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.
Major developments across the globe in monetary and fiscal policy keep happening on a daily basis at present. We are now hearing conservatives, who previously made careers out of claims that government deficits would send nations broke and more, appearing in the media now claiming “We need the state to bail out the entire nation”. Not too many economists are pushing the line that the market will deal with this crisis. They all the want the state to be front and centre as their own personal empires (income etc) becomes vulnerable. In a normal downturn there is not much sympathy for the most disadvantaged workers who bear the brunt of the unemployment. Now it is different. This crisis has the potential to wipe out the middle classes and the professional classes. And suddenly, who would have thought – the nation state is apparently back, all powerful and being begged to intervene. It is wake up time. Now no-one can be unclear about the fiscal capacity of the state. They now know that politicians who claim they don’t have enough money to do things were lying all along. They just didn’t want to do them. And when this health crisis was over we have to demand that the governments continue to lead the way financially and work out solutions to the socio-ecological climate crisis. No-one can say there is not enough funds to do whatever it takes. We all know now there are unlimited funds. The question must turn to the best way to use them. I also provide in this post some further estimates of the labour market disaster that Australia is facing as part of the development of my 10-point or something plan. It is all pretty confronting.
Today is Wednesday which means it is my short blog post day. I have been travelling a lot today. By the way, there are still some things which cannot be attended to via the Internet, Zoom or otherwise. As I continue to calculate various things along the way to my 10-point or something plan which I hope to have final by next Monday. But with limited time today as I dodge and weave to avoid the virus, I have been reading a lot of the research literature about modelling epidemics. It is quite interesting and nurtures my penchant for modelling, estimation, numerical forecasting etc. But it has helped me understand the reason governments are now inflicting massive economic damage on our nations in the name of ‘flattening the curve’. I cannot say I know much about all this. But I know more than I did a week ago. Knowledge is good. And, generally, you get that from the scientific research literature rather than blogs and Twitter. I exclude economics (unless it is about MMT) from that recommendation. Back with my unemployment modelling tomorrow.
This post continues my thinking and analysis of the issues relating to the design of a fiscal intervention by the Australian government to ameliorate the damaging consequences of the coronavirus dislocation. Today, I delve a little bit back in history to provide some perspective on the current fiscal considerations. Further, I consider some of the problems already emerging in the policy response. And finally, I consider the lessons of history provide an important guide to the sort of interventions that the Australian government might usefully deploy. While the analysis is focused on Australia at present, the principles developed are portable across national boundaries. And the underlying Modern Monetary Theory (MMT) understanding is applicable everywhere there is a monetary system. This series of blog posts are building up to the production of my 10-point or something plan to address the crisis.
The world is changing that is for sure. Governments around the world are promising to spend billions to address the coronavirus crisis and no-one (other than a few so-called progressives – see below) are talking about how governments will pay for the interventions. Everybody knows how. They have always known. The shams about governments not having enough money to provide adequate housing, schooling, health care, employment, other services, and a sustainable response to climate change are now exposed for all to see. The game is well and truly up. Everybody can now see that governments just have to announce billions of intervention and it will happen. Forget all the ‘complexity’ about accounting arrangements. Forget all the stuff that we will also drown under massive tax burdens if the government dares to help some disadvantaged person get a leg up in life. Forget all the stuff about bond markets punishing profligate governments with insolvency. Everybody can now see that the bond markets are the beggars and the government rules. Even in the Eurozone, it is obvious that the ECB is able to fund fiscal deficits of any size – ‘there is no limit’. Only the Modern Monetary Theory (MMT) economists have consistently outlined the rationale for what is going on at present. And that point is increasingly being recognised although not always in ways I think does our work justice.
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.
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.
This is the ‘calm before the storm’ data release, although the calm is already pretty poor. It will get worse in months to come. The Australian Bureau of Statistics released of its latest data today (March 19, 2020) – Labour Force, Australia, February 2020 – which continues to show that the Australian economy is in a weak state with a fairly moderate labour market performance being recorded for the start of 2020. The culprit in the coming months will be the coronavirus. But to date there is one culprit – the Australian government – which has been starving spending by its obsessive pursuit of a fiscal surplus. Employment growth was weak – 0.2 per cent and only outstripped the change in the labour force because participation fell by 0.1 points. As a consequence, unemployment fell by 26,400 as about that many workers exited the labour force. The fall in broad labour underutilisation from 13.9 per cent to 13.7 per cent is all due to the decline in participation. There were a total of 1,882.1 thousand workers either unemployed or underemployed. This is a deplorable result. My overall assessment is that the Australian labour market remains a considerable distance from full employment and that that distance is increasing. With the coronavirus about to dwarf everything, the prior need for a fiscal stimulus of around 2 per cent has changed to a fiscal stimulus requirement of several times that. There is clear room for some serious fiscal policy expansion at present and the Federal government should not delay any further.
A fairly short post today (Wednesday oblige!). So just some snippets. Today, the Australian Bureau of Statistics published the latest – Retail Trade, Australia, Preliminary, February 2020 – which was the first release of a “suite of new products for Australian retail turnover”. The new offering is designed to more accurately and immediately pick up the “economic impact of coronavirus”. This release is preliminary and gives us more current data to that which is published in the upcoming April Retail Trade, Australia. The news is not good, as you might expect. Retail trade rose by 0.4 per cent in February 2020, as food purchases rose but all other spending categories fell. So the result is driven by the ridiculous panic hoarding behaviour that is now common. I went to a supermarket last night on the way home to get a few items (like some oats for muesli) and the shelves were nearly empty across a wide range of products. It makes no sense. Even if we are to be locked down, the Government has said shopping will be allowed. But in other sectors of the economy major impacts are being felt. All by band’s gigs in Melbourne have been cancelled and Virgin (who I fly with mostly) have cancelled all international flights until at least the end of June and many domestic flights. Life is changing dramatically. And this would be a great time to introduce a Job Guarantee for artists and musicians. Further, I report on some statistical events in West Africa that have far-reaching implications for how nations interact with multilateral agencies such as the IMF or the World Bank.
When the Remain vote lost the June 2016 Referendum there was a sense of denial. They had lost but only because of the ingrates that voted the Leave. And sooner, rather than later, those dolts would soon have the so-called Bregrets and another vote would be held and the Remainers would win. That sense of denial persisted past the 2017 General Election, which should have consolidated Jeremy Corbyn’s leadership, but didn’t. The biting sense of privilege that the Remain camp seemed to construct for itself slowly but surely ate into the Labour Party leadership, regularly feeding news stories to the press and social media about the impending doom facing the British economy (Project Fear), and pushing the myth (supported by all sorts of interpretable public polls) that a ‘peoples’ vote’ (I am not sure what they thought the Referendum was) was inevitable and would reverse the 2016 choice and restore equanimity. And the Labour leadership crumbled in the face of this onslaught from within and abandoned their previous commitments to their constituencies, which the majority of their elected MPs represented, and went along with this ‘peoples’ vote’ nonsense. The Tories, meanwhile, realised that the underlying sentiment that drove the Brexit choice was consolidating and pushed through a General Election which categorically demonstrated that the Labour Party were nowhere near the mark. That was a disastrous loss in any one’s estimation for Labour. But, still in denial, the apparatchiks in the Party, the hangers on, the wannabees, whatever you choose to call them are out there on social media now claiming that, in fact, despite the humiliating devastation at the December 15 polls, that the Labour Party’s agenda has been accepted as the norm – ‘we won the argument’ – and that they as good as won the election. And meanwhile, the leading contender for the leadership is suggesting they will campaign to be readmitted to the European Union. It is hard to make this sort of stuff up. A lost generation for Labour coming up unless it gets real.