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

When the elites wine and dine together and hand out prizes to each other

What I learned studying history at university about Charlemagne I have mostly forgotten other than the broad brush of his historical presence. I know where he is buried because his Frankish home base was Aachen on the extreme west of Germany bordering with the Netherlands. I have spent a lot of time in that area (given my association with the University of Maastricht) and have visited the cathedral that houses his grave. What I can recall is that he was a Christian imperialist who forcibly imposed “Germanic” rule on most of what is now Western Europe. But while he largely restored the old “Holy Roman empire”, this “unity” did not last long after his rule ended. That is, he dramatically failed to embed a lasting unity. I think it is appropriate then that yesterday, the President of the ECB, Jean-Claude Trichet, was awarded the famous The Karlspreis which is in honour of Charlemagne. The Germans think it is about unity or at least that is what they claim it is about. The other analogy with Charlemagne is that just as he sought to impose his religious views on the “heathens”, Trichet is also seeking to impose another religion on the people of Europe – neo-liberalism. It is a religion that has failed to provide succour to those who have had to endure it. It works well for the “priests” as all religion seem to. But it is imposing harshness and calamity on the rest. Anyway, in Aachen yesterday, it was another one of those days when the elites wine and dine well together and hand out prizes to each other.

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When a former US president makes things up

Some years ago – I did not have sexual relations with that woman – were the famous words that seemed to redefine everything we had come to think of sexual relations between two consenting partners. Suddenly we could have sexual relations without having them. The same person has come up with a new conclusion – the US never ran “permanent structural deficits of any size before 1981”. Hmm, you mean that for 84 per cent of those years from 1930 when the US federal government ran deficits they were just cyclical events indicating deteriorating economic conditions? Maybe the former president might say a structural deficit equivalent to 3 per cent of GDP was not of “any size”. My conclusion is different – that this statement like the previous one was another case of a former US president making things up.

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The US is living below its "means"

The US press was awash with claims over the weekend that the US was “living beyond” its “means” and that “will not be viable for a whole lot longer”. One senior US central banker claimed that the way to resolve the sluggish growth was to increase interest rates to ensure people would save. Funny, the same person also wants fiscal policy to contract. Another fiscal contraction expansion zealot. Pity it only kills growth. Another commentator – chose, lazily – to be the mouthpiece for the conservative lobby and wrote a book review that focused on the scary and exploding public debt levels. Apparently, this public debt tells us that the US is living beyond its means. Well, when I look at the data I see around 16 per cent of available labour idle in the US and capacity utilisation rates that are still very low. That tells me that there is a lot of “means” available to be called into production to generate incomes and prosperity. A national government doesn’t really have any “means”. It needs to spend to get hold off the means (production resources). Given the idle labour and low capacity utilisation rates the government in the US is clearly not spending enough. The US is currently living well below its means. But the US government can always buy any “means” that are available for sale in US dollars and if there is insufficient demand for these resources emanating from the non-government sector then the US government can bring those idle “means” into productive use any time it chooses.

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We should ban financial speculation on food prices

The Great Hunger Lottery report shows how such speculation on food has impacted on the poor around the world. Hunger and starvation escalated between 2007 and 2008 with over 1 billion people considered chronically malnourished at the time they prepared the Report. The major players in creating this havoc are Goldman Sachs, Bank of America, Citibank, Deutsche Bank, HSBC, Morgan Stanley and JP Morgan. In my view, this speculation creates no widespread good and should be declared illegal. We should ban financial speculation on food prices.

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The IMF needs a budget deficit-biased head

Let Peter Costello work his magic at IMF – mounted a case for our former Treasurer (one of the worst this country has ever had) should get the baton and head to Washington. The problem is that Costello left a destructive mess in his wake and is a budget surplus obsessive. What the IMF needs is a budget deficit-biased head.

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I'll buy the Acropolis

Sell, Sell, Sell – which referred to renewed calls for an even more expansive privatisation program in Greece than is already under way. The initial program of asset sales was projected to net more than 20 per cent of GDP in funds. But now the EU bosses want more. There appears to a group denial in Europe at present which is being reinforced by the IMF and the OECD and other organisations. They seem to be incapable of articulating the reality that if you savagely cut government spending while private spending is going backwards and the external sector is not picking up the tab then the economy will tank. Under those conditions policies that aim to cut the budget deficit will ultimately fail. But in the meantime the reason we manage economies – to improve the real lives of people – are undermined and living standards plummet and the distribution of income and wealth move firmly in favour of the rich. But if the price is right I’ll buy the Acropolis (and give it back to the people)!

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