The Weekend Quiz – August 18-19, 2018

Welcome to The Weekend Quiz. The quiz tests whether you have been paying attention or not to the blog posts that I post. See how you go with the following questions. Your results are only known to you and no records are retained.
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    Posted in Saturday quiz | 2 Comments

    Australian labour market weakens in July 2018

    The Australian Bureau of Statistics released the latest – Labour Force, Australia, July 2018 – today which show that the Australian labour market weakened in July 2018 and one is lead to think that the June 2018 improvement was an outlier after several months of poor results earlier in the year. It looks like the labour market has settled back into that weak pattern. Overall employment growth was negative but this was all down to the teenage segment, where there were substantial losses of part-time work. Unemployment fell marginally but only because the participation rate fell by 0.1 points, which meant that the labour force contracted by more than employment. Overall, my assessment is that the Australian labour market remains in an uncertain state, but is on the weak side, and, is still a considerable distance from full employment. There is room for some serious policy expansion at present.
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      Posted in Labour Force | 2 Comments

      A twitter storm of lies …

      This is my short Wednesday offering, which will be quite short considering the last two days have been (necessary) epics. My three-part series created somewhat of a social media storm, which means people are interested in the topic and I think that is healthy. Democracy is strengthened if people educate themselves and contest propositions that are abroad in the debate. But, as I noted yesterday, social media storms have a way of getting out of control and out of the realm of being complementary to a more considered educative process and interaction. What the recent Twitter storm has demonstrated is that key people are just willing to make spurious accusations (aka lies) without having taken the time to consider the depth of the literature that is available on any topic. That is not helpful to democracy. It undermines it. Anyway, in this short blog post, I consider some of the responses to my three-part series. As a footnote, I have now retitled the three-part series “MMT is just plain good economics” rather than using the quotation from the British Shadow Chancellor’s advisor who said that “MMT is just plain bad old economics”. Framing. I took the points of several commentators on this blog seriously in this regard. Thanks.
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        Posted in Britain, Demise of the Left, Fiscal Statements, Framing and Language, UK Economy | 33 Comments

        MMT is just plain good economics – Part 3

        This is the third and final part of this series where I examine claims made by senior advisors to the British Labour Party that a fiscal policy that is designed using the insights provided by Modern Monetary Theory (MMT) would be “catastrophic” and render the British pound worthless. In Part 1, I examined the misunderstanding as to what MMT actually is. A senior Labour advisor had claimed, in fact, that any application of MMT would be “catastrophic” for Britain. He talked about MMT “policy prescriptions”, which disclosed an ignorance about the nature of MMT. In Part 2, I considered the British Labour Party’s Fiscal Credibility Rule and demonstrated that its roots were in core neoliberal ideology and any strict adherence to it would not be consistent with progressive outcomes. I noted that it was likely to promote a private ‘debt-bias’ that was unsustainable. In this final part, I explore some economic history over the last five decades to give some further force to the argument presented in Part 2. And I finish by arguing that a well governed, rule of law abiding Britain with a government building and maintaining first-class infrastructure, with excellent public services (energy, transport, health, education, training, environmental certainty, etc), with a highly skilled labour force, and regulative certainty, would be a magnet for profit-seeking private investment irrespective of whether it was running a continuous fiscal deficit or not. Yet, it is highly likely, given Britain’s history, that such a deficit (both on current and capital contexts) would be required.
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          Posted in Britain, Capital controls, Fiscal Statements, Framing and Language, Job Guarantee, UK Economy | 50 Comments

          MMT is just plain good economics – Part 2

          I am surprised at the hostility that Part 1 in this series created. I have received a lot of E-mails about it, many of which contained just a few words, the most recurring being Turkey! One character obviously needed to improve his/her spelling given that they thought it was appropriate to write along the lines that I should just ‘F*ck off to Terkey’. Apparently Turkey has become the new poster child to ‘prove’ Modern Monetary Theory (MMT) wrong. Good try! I also note the Twitterverse has been alight with attention seekers berating me for daring to comment on the sort of advice British Labour is receiving. Well here is Part 2. And because you all liked it so much, the series has been extended into a three-part series because there is a lot of detail to work through. Today, I revisit the fiscal rule issue, which is a necessary step in refuting the claim that MMT policy prescriptions (whatever they might be) will drive the British pound into worthless oblivion. And, you know what? If you don’t like what I write and make available publicly without charge, then you have an easy option – don’t read it. How easy is that? Today, I confirm that despite attempts by some to reconstruct Labour’s Fiscal Rule as being the exemplar of progressive policy making, its roots are core neoclassical economics (which in popular parlance makes it neoliberal) and it creates a dependence on an ever increasing accumulation of private debt to sustain growth. Far from solving a non-existent ‘deficit-bias’ it creates a private debt bias. Not something a Labour government or any progressive government should aspire to.
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            Posted in Britain, Central banking, Fiscal Statements, Framing and Language, Inflation, UK Economy | 35 Comments

            The Weekend Quiz – August 11-12, 2018 – answers and discussion

            Here are the answers with discussion for this Weekend’s Quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of modern monetary theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.
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              Posted in Saturday quiz | 11 Comments

              The Weekend Quiz – August 11-12, 2018

              Welcome to The Weekend Quiz. The quiz tests whether you have been paying attention or not to the blog posts that I post. See how you go with the following questions. Your results are only known to you and no records are retained.
              Read the rest of this entry »

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                Posted in Saturday quiz | 2 Comments

                MMT is just plain good economics – Part 1

                On August 6, 2018, British tax expert Richard Murphy who is becoming increasingly sympathetic to the principles of Modern Monetary Theory (MMT) published a blog post, which recorded an exchange with one James Meadway, who is the economics advisor to the Shadow Chancellor John McDonnell in Britain. The exchange took place on the social media page of a Labour Party insider who has long advocated a Land Tax, which McDonnell is on the public record as saying will “raise the funds we need” to help local government. He called it a “radical solution” (Source). An aside, but not an irrelevant one. It reflects the mindset of the inner economics camp in the British Labour Party, a mindset that is essentially in lockstep with the neoliberal narrative about fiscal policy. Anyway, his chief advisor evidently openly attacked MMT as “just plain old bad economics” and called it a “regression in left economic thinking” which would ultimately render the currency “entirely worthless” if applied. He also mused that any application of MMT would be “catastrophic” for Britain. Apparently, only the US can apply MMT principles. Well, the exchange was illustrative. First, the advisor, and which I guess means the person being advised, do not really understand what MMT is. Second, the Labour Party are claiming to be a “radical and transformative” force in British politics, yet hang on basic neoliberal myths about the monetary system, which is at the core of government policy implementation. Astounding really. This is Part 1 of a two-part series on this topic, most of it will be summarising past analysis. The focus here is on conceptual issues. Part 2 will focus more specifically on Balance of Payments issues.
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                  Posted in Debriefing 101, Fiscal Statements, Friends like this, Reclaim the State | 63 Comments

                  Australian households running down savings and in a race to go broke

                  A short blog post today as it is Wednesday. I have also been travelling a lot and have been reading a lot. And have been otherwise distracted. But I thought this information was worth writing a few paragraphs about for the record. Last week, I wrote a blog post – The fundamental realignment of British society via fiscal austerity (July 30, 2018) – about some of the more unsavoury impacts of the British government’s austerity push. I highlighted how the current growth strategy was precarious because it was reliant on the private domestic sector accumulating increasing debt to maintain consumption growth at a time when the external sector was draining growth, private investment was weak and the government was hell bent on cutting services and infrastructure investment. The ONS data shows that “UK households have seen their outgoings surpass their income for the first time in nearly 30 years” and they “are borrowing more and saving less”. A recipe for disaster. A report published in Australia late last week – 14th Household Financial Comfort Report (August 2018) – provides “in-depth and critical insights into the financial situation of Australians based on a survey of 1,500 households”. It is not a pretty story and demonstrates the global uniformity of the neoliberal approach, which is characterised on ever increasing private debt and falling commitments to sustain public services. The GFC only temporarily interrupted this agenda that aims to reverse decades of gains for workers and their families under social democratic governments.
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                    Posted in Economics, National Accounts | 5 Comments

                    Framing matters – the unemployed and the farmers

                    At present, Europe is sweltering in both relative and absolute terms as the harsh summer ensues. In Australia, we are in drought after an unseasonably warm and dry Autumn. Drought is no stranger to Australia but the frequency and circumstances of the current period coupled with what is going on around Europe (including the cold spell I was caught up in Finland in February while the North Pole struggled with heat) tells us that weather patterns are changing. There is now credible research pointing in that direction. But the drought in Australia is demonstrating another thing – the hypocrisy of the way we deal with unemployment and the unemployed vis-a-vis other groups in society that we endow with higher privilege, especially in this neoliberal era. Australia is experiencing a serious drought and Federal and State governments are tripping over each other to offer very large support packages to farmers and their communities to tide them over while their income dries up (excuse the pun). There appears to be no limit to the support these governments are announcing. The Prime Minister is wandering around rural Australia promising this and that to help farmers make ends meet. Whenever I see these special assistance packages being handed out to the rural sector, which is politically well-organised, I reflect on the plight of the unemployed. With unemployment at elevated levels in Australia, the decision to hand out economic largesse to the farmers reeks of inconsistency. The unemployed have diminishing chances of getting a job at present and the income support provided by government is well below the poverty line. That poverty gap is increasing and the Government refuses to increase the benefit claiming fiscal incapacity. The comparison of the vastly different way the government treats farmers relative to unemployed highlights, once again, that the way we construct a problem significantly affects the way we seek to solve it. The neo-liberal era has intensified these inconsistencies which have undermined the capacity of public policy to achieve its purpose – to improve the welfare of all citizens. The research question is: Why do we tolerate such inconsistent ways of thinking about policy problems and their solutions?
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                      Posted in Climate change, Fiscal Statements, Framing and Language, Labour Force | 10 Comments