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 complete the text during 2013 (to be ready in draft form for second semester teaching). Comments are always welcome. Remember this is a textbook aimed at undergraduate students and so the writing will be different from my usual blog free-for-all. Note also that the text I post is just the work I am doing by way of the first draft so the material posted will not represent the complete text. Further it will change once the two of us have edited it.
Today, I was (perhaps) going to discuss the Federal coalition’s so-called budget costings, which they have released this afternoon a day and a half before the federal election is held. The major policy proposals are not costed and the whole exercise makes a mockery of their claims to transparency. The Coalition hired three so-called experts to validate the “costings” (after the debacle in the last election when their were major mistakes in the arithmetic revealed) and those characters should be ashamed of themselves for giving their imprimatur to such a shoddy process. Even from the pittance of information they have released it is clear they do not understand the macroeconomic reality and will damage overall growth. So that is all I intend to say about that matter. But in the last few days I have done a few media interviews (radio) on an article that appeared in the local Fairfax press, but was originally published in the Strike! Magazine as – On the Phenomenon of Bullshit Jobs by LSE anthropologist, David Graeber. The title in the local article had changed to “nonsense jobs” – a sign of the conservatism of our press. The interviews I did were interesting because the article brings together a number of strands that further expose the weakness of the economic theory taught to students in most universities. That is much more interesting to write about here than the tawdry realities of Australian politics at present which can be described as indecent ignorance.
Today’s Australian Bureau of Statistics – Australian National Accounts – for the June-quarter 2013, shows that real GDP growth was 0.6 per cent, up slightly from the revised 0.5 per cent for the March-quarter 2013 (previously published at 0.6 per cent). The annualised growth rate of 2.6 per cent is now well below the trend rate between 2000 and 2008 and there is now a 4.3 per cent gap between actual growth and trend. This will widen in coming quarters and it is the reason the unemployment rate is rising. Overall, the data paints a fairly gloomy overall picture for the Australian economy. Gloomy without being disastrous. However, if the new federal government (after Saturday) start hacking into public spending to flex their conservative muscles then the outlook will shift very quickly from gloomy to disastrous and we will follow Europe down the sink hole.
Tomorrow, the Australian Bureau of Statistics will release the June-quarter National Accounts for Australia. In the lead up to this release, we get some information about the components of national expenditure and the contribution to the final real GDP growth result that will be released tomorrow. Last week, we learned, courtesy of the release – Private New Capital Expenditure and Expected Expenditure, Australia, June 2013 – That seasonally adjusted new capital expenditure and fallen by 2.3 per cent in the year to June 2013. This is off an extremely high base and suggests that the investment boom associated with the mining sector is winding down, albeit steadily. Today, the ABS released the latest – Balance of Payments and International Investment Position, Australia, June 2013 – which showed a widening Current Account deficit (by 7 per cent) with the surplus on the trade part of the account falling by 2 per cent. In volume terms, it is estimated that the external deficit would reduce real GDP growth by 0.04 percentage points. That is, a modest spending drain from the domestic economy.
There was an interesting article in the Financial Times last week (August 29, 2013) – The German miracle is now running out of road – about the myopia of policy settings in Germany. The FT author was Sebastian Dullien, who has been consistently presenting the case that Germany is not a role model for the rest of Europe to follow. For example, see – A German model for Europe?. He notes that by targetting a budget surplus in a period of fiscal austerity, the Germans are undermining the very factors which made their manufacturing sector some strong. Their public investment in education and infrastructure is now lagging so much that the costs of business are rising in Germany and the long-term consequences of this are likely to be very damaging. The stupidity of the German ideology will come back to haunt them.
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 complete the text during 2013 (to be ready in draft form for second semester teaching). Comments are always welcome. Remember this is a textbook aimed at undergraduate students and so the writing will be different from my usual blog free-for-all. Note also that the text I post is just the work I am doing by way of the first draft so the material posted will not represent the complete text. Further it will change once the two of us have edited it.
The Politics of Envy – that old chestnut from the neo-liberals – is bandied around every time there is any insinuation that the capitalist system produces distributional outcomes that are not remotely proportional to the effort put into production. Whenever governments challenge the distributional outcomes – for example, propose increasing taxes on the higher income recipients (note I don’t use the word “earners”) there is hell to cry and the defense put up always appeals to the old tags – “socialist class warriors undermining incentive”, “envy”, etc. In the 1980s, when privatisation formed the first wave of the neo-liberal onslaught, we all apparently became “capitalists” or “shareholders”. We were told that it was dinosauric to think in terms of the old class categories – labour and capital. That was just so “yesterday” and we should just get over it and realise that we all had a stake in a system where reduced regulation and oversight would produce unimaginable wealth, even if the first manifestations of this new “incentivised” economy channelled increasing shares of real income to the highest percentiles in the distribution. No worries, “trickle-down” would spread the largesse. We know better now – and increasingly the recognition, exemplified in 2006 by Warren Buffett’s suggestion that “There’s class warfare, all right … but it’s my class, the rich class, that’s making war, and we’re winning” (Source), is that class is alive and well and in prosecuting their demands for higher shares of real income, the elites have not only caused the crisis but are now, in recovery, reinstating the dynamics that will lead to the next crisis. The big changes in policy structures that have to be made to avoid another global crisis are not even remotely on the radar.