The Job Guarantee is a progressive vehicle for change

In my search for new terminology and descriptors I am no longer going to use “minimum wage” to describe the wage that a currency-issuing government should pay when implementing a Job Guarantee (JG). In the past I have written that to avoid disturbing private sector wage structure and to ensure the JG is consistent with stable inflation, the JG wage rate is best set at the minimum wage level. I have also indicated that the minimum wage should not be determined by the capacity to pay of the private sector, but should, rather be an expression of the aspiration of the society of the lowest acceptable standard of living. My view is that any private operators who cannot “afford” to pay the minimum should exit the economy. I also have proposed that the JG wage should be supplemented with a wide range of social wage expenditures, including adequate levels of public education, health, child care, and access to legal aid. Finally, I have stressed for many years that the JG does not replace conventional use of fiscal policy to achieve appropriate social and economic outcomes. In general, the JG would be accompanied by higher levels of public sector spending on public goods and infrastructure. I have written several times, in various outlets (academic, Op Ed, blog), that I see the JG as part of a fundamental transformative agenda to broaden the concept of work and to allow all people to receive a dignified and appropriate access to the distribution system. That message doesn’t seem to get through. So from now on the JG wage will be referred to as the living wage. Further, recent discussions of the JG reveal that commentators who criticise it do so from a standpoint of ignorance – a problem that is engendered by the blogosphere, which should be a liberating force, but in my view seems to unfortunately spawn narrow-mindedness and an anti-intellectual approach to policy debates.

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Saturday Quiz – December 7, 2013 – answers and discussion

Here are the answers with discussion for yesterday’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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Analytical appendix for NIPA Chapter 3

I am now using Friday’s blog space to provide draft versions of the Modern Monetary Theory textbook that I am writing with my colleague and friend Randy Wray. We expect to publish the text sometime in 2013. Our (very incomplete) textbook homepage – Modern Monetary Theory and Practice – has draft chapters and contents etc in varying states of completion. Comments are always welcome. Note also that the text I post here is not intended to be a blog-style narrative but constitutes the drafting work I am doing – that is, the material posted will not represent the complete text. Further it will change as the drafting process evolves.

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Australian national accounts – stagnation sets in

Today’s Australian Bureau of Statistics – Australian National Accounts – for the September-quarter 2013, shows that real GDP growth was 0.6 per cent, down from the (revised) 0.7 per cent for the June-quarter. The annualised growth rate of 2.3 per cent is now well below the trend rate between 2000 and 2008 of 3.3 per cent. This poor growth relative to trend is the reason the unemployment rate is rising. The stunning result is that the public sector contributed 1.5 percentage points to growth this quarter (a reversal from the June-quarter). This contribution, while welcome, will not be sustained given the current political environment. Overall, the data paints a fairly gloomy overall picture for the Australian economy. It ia hard to discern what the new Federal government is up to given that in 2 months we have already had four discrete statements about education policy, for example! But if their overall macroeconomic rhetoric is maintained and they start hacking into public spending to flex their conservative muscles then the outlook will shift very quickly from gloomy to disastrous and we will follow Europe down the sink hole.

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The fiscal role of the KfW – Part 1

This is the first part in what might be several blogs. I will see where my curiosity takes me. Today I want to invoke that well-known piece of inductive reasoning the – Duck Test. We all should know how that goes. But consider this reasoning. We have an institution that is 100 per cent government owned. It borrows millions and its liabilities are 100 per cent guaranteed by the federal government. It spends, I mean lends millions each year at very low rates to all manner of firms, organisations and even builds infrastructure. It also takes equity positions (provides capital) to a range of enterprises. It pays no tax having the same status as the central bank. It is not a duck but looks very much like a government fiscal entity. Welcome to the Kreditanstalt für Wiederaufbau (Reconstruction Credit Institute) or as it is now known the – KfW. This bank was created in 1948 as a German vehicle to faciliate the infrastructure rebuilding under the Marshall Plan. It has since grown (and diversified) into one of the largest banks in Germany (taken its main business units into account) and pumps millions of Euros in the domestic economy and the export sector (via IPEX, its 100 per cent owned subsidiary). It is a major reason why the public debt ratio in Germany is 80 per cent rather than close to 100 per cent. It is a major reason why the federal deficit has been reduced without scorching the German economy. It is a story about smoke-and-mirrors accounting, German-style.

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Saturday Quiz – November 30, 2013 – answers and discussion

Here are the answers with discussion for yesterday’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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