Welcome to the billy blog Saturday quiz. The quiz tests whether you have been paying attention over the last seven days. See how you go with the following five questions. Your results are only known to you and no records are retained.
Sometimes we get lost in detail and forget the simple macroeconomic relationships that sit below the complexity. I also like to get lost in detail too – to work out tricky little aspects of the financial system, etc but it is always a sobering experience to go right back to the beginning. I have been forcing myself to think “basic” lately as I progress the macroeconomics textbook that my mate Randy Wray and I are writing at present. It seems that our national governments have lost their perspective to think at this basic level – to really understand what drives prosperity in their nations. The evidence for this statement lies in the various fiscal austerity plans that are being rehearsed around the world at present. The most blatant and severe example of this in the non-EMU world has just been announced in Britain. This is a case of a government driven by ideology deliberately inflicting massive damage on its citizens while lying to the population about the necessity for such a policy. Its fits my definition of a state-motivated terrorist attack. If only the people of Britain understood the most basic economic relationship – aggregate demand drives output and national income. Cut spending and prosperity falls. Only by lying to the people, has the British government been able to take this policy path.
I have been working on the macroeconomics textbook today that Randy Wray and I are hoping to publish sometime next year. We have a publisher and now just have to complete the text which is progressing well. Also today I have been wondering why UK business firms are not horrified at the latest damaging policy announcement by the new conservative British government. My thoughts generalise to any government at present in terms of the obvious need to expand fiscal policy. I brought those two things together today – the practical need for continued fiscal support for private sector activity and the development of our textbook – by considering the macroeconomic origins of profits. It is an interesting story that very few people really understand because they think micro all the time when it comes to the understanding the profits of business firms whereas you have to start thinking from a macroeconomics perspective to really understand this. It also helps you understand the relationship between the government and non-government sector more fully – a relationship which is at the heart of Modern Monetary Theory (MMT). So read on and see if you have thought about this before.
The news from the US housing market remains pretty bleak three years after the financial crisis began. Last week, we read that attorneys general from all 50 states were investigating allegations that some major banks inappropriately reviewed mortgage files and/or tendered false foreclosure statements which led to the eviction of thousands of delinquent borrowers from their homes. Apparently, banks and credit suppliers used “robo-signers” to sign false affidavits. The US federal regulators are meeting today (October 20, 2010) to discuss the “foreclosure crisis”. The question is whether this will become a bigger problem and spill over into the real economy and worsen the unemployment crisis. The governments have all the tools and capacity they need to ensure that any financial crisis is totally insulated from the real economy. But their reluctance to show the necessary policy leadership almost ensures that a financial crisis will spread and wreak havoc in the real economy. Their lack of policy action amounts to plain stupidity or malicious contempt for their citizens. Probably both.
I happened to re-read an article from the 1960s today – The paranoid style in American politics – written by Richard Hofstadter which was published in the November 1964 edition of Harper’s Magazine. It is one of those articles you should re-read from time to time to remind yourself that not a lot changes. What we call the deficit terrorists now were alive and well then and predicted that anything government amounted to a descent into communism with accompanying mayhem. The facts are clear. The US and most of the world enjoyed positive contribution from government net spending (budget deficits) for most of the post Second World War period and managed to avoid becoming communist (although they might have been better off if they had!). Today, the same paranoia is evident in the interventions into the policy debate from the deficit terrorists. They are so anxious. But underlying their alleged anxiety is a visceral hatred of anything government (except when the handouts are in their favour). None of the calls for fiscal consolidation are based on any firm understanding of how the monetary system works.
Answer: out towards the far right. Today’s blog adds to my previous posts where I consider so-called progressive interventions in the policy debate and show that they are really nothing more than attenuated forms of neo-liberalism. The evidence is that what goes for progressive input these days bears no resemblance to what we used to consider represented progressive thinking. The way the population has been inveigled into accepting policy positions and justification that are represented as “centrist” but are, in fact, what we used to call right-wing positions is one of the success stories of the neo-liberal era. The tendency of so-called progressive organisations to mimic the language and concepts of the right is one of the main constraints on advancing a solid attack on the conservative orthodoxy that created and perpetuated the crisis and which is setting nations up for a repeat in the coming years.
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.
Welcome to the billy blog Saturday quiz – London 2010 Edition. The quiz tests whether you have been paying attention over the last seven days. See how you go with the following five questions. Your results are only known to you and no records are retained.
I am leaving London tonight just as the Australian dollar hits parity with the USD (although it has now come off again).
Today is my last day in London and I am tied up all day with meetings and activities and then later I am travelling back to Australia. So I invoked the guest blogger facility and asked Victor Quirk to share his views on employment guarantees. Victor has just finished a doctoral dissertation and has produced one of the most compelling research efforts I have had the pleasure to supervise. He chose a very challenging topic overall – the political constraints on full employment – and compiled a very rich argument based on a substantial interrogation of an extensive array of primary documents which he sourced from various national archives in Australia, Britain and the US. Now that Victor has finished his work I hope he will share more of it as a guest blogger. So … over to Victor.