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.
I am now using Friday’s blog space to provide draft versions of the Modern Monetary Theory textbook that I am writing with my colleague and friend Randy Wray. We expect to publish the text sometime in 2013. Our (very incomplete) textbook homepage – Modern Monetary Theory and Practice – has draft chapters and contents etc in varying states of completion. Comments are always welcome. Note also that the text I post here is not intended to be a blog-style narrative but constitutes the drafting work I am doing – that is, the material posted will not represent the complete text. Further it will change as the drafting process evolves.
The Australian Bureau of Statistics released the Consumer Price Index, Australia data for the September-2013 quarter today. The quarterly inflation rate was 1.2 per cent and this translated into an annual rate of 2.2 per cent, down on 2.4 per cent in the June-quarter 2013. The Reserve Bank of Australia’s preferred core inflation measures – the Weighted Median and Trimmed Mean – are now well within the inflation targetting range and are probably trending down. The RBA measure of inflationary expectations is also falling. This suggests that the RBA will probably consider the inflation outlook to be benign or “too low” and if the labour market continues to deteriorate (data for October out early November) then they will probably cut interest rates once before the holiday period. The evidence is suggesting that the economy is slowing under the weight of the previous federal government’s obsessive pursuit of a budget surplus and subdued private spending (particularly non-mining investment). The benign inflation outlook provides plenty of room for further fiscal stimulus.
Australians have a history of being prone to a syndrome, which social anthropologists refer to as – cultural cringe. It’s a very nasty condition an “internalised inferiority complex which causes people in a country to dismiss their own culture as inferior to the cultures of other countries”. Not very attractive. Some might say it is a “fundamental element of Australian self-identity”. I don’t intend to write about that though – just observe that it exists and explains why scores of Australians have to “go overseas” and then come back again before recognition is forthcoming (for example, do PhD programs abroad when there is no evidence that they are better). Anyway, this syndrome revealed itself again this week when our politicians clearly felt they were being too sane and so decided to follow the lunacy of the politicians in the US and beat up our own little debt ceiling crisis. It just confirms that we are all living in the Land of Smoke and Mirrors and the Martians are embarrassed for us.
There is a literature emerging that suggests that a Eurozone nation would be no better off with its own currency then and is within the monetary union. The claim is that these nations have not performed any worse than nations outside the Eurozone during the current crisis. A recent paper by an American economist (Andrew Rose) – Surprising Similarities: Recent Monetary Regimes of Small Economies – is being used as the authority to support this claim. The intent is clear – to deny that the Eurozone as a monetary system is inferior to systems where the nation issues its own currency and sets its own interest rates. However, these studies skate over the currency sovereignty issue and cast the differences between nations in terms of exchange rate arrangements or whether their central bank targets inflation or not. The real issue is whether the monetary system is characterised by the government facing a financial constraint or not in its spending – that is, whether it issues its own currency, sets its own interest rates and resists issuing debt in a foreign currency. Once you consider those basic aspects of the monetary system then it becomes obvious that the Eurozone nations as a whole have performed worse than other advanced Non-Eurozone nations which have enjoyed more fiscal flexibility.
Over the weekend, I was reading the new report from the British Social Mobility and Child Poverty Commission – State of the Nation 2013: social mobility and child poverty in Great Britain – which has just been presented to the British Parliament (October, 2013). The conclusions from the Report are not good. They find that the “falls in poverty seen over the last 15 years may be be reversing” and that “(a)bsolute poverty is rising”. The UK will likely miss its “2020 target to end child poverty”. The other shocking statistic is that poverty rates among those who work are rising and “(t)wo in three poor children are now in families where someone works”. There are now “5 million adults and children in working poor households” in Britain. This puts the skiver/bludger/welfare criminal narrative that the neo-liberals in Britain have been running into a different light. It cannot be said that workers are skivers – they get up in the morning (or sometime) and sacrifice the best part of their lives working for some capitalist or another. They are increasingly getting paid such that they cannot live above the poverty line. That is a failed state if ever there was one.
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.
I am now using Friday’s blog space to provide draft versions of the Modern Monetary Theory textbook that I am writing with my colleague and friend Randy Wray. We expect to publish the text sometime in 2013. Our (very incomplete) textbook homepage – Modern Monetary Theory and Practice – has draft chapters and contents etc in varying states of completion. Comments are always welcome. Note also that the text I post here is not intended to be a blog-style narrative but constitutes the drafting work I am doing – that is, the material posted will not represent the complete text. Further it will change as the drafting process evolves.