Welcome to the Billy Blog Saturday quiz. The quiz tests whether you have been paying attention over the last seven days. See how you go with the following questions. Your results are only known to you and no records are retained.
I am still in Darwin today and have limited time to write. It seems, however, that the Euro bosses have gone all growth on us. For non-English speakers – going all growth on us – is terrible slang meaning are they becoming enamoured with the idea that growth is important. Apparently, austerity is “so yesterday”, if not “last week” and the mantra is now about “growth compacts”. Forget the fiscal compact which most of the EU states have signed up for which if realised will drive their economies into the ground so harsh are the proposed rules on budgets and public debt. Now there is a growth compact proposal – which Mario has suggested Europe follows. Angie is right in behind him – has Madame Austerity – has gone all growth on us too?. It has been a bad week for the Troika (IMF, ECB, EU) – what with the UK now officially in a double-dip due to the deliberate strategy of its government (emulating the EMU) and across the Channel, the impending success of François Hollande is now becoming obvious. Merkoz will now have to morph into Mollande. And while on “olland”, the Dutch government also collapsed as a direct result of the backlash over the fiscal austerity. Apparently, the likely new French president is not particularly keen to join the fiscal austerity conga line although all his public statements to date would suggest he is committed to the SGP principles. So what is this all about? Are the Euro bosses going “all growth on us”? Answer: there will be no “growth compact” other than in the title of some EU Summit paper. The growth spin is mounting but the EU elites remain firmly wedded to doing everything they can to undermine growth.
I am in Darwin today – right in the North of Australia. This is the frontier of Australia and merges our nation with Asia to the north. The dry season has just started and so the tropical weather today is glorious – warm and sunny and dry! It is a 6 hour flight from Newcastle and a remote part of our nation despite Darwin being one of our capital cities. But the world is not very far away from anywhere these days in terms of information access and so it is hard to avoid reading the latest data from around the world and analysing it. The news from Europe over the last 24 hours is shocking and the responses by leading politicians is worse. Just as the British Office of National Statistics was announcing that the UK has achieved a double-dip recession for the first time since the 1970s – an achievement that the Government will no doubt erroneously claim is the work of others – Bloomberg published a story (April 25, 2012) – Merkel Pushes Back Against Hollande Call to End Austerity Drive which tells you how far out of touch with reality the Euro leadership is. The UK government is working as hard as it can to undermine its own economy so it can catch up with the Eurozone economies in the race to the bottom of the slime. It beggars belief really. When will the citizens revolt?
It is a public holiday in Australia today remembering our First-World War soldiers who died during the ill-fated invasion of the Gallipoli peninsular in Turkey. Anzac Day is part of the Australian legend about heroism and the ideals of mateship that are (dubiously) prominent in our culture. However, this part of our history (and legend) is now being scrutinised by historians and more documentary evidence emerges and it is clear that the conventional history of the campaign that Australia was fighting a heroic struggle in service of the British Empire is not supportable (for example, see this Op Ed for one of the alternative viewpoints that make the Gallipoli story rather mirky). I also have a lot of travel coming up later today and so my blog will be relatively short. I have been rounding up the latest data – surveys, national statistical office releases, bank statistics – from Europe and the UK, to see how the fiscal austerity experiment is actually going. The neo-liberal proponents of austerity all promised us that the private sector was ready and willing to fill any spending gap left by government net spending cuts (and then some) so that the austerity would actually increase growth. Any reasonable person disputed that promise pointing out that spending equals income and private spending was going no-where fast. The evidence is increasingly supporting the latter view. The question is – given the massive damage the austerity policies are having is – when does the experiment end?
The Australian Bureau of Statistics released the Consumer Price Index, Australia data for the March 2012 quarter today and the inflation rate has plummetted in the face of a slowing economy. The trend over the second half of 2011 was for inflation to ease. But the plunge in the first three months of 2012 that today’s data reveals is pointing to a very sick economy. The annual inflation rate is now estimated to be 1.6 per cent with a downward trend. As I noted last September if the trend that was apparent then continued, then the annualised rate would fall below the Reserve Bank of Australia’s (RBA) lower inflation targetting bound. That has now happened in today’s data, which means that the RBA has to consider inflation to be “too low” now and significant monetary policy easing (via their own logic) should be forthcoming next Tuesday when the RBA Board meets again. You might ask whether the “bank economists” (the private sector mavens who always think inflation is about to accelerate out of control) predicted that the March quarter inflation rate would be 0.1 per cent. The answer is that they predicted that inflation for the March would be running at 7 times the actual rate (0.7 per cent), which raises the question yet again – why does the mainstream media rely on their input to guide the public on where the economy is heading. Today’s data signals that the Australian economy is not in robust shape and the major cause of this slowdown is the irresponsible fiscal policy obsession that the Government has with achieving a budget surplus in the coming fiscal year. It is an act of vandals.
There is increasing evidence that the manic obsession with fiscal austerity instead of employment-generating growth is not only further de-stabilising the EU economy and foreshadowed the next chapter in the crisis but is also undermining the political accords that were the rationale in the first place for political and economic “integration”. The news from France yesterday that Marine Le Pen received close to 20 per cent of the first-round vote in the Presidential election and the impending collapse of the Dutch coalition government as Geert Wilders torpedoed the fiscal austerity negotiations – outrightly refusing to agree to the cuts, tells me that the political scene is polarising and extreme right candidates are coming to the fore. The mainstream left parties stand indicted for embracing the neo-liberal economic myths and then trying to sell a softer vision for Europe. The reality is that Europe will only be able to implement and sustain progressive social agendas if the neo-liberal malaise is abandoned. That will mean that nations abandon the Euro and use fiscal policy to promote employment growth. However, the various political outcomes that we are witnessing in Europe indicate that we can expect no leadership from the mainstream left on any of these issues. They are entranced by the fiscal austerity mantra sold to them by the conservatives. Which gives credibility for the incredulous demands of Le Pen and Wilders!
Here are the answers with discussion for yesterday’s quiz. The information provided should help you understand the reasoning behind the answers. 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.
Welcome to the Billy Blog Saturday quiz. The quiz tests whether you have been paying attention over the last seven days. See how you go with the following questions. Your results are only known to you and no records are retained.
The ABC News today reported that – Newcastle hosts frisbee championships – which means the national frisbee championships will be in my town this week and I will be around. Apparently the championships involve “flinging a frisbee between players on a pitch similar to a football or soccer field” and then “catching the disc in the endzone”. I suggest the Australian Prime Minister take up the sport. It seems an innocuous pastime and she surely couldn’t be any less skilled at it than she is at managing the economy. Her speech yesterday in Perth certainly established she has no understanding of macroeconomics or if she does, then she is deliberately misleading us. Her Finance Minister was also fully engaged in the misinformation exercise about the state of the budget. But then she is in solid company. The German Bundesbank has made public statements telling nations crippled by self-imposed fiscal austerity to forget about growth and balance their budgets. The ugly German stereotype is unfortunately reinforced by these sort of public interventions. And, finally, we have the genius who yesterday was advocating widespread cuts in welfare entitlements today out in the Op Ed pages suggesting that countries who exert their sovereign rights over multinationals are committing suicide despite the particular country in focus having real GDP growth rates that most other nations envy. Its all in a day of neo-liberal madness.
It seems that the fiscal austerity agenda is morphing into what is probably the real underlying strategy – to demolish or seriously compromise government welfare spending and income security provisions where it benefits individuals. In a Bloomberg Op Ed today (April , 2012) – To Thrive, Euro Countries Must Cut Welfare State – we learn that Europe is “overspending on social welfare” and that benefit programs have to far less generous into the future. This resonates with the foolish intervention overnight from the Australian conservative Treasury spokesperson (one Joe Hockey) who claimed that when they regain power next year (which they will given how hopeless the Labor government has been) they will dismantle our income support system to save the government from running out of money. On the one hand, the level of ignorance about macroeconomic matters displayed by these commentators is stunning. On the other hand, one could easily assume they know exactly what the story is but are choosing to mislead their audiences because if they disclosed their true agenda they might not get the same support. Either way, the attack on the welfare state is misguided and will only worsen the long-run prospects of us all.