The way private banks in Australia screw their communities

Today, I am over committed and have to travel some, and, luckily, we have a guest blogger in the guise of Professor Scott Baum from Griffith University who has been one of my regular research colleagues over a long period of time. He indicated that he would like to contribute occasionally and that provides some diversity of voice although the focus remains on advancing our understanding of Modern Monetary Theory (MMT) and its applications. Today he is going to talk about the current concerns about the provision of regional banking services.
Anyway, over to Scott.

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Australian labour market bounces back after two months of gloom – the RBA will not be pleased

The Australian Bureau of Statistics (ABS) released of the latest labour force data today (March 16, 2023) – Labour Force, Australia – for February 2023. My overall assessment is that after two months of decline (some of which was related to abnormalities during the holiday period), the February result is much stronger. All the things one looks for improved – employment rose by 64,600 (0.5 per cent) with a bias towards full-time work; unemployment fell 16,500 to 507,500 persons and the official unemployment rate fell by 0.3 points to 3.5 per cent; and the participation rate rose 0.1 point Some caution needs to be observed though – the underlying (‘What-if’) unemployment rate is closer to 5.1 per cent rather than the official rate of 3.5 per cent, which indicates the labour market still has slack. There are still 1,343.2 thousand Australian workers without work in one way or another (officially unemployed or underemployed). The problem is that the RBA, which is intent on increasing unemployment in the misguided belief that the inflationary pressures are coming from the labour market, will hike further and eventually kill off employment growth.

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US inflation falling fast as Europe prepares to go back into a deliberate austerity-led crises

The transitory view of the current inflation episode is getting more support from the evidence. Yesterday’s US inflation data from the Bureau of Labor Statistics (March 14, 2023) – Consumer Price Index Summary – February 2023 – shows a further significant drop in the inflation rate as some of the key supply-side drivers abate. All the data is pointing to the fact that the US Federal Reserve’s logic is deeply flawed and not fit for purpose. Today, I also discuss the stupidity that is about to begin in Europe again, as the European Commission starts to flex its muscles after it announced to the Member States that it is back to austerity by the end of this year. And finally, some beauty from Europe in the music segment.

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US labour market slows a bit but no sign of a major contraction yet

Last Friday (March 10, 2023), the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – February 2023 – which revealed a slight dip in the number of net payroll jobs created and a slight increase in the unemployment rate. It is too early to say whether this marks a turning point in the US labour market after several months of interest rate increases. We will know more about that next month. January’s result was very strong, so a slight dip on that is no cause for concern. Most of the aggregates are steady and in terms of the pre-pandemic period, February’s net employment change was still relatively strong.
Real wages continued to decline in the face of a decelerating inflation rate. Overall, the US labour market is steady and doesn’t appear to be contracting fast in the face of the Federal Reserve interest rate hikes.

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The current inflationary period is not remotely like the 1970s

In the light of recent debates about whether we are back in the 1970s, where the only ostensible similarity is that inflation has accelerated over the last year or so, I dug into my data archives to remind myself of a few things. One of the problems with dealing with official data is that it gets revised from time to time and time series become discontinuous. So the labour market data for Australia tends to start in February 1978 when the Australian Bureau of Statistics moved to a monthly labour force survey. Researchers who desire to study historical data have to have been around a while and have saved their earlier data collections (such as me). But it is often impossible to match them with the newer publicly available data. You will see in what follows how that plays out. But, I was also interested to return to the past today after the ABS released their latest – Industrial Disputes, Australia – data (released March 9, 2023), which shows that disputes remain at record lows. So in what follows I show you how far removed the current situation is from what happened in the 1970s and this renders the narratives from our central bankers a pack of lies.

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RBA is engineering one of the largest cuts to real disposable income per capita in our history

Yesterday (March 7, 2023) two big things happened. The first is that I got a lovely bunch of sunflower blooms for my birthday present. Which was ace. The second, the RBA Board wheeled out the governor to announce the 10th consecutive interest rate rise even though inflation has been falling for several months. The RBA has now become preposterous and the Government should definitely terminate the tenure of the Governor in September when his term is up for renewal. In the meantime, it should clean the RBA Board out, or introduce legislation that says each member including the governor gets the real disposable loss that they are imposing on the worker deducted in percentage terms from their own salaries. A further deduction would be made (quantum to be determined) for each percentage point the unemployment rate rises. That might give them pause for thought. The music segment will definitely lift your spirits after reading through the following gloom.

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German Bundestag body’s MMT overview exposes the hidden agenda – the population simply can’t be allowed to understand MMT

The Scientific Advisory Department of the Deutscher Bundestag recently (January 27, 2023) released a discussion paper – Modern Monetary Theory – An overview – which really exposes what all the opposition to our work is about. Initially, I was interested to learn from the discussion paper that I was a US economist after thinking all these years that I was Australian by birth and citizenship. Perhaps that error tells you something about the quality and depth of the research effort that the authors undertook. The paper recognises that Modern Monetary Theory (MMT) is “an economic school of thought that has existed for around 25 years” but is hazy on the provenance, ignoring that at the beginning there was Warren Mosler, Randy Wray and myself. Rather interestingly, the discussion paper claims that there is no disagreement among the mainstream as to the theoretical and conceptual elements of MMT. So the mainstream all agree with us now! That is quite an admission. But, as one gets further into the discussion, it becomes obvious that the authors miss the point when they start talking about MMT policies. What their critique of MMT illustrates is that the real antagonism to our ideas is that they might open up wider policy options to the public than the political process cares to admit. Or, in other words, the real problem is that an understanding of MMT exposes the TINA mantra – that allows governments to maintain policies that advance the interests of the few at the expense of the many – as wanton neglect of the responsibilities of government. That exposure, if sustained, would alter the whole policy terrain and challenge the hegemony of the elites. That is what the opposition to MMT is about.

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Inflation has probably peaked in Australia – yes, it was a transient episode

Given yesterday’s extensive National Accounts analysis replaced my usual Wednesday blog post, I am using today to discuss a range of issues and provide a musical interlude into your lives for peace. Yesterday’s bad National Accounts data release took the headlines away from another data release from the ABS yesterday – the monthly CPI data results. Inflation is falling in Australia and has probably peaked. The RBA still thinks it is going to hike rates a few more times. As more data comes out, their cover (justifications) are evaporating by the day and it is becoming obvious that they are pushing rates up because they want to reclaim the territory as the ‘boss’ of macroeconomic policy irrespective of the costs and hardships they impose on lower-income Australian families. Shocking really. I also look at the new RadioMMT show which launched last week. And the debate about Covid continues but the evidence is being distorted badly by those who continue to claim it was all a conspiracy to bring us to heel. And then some music.

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Australian National Accounts – GDP growth in decline, expect unemployment to rise – courtesy RBA sabotage

The Australian Bureau of Statistics released the latest – Australian National Accounts: National Income, Expenditure and Product, December 2022 – today (March 1, 2023), which shows that the Australian economy grew by 0.5 per cent in the December-quarter 2022 and by 2.7 per cent over the 12 months. This is a significant decline in growth, which is now insufficient to prevent unemployment from rising over the coming period. Growth is being driven largely by continued (but moderating) growth in household spending. This was augmented by the strong rebound in the Terms of Trade (commodity prices), which helped net exports make a positive growth contribution. There was growth in employee compensation (the wage measure from the national accounts) of 3.2 per cent but that was largely due to administrative decisions (for example, minimum wage increases) that impacted in this quarter rather than being the result of market pressures. Households are now saving less relative to their disposable income in an effort to maintain consumption growth in the face of rising interest rates and temporary inflationary pressures. I expect growth to decline further and we will be left with rising unemployment and declining household wealth as a result of the RBA’s poor judgement.

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Abandoning the euro would have essentially zero negative income effects for the vast majority of Member States

If you cast your mind back to the peak of the GFC, when people were actually talking about the dissolution of the Economic and Monetary Union (EMU), a.k.a. the Eurozone, or more specifically, a unilateral exit by Greece or Italy, we were told by the ‘experts’ that it would be catastrophic. Over and over, headlines shouted at us how disastrous it would be if the Eurozone failed. Well, guess what, even pro-Euro researchers have come to the conclusion that the effects of collapsing the monetary union would be minimal, to say the least. And when we dig into their analysis a bit deeper, using technical knowledge, the results are even more devastating for the pro-Euro camp. Mostly, using techniques that give pro-Europe narratives the best chance of delivering supportive empirical results, they find mostly impacts that are not statistically different from zero, of an abandonment of the common currency and a return to currency sovereignty for the 20 Member States. I haven’t seen any attention given to this in the mainstream media or from those pro-Euro Tweeters that tweet away with all sorts of nonsense about how good the common currency has been. But then that would be a bridge to far for them I guess.

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