The catch-all category for my blogs reflecting my professional expertise as a full professor of economics.
In this blog I will complete my analysis of the concept of fiscal sustainability by bringing together the discussion developed in Part 1 and Part 2 into some general principles. The aim is to provide a blueprint to cut through the deceptions and smokescreens that are used to deny fiscal activism and leave economies wallowing in persistently high levels of unemployment. So read on.
I wrote this for the Fairfax press early this morning before a 10km run around the Vondelpark in the heart of Amsterdam – in cold pouring rain. They call it high summer. Anyway, the opinion piece was confined to 500 words. I could have said a lot more but you can extrapolate each line accordingly. I also did an ABC radio interview hiding under a tree in the park – the juxtaposition of talking to Sydney about the NSW Government’s failure to deliver adequate services and being among the wonderful urban amenities (for example, public transport and bike paths) and public spaces provided by the Dutch was not lost on me. Pity public spending can’t fix the lousy weather over here. Anyway, now I am off to work for the day over here. Part 3 of the fiscal sustainability series coming next – for Wednesday.
This is Part 2 of my little mini-series on what we might conceive fiscal sustainability to be. In Part 1 we considered a current debate on the National Journal, which is a US discussion site where experts are invited to debate a topic over a period of days. By breaking the different perspectives that have been presented to the discussion, we can easily see where the public gets its misconceived ideas from about the workings of public deficits and the dynamics of the monetary system – its leaders. My aim in this 3-part series is to further advance an understanding of how a fiat monetary system operates so that readers of this blog (growing in numbers) can then become leaders in their own right and provide some re-education on these crucial concepts. So read on for Part 2.
Greetings from Amsterdam where I am spending the next few days talking about what drives spatial changes in unemployment at a Tinbergen Institute regional science workshop. The spatial econometric work that I am outlining tomorrow provides the conceptual framework for the construction of the Employment Vulnerability Index, which received a lot of press earlier in the year. But while I was flying over here I thought about the concept of fiscal sustainability which is now getting a lot of press. So this is the first of a multi-part series on what constitutes a sustainable fiscal policy. Its that time again. Time to debrief!
The talk at present is that while we are hoping for a V we might have to accept a W. Its all about shape. The shape of the future. The shape of the recovery! In Post-Lehman World Will Mean W-Shaped Recoveries we read that Japan’s former economic and fiscal policy minister, Hiroko Ota said that “The worst is over but I can’t say the economy is heading for a recovery at all”, Japan’s recovery may be W-shaped instead of V-shaped. There are some very real reasons why W might rule over V. They all relate to the lack of understanding of the characteristics of a fiat monetary system and the opportunities that such a system presents the sovereign government. Unfortunately, the ignorance (or wilful neglect) among policy makers may force millions of people to endure unnecessary hardship.
Its winter here in Newcastle! Today my shark-o’clock morning surf expedition was freezing! Full wetty and still cold! But for northern hemisphere readers pleased be warned that freezing means a water temperature of 19 degrees celsius and air temperature of 14 celsius. Anyway, the sudden sensation of cold reminded me of my mortal origins. One thing led to another and I was soon thinking of animal spirits! This is what JM Keynes said drives the business cycle up and down. And today (and yesterday) we have been reminded of the role that sentiment might play in economic life. The news is probably good and suggests that this downturn might be more moderate for Australia than the global experience would have indicated. But it might also be bad. Ahh, economics!
I saw this story in the Melbourne Age today World’s best airport named. I knew it wouldn’t be Sydney or Melbourne where I am often in and out of much to my displeasure. So I scanned the list. Sure enough a whole lot of airports some of which I regularly fly and know to be excellent in terms of ease of use, charges and available facilities. Anyway, I had intended to write a blog today about trends in world foreign exchange markets (see digression below) but the airport rankings attracted my interest because I am also thinking about infrastructure provision at present.
I saw this in The Australian (on-line) front-page today – “POLL: Do unions have too much power?” So the campaigns are emerging: deficits, debt and union power. Seems like we are back in the 1970s when the conservatives last ran the union power campaign. The topic is apposite given the Government’s reaction last week to union requests to eliminate some of the nasty elements that remain from Work Choices. I laughed when I saw the poll – who are they trying to kid. Anyway, the current Government is playing hard cop with the union movement exploiting the lack of capacity of the latter to fight back.
In today’s Melbourne Age there was a headline that attracted my attention – Hurling invective at CEOs over salaries is a bit rich. The writer from the conservative Institute of Public Affairs was reacting to a speech made by the President of the ACTU this week who proposed a salary cap on executives. The writer, Chris Berg claimed this was just whipping up some “traditional class conflict”. He asked: “who seriously believes that the level of CEO pay in Australia had anything to do with the subprime crisis that set off this whole mess?” Well, I for one think that the growth in executive pay was linked to the crisis. Here is the point.
I have been doing work on international trends in unemployment today and spent some time on the UK economy. Of-course, Britain is in the news at present because its polity is melting down rapidly. We have been laughing a bit I am sure about the so-called rorts scandal, especially the story about the ducks not liking their island anyway. I laughed anyway. I also applauded the skilled research that tracked the island down on Google Earth. Anyway, the rorts scandal is a sideshow in a much bigger problem that is unfolding in Britain at present. Its labour market is in free fall!