The IMF is all at sea, stuck in its ways, and sending conflicting signals

Last week, I wrote about how the IMF is presenting a somewhat nuanced view these days. See – IMF now claiming continued inequality risks opening a “social and political seismic crack” (April 21, 2021). But, there was a warning for those who might think this suggests the institution is leaving its mainstream macroeconomics past behind them though. Rather, I think what is going on is a series of ad hoc responses to the growing anomalies that the institution faces between the observed reality and the sort of predictions it has been making based on its core paradigmatic approach. We are observing a specific form of dissonance in many of the current contributions coming out of mainstream economics. This takes two forms: (a) an incomplete response to the current situation (pandemic, GFC aftermath, climate change) where there are conflicting signals being sent; and (b) a tortured attempt to absorb pragmatic narratives within a theoretical structure that cannot consistently accept that absorption. The IMF’s latest blog post (April 20, 2021) – A Future with High Public Debt: Low-for-Long Is Not Low Forever – is a good example of both forms of this dissonance.

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The Weekend Quiz – April 24-25, 2021 – 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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German Bundesverfassungsgericht decision is no victory for EU federalists

The banner on the home page of the German citizens’ group – Bündnis Bürgerwille e.V. – says “Recht gilt auch in der EU” (Law also applies in the EU) and the sub-header “EU – Verträge müssen eingehalten werden” (EU treaties must be complied with). I have sympathy for that sentiment but not the politics of the so-called ‘Citizens’ Will Alliance’, which recently sought to block German government approval of the much vaunted, much delayed, fairly small recovery plan. The mainstay of the EU is the Eurozone because it comprises 19 of the 27 EU nations and the largest nations. The dynamics of the EU economy are driven by what happens in the largest Member States of the Eurozone. The European Commission has been dithering for more than a year to get a fiscal stimulus plan in place and by the time it eventually gets the pittance proposed flowing, significant economic and social damage will have been done, given that if all 27 states ratify the plan, funds (loans mostly) will only start flowing in July – like 18 months after the pandemic began. The Bündnis Bürgerwille group has challenged the German participation in the German Constitutional Court, the Bundesverfassyngsgericht, which delivered its (interim) decision last week. Bündnis Bürgerwille lost, or did they?

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IMF now claiming continued inequality risks opening a “social and political seismic crack”

It is Wednesday and I have had lots of unscheduled commitments (that just come out of the blue) to attend to today. So not much writing. I did have time to read the latest IMF – Fiscal Monitor, April 2021 : A Fair Shot – which was published on April 7, 2021. The schizoid nature of this institution continues to evolve and it will be hard for the austerity mavens to unambiguously use it as a cover for their arguments when they resume their call for public sector spending cuts etc. Music follows.

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The Brexit predictions of doom are proving to be wildly inaccurate

When the British Office of National Statistics published the January 2021 trade figures in March, the first after Brexit was finalised, they showed a 42 per cent decline in UK exports to the European Union. Exports fell by £5.6 billion and imports fell by 28.8 per cent or £6.6 billion. it was the worst monthly drop since records were first published on a monthly basis in 1997. The Remain crowd went berserk and the ‘I told you so’ chorus was raucous. I wonder where there voice has gone now the February 2021 trade figures show a 46 per cent rise in UK exports to the UK. Boats and trucks are carrying goods to the EU from Britain still. We shouldn’t take the monthly data too seriously, especially as it has been complicated by the transition arrangements and COVID. There will be costs from the change in border arrangements. But the predictions of doom are proving to be wildly inaccurate. I have my flame suit standing by.

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Dr Die Schwarze Null still not thinking beyond more austerity

Project-Syndicate recently published the latest Op Ed (April 16, 2021) from former German finance minister and current President of the German Bundestag, Wolfgang Schäuble – Are We Risking a Debt Pandemic?. He is the person who personified the so-called ‘die schwarze null’ (Black Zero) while finance Minister. His conduct as finance minister was an instrumental element in extending the GFC across the Eurozone. He is still influential in European politics and his latest Op Ed makes it clear that the austerity mindset is still alive and well despite the current relaxation of the Stability and Growth Pact rules during the pandemic. The problem is that if Europe reverts back to that mindset, the essential changes to the monetary union that are necessary to make it viable will never be discussed. It will be just more of the same. And that same is pretty ordinary for the common folk across the EMU.

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The Weekend Quiz – April 17-18, 2021 – 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 market – recovery continues but storm clouds on the immediate horizon

The latest data from the Australian Bureau of Statistics – Labour Force, Australia, March 2021 – released today (April 15, 2021), shows that the Australian labour market continues to recover – and while the recovery had stalled a bit over the latter part of 2020, the March result builds on the strong February result. Employment increased by 0.5 per cent (70,700) in the month and unemployment fell by 27,100 to 778,100 persons. As a result the unemployment rate fell by 0.2 points to 5.6 per cent, even though participation rose by 0.2 points. Overall, a good outcome. The main uncertainty now is that the recovery to this point has been dependent on government fiscal support, which ended in March 2021. Given the labour market is still quite a margin from where it was in March 2020, the idea that the government would withdraw its fiscal support is not a compelling option. We will see the first results of the fiscal withdrawal in the next month’s data and I expect things to not look as rosy as they are this month. Further, undertainty has now entered the equation as a result of the vaccination bungling by the federal government. We will see how that plays out in the coming months. Overall, the recovery is still too slow and more government support by way of large-scale job creation is needed.

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