It is my Friday Lay Day blog and it is going to be relatively quick. There was an article in the Wall Street Journal (December 23, 2015) – Economists Say ‘Bah! Humbug!’ to Christmas Presents – that says a lot about how my profession struggles to appreciate reality in all its dimensions. Every year, it…
Its the Friday lay day. I thought I would share a few home truths with you that various people have alerted me to over the last week. Some interesting video viewing, while I get on with other things that have pressing deadlines. It has been quite a week in Australia. The national accounts showed we are barely growing in volume terms but in doing so our real net national disposable income growth has been negative for the last two quarters (a recession) with clear impacts of public austerity now evident. The Australian Treasurer claimed the national accounts vindicated their austerity position. Like a lot of politicians these days he trying to sell the impossible claim that cutting spending increases growth. In his case, he is also trying to tell the population that negative income growth is a positive thing and rising unemployment is a signal of policy success. Hockey claimed on the news this morning that “we have a terrific budget story to tell”. It is a strange politics.
Last week I was in Italy and enjoyed the hospitality of the group from – eunews – which is a new Italian media service designed to provide more in-depth analysis to the news and public events, to replace the vacuous trend in media to sensationalise and mislead. I won’t say the economics of the journalists associated with that service is completely sound but it is a welcome trend and I was grateful for their generous hospitality.
I also enjoyed the hospitality of the Modern Monetary Theory (MMT) group in Italy which are becoming very active. They are organised on a near national level now and their membership is growing.
I met with members from Bologna and Rome and they were very enthusiastic about learning macroeconomics and educating the Italian public about the myths of neo-liberal (mainstream) economics.
But there are problems. I received an extremely vituperative and vicious E-mail from the character that helped put the national network of MMTers together because I had the audacity (apparently) to visit his country (as if that is a privilege) and dare to suggest to the groups I met that if they wanted to become a political force then they would have to reorganise their public visibility under a banner of progressive issues – such as full employment, climate change, reducing income and wealth inequality etc.
I told the group in Rome that I never use the term MMT when I am giving press interviews. I just focus on these issues that touch at the experience of citizens and use the principles of MMT to inform people that we can have full employment and price stability, that the government is not a household, that we can reduce income inequality and still enjoy rising material standards of living; that we also need to recognise that rising material standards of living have to accompanied by a concern for non-material matters and a regard for the natural world.
Apparently, this character considered this an intrusion in his attempt to personalise the MMT movement as far as I can tell – given the stream of abuse. The problem is that this person has alienated all the original MMT economists with similar E-mails or other abuses at various times and the movement will not make traction in the public debate in Italy until the younger activists reorganise and leave him behind.
I know a lot of Italians who are not currently associated with the MMT groups but who are progressive and turned off by this divisive approach.
But that was just the one negative. I also received a lot of very nice E-mails from the MMT activists in Italy that I met during my week there. They were genuinely grateful for the time I gave to present a talk and engage in meetings with them. Thanks for that. These people are the future of MMT in Italy and I wish them well.
Here is a photo with the organisers of my presentation at Roma Tre University after my talk. A great group – diverse in age and gender and very progressive.
Anyway, I hope you enjoy the following snippets – they are hometruths.
There is no financial constraint on a currency issuing government!
This week, the ratings agency Moody’s, clearly suffering from an organisational form of attention-deficit disorder decided to make itself feel important by cutting Japan’s government debt rating from A1 to Aa4, as if their judgement mattered.
They had the temerity to claim that their decision was over:
… heightened uncertainty over the achievability of fiscal deficit reduction …
To further humiliate themselves in the face of those who know anything (and history!) they claimed that the decision by the Government to postpone the second sales-tax hike, after the first caused private spending to tank and push Japan back into recession:
… poses risks to fiscal consolidation and, over the longer term, to debt affordability and sustainability.
This is a deeply incompetent organisation who should close their doors and stop issuing stupid press releases.
This is what the former US Federal Reserve chairman, who is anything but progressive, said about why the debt of currency-issuing governments is risk free. His clarity also allows you to see why such governments should eschew the issuance of debt in the first place. After all, how much clearer does one have to get – they issue their own currency!
Loans create deposits – 1948 style comes to 2014!
The standard macroeconomics textbooks cover money creation by banks but they never tell the true story about how the banking system actually operates. The textbook treatment is designed to push the neo-liberal agenda about
Thanks to Stephanie Kelton for alerting me to this.
Bobby Keys dead
On Tuesday, December 2, 2014, the great tenor sax player – Bobby Keys – died from cirrhosis of the liver. He played hard and lived hard but we are all better for his music.
He was, of course, the long-term sideman for the Rolling Stones and other major acts.
Here is a live version of – Can’t You Hear Me Knocking – from the 1971 Sticky Fingers album featuring a long jam solo from Bobby Keys.
Rolling Stone Magazine ranked the song Number 25 in its The 100 Greatest Guitar Songs of All Time.
The last vocal lyrics proceed as follows:
Hear me ringing big bell tolls
Hear me singing soft and low
I’ve been begging on my knees
I’ve been kickin’, help me please
Hear me prowlin’
I’m gonna take you down
Hear me growlin’
Yeah, I’ve got flat-ten feet now, now, now, now
Hear me howlin’
And all, all around your street now
Hear me knockin’
And all, all around your town
Bobby Keys really growled and howled and knocked everyone over with his great tenor sound. Very Sad.
The Saturday Quiz will be back again tomorrow. It will be of an appropriate order of difficulty (-:
That is enough for today!
(c) Copyright 2014 William Mitchell. All Rights Reserved.