Today a relatively short blog buts lots of different colour graphs. I have been going through the updated IMF growth forecasts released on January 26 and doing some projections of what this might mean for the capacity of this growth to reduce the unemployment rate. Like any projection exercise you have to make assumptions. And it seems that there is still quite a bit of dispute about whether we are going to recover fairly steadily or keep skidding along the bottom in 2010 with tepid growth in 2011. The IMF are the most optimistic around at the moment and as you will see, even this level of optimism doesn’t paint a very good labour market picture.

Today is a national holiday in Australia (more about which later). In the lead up to the US President’s State of the Union speech tomorrow came news that he was planning to freeze public spending from next year to get the budget back on track. I wondered what track that might be. Governments all around the world are now being pressured by conservative lobbies to engage in a renewed period of fiscal austerity even though the respective labour markets are disaster zones. History has a habit of repeating itself. The US government did exactly this in 1937 and the unemployment worsened. Japan did it in 1997 with the same outcome. The UK government is likely to do it in 2010 with totally predictable results – their economy will falter. What the US government is now in danger of repeating is taking its economy down the fast track to a double-dip recession. It is plain stupidity and the “freeze” doesn’t reflect the reality they are in.

Today I delve into the world of financial advice by E-mail. There are a growing number of subscription lists that people are exhorted to join to receive the latest in analysis from so-called experts. Most of it would qualify as spam. They seem to follow a formula – stir the emotions, offer great deals (which appear to be the motive – to make money), and spread dangerous half-truths and total fallacies. I get a lot of E-mails myself from readers asking me to comment on some of the claims that they have been reading in these “products”. So today I thought I would meet those requests by focusing on a particular newsletter that is broadly representative of the genre. My advice is to avoid wasting your time on these lists and read billy blog instead!

Ahh … the Great Moderation – now wasn’t that a laugh. Today I have been examining data in preparation for a new project I am beginning on inflation response functions. Thinking about the data made me recall the sheer arrogance of my profession. And an article in the Melbourne Age prompted this further by way of coincidence. The idea that the economics profession had solved the business cycle by implementing inflation targetting-type policies and pursuing fiscal austerity was the flavour of the late 1990s and early 2000s. I was even told several times in the last decade that I was mad running a research centre which focused on unemployment because that problem had been solved too. Economists of my persuasion were regularly ridiculed at conferences and meetings. And then … the crisis struck confirming everything that us “idiots” had been saying for more than a decade. And yet, the chief proponents of the Great Moderation lie still aspire to top public office.

The news that the Democrats lost their long-held and iconic Massachusetts Senate seat has had the news services in apoplexy this week. One gets the impression from listening to the mainstream media, which is becoming more right-wing by the day, that the US President is on his last legs. The so-called progressive reaction seems to be that the “reform” agenda now has to be scaled back and a fiscal consolidation is required to steady nerves. While it is hard to actually see a progressive reform agenda in any country anyway, the more immediate danger is that the fiscal support that has been keeping our economies afloat all around the World will be withdrawn. The share markets are back, Goldman have record profits … so the crisis is over … That message dominates the business news. That the progressive side has not been able to take overwhelming command of the public debate, given the scale of the crisis and the fact that the neo-liberals/neo-cons etc have all been caught red-handed, is a stunning reflection of its obsequious and disorganised organisation. We need something very different to happen if things are not to revert to where they were.

I am going to start a public campaign to help our friends in the financial markets. I would like all caring citizens to start donating comics and other light material and send it to the business houses so that the workers can actually read something productive during there time in the offices rather than the usual stuff that circulates. Unfortunately the usual so-called analysis spreads out into the wider research world – which means I read it too. Today we consider a classic case of manipulation to make a case. A denial of the empirical reality, a spurious claim to an historical relationship, and an assertion of an authority – the “bond markets” – that ultimately doesn’t exist. Classic propaganda but some lessons to learn as well.

As one dead-end traps the mainstream deficit terrorists’ relentless “hyperinflation is coming”, “the deficits are large and unsustainable” campaign another road is opened. New ways are found of pushing the same boring message. I read several papers and article today that all try to come up with a new tack – a new way of scaring the bjesus out of us and steer our minds towards what they assert is misguided government policy. They actually just don’t like any government claim on real resources because they think there is less for them then. Even when they don’t want to create jobs for the unemployed they resent government employing these people because it would just be a “waste of resources”. Its got worse as I read on. I tell you keeping up with all this stuff is surely going to be “a hard road till I die”.

Today I have been working in the Australia’s national capital Canberra. I have been discussing the work I am doing to develop a new geography for Australia based around the concept of functional economic regions with the Australian Bureau of Statistics which is currently seeking to revise their own geography along similar lines. You can find out about this work if you are interested via the CoffEE Functional Regions homepage. It will provide you with quite a different perspective on my other research interests beyond macroeconomics. Anyway, on the plane I was reading some monetary analysis and recalling a blog from the weekend by our favourite (not!) macroeconomics textbook writer. I started humming Take the power back to myself as I considered the damage this sort of textbook is doing to the minds of our students and the future policy makers.