Older workers in Australia taking on more work, while in Britain they are bailing out

It’s Wednesday and a few items caught my interest in the last few days. I have been besieged with requests to comment on the Bank of Japan’s announcement yesterday to widen the range in which it conducts yield curve control for the 10-year Japanese government bond yield. Some of the besiegement (which means in English – aggressive pressure or intimidation) claims that the decision shows the private bond investors have finally won and is the last nail in the Modern Monetary Theory (MMT) coffin. If the senders were comics, they would be very funny. Otherwise, it signals a sad reluctance to face reality. It is called yield curve CONTROL for a reason. Anyway, I will analyse the decision for my readership tomorrow I think. Today, though, I saw two pieces of data that demonstrate the impacts of Covid and inflation on two different labour markets. In Australia, they are now calling it the ‘great unretirement’ as older workers flood into the labour market in recent years – allegedly, so the spin goes because of by “more favourable workplace conditions”. I think there is more to it than that. Over the other side of the World in freezing cold Britain, it appears that the impacts of Covid (“rising sickness”) have, in part, been responsible for an “exodus of more than half a million people from the British workforce”, which means the growth capacity is now more limited. These are interesting trends that need thinking about.

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A podcast on Japan and MMT

I have a major reporting deadline today and also have to travel interstate, which means I have no spare time at all. So for today, I am promoting a Podcast I recorded a few weeks ago with Steve Grumbine at Real Progressives. We talked about my recent period living and working in Japan and questions of culture and Modern Monetary Theory (MMT). The discussion goes for just over an hour and you can shorten it by fast tracking with volume set to zero the musical introduction and the musical intermission. Steve’s tastes (heavy metal) are quite disturbing (-: I would sooner like a nice quiet jazz oriented introduction. So save yourself some time and skip the music!

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The Weekend Quiz – December 17-18, 2022 – answers and discussion

Here are the answers with discussion for this Weekend’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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Australian labour force – stronger employment growth defying RBA interest rate hikes

The Australian Bureau of Statistics (ABS) released of the latest labour force data today (December 15, 2022) – Labour Force, Australia – for November 2022. The labour market continued to improve in November 2022 with employment rising relatively strongly by 64,000 (0.5 per cent) on the back of strong full-time and part-time employment growth. The participation rate also rose by 0.2 points, which meant the change in the labour force was larger than the change in employment, and as a consequence, official unemployment rose. There is some evidence that more people are taking on extra work to cope with the cost-of-living pressures. While all this suggests a fairly tight labour market, the underlying (‘What-if’) unemployment rate is closer to 5.1 per cent rather than the official rate of 3.4 per cent. There are still 1,325.5 thousand Australian workers without work in one way or another (officially unemployed or underemployed). The only reason the unemployment rate is so low is because the underlying population growth remains low after the border closures over the last two years. But that is changing as immigration increases.

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US inflation has peaked and monetary policy had nothing much to do with it

It’s Wednesday, and I have two things to write about briefly before exposing readers to some more music. First, the evidential base for my ‘this inflationary period is transitory’ narrative gains more weight. The latest CPI data from the US Bureau of Labor Statistics shows that inflation has peaked in the US and falling rapidly in the goods sector, which started this episode off. The second topic relates to measuring progress in the development and spread of new ideas. It is often difficult to know how far a new framework has penetrated the broader debate. But sometimes things happen that remind me of how far we have to go in changing the framing and language surrounding fiscal capacity and the related topics, that Modern Monetary Theory (MMT) has brought to the fore. We finish with some calming guitar playing.

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The poorest nations are increasingly beholden to the hedge funds

We kid ourselves when talking about change. I see a lot of Op Ed material recently from the so-called Left that seems to suggest, for example, that those concerned about climate change are really just handing the keys to capital who will use the appetite for ‘change’ to impose punitive policy shifts that will damage the poorer households and communities, while at the same time, strengthen the elite control over income distribution and governments. There are elements on the Left that also think we can ‘heal’ Capitalism – somehow by redefining what ‘capital’ means. This morphs into an assertion that the major problem is that private banks can create credit at will such that we have allowed ‘allowed the credit commons to be privatised’, which in turn drives an unsustainable need for growth to continue to pay interest. I will comment more on that idea in another post – as part of my Degrowth series. But the relevant point here is that Capitalism has created institutions that work to perpetuate the power relations that define who owns capital. These institutions extend to the multi-lateral, government funded organisations such as the IMF and the World Bank, who now function quite differently to the way they were originally conceived. I was thinking about that while reading the latest World Bank publication – International Debt Report 2022 (released December 6, 2022) which captures what is really wrong with Capitalism and leads one to conclude that ‘healing’ requires killing the patient!

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The Weekend Quiz – December 10-11, 2022 – answers and discussion

Here are the answers with discussion for this Weekend’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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The monetary institutions are the same – but culture dictates the choices we make

In discussions about the significant differences that we have observed over the last 30 odd years between the conduct of economic policy in Japan and elsewhere, the usual response from mainstream economists, when challenged to explain the outcomes in the former nation, is that it is ‘cultural’ and cannot be applied elsewhere. I always found that rather compromising because mainstream economics attempts to be a one-size-fits-all approach based on universal principles of maximising human behaviour. So, by admitting ‘cultural’ aspects to the discussion, this is tantamount to admitting that the ‘market-based’ micro founded approach to macroeconomics is incapable of explaining situations. That is the first black mark against the veracity of mainstream theory. But when one prods further, it becomes clear that the term ‘culture’ is fairly vacuous and blurred in this defense of the mainstream framework. I respond by pointing out that essentially the monetary system dynamics in Japan are identical to the way the system works elsewhere. The institutions might have subtle variations but essentially the operations are so similar that the ‘culture’ bailout doesn’t help resurrect the appalling lack of predictive accuracy when it comes to examining the macroeconomics of Japan. Cultural aspects, however, are crucial to understanding the differences. The trick is understanding how these monetary and fiscal institutions are managed. This is where the cultural aspects impact. And, while I have learned a lot about Japanese cultural nuances, some of the more important ‘cultural’ drivers are transportable to any nation – if only we cared enough and valued people in the same way.

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