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Japan’s growth slows under tax hikes but the OECD want more

The OECD yesterday released their interim Economic Outlook and claimed that real economic growth around the world was slowing because of a lack of spending. Correct. But then they determined that structural reforms and further fiscal contraction was required in many countries, including Japan. Incorrect. The fact that they have departed from the annual release of the Outlook (usually comes out in May each year) indicates the organisation is suffering a sort of attention deficit disorder – they just crave attention and their senior officials love pontificating in front of audiences with their charts and projections that attempt to portray gravitas. No one really questions them about how wrong their last projections were or that cutting spending is bad for an economy struggling to grow. All the participants just get sucked into their own sense of self-importance because the event generates headlines and the neo-liberal deception rolls on. The OECD needs a reality check on Japan, but it isn’t the only organisation that is pumping out nonsense this week.

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Public employment and other matters of scale

I gave a keynote presentation at a recent conference where I showed that public sector employment contractions in Australia were a significant part of the rise in unemployment in Australia since the late 1980s. Had the public maintained its scale (proportion) with the underlying growth in the population then unemployment would have remained low throughout that period. The neo-liberal onslaught and the fiscal surplus fetishism has been a major reason why persistent unemployment occurs. All the nonsense about structural reform and the need to cut workplace protection overlook this fact. The government made a political decision to significantly cut its own employment and quite apart from the fluctuations in the private sector and the increased precariousness in private employment, that decision by government has had devastating consequences. The same situation arises in many advanced western nations under the spell of neo-liberalism. The thing about the current pro-market orthodoxy is that it has lost all sense of proportion. Mass unemployment involving billions of dollars of lost income is deliberately created by policy makers in search of a few pennies (relatively) in making ports work more quickly etc (microeconomic reform). In Europe, all sense of proportion has been lost. Read on …

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Saturday Quiz – September 13, 2014 – answers and discussion

Here are the answers with discussion for yesterday’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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Friday lay day

Its Friday and my declared lay day for blogging. I am currently working on some research analysing the shift in patterns of regional unemployment in Europe as a result of the GFC and the policy austerity that followed (it is an invited paper from one of the leading regional science journals). That is my most pressing deadline. The patterns that we are picking up are interesting already and will be analysed in more formal terms using spatial econometric tools. I will report more fully when the paper is finished around the end of the month. I am also working on the completion of our Modern Monetary Theory (MMT) textbook, and a book on the evolution of MMT (due later this year). Bit busy.

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Australia labour force data – now a million underemployed

Today’s release of the – Labour Force data – for August 2014 by the Australian Bureau of Statistics revealed an extraordinary rise in part-time employment and a decline in unemployment. The results are suspicious as the ABS themselves acknowledge. Despite the massive increase in part-time employment, total working hours barely rose and the upshot was the underemployment jumped sharply. There are now more than 1 million workers in Australia who are underemployment. The broad labour underutilisation rate jumped from 13.5 to 14.6 per cent. Teenagers gained some of the part-time employment growth but full-time employment slumped further. The Government will be claiming the employment reversal is a vindication of their economic policy – but we will have to see if the sudden jump is sustained or is a statistical artifact.

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Can we really say the US economy is in recovery?

The latest US Federal Reserve Bank Bulletin – (Volume 100, No. 4) was released on September 4, 2014 and – Changes in U.S. Family Finances from 2010 to 2013: Evidence from the Survey of Consumer Finances provides a very deep insight into what has been going in America over the period since 2010 with some comparative data from 2007-2010. So we get a glimpse of what happened during the crisis period in family incomes and wealth holdings (by a number of different characteristics) and then see what has transpired during the so-called ‘recovery’. The results will lead you to question the extent to which using the term ‘recovery’ is meaningful. In the growth period 2010-13, only the top 3 per cent of the income distribution have enjoyed real income gains whereas the bottom 40 per cent have seen major real cuts. A similar story relates to changes in family wealth. The reality is the highest income earners are capturing the real income growth at the significant expense of the rest notwithstanding the overal decline in unemployment. It is a recipe for disaster – an increasingly unequal society where some cohorts have virtually no chance for upward mobility.

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Our poster child keeps exposing the myths

A regular occurrence is the prediction of doom for Japan. Some minor upturn in Japanese government bond yields or a movement in some other irrelevant financial statistic relating to the Japanese public sector sends the financial press into apoplexy. But the Japanese economy continues to defy all these prophecies from the neo-liberal zealots and eventually they will be dismissed by the broader public as the education process continues. The latest dramas surround the massive purchases of Japanese Government Bonds (JGBs) by the Bank of Japan. The fact is that the Bank of Japan is currently exposing the myths of the mainstream position even if it would not see it that way. Our post child just keeps giving us real life examples to substantiate the views presented in Modern Monetary Theory (MMT).

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Myths regarding sovereign funds

There was an article in the Australian edition of the UK Guardian last week (September 4, 2014) – Oil tax: Norway could teach Australia a thing or two about managing wealth – which demonstrates the myths that pervade the public debate about fiscal policy and monetary systems. This particular myth relates to the opportunities that so-called sovereign funds offer currency-issuing governments and the calibration of national assets as something being

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Saturday Quiz – September 6, 2014 – answers and discussion

Here are the answers with discussion for yesterday’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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