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Latest IMF report on Australia is food for uncritical and lazy journalists but garbage nonetheless

The IMF regularly conduct ‘missions’ to member countries, where a group of highly paid economists trot out to a capital city somewhere, hole up in some luxury hotel, and have a few meetings with Treasury officials and the like and then shoot through after the short visit back to whence they came and produce their report. On October 31, 2023, the IMF published – Australia: Staff Concluding Statement of the 2023 Article IV Mission – which attracted a lot of mainstream press attention in Australia. The message that the public received was summarised in this article – International Monetary Fund says Australia needs higher interest rates. The article carried no qualifications or reflection on the methodology. The journalists who have a high profile in the mainstream national media sanctioned without question the IMFs conclusions. That is what goes for information in these times. It is an assault on our collective intelligence really.

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Bank of Japan shifts ground – just a little but there is no sign of a major adjustment any time soon

It’s Wednesday and I use this space to write about any number of issues or items that have attracted my interest and which I consider do not require a detailed analysis. The issues discussed may be totally unrelated. Today, I provide my response to yesterday’s decision by the Bank of Japan to vary its Yield Curve Control (YCC) policy, which some commentators are frothing about. The change was very minor and is not a sign that the expansionary position of the Bank is shifting significantly. I also discuss the culture of denial in the US State Department and then rock out to come classic swamp.

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US national accounts data – no sign that interest rates are working the way economists think they work

On October 26, 2023, the US Bureau of Economic Analysis published the latest US National Accounts figures – Gross Domestic Product, Third Quarter 2023 (Advance Estimate) – which showed that “Real gross domestic product (GDP) increased at an annual rate of 4.9 percent in the third quarter of 2023”. The June-quarter 2023 growth rate was 2.1 per cent. There was broad-based growth in all the expenditure components, including those that would be most sensitive to interest rate rises. My prior, of course, is that the interest rates would not significantly reduce growth in the short run, whereas mainstream New Keynesian theory considers interest rate rises to be an effective tool in moderating total spending, and, in turn, reducing inflation. The reality does not support the mainstream proposition. Consecutive national accounts releases from the US, however, have shown that aggregate expenditure is resilient in the face of the interest rate increases.

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The Smith Family manga continues – Episode 2 is now available

Yes, you have been waiting all week to see how the Smith Family was faring as they struggle to work out where the government currency comes from. Well, Episode 2 in our new weekly Manga series – The Smith Family and their Adventures with Money – is now available. Have a bit of fun with it and circulate it to those who you think will benefit …

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Video conversation – Seeking Full Employment Without Falling Prey to Neoliberal Traps

Given I wrote a detailed CPI analysis yesterday (Wednesday), I am using today as if it was my Wednesday post where I cover a range of topics. I was criticised on social media last week for combining in last Wednesday’s post – Launching the CofFEE Financial Resilience Barometer – Version 1.0 (October 18, 2023) – scientific material (the research project results) with commentary on the current situation in the Middle East (and music etc). I was accused of trying to drum up traffic to the research site by including an unrelated discussion on a topical matter (the situation). The point is that in my usual Wednesday post I just roam free and write about all manner of topics that I have thought about in the previous week and which I don’t want to devote a full post too. I don’t play games such as clickbait etc. Anyway, today, I promote a video of a long interview I did in September that has just been released, talk about some framing issues and provide the usual musical segment to calm us all down.

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Slight rise in Australian inflation rate driven by factors that do not justify further rate hikes

Today (October 25, 2023), the Australian Bureau of Statistics released the latest – Consumer Price Index, Australia – for the September-quarter 2023. The data showed a slight uptick in the quarterly rate of inflation with the CPI rising by 1.2 per cent (up 0.4 points), largely due to petrol price rises and rental increases. The latter is, in part, driven by the previous RBA interest rate hikes – so monetary policy causing inflation rather than reducing it. The annual inflation rate, however, was significantly lower again in the September-quarter as the supply-side drivers abate – down to 5.4 per cent from 6.1 per cent in the June-quarter. While the RBA has been threatening further rate hikes if the new data showed an increase in the inflation rate, there is nothing in this quarterly release that would justify that. The fuel prices are not sensitive to domestic monetary policy and further rate hikes will make the rental situation worse.

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Neoliberalism has not been about applying Chicago-style economic theory

Scottish-born economist – Angus Deaton – recently published his new book – An Immigrant Economist Explores the Land of Inequality – in which he provides a swathing critique of the state of the economics profession, particularly in the way that it impacts on policy making and societal well-being. He is a microeconomist who made a name for himself studying consumer demand, which means he has not contributed anything significant to the field of macroeconomics, where I hang out. The title refers to his migration to the US from Britain in the 1980s and his reflections on what he found and how the economics academy has changed over this 45 years in the profession. His point is that the economics profession has lost its purpose and should return to a focus on advancing well-being. He is particularly critical of Chicago-style economics – or ‘free market’ thinking. The problem though is that the neoliberal era has not been about applying Chicago-style economic theory. The elites just say they are doing that when in fact all they are doing is utilising the immense government capacity to shift the intervention dial in their favour. The government has not given way to the free market – it has just been reconfigured to become an agent of capital.

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