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 where I just wander around in the time I allocate to writing this blog. The venality of neo-liberal governments is never far from the surface. The more successful ones manage to mostly hide the nasty stuff they get up to from the general public or assuage public concern via their spin doctors. Sometimes, an outrageous decision breaks out of the cocoon of spin and demonstrates the sheer bastardry of the political elites. That happened in Australia over the last week when it was announced that the Australian government was providing $A4 million to the University of Western Australia to set up a new think tank under the influence of a Dane Bjørn Lomborg – who has been described as a “sceptical environmentalist” (Source). Our Prime Minister has favourably quoted Lomborg’s work in his own work and is the Australian leader who abandoned the carbon tax and thinks continued use of “coal is good for humanity” (Source).
The Committee for Economic Development in Australia (CEDA), which is usually a pro-business, neo-liberal leaning organisation, released a major report on April 21, 2015 – Addressing entrenched disadvantage in Australia. It was accompanied by a Press Release- CEDA Report: More than a million Aussies living in poverty a disgrace – and an Op Ed article – Australia must do more to address entrenched disadvantage and a – Blog post. They clearly wanted the message to get out! Australians like to think we live in a fair society. The CEDA Report should shake us out of our ‘egalitarian’ dreamland. It is a shocking indictment of an income and wealth rich society that such a high percentage of our population have no hope of prosperity or even a modicum of security. It is an indictment of a policy regime that deliberately undermines the chances that many young Australians have of a decent material life while it shamelessly transfers public resources to the children of the rich to purchase even better schooling facilities. As the Report states – it is a disgrace that so many people in such a wealthy nation can be so poor.
A few weeks ago (April 8, 2015), I wrote a blog – Monetary policy is largely ineffective – which detailed why fiscal policy is a superior set of spending and taxation tools through which a national government can influence variations in activity in the real economy. In today’s blog I will consider two recent bits of evidence that reinforce that viewpoint. Today’s inflation data issued by the Australian Bureau of Statistics clearly indicates that there is plenty of scope for further interest rate cuts within the logic of the central bank’s inflation targetting strategy. But monetary policy is trapped in Australia at present between the need to expand the economy (for which it is largely ineffective) and the worry that further interest rates cuts will push housing prices up further. Second, economic activity is faltering and unemployment has risen because the Government refuses to take discretionary action to increase the fiscal deficit to support higher spending levels. They are firmly caught up in the neo-liberal obsession about the need for surpluses and where they are likely to make concessions is in tax cuts for high income earners – based on the so-called trickle down hypothesis. Some recent research from the US, however, demonstrates fairly categorically that tax changes at the top end of the income distribution have negligible effects on economic activity. This is in contradistinction to changes in disposable income at the bottom end. They are very powerful in terms of stimulating or undermining employment and output.
Finland has been one of the Eurozone nations taking a hardline on Greek austerity and have consistently refused to support on-going bailouts of Greece. At the weekend, Finland went to the polls and tossed out the incumbent government and put in its place a centrist party that stood on a platform of a wage freeze and further spending cuts, allegedly to restore Finland’s competitive position. If that prospect wasn’t bad enough, the Centre Party will have to enter a coalition with the party that came second in the polls – the Finns Party, which is a ragbag anti-immigration group that wants Greece kicked out of the Eurozone. It is possible that Finland’s Parliament will not support any further European Union bailouts for Greece. Apparently Finn’s are buying the line that further and intensified austerity is necessary because of rising labour costs have undermined Finland’s capacity to compete in international markets as the demise of Nokia, so the narrative goes, illustrates. The last thing that Finland needs right now is more austerity.
On the eve of the Annual Spring Meetings of the IMF and the World Bank in Washington last week, German Finance Minister Wolfgang Schäuble wrote an article in the New York Times (April 15, 2015) – Wolfgang Schäuble on German Priorities and Eurozone Myths – justifying the German stance with respect to the Eurozone crisis. He argued that the Eurozone was pursuing the correct response by placing a focus on “structural reforms”. He said that the IMF boss was in accord with this assessment and further structural reforms were necessary, including “more flexible labor markets”. He included labour market reform as part of a push for “modernization and regulatory improvements”. In denial of the basic rule of macroeconomics that ‘spending equals income’, Schäuble said that fiscal stimulus “is not part of the plan”. He might have read the complete text of the latest IMF World Economic Outlook (April 2015) – Uneven Growth: Short- and Long-Term Factors – before he sought comfort in the imprimatur of the IMF. That organisation seems to say one thing here and another there! It has become schizoid as it confronts the fact that its Groupthink sees itself as a major part of the neo-liberal free market (help the rich) putsch whereas its research economists find out that the facts don’t match the political (ideological) stance. The IMF should be defunded and recreated to serve positive purposes.
Here are the answers with discussion for yesterday’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 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. Today I have been recording interviews about Modern Monetary Theory (MMT) , which will eventually become part of our MMT Educational Resources site on the Internet that will be linked to the MMT textbook that we are finalising in the coming months. It is actuall quite hard trying to talk to a camera. But we completed the first session today and I will put up a taste of the material when it is edited and produced. We will get better at it as we gain more experience in video production techniques. It took my mind of the policy debate going on in Australia at the moment about the best way to reduce the fiscal deficit. No commentator (other than a few like myself) have the temerity to ask: Why are we actually aiming to reduce the fiscal deficit when there is more than 15 per cent of available workers underutilised in some way or another (unemployed or underemployed). That would be like sacrilege to the kool-aid drinkers within the neo-liberal policy Groupthink. Either side of politics is just locked into a debate about the ‘best’ way to accomplish the task. You expect such cant from the conservatives. But Australia is also being let down by our so-called progressive organisations. It is a world-wide disease – the ‘left’ (which is more right than the right used to be) are infested with neo-liberal macroeconomics that they cannot see how compromised their positions have become in the public debate. The filming this morning took my mind of that dilemma.