Welcome to The Weekend Quiz. The quiz tests whether you have been paying attention or not to the blog posts that I post. See how you go with the following questions. Your results are only known to you and no records are retained.
I read a lot about Japan. It has interested me since the early 1990s commercial property collapse and the subsequent fiscal and monetary policy measures that the Japanese government deployed to deal with it, which took policy settings outside the bounds that mainstream economists could cope with. These economists predicted the worst based on mindless extrapolations of their ‘theoretical’ models, which are really incapable of dealing with the real world in any meaningful way. Their worst didn’t come and some 3 decades later, with policy settings still at ‘extreme’ levels compared to the way mainstream economists think (and the policy makers are not budging it seems), Japan continues to demonstrate why New Keynesian macroeconomics is inapplicable and why Modern Monetary Theory (MMT) has traction. And while Japan provides first-class public transport, health and education systems, a viable housing policy, good urban systems, and has maintained low unemployment rates even during the GFC and the pandemic, there is one feature that is troublesome – the flat lining wages growth over the last 20 years. I have been very interested in learning the reasons for this phenomenon, which sets Japan apart from most other nations (who have also experienced low wages growth – but not that low). I plan to work on this aspect, in part, when I move to Kyoto next month for an extended stay.
It’s Wednesday and some short items that caught my interest over the last week. The FAO’s latest – Food Price Index – shows that even though food prices fell 8.6 per cent from June (to August), “the fourth consecutive monthly decline”, they are still massive inflated (13.1 per cent higher than August 2020) and the “world’s top four grain traders” are profiting from record sales in the face of supply disruptions. The World Food Program informs us that 345 million people are enduring ‘acute food insecurity’ which is nearly 3 times the pre-pandemic number. The system is not working and I have some things to say about that below. Further, latest PMI data from Europe shows that price pressures are declining, which brings into question those (with vested interests) calling for even higher interest rates. And then some music.
As part of the my research on the concept of a ‘poly crisis’, which is the focus of my next book, I have been reading a lot about urban systems, building codes, and other facets of the climate problem. In that vein, I have been considering the concept of – Deep Adaptation – which emerged from the work of British academic Jem Bendell in 2018. His seminal paper – Deep adaptation: a map for navigating climate tragedy – was updated in July 2020 as – Update. The author has a background in geography and makes it clear he is not a climate scientist. His work on deep adaptation came up against a harsh refereeing process because it ran counter to the Groupthink surrounding how we should deal with the climate issue. Most of the resistance I suspect relates to a view that the crisis can be solved within Capitalism. In that sense, his work was dismissed as being overly pessimistic. However, the initial work on deep adaptation is rather scant on how it fits in with the ideas of class conflict within the current economic order. Jem Bendell admitted that is his original essay “the power of capital in keeping us compliant is implied” rather than explicit. His defense was that he was “writing for the sustainability profession” and he was thus “embedded in that system” (Source). This is where I am interested in the concept – to fully embed it within a more radical, Modern Monetary Theory (MMT) focused paradigm. This is Part 1 of a series of unspecified Parts at this stage where I explore the concept of Deep Adaptation and try to extent it into the MMT world.
Here are the answers with discussion for this Weekend’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 Weekend Quiz. The quiz tests whether you have been paying attention or not to the blog posts that I post. See how you go with the following questions. Your results are only known to you and no records are retained.
The Australian Bureau of Statistics (ABS) released of the latest labour force data today (August 18, 2022) – Labour Force, Australia – for July 2022. With Covid infection rates rising quickly, and already around 780,000 workers working few hours than usual because of sickness, I predicted last month that there would be a deterioration in the labour market in the coming months. That trend emerged in July 2022. The labour market deteriorated in July 2022 with employment and participation both contracting. While the official unemployment rate fell to 3.4 per cent this was all down to the decline in participation. Had the participation rate not declined the unemployment rate would have risen from 3.6 per cent to 3.9 per cent. Further, the underlying (‘What-if’) unemployment rate is closer to 6.1 per cent rather than the official rate of 3.4 per cent. There are still 1313.7 thousand Australian workers without work in one way or another (officially unemployed or underemployed). The only reason the unemployment rate is so low is because the underlying population growth remains low after the border closures over the last two years. Overall, the situation worsened over July.
All eyes have been waiting for today’s release (August 17, 2022) of the – Wage Price Index, Australia – by the Australian Bureau of Statistics for the June-quarter, given that the Reserve Bank of Australia has been claiming wage pressures are becoming threatening and using that as a cover for unnecessarily pushing up interest rates. Prior to pushing up interest rates over the last several months, the RBA had been signalling that they would not move on interest rates until there was a concerted increase in wages growth, which has been at record low levels for some years now. On the back of that information, many new entrants to the housing market ran up massive mortgage debts and now feel dudded by the central bank. Whatever, information on wages the RBA is privy too is not gelling at all with the official data, which continues to show that wages growth remains flat (hasn’t moved in three months) and at record low levels. The is no acceleration. Wages growth is not driving the inflation trajectory. Workers are enduring massive real wage cuts and the RBA has made that worse by pushing up mortgage rates for those exposed. The business sector, as a whole, thinks it is clever to always oppose wages growth and the banks love that because they can foist more debt onto households to maintain their consumption expenditure. But the reality is clear – there can be no sustained recovery for the economy post Covid without significant increases in the current rate of wages growth.