The catch-all category for my blogs reflecting my professional expertise as a full professor of economics.

I don’t care if every fact is correct

I thought it was hysterical when back in 2009 and 2010 there were papers written and conferences held which carried the theme of the “lessons learned from the crisis”. For example, the – 6th ECB Central Banking Conference (November 2010) – had an array of leading mainstream economists and central bankers telling us what it was all about despite these same characters previously representing a body of work that told us the macroeconomic problem (cycles and unemployment) had been solved. There were lots of papers, Op Eds and media commentary (every day on Fox News and its ilk) warning us of the worst unless governments imposed austerity. Even as recently as the last US election, the “skies are about to fall in” message was prominent and dominated the Republican campaign. Millions of people are unemployed as a result of these economists having sway with policy makers. The evidence denying their predictions etc started to slowly trickle in around 2008 and as the years of this madness have passed the evidence is now a dam break. At this point, the mainstream just talk among themselves and continue to bank their high salaries and take on lucrative consultancies. Denial of facts is their ultimate recourse.

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Australian PBO – another myth-making neo-liberal institution

The economics journalists were out in force again today in Australia after being fed their latest copy from the neo-liberal propaganda machine. In this case, the propaganda was in the form of the first report published yesterday (May 22, 2013) from the newly established Parliamentary Budget Office – Estimates of the structural budget balance of the Australian Government 2001-02 to 2016-17. The Report estimates that huge unsustainable budget deficits and has led to a flurry of media activity all just repeating what the PBO told them was the message. I wonder if any of the journalists have actually read the report in detail particularly the Appendix where the technicalities are exposed. Technicalities is too strong a word because it suggests there is something robust going on. Nothing could be further from the truth. This is another shoddy attempt to bias the public perception towards thinking the current (pitifully small relative to the scale of the problem) budget deficit is problematic.

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Our national broadcaster has become part of the problem

There was a time, in better days, that the evening news had news, sport and weather. Then, at some point, around the 1980s the national news started to host a Finance segment. Sometimes these segments are meagre reporting of what happened in the share markets. Even that benign news is symptomatic of the way neo-liberalism has infested our daily thinking and made the common folk feel part of the game that they are really can never be part of – wealth creation. At other times, the finance segments introduce economic theory and analysis as if it is news. Then the insidious nature of the neo-liberal propaganda machine becomes stark. But the starkness is lost on most because they think it is news and we have been led to believe that what gets pumped out at 19:00 on the national broadcaster (and other times by other broadcasters) are facts. Facts don’t lie do they? Well, when it comes to finance segments they are mostly lies.

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A Budget that reduces growth and increases joblessness – for no sound reason

Last night, the Federal Government brought down the – 2013-14 Budget – claiming it was a responsible response to the circumstances it faced (declining world growth, declining terms of trade and persistently high exchange rate) and that it emphasised growth and jobs. Neither claim is remotely correct. It is a pro-cyclical budget – that is, a contractionary budget that builds on the contractionary fiscal shift in 2012-13, which by its own arithmetic reduces growth and causes the unemployment rate to rise. It will damage employment growth and increase poverty rates. It reflects a failure to acknowledge the state of the economy (4 per cent output gap) and to implement the correct counter-cyclical fiscal response (a significant rise in the projected budget deficit). It might have some education and disability spending in it. But even in those areas the spending is inadequate and, in the case of education, based on a neo-liberal view that the federal government should be funding the private schools, which, in general, educate the children from wealthy and high-income families. Overall, a destructive fiscal plan given the state of the economy.

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The glorious gouging of the public purse

It is budget time in Australia this month. The federal government will release their Budget next Tuesday and the State and Territory governments all put them out around the same time. Yesterday, it was the turn of one of our larger states Victoria. I will come to that in a moment. The mania intensifies around May and every day and night on TV, radio and in the printed media there is a constant commentariat and an almost uniform message, which was summarised by one so-called expert last night – “the Budget is broken”. I remember this chap in the 1980s as a junior Treasury official aspiring to be important. I wondered about the analogy. There are lots of “black holes” (buckets) and “drunken sailors” (big spending) but “broken”. I guess the only thing is that broken is bad – using broken as an adjective. All the commentary is about how bad the deficit is given the terms of trade are slowing and undermining tax revenue. While the deficit is way to low, it is good that we have one. It is good that America and Japan and the UK have deficits. There is at least some net spending flowing each day to support the economy. Anyway, time to look into the glorious gouging of the public purse that only the neo-liberals can make look as though it is financial responsibility at its best.

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Lower deficits now, undermine our grandchildren’s future

It been quite a few weeks for the prophets of doom. R&R revealed they can’t handle a simple spreadsheet competently, and then try to claim a positive number is really a negative number. And who said they said there was a threshold of debt anyway? They now deny there is a threshold. History tells us this is a new denial. Then their Harvard colleague, the so-called historian throws himself off a cliff – again – with his remarks about JMK. Again? Joe Weisenthal has – Ferguson’s Horrible Track Record on display. He reports that Ferguson has “self-immolated a number of times trying to fight an ant-Keynesian battle”. What is it about Harvard? Has there been an internal inquiry set up to consider whether R&R committed academic fraud or were just incompetent? Why do they still continue to employ Ferguson after his homophobic remarks? It is not as if he displays any acumen when it comes to economic commentary. How much does he receive in appearance fees for telling all and sundry what is not going to happen, even though he says it will? I guess as an historian, Ferguson might know one thing. Fools have a habit of reappearing and repeating the nonsense that prior fools claimed was the truth.

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Australia output gap – not close to full capacity

A national media organisation (Crikey) invited me to be one of their Fantasy Budget providers this year and this is a background blog to the preparation of my Fantasy Budget 2013-14 for Australia, which I will publish next Monday. In this blog I consider the state of the Australian economy in terms of output gaps. The Australian government is keen to claim that the economy is operating close to or at trend real output – sometimes the Prime Minister or Treasurer – and senior Treasury officials, will replace the descriptor “trend output” with “full employment”. They make that claim to justify imposing fiscal austerity on the economy, which is expressed by their most recent goal to achieve a budget surplus in the current year. They have been pursuing that strategy for several budgets now after taking appropriate steps in 2008 to allow the budget deficit to rise significantly to head off the looming disaster associated with the global financial crisis. While the stimulus was not large enough at the time it did save the economy from the type of chronic recession that most of the advanced world remains stuck in. But, once recovery was established, the conservative ideology returned and the fiscal stimulus was withdrawn too quickly and an austerity plan implemented. At the time, it was clear that they would fail to achieve a surplus because in attempting to do so they undermined the recovery, and, their tax revenue growth. Other international events (a slowing of the terms of trade and an overvalued dollar) have compounded their poorly crafted fiscal strategy. The reality is that the Australian economy is now performing well below trend and the divergence is increasing. The labour market is also producing grossly inferior outcomes and we are clearly a hundreds of thousands of jobs short of what a reasonable definition of full employment would require. The budget deficit is too small not too large and the direction of policy in the coming year should be expansionary not contractionary.

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Austerity as law not political discretion

I agree that we should have speed limits and other traffic regulations to prevent mayhem and carnage on our roads. There are other laws I agree with such as protecting children from sexual predators and laws protecting citizens from police brutality and processes to allow us to monitor and prosecute corruption in public office etc. They all make sense to me. Many other laws I would scrap because they are petty infringements on our liberty. But I would never enshrine a particular fiscal policy stance in law or even in codes such as fiscal rules. Such practice defeats the purpose of having the fiscal policy capacities, which is to respond to economic circumstance such that public purpose including full employment can be maintained at all times. Creating legal frameworks that stop governments from exercising their discretion are not only counter-productive but also highly destructive as we are seeing now in the Eurozone. I prefer the people to be able to tell politicians what they should be doing in this respect not judges. However, the Euro elites have been moving towards making austerity law and eliminating political discretion that disagrees with them. And, come to think of it, when some judges disagree with them on a matter of law, the EU elites just instruct their puppets to ignore the courts and proceed as before.

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The day the Australian media failed the public, again

For those who don’t know about cricket, it is good to get a high score in each of the innings. Just like baseball. An innings score of 350 runs in Cricket would be respectable. So imagine the headlines – Big problem, team only scores 130 runs in final innings! The whole cricket world then gets itself in a lather about this with experts blabbing on national TV about only 130 runs. As an after thought, the news bulletin also announced – “and team pulls off a thrilling victory”. Imagine, some bean counter expert coming out in the middle of a game of football and telling the teams that the game is being called off because the budget for goals had been exhausted. The two points – context with respect to meaning and aims and where does the unit of account come from – have been sadly lost in the current economic debate. Even journalists who know better have done a great disservice to the Australian public today by choosing to present an uncritical version of a report that is at best incompetent but also much worse than that. This morning Australians have been bombarded via TV, radio and the printed media with economists, appearing seriously self-important but, at the end of it all, all they are doing is making stuff up and are probably too stupid to know otherwise.

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Elementary misuse of spreadsheet data leaves millions unemployed

Remember, earlier this year, when the IMF admitted they had made errors in their modelling of expenditure multipliers. They had been tramping into countries with their jackboots telling all and sundry that fiscal austerity would promote growth because their multiplier estimates told them so. Millions of job losses later, they came clean. It turns out that when they revised their multiplier estimates exactly the opposite was the case. Now they acknowledge that spending multipliers are in range of 1.5 1.75, meaning that increasing government spending adds at least 150 cents in the dollar spent extra to the economy. Now, the darlings of the austerity cultists – Rogoff and Reinhart – has been exposed for poor research standards – to wit, errors in spreadsheet coding. Meanwhile, Cyprus is being driven into oblivion. Who is ever going to take responsibility for these travesties?

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