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.
As noted last week, I am now using Friday’s blog space to provide draft versions of the Modern Monetary Theory textbook that I am writing with my colleague and friend Randy Wray. We expect to complete the text by the end of this year. Comments are always welcome. Remember this is a textbook aimed at undergraduate students and so the writing will be different from my usual blog free-for-all. Note also that the text I post is just the work I am doing by way of the first draft so the material posted will not represent the complete text. Further it will change once the two of us have edited it. Anyway, this is what I wrote today.
I read this New York Times article (June 9. 2012) – Europe Needs a German Marshall Plan – by a history professor at Harvard Charles S. Maier with some interest. And then a few days later (June 12, 2012) – the other end of the spectrum appeared – Why Berlin Is Balking on a Bailout – written by the conservative (but difficult to stereotype) German economics professor Hans-Werner Sinn. The two articles demonstrate that selective versions of history always fail, especially when they are overlaid and driven by a blinkered ideology that prevents a full understanding of why things happen. The Harvard historian understands how European reconstruction occurred and has articulated what that means for the current European malaise. The German economics professor, imbued with Ordo-liberalism, cannot see beyond his blinkers.
I was reading the recently published (June 11, 2012) – CBI Education and Skills Survey 2012 – from the Confederation of British Industry today. A day after the Report was published, the British Office of National Statistics released the latest (April 2012) – Index of Production – data which shows that “the seasonally adjusted Index of Production fell by 1.0 per cent” over the 12 months to April 2012 and that in the last month the “seasonally adjusted Index of Manufacturing fell by 0.7 per cent”. That is a large collapse. Since 2008, British production has slumped by 10 per cent overall even though the currency has depreciated by around 20 per cent against the Euro over the last 5 years. Earlier today I saw news footage of ignorant males (mostly) beating each other up over a soccer game in Warsaw. And in recent national elections, polarisation towards the extremes is evident. And all the while, technocrats that dominate organisations such as the IMF and the ECB are, inexorably, pushing economies into even more dire situations that we could have imagined four years ago, when the neo-liberal bubble burst. And in my own sector (higher education) the buzz is STEM and technocrats are using that buzz agenda to pursue strategies that will diminish our futures irrevocably. All these events, outcomes, strategies etc are related and cry out for a major shift in thinking by governments and educational institutions.
And what is UE you might ask? Unemployment easing! As the major economies start to slow again (as fiscal stimulus is withdrawn prematurely), the calls are coming thick and fast for more quantitative easing. The Bloomberg editorial (June 8, 2012) – The Key to a Stronger Recovery: A Bolder Fed – was representative of this renewed call for the central banks to somehow stimulate aggregate demand to the tune of several percent of GDP in many nations. Like the latest bailout in Europe, the call for more QE is predictable. Neither initiative addresses the real problem with the relevant policy tool or change. What is needed is something much more direct. Why don’t we have a policy of unemployment easing (UE) where the treasury departments, supported by their respective central banks, immediately set about directly creating jobs and reducing the unemployment rates around the world. Putting cash (wages) into the hands of those that are most constrained (the unemployed) will do much more good for the economy than doing portfolio swaps with banks who will not lend to thin air! So we need UE not QE.
Its a public holiday in Australia – Queen’s Birthday – so all is quiet. Why the Queen of England is also the Queen of Australia and our Head of State is one of those puzzling things that escape logic. Anyway, for the record, the latest Eurozone development – the request of a 100 billion euro bailout from the Spanish government – does not address the major problem facing the Eurozone – the Euro itself. The intransigence of the EU elites has meant that they are unwilling to reform the poorly designed European monetary system and seem to think that a sequence of band-aid remedies which only buy a little time without addressing the main issue demonstrates leadership. Meanwhile, the real economies deteriorate further and unemployment rises. The current policy proposals that are abroad in the Eurozone, are, in my view, the anathema of leadership.
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.
Today I am departing from usual practice. I have decided to use Friday’s blog space to provide draft versions of the Modern Monetary Theory textbook that I am writing with my colleague and friend Randy Wray. We expect to complete the text by the end of this year. So each Friday I will publish the work I have been doing on it during the previous week in between the other work that I am pursuing. Comments are always welcome. Remember this is a textbook aimed at undergraduate students and so the writing will be different from my usual blog free-for-all. Note also that the text I post is just the work I am doing by way of the first draft so the material posted will not represent the complete text. Further it will change once the two of us have edited it. Anyway, this is what I wrote today.