I am travelling today and so have to steal time to write this blog between other commitments. Later this week I am presenting a paper at a workshop on stock-flow consistent macroeconomics and I was thinking over the weekend just gone what I would do with the time I have for the presentation (1 hour). I started putting together a database of IMF forecasts out to 2016 for various nations and simulating the implications for the sectoral balances. Then I thought I would discuss the internal inconsistencies of those forecasts from a stock-flow perspective and the implications of those inconsistencies. I will write a blog later in the week on that once I have finalised the presentation. But the preliminary thinking led to today’s blog. In policy you have to wish for the possible.

I saw a bit of the recent US Republican candidates’ debate. It was extremely boring to say the least. If that field is the best conservative America can muster and Obama is the best the conservatives who think they are progressives can muster then que dieu nous aide. I thought the policy discussion from the candidates in the debate were woeful and I longed for Sarah Palin to walk in and say something sensible. But one influential commentator did find something rather interesting and pleasing about the debate. In this Wall Street Journal article (June 16, 2011) – Republicans Return to Reality – Peggy Noonan tells us that the GOP has at least demonstrated a new sobriety when it comes to policy. The reason? Read on. But my reaction is to draft a memo to the US Treasury – headline – E-mail me for my bank details.

I have very little spare time to write my blog today so this will truly be brief. Amidst all the riots in Athens as the Eurozone farce descents further into the mire, the UK Labour Force data came out yesterday (June 15, 2011). There are some who are saying that the data presents good news. A closer examination reveals nothing of the sort. Others are claiming that there isn’t really a problem of unemployment in Britain because the unemployed are largely unemployable. That is a familiar refrain after a deep recession as the labour market struggles to keep pace with the underlying population growth. The conservatives always try to redefine what we might call full employment and claim that a much higher unemployment rate is now indicative of full capacity. The same game is being played out in Australia where despite unemployment and underemployment totally 12.2 per cent at present the Reserve Bank governor had the audacity to claim there were not that many spare labour resources (like 1.3 million odd workers don’t count any more).

It is going to be brief today – it is a holiday in Australia. Queen’s Birthday no less. Can you believe that we are still under the yoke of our colonial masters? Anyway, a winter’s holiday – pouring rain and cold. But I read a couple of things today which I thought were worth interrupting other work to write about as they establish some general principles relevant to understanding Modern Monetary Theory (MMT). The discussion also highlights the recurrent nature of the prophecies of doom – that come from the likes of the Peter G. Peterson foundation now but others in the past. We were told in the 1930s that profligate governments would go bankrupt. They didn’t but when they cut back there economies went broke. The Japanese government was predicted to become insolvent in the 1990s along with hyperinflation and skyrocketing interest rates. Nothing happened other than the fiscal austerity that was imposed as a result of the political pressure arising from these predictions sent the economy back into recession. Same as now … fiscal austerity – imposed because allegedly budgets are unsustainable – will drive economies back towards and into recession. When will we ever learn?