The central bank independence myth continues

One of the enduring myths that mainstream macroeconomists and the politicians that rely on their lies to depoliticise their own unpopular actions continue to propagate is that of ‘central bank independence’. This is the claim that macroeconomic policy making improved in the ‘neoliberal’ era following the emergence of Monetarism because monetary policy was firmly in the hands of technocratic bankers who were not part of the political cycle. As such, they could make decisions based on fundamentals rather than the requirements of the political cycle. The corollary was that vote-greedy politicians, who operate on short-term political cycles, would be willing to compromise the ‘longer-term’ health of the economy to splurge on populist programs that might increase their chances of re-election. As a result of the mismatch between the political cycle and the, longer, economic cycle, the neoliberal solution was to make monetary policy independent of the political cycle. Except, of course, it didn’t and cannot. The latest scaremongering about the ‘loss’ of central bank independence was published in the UK Guardian last week (February 28, 2020) – From the Fed to Bank of England, central banks must up their game. The author is a former deputy governor of the Bank of England Board and former director general of the CBI. The interesting point about the article was not the further elaboration of the myth, but, rather, his assessment that the chances of reforming the European Union treaties in any direction “are vanishingly small”. Read: zero. From the mouth of the elites. I hope our Europhile Left colleagues absorbed that bit, at least.

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The Weekend Quiz – February 29-March 1, 2020 – 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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Our sequel to Reclaiming the State in now in progress

As parat of my recent European speaking engagements, I went to Rome on February 5, 2020 to speak at the Italian Senate on Modern Monetary Theory (MMT) and the dysfunctional state of the European Union. The next day I had long discussions with one of my co-authors, Thomas Fazi, who I wrote – Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto Books, September 2017) with. We have been working on the sequel to that book for some time, and, in the process, have had to work through some difficult issues on which there has been some degree of difference in our viewpoints. While I was in Rome, Thomas and I also recorded a video of a conversation where we talk about our sequel. We provide that video here as well as a brief discussion outlining some of the major issues that the book will address.

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Rounding off the Masterclass in London last weekend

Last Saturday, I held an MMT Masterclass or Teach-In in London. It was an experimental session because I wanted to see what level of difficulty people would find useful as we work on developing the pedagogy and materials for MMTed, which is intending to provide free teaching resources for those interested to learning Modern Monetary Theory (MMT) from first principles. Given the time constraints, I didn’t quite finish Module 1. So I thought I would provide the slides here with a written explanation of what I would have said so that you get the complete context and application of the concepts that we developed together during the class. So this blog post completes the lecture. Thanks to all those who attended and to those who have sent me the requested feedback. This will help us improve the material and presentation approach.

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Travelling all day – listening to jazz

I am travelling for most of today after a rather (exhausting) speaking tour of Europe and the UK. I met a lot of people, gave an (awful) lot of presentations and I thank all the organisers who helped set up the meetings. Special thanks to Tristan (Paris), the GIMMS team (UK), Kevin (Dublin), and all the other people who helped make the tour work. I will be back in Europe in June-July. On Thursday, I will be provide some information about the new book that Thomas Fazi and I are working on as the sequel to our last book – Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto Books, September 2017). Tomorrow, I will be providing some final remarks to cover the material that we did not get to in last Saturday’s London MMT Masterclass.

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Workers in half Australian industries endure real wage cuts

Last Wednesday (February 19, 2020), the Australian Bureau of Statistics (ABS) released the latest- Wage Price Index, Australia – (December-quarter 2019). Both private and public sector wages growth was just 0.5 per cent in the December-quarter – keeping growth at record lows. Over the year to December 2019, overall wages growth was 2.2 per cent. With the annual inflation rate running at 1.8 per cent, workers were able to enjoy some real wages growth. However, over the longer period, real wages growth is still running well behind the growth in GDP per hour (productivity), which has allowed profits to secure a substantially increased share of national income. Further, 9 of the 18 industrial sectors delivered real wage cuts to their workers and the aggregate figure is distorted by the strong growth in two sectors only. At the current rate, nominal wages will be lucky to top 2 per cent in 2019-20, which means the tax revenue estimates in the fiscal plans are likely to be over-stated. And, if the mainstream narrative was remotely correct, why is employment growth flat-lining when wages growth is at record lows?

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The Weekend Quiz – February 22-23, 2020 – 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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Australia labour market – getting worse as unemployment and underemployment rise

The Australian Bureau of Statistics released of its latest data today (February 20, 2020) – Labour Force, Australia, January 2020 – which continues to show that the Australian economy is in a weak state with a fairly moderate labour market performance being recorded for the start of 2020. The culprit – the Australian government – which is starving spending by its obsessive pursuit of a fiscal surplus. Employment growth was weak – 0.1 per cent and failed to keep pace with the underlying population growth. As a result, unemployment rose by 31 thousand persons and the unemployment rate rose by 0.2 points. Hours worked fell by 0.45 per cent. The only bright spot was the rise in full-time employment. The really worrying sign was the rise in underemployment – sharply up by 0.3 points to 8.6 per cent. The total labour underutilisation rate (unemployment plus underemployment) rose sharply to 13.9 per cent (up 0.5 points). There were a total of 1,905.2 thousand workers either unemployed or underemployed. This is a deplorable result. My overall assessment is that the Australian labour market remains a considerable distance from full employment and that that distance is increasing. This persistence in labour wastage indicates that the policy settings are too tight (biased to austerity) and deliberately reducing growth and income generation. There is clear room for some serious fiscal policy expansion at present. The Federal government is willfully undermining our economy with its irresponsible policy position.

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