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 new conservative Australian government is scaling new heights in their attack on the most disadvantaged. The May Fiscal Statement was littered with nasty cuts, which reduce spending by trivial amounts at the macroeconomic level but which will have devastating effects to the recipients of the income support. Today I briefly look at the changes in the unemployment benefit regime that have been foreshadowed. Let us hope the Senate blocks them for good.
Today’s release of the – Labour Force data – for May 2014 by the Australian Bureau of Statistics confirms, once again, how weak the labour market is. All the talk recently from the financial markets and the government about how the economy has ‘turned the corner’ and the lean times are behind us are plainly wrong. Today’s data confirms the stagnant situation that we have been witnessing for the last few years. Employment growth was negative and unable to keep up with the underlying population growth and unemployment rose modestly as a result. The participation rate fell again and held the rise in unemployment down by around 0.2 points. Workers are exiting the labour force because there are not enough job opportunities available. As a result, hidden unemployment rises as well. underemployment has risen since February by 0.2 points and the broad labour underutilisation rate (sum of underemployment and unemployment) stands at 13.5 per cent or more than 1.65 million workers. If we add the workers who have exited the labour market due to the lack of job openings then the total labour wastage will be well above 15 per cent. The other on-going disaster is the teenage labour market and that group fell further behind this month. The policy settings are wrong and the politicians are moving in the opposite direction to what is needed.
One of the things you can always bet on with surety is that the conservatives will always try to convince the public that a cyclical event is, in fact, a ‘structural’ event. This has two, linked purposes. First, they can downplay any hint that aggregate fiscal policy interventions, which work at the macroeconomic level are necessary no matter how bad the problem is. Second, they can then wheel out their favourite ‘structural’ remedies, all of which just happen to result in national income being distributed to profits or high income earners, less capacity for low-wage workers to enjoy real wage rises or reasonably share in national productivity growth, and lower government income support payments to the disadvantaged. A double-whammy strategy. Here is an example of that sort of lie. The US Employment-Population ratio has fallen dramatically since the onset of the crisis and remains stuck at low levels. The reason is clear – there was a huge collapse in employment in 2008 and 2009 and, in the recovery, the rate of job creation has not been sufficiently strong to reverse that decline. Total employment growth has been around or just above the underlying growth in the civilian population (above 16 years), which is why the ratio is stuck. There needs to be much faster employment growth for the US to make back the ground that was lost in the downturn. While the US civilian population is growing older and that is having an impact on the calculated Employment-Population ratio, the impact is small and doesn’t alter the fact that a huge negative cyclical event occurred in the US and the fiscal intervention was not large enough to fix the problem.
I was happy this morning and then I thought about the spikes that I had read about last week. Those 17-inch spikes didn’t improve my mood. They are symbols of how successful the neo-liberal period has been in dissolving the sense of collective will in our societies. We have been indoctrinated by the capitalists, their servant politicians, and the think tanks and co-opted media to believe that we are all in this for what we can get whereas in the full employment period after World War II we were all in it together. Now we think someone who is unemployed or homeless is in that state because of their own failing whereas we used to understand it was because their were not enough jobs and an individual was powerless to alter that overall lack of spending in the economy. It needed strong government intervention to resolve the issue. Now we consider the homeless are to be treated like pigeons!
Today is a public holiday in Australia where we go to the football or do other things all in the name of the Queen’s Birthday – the Queen of England that is. It remains an expression of our colonial yoke and our lack of confidence as a nation, which continues to harm us, none more than our indigenous population. Anyway, the workers get to have a day off, which can’t be a bad thing. One of the more amazing frauds that the population is exposed to from our political leaders is the claim that if you impose fiscal austerity growth will spring forth as consumers and firms start spending again because they don’t have to save up to pay for higher taxes in the future. It is a crazy theory without an evidential standing. More evidence from Australia since the release of the Government’s May Fiscal Statement (aka Budget) is very conclusive that consumers and firms do not like announcements of major fiscal cutbacks.
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.
Seventy years ago today there was a major mobilisation – D Day – designed to free Europe from the German military (and ideological) oppression. The allied troops stormed the beaches at Normandy as part of the so-called ‘Operation Overlord’, which quickly liberated France and set up the campaign that would end Germany’s dominance. Unfortunately, modern day Europe is caught up in a different form of German ideological oppression and the economic consequences have been devastating. The European Central Bank showed yesterday how stifling this oppression is when they made what were considered ‘historic’ changes to policy, which any reasonable assessment would conclude will do very little to stimulate growth. The policy mentality is in denial of history and economic logic. But with fiscal policy bolted down by the neo-liberal ideology there is no room to grow. Another major invasion of Europe is needed – an intellectual storming of the beaches. That is the only way the euro-zone nations will liberate themselves from the current malaise.