One quarter shorter, three quarters deeper

Yesterday, October 5, 2011, the UK Office of National Statistics released their Quarterly National Accounts, June 2011 for the second quarter. The data revealed an economy that barely grew at all in the period from April to June. It also showed that households are continuing to reduce their overall consumption. The data also revised earlier releases and we now learn that the UK recession was deeper (for three quarters) than previously thought but was one quarter shorter. The data release continues to demonstrate that the policy settings (which are pushing towards contraction) are completely wrong for the spending trends that are being revealed in the private and external sectors. If the British economy goes back into recession there will be only one cause – the wilfully irresponsible management of fiscal policy.

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What is Wall Street for?

Last night, I was listening to the ABC Current Affairs program PM and they were running a segment – ‘Occupy Wall Street’ protest growing and they were interviewing American journalist Jeff Madrick. At one point in the interview he said: “I hope the American establishment has the courage to ask one fundamental question; what is Wall Street for? What are they supposed to do?” The answer to those questions are in order: not much that is worth anything; and not what it was created to do.

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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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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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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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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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The first act of fiscal consolidation – terminate the IMF funding

I am back in the land of semi-austerity and the sun is shining warmly. That is one of the advantages of living in Australia. We have mindless politicians like everywhere else but at least one can luxuriate near the beach in the sun. Let me just say at the outset that I am not against forecasting. I do it myself almost everyday and acknowledge that it is an art rather than a science – in other words forecast errors are par for the course. But a problem arises when ideology drives the forecasting process and that the forecasts are then used to perpetuate that ideology via policy development. If the underlying model of the economy that is reflective of that ideology is indelibly wrong then the policies advocated may damage the economy rather than improve it. The forecast errors will also be a sign that the underlying theory is deficient. That is exactly what occurs when the IMF produces its World Economic Outlook. If you trace the WEO forecasts for the last several years you will see how inaccurate they have been. But that hasn’t stopped the IMF from demanding fiscal austerity which has worsened the crisis. They continue to strut the world stage – bullying and claiming authority. The participating governments should terminate the IMFs tenure immediately by writing to the IMF saying that the first act of fiscal consolidation is to terminate their funding. The organisation serves no useful purpose.

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The coalition of the willing

When the Liberal Democrats went into coalition with the British Tories I was surprised how readily and brazenly their leadership was prepared to compromise the underlying principles of the party for power. While the Party Constitution claims they stand for – “a fair, free and open society” balancing “the fundamental values of liberty, equality and community, and in which no-one shall be enslaved by poverty, ignorance or conformity” and “that the role of the state is to enable all citizens to attain these ideals, to contribute fully to their communities and to take part in the decisions which affect their lives” it is clear that they have become partners in a policy regime that is the anathema of those ideals. By entering the coalition they have allowed a pernicious regime to be inflicted on the British people – one which is driving unemployment up and incomes down. The Liberal Democrats are having their Annual Conference this weekend in Birmingham and it is clear if the utterances of some of their members are anything to go by that the Party is struggling with their identity. The Deputy Leader for example said (September 17, 2011) that the job of the Liberal Democrats was “to rein in the ruthless Tories”. The reality is that it is the government that is ruthless and the Liberal Democrats are part of that government and give it the air it needs. I was unfortunate to listen to a BBC interview today with Liberal Democrats leader Nick Clegg and it left me with the impression that there is little to distinguish the coalition partners on the main economic issues. Both parties are infested with neo-liberalism and both fail to understand basic macroeconomics – that spending creates income.

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You couldn’t make all this stuff up

Its hard to know where to start today. I opened my hard copy version of the Financial Times this morning and every page was “Greek yields off the scale”; “Greece default talk”; “Number of Americans in poverty at highest in 50 years”; “Rome set to identify next asset sales”; Fears of Greek collapse prey on French banking”; “Brics to debate possible eurozone aid”; and so it went. You couldn’t make this stuff up. To avoid sinking into an inconsolable depression, I closed the orange pages and, maybe foolishly, turned my attention to the Wall Street Journal. That came up with gems such as “Limiting the Damage of a Greek Default”; “Exit Strategy Goes Right Out the Door for Euro-Zone States”; “Yields in Italian Bond Auction Highlight Financing Challenge”; “China Not Seen as Knight Riding to Rescue of Italy”; at which point I wondered – given my current geographic location – what happens if I get stuck here? And then, to ease the day’s burden I wondered why the WSJ spells the Eurozone with a hyphen. That seemed to calm things down. Researching the use and mis-use of hyphens splitting words in two. But the thought kept lingering – this is so bizarre that you couldn’t make all this stuff up.

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