Welcome to the Bastille Day Edition of 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.
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 complete the text by the end of this year. Comments are always welcome. Remember this is a textbook aimed at undergraduate students and so the writing will be different from my usual blog free-for-all. Note also that the text I post is just the work I am doing by way of the first draft so the material posted will not represent the complete text. Further it will change once the two of us have edited it.
Last month my Labour Force commentary was entitled – Australian labour market – good signs but wait for the reversal. It didn’t take very long for the reversal to come, although I caution anyone drawing trends from month-to-month variations in this sort of data. Today’s release by the Australian Bureau of Statistics (ABS) of the Labour Force data for June 2012 reveals a weakening labour market with all the negative signs concurring – falling full-time employment, falling participation, falling hours worked and rising unemployment. If the labour force had not have contracted due to the falling participation rate, the unemployment rate would have been closer to 5.5 per cent rather than 5.2 as officially recorded. Certainly this data is not consistent with any notions that the Australian labour market is booming or close to full employment. The most continuing feature that should warrant immediate policy concern is the appalling state of the youth labour market. My assessment of today’s results – weak and weakening.
I had an interesting conversation with a lunch visitor today about Germany (he lived and studied there) and its role in the Eurozone crisis. Yes, we talk economics even at times of rest! We discussed some of the events leading up to the Euro crisis and the important role played by the so-called progressive political parties in Germany. The conservative Christian Democrats are sounding like lunatics at the moment with the “You will have austerity and enjoy it” mantras. The focus on their harsh and destructive stance supporting fiscal austerity has taken the spotlight off the real culprits – the SPD and the Greens. We should never forget the role that they played – over the period of the Gerhard Schröder’s federal government (1998-2005) – in creating the pre-conditions that have ensured the crisis will be long and very damaging. We should also remember that Green parties have developed a tendency to be “neo-liberals on bikes” as a means of gaining power. The problem is that once they are pedalling in that direction they lose the capacity to pursue truly green policies, which extend beyond the remit of having clean building codes and sound urban design.
A recurring theme in the press and one that I get several E-mails about a month is that a national government has “more space to net spend” if its past history of deficits and debt are lower than otherwise. This is also related to the acceptance by many so-called progressive economists that national government budgets should be balanced over the course of the business cycle – that is, it is fine to go into deficit when there is a downturn but the government should pay it back via surpluses when the economy is strong. Neither proposition has merit but serve as powerful buttresses for the continuation of the neo-liberal attack on government fiscal freedom and full employment. Government deficits have not caused the crisis. Growth is lagging because spending is lagging. If the non-government sector cannot sustain aggregate spending to ensure unemployment drops then there is only one sector left in town folks!
Last week (June 6, 2012), the US Bureau of Labor Statistics released the Employment Situation Summary – for June 2012, which revealed that the US economy had added 80,000 net jobs in the last month, well below the quantity that economists had been estimating. The US national unemployment rate was unchanged at 8.2 percent. The BLS said that the “Nonfarm payroll employment continued to edge up” but the commentators labelled the result “soft”. The US policy makers continues to ignore the plight of the unemployed. The data shows that June 2012 is the 41st consecutive month that the national unemployment rate has exceeded 8 per cent, which is the longest period of above 8 per cent unemployment in the history of the data series (from January 1948). The danger now is that the economy will fall prey to the political debate leading up to the November election and resulting policy responses will truly push the economy over the cliff into recession. The US economy is precariously poised at present and some fiscal commitment to supporting growth is urgently needed.
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.
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 complete the text by the end of this year. Comments are always welcome. Remember this is a textbook aimed at undergraduate students and so the writing will be different from my usual blog free-for-all. Note also that the text I post is just the work I am doing by way of the first draft so the material posted will not represent the complete text. Further it will change once the two of us have edited it.
In the last week, it was alleged that economists such as the IMFs Olivier Blanchard were alleged to be working in the tradition of Hyman Minsky, which by association inferred that they were on top of the crisis – foresaw it, understand why it occurred and offer the best ways out of the mess. Please read my earlier blog – Revisionism is rife and ignorance is being elevated to higher levels – for an introduction to this issue. I argued that this attempted association is plainly false and Blanchard’s monetary economics is more in the Monetarist tradition, which is the anathema to the endogenous money framework that Hyman Minsky worked within. This is no small issue. The economists mentioned are often in leading positions (media, universities, policy) and influence the way the public (and students) think about the policy choices available. By promoting erroneous understandings of the way the monetary system operates, such economists become part of the problem not the solution, no matter if they are currently opposing fiscal austerity. If only they were operating in the tradition of Minsky!