Australia – the Fourth Intergenerational Myth Report

The Australian government will release the Fourth Intergenerational Report today with much fanfare, scaremongering and lies. Our boofhead Treasurer has been doing the rounds of the media outlets giving his evangelical sales pitch on how scary the future is unless we cut the fiscal deficit now and get the balance back in surplus as soon as possible. These intergenerational reports are really a confection of lies, half-truths interspersed with irrelevancies and sometimes some interesting facts. There is very little economics in these reports. What parades as economic analysis is just the usual neo-liberal mainstream nonsense that currency-issuing governments have run out of money and fiscal deficits are dangerous. The Treasurer is selling the Report on the grounds of “intergenerational theft” (the classic anti-fiscal deficit argument about mortgaging our future grand children’s future). Apparently, this justifies large cuts to the fiscal deficit now in order to turn it into a surplus so that our future generations are left with no debt. The real intergenerational theft though is embodied in a current fiscal strategy that leaves around 45 per cent of our teenagers unemployed, underemployed or NEET (Not in Education, Employment or Training) and hacks into public infrastructure provision as a strategy to create fiscal surpluses now. With private spending subdued at present and the external sector also draining expenditure from the economy relative to its income, trying to impose fiscal austerity now in the name of defending future prosperity is a grand lie and will ensure that the future prosperity is undermined.

Read more

Australian national accounts – growth well below trend continues

The – December-quarter 2014 National Accounts data – released by the Australian Bureau of Statistics today confirms that the Australian economy was stuck in a weak growth state in the last three months of 2014. Real GDP growth grew by by a miserable 0.5 per cent in the December-quarter 2014. The annual growth rate of 2.5 per cent is being held up by the strong March-quarter 2014 result (1.1 per cent growth), which was clearly atypical. An growth rate of around 2 per cent is a more reasonable estimate of where Australia began 2015. With fiscal austerity set to worsen this year, today’s date paints a fairly gloomy picture for the Australian economy for the remainder of this year. Now is not the time for fiscal retrenchment. The government needs to stimulate the economy to boost income and employment growth and not squeeze households and lead them into more debt.

Read more

The Balanced Budget silly season is upon us again

Wasn’t Chuck Norris the muscle-bound guy with big guns and stuff who blasted the hell out of people and causes a lot of havoc? Well, apparently, he thinks he knows something about macroeconomics. In an article in the right-wing conservative media outlet WorldNetDaily (February 22, 2015) – Ready for a new U.S. Constitutional Convention? – Norris reveals what a knucklehead he really is. The article seems like an exercise in how many scary words, phrases and metaphors about government fiscal policy a writer can get into each sentence. Once you get over that there is nothing of substance left. Mr Action Man clearly needs to do some weights and leave the economics commentary to those who know even more than the slightest thing about it. American politics is once again come around to the more or less regular Balanced Budget Amendment (BBA) cycle. This is a regular comedy event that occupies Congress and all the commentators for a while as they reveal how little they know about the consequences of their grand plans for American prosperity. If they ever took it seriously it would be a disaster for the US economy and the people that depend on it.

Read more

Germany is not a model for Europe – it fails abroad and at home

Some time ago I wrote a blog – The German model is not workable for the Eurozone (February 3, 2012) where I outlined why Germany’s export-led growth strategy could not be a viable model for the rest of the Eurozone nations. More recent data shows that Germany is not even working very well in terms of advancing the prosperity of its own citizens. A recent report (in German) – Der Paritätische Gesamtverband (HG): Die zerklüftete Republik (The Fragmented Republic) – shows that poverty rates are rising in Germany and there is now a dislocation emerging between unemployment and growth and poverty rates. The reason is clear – too much neo-liberal labour market deregulation and ridiculously tight fiscal policy. Both failing policies that Germany continues to insist should be adopted throughout Europe. It would do the other Member States a service if they banded together and rejected the ‘German poverty model’.

Read more

Saturday Quiz – February 28, 2015 – answers and discussion

Here are the answers with discussion for yesterday’s quiz. The information provided should help you understand the reasoning behind the answers. 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.

Read more

Friday lay day – The superiority of economists!

Its the Friday lay day blog and today I briefly discuss economists. What a topic! There is an interesting article just published in the Journal of Economic Perspectives that examines the way economists think of themselves and other social science disciplines. It is a horror story really. Having been immersed in the profession for many years now, I sometimes forget how bad it is. Here is what the study found. The title is a deliberate double entendre. It is more about the way economists think they are superior rather than any absolute finding of superiority.

Read more

Don’t mention the war! er the Troika …

“Don’t mention the war”! was a classic line from the episode – The Germans – in the comedy Fawlty Towers. Basil Fawlty implored his meagre staff to stay silent in case they offended some German tourists staying at his hotel. His attempt at self-censorship failed and led to hilarious consequences. I was reminded of the sketch (see it below) when I was reading the – Greek finance minister’s letter to the Eurogroup (February 24, 2015). Apparently, it is now a case of ‘Don’t mention the Troika’, ‘Don’t mention the Memorandum’ and never ever talk about the ‘Lenders’. The bullying threesome (European Commission, ECB and the IMF) are now known as “the institutions” and the “Memorandum” (the bailout package) is now to be called “The Agreement” and the “Lenders” have been recast as the “Partners”. Okay, and that is progress. The Reform package surely lets the Greeks choose which nasty policy they will implement but it is still nasty. Yes, it “buys them time”. The damage from massive unemployment and poverty eats into people every day. 4 months is a long time when you are on the street starving. And by the time this agreement is done – will the Germans be happy to unleash billions of euros via the European Investment Bank to allow the Greek government to continue running fiscal primary surpluses and keep pumping interest income on outstanding debt into ‘foreign’ coffers? Pigs might fly.

Read more

National income continues to be redistributed from wages to profits in Australia

One of the salient features of the neo-liberal era has been the on-going redistribution of national income to profits away from wages. This feature is present in many nations. As I noted in yesterday’s blog – Employer group demands free labour from Government – employer groups in Australia are upping the ante and demanding that the Government provide them with free labour. It goes like this – the government runs a fiscal austerity campaign, which creates rising unemployment. They then harass the unemployed for daring to apply for the below poverty line income support. If that is not enough, then the private sector demands the Government hand these unemployed workers over to them for free to “make coffee” and other tasks. Its a lovely world that we are living in. Meanwhile there is growing pressure on Australia’s wage setting tribunals to scrap penalty and overtime rates, allegedly because they damage employment and firms are just busting to put more workers on as long as wages drop. The Australian Bureau of Statistics published the latest – Wage Price Index, Australia – for the December-quarter today and we learn that the annual growth in wages is now at the lowest level since the data series began in the June-quarter 1997. The annual hourly wage inflation is now down to 2.5 per cent overall and 2.4 per cent in the private sector. With productivity growth running slightly slower and the annual inflation rate dropping sharply in recent quarters as the overall economy slows down (and oil prices fall), the shift to profits slowed marginally in the December-quarter. But Real Unit Labour Costs (RULC) continued to fall. Further, the long-term trends are still alarming with employment growth flat or negative and unemployment rising.

Read more

Eurozone Dystopia – Groupthink and Denial on a Grand Scale – Early peek

Edward Elgar, who is publishing the English language version of the book – to be released in May 2015, sent me the proposed front and back covers for approval last night. You can guess what colours I like. Here they are for your (possible) interest and so you will easily recognise it when you go to the bookshop :-). Whether the German and Italian editions, which are currently in the process of translation, have the same cover will depend on whether EE will give me the rights. But it is likely that the graphic will be the same because I have the rights to that. Anyway, just three pictures in this blog.

Read more
Back To Top