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.
Its the Friday lay day blog and here are some snippets from the week. The Hellenic Statistical Authority (EL.STAT) released the latest – Quarterly National Accounts ( 1st Quarter 2015 ) – on May 13, 2015. After all the claims that austerity was working and the Greek economy was growing again, we now learn that Greece is back in recession, having recorded two successive quarters of negative real GDP growth. Whatever way one spins it, the policy framework employed by the Eurozone is a failure. The national accounts data released by Eurostat which coincided with the Greek release – GDP up by 0.4% in the euro area and the EU28 – also shows that the German economy slowed considerably in the first-quarter 2015 and Finland, one of the fiercest supporters of austerity entered official recession. The Finnish response was they had to cut public spending harder because they would be in breach of the Stability and Growth Pact rules relating to size of the deficit and the volume outstanding public debt. These nations are so caught up in neo-liberal Groupthink that they cannot see how ridiculous their policies and supporting dialogue have become.
The day after the Australian government published their fiscal strategy for 2015-16, which assumes (unrealistically) a significant upstep in economic growth and hence taxation receipts, the Australian Bureau of Statistics published the latest – Wage Price Index, Australia – for the March-quarter today and we learn that the annual growth in wages is now at the lowest level since the data series began in the December-quarter 1997. Last quarter, we learned the same thing. In other words, consecutive quarterly lows have now been set in the Wage Price time series measure. The annual hourly wage inflation is now down to 2.3 per cent overall down from 2.5 per cent in the December-quarter. Private sector wages growth was a miserable 2.2 per cent. In the 2015-16 fiscal statement, the Government had assumed wages growth for 2014-15 would be 2.5 per cent rising to 2.75 by 2017. On current trends, that is highly unlikely to occur, which means the arithmetic surrounding its fiscal outcomes is awry already and the fiscal deficit will be larger than assumed. Overall productivity growth is running around 1.8 to 2.1 per cent (depending how one measures it) and despite the decline in the annual inflation rate in recent quarters as the overall economy slows down (and oil prices fall), Real Unit Labour Costs (RULC) continue to fall. This means that the gap between real wages growth and productivity growth continues to widen as more the wage share in national income falls (and the profit share rises). The flat wages trend will not only blast the forward estimates in the fiscal statement out of the water but the on-going redistribution of national income to profits is intensifying the pre-crisis dynamics, which saw private sector credit rather than real wages drive growth. The lessons have not been learned.
Last night, the Australian Federal Treasurer brought down his second ‘fiscal statement’ (aka, the Federal ‘Budget’). I try to avoid the term ‘budget’ when discussing national government fiscal balances because it leads to a confusion between a the finances of a household, which uses the currency and is financially constrained and the finances of a sovereign government, which is never revenue constrained because it is the monopoly issuer of the currency. In last night’s fiscal statement, the Treasurer committed the Government to a policy path that will entrench mass unemployment (over 6 per cent for the next three years and not much below that in 2018-19). In each of the next four years, the fiscal shift is contractionary despite claims that it is a ‘big-spending budget’. It has nothing much to do with economics and all to do with the dramatic failure of last year’s fiscal strategy and the resulting plunge in electoral support. With an election next year, the Federal government has tried to run a fiscal policy with headline appeal but the reality is that the outcomes will continue to undermine the well-being of the disadvantaged. It will also fail to achieve its own fiscal targets because the in-built growth assumptions are too optimistic. Finally, it exposes the lie that the Government peddled in the lead up to the last election that on-going deficits would cripple the economy and send the nation bust. In that sense, the government is looking like the Tories in Britain in 2012 when they cut short the ridiculous austerity push which had sent the economy back into recession and instead allowed for an on-going deficit. The deficit wasn’t nearly large enough and so growth there has been pitiful. But it was large enough to support some growth. The same will be the case in Australia.
At one point in my student days anyone who wasn’t reading Marx on a particular day, was reading Satre, Camus and Merleau-Ponty, among others, at least in the groups that I mixed in. But then they were also reading Dostoyevsky. Whichever way – they learned a lot about class conflict and existentialism. Labour-type political parties might reflect on the concept of an existential crisis because the declining electoral fortunes around the World are of their own making and reflect a lack of identity and certainly little ‘essence’. These parties have lost their meaning and purpose of existence and everyone knows it. The reasons are relatively straightforward. They have bought into the free-market myths and demeaned the role of the State. They now only argue about how much fairer their version of fiscal austerity will be relative to the conservatives, never challenging the underlying lies that drives the austerity agenda in the first place. Here are some lunchtime thoughts on the matter.
Last week (May 5, 2015), the European Commission’s Directorate-General for Economic an Financial Affairs (ECFIN) published the – Spring 2015 European Economic Forecast – which provide a picture of what they think will happen over the next two years across 180 variables. To the extent that the forecasts reflect past trends (given the inertia in economic time series outside major cyclical events), they provide a clear picture of what is wrong with the Eurozone. The salient feature of the Forecasts is that the European Commission expects Germany to increase its already astronomical Current Account surpluses to peak at 7.9 per cent of GDP in 2015 and falling only to 7.7 per cent in 2017. The Commission has in place a set of rules that require nations to restrict external surpluses to not exceed 6 per cent of GDP. Germany repeatedly fails to abide by those rules, yet lectures the rest of its Eurozone partners about their failures to meet the targets, crazy as they are. The unwillingness of the European Commission to enforce their own rules in relation to Germany is one of the telling failures of the whole Eurozone experiment.
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.
Its my Friday lay day blog. I try to devote the major part of Fridays to writing other things (some book projects I am working on and some journal articles and other things). That is the logic of the lay day. I cut the time I devote to the blog in half (down to around 1 hour) in recognition of that logic. Today, I was examining the recent population data from Latvia to see what the latest trends were. Most countries would not judge success by the number of its population that leaves, especially when the departing souls are among the young and talented. But the so-called Latvian ‘miracle’ does just that. When the Latvian government aided and abetted by the IMF and the EU stooges imposed the harshest austerity of all on the people and real GDP growth followed, the neo-liberals were beside themselves with joy. Austerity works they screamed. Well not for the 10 per cent of the population who left. And now, the peak of the ‘miracle’ appears to be over as growth slows and the residual of a privatised, socially damaged society remains. I wouldn’t be holding out this little nation as a success story. More like a disaster if the reality is to be correctly appraised.
Today’s release of the – Labour Force data – for April 2015 by the Australian Bureau of Statistics shows that the Australian labour market has contracted again, repeating the pattern over the last 24 months or so where employment growth zig-zags around the zero line and is weak at best. Full-time employment growth was sharply negative this month. Unemployment rose as a result as did the unemployment rate, but the latter would have been higher than 6.2 per cent had not the participation rate fell by 0.1 percentage points. The teenage labour market went backwards again and remains in a parlous state and requires an urgent policy problem that the Federal government refuses to recognise or deal with. In general, there remains a need for more job creation stimulated by an increased federal government deficit. Next week’s fiscal statement, widely tipped to include further cuts in net government spending, will demonstrate how incompetent and out of touch the federal government in Australia is.