Ah Sunday. I don’t go to my office at the University. I ride lots of kms on my bike. I mix working at home on my research with digging in my food production system (garden). And … if I am stupid, I read the financial press and study the data trends. At that point, any sun that is around becomes a dark cloud and I sink into a malaise and wonder why modern monetary theory (MMT) ….
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 five questions. Your results are only known to you and no records are retained.
Earlier this week my professional association (which I decline to join) – the Economics Society (ACT Branch) awarded its inaugural Enemy of the State/Friend of the People award to a microeconomist for advocacy in defence of economics and its application to public policy. The stunt reflects the major historical revisionism that is now a daily occurrence and appears worse than anything that occurred in the communist states. Those who think they have an entitlement to make huge profits (helped by government guarantees) yet return to behaviour that brought the world economy unstuck are now in attack mode. There is denial, outright deception, constant hectoring. To redress this issue, I am now calling for nominations for the Modern Monetary Theory’s (MMT) Friend of the state, Friend of the people award. It will be awarded to all persons (we believe in collectives) who understand how our monetary system operates and how it can be managed via fiscal policy to serve public purpose and advance the welfare of the most disadvantaged.
Australia’s central bank governor is now appearing in the world press as something of a hero for putting interest rates up recently in defiance of world trends. Today he is featured in many finance home pages for his statement that the RBA cannot afford to be timid in putting rates up in the current months. This has raised expectations that we are in a race to get the target rate up towards their so-called neutral rate sometime soon. So almost rock star status for our central bank governor. Pity, the whole paradigm he is representing is destructive and helped get us into this mess in the first place. This blog explains why inflation targeting per se is not the issue. The problem is that fiscal policy becomes subjugated to the monetary policy dominance. This passivity manifests as the obsessive pursuit of budget surpluses which allegedly support the inflation-first stance. But this policy strategy is extremely damaging in real terms and will provoke another debt-bust cycle sometime in the future.
Several readers have asked me to explain in a little more detail what I mean by statements such as investment brings forth its own saving or government budget deficits finance non-government saving. So this blog is about those topics and takes you on journey from what you won’t learn if you study macroeconomics in a typical university through to a clearer understanding of the way macroeconomies work via modern monetary theory (MMT).
A number of readers write to me asking me about the applicability of modern monetary theory (MMT) to less developed economies and open economies generally. The issues are not entirely the same for both cases but there is a strong commonality. The aim of this blog is to advance the understanding of how MMT deals with open economy issues. They remain mysterious to most people and grossly misrepresented by those who claim to understand.
I have been looking into underemployment data for Europe today as part of a larger project which I will report on in due course. But whenever I am studying European data I think how stupid the European Monetary Union (EMU) is from a modern monetary theory (MMT) perspective. Then I read the Financial Times this afternoon and saw that Diverging deficits could fracture the eurozone and I thought there is some hope after all although that is not what the journalist was trying to convey. This is an opportune time to answer a lot of questions I get asked about the EMU. Does MMT principles apply there? Why not? Is this a better way of organising a monetary system? So if you are interested in those issues, please read on.
I am researching a new book project at present. I plan with a (development economist) colleague to outline a new development agenda for low income countries. The imposition of neo-liberal policy agenda has artificially and immorally constrained development in the poorest nations. This paradigm is in denial of the opportunities forthcoming to a sovereign government to expand employment and national well-being. We intend to outline a modern monetary approach to economic development as a rival development paradigm. As part of this project, I was reading a research report released last week by the Centre of Economic Policy Research (Washington). The report shows that around 75 per cent of IMF agreements in the current downturn are pro-cyclical. That is we learn what we have always known – the IMF should not be allowed out without supervision.
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 five questions. Your results are only known to you and no records are retained.
Today I read an interview with Richard Koo from the Nomura Research Institute in Japan who is the touring the world promoting his views of why the fiscal stimulus packages are so important. His views are drawn from his extensive experience of the Japanese malaise that began in the 1990s. The interview was published in the September 11 edition of welling@weeden which is a private bi-weekly emanating from the US. I cannot link to it because you have to pay to read. Anyway, much of what he says reinforces the fundamental principles of modern monetary (MMT) and is quite antagonistic to mainstream economic thinking. It is the latter which is now mounting political pressure to cut the stimulus packages. Koo thinks this would be madness, a view I concur with.