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.
Welcome to The Weekend Quiz, which used to be known as the Saturday Quiz! The quiz tests whether you have been paying attention or not to the blogs I post. See how you go with the following questions. Your results are only known to you and no records are retained.
The latest labour force data released today by the Australian Bureau of Statistics – Labour Force data – for March 2017 shows a rather substantial jump in full-time employment (74,500 thousand) and a rising participation rate (up 0.2 points). That is usually a virtuous duet even though unemployment rose by 4 thousand and the unemployment rate was steady at 5.9 per cent. I say virtuous because it means that more jobs are being created and more people are coming back into the labour market to access the better environment. The curious thing though is tha total monthly hours of work barely rose, which leads one to suspect that the employment strength is a sampling issue and we will see next month whether the underlying behaviour over the last several months reasserts itself or whether March 2017 marks a shift to better times. Put me in the sceptical camp at this stage. Broad labour underutilisation remains high at 14.7 per cent with unemployment and underemployment summming to 1,890.3 thousand persons. The teenage labour market also showed some improvement but remains in a poor state. Overall, we will have to see.
The other day I read a report in the UK Guardian (April 6, 2017) – Jeremy Corbyn: add VAT to private education fees to fund school meals – which appeared to signal that the world has gone mad. Today, I read a story in the Financial Times (April 11, 2017) – NHS looks to hedge funds to finance possible improvements. They both tell us how entrenched the erroneous neo-liberal ‘cost’ framing is. Modern Monetary Theory (MMT) emphasises real resource availability as the demarcation of fiscal space and rejects the way in which ‘costs’ are framed in the mainstream debate. Statements such as the ‘nation cannot afford the cost of some program’ are never made when the military goes crazy and launches millions of dollars of missiles to be blasted off in the dark of the night. But when it comes to public health systems or the nutritional requirements of our children, the neo-liberals have their calculators out toting up the dollars. However, the actual cost of a government program is the change it causes in the usage of real resources. When we ask whether the nation can afford a policy initiative, we should ignore the $x and consider what real resources are available and the potential benefits. The available real resources constitute the fiscal space. The fiscal space should then always be related to the purposes to which we aspire, and the destination we wish to reach. British Labour needs to learn those basics fast and to break out of the neo-liberal ‘cost’ framing it is trapped within.
On April 7, 2017, the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – March 2017 – which showed that total non-farm employment from the payroll survey rose by only 98,000, a considerable shortfall when compared to the previous two months. The unemployment rate fell to 4.5 per cent (down 0.2 points). The question is whether this month’s results signal a slowdown after the positive ‘Trump’ spike or is just a monthly variation that will iron itself out over the longer period. Whatever the direction, there is still a large jobs deficit remaining and the jobs created since the recovery are still biased towards low pay sectors.
Bloomberg published an article last week (April 7, 2017) that it should not have published given that the article offers only fake knowledge to its readership. The article in question – Australia’s Delayed Recession Fallout Is Showing Up in Its Jobs Data – carried the sub-title “There may be trouble ahead” and purported to argue that because the Australian government’s fiscal stimulus allowed our nation to avoid a recession in 2009 we now have to ‘pay the piper’ and take our medicine and suffer a recession anyway. The proposition is ridiculous to say the least. The article uses as authority some nonsensical statements from a “business management consultant”, who doesn’t appear to have a very sound grasp of either history or what is actually going on. This is another case of misinformation. The fact is that the Australian government’s fiscal stimulus in 2008 and 2009 saved the economy from recession. The current slowdown and parlous labour market is not some delayed effect from that. Rather, it is because the Australian government caught the ‘fiscal surplus bug’ obsession, and began a misguided pursuits of surpluses, irrespective of what the external and private domestic sectors were doing. It caused an immediate slowdown and all the virtuous dynamics that were accompanying the stimulus-led growth (for example, fall in household debt and the rise in the household saving ratio) were reversed, as we would expect. Far from being delayed effects, the poor jobs data is because current fiscal policy is too restrictive. Simple solution: expand the discretionary fiscal deficit (preferably with a large-scale public sector job creation strategy).
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.
Welcome to The Weekend Quiz, which used to be known as the Saturday Quiz! The quiz tests whether you have been paying attention or not to the blogs I post. See how you go with the following questions. Your results are only known to you and no records are retained.
Economic debate in Britain in the last year or so has been dominated by the Brexit issue. Both sides of the debate have swamped the public with claims and counterclaims that mostly just seek to confuse. My position was clear – if I was a British voter I would have been voted to Leave. Some 9 months or more later my opinion has not changed. The EU is a right-wing corporatist failure which deliberately impoverishes its citizens and should be dismantled as soon as possible. The Brexit debate, whatever your view, has, however, clouded other trends in Britain that are clearly, and immediately, more damaging that anything that might happen when Britain finally regains its independence from the thugs in Brussels. The latest data relating to household debt in Britain confirms what we have known all along and first raised in 2011. British growth is reliant on the private domestic growth in credit and indebtedness, which was the growth drivers that were present before the GFC. Which means one thing: the current growth will not be sustainable unless there are significant changes in the composition of final expenditure in the UK. With private income growth lagging well behind consumption growth and the external sector draining growth, the solution is for the government to abandon its austerity obsession and increase the fiscal deficit. That would support private income growth and provide space for some private balance sheet restructuring which is so sorely needed. Lessons do not seem to have been learned.