Oligarchy is a Symptom, Not the Cause

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September 28, 2026 — The American political system is broken.  We should ask how it got that way and should hope that the answer could contain a clue as to how it might get back on track.

Of course, many factors are at play.   The long list includes things that cry out for reform, like gerrymandering of Congressional districts.  But most will not bear the weight of being identified as a single fundamental exogenous cause of all the others, nor explain why this has happened now, in the early decades of the 21st century. read more

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Undervalued Asian currencies

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August 17 – Observers of international monetary economics have shifted attention back to the exchange rates of Asian currencies.  The concern is that China’s yuan, Japan’s yen and Korea’s won are undervalued.  All three countries run trade and current account surpluses, at a time when the US is running corresponding deficits.  But given the fundamentals that keep US interest rates higher than the three Asians’, foreign exchange intervention is unlikely to be helpful.

  1. Three Asian currencies

Brad Setser has recently argued that, “The world should not ignore China’s undervalued currency”, while Gopinath, Gourinchas and Rey have responded that the US-China exchange rate is not the root cause of current account imbalances and does not warrant action by other countries.  Should Beijing be internationally pressured to push its yuan upwards, as Donald Trump has long argued?  (The People’s Bank of China used to intervene in the foreign exchange market to impede an appreciation. It stopped doing that in 2014, and started intervening to impede depreciation.) read more

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Recalling a Cold War adventure in Portugal

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July 24, 2026 —  Fifty years ago this month, I was one of a team of five MIT graduate students who were in Lisbon working for the Central Bank of Portugal.  Paul Krugman, another member of that  team  has reminisced, on the occasion of the semicentennial of the 1976 mission. I will contribute my own reflections on that summer in light of where we are today, geopolitically.

  1. Portugal in 1976

Two years before, Portugal had ended a 48-year military dictatorship in its “Carnation Revolution” of 1974. It had then swung from right wing to left-wing — the government had taken over some parts of the economy, as marchers in the street chanted, “muerte à CIA,” a slogan that we saw still visible painted on the walls.   But the country had turned back from an attempted left-wing coup in November 1975, setting the stage for a new beginning. read more

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