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.
Welcome to The Weekend Quiz. The quiz tests whether you have been paying attention or not to the blog posts that I post. See how you go with the following questions. Your results are only known to you and no records are retained.
Last Thursday (March 26, 2020), the European Council met to discuss the way in which the European Union would deal with the coronavirus crisis. Not much happened. Well that is not exactly true. A lot happened in the sense that even when faced with the worst health crisis in a century that is already devastating the populations in Italy and Spain and creating economic havoc throughout, the leadership split along familiar lines and failed to come up with any solution. There was a lot of talk about solidarity and all the buzz words that the European leadership frequently outputs in their wordy statements. But very little action and lots of acrimony, division and back to form behaviour. My view is that the Member States should now just do whatever they consider it takes to bolster their health systems and protect their economies, which will involve significant fiscal deficits (multiples of the allowable limits under the Stability and Growth Pact), and trust that the ECB’s unlimited bond buying spree will back them. And when the Brussels technocrats start talking about Excessive Deficit Mechanisms and the rest of the blather, they should just show them the door. And if push comes to shove, they just should exit the whole rotten structure. But now is the time for defiance and disobedience. Now is the time that democracy fought back and told the elites to be quiet.
Today is Wednesday and I have been tied up a lot with various meetings – all on-line these days. I don’t enjoy them as much as face-to-face, given that I spent a considerable part of each day in front of my computer or with my head in books and so the human contact is a welcome variation. But needs must, as they say. Anyway, just a few snippets today, being Wednesday. I can say that in between all this Zooming and writing, I have now nearly put together a complete on-line learning system which I am now trialling. This will be the support platform for – MMTed – which I hope to make operational sometime in the coming months. One of the issues that I touched on yesterday, which is now starting to crawl out of the slime, is the “what will happen to all the debt when the crisis is over” story. And, it is not just a narrative being promoted by the Right or the conservatives. The Federal Labour Party spokespersons and those hanging around the edges have started to push the narrative. As the Prime Minister told us the other day in relation to the people who are panic buying “Stop it! It’s Ridiculous!” I think he was actually talking about those (morons) who are starting the deficit hysteria before the deficits have even actually risen much. For their own health, I urge them to “stop it”. Imagine how apoplectic they are all going to be once the deficit goes to 10 per cent or more and the RBA is buying up all the debt. My god.
The buzz-word at the moment in Australian government and policy circles is ‘hibernation’ – the government is hoping, that the economy can behave like a crocodile and find some ‘river bank’ and have a ‘good sleep’ until the pandemic is over, at which time, it will burst forth into a new growth phase and unless the virus mutates into something worse in the meantime then all will be well. Their policy interventions to date – while they have been like dragging a chain as their conservative instincts are being dragged very quickly into the demands and realities of real world macroeconomics, which is different to the nonsense that is taught by mainstream economists in our now depleted universities – have been crafted to ensure nothing important changes in a structural sense in our socio-economic lives. The problem is that the existing system, which they are hoping to put into hibernation for a while, is putrid to the core and needs major changes if we are to achieve a socio-ecological transformation. Remember the failings of neoliberalism? Remember climate change? Remember the poles melting? Remember the engineered cuts to workers who rely on penalty rates at weekends to maintain a sense of material prosperity? Remember the 13.7 per cent labour underutilisation rate? Remember the failed public transport and energy sectors, privatised and lacking in investment? Remember the financial markets that were exposed by the recent Royal Commission as corrupt, inefficient and downright dangerous to the our material and psychological prosperity? We don’t need a hibernation. We need the Government to take advantage of the dislocation that is currently occurring to make some basic changes. Like wiping out the gig economy. Like … read on. At present, the stimulus interventions, which are mostly about saving capitalism from itself. We should be demanding much more.
Modern Monetary Theory (MMT) has been gaining more attention in Australia in recent weeks. I have been shifting my face-to-face speaking commitments slowly to on-line presentations. I will be announcing more systematic MMTed classes beginning via the Internet soon. And I will do some Live Youtube presentations as well. Last week, the well-known financial market journalist Alan Kohler used his weekly column in The Australian newspaper to discuss MMT – It’s Modern Monetary Theory time as the state steps in (March 23, 2020 – subscription required). Apart from his private corporate work in the financial markets (he writes a regular briefing and does an inflight business report for Qantas), Alan presents the finance report on the national broadcaster ABC nightly news program. He is also a regular columnist in the business pages. So he has high profile. I discussed my concerns with Alan’s representation of MMT in this blog post – It’s Modern Monetary Theory time! No, it always has been! (March 23, 2020). We made contact soon after that – I E-mailed him to tell him I had written a response to his column and he rang me and we arranged to talk further. On Wednesday last week (March 25, 2020), we spoke as part of Alan’s regular podcast – published at Eureka Report (which is a subscription business service). The 48-odd minute is also published here with some additional commentary.
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.
Welcome to The Weekend Quiz. The quiz tests whether you have been paying attention or not to the blog posts that I post. See how you go with the following questions. Your results are only known to you and no records are retained.
Major developments across the globe in monetary and fiscal policy keep happening on a daily basis at present. We are now hearing conservatives, who previously made careers out of claims that government deficits would send nations broke and more, appearing in the media now claiming “We need the state to bail out the entire nation”. Not too many economists are pushing the line that the market will deal with this crisis. They all the want the state to be front and centre as their own personal empires (income etc) becomes vulnerable. In a normal downturn there is not much sympathy for the most disadvantaged workers who bear the brunt of the unemployment. Now it is different. This crisis has the potential to wipe out the middle classes and the professional classes. And suddenly, who would have thought – the nation state is apparently back, all powerful and being begged to intervene. It is wake up time. Now no-one can be unclear about the fiscal capacity of the state. They now know that politicians who claim they don’t have enough money to do things were lying all along. They just didn’t want to do them. And when this health crisis was over we have to demand that the governments continue to lead the way financially and work out solutions to the socio-ecological climate crisis. No-one can say there is not enough funds to do whatever it takes. We all know now there are unlimited funds. The question must turn to the best way to use them. I also provide in this post some further estimates of the labour market disaster that Australia is facing as part of the development of my 10-point or something plan. It is all pretty confronting.
Today is Wednesday which means it is my short blog post day. I have been travelling a lot today. By the way, there are still some things which cannot be attended to via the Internet, Zoom or otherwise. As I continue to calculate various things along the way to my 10-point or something plan which I hope to have final by next Monday. But with limited time today as I dodge and weave to avoid the virus, I have been reading a lot of the research literature about modelling epidemics. It is quite interesting and nurtures my penchant for modelling, estimation, numerical forecasting etc. But it has helped me understand the reason governments are now inflicting massive economic damage on our nations in the name of ‘flattening the curve’. I cannot say I know much about all this. But I know more than I did a week ago. Knowledge is good. And, generally, you get that from the scientific research literature rather than blogs and Twitter. I exclude economics (unless it is about MMT) from that recommendation. Back with my unemployment modelling tomorrow.