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 blogs I post. See how you go with the following questions. Your results are only known to you and no records are retained.
This is Part 3 (and final) of my mini-series analysing some of the challenges that the newly elected majority government in Timor-Leste faces. In Part 2, I discussed the progress of the Strategic Development Plan and the challenges ahead in terms of poverty, unemployment, and other indicators relating to the development process. In Part 2, I focused more on the currency debate – documenting how the IMF and World Bank had infused its ideological stance into the currency arrangements that Timor-Leste set out with as a new nation. I made the case for currency sovereignty which would require Timor-Leste to scrap the US dollar, convert the Petroleum Fund into its stock of foreign exchange reserves, and to run an independent monetary policy with flexible exchange rates, mediated with the capacity to use capital controls where appropriate. In this final discussion I consider specific policy options that are required to exploit what is known as the ‘demographic dividend’ where the age-structure of the nation generates a plunging dependency ratio. To exploit that dividend, which historically delivers massive development boosts to nations, the shifting demographics have to be accompanied by high levels of employment. That should be policy priority No.1.
It is Wednesday and so I am only writing a few thoughts today for the blog, preferring to spend the day writing other more detailed academic material and doing final edits on our next Modern Monetary Theory (MMT) textbook (current publication date with Macmillan, November 2018). But I wanted to briefly reflect on the discussions over the last week about trade which seem to have sparked some emotion and disagreement. In particular, there has been a lot of misrepresentation of the MMT position and also a lot of mistaken reasoning. After that I will go back to listening to some post minimalist piano music.
Regular readers will recall that Thomas Fazi and I published an article in the Jacobin magazine (April 29, 2018) – Why the Left Should Embrace Brexit – which considered the Brexit issue and provided an up-to-date (with the data) case against the on-going hysteria that Britain is about to fall off some massive cliff as a result of its democratically-arrived at decision to exit the neoliberal contrivance that the European Union has become. There was an hysterical response on social media to the article, which I considered in this blog post a few days later – The Europhile Left loses the plot (May 1, 2018). In recent days, two British-based academics have provided a more thoughtful response in the Jacobin magazine (May 18, 2018) – Caution on “Lexit”. Here is a response which was co-written with Thomas. As a general observation, I noted some prominent progressive voices citing their attack on us enthusiastically, one even suggesting it landed “some good punches” after taking “a while to warm up”. Well, I can assure Andrew that my face (nor Thomas’s) was the slightest bit puffy after reading the critique.
Last Tuesday (May 15, 2018), the new German Finance Minister Olaf Scholz stood up in the German Bundestag and delivered his first fiscal policy presentation. Not only was “die schwarze Null” (Black Zero) sustained but in his address, the new German Finance Minister made it clear that Germany would not entertain any expansion of the EU fiscal capacity (thus rejecting Emmanuel Macron’s proposals) and wanted to delay other ‘reforms’ that Germany had previously suggested they would support (beefing up the Single Resolution Fund and the creation of the European Monetary Union). For those Europhile progressives who have been hanging their hat on the hope that the takeover of the German Finance Ministry by the SPD would be the deal breaker that the Scholz’s presentation was nothing short of a disaster. He reiterated Germany would not be shifting in any major way and that Member States just had to buckle down and follow Germany’s fiscal example – surpluses as far as the eye can see. None of this was a surprise to me. It has been clear for some time that Scholz is just a continuation of Schäuble. Indeed some pointed statements from Bundestag politicians next day in their responses suggested just that.
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 blogs I post. See how you go with the following questions. Your results are only known to you and no records are retained.
The Australian Bureau of Statistics released the latest – Labour Force, Australia, April 2018 – today which showed that the Australian labour market remains in a weak state even though full-time employment grew. Over the first four months of 2018, the labour market is decidedly weaker when compared to 2017. With relatively modest employment growth and rising participation, unemployment increased by 10,600 and the unemployment rate edged up to 5.6 per cent. The teenage labour market was the only bright spot although most of the employment gains were in part-time jobs. Further, underemployment fell marginally as did the broad labour underutilisation rate as a result of the bias towards full time work (also reflected in the monthly hours gain). Overall, my assessment is that the Australian labour market remains stuck in a weak state and is still a considerable distance from full employment. There is a lot of slack remaining and defies the foolish calls in recent months from those demanding reductions in the fiscal deficit.
This is Part 2 of my mini-series analysing some of the challenges that the newly elected majority government in Timor-Leste faces. Yesterday, I documented how the IMF and World Bank had infused its ideological stance into the currency arrangements that Timor-Leste set out with as a new nation. That infusion is still apparent in the major commentary on Timor-Leste’s future options – specifically that the dollarisation should continue and that fiscal austerity should be pursued (relative to the current fiscal stance) because the nation will run out of money. What they mean is that the Petroleum Fund will eventually run out of money. There is a major difference in those statements although under the current currency arrangements they are identical. The ‘run out of money’ story is only applicable as long as the new government resists adopting its own currency. I also showed how the development process has been stalled by the austerity bias. In Part 2, I explore the currency issue directly and make the case for currency sovereignty which would require Timor-Leste to scrap the US dollar, convert the Petroleum Fund into its stock of foreign exchange reserves, and to run an independent monetary policy with flexible exchange rates, mediated with the capacity to use capital controls where appropriate. In Part 3, which will come out next Monday, I will discuss specific policy options that are required to exploit what is known as the ‘demographic dividend’ where the age-structure of the nation generates a plunging dependency ratio. To exploit that dividend, which historically delivers massive development boosts to nations, the shifting demographics have to be accompanied by high levels of employment. That should be policy priority No.1. I will also complete some Petroleum Fund scenarios to complement the policy advice.