The Magic Money Tree and Other Economic Tales

An insightful journey through politics and economics, addressing why the former might mismanage the latter. Lorenzo Forni describes in depth the causes and consequences of many policy 'mistakes', all characterized by a common error: forgetting the economic constraints. -- Francesco Giavazzi, economic adviser to the Italian prime minister This book aptly distills lessons about sound macroeconomic policies from theory and international experiences in a non-technical and user-friendly way. It will be especially useful to non-economists who want to form well-informed opinions about important current debates on the appropriate stance of fiscal and monetary policies. I especially like its key message that prolonged expansionary policies cannot raise potential GDP growth rates. Doing so requires structural fiscal, financial, and regulatory reforms. The book highlights the political economy challenges that such reforms face. -- Teresa Ter-Minassian, former Director, Fiscal Affairs Department, International Monetary Fund A most enjoyable and instructive read with many fascinating country examples. As fiscal deficits explode and central banks remain big buyers of government bonds, Forni's lucid warnings about unsustainable macroeconomic policies could not be better timed. -- Philip Turner, University of Basel, and former Senior Manager, Bank for International Settlements Live by the printing press, die by the printing press. This is the no-free-fiscal-lunch message of Lorenzo Forni, a premier economic advisor to countries across the globe. The Money Magic Tree is a sobering wake-up call for the United States and other advanced economies who think they can live well beyond their means. -- Larry Kotlikoff, Boston University This book is about magic. Yet, the magic tricks work and are exciting only when the audience does not know what to expect. With magical economic policy-making, the audience have been conned before. This book shows that harsh economic truths are much less exciting than magic but are inescapable. -- Aleh Tsyvinski, Arthur M. Okun Professor of Economics, Yale University Forni’s main target is the politicians who, in targeting their short-term advantage, undermine the medium and long-term prospects for their countries ... SPE members who need to find support for economic rationality in dealing with their clients, masters, or even the friends in the pub will find useful material in here. -- Society of Professional Economists