Australian inflation trending down – where are all the gold bugs?

There was a time, in better days, that the evening news had news, sport and weather. Then, at some point, around the 1980s the national news started to host a Finance segment. Sometimes these segments are meagre reporting of what happened in the share markets. Even that benign news is symptomatic of the way neo-liberalism has infested our daily thinking and made the common folk feel part of the game that they are really can never be part of – wealth creation. At other times, the finance segments introduce economic theory and analysis as if it is news. Then the insidious nature of the neo-liberal propaganda machine becomes stark. But the starkness is lost on most because they think it is news and we have been led to believe that what gets pumped out at 19:00 on the national broadcaster (and other times by other broadcasters) are facts. Facts don’t lie do they? Well, when it comes to finance segments they are mostly lies.

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British government analysis shows fiscal stimulus effective in supporting growth

The British Office of National Statistics published the – Gross Domestic Product Preliminary Estimate, Quarter 3 2015 – yesterday (October 27, 2015) which showed, unsurprisingly, that the British economy is slowing and heading back into recession under current policy settings. The annual real GDP growth rate declined for the third successive quarter as the impacts of the world slowdown and domestic policy austerity start to take their toll. The British government really has to reflect back on 2012 and realise that with non-government spending weak and a household sector carrying very high levels of indebtedness, now is not the time to be trying to cut discretionary net public spending. There is a need for a public spending injection to restore growth while the world works out which way it is going to go.

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The tale of two nations – democracy dies in Portugal and lives in Canada

The tale of two nations – two monetary systems – two continents – Canada and Portugal. It is reasonable to assume that when voters in so-called free democracies elect members to their parliaments who then freely coalesce across ‘party’ lines to form an absolute majority that they will be given the right to govern irrespective of the ideology they represent and the policies that they have put forward to the voters to win their approval. That seems to happen in Canada. It definitely doesn’t happen in Portugal. The Portuguese President dropped his so-called “bomba atómica” last week when he refused to endorse the coalition of parties that held the absolute majority of seats in the Assembly as a result of the recent national election. He indicated that he would not allow a government that would relax the fiscal austerity and consider exiting the Eurozone. His motivation was that financial markets had to remain appeased. It was an extraordinary intervention and will come back to haunt the nation given that the conservative austerity government will lose its authority as soon as it puts its platform to the new Parliament for endorsement (within the next 10 or so days). Then the nation is in chaos and the President will be compelled to accept the anti-austerity left coalition or something worse will happen. But, happily, in Canada, the election of the Liberal Party is a rejection of the obsession with fiscal surpluses – at least for now.

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The British Tax Credits system is a sign of New Labour failure

In 2012, the British government, which had for the first two years of its last term, realised that it was going to drive the economy back into deep recession if it maintained its fiscal austerity plans. It had spent the previous two years telling everyone how it had to cut into the fiscal deficit to save Britain but by 2012 the data was telling the government that their view of the world did not accord with reality. As a consequence they curtailed the austerity onslaught and allowed the deficit to grow and support growth. The result was that Britain avoided a triple-dip recession and the nation demonstrated to its EU partners across the Channel how stupid and reckless the Eurozone’s fiscal austerity was. But ideology often comes back to the fore when the emergency is over. Now with continued, albeit weak growth and a renewed electoral mandate, courtesy of the pitiful British Labour Party, the Tories are once again talking tough and in the Spring 2015 ‘Budget’, the austerity returned with vengeance. The focal point at present of that austerity is the impending parliamentary vote on cutting the benefits to low income families in Britain via the Tax Credits system. The attempt to force harsh austerity onto the poor in Britain is vile in its conception. But the Tax Credits system in the first place is the result of weak-kneed decisions by New Labour to avoid forcing British employers to pay a decent minimum wage which would have eliminated ‘working poverty’. Now the chickens are coming hometo roost. And as usual, when austerity is introduced it is the poor that suffer. A disgrace all around really.

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Saturday Quiz – October 24, 2015 – answers and discussion

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.

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Neo-liberal myths constrain our understanding of poverty

I was on a panel last night discussing the causes of poverty in Australia. The panel was rather diverse with housing, welfare and other representatives. There was a crowd of around 400 I believe. The format was difficult given that the panel of six was assembled in line at a table so could not see each other easily. But the real problem was that the facilitator, a national journalist, who had the role of asking questions to the panellists, chose to assert the standard neo-liberal macroeconomic myths in response to statements I made with respect to the causes and solutions to poverty. I was confronted with as-if facts such as “they have to get the money from somewhere before they can spend” in response to questions about public debt eventually becoming too large and foreigners funding our national (currency-issuing) government. I thought a facilitator was not meant to have an agenda but in this case holding out these neo-liberal myths perpetuated the standard agenda which guarantees that poverty will continue to worsen. There is a lot of work to be done before people will identify these neo-liberal myths as non-knowledge and readily understand that national, currency-issuing governments such as in Australia have no financial constraints and they spend out of ‘thin air’. Once that knowledge is accepted a whole new world opens up that allows us to see the path to reducing poverty and inequality.

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Public R&D austerity spending cuts undermine our grandchildren’s future

Growth in material living standards, which is just one measure of overall (average) prosperity and contestable at that, depends on productivity growth. How national income is distributed, real wages growth in relation to productivity growth, and the employment rates also impact on how this average is reflected in the fortunes of individuals. Strong productivity growth is only a necessary condition for improved material living standards. In this period of fiscal austerity with suppressed overall growth rates and labour market deregulation that undermines working conditions and reduces the incentives to invest in best-practice technology labour productivity is falling – as will living standards in the coming years. The world is locked into an idiotic race-to-the-bottom. It is a curious period really. The hypocrisy of governments, aided and abetted by the right-wing think tanks, who claim they are cutting into public spending to reduce the drain on living standards of our children and grandchildren, is clear to see. What they are really doing is undermining the future prosperity of the next several generations at the same time that they push millions into unemployment and poverty now. Why are we so stupid that we tolerate this nonsense?

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The Eurozone Groupthink and Denial continues …

I have been going back through my snippets library looking at what economists and politicians said back earlier in the crisis and comparing the predictions with reality to try to understand better why Europe is lagging behind. I have been compiling national profiles for various nations lately to ensure I remain cogniscant of the detailed developments that have been occurring. It takes some organisation. I have been concentrating by interest on Finland, Spain and Portugal lately. It astounds me when I read or hear that the Eurozone has been a success because the currency is stable. Even that last statement is false given the monetary union is fighting deflation at present with recessed output levels and entrenched mass unemployment. The current statements coming out of European leaders accord almost directly with the same sort of things they were saying in 2010 as the region was plunging deep into recession. It seems that they have learned nothing. Some of the past leaders have retired with handsome pensions and will not be held to account for their policy incompetence. Others remain in office and their public statements demonstrate that they cannot see beyond the blindness of the Groupthink that defines the patterned behaviour of the elite European policy-making institutions.

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