Posts about British economy and social issues

US and UK fiscal stimulus supporting growth while the delays in the Eurozone lead to a double-dip recession

Last week (April 29, 2021), the US Bureau of Economic Analysis published the latest national accounts data – Gross Domestic Product, First Quarter 2021 (Advance Estimate) – which showed that the US economy grew by 1. The following day (April 30, 2021), saw Eurostat announce that the Eurozone contracted by 0.6 per cent in the first-quarter 2021, which means it is now enduring a double-dip recession. The European Union, now without Britain as a member, contracted by 0.4 per cent. In contrast, with Britain now out of that mess and determining its own future, we saw the British economy return a positive GDP growth rate in February as exports rose and government stimulus sustained domestic activity. Why should we be surprised about this. In this post, I examine the US situation in more detail and reflect on some interesting trends in the UK. The Eurozone situation is too depressing to write about on a sunny day!

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The Brexit predictions of doom are proving to be wildly inaccurate

When the British Office of National Statistics published the January 2021 trade figures in March, the first after Brexit was finalised, they showed a 42 per cent decline in UK exports to the European Union. Exports fell by £5.6 billion and imports fell by 28.8 per cent or £6.6 billion. it was the worst monthly drop since records were first published on a monthly basis in 1997. The Remain crowd went berserk and the ‘I told you so’ chorus was raucous. I wonder where there voice has gone now the February 2021 trade figures show a 46 per cent rise in UK exports to the UK. Boats and trucks are carrying goods to the EU from Britain still. We shouldn’t take the monthly data too seriously, especially as it has been complicated by the transition arrangements and COVID. There will be costs from the change in border arrangements. But the predictions of doom are proving to be wildly inaccurate. I have my flame suit standing by.

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It isn’t just like household debt!

Yesterday, apparently I disappointed several people by analysing the Australian National Accounts release instead of concentrating on what ripper music release we could discuss. Well, I cannot stop the ABS releasing the GDP data on a Wednesday. But I can call Thursday Wednesday when they do release the data and so here we are. I also have to travel a lot today so it is good that I don’t have to spend much time writing this blog post. The music tribute today is to the famous Bunny Livingstone, one of the best Jamaican musicians who died earlier this week. What else could it be. I also have some other snippets that interested me, including a rather interesting BBC video short which well and truly tells us that Modern Monetary Theory (MMT) ideas are invading the mainstream even if they would never care to admit that publicly. Happy days.

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Enforced poverty and torture for the victims of government policy failure – welcome to modern Australia

My Wednesday blog post with a few snippets. Don’t forget to enrol in our MOOC which begins next week. Also, some news from Britain that shows once again the British Labour Party has the gun aimed straight at its foot. And some comments on yesterday’s Australian government decision to increase the unemployment benefit by $25 per week and claiming this was appropriate – when it still means the recipients are $163 per week below the accepted poverty line. Enforced poverty by a government that refuses to create enough jobs and then punishes the victims of the policy failure. This all amounts to War and we can sing along to that after getting angry about the rest.

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A very dangerous variant of the global virus is spreading again after being subdued throughout 2020

There is a new variant of the global virus spreading again after being subdued throughout 2020. This is a very dangerous variant and if it takes hold will guarantee massive human suffering, and, a further, substantial shift in national income towards the top-end-of-town. I refer to the creeping infestation that is starting to pop up claiming that austerity will be required to pay for all the “profligacy” associated with government approach to the pandemic. I have seen this virus in the wild and it is creepy and being spread by those who seem to want to gain attention as time passes them by. Overheating threats, austerity threats – it is all part of the economics establishment trying to remain relevant. A vaccine will not work. They need to be permanently isolated.

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British Labour may as well just not turn up at the next election

Why does the Shadow Chancellor of Britain have a WWW page entry at the Institute for Fiscal Studies? HERE. Perhaps when you read this you will have the answer. What follows is bad. It won’t make anyone happy – my critics or those who agree with the analysis. But that is what has happened in the progressive world as lots of ‘progressives’ added the neoliberal qualifier to their progressiveness and paraded around claiming technical superiority and insights on economic policy that the old progressives just could not grasp. They have become so enthralled by their own cute logic that they cannot see they are handing the opposite side of politics electoral victory on a consistent basis. After you read this you might understand why I say that the British Labour may as well just not turn up at the next election.

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Scotland: a nation cannot be independent and use another nation’s currency or even peg to it

It is Wednesday and only a few points plus a sort of reflection on a recently departed musician. The few points really relate to the latest news from Scotland that it is thinking (once again) of seeking independence but using a foreign nation’s currency (one version) or pegging to another nation’s currency (another version. We should be clear – an independent Scotland requires its own currency, which it floats on international markets and has a central bank that sets its own interest rates (that is, determines its own monetary policy). Using a foreign currency or pegging to a foreign currency immediately voids national independence. The fact that the leading players in the independence debate don’t seem to comprehend that point is a worry. The fact that there is also strong sentiment to be part of the European Union post independence also tells me that the notion of independence is not well understood or developed in Scotland. That’s the bad news today. The good news is much more interesting – check it out.

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Britain is now free of the legal neoliberalism that has killed prosperity in Europe

So Britain finally became free – sort of – from the European Union last week. I haven’t fully read the terms of the departure but the progress I have made so far in the text (several hundred pages) leads me to conclude that Britain has not gone completely free from the corporatist cabal that is the European Union. The agreement will see a Partnership Council established which locks Britain in to an on-going bureaucratic process dominated by technocrats – the sort of things the EU revels in and gets it nowhere. Overall, though, despite all the detail, Britain’s future policy settings will be guided by its polity and resolved within its own institutions. That means that the Labour Party has the chance to really push a progressive agenda. I doubt that it will but there are no excuses now. Which brings me to look at some data which shows how the fiscal rules imposed by the European Union, particularly in the 19 Member States who surrendered their currencies, have constrained prosperity and worked against everything that citizens were told.

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Bond investors see through central bank lies and expose the fallacies of mainstream macroeconomics

It’s Wednesday and I usually try to write less blog material. But given the holiday on Monday and a couple of interesting developments, I thought I would write a bit more today. And after that, you still get some great piano playing to make wading through central bank discussions worth while. The Financial Times article (January 4, 2021) – Investors believe BoE’s QE programme is designed to finance UK deficit – is interesting because it provides one more piece of evidence that exposes the claims of mainstream macroeconomists operating in the dominant New Keynesian tradition. The facts that emerge are that the major bond market players do not believe the Bank of England statements about its bond-buying program which have tried to deny the reality that the central bank is essentially buying up all the debt issued by the Treasury as it expands its fiscal deficits. This disbelief undermines many key propositions that students get rammed down their throats in macroeconomics courses. It also provides further credence to the approach taken by Modern Monetary Theory (MMT).

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No justification for public sector wage freezes during the pandemic

I provide a lot of research support for trade unions in wage determination cases in Australia, where wage agreements are uniquely decided in judicial processes. The cases are onerous and highly contested and as an expert witness I am often grilled for lengthy periods by the employers’ barristers in the evidential phase. One of the things that has been relevant in the last year or so has been the wage caps and freezes that government employers are placing on their workforce as a way of ‘saving money’. Prior to the pandemic they were forcing real wage cuts or zero real wages growth on workers under their wage cap strategies as part of their pursuit of fiscal surpluses. Now they are imposing freezes to reduce the size of their deficits. And, the same is happening in other jurisdictions such as the UK. Not only were the wage caps in the public sector damaging the well-being of public workers, in some cases, the lowest paid (cleaners etc), but they were also providing ‘wage guidance’ to the private sector, at a time when household debt is at record levels and consumption growth wage faltering. At a time when consumers are already wary and saving higher proportions of their disposable income, freezing wages is not a responsible thing to do in a pandemic. The UK government, for example, does not need to ‘save money’. But as part of the recovery from the pandemic, the government will benefit from households having been able to pay down debt while saving more and from the maintenance of their real purchasing power. There are no grounds for freezing wages – public or private.

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