,000 Years by David Graeber* (free PDF of book is available here) Debtor Nation: The History of America in Red Ink by Louis Hyman (free PDF of each chapter available here with your University login on JSTOR) Macroeconomics by William Mitchell, L. Randall Wray, and Marin Watts Can We Avoid Another Financial Crisis? by Steve Keen A Brief History of Doom by Richard Vague* The Great Debt Transformation by Gregory W. Fuller House of Debt: How They (and You) Caused the Great Recession, and How We Can Prevent It from Happening Again by Atif Mian and Amir Sufi* Indebted: How Families Make College Work at Any Cost by Caitlin Zaloom* Scans and soft copies of additional articles and book chapters will be provided via Google Classroom.

ECON 397SL: DEBT ECONOMICS | 4 DATA SOURCES ON DEBT AND SYSTEM DYNAMICS SOFTWARE Macro data FRED Economic Data: https://fred.stlouisfed.org OECD Data: https://data.oecd.org OECD Stat: https://stats.oecd.org IMF Global Debt Database (GDD): https://www.imf.org/external/datamapper/datasets/GDD Bank of International Settlements (BIS): https://www.bis.org/statistics/index.htm Macrofinance & Macrohistory Lab, Jorda-Schularick-Taylor Macrohistory Database: http://www.macrohistory.net/data A Brief History of Doom by Richard Vague website, historical data from the book: https://bankingcrisis.org Micro data Federal Reserve Board of Governors, Survey of Consumer Finance (SCF): https://www.federalreserve.gov/econres/scfindex.htm Federal Reserve Bank of New York, Center for Microeconomic Data: https://www.newyorkfed.org/microeconomics Systems Dynamics Software Minsky: https://sourceforge.net/projects/minsky InsightMaker: https://insightmaker.com For a list of other software available, see this Wikipedia page: https://en.wikipedia.org/wiki/Comparison_of_system_dynamics_software

COURSE OUTLINE Module 1: The Origin and History of Debt, Credit and Money 1.1 Alternative stories of the origin of money 1.2 Evolution of consumer credit during the 20th century Module 2: Theoretical Perspectives of Modern Money, Credit and Crises 2.1 Chartalist and credit theories of money 2.2 Schools of economic thought 2.3 Theories of capitalism and crisis Module 3: Macroeconomic Analysis of Debt 3.1 Sectoral balances approach 3.2 Data sources of debt 3.3 Dynamic systems modeling with stocks and flows 3.4 Predicting debt crises Module 4: The Government Sector 4.1 Basics of fiscal and monetary institutions and policy 4.2 Fiscal sustainability 4.3 Government debt and economic growth debate Module 5: The Private Sector: Households 5.1 The Great Depression vs the Great Recession: The same underlying crisis? 5.2 The macroeconomic effects of household debt burdens 5.3 The global debt transformation: causes and consequences 5.4 Student debt, racial inequality, and the pandemic 5.5 Policy solutions and reform Module 6: The Private Sector: Non-Financial Firms 6.1 Private equity shenanigans 6.2 The rise of ‘zombie’ companies, and the pandemic

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COURSE CALENDAR

WEEK 1: FEBRUARY 1-4 For Monday: Review of course syllabus and brief introductions Module 1: The Origin and History of Debt, Credit and Money For Wednesday: 1.1 Alternative stories of the origin of money Required reading: Graeber, Debt, Chapter 2 “The Myth of Barter” pp. 21-41 (20 pages) (Audiobook of chapter https://youtu.be/HKjpwGNcdOQ, 53:56) Graeber, Debt, Chapter 3 “Primordial Debts” pp. 43-71 (32 pages) (Audiobook of chapter https://youtu.be/Mghe6JO1OIg, 1:19:36) Graeber, Debt, Chapter 6 “Games of Sex and Death” pp. 127-135 (8 pages) (Audiobook of chapter https://youtu.be/tBcTngvWB_E) Reading questions: (1) Why might the myth of barter be central to the ideology of (neo)classical economics? (2) Why is Graeber equally dismissive of primordial debt theory? What erroneous logic does he point out is at play here? (3) According to credit and state theories of money, as proposed by A. Mitchell Innes, what is money fundamentally? Recommended (further) reading: Mitchell-Innes, Alfred (2004 [1914]). “The Credit Theory of Money.” L. Randall Wray (ed). Credit and State Theories of Money: The Contributions of A. Mitchell Innes. Northampton, MA: Edward Elgar Publishing, Inc. Ballinger, Clint (Oct. 29, 2019). “THE RHETORIC OF GRAEBER’S “MYTH OF BARTER” (& the likely early role of commodity-exchange in credit- & State-money development),” www.clintballinger.wordpress.com. https://clintballinger.wordpress.com/2019/10/29/the-rhetoric- of-graebers-myth-of-barter Graeber, Debt, Chapters 8-12 Zeitlin, Matthew (4 Sep. 2020). “How David Graeber Changed the Way We See Money.” The New Republic. https://newrepublic.com/article/159227/david-graeber-changed-way-see-money

WEEK 2: FEBRUARY 8-10 Note: February 12th is the last day to drop the course with no record. th Monday: 1.2 Evolution of consumer credit during the 20 century Required reading: Hyman, Debtor Nation, Chapter 1 “Making Credit Modern” pp. 11-44 (33 pages) Hyman, Debtor Nation, Chapter 2 “Debt and Recovery” pp. 45-72 (27 pages) Recommended listening: Podcast: Poe, Marshall (Host) (2011). “Louis Hyman, “Debtor Nation: The History of America in Red Ink” (Princeton UP, 2011).” New Books in Economics. New Book Network. [Stitcher] https://www.stitcher.com/show/new-books-in-economics/episode/louis-hyman-debtor-nation-the- history-of-america-in-red-ink-princeton-up-2011-44378932 Wednesday: Postwar consumer credit, and the racial wealth gap. Required readings: Hyman, Debtor Nation, Chapter 5 “Postwar Consumer Credit” pp. 132-145 (13 pages) Watch video: Netflix (17 Apr. 2020). “Explained | Racial Wealth Gap | FULL EPISODE | Netflix.” YouTube. https://youtu.be/Mqrhn8khGLM

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Recommended listening: Podcast: Ezra Klein (Host) (27 May 2018). “Political Power and The Racial Wealth Gap.” Vox Conversations [formerly The Ezra Klein Show]. Vox Media Podcast Network. [Stitcher link:] https://www.stitcher.com/show/vox-conversations/episode/political-power-and-the-racial-wealth- gap-54651022

WEEK 3: FEBRUARY 15-17 Note: Although the 15th is Presidents’ Day, we will still have class. Module 2: Theoretical Perspectives of Modern Money, Credit and Crises Monday: 2.1 Chartalist and credit theories of money Required reading: Tymoigne, Éric (2017). “On the Centrality of Redemption: Linking the State and Credit Theories of Money through a Financial Approach to Money.” Working Paper No. 890, Levy Economics Institute. http://www.levyinstitute.org/pubs/wp_890.pdf *Mitchell, Wray, and Watts, Macroeconomics, Chapter 9 “Introduction to Sovereign Currency: The Government and its Money” pp. 134-146 (12 pages) *Mitchell, Wray, and Watts, Macroeconomics, Chapter 10 “Money and Banking” pp. 147-161 (14 pages) Watch video: Bank of England (12 Mar. 2014). “Money creation in the modern economy - Quarterly Bulletin article.” YouTube. https://youtu.be/CvRAqR2pAgw Wednesday: Overview of the evolution of the banking system, a ‘money view’ how credit expands and contracts, and the ‘quantity theory of disaggregated credit.’ Required reading: Chick, Victoria (1992). “The Evolution of the Banking System and the Theory of Saving, Investment and Interest.” Philip Arestis and Shiela C. Dow (ed). Money, Method and Keynes. New York, NY: St. Martin’s Press Inc. Mehrling, Perry (2020). “Payment vs. Funding: The Law of Reflux for Today.” Working Paper No. 113, Institute for New Economic Thinking. https://www.ineteconomics.org/uploads/papers/WP_113-Mehrling-Payment-vs-Funding.pdf Werner, Richard A. (1997). “Towards a New Monetary Paradigm: A Quantity Theorem of Disaggregated Credit, with Evidence from Japan.” Kredit und Kapital, 30(2), 276-309. https://eprints.soton.ac.uk/36569/1/KK_97_Disaggregated_Credit.pdf Recommended reading: Wray, L. Randall (1999), “The Origins of Money and the Development of the Modern Financial System.” Working Paper No. 86, Levy Economics Institute. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=150948 Kelton (Bell), Stephanie (1998). “The Hierarchy of Money,” Working Paper No. 231, Levy Economics Institute. http://www.levyinstitute.org/pubs/wp/231.pdf Mehrling, Perry (2012). “The Inherent Hierarchy of Money.” https://ieor.columbia.edu/files/seasdepts/industrial-engineering-operations-research/pdf- files/Mehrling_P_FESeminar_Sp12-02.pdf Carpenter, Seth, and Selva Demiralp (2010). “Money, Reserves, and the Transmission of Monetary Policy: Does the Money Multiplier Exist?” Federal Reserve Board of Governors, Washington, D.C. https://www.federalreserve.gov/pubs/feds/2010/201041/201041pap.pdf McLeay, Michael, Amar Radia, and Ryland Thomas (2014). Money creation in the modern economy. Quarterly Bulletin 2014 Q1, Bank of England. https://www.bankofengland.co.uk/- /media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern- economy.pdf?la=en&hash=9A8788FD44A62D8BB927123544205CE476E01654

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Nichols, Dorothy M., and Anne Marie L. Gonczy (1992 [1961]). Modern Money Mechanics. Federal Reserve Bank of Chicago. https://upload.wikimedia.org/wikipedia/commons/4/4a/Modern_Money_Mechanics.pdf Bennet, Paul, and Stavros Peristiani (2002). “Are Reserve Requirements Still Binding?” Economic Policy Review, 8(1), Federal Reserve Bank of New York. https://www.newyorkfed.org/research/epr/02v08n1/0205benn/0205benn.html Mehrling, Perry (2000). “Modern Money: Fiat or Credit?” Journal of Post Keynesian Economics, 22(3), 397-406. https://www.jstor.org/stable/4538686?seq=1 Wray, L. Randall. “Seigniorage or Sovereignty?” http://k.web.umkc.edu/keltons/Papers/501/Seigniorage%20or%20Sovereignty.pdf Mehrling, Perry (2012). “A Money View of Credit and Debt.” https://www.cigionline.org/sites/default/files/inet2012mehrling_amoneyviewofcreditanddebt.pdf Awrey, Dan, and Katharina Pistor. “An Overview of the Legal Theory of Finance.” https://math.umn.edu/sites/math.umn.edu/files/paper- an_overview_of_the_legal_theory_of_finance.pdf Recommended listening: Podcast: Kofinas, Demetri (Host) (2020). “The Code of Capital: Markets, Big Tech, & Blockchain | Katharina Pistor.” Hidden Forces. https://www.patreon.com/hiddenforces. [Stitcher] https://www.stitcher.com/show/hidden-forces/episode/the-code-of-capital-markets-big-tech- blockchain-katharina-pistor-80569255 Podcast: Weisenthal, Joe, and Tracy Alloway (Hosts) (26 Jan. 2020). “Perry Mehrling Explains Why "The Money View" Is Key To Understanding Financial Markets.” Odd Lots. Bloomberg. [Stitcher] https://www.stitcher.com/show/odd-lots/episode/perry-mehrling-explains-why-the- money-view-is-key-to-understanding-financial-markets-66873946

WEEK 4: FEBRUARY 22-24 Note: “Wellbeing Wednesday” Observed, no class on the 24th.

Monday: 2.2 Schools of economic thought and 2.3 Theories of capitalism and crisis Required reading: Mitchell, Wray, and Watts, Macroeconomics, Chapter 29 “Modern Schools of Economic Thought” pp. 469-486 (17 pages) Mitchell, Wray, and Watts, Macroeconomics, Chapter 26 “Stabilising The Unstable Economy” pp. 419-429 (10 pages) Mitchell, Wray, and Watts, Macroeconomics, Chapter 32 “Macroeconomics in the Light of the Global Financial Crisis” pp. 535-550 (15 pages)

Watch film: Boom Bust Boom (2016) at https://tubitv.com/movies/387156/boom-bust-boom Recommended listening: Podcast: Weldon, Duncan (Host) (30 Mar. 2014), “Why Minsky Matters.” Analysis. BBC Radio 4. https://lnns.co/wVu5qm8FcT7 Recommended reading: Minsky, Hyman P. (1992). “The Financial Instability Hypothesis.” Working Paper No. 74, Levy Economics Institute. http://www.levyinstitute.org/pubs/wp74.pdf Wray, L. Randall (2016). “An Overview of Minsky’s Main Contributions.” Why Minsky Matters. Princeton, NJ: Princeton University Press. “Why Economists Failed to Predict the Financial Crisis” (13 May 2009). Knowledge@Wharton. The Wharton School, University of Pennsylvania. https://knowledge.wharton.upenn.edu/article/why- economists-failed-to-predict-the-financial-crisis

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WEEK 5: MARCH 1-3 Note: Monday the 1st we follow a Wednesday schedule. This does not affect us, but keep in mind for your other classes. Module 3: Macroeconomic Analysis of Debt Monday: 3.1 Sectoral balances approach Required reading: Mitchell, Wray, and Watts, Macroeconomics, Chapter 4 “The System of National Income and Product Accounts” pp. 50-65 (15 pages) Mitchell, Wray, and Watts, Macroeconomics, Chapter 6 “Sectoral Accounting and the Flow of Funds” pp. 83-103 (20 pages) Wednesday: 3.2 Data sources of debt and 3.3 Dynamic systems modeling with stocks and flows Required reading: Godley, Wynne, and Marc Lavoie (2006), [Chapter 2] “Balance Sheets, Transaction Matrices and the Monetary Circuit.” Monetary Economics: An Integrated Approach to Credit, Money, Income, Production and Wealth (2nd ed.). New York, NY: Palgrave Macmillan. Aronson, Daniel, and Daniel Angelakis (1999). “Step-by-Step Stocks and Flows: Improving the Rigor of Your Thinking.” The Systems Thinker. https://thesystemsthinker.com/wp- content/uploads/pdfs/100402pk.pdf Kim, Daniel H. (1999). “Introduction to Systems Thinking.” The Systems Thinker. https://thesystemsthinker.com/wp-content/uploads/2016/03/Introduction-to-Systems-Thinking- IMS013Epk.pdf Mitchell, Wray, and Watts, Macroeconomics, Chapter 7 “Methods, Tools and Techniques” pp. 104- 117 (13 pages) Recommended reading: Schlefer, Jonathan (10 Sep. 2013). “Embracing Wynne Godley, an Economist Who Modeled the Crisis.” The New York Times. https://www.nytimes.com/2013/09/11/business/economy/economists-embracing-ideas-of-wynne- godley-late-colleague-who-predicted-recession.html

WEEK 6: MARCH 8-10 Monday: 3.4 Predicting debt crises Required reading: Keen, Can we avoid another financial crisis? Chapter 1 “From Triumph to Crisis in Economics” pp. 1-24 (24 pages) Keen, Can we avoid another financial crisis? Chapter 2 “Microeconomics, Macroeconomics and Complexity” pp. 25-48 (23 pages) Keen, Can we avoid another financial crisis? Chapter 3 “The Lull and the Storm” pp. 49-73 (24 pages) Keen, Can we avoid another financial crisis? Chapter 4 “The Smoking Gun of Credit” pp. 74-103 (29 pages) Wednesday: Econometric analysis of debt and crises.

Required reading: Schularick, Moritz, and Alan M. Taylor (2012), “Credit Booms Gon Bust: Monetary Policy, Leverage Cycles, and Financial Crises, 1870-2008.” Working Paper 15512, National Bureau of Economic Research. https://www.nber.org/system/files/working_papers/w15512/w15512.pdf (black&white version) or https://economics.ucdavis.edu/people/amtaylor/files/w15512.pdf (color)

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Medlin, Aaron M. (2019). “Money, Credit, and Financial Crises by International Monetary Regime: An Extension of Schularick and Taylor.”

WEEK 7: MARCH 15-17 Module 4: The Government Sector Monday: 4.1 Basics of fiscal and monetary institutions and policy and 4.2 Fiscal sustainability Required reading: Mitchell, Wray, and Watts, Macroeconomics, Chapter 20 “Introduction to Monetary and Fiscal Policy Operations” pp. 314-329 (15 pages) Mitchell, Wray, and Watts, Macroeconomics, Chapter 21 “Fiscal Policy in Sovereign Nations” pp. 332-347 (15 pages) Mitchell, Wray, and Watts, Macroeconomics, Chapter 22 “Fiscal Space and Fiscal Sustainability” pp. 349-359 (10 pages) Mitchell, Wray, and Watts, Macroeconomics, Chapter 23 “Monetary Policy in Sovereign Nations” pp. 360-373 (12 pages) Mbaye, Samba, Marialuz M. Badia, and Kyungla Chae (2018). “Bailing Out the People? When Private Debt Becomes Public.” IMF Working Paper, WP/18/141, International Monetary Fund. https://www.imf.org/en/Publications/WP/Issues/2018/06/21/Bailing-Out-the-People-When- Private-Debt-Becomes-Public-45904 Wednesday: 4.3 Government debt and economic growth debate Required reading: Reinhart, Carmen M., and Kenneth S. Rogoff (2010). "Growth in a Time of Debt." American Economic Review, 100(2), 573-578. https://scholar.harvard.edu/files/rogoff/files/growth_in_time_debt_aer.pdf Herndon, Thomas, Michael Ash, and Robert Pollin (2013). “Does high public debt consistently stifle economic growth? A critique of Reinhart and Rogoff.” Cambridge Journal of Economics, 38(2), 257–279. https://umassmed.edu/globalassets/quantitative-health-sciences/files/camb.-j.-econ.- 2013-herndon-cje-bet075.pdf Cassidy, John (26 Apr. 2013). “The Reinhart and Rogoff Controversy: A Summing Up.” The New Yorker. https://www.newyorker.com/news/john-cassidy/the-reinhart-and-rogoff-controversy-a- summing-up Watch video: Colbert, Stephen (Host) (4 Apr. 2013). “Austerity’s Spreadsheet Error” [Video]. The Colbert Report, Comedy Central. https://www.cc.com/video/dcyvro/the-colbert-report-austerity-s-spreadsheet- error Colbert, Stephen (Host) (23 Apr. 2013). “Austerity’s Spreadsheet Error - Thomas Herndon” [Video]. The Colbert Report, Comedy Central. https://www.cc.com/video/kbgnf0/the-colbert-report- austerity-s-spreadsheet-error-thomas-herndon openDemocracy (14 Dec. 2017). “The man who debunked austerity | Interview with Thomas Herndon” [Video]. YouTube. https://www.youtube.com/watch?v=CAcUvXjM14c Recommended reading: Reinhart, Carmen, and Kenneth Rogoff (2013). “Response to Herndon, Ash and Pollin.” https://scholar.harvard.edu/files/rogoff/files/response_to_herndon_ash_and_pollin.pdf Pollin, Robert, and Michael Ash (29 Apr. 2013). “Debt and Growth: A Response to Reinhart and Rogoff.” The New York Times. https://www.nytimes.com/2013/04/30/opinion/debt-and-growth-a- response-to-reinhart-and-rogoff.html Ash, Michael, Deepankar Basu, and Arindrajit Dube (2020 [2017]). “Public Debt and Growth: An Assessment of Key Findings on Causality and Thresholds.” Working Paper Series No. 422,

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Political Economy Research Institute. https://www.peri.umass.edu/publication/item/980-public- debt-and-growth-an-assessment-of-key-findings-on-causality-and-thresholds Kuttner, Robert, Joseph E. Stiglitz, James K. Galbraith, Heather Boushey, Josh Bevons, and Gerald Epstein (6 Apr. 2020). “How the Corona Crisis Liberated Massive Public Spending: A Prospect Roundtable.” The American Prospect. https://prospect.org/economy/corona-crisis-liberated- massive-public-deficit-spending

WEEK 8: MARCH 22-24 Module 5: The Private Sector: Households Monday: 5.1 The Great Depression vs the Great Recession: the same crisis Required reading: Vague, A Brief History of Doom, Chapter 1 “A Jazz Age Real Estate Crisis: The Great Depression” pp. 17-45 (28 pages) Vague, A Brief History of Doom, Chapter 6 “2008 Global Mortgage and Derivatives Crisis” pp. 162- 189 (27 pages) Required watching: Inside Job (2010) at https://watchdocumentaries.com/inside-job or https://vimeo.com/20536543 The Big Short (2015) Wednesday: Where did the money come from? Required reading: Shin, Hyun Song (20 Dec. 2011). “Global savings glut or global banking glut?” VoxEU CEPR. https://voxeu.org/article/global-savings-glut-or-global-banking-glut McCauley, Robert (2018). “The 2008 crisis: transpacific or transatlantic?” BIS Quarterly Review, December 2018. Bank of International Settlements. https://www.bis.org/publ/qtrpdf/r_qt1812f.pdf

Watch video: Bank of International Settlements (16 Dec. 2018). “The 2008 crisis: transpacific or transatlantic?” YouTube. https://youtu.be/4l_jkHQjcZc

WEEK 9: MARCH 29-31 Note: March 29th is last day to drop the course with ‘W’ or to select ‘Pass/Fail’ on Spire. Monday: 5.2 The macroeconomic effects of household debt burdens Required reading: Mian and Sufi, House of Debt, Chapter 2 “Debt and Destruction” pp. 17-30 (13 pages) Mian and Sufi, House of Debt, Chapter 3 “Cutting Back” pp. 31-45 (14 pages) Mian and Sufi, House of Debt, Chapter 4 “Levered Losses: The Theory” pp. 46-59 (13 pages) Wednesday: Private debt and inequality. Required reading: Pollin, Robert (1990). Deeper in Debt: The Changing Financial Conditions of U.S. Households. Economic Policy Institute. https://files.epi.org/page/-/old/studies/deeper-1990.pdf Coibion, Olivier, Yuriy Gorodnichenko, Marianna Kudlyak, and John Mondragon (29 Jan. 2014). “Greater inequality and household borrowing? New evidence from household data.” VoxEU CEPR. https://voxeu.org/article/inequality-and-household-debt-new-evidence Fasianos, Apostolos, Hamid Raza, and Stephen Kinsella (2016). “Exploring the link between household debt and income inequality: an asymmetric approach.” Applied Economics Letters, 24(6), 404-409. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2786891

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Alina Kristin Bartscher, Moritz Kuhn, and Moritz Schularick (18 May 2020). “Inequality and US household debt: Modigliani meets Minsky.” VoxEU CEPR. https://voxeu.org/article/inequality- and-us-household-debt-modigliani-meets-minsky

WEEK 10: APRIL 5-7 Monday: 5.3 The global debt transformation: causes and consequences Required readings: Fuller, The Great Debt Transformation, Chapter 1 “Introduction” pp. 1-24 (24 pages) Fuller, The Great Debt Transformation, Chapter 2 “Consequences and Choices” pp. 25-52 (27 pages) Fuller, Gregory W. (2015). “Who's Borrowing? Credit Encouragement vs. Credit Mitigation in National Financial Systems.” Politics and Society, 43(2), 241-268. Wednesday: 5.5 Policy solutions and reform Required readings: Vague, A Brief History of Doom, Conclusion: “The Crisis Next Time—and Policy Solutions” pp. 190-196 (6 pages) Vague, Richard (11 Sep. 2020). “It’s Time for a Debt ‘Jubilee.’” Institute for New Economic Thinking. https://www.ineteconomics.org/perspectives/blog/its-time-for-a-debt-jubilee Mian and Sufi, House of Debt, Chapter 11 “Monetary and Fiscal Policy” pp. 152-166 (14 pages) Mian and Sufi, House of Debt, Chapter 12 “Sharing” pp. 167-187 (20 pages) Fuller, The Great Debt Transformation, Chapter 6 “Transformation and Policy Responses” pp. 221- 233 (12 pages) Keen, Can we avoid another financial crisis?, Chapter 6 “A Cynic’s Conclusion” pp. 115-129 (14 pages) Keen, Steve (1 Jan. 2012). “The Debtwatch Manifesto.” Steve Keen’s Debtwatch. http://www.debtdeflation.com/blogs/manifesto Watch video: (Host) (16 Jul. 2020). “Steve Keen — We Need A Private Debt Jubilee.” The Interview, Real Visions. https://www.realvision.com/shows/the-interview/videos/steve-keen-we-need-a-private- debt-jubilee Recommended listening: Podcast: Harrison, Ed (Host) (16 Jul. 2020). “Bonus Episode - The Interview - Steve Keen — We Need a Private Debt Jubilee.” Real Vision: Finance, Business & The Global Economy, Real Vision. [Stitcher] https://www.stitcher.com/show/real-vision-presents/episode/bonus-episode-the- interview-steve-keen-we-need-a-private-debt-jubilee-76232536 Podcast: Dobbie, Phil, and Steve Keen (Hosts) (7 May 2020). “A debt jubilee – the only real answer?” www.patreon.com/profstevekeen.com. https://www.patreon.com/posts/debt-jubilee- 36847036

WEEK 11: APRIL 12-14 Note: “Wellbeing Wednesday” will be observed on 14th, no class. Monday: 5.4 Student debt, racial inequality, and the pandemic Required reading: Zaloom, Indebted, Chapter 2 “Best-laid Plans” pp. 30-66 (33 pages) Zaloom, Indebted, Chapter 3 “The Model Family” pp. 67-94 (27 pages) Zaloom, Indebted, Chapter 4 “Enmeshed Autonomy” pp. 95-121 (26 pages) Recommended listening:

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Podcast: Hayes, Chris (Host) (27 Aug. 2019). “College at Any Cost with Caitlin Zaloom” [Audio podcast]. Why is this happening? MSNBC. [Stitcher] https://www.stitcher.com/show/why-is-this- happening-with-chris-hayes/episode/college-at-any-cost-with-caitlin-zaloom-200152351

WEEK 12: APRIL 19-20 Note: Although the 19th is Patriot’s Day, we will still have class. Tuesday the 20th, we will follow a Wednesday schedule. So, we will have class Monday, and Tuesday (to make up for no class on the 14th), and Wednesday. Monday: The student debt burden, and racial inequality. Watch film: Ivory Tower (2014) Required listening: Podcast: Yglesias, Matthew (Host) (15 Oct. 2019). “Understanding the student debt crisis” [Audio podcast]. The Weeds. Vox Media Podcast Network. [Stitcher] https://www.stitcher.com/show/voxs-the-weeds/episode/understanding-the-student-debt-crisis- 64615206 Watch video (or read the article): Johnson Hess, Abigail (12 Jun. 2020). “How student debt became a $1.6 trillion problem” [Video]. CNBC. https://www.cnbc.com/2020/06/12/how-student-debt-became-a-1point6-trillion- crisis.html “How coronavirus changed college for 14 million students” [Video] (26 Mar. 2020). CNBC. https://www.cnbc.com/video/2020/03/26/how-coronavirus-changed-college-for-14-million- students.html Recommended reading: Bozick, Robert, and Angela Estacion (2014). “Do student loans delay marriage? Debt repayment and family formation in young adulthood.” Demographic Research, 30(69), 1865-1891. https://www.demographic-research.org/volumes/vol30/69/30-69.pdf Mezza, Alvaro, Daniel Ringo, Shane Sherlund, and Kamila Sommer (2020). “Student Loans and Homeownership.” Journal of Labor Economics, 38(1), 215-260. https://www.journals.uchicago.edu/doi/pdf/10.1086/704609 Woluchem, Maia, and Tax George (17 July 2014). “Is student debt hindering homeownership?” Urban Institute. https://www.urban.org/urban-wire/student-debt-hindering-homeownership Ambrose, Brent W., Larry Cordell, and Shuwei Ma (2015). “The Impact of Student Loan Debt on Small Business Formation.” Working Paper No. 15-26. Federal Reserve Bank of Philadelphia. https://www.philadelphiafed.org/-/media/frbp/assets/working-papers/2015/wp15-26.pdf?la=en Mishory, Jen, Mark Huelsman, and Suzanne Kahn (9 Sep. 2019). “How Student Debt and the Racial Wealth Gap Reinforce Each Other.” The Century Foundation. https://tcf.org/content/report/bridging-progressive-policy-debates-student-debt-racial-wealth-gap- reinforce/?agreed=1 Tuesday: Proposals and solutions to address student debt. Required reading: Gunn, Dwyer (Jul. 2019). “Cancellation of Student Loans Led to a General Deleveraging.” The Digest, No. 7, July 2019. National Bureau of Economic Research. https://www.nber.org/digest/jul19/cancellation-student-loans-led-general-deleveraging Arnold, Chris (25 Nov. 2019). “Forgiving Student Debt Would Boost Economy, Economists Say.” NPR. https://www.npr.org/2019/11/25/782070151/forgiving-student-debt-would-boost-economy Bloomberg News (27 Jun. 2019). “Here’s the argument for erasing student.” Finance & Commerce. https://finance-commerce.com/2019/06/heres-the-argument-for-erasing-student-debt

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Hiltzik, Michael (2 Dec. 2020). “Canceling student debt should be a slam dunk. Here’s why.” Los Angeles Times. https://www.latimes.com/business/story/2020-12-02/canceling-student-debt-a- slam-dunk Friedman, Zack (23 Jan. 2021). “Why Do Some People Oppose Student Loan Cancellation?” Forbes. https://www.forbes.com/sites/zackfriedman/2021/01/23/why-do-some-people-oppose-student- loan-cancellation/?sh=747d27f25b2c Jabbari, Jason, Olga Kondratjeva, Mathieu Despard, and Michal Grinstein-Weiss (5 Aug. 2020). “Low-income households falling further behind on student debt due to COVID-19.” The Brookings Institute. https://www.brookings.edu/blog/up-front/2020/08/05/low-income- households-falling-further-behind-on-student-debt-due-to-covid-19

Recommended reading: Sullivan, Laura, Tatjana Meschede, Lars Dietrich, Thomas Shapiro, Mark Huelsman, and Tamara Draut (2015), “Less Debt, More Equity: Lowering Student Debt While Closing the Black-White Wealth Gap,” Demos IASP. https://www.demos.org/research/less-debt-more-equity-lowering- student-debt-while-closing-black-white-wealth-gap DiMaggio, Marco, Ankit Kalda, and Vincent Yao (2019). “Second Chance: Life Without Student Debt.” Working Paper 25810. National Bureau of Economic Research. https://www.nber.org/system/files/working_papers/w25810/w25810.pdf Hamilton, Darrick, and Naomi Zewde (24 Jun. 2020). “The coronavirus recession is an opportunity to cancel all U.S. student loan debt.” Washington Center for Equitable Growth. https://equitablegrowth.org/the-coronavirus-recession-is-an-opportunity-to-cancel-all-u-s-student- loan-debt Fullwiler, Scott, Stephanie Kelton, Catherine Ruetschlin, and Marshall Steinbaum (2018). “The Macroeconomic Effects of Student Debt Cancellation.” Research Project Report, February 2018. Levy Economics Institute. http://www.levyinstitute.org/pubs/rpr_2_6.pdf Wednesday: Free day cushion.

WEEK 13: APRIL 26-28 Module 6: The Private Sector: Non-Financial Businesses Monday: 6.1 The rise of ‘zombie’ companies, and the pandemic Required reading: Banerjee, Ryan, and Boris Hofmann (2018). “The rise of zombie firms: causes and consequences.” BIS Quarterly Review, September 2018. Bank of International Settlements. https://www.bis.org/publ/qtrpdf/r_qt1809g.pdf Rodriguez Valladares, Mayra (30 Jun 2019). “Highly Leveraged Zombie Companies Threaten the Global Economy.” Forbes. https://www.forbes.com/sites/mayrarodriguezvalladares/2019/06/30/highly-leveraged-zombie- companies-threaten-the-global-economy/?sh=7b1e1f764c39 Cox, Jeff (20 May 2020). “Highly indebted ‘zombie’ companies control more than 2 million U.S. jobs.” CNBC. https://www.cnbc.com/2020/05/20/highly-indebted-zombie-companies-control- more-than-2-million-us-jobs.html Gagnon, Joseph E. (22 Oct. 2020). “Who’s afraid of zombie firms?” Peterson Institute for International Economics. https://www.piie.com/blogs/realtime-economic-issues-watch/whos- afraid-zombie-firms Òscar, Jordà, Martin Kornejew, Moritz Schularick, and Alan M. Taylor (2020). "Zombies at Large? Corporate Debt Overhang and the Macroeconomy." Working Paper 2020-36, Federal Reserve Bank of San Francisco. https://doi.org/10.24148/wp2020-36

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Watch video: Bank of International Settlements (23 Sep. 2018). “The rise of zombie firms: causes and consequences.” YouTube. https://youtu.be/6gwcr3kWczg Recommended reading: Lazonick, William (September 2014). “Profits Without Prosperity.” Harvard Business Review. https://hbr.org/2014/09/profits-without-prosperity Wednesday: 6.2 Private equity shenanigans Required reading: Appelbaum, Eileen, and Rosemary Batt (26 Oct. 2018). “Private Equity Pillage: Grocery Stores and Workers At Risk.” Center for Economic and Policy Research. https://cepr.shorthandstories.com/private-equity-pillage/index.html#group-reform-aIUuVk8LnI Stewart, Emily (6 Jan. 2020). “What is private equity, and why is it killing everything you love?” Vox. https://www.vox.com/the-goods/2020/1/6/21024740/private-equity-taylor-swift-toys-r-us- elizabeth-warren [In place of this reading, you can listen to the recommended podcast below which provides the same information.] Appelbaum, Eileen, Andrew Park, and Rosemary Batt (7 May 2020). “How Private Equity Firms Will Profit From COVID-19.” The American Prospect. https://prospect.org/coronavirus/private- equity-firms-profit-covid-19-j-crew Recommended listening: Podcast: Yglesias (Host) (13 Feb. 2020). “Private equity, explained” [Audio podcast]. The Weeds. Vox Media Podcast Network. https://www.stitcher.com/show/voxs-the-weeds/episode/private- equity-explained-67335031

WEEK 14: MAY 3 Note: Last day of classes May 4 Monday: Free day cushion.

WEEK 15: MAY 8-12 Note: Final exams week. Since we have no final exam, work on your term papers. Remember the due date is May 12 at 11:59 PM EST. Final grades will be posted no later than May 17.

Copyright © 2021 by Aaron M. Medlin. All rights reserved. Subject to change, as necessary.

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