It’s Wednesday and I have comments on a few items today. I haven’t been able to write much today because the power has been down after the dramatic storms yesterday in Victoria damaged the network and caused absolute chaos (see below). Power is mostly back on now (which is why this post is later than usual). The US CPI data released yesterday showed that inflation continues to decline and the so-called ‘surprise’ that seems to have shocked the ‘markets’ are mostly down to the eccentric way the US Bureau of Labor Statistics calculates housing costs. The data provides no justification for further rate hikes in the US or anywhere else for that matter. I also report on an interesting survey from Japan regarding local attitudes to foreigners. I don’t think it reflects Japanese insularity although many will conclude otherwise. Then some Wayne Shorter.
The latest information from Japan suggests that in December 2023, its inflation fell sharply for the second consecutive month and that one might conclude the inflation episode is coming to an end. The Bank of Japan made the assumption that this supply-side inflation was temporary and would subside fairly quickly once those constraints eased. And they were right. All the other central banks somehow convinced themselves that the inflation was demand-driven and have been needlessly pushing up interest rates. The experiment is nearly over and I think it is clear that the Japanese path was the sound one. At that point, the New Keynesian academics and officials should resign. After that, as it is Wednesday, we have some music to soothe our souls.
For the time being I will continue my Wednesday format where I cover some things that crossed my mind in the last week but which I don’t provide detailed analysis. The items can be totally orthogonal. The latest inflation data for Australia continues to affirm the transitory narrative – dropping significantly over the last month. I will analyse that tomorrow in the context of a recent ECB paper that decomposes the different factors that drove the inflationary pressures across the globe. Today, I consider the basis of a claim by the Australian Treasurer that real wages are now growing. Like many things in statistics, the numbers can say almost anything that you want them to via different ways of measurement and combination. In one sense, the Treasurer is correct. But when we use a more careful method of calculating purchasing power loss, he is incorrect. If the Treasurer was wanting to be really honest with the Australian people he would admit that rather than try to score petty political points against an opposition that has no clue at all. I also consider the role of the US in the on-going massacre of innocent people in Gaza. The US could stop the conflict immediately and the fact that they don’t demonstrates the poverty of the capitalist system in terms of advancing humanity in general. And some old folk music to finish.
It’s Wednesday and I have some commitments in Melbourne (recording a podcast with the Inside Network) and that requires some travel. So time is tight. Today, I update the latest from Japan courtesy of yesterday’s release from the Bank of Japan of its ‘Statement on Monetary Policy’. The parallel universe continues and is delivering superior outcomes, while the rest of the world’s policy makers, smitten with neoliberal nonsense, have their heads in the sand and the economies are turning to dust. I also provide some links to the video recording of the launch of the Japanese version of Reclaiming the State, which was held in Kyoto in November 2023. And I provide some links to a major article that I was featured in with one of Japan’s leading magazines. And if that isn’t enough, we have Voodoo Child.
Today, I discuss a recent paper from the Bank of Japan’s Research and Studies series that focused on how much attention central banks around the world give to climate change and sustainability and how they interpret those challenges within their policy frameworks. The interesting result is that when there is an explicit mandate given to the central bank to consider these issues, the policy responses are framed quite differently and are oriented towards solutions, whereas otherwise, the narratives are about how climate change will impact on inflation. In the latter case, the central banks do not see their role as being part of the solution. Rather, they threaten harsher monetary policy action to deal with inflation. I also consider the most recent US inflation data. Finally, some live music from my time in Kyoto this year.
I am covering a few topics today, given that I used yesterday’s post space to analyse the national accounts release. There is a further point I wish to make about the latest national accounts data. A focus on real household disposable income shows the full extent of the impacts of monetary policy (rate hikes) and fiscal policy (tax bracket creep) on household prosperity. The Australian government is overseeing one of the largest falls in household prosperity in recent history aided and abetted by the RBA. And the only thing the Treasurer has announced this week is his intention to alter the RBA Act to rescind his power to change monetary policy if it acts against the national interest. Meanwhile, the British Labour Party leader was out there praising Margaret Thatcher and equating her shock therapy to his own purges within the Labour Party of anything that resembles a progressive voice. After all that, I have some spiritual jazz for our listening pleasure.
Today, I consider the latest development in the entrenchment of neoliberalism in the Australian policy sector, specifically, the latest decision by the Treasurer to excise his powers under Section 11 of the Reserve Bank Act 1959, which allowed the Treasurer to overrule RBA policy decisions if they considered them not to be in the national interest. This power was considered an essential aspect of a working democracy, where the elected member of parliament had responsibility for economic policy decisions that impacted on millions of people. The latest evolution will further see macroeconomic policy depoliticised and placed in the hands of a small cabal of mainstream economists who regularly advocate policies that serve special corporate interests and leave millions unemployed. I also provide a video from a TV show I appeared on in Tokyo the other day. Then some lovely guitar music. It’s Wednesday after all!
It’s Wednesday, and today I discuss a recently published analysis that has found that Australian privatised electricity network companies are recording massive supernormal profits because the government has been to slack in its regulatory oversight. Electricity prices have been a major driver of the current inflationary episode and we now have analysis that shows where the problem lies. The preferred solution is for governments to renationalise the industry, but in lieu of that, they should at least force the companies to obey the relevant laws. And we then can listen to a soundtrack I heard while watching a movie between Tokyo and Sydney on Monday.
My time in Japan this year has come to an end (sob). It is back home for me and I will have to wait until next year before I return. At any rate, today I have no time to write a post so you will have to be content listening to the music I have ready for the flight.
It’s Wednesday, and today I discuss the latest US inflation data, which shows a significant annual decline in the inflation rate with housing still prominent. But for reasons I discuss, we can expect the housing inflation to fall in the coming months. I also discuss how on-going fiscal ignorance allows the Australian government to avoid investing in much-needed fast rail infrastructure which would solve many problems that are now reducing societal well-being. And then some of the best guitar playing you will ever hear.