Impeccably running a sinking ship

Today I am writing from Austerity Land a.k.a Europe. I know Britain is also austerity land but it has its own currency and will be able to reverse direction more easily as the political sentiment moves against them. I know the US is also trying to emulate the austerity lands but so far the deficit is sufficient to maintain some vague sense of growth there and the politicians haven’t really been able to agree on anything. But in Europe the politicians and central bankers are systematically demolishing their economies – one step at at time – and pushing the system ever more closer to collapse. It is only the extraordinary “outside the rules” intervention of the European Central Bank that is keeping the EMU from collapsing virtually immediately. The Australian ABC News is carrying a story (September 13, 2011) – Shares hit 2-year low as Eurozone crisis deepens. The message of that article is being repeated in various languages over here in Europe across the mainstream media. There is an advanced state of denial over here – a denial that the problem is the Euro itself. How could a currency be a problem? Answer: when it is foreign to every government that uses it. Whatever we conclude about who pays taxes in Greece or who doesn’t; about whether certain public servants have excessively generous pay and conditions or not; about whether workers in one nation are lazier than workers in another; none of these mini-debates focuses on the issue. The problem is that when a nation surrenders its currency-issuing capacity and starts borrowing in a foreign-currency then it is open to solvency risk and cannot respond easily to a negative demand shock of the proportions that we say hit the world in 2007-08. Setting up a monetary system with those intrinsic features ensured that the EMU would enter crisis when the first significant negative demand shock arrived. It was not if but when. Now the same logic that got the EMU into this mess is also prolonging the crisis and denying the region of much-needed growth.

Read more

Saturday Quiz – September 10, 2011 – answers and discussion

Here are the answers with discussion for yesterday’s quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of Modern Monetary Theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

Read more

It is easy to create jobs

The US President delivered his long-awaited speech outlining the proposed American Jobs Act today to a packed Congress. The room was full of self-serving, anti-intellectuals masquerading as the representatives of the people of America. Eventually, this sham will be clear to all and the “American people” will “demand action”. If they don’t then the neo-liberal domination of policy which has led to the crisis and the extended malaise will continue to impoverish them. Bold action was needed from the President at least to demonstrate leadership so that the democratic forces could start to pressure the T-pots. Unfortunately, the President doesn’t seem to understand that it is easy to create jobs. A government just has have the will to do so.

Read more

Australian labour market – in reverse gear and accelerating

Yesterday, the June quarter National Accounts came out showing a real GDP growth spurt. As I noted yesterday, the results should be treated with caution because they apply to the period April to June, the strong growth was largely driven by inventory accumulation, and the household consumption behaviour runs counter to more recent retail sales data. Moreover, national accounting data is typically revised when the next quarter results are known. The other cause for caution in thinking that the Australian economy is really growing above trend is that more recent data is not good at all and it is difficult rationalising the poor data results with the vision of a booming Australian economy. Today, there was more bad news when the Australian Bureau of Statistics (ABS) published the Labour Force data for August 2011. It shows that the labour market has gone backwards for the second consecutive month with total employment declining and full-time employment falling again. It shows unemployment rising further and the unemployment rate at 5.3 per cent. More worrying is that the BS broad labour underutilisation rate (underemployment plus unemployment) rose to 12.3 per cent over the last quarter. This is not an economy that is “bursting at the seams”. The labour market is in reverse gear and accelerating.

Read more

Australian National Accounts – good result but be wary

As winter arrived (June 1), the March quarter Australian National Accounts came out and showed that the Australian economy contracted by a staggering 1.2 per cent. With the seasons passing into spring and the warm days are back, the Australian Bureau of Statistics released the National Accounts data for the June 2011 quarter which not only revised last quarter’s result to -0.9 per cent but also showed than in the subsequent three months of this year the Australian economy grew at a robust 1.2 per cent. That means in the last 12 months the economy has grown by 1.4 per cent (a very poor result) but in the second quarter accelerated on the back on household consumption and a strange pickup in inventories. But if the growth continues then I expect some reductions in the unemployment rate by the end of the year – which is a good prospect. The irony is that the external sector continues to drag the growth rate down despite our so-called “once-in-a-hundred-years” mining boom. There are mixed signals in the economy at present though. Remember the National Accounts are a rear-vision view of what was happening in April, May and June. Since then the global economy has gone apoplectic and China is slowing. The most recent Australian data does not accord with the strength indicated in today’s (rear-vision) version of events.

Read more

Britain is tracking Ireland down the drain

I have noted in recent weeks how the deficit terrorists have started to suggest that Ireland, which led the world into enforced fiscal austerity, is now demonstrating how such a policy can spawn growth. I don’t know what planet these commentators live on but when you examine the most recently available data and understand what it is saying you would not conclude that Ireland is emerging as a picture of health. What I learn from the daily data that is coming out from that part of the world is that fiscal austerity is ensuring that Britain is tracking Ireland down the drain.

Read more

NSW State Budget 2011-12 commentary

This is my Op Ed commentary for the local press on the NSW State Budget which came out today. I had 750 words. It might be of interest to readers although it is localised sort of discussion of state public finances which are very different in terms of constraints etc than those pertaining to the Federal level. I will have a blog later today on Ireland as well.

Read more

The US labour market is looking grim

With the US politicians are mired in a self-aggrandising dispute about who is best to manage a policy of fiscal austerity. Meanwhile, Rome burns around them. I know Americans like to talk about how free their nation is but while their elected representatives grossly indulge themselves in anti-intellectual disputes largely to console the demands of their corporate slave masters a growing number of US workers are being denied the freedom to earn a basic living. The latest data shows that the labour market has deteriorated again and the economic recovery is being undermined by those same elected representative. The US labour market is now looking very grim.

Read more
Back To Top