Britain – wrong problem, wrong solution

George Osborne, Britain’s vandalising exchequer gave his Conservative Party Conference speech yesterday in Manchester. The Transcript is courtesy of the New Statesman. Like everyone I scanned the speech for signs that the British Government was prepared to suspend its ideological arrogance for the sake of the economy, which the people had entrusted them to revive. No such luck. Instead the nation was presented with a self-satisfied denial of the basic problem that is sending the British economy into reverse gear after showing some signs of recovery about the time the national government changed hands. The problem for Britain is that the Government has outlined the wrong problem and proposed the wrong solution.

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Redistribution of national income to wages is essential

It is a public holiday in NSW today – Labour Day – which originates from the “eight hour day movement, which advocated eight hours for work, eight hours for recreation, and eight hours for rest”. History will tell you that on April 21, 1856, the stonemasons and building workers on building sites around Melbourne, Australia (my home town) laid down their tools and marched to Parliament House to call for an 8-hour day. They were successful and were the “first organized workers in the world to achieve an eight hour day with no loss of pay”. Similar action saw the spread of the 8-hour day to the other states. Now Australia is in the farcical situation where 600 thousand workers cannot get any hours of work, 750 thousand cannot get enough, and millions are coerced by employer-friendly industrial relations legislation into working more hours than they desire just to keep their jobs. In recognition of the holiday I will write less than usual! The issue surrhttps://billmitchell.org/blog/?p=16325&preview=trueounding wages and conditions of work are crucial to understanding why the world entered the crisis and why it is persisting. At present policy makers, in response to the disaster that beset them in 2007-08, are skating around the edges of reform and are refusing to recognise that they will have to engage in a wholesale abandonment of neo-liberal policies before sustainable recovery will be possible. There is no more stark demonstration of this reality than in the area of wages.

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Saturday Quiz – October 1, 2011 – 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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Tripping over one’s ideological shoe laces

I’m sitting here at the airport typing away while the morning TV news in the background is showing the Australian Treasurer acknowledging that the economy is slowing and undermining his obsessive desire to achieve a budget surplus next year. Tax revenue continues to decline as activity stalls. Why? Because the Government withdrew the fiscal stimulus too early which caused real GDP growth to stall. Not to be beaten though the resolute Treasurer is now exploring further spending cuts to get the budget “back on track to surplus”. Its high comedy in one sense but high tragedy in the real sense – that unemployment is rising and employment growth falling. But the Treasurer is running with the rest of the G-20 Finance ministers and they are all tripping over their ideological shoe laces

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There was once a country named Greece

Sometimes good things come out of bad – not often but sometimes.Yesterday was an example. I merrily set off for my bit over an hour flight from Newcastle to Melbourne with meetings organised in the late afternoon. Weather fine and warm. Upon approaching Melbourne airport we were informed that there were severe storms and after circling for an hour were diverted to Canberra – half-way back to Newcastle to refuel. After an hour doing we renewed our attempt to land in Melbourne and about 45 minutes later we succeeded. Phone calls made meetings rescheduled no problems. Except the airport was in chaos and we were stranded for 3 hours on the tarmac waiting for a gate. So 8 hours after leaving Newcastle – about 21:30 we leave the plane very frustrated and tired. See ABC News report. During the extended “flight” I read a detective novel. So what is good about that? Answer: being stuck in the plane I didn’t have the opportunity to read the WSJ, the FT, IMF papers, World Bank reports – in fact, I managed to avoid reading any financial or economic material. I ate dinner at around midnight – relaxed! But I lie. I did actually read the French financial paper La Tribune which carried the story – Les détails du plan secret allemand pour sauver la Grèce – which translates to “the details of a secret German plan to save Greece”. The headline grabbed me before sleep. As the zzzz’s started to overtake me I concluded that the Eurozone will be one less nation soon – there was once a country named Greece.

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Playing Ball is not a better way

On Monday, September 26, 2011 the British Shadow Chancellor gave a speech (his first major speech in that role) to the Labour Party Conference in Liverpool. The Full Transcript of the Speech is courtesy of the New Statesman. Balls ended his speech by saying “There is a better way” and I agree – the current macroeconomic policy settings in the UK are destructive and will be regretted. The problem is that Balls’ path to prosperity is not that better way which means the British people are in the same boat as a lot of electorates – caught between the devil and the deep blue sea. Playing Ball is not a better way.

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Accelerating inflation has to be out there somewhere … in the dark or somewhere

Today I was trawling through old issues of the now-defunct The Public Interest quarterly today and unfortunately stumbled on a recent issue of its successor National Affairs (Number 9, Fall 2011 edition) which carried an article – Inflation and Debt – written by Chicago economist John H. Cochrane – a known free market/anti-government commentator. It was one of those articles where the analytical framework was taken from some textbook rather than being ground in the realities of the monetary system and all the evidence pointed away from the major conjecture but the conjecture was still asserted as an inevitability. The title reflects the sort of wan, desperate need to find inflation despite vast volumes of excess capacity and zero wage pressures. Accelerating inflation has to be out there somewhere … in the dark or somewhere.

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Framing today’s leadership failure in history

It seems my attempt to escape the Lands of Austerity last week unscathed was a pipe dream. I have been slowed over the last days by a European flu of some sort. So I have less energy than usual which doesn’t tell you very much but might explain why I might write less today than on other days. I am also behind in my reading. But I did read a little over the weekend, especially the documents and statements pertaining to the IMF annual meetings, which had the effect of worsening my condition. I also dug out an old 1933 document which helped restore my equanimity. It allows us to frame today’s leadership failure in history.

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Saturday Quiz – September 24, 2011 – 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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