In today’s Australian newspaper ex Federal Treasury official Tony Makin writes that We keep repeating Keynes’s mistakes. Do we now? The story is a litany of half-truths and basic conceptual errors. He is now a professor of economics. Bad luck for his students. The article, one of a regular contribution he makes to the increasingly squawking right-wing News Limited daily, is a classic example of how to deceive the public with spurious economic reasoning – that the author knows most of the public will just accept without question.

In yesterday’s (August 23 2009) Financial Times, so-called financial markets expert Nouriel Roubini wrote that The risk of a double-dip recession is rising. The American academic was recently in Australia as a speaker at the Diggers & Dealers Forum which is an annual mining conference. The problem is that Roubini is an influential advisor to the US Government and so will have a hand in determining the direction of fiscal policy. He continually demonstrates, however, that he does not understand how the fiat monetary system operates and in that context becomes part of the problem.

There is a lot of speculation in the financial press about the shape and timing of the recovery. As one article implied there is a veritable alphabet soup out there. Tied in with this speculation is the disagreement about whether governments have provided enough fiscal stimulus. The conservatives are mounting a vigorous campaign to choke off any more fiscal expansion. However, given how poorly the labour markets are functioning and the fact that they trail behind the output side of the economy by some quarters, there is a strong case to be made for more fiscal stimulus to be applied. I definitely see this as being required in Australia – a third package aimed directly at employment rather than consumption. Not many will agree with me though.

Someone wrote to me today and said they had been reading Paul Krugman’s 1999 book Peddling Prosperity, where he presents the now-famous baby-sitting model. You can read a shortened version of the model HERE. The reader asked me whether the model had any relevance to modern monetary theory. The short answer: yes but not necessarily in the way Krugman thinks (he is still locked into gold standard thinking).

I am catching up on the mountains of things I have to read. It is a pointless task – the pile rises faster than my eyes can process it. But I try. There was an article in the June 25, 2009 edition of The Economist entitled A slow-burning fuse, which carried the by-line “Age is creeping up on the world, and any moment now it will begin to show. The consequences will be scary”. It definitely might be scary getting old but the discussion that needs to be had is nothing remotely like the discussion that dominates the current policy debate about the ageing society.

The ABS released the latest Household Income and Income Distribution, Australia data today which allows us to get a better understanding of how the national income is being distributed among individuals. The data released today provides information about what is known as the size or personal distribution of income (ignoring how the income was gained). The data confirms the trend that Australia is becoming more unequal with the bottom 20 per cent losing out to the top 20 per cent. The changes however are relatively modest.

This blog is based on some research on Japan I have been doing as a precursor to a book contract I am working on which will be about developing a progressive macroeconomic narrative – a sort of cookbook for progressives to enable them to challenge the major myths that are perpetuated by neo-liberals. These myths lead to the imposition of voluntary constraints on the government capacity to achieve and sustain full employment. Some of the underlying dynamics of the system which expose these constraints for what they are – an ideological distaste for fiscal intervention – are still not well understood though. Here is some more on that theme.

Today I am a keynote speaker at the LHMU National Conference in Canberra. I am talking about the challenges of underemployment and low wages and the need for the union movement to broaden out their activism from narrow concerns about wages and conditions for their members to development and pursuit of a full-scale attack on neo-liberalism. In much the same way that the neo-liberal think tanks boosted the saturation of those ideas. I will report back when I get back – much later this evening.

On Friday, the RBA signalled that it wanted to start hiking interest rates early in the upturn (and be one of the first central banks to do so). The justification was that this recession was more like the shallow, short-lived downturn in 2000-2001. I disagree. The evidence doesn’t support that contention. Increasing interest rates now will have serious impacts on the solvency of households currently struggling to get anywhere near enough hours of work. The RBA once again will be choosing to use underutilisation as a tool rather than a policy target. Another disgraceful chapter in their history is looming.