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.
Eurostat published their latest National Account estimates for the Eurozone on Wednesday (February 15, 2012) – Flash estimate for the fourth quarter of 2011 – which allows us to complete the picture for the 2011 calendar year. Overall, the results are appalling. Many nations are now double dipping and even the European powerhouse, Germany contracted last quarter. Over the Channel, the British economy also contracted in the 4th quarter 2011. None of this should come as any surprise. An economy cannot grow when the private sector is deleveraging and is in constant fear of unemployment and the public sector deliberately refuses to step in and provide fiscal support. It is even worse when the government further undermines the capacity of the private sector to spend (by harsh cuts in pensions etc) and cuts its own net spending into the bargain. As one commentator noted yesterday “it makes no sense to drive an economy into recession where it stops people from working and thus paying more taxes” if the goal is to reduce budget deficits. The political leadership in Europe and the UK is deliberately sabotaging their economies. The same mentality is gathering pace in the US. Spare us!
Today’s release by the Australian Bureau of Statistics (ABS) of the Labour Force data for January 2012 shows that the deterioration in the Australian economy towards the end of the year has temporarily ceased although working hours have fallen sharply. The data shows that employment has recovered a little and unemployment fell as a response – both good signs. The employment growth, however, is dominated by part-time jobs growth and underemployment is almost certain to have risen in January. The fall in hours worked is consistent with that conclusion. So the news is mixed this month. I still consider the Federal government to be undermining our prosperity by pursuing its obsession to get the budget back into surplus in the coming year. The most disturbing aspect of the labour market data over the last year or more has been the appalling state of the youth labour market. Teenage females did gain some modest relief this month from the relentless loss of jobs, but teenage males continued to go backwards. This should be a policy priority for the government. But they have gone missing in action – lost in their surplus mania. My assessment of today’s results – mixed news with little to be happy about.
A lot of attention is being focused on the Eurozone at the moment given the scale of the economic and social crisis that is unfolding there. It is clear that the unemployed and other pension recipients are being made to pay very significant costs for the policy folly imposed upon them by the Euro political leadership. However, the mean-spirited treatment of the disadvantaged is not confined to Europe. In the US, for example, the Congress is soon to debate and vote on a serious reduction in income support for the already beleaguered unemployed. There is a tendency to think about this from the perspective of a commitment to social democracy as being immoral, iniquitous, and a violation of the human rights of the disadvantaged. While I have great sympathy with all of those emphases, there is an easier attack that can be mounted on cutting unemployment benefits in the US or elsewhere. Such a strategy only serves to further undermine the spending capacity of the private sector at a time when the principal problem is a deficiency of aggregate spending. A simple understanding of macroeconomics leads to the conclusion that our pathological meanness to the unemployed is just bad economics.
In case you are wondering what is going on with my blog today you might care to read the following.
I am travelling for most of today and so haven’t much time to write a blog. I am typing this on the train to Sydney airport. The press has been increasingly highlighting the on-going Greece situation. What is important to note is that the neo-liberals are no longer honey-coating the fiscal austerity in terms of “fiscal contraction expansion”. The Greek finance minister is now saying that the Greeks have a choice between disaster and total disaster. Other are juxtaposing sacrifice with chaos. I have noted that in recent months that a lot of commentators have been asserting that an exit would be a disaster – far worse than the current “disaster” of 4 years recession and more to come. But rarely do you read any coherent analysis of what might happen should Greece exit the Eurozone. My view is that while the dislocation would be intense and costly it would, in the longer-term, be less costly than the current alternative – which is persistent recession for the foreseeable future and a savage erosion of real living standards, especially for the next generation. As on commentator put it over the weekend (full quote provided later) – the current austerity approach with “deep structural inequalities and its rigid adherence to a failed economic ideology, protects neither democracy nor human rights. Stiff-necked and punitive, it prefers to eat its children
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.
I’ve been travelling for most of today (now back in Newcastle) which has cut the time available to write anything. So this will be a relatively short blog and focuses on the way in which my profession is always trying to reconstruct economic issues when they find some policy proposition uncomfortable. The vehicle to demonstrate this phenomenon is an article published by Bloomberg (February 10, 2012) – Sachs Says Krugman Is ‘Crude Keynesian’. It summarised the radio interview (mp3 link – running for nearly 15 minutes) with Columbia University’s Jeffrey Sachs. The latter is well-known for providing advice to the old Soviet economies, which led to the massive transfer of public wealth to the private oligarchs via privatisation. Under Sachs’ guidance, the so-called “shock therapy”, hastily imposed deregulation, privatisation and the abandonment of price controls (on rent etc) on the previously planned economies – with disastrous consequences. In the Bloomberg interview, Sachs is highly critical of “macro” interpretations of the current problems – claiming that the major challenges are all micro in origin.