There is no detailed blog today as I am travelling from Brussels to Sydney. I will resurface again on Tuesday after the long flight. When I wrote my blog on Friday documenting the austerity tour around Porto I forgot to mention a few things. This blog adds some more observations I have made of conditions in this part of the world at present.
Here are the answers with discussion for yesterday’s quiz. The information provided should help you understand the reasoning behind the answers. 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 Billy Blog 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.
Its my Friday lay day blog and I am on the austerity trail. I have been in Porto, Portugal for the last few days, ostensibly taking a short break by the beach. There has been no swell at all. The beach area to the south of the Douro River is like beach areas everywhere. They give little hint of what austerity has done to this country. Porto is the northern capital of Portugal and a town of around 240 thousand people (in 2012) with the wider region containing around 1.4 million people. It is considered one of “the major urban areas of Southwestern Europe.” But it is also disintegrating as an urban centre with an extraordinary number of derelict buildings and many shops closed as austerity ate into incomes and spending. There are decaying buildings everywhere some with for sale signs on the front. The urban infrastructure is falling apart – the main market is being held up with scaffolding and weeds overtake sporting arenas. In many respects, it looks like a city in the poorest nations rather than being part of Europe. Around a third of the inner city population has left. A large number of people in the greater urban area have left. The mobile are dominated by the young and the educated with the skills leaving behind an elderly population. There is little hope for the city under the current policy structures. A nation and its cities destroyed by austerity. There is no exaggeration here. I invite people to see for themselves. An extraordinary outcome of an out of control recession cult ideology reinforced by neo-liberal Groupthink ruining the prosperity of a people. I had quite a day yesterday as I went on a field trip around Porto organised by the – The Worst Tours.
At the London event last week, I indicated that governments should not issue any public debt as the benefits of doing so are small relative to the large opportunity costs. The Modern Monetary Theory (MMT) position is that there is no particular necessity to match public deficits with debt-issuance for a currency-issuing government and deficits should be accompanied by monetary operations which we now call Overt Monetary Financing (OMF). Surprisingly there was some arguments by audience members that governments should continue to issue debt, largely, as I understand them, to provide a safe haven for workers to save for the future. So the idea is that we maintain the elaborate machinery that is associated with the public debt issuance just to provide a risk free asset that workers can use to park their hard-earned savings in. It is a strange argument given the massive opportunity costs associated with debt issuance. A far simpler solution is to exploit the currency-issuing capacity of the government to guarantee a publicly-owned National Saving Fund. No debt would be required.
When the March-quarter 2015 National Accounts came out three months ago I wrote that “the fragility of growth increases”, as the economy descended into a state of weak growth well below the accepted trend rate. The latest data – June-quarter 2015 National Accounts data – released by the Australian Bureau of Statistics today suggests that that fragility has worsened as net exports contracted sharply. Only household consumption and government spending (both consumption and investment) kept the Australian ecoomy growing, albeit at an aneamic rate of 0.2 per cent for the quarter and 2 per cent for the year to June 2015. But the trend is towards near zero growth and the ABS wrote that “Nominal GDP growth was 1.8% for the 2014-15 financial year”, which was “the weakest growth in nominal GDP since 1961-62.” The other notable result was that ‘income recession’ that Australia entered in the last quarter has consolidated wth the total market value of goods and services (GDP) outpacing the flow that Australian residents enjoy as income. Real net national disposable income fell by a further 0.9 per cent over the quarter and 1.1 per cent over the last year. While private consumption growth remained positive, the savings ratio continues to fall indicating indebtedness in on the increase as wages growth remains weak. The other notable result is that despite the call for austerity by the Federal government, gross fixed capital formation (investment) rose by only 0.4 per cen, driven entirely by public sector investment spending. Without the contribution of public spending overall, the Australian economy would have been in negative growth territory. Today’s data paints a very negative outlook for the Australian economy for the remainder of this year and into 2016. With real GDP growth well below that needed to reduce unemployment and underemployment, the government needs to stimulate the economy to boost income and employment growth. This would also allow wages to grow and take the squeeze off households.
I am heading south today to the periphery of the Eurozone and will spend the rest of the week down in the sun. We will see what I come up with. My next blog will come from the South – in deep austerity land! Today, though, I have little time. So I have posted the Presentation I gave in London last Thursday plus a Radio interview I did in London on Friday. They might be of interest to those who could not make it to the event on Thursday. We launched my latest book – Eurozone Dystopia: Groupthink and Denial on a Grand Scale – in Maastricht yesterday and a video record of the proceedings will be available in due course. But for now it is off to the beach!
Today, is the official launch of my new book – Eurozone Dystopia: Groupthink and Denial on a Grand Scale – in Maastricht, which is an appropriate geographic location given the book proposes to dismantle the Eurozone. It just happens to be the place (Maastricht University), where we established CofFEE-Europe (a sister centre to my research centre in Australia). There are two excellent guest speakers (see below) and I am very grateful that they agreed to accept the invitations. The upshot is that I haven’t all that much time today. Over the next few days I will address some points that were raised in question time or at the reception (aka cup of tea and cakes) after the event in London last Thursday evening. There is still work to be done if the progressive side of politics is to fully understand Modern Monetary Theory (MMT) and the implications of it for policy development and choice.
Here are the answers with discussion for yesterday’s quiz. The information provided should help you understand the reasoning behind the answers. 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 Billy Blog 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.