I am sitting in one of my “offices” – the little nook I have found at Melbourne airport that lets me work while waiting for planes – watching the video fo the US President’s recent Press Conference (June 29, 2011). I have “offices” like this at various airports. In the speech he berates the Republicans for refusing to show leadership in the current budget debate. My assessment is that after reading the full speech (the video goes for 67 minutes and 5 minutes is too long) – is that the US President outlined in the most categorical terms why he shouldn’t be in charge of the largest economy in the World. In the short time I have to write my blog today I will tell you why that is the case. But overall – as I noted the other day – it is looking more every day like a case of RIP USA.

I haven’t much time today. I gave a talk at a conference in Melbourne today (as noted in yesterday’s blog). I will edit the audio soon and post the presentation for those who might be interested. In general I made the obvious point – if you want people to reach their potential and participate in the economy there has to be enough jobs and hours on offer. But the blog topic today relates to a speech made by a senior RBA official in Sydney yesterday which has excited some conservatives. In that speech, the RBA indicated that it would always lend to private banks which had high quality assets (in AUD) but might be experiencing a temporary liquidity problem and were unable to meet its reserve obligations. This function is part of the public good responsibilities of the central bank and does not mean that they prop up failed capitalist businesses. The speech made the valid distinction between illiquid firms and insolvent firms. The point of relevance to Modern Monetary Theory (MMT) is that the central bank cannot control the money supply because as part of its commitment to financial stability it must be prepared to provide reserves to the private banking system. That point is in contradistinction to the mainstream macroeconomics which starts by teaching students that the central bank controls the money supply. Overall, the central bank must treat financial stability as a public good and therefore must always guarantee reserves on demand.

I checked my calendar today thinking I must be a few months out. Upon checking I determined that it wasn’t April 1. So what the hell is going on? I refer to the announcement of a senior appointment at the World Bank. They have just appointed to the role of Vice President and Treasurer the former Lehman Brothers Global Head of Risk Policy who then was Lehman’s Global Head of Market Risk Management as they sailed into bankruptcy. Hilarious. As the Twitter-verse noted – Did they also interview Bernie Madoff? Anyway, I saw this news piece come in as I was studying the 81st Annual Report 2010/11 of the Bank of International Settlements – the central bank of the central banks – which was released yesterday (June 26, 2011). My conclusion: BIS = BS – the I is gone and used to stand for integrity

I gave a talk about Modern Monetary Theory (MMT) today at a workshop on Stock-Flow consistent macroeconomics organised at the University of Newcastle by the economics group here. While I hold the research chair in Economics at this university I am not formally part of the economics group – my affiliation is with my research centre (CofFEE) which stands outside the Department/Faculty structure. So it was good to interact with the economics group. It is coincidental because the things I was talking about were being played out in the US and elsewhere (for example, Greece). The US conservatives are now pushing hard for a balanced budget amendment to the US Constitution. If they understood economics they would never consider doing that. If they succeed they will undermine US prosperity forever. It is a case of ignorance undermining prosperity which really describes a lot of what is going on at present in the public debates.

Overnight, the US Bureau of Labor Statistics released their latest Mass Layoffs data (May 2011) which showed that the number of mass layoff events in May increased by 2 percent. Further, another month went by and the US national unemployment rate remained unchanged at (a very high) 9.1 percent. There is very little happening to reduce it and the omens are bad. Also yesterday the US Federal Reserve decided to keep interest rates on hold in the 0 to 1/4 per cent range indefinitely and the Congressional Budget Office (CBO) released its 2011 Long-Term Budget Outlook. The statements accompany the central banks decision by its Chairperson Ben Bernanke about long-run fiscal problems and the very aggressive message in the CBO Outlook suggest that the politicians will continue to retard the US economic recovery and lock millions into entrenched unemployment and poverty. The US leaders are sure making a mess of things and the advice they are getting is appalling. The omens are clear – aggregate demand growth is desperately required to attack unemployment. But the land of the free is sliding further into oppression – self-induced by its political class.

In yesterday’s blog, I mentioned that Paul Krugman gave a plenary lecture over the weekend just gone at a conference held at Cambridge University. The conference – 75th Anniversary of Keynes’ General Theory – seems to have been a remarkable event. First, I don’t know everything but I always know when there is a major “Keynesian/Post Keynesian” conference and sometimes I even go. In the case of the 75th Anniversary conference I didn’t even know it was being held. It seems that wasn’t exceptional. As Ann Pettifor points out the UK Post Keynesian Economics Study Group, which is a leading group who focus on studying Keynes and, arguably, has the leading UK Keynesian scholars among its membership, “found out about the conference by accident.” Second, if you examine the speaker’s list and read the papers that are available you might wonder what this conference had to do with Keynes. Certainly if the Cambridge organisers were aiming to “honour” the message that Keynes gave, then they had a strange way of doing that. The reality is that the celebration of 75 years since Keynes was a farce.

Everything is Greek today in the financial press. The number of commentators who are concluding that Greece has to exit the Eurozone are increasing. It is obvious and it is only the obsessive desire of the Euro bosses to preserve the interests of a few banks at the expense of the welfare of millions that is keeping the EMU together at present. If they stepped outside their mainstream straitjacket for a moment they would see that the ECB could guarantee all French and German bank assets at the stroke of a pen. This mainstream blindness comes out in all sorts of ways. The problem is that social science of which economics is a branch (yes I am in that school rather than placing economics in “business”) – suffers in relation to the other sciences because it is hard to pin down things given the lack of controlled environments. With human behaviour essentially shifting the mainstream economists can get away with all sorts of lies and deceptions most of the time because it is too hard to prove otherwise. But sophisticated analysis is really not necessary. Over the last two decades we have had some real-life experiments going on before our very eyes that allow us to see through the cant that is mainstream theory. How many more experiments do we need before my professional colleagues are totally discredited?