Today, I am heading to the airport for travel to Japan. For the next several months I will once again be working as a professor at Kyoto University as part of the research team concerned with integrating the macroeconomic principles in Modern Monetary Theory (MMT) principles into a broader framework to build national resilience in the face of climate change, demographic challenges, transport and housing challenges and more. So from tomorrow I will be in Kyoto and depending on commitments my blog posts might be a little less regular although I think I will be able to continue the usual output. I will have more to say about what we are working on, including the release of a book we have been completing from last year’s collaborations. There is also a major event planned for later in November in Tokyo to launch our latest work. I will provide details later when I know them. We are also talking about hosting an Modern Monetary Theory symposium in Kyoto next April to welcome in the Spring and the cherry blossoms. When I know more I will relate the details here. I am also working on my next book which will traverse the topics of degrowth, the sustainability of capitalism and more. Japan’s shrinking population presents an opportunity to lead the world in reducing the society’s reliance on economic growth and exploring more substantial aspects of human existence. I mapped out that argument in this blog post – Degrowth, deep adaptation, and skills shortages – Part 4 (October 31, 2022). Anyway, until I resurface tomorrow beside the Kamo River, we can listen to some music.
Two items this Wednesday before the music segment. First, we saw the stark ideology of the elites on full display in Sydney yesterday with a property developer demanding the government increase unemployment by 40-50 per cent to show the workers that the employer is boss and redistribute more national income back to profits. For anyone who doubts the relevance of a framework based on underlying class conflict between labour and capital, then this outburst should eliminate those doubts. On the same day, a leading research group in the welfare sector released an update in their series tracing poverty in Australia. It demonstrated a rising incidence of poverty (nearly 20 per cent of the population) and 1 in 6 children living in impoverished conditions. And the profit takers want more of that to enrich (engorge) themselves even further. A shocking indictment of what has gone wrong with this nation.
Several related strands have come together in the last week of work and thinking. Today (September 11, 2023), of course, is a massive day in history and I am not referring to the year 2001. Today marks the 50th anniversary of the overthrow of the Salvatore Allende’s democratically-elected government in Chile by the US CIA and there local puppets under the leadership of General – Augusto Pinochet. I have also been following a trail of the antecedents of the Powell Manifesto (thanks to Jonathan for a tip), which helps understand how the neoliberals infested every institution in the US and beyond. And the Chilean coup d’état in 1973 was followed by – Operation Condor – which together with the coup demonstrated the principle terrorist organisation in the world has been the US government and its agencies. Tracking the Powell trail also took me to old research about the so-called ‘Manne Programs in Economics for Federal Judges’ – which was a program mostly taught by Chicago School economists that indoctrinated US judges into free market economic thinking and has distorted US judicial decisions ever since. And the circle closes when we investigate the role played by the so-called – Chicago Boys – who were Chilean PhD graduates from that school, who went back to Chile and ravaged the prosperity of the people with their extreme neoliberal ideas. All interlinked events on the path to global neoliberal domination. History is worth studying and it is striking how interrelated all these things are that have come together in my work the last week or so.
Yesterday (August 29, 2023), the incoming Reserve Bank of Australia governor was confronted with ‘activists’ as she prepared to present to an audience at the Australian National University in Canberra. They presented her with an application for unemployment benefits and had done her the favour of already filling it in with her name. It was in response to her dreadful speech in June where she said the RBA was intent on pushing the unemployment rate up to 4.5 per cent (from 3.5), which means that around 140,000 workers will be forced out of work. The problem is that even if we believed the logic underpinning such an aspiration, the actual empirical evidence doesn’t support the conclusion. Today August 30, 2023, we received more evidence of that as the Australian Bureau of Statistics (ABS) released the latest – Monthly Consumer Price Index Indicator – for July 2023, which showed a sharp drop in inflation. As well as considering that data, today I reflect on the latest JOLTS data that was released by the US Bureau of Labor Statistics yesterday. The two considerations are complementary and demonstrate that central bankers in Australia and the US have lost the plot. To soothe our souls after all that we remember a great musician who died recently.
I have been looking for signs that the concerted efforts by most central banks (bar the eminently more sensible Bank of Japan) to kill growth and force unemployment up have actually been effective. My prior, of course, is that the interest rates will not significantly reduce growth in the short run, but may if they go high enough start to impact on spending patterns of low income households. The next data that will help us associate the interest rate effects on spending by income quintile in the US comes out in September 2023, so I will watch out for that. The most recent national accounts data from the US, however, does not support the mainstream belief that monetary policy is the most effective tool for suppressing expenditure. Far from it.
Recently, I wrote about the conditions that dictate what impacts interest rate changes will have on aggregate spending and demand-driven inflation in direction, magnitude and temporality – see RBA governor’s ‘Qu’ils mangent de la brioche’ moments of disdain (June 8, 2023). It is highly likely in many cases, the decisions by central banks to increase interest rates, ostensibly to ‘fight inflation’ actually make inflation worse. More people are starting to understand that point even though central bankers appear to be still talking big about further interest rate rises. But the evidence is mounting against their position and ultimately that evidence is exposing the deep flaws in mainstream macroeconomics. I argue today that the problem is not only that the interest rate hikes can be inflationary but they are also facilitating a major reinforcement of the class divisions in our societies whereby the low income cohorts are transferring massive income benefits to the higher deciles. I also discuss cricket which recently has provided a demonstration of how the class divisions work. Then some music, given it is a Wednesday.
Today (June 28, 2023), the Australian Bureau of Statistics released the latest – Monthly Consumer Price Indicator – which covers the period to May 2023. On an annual basis, the monthly All Items CPI rate of increase was 5.6 per cent down from 6.8 per cent. There is some stickiness in some of the components in the CPI but overall inflation peaked last year and is now declining fairly quickly as the factors that caused the pressures in the first place are abating. I doubt that any of this decline is due to the obsessive interest rate hikes by the Reserve Bank of Australia. Anyway, a quick analysis of the data then some discussion of the British teachers’ pay dispute, the latest Australian Covid numbers (worrying) and some music to cheer us all up after the economics. The overwhelming point of today’s data is that this period of inflation is proving to be transitory and did not justify the rate increases. It was a supply-side event and trying to increase unemployment to kill off spending (demand) will just leave an ugly legacy once those supply-side factors abate (which they are and were always going to).
It’s Wednesday and I cover a few topics usually in less depth than usual and provide a musical entree. From tomorrow (June 22 to 23), the so-called world leaders are meeting in Paris for the – Summit for a New Global Financing Pact – which is being hosted by the French president. The aim, apparently, is to build a new global architecture to replace the Bretton Woods system (they left it a while!) to ‘address climate change, biodiversity crisis and development challenges’. The solution that is being proposed is to allow the financial markets to create debt and speculative derivative products to fund the new architecture because, apparently, governments do not have the financial capacity. The whole initiative is about replacing defunct financial architecture but it still proposes to rely on the same (defunct) approach to public infrastructure development and the like that has failed dramatically to reduce inequality and poverty. It has certainly massively enriched the top-end-of-town and the same result will come out of this Pact. I also comment on the latest Brexit claims and provide a brief entree into some Covid research that I found interesting. Then some music.
It’s Wednesday and as usual I consider a few topics in less depth than a single blog post, as a precursor to the music segment. Yesterday’s US inflation data from the Bureau of Labor Statistics (June 13, 2023) – Consumer Price Index Summary – May 2023 – shows a further significant drop in the inflation rate as some of the key supply-side drivers continue to abate. All the data is pointing to the fact that the US Federal Reserve’s logic is deeply flawed and not fit for purpose. Today, I also discuss the latest data on remuneration from Australia which shows that while corporate bosses have been urging wage setting processes in Australia to suppress the growth in wages for workers, an argument also used by the RBA governor recently, the bosses themselves have been getting massive nominal salary growth and increasing their purchasing power by a mutiple of the inflation rate. Modern day capitalism.
It’s Wednesday and there is a lot going on in the data release sense – housing finance, construction and today, the Australian Bureau of Statistics released the latest – Monthly Consumer Price Indicator – which covers the period to April 2023. On an annual basis, the monthly All Items CPI rate of increase was 6.8 per cent down from 6.9 per cent. There is some stickiness in some of the components in the CPI but overall inflation peaked last year and is slowly declining as the factors that caused the pressures in the first place are abating. Tomorrow I plan to discuss an apparent tension in the Modern Monetary Theory (MMT) community as to whether interest rate increases are expansionary or contractionary. But today we just consider the data and then listen to some dub.