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 six questions. Your results are only known to you and no records are retained.
Progressives who comment on macroeconomic matters invariably invoke the ghost of John Maynard Keynes as a motivating influence presumably because the popular perception – albeit shallow – is that Keynes supported generalised fiscal expansion in times of high unemployment. A striking example of this “association” is the recent Australian Fabian Society essay (April 11, 2011) by the Australian Treasurer Wayne Swan – Keynesians in the recovery.
Last night (April 13, 2011) the Australian Prime Minister Julia Gillard gave a speech to the right wing think tank – the Sydney Institute – entitled The Dignity of Work. The Sydney Institute has taken positions in the past which include supporting the labour market deregulation (removal of trade union privileges); financial deregulation; need for budget surpluses in times of prosperity; privatisation; welfare reform (emphasising private solutions); the expansion of private education at the expense of public education and more. So it is a strange place to give a lecture on the dignity of work. The labour market policies which the Sydney Institute has supported have undermined workers’ rights, held back the growth of real wages, and been responsible for a massive redistribution of income from wages to profits over the 20 or 30 years.
Many readers ask me to provide a Modern Monetary Theory (MMT) rule for sound fiscal management. I had done this often but apparently not concisely enough. It is important to understand what the limits on fiscal deficits are in term of prudent fiscal practice given that terms such as fiscal sustainability, fiscal consolidation, fiscal austerity are in the media almost every day without fail. The mainstream version of fiscal responsibility is based on false premises and is not an applicable guide for sovereign governments to base their policy decisions on. MMT provides a coherent fiscal position for governments to aim for. In this blog, I juxtapose that position with the sort of narrative that is now coming out of the OECD with renewed vigour – after they went a bit quiet once it was clear they were exposed by the magnitude of the economic crisis. But they are back, strutting and arrogant as before and threatening the jobs of millions. So here is the full employment fiscal deficit condition that makes a mockery of the IMF and OECD narratives.
Everyone is lining up to be the next Japan – the lost decade or two version that is. It has been taken for granted that Japan collapsed in the early 1990s after a spectacular property boom burst and has not really recovered since. The conservatives also claim that Japan shows that fiscal policy is ineffective because given its on-going budget deficits and record public debt to GDP ratios the place is still in shambles. I take a different view of things as you might expect and while Japan has problems it demonstrates that a fiat monetary system is stable and we should be careful comparing Ireland, the US or the UK to the experiences that unfolded in Japan in the 1990s and beyond.
Over the weekend, Iceland once again showed some pluck and rejected an onerous agreement to repay debts incurred by the failed private banks to the British and Dutch governments. The Icelandic government has been trying to lumber the population with these debts largely because the politicians aspire to join the Eurozone and they have been willing to sacrifice the welfare of their own population in pursuit of that misguided goal. According to Iceland Statistics there are (as at January 1, 2011) – 318,452 people living in Iceland with 23,596 between the age of 0-4 years; 21,194 in the 5-9 years cohort and 21,802 10-14 year olds. That is 66,592 children that the people of Iceland have decided not to burden with debt obligations.
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.
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 six questions. Your results are only known to you and no records are retained.
Yes, I am back to letter writing. This time I am writing a letter to the US Congressman Paul Ryan who has enjoyed a wave of publicity this week after releasing his Path to Prosperity Report which outlines a radical plan to cut US federal government deficits and debt. I just thought he might like some advice and make some edits to the plan. I guessed he probably rushed to get it out into the public domain and left a few i’s undotted and some t’s uncrossed.
The Australian Bureau of Statistics (ABS) released the Labour Force data today for March 2011 which sends some very positive signals unlike the mixed news we have been receiving over the last few months. Overall, my interpretation of the data is that the labour market is adding jobs and providing some modest scope to reduce the huge pool of unemployed. Full-time and part-time employment growth was positive and the participation rate rose slightly – a virtuous duet. Total hours of work rose for the month. But despite the media narrative that we are now “below” full employment. The bank economists were claiming this meant that the RBA should put interest rates up. My view is that there is a lot of slack left in the economy. A stunning aspect of this observation is that teenagers continue to suffer employment losses having lost 86 thousand jobs overall since the crisis then recovery began. The other reality is that employment growth is barely keeping pace with population growth so unemployment is hovering at high levels – at at time when we should be really eating into it. Given related data series recently, the RBA would be mad to increase the interest rate.