The Bacon-Eltis intervention – Britain 1976

This blog continues the discussion of the British currency crisis in 1976. It traces the growing anti-government influence on key players within the British Labour government as the pressures on the exchange rate were mounting in the early part of 1976. While the Chancellor was clearly influenced by the growing dominance of Monetarist thought, he also fell under the influence of the so-called Bacon-Eltis thesis, which argued that the growth of the public sector in the 1960s and early 1970s in Britain had starved the private sector of resources, which had led, directly, to the declining growth, high inflation and elevated unemployment. The conservative mainstream used this thesis to call for harsh cut backs in public spending and the British Labour government were increasingly cowed into submission by the vehemence of this mounting opposition. The problem is that the ‘thesis’ didn’t stand up to critical scrutiny, although that fact didn’t seem to bother those who used it to advance their anti-government ideological agenda. This blog is longer than usual because I felt it important to put this part of the story into one continuous narrative rather than break it up into two or three separate, shorter blogs.

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There is no secular stagnation – just irresponsible fiscal policy

I am in Barcelona today until later then I am off to Valencia for two days. More on the Spanish tour later. The latest edition of the ECB’s Economic Bulletin released on May 5, 2016 carried and – Update on economic and monetary developments – provides more evidence, as if any was needed, that the current reliance on monetary policy – standard or otherwise – to reboot the stagnant economies of Europe has failed and will continue to fail. Why? It is the wrong policy tool. Journalists are increasingly writing that policy options are exhausted because central bankers ‘have fired all their shots’ and the “more shots they fire, the less effective they become”. The implication is that the world is locked into a future of secular stagnation with elevated levels of unemployment and low productivity growth. They seem to have forgotten that fiscal policy remains effective if it is used properly. There is no secular stagnation – just irresponsible fiscal policy use.

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The Wall Street-US Treasury Complex

Today I am in Barcelona, Spain after travelling from Trujillo (in the western part of Spain). Today’s blog continues the analysis I have been providing which aims to advance our understanding of why the British government called in the IMF in 1976 and why it fell prey to a growing neo-liberal consensus, largely orchestrated by the Americans. Yesterday, we analysed the way in which the IMF reinvented itself after its raison d’être was terminated with the collapse of the Bretton Woods fixed exchange rate system. Today’s part of the story, is to trace the growing US influence on the IMF and the way it manipulated that institution to further its ‘free market’ agenda on a global scale. We will consider what Jagdish Bhagwati called the “Wall Street-Treasury complex”, which referred to the way in which financial market interests in the US combined with (pressured) the US Treasury Department to advance the myth that liberalisation of global capital flows would deliver massive benefits in the post-1971 period after the convertible currency, fixed exchange rate system collapsed.

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The Weekend Quiz – May 7-8, 2016 – answers and discussion

Here are the answers with discussion for the Weekend 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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The Weekend Quiz – May 7-8, 2016

Welcome to The Weekend Quiz, which used to be known as the Saturday Quiz! The quiz tests whether you have been paying attention over the last seven days. See how you go with the following questions. Your results are only known to you and no records are retained.

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Solving Our Unemployment Crisis presentation, April 19, 2016

Today, I am in Madrid for the start of the public events associated with the promotion of the Spanish version of my current book – Eurozone Dystopia: Groupthink and Denial on a Grand Scale. I travelled this morning from Granada to Madrid and am tied up for the rest of the day. So here is a video of a keynote address I presented on April 19, 2016 to the inaugural Australian Unemployed Workers’ Union Conference Solving Our Unemployment Crisis in Melbourne, Australia. You can find out more about the Union from their – homePage – and their – Facebook Page. They need more members and the support (funding, promotion etc) from all employed people who care about the problem of unemployment. The talk and questions go for about 37 minutes.

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Australian government doesn’t deserve office, nor does the Opposition!

Yesterday (May 2, 2016), the Reserve Bank of Australia (RBA) dropped the short-term policy interest rate by 25 basis points (1/4 of a percent) to 1.75 per cent, a record low as a result of its assessment of a weakening economy and the deflation that has now been revealed by the ABS. I wrote about the latest CPI data in this blog – Australia enters the deflation league of sorry nations. The fact that the RBA is trying to stimulate growth is a sad testament to the current conduct of the Australian government (and the Treasury), which despite all the lying rhetoric that its corporate tax cuts, revealed in last night’s fiscal statement will stimulate jobs growth, is actually continuing to undermine growth. The fiscal contraction implied by last night’s statement by the Federal Treasurer is modest next year and then gets sharper in the year after (2017-18). Many would conclude that the contractionary shift is benign. However, in the context that the strategy is being delivered, the actual need is for the discretionary fiscal deficit to rise by around 1 to 1.5 per cent of GDP, at least, not contract at all. The federal government has moderated its ‘surplus at all costs’ mania which dominated the macroeconomic policy debate a few years ago but is still aiming for a surplus (or close to it) within 4 years. It will fail in that goal because the non-government spending behaviour will not allow that outcome and the government’s own fiscal contraction over that period will undermine growth further. The early statements by the Federal opposition are also idiotic. It is claiming it would make ‘tougher’ decisions (that is, cut the deficit more sharply). That just means it would end up with higher levels of unemployment than the conservatives will under their current strategy. Both unemployment levels will be unacceptable. Neither major political party in Australia is fit for office!

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The metamorphosis of the IMF as a neo-liberal attack dog

Today I am in Granada, Spain having an interesting time. Nothing public to report. I will be here until Thursday morning upon which I travel back to Madrid and the public events begin (see below). Today’s blog continues the analysis I have been providing which aims to advance our understanding of why the British government called in the IMF in 1976 and why it fell prey to a growing neo-liberal consensus, largely orchestrated by the Americans. The current book I am finalising with my Italian colleague Thomas Fazi, is tracing the way in which the Right exploited the capacities of the ‘state’ to advance their agenda and how they duped the Left into believing that globalisation had rendered the nation state powerless. There were several turning points in this evolution, and one of those key moments in history, was the assertion by British Labour Prime Minster James Callaghan on September 28, 1976 that Britain had to end its ‘Keynesian’ inclinations and pursue widespread market deregulation and fiscal austerity has been taken to reflect a situation where the British government had no other alternative. His words have echoed down through the years and constituted one of the major turning points in ‘Left’ history. Successive, so-called progressive governments and politicians have repeated the words in one way or another. The impact has been that they have forgotten that their were options at the time that the British government rejected, which would have significantly altered the course of history. Today, we consider the role way in which the IMF reinvented itself after its raison d’être was terminated with the collapse of the Bretton Woods fixed exchange rate system. The next part of the story will examine the growing US influence on the IMF and the way it used the IMF to further its ‘free market’ agenda on a global scale.

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Travelling all day today

I am travelling for most of today on my way to Spain to help launch the Spanish language edition of my current book – Eurozone Dystopia: Groupthink and Denial on a Grand Scale (see details below). I will also be meeting various people at a very interesting period for Spain, the build-up to the June national election that will attempt to resolve the impasse that arose from the election. I will report when I can on what is going on while I am away

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The Weekend Quiz – April 30-31, 2016 – answers and discussion

Here are the answers with discussion for the Weekend 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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