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.
I am Australian but not a proud one. That doesn’t mean anything other than I don’t consider nationalism to be a particularly appealing trait. I would perhaps defend our borders from attack and I prefer Australia winning at sport than the English (but not the West Indies!). But when I read a newspaper headline (March 24, 2011) – Australia tops index ranking for maintaining strong fiscal balance – I feel ashamed that I live in such a nation. Given the methodology that went into construct this index, Australia would be better off being down the bottom of the rankings – by choice rather than inaction. Just when you thought the public debate about fiscal policy couldn’t deteriorate any further … it plunges to new depths. This index is published in a new “study” (I would not actually give it the gravitas of a study) – is actually an exercise in reductio ad absurdum ad infinitum aka total BS.
I am travelling today and have commitments which will take me into the night. So I have limited blog time. But there is always something to say and while I might say the same thing often I figure that there are thousands of commentators to my one who all say the same (different) thing every day. Anyway today you will learn that the Japanese government can call on the central bank to buy its bonds whenever it wants. You will also learn how crazy the British government is and how obsessive compulsive behaviour locks a nation into slow growth and entrenched unemployment. We’re sticking to our strict fiscal rules – no matter what! Simple conclusion for today – the budget madness continues.
So I guess it is time to build those very large bon-fires and burn all the mainstream macroeconomics textbooks that have poisoned the minds of millions of students for years. Mankiw, Blanchard, Barro to name a few. Burn them all. I also think it is time to delete all the computer code that supports mainstream economics models. My long-held belief that these actions would be educative and liberating have been ratified by a recent IMF conference that seems to have concluded that “the macroeconomic models that had been relied upon in the past and had informed major aspects of monetary and macro-policy had failed”. So all the supporting literature needs to be deleted. I am now advocating biblioclasm …
I am working on our textbook today and writing a chapter about one of my favourite topics – the Phillips curve – which describes a relationship between some measure of inflation (wage, price) and some measure of excess supply of labour (usually the unemployment rate). I wrote my PhD about the Phillips curve developing models which demonstrated the inadequacy of the mainstream macroeconomics take on the subject. Today I read a strange tale in the UK Guardian – ONS inflation slip-up leaves millions out of pocket – which has some relevance to the chapter I am working on at present. The point is that if you believe the mainstream neo-liberal economic theories that are forced onto students in our universities around the world then you might expect a massive drop in the UK unemployment rate right now. Why? Read on.
Some time ago I started a theme “When you’ve got friends like this” which focuses on how limiting the so-called progressive policy input has become in the modern debate about deficits and public debt. Today is a continuation of that theme. The earlier blogs – When you’ve got friends like this – Part 0 – Part 1 – Part 2 and Part 3 – serve as background. The theme indicates that what goes for progressive argument these days is really a softer edged neo-liberalism. The main thing I find problematic about these “progressive agendas” is that they are based on faulty understandings of the way the monetary system operates and the opportunities that a sovereign government has to advance well-being. Progressives today seem to be falling for the myth that the financial markets are now the de facto governments of our nations and what they want they should get. It becomes a self-reinforcing perspective and will only deepen the malaise facing the world.
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.
I stole the title of today’s blog from an article I wrote for the US weekly – The Nation – which will come out on April 4 in print. The on-line version is out now. It comes out in the same week that the nations that are leading the austerity charge – Ireland and Britain – publish disastrous labour market data. The Irish data is nothing short of atrocious some 2 years after their government led them down the austerity path promising salvation. Where are the economists who from the desks of their safe jobs were highly vocal in promoting the myth of the “fiscal contraction expansion”? Still sipping Chardonnay from their safe jobs I dare say. The article, in part, is about how these liars have convinced governments to push their economies over the brink. It is also about how the same lies that are being to used to justify the austerity barrow were used to justify the massive deregulation that led to the financial sector feeding frenzy and caused the crisis in the first place. When we will ever learn? In today’s blog I offer a video commentary on the thoughts behind the article in this blog (which as it turns out didn’t save me much time – I seem to type faster than I speak!).
A number of readers have written to me asking me to explain why the US government (and any sovereign government) should not learn the lesson of the inflation that was caused by the spending policies of the Confederacy during the 1860s in the US. They have tied this query variously in with the rising budget deficits, the quantitative easing policies of the Bank of England and the US Federal Reserve Bank, and more recently the “injection of liquidity” by the Bank of Japan as a reaction to their devastating crisis. The proposition presented is simple – the Confederacy funded their War effort increasingly by printing paper notes (and ratifying counterfeit notes from the North) and saw runaway inflation as a result. This blog examines that point. What you will learn is that the experience of the Confederate states during the Civil War does not provide an case against the use of fiscal policy or the proposition that sovereign governments should run deficits without issuing debt. The fact is that “printing paper notes” does not cause inflation per se. It might under certain circumstances. Those circumstances were in evidence in the Civil Wars years in America.