The failure of economics – reality and language

Yesterday (March 7, 2017), I presented the Second Lecture in the 3rd Annual Joan Muysken Lecture at Maastricht University. Unfortunately, the recording from the First Lecture, which I delivered on Monday evening (March 6, 2017) was corrupted but I am told there was an alternative video recorded and I will make it available when I can. The first lecture was a public event and the presentation reflected that. The second lecture was delivered to academic staff and students and so the language was more pitched to an academic audience, although it should be generally accessible. There is a little noise interference at odd times, which I could not get rid of. The audio of the talk runs for 50 minutes and I have interleaved the slides from the lecture in with the sound.

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Inflation rises in Euro Area – but don’t claim it is the ECB’s doing

Eurostat released the latest inflation data for the Eurozone last week (March 2, 2017) for February 2017 – Euro area annual inflation up to 2.0%. As the title reveals the Euro area inflation rate rose from 1.8 per cent in January 2017 to 2 per cent in February 2017. The mainstream narrative is already emerging – ‘see we told you that all that central bank bond purchasing would (eventually) be inflationary’ – type of stories. Bloomberg (March 5, 2017) waded in early with the headline – Draghi Seen Keeping Cool on Stimulus Drive Amid Inflation Surge. I expect a bevy of mainstream economists who haven’t worked out yet they have nothing sensible to add to the public debate will chime in like those wind-up toys that children play with and argue they ‘knew it all along’ – QE would be inflationary. Well I am sorry to say that the data tells us if a significant element of the cost structure rises so will inflation – simple as that. The slight uptick in inflation in the Euro area does not support the mainstream argument that building bank reserves will flood the economy with ‘money’, which then drives inflation.

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Travelling today so enjoy the music

I am travelling a lot today – from London to Brussels and then onto Maastricht. I have had some meetings in London and then tonight (Europe time) I will present the Third Joan Muysken Lecture at the University of Maastricht, which honours their foundation professor in macroeconomics (and one of my co-authors). The talk will outline why the Eurozone should be dissolved forthwith. I don’t expect a sympathetic crowd. Tomorrow, I am giving a talk at the University on why mainstream economics has contributed nothing to the advancement of societal well-being. Rather, it has been a blight on progress. I expect a even less than sympathetic audience. Should be fun! I will try to post audio (at least) of these events. But for now … here is some music.

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The Weekend Quiz – March 4-5, 2017 – answers and discussion

Here are the answers with discussion for this Weekend’s Quiz. The information provided should help you work out why you missed a question or three! 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.

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When progressives become neo-liberals and create a Trump

When you have a madman sounding, well “presidential” (according to the obsequious US press) what would you expect a Democrat politician to say in response? Yes I am talking about the Democratic response to the speech given by the US President on February 28, 2017 to the joint session of the United States Congress. The last thing I would want is for the response to begin with a report card on how the responder was fiscally responsible because he had achieved fiscal surpluses during the GFC. But then this is the Democratic Party circa 2016 we are talking about. The Party that lost an unlosable election to a showman who is sparing of the truth. This is the Democratic Party that having just lost an election because its candidate was seen as part of the neo-liberal establishment that has brought grief on millions of Americans, decides to replace its administrative head with another neo-liberal corporatist. But this problem is not uniquely American, although Americans do like to think they are unique. All around the world, political parties who should be defending workers and the poor have morphed into right-wing look-a-likes preaching fiscal rectitude (they would do it fairer) and cuts to public services and all the rest of it. They have so let down their natural constituents that real right-wingers preaching hate against immigrants and refugees and the like have seized the political initiative and taking votes from them. Trump is a sort of hybrid of that. Until the Left abandons its notions that fiscal responsibility does not mean running fiscal surpluses as a matter of course, it will continue to lose ground. And, we will all be worse off as a consequence.

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Australia national accounts – return to unstable growth

Today, the Australian Bureau of Statistics released the – December-quarter 2016 National Accounts data – which showed that real GDP had rose by a strong 1.1 per cent after recording a negative 0.5 per cent outcome in the September-quarter 2016. Annual growth (last four quarters) was 2.4 per cent. The December-quarter result was driven by strong household consumption growth (even as wages growth was negative), public investment and net exports (on the back of a massive shift upwards in the terms of trade). A bright spot was the positive private investment growth. However, I consider the overall outcome to be an unstable situation. Households cannot continue to dominate the growth outcome when wages are flat or falling and the household debt ratio is already at record levels. The decline in the household saving ratio cannot be sustained. Further, public investment is spiky (large public infrastructure projects) and could just as easily turn negative next period. The overall trend in government intent is to cut back its contribution to growth in the coming year. Which means that growth becomes dependent on the swings in the terms of trade, which fluctuate substantially.

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