A few weeks ago in this blog – So who is going to answer for their culpability? – I wrote about the IMFs latest “discovery” that their policy advice, which has caused millions to become unemployed and nations to shed income and wealth in great proportions and all the rest of the austerity detritus, was based on errors in estimating the value of the multiplier. They now admit the expenditure multipliers may be up to around 1.7, which means that for every dollar of government spending, the economy produces $1.70 of national income. Under their previous estimates of the multiplier, a dollar of government spending would translate into only 50 cents national income (a bad outcome). The renewed awareness from the arch-austerity merchants that they were wrong and that fiscal policy is, in fact, highly effective, has to be seen in the light of the continued obsession not only with fiscal austerity but also with discussions surrounding monetary policy. There have been many articles over the last few years expressing surprise that the vast monetary policy changes have had little effect. But as soon as the writers note this they launch into the standard arguments about inflation risk and the rest of the narratives that accompany discussions about central banks. Soon we will have to accept the fact that monetary policy is not a suitable tool to stabilise aggregate demand at appropriate levels. We will also have to acknowledge that the only way out of the crisis is via renewed fiscal stimulus.

It was a sort of relief being in Seoul for Monday and Tuesday immersed in discussions about development strategies for Kazakhstan and Korean experience. I could sort of kid myself that the Mid-Year Economic and Fiscal Outlook 2012-13, which usually doesn’t come out until December, didn’t really happen. Out of sight out of mind sort of logic. It did come out and I read all the news and the – Treasury Document – that the Treasurer delivered to the Australian public on Monday. The latter will be oblivious to the chicanery contained in that document and the sheer absurdity of the message that the Treasurer triumphantly presented. This is high farce, high deception, vandalism, and ultimately, shocking politics, despite politics being the motivation for the strategy that the Treasurer is pursuing. Anyway, for two days I abstracted from it, despite calls from the Australian media asking my views. It was much more interesting considering the way in which Korean created its growth miracle. But more on that another day. For now, I am back in Australia (Sydney this morning early, now Darwin) and have to confront the reality – Australia is being governed by a party that is intent on deliberately creating unemployment and pushing more Australians into hardship and despair at a time when we should all be prospering. Interestingly, by next year that unemployment will extend to their own tenure in office such will be the economic consequence of their cynical political strategy, which will backfire gloriously.