Central banks should just write off all their government debt holdings

The tensions in the public policy debate between economists is intensifying and on show in Europe, where these sort of obvious conflicts between adherence to dogma and a recognition that ‘out-the-box’ solutions are not only possible but preferred. More of these latter thought offerings are starting to appear as more people come to understand that the mainstream dogma has become more of a security blanket for reputations rather than saying anything about reality. One such proposal emerged last week in the form of a letter to the major European newspapers signed by more than 100 economists and politicians calling for the ECB to write-off its massive public debt holdings, which currently amount to around 25 per cent of total outstanding public debt. It is a good idea but some of the framing leaves a lot to be desired. At any rate, central banks everywhere should be buying up massive amounts of government debt and hitting the keyboard with zeros and writing it off. The world would be a much better place if they did that.

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The Weekend Quiz – February 13-14, 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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Using a regional lens reveals the uneven impact of the COVID employment crash

Today, we have a guest blogger in the guise of Professor Scott Baum from Griffith University who has been one of my regular research colleagues over a long period of time. Today he is writing about the uneven impact of the COVID employment crash. This theme – the spatial unevenness of fluctuations in aggregate economic activity – is one we often explore (in our past research together) because understanding these patterns is essential for designing appropriate policy interventions. It is one of the reasons we both favour employment creation programs that respond to local conditions, like the Job Guarantee. It is also the topic a new large grant application that we are currently putting in (as part of the annual funding circus in Australia). Anyway, while I am tied up today it is over to Scott …

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When progressives remain regressive

It is Wednesday and I have been tied up all day working on the MOOC that will be launched in early March. We have been filming a lot and it is starting to take shape (see below for more details on how you can enrol). So just a light blog day but that doesn’t mean what I am writing is trivial. The two stories demonstrate how far we have to go on the progressive side of the debate before we actually make progress. It is, unfortunately a repeating tale and it is hard to define a strategy that will get through the blockades that some progressives erect that sustain neoliberalism at its most elemental level. While the British Labour Party is aiming to reinvent itself by pitching its message at the worst element of the voters that it has lost in recent years – patriotism, flags etc – that sort of nonsense – progressives in Australia are revealing how regressive they can be.

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A very dangerous variant of the global virus is spreading again after being subdued throughout 2020

There is a new variant of the global virus spreading again after being subdued throughout 2020. This is a very dangerous variant and if it takes hold will guarantee massive human suffering, and, a further, substantial shift in national income towards the top-end-of-town. I refer to the creeping infestation that is starting to pop up claiming that austerity will be required to pay for all the “profligacy” associated with government approach to the pandemic. I have seen this virus in the wild and it is creepy and being spread by those who seem to want to gain attention as time passes them by. Overheating threats, austerity threats – it is all part of the economics establishment trying to remain relevant. A vaccine will not work. They need to be permanently isolated.

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US labour market in dire straits – overheating potential – zero

Payroll employment highly subdued. 408 thousand workers exit the labour force due to lack of jobs. Overheating potential zero. In last month’s assessment – US labour market – things are getting worse again as the virus spreads (January 18, 2021) – I predicted things would get worse given the trajectory of the virus. I have formed a strong view that nations have to deal with the health issue before they can expect the economy to open up again. No nation can ignore a spiralling death rate and avoid some restrictions which damage the economy. The evidence demonstrates that the nations that have largely suppressed the virus are doing the best in economic terms. Last Friday (February 5, 2021), the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – January 2021 – which is consistent with my prediction. Payroll employment growth has slowed rapidly (only increasing by 49 thousand). But the labour force survey data is a bit difficult to interpret this month due a population benchmarking changes (see below). In terms of the household survey, employment rose by 201 thousand and the labour force was reduced by 408 thousand, meaning that official unemployment fell by 606 thousand and the unemployment rate fell by 0.4 points. Taking out the population control effect, the labour force shrank by 200 thousand. While the signals are a little confused, the data is showing there is no strong recovery going on at the moment as the health crisis intensifies. There is an elevated degree of excess capacity. I consider that the US will have to stabilise the health situation before they will be able to sustain any economic recovery. And we can disregard New Keynesian macroeconomists who are suffering from attention deficit problems it seems, and claiming that the economy is close to overheating and cannot absorb the proposed stimulus from the new Administration. The stimulus is actually too little!

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The Weekend Quiz – February 6-7, 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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Unemployed in Australia forced to live in abject poverty and the business sector thinks that is fine

Last week (February 1, 2021), the Australian Chamber of Commerce and Industry, which represents the business lobby, demanded the Australian government cut the unemployment benefit back to less than $A40 per day but at the same time it also demanded the Government extend wage subsidies to businesses. It is repugnant that the business culture in Australia is so impoverished, that the key business lobby group wants unemployed workers who cannot get a job because there are not enough jobs on offer to be forced to live at income support levels that are well below conventional poverty lines. But, at the same time, it supports businesses putting their own hands out to government for more. It is also stupid. They don’t seem to realise that providing an environment for strong wages growth produces the best conditions for profits. Yet these characters just want to accelerate the ‘race to the bottom’ which is a self-defeating strategy.

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