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…
Friday lay day – central bank governor disgraces himself
Its the Friday lay day blog. I could write a lot on the next story but consistent with my plan to not write much blog text on a Friday I will refrain. But the Governor of the Reserve Bank of Australia disgraced himself yesterday by claiming that the unemployment and underemployment rate were about “where the central bank expected them to be” and that there was no case to be made for easing monetary policy. I wonder where that leaves the bank in relation to its legislative charter as outlined in the – Reserve Bank Act 1959. Further, under the so-called charter of central bank independence, since when has it been appropriate for the Governor of the RBA to lecture the Treasury on the state of fiscal policy? Of course, the so-called independence is just a sham.
In his interview yesterday – reported in the Fairfax article (December 12, 2014) – RBA governor Glenn Stevens says Australian dollar ‘better’ at US75, the Governor:
… pushed back against calls for near-term cuts, saying the economy, jobs and inflation were roughly where the central bank expected them to be.
He also said that if the Federal government didn’t cut the fiscal deficit then:
Australia’s AAA rating could be threatened if longer-term tax and spending issues weren’t fixed.
Without action, including from Senate crossbenchers, he suggested Australia could within five years find itself forced by international bond markets to adopt more hard-line austerity measures, something that has led to double- and triple-dip recessions in Europe.
Both comments violate reason. Taking the second first, who would care if the corrupt rating agencies downgraded Australia’s public debt rating?
Did it hurt Japan in the early years of this century? Not a bit.
Did it hurt the US in the recent years? Not a bit.
International bond markets can only exert an influence on bond yields if the government and the central bank allow them to. It is a failing of the policy makers if they permit the greed of the bond markets to dictate national policy.
The government can always net spend independent of what the international bond markets think of it. You will see that in the Reserve Bank Act 1959, Section 8 empowers the central bank “to buy and sell securities issued by the Commonwealth and other securities”, “to establish credits and give guarantees” and more.
On his first quoted statement, note that under Section 10 Functions of the Reserve Bank Board, Clause (2):
It is the duty of the Reserve Bank Board, within the limits of its powers, to ensure that the monetary and banking policy of the Bank is directed to the greatest advantage of the people of Australia and that the powers of the Bank under this Act and any other Act, other than the Payment Systems (Regulation) Act 1998, the Payment Systems and Netting Act 1998 and Part 7.3 of the Corporations Act 2001, are exercised in such a manner as, in the opinion of the Reserve Bank Board, will best contribute to:
(a) the stability of the currency of Australia;
(b) the maintenance of full employment in Australia; and
(c) the economic prosperity and welfare of the people of Australia.
In other words, to maintain full employment with price stability so that all people in Australia are prosperous and secure.
However, the RBA has been significantly influenced by the NAIRU concept and it conducts monetary policy in Australia to meet an openly published inflation target. The persistently high unemployment in Australia over the last 25 years, would suggest that the RBA is not working within its legal charter.
In September 1996, the Treasurer and Reserve Bank Governor issued the Statement on the Conduct of Monetary Policy, which set out how the RBA was approaching the attainment of its three identified policy goals.
It elaborated the adoption of inflation targeting as the primary policy target. The RBA (1996: 2) said it had “… adopted the objective of keeping underlying inflation between 2 and 3 percent, on average, over the cycle.”
In terms of the priorities, the Statement said:
These objectives allow the Reserve Bank to focus on price (currency) stability while taking account of the implications of monetary policy for activity and, therefore, employment in the short term. Price stability is a crucial precondition for sustained growth in economic activity and employment.
The rest of the text emphasised the need to target inflation and inflationary expectations and the complementary role that “disciplined fiscal policy” had to play. There was no discussion about the links between full employment and price stability except that price stability in some way generated full employment even though the former required disciplined monetary and fiscal policy to achieve it.
In a stagflation environment if price spirals reflect cost-push and distributional conflict factors, such an approach can surely never work. In the Job Guarantee approach that I advocate, the causality and emphasis is reversed – the creation of full employment guarantees price stability. Without employment buffers (which are the basis of the Job Guarantee approach), the RBA will always control inflation by imposing unemployment.
How does the RBA answer this apparent contradiction? The RBA says that it only has to meet an average inflation target over a business cycle. In 1999, the then Head of Economic Analysis at the RBA, Malcolm Edey argued that the Bank is sensitive to the state of capacity in the economy when it pursues a change of interest rates aiming at the inflation target (Source):
Consider, for example, a situation in which inflation is regarded as likely to be too high. A rise in interest rates will help to reduce inflation but can also be expected to reduce growth. How far and how quickly interest rates should be raised will depend partly on how the economy is performing at the time. If the economy is operating with very little surplus capacity or is overheating, a fairly rapid rise in interest rates might be called for; if, on the other hand, there is significant surplus capacity in the economy, the appropriate increase in rates might be more gradual. Thus it makes sense for policy to take account of short-run cyclical developments in pursuing the inflation target.
But in the next paragraph, Edey (1999) says that the trade-off between inflation and unemployment is not a long-run concern because, following NAIRU logic, it simply doesn’t exist.
Ultimately the growth performance of the economy is determined by the economy’s innate productive capacity, and it cannot be permanently stimulated by an expansionary monetary policy stance. Any attempt to do so simply results in rising inflation. The Bank’s policy target recognises this point. It allows policy to take a role in stabilising the business cycle but, beyond the length of a cycle, the aim is to limit inflation to the target of 2-3 per cent. In this way, policy can provide a favourable climate for growth in productive capacity, but it does not seek to engineer growth in the longer run by artificially stimulating demand.
The RBA is silent, however, about the stock of long-term unemployed that exists beyond the cycle. The empirical evidence is clear that the economy has not provided enough jobs since the mid-1970s and the conduct of monetary policy has contributed to the malaise. The RBA has forced the unemployed to engage in an involuntary fight against inflation and the fiscal authorities have further worsened the situation with complementary austerity.
You should also note that the legislative obligations under the RBA Act 1959 are administered by The Australian Treasury. That should tell you that the claim to central bank independence is another neo-liberal myth designed to reduce the responsibility of our elected officials and allow them to sheet the blame hometo non-elected and largely unaccountable officials.
I suggested to the Australian progressives representatives that I met last week that they team up with the new Unemployed Union and organise a class action against the Reserve Bank Board for breaching their legislative charter. Under the control of a pro bono senior counsel briefed by someone like myself, they could humiliate the central bank officials in a court where evidence is required.
How would they explain a broad labour underutilisation rate of 15 per cent and rising as being consistent with full employment?
On yesterday’s labour force data release, you might be interested in this segment on the national ABC program – PM – Jobless rate ticks up as more people look for work – which was broadcast last evening. I was one of the contributors.
Next week, I am doing an ABC TV Four Corners segment on what I call the ‘unemployment industry’. Please read my blog – Why we should close the ‘unemployment industry’ – for more discussion on what I mean by that.
I will report on the program when it screens in 2015.
Tommy McCook and Don Drummond and the Skatalites
Here is one of my favourite tenor sax players – Tommy McCook – who was born in Cuba but made his mark in Jamaica as a top session woodwind player in the Ska, Rocksteady and later Reggae tradition. He died in 1998. He combined with trumpet player Booby Ellis to form the fabulous Dub horn section – Blazing Horns.
This sample is from his first major band, Tommy McCook & His Skatalites playing the Don Drummond piece – Silver Dollar, released by Studio One in 1964 and produced by Clement ‘Coxsone’ Dodd.
That label has an interesting history, in fact. Up until 1965, Tommy McCook and His Skatalites were session players at Studio One, in Kingston run by the omnipresent C.S. Dodd. It was the leading recording studio and record label in Jamaica.
Lee ‘Scratch’ Perry – was a leading producer at the studio and this is where Burning Spear, The Wailers, Delroy Wilson, the Heptones, and Toots and the Maytals, to name just a few made their mark.
But the writer of the song, Don Drummond – who features on it on trombone player was one of the original members of the Skatalites. He also wrote a lot of music that defined the early 1960s Ska and later Rock Steady eras. The great jazz pianist George Shearing rated Drummond one of the “top five trombone players” in the World.
Here he is in action (around 1964):
There is a great biography of Drummond by Heather Augustyn (2013) Don Drummond: The Genius and Tragedy of the World’s Greatest Trombonist – published by McFarland. It is a very political tract and worth reading.
You learn that Ska music was the:
… people’s music … conceived, played, and listened to by the poor. The middle and upper classed Jamaicans avoided it like a plague. And after labeling its ‘gutbucket quality as vulgar, they banned it from the island’s only radio station, RJR.
But its popularity could not suppress it and it soon became the defining political statement among the poorer Jamaicans.
She also recounts how the Skatalites were never chosen to represent Jamaica in festivals in North America. Quoting a source, she writes:
I can see why the government was concerned. Having seen various members of Skatalites act out in public over the years, these were valid concerns. Nobody knew what some of these guys would pull next, especially the drinkers like Tanamo and Jackie. The problem is that their music was so much better and the really the best representative of ska at the time.
Drummond was never “light-skinned enough to travel to the U.S. on a promotional tour” despite his undoubted talent and the fact that “his songs were lining the pockets of producers and labels in the U.K. as well” as the US. By 1965, Don Drummond had written more than 200 songs that were out on records somewhere.
The hypothesis is that the alienation and exploitation of his musical talents “broke Drummond’s fragile mental state”. He spent a lot of time in the Kingston mental hospital (self-committed and involuntarily committed).
Unfortunately, Drummond’s mental issues became intractable and he killed his girlfriend and was arrested on January 1, 1965 and was committed to an asylum for the insane upon the guilty verdict. He died a few years later still in custody.
After the murder, the two tenor sax players in the Skatalites, Roland Alphonso and Tommy McCook went their separate ways, with the former starting the band Roland Alphonso and the Soul Vendors, and the latter Tommy McCook and the Supersonics. The Skatalites were spread between the two bands with new members joining as complements.
The Supersonics moved over to the Treasure Isle label, run by an ex-cop – Duke Reid. The famous Trojan Records came out of this studio.
While the massive collection of music from Drummond is a major legacy, his other influence was on the contemporary Jamaican trombonist Rico Rodriguez, who is another of my favourite Jazz/Reggae/Dub players.
Anyway, this is what has been playing on my turntable this morning while I have been working. Having a fun morning actually rocking.
And if that wasn’t enough here is Don Drummond with the Skatalites playing his composition – Man in The Street from the Studio One release.
Rally for the Newcastle Train
I urge all people in the Hunter/Newcastle/Central Coast area to join the march this Sunday to protest at the imminent closure of the rail line into Newcastle.
The – Stop the Chop Rally – will begin at Pacific Park, near to the Newcastle Railway Station and march to Civic Park near the Town Hall.
It begins at 10.30. This is the last chance – the conservative NSW Government has decreed that the line will be cut some kilometers out of Newcastle on Boxing Day 2014. That is two weeks from today.
The Newcastle Council has just reversed its support for the cut. The previous regime under the Mayorship of one of the largest property developers had voted in favour of the cut despite the opposition from the local citizens. That mayor was forced to quit after the Independent Commission Against Corruption (ICAC) heard he had made illegal payments to local conservative members of parliament. A number of other property developers are caught up in the same scandal.
The rail line is one of the few remaining areas that is not subject to mine subsidence issues and, of course, it abuts the fabulous harbour. It is a means that young kids can come into Newcastle from the hinterland to access the beaches – and Newcastle area has some of the best surfing beaches on the East coast.
Newcastle and the hinterland is a relatively low income area and the railway is the means for many people accessing the city and the beaches. You cannot load 20 or 30 surfboards on a bus!
The Government promised the rail would be replaced by light rail but there is no plan for that at present. No contracts, design, route. It was a lie.
The bus terminals at the stations are inadequate for the extra services that will be required and no fiscal outlays have been made to improve them.
Save our Rail has fought a long campaign on behalf of the ordinary citizens of Newcastle and those that come into Newcastle on the train to stop the developers getting access to the land.
So please get down and join me and others in signalling that we object to this land grab and the demolition of an essential public service.
If only a small number turn up then the Government and the property developers will claim there was no support for the rail anyway.
I admit to a personal motive – I use the local station to access airports and Sydney and to get to the University some days.
Saturday Quiz
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.
I love you Bill, but only you could consider this amount of text as a ‘refrain on blog text’ because its friday. ROFL. You are such a loquacious writer. And we readers are the better for it, but if anyone deserves to have a briefly worded layday post, its you sir.
P.S. thinking like this Reserve bank governor should be grounds for either dismissal or prosecution as he is directly disobeying the elected legislature’s directives. But its like the old saying, “its only illegal if you get caught’. In this case, he has no fears because there is nobody that will hold him accountable.
Look up Squilliam Fancypants and there’s the appropriate caricature of our Central Bank Governor.
I watched the headlines last night, then suffered through the entire transcript this morning – http://m.afr.com/p/national/glenn_stevens_interview_the_full_FiihZ41I8IrOls4Yh6D8wK.
What we got from this interview devoid of rigorous scrutiny was a general (and generally soporific) view with a distinct absence of insight and nuance. It’s almost as if he doesn’t quite understand the issues himself, and I’m guessing his half answers and arrogant approach to questions (not just in this instance) is a reflection that he isn’t quite equipped to answer them.
He did have the time, though, to remark that “17,000 is a lot higher than 2,200” when talking about his apparent ‘flat screen mandate’, before adding (and proving he is a wiz at maths), “It’s seven times higher, actually”.
If I were to be pedantic, and I will be, it’s closer to eight times, so my confidence in him is diminished even further.
So he thought 85c last year … now it’s 75c … is he making this up as he goes along? Why? For what reasons, Glenn? Tell us more …
The fact is, the RBA botched the AUD jawboning effort, and the only reason it has fallen so far is due to the contagion effects of the commodity price collapse.
And Glenn, why would you even breathe austerity-affected issues in the Eurozone in the same sentence as Australia?
FFS …
Perhaps he is just voicing what he thinks will happen anyway. As far as I know the RBA doesn’t target exchange rates directly. Commodity prices are well down and overall productivity in the pooper for over a decade can’t help. Poor Stevens, it’s a tough gig.
The RBA can dirty the float but they cannot determine the exchange rate of the $AUS.
Considering the lions share of productivity gains are going to the capitalist rather than the workers the solution is easy. Tax the shitter out of profits or bring back some balance with respect to the wage bargaining process.
Better yet, bring in a Jobs Guarentee and end the problem overnight with full emplyment and price stability.
Glenn Stevens gets no sympathy from me because he’s just another stooge for the elites that own him.
Alan, what productivity gains. Gains in productivity have been diminishing for a decade or more. Slowing productivity growth puts Milti-factor now in negative territory.
Re: “I suggested to the Australian progressives representatives that I met last week that they team up with the new Unemployed Union and organise a class action against the Reserve Bank Board for breaching their legislative charter. ”
In Canada:
Report of an Appeal of an August 2013 Interim Order
in the Lawsuit Respecting the Bank of Canada
http://www.comer.org/content/Appeal2.htm
“.. that the defendants'(officials) are wittingly and/or unwittingly, in varying degrees, knowledge, and intent, engaged in a conspiracy, along with the Bank for International Settlements, the Financial Stability Board, and International Monetary Fund to render impotent the Bank of Canada Act, as well as Canadian sovereignty over financial, monetary, and socio-economic policy, and in fact by pass the sovereign rule of Canada, through its Parliament, by means of banking and financial systems…causing injury to Canadians….”
If memory serves, multifactor productivity (MFP for short) which apparently just means productivity of labour and productivity of capital shows the productivity of labour is nearly always increasing (at least currently) whilst the productivity of capital is offering less than negligible returns. So when a pollie talks about productivity they mean labour productivity (employment) but they neglect to mention capital productivity.
Now I don’t know if I got all the facts correct but if memory serves ACTU/Matt Cowgill did a study on it.
I’m baffled as to how, as Bill puts it, “..the creation of full employment guarantees price stability..”. We could of course put all or a substantial proportion of the unemployed onto public sector JG work and leave demand untouched. Assuming that level of demand was not inflationary, then the JG work would not bring excess inflation. But in that case, it’s the fact of maintaing constant AD that causes a lack of excess inflation, not the fact of creating employment (JG or non-JG).
Moreover, I’ve assumed there that JG itself does not raise demand. That of course is wholly unrealistic: unless a JG scheme is going to be disastrously unproductive, it has to employ materials, capital equipment and permanent skilled labor. That all has to be ordered up or “demanded” from the existing economy.
Thanks Bill for mentioning the Trains!
The train made going to uni very easy when i was living in the center of the city. The family will be out protesting this for sure!
@Ralph Musgrave
“””That of course is wholly unrealistic: unless a JG scheme is going to be disastrously unproductive, it has to employ materials, capital equipment and permanent skilled labor. That all has to be ordered up or “demanded” from the existing economy.”””
Thank goodness there are so many underutilised skilled people out there then. Less armchair philosophising, talk to people whom work in employment agencies they are shuffling degree/trade+industry experience people every day in Australia.
JG will not bring excess inflation because people who earn a living wage will spend it on manufactured commodoties.
Law of supply and supply cure was refuted AS it was hypothesised at the time BY factory operators as they NEVER saw the behaviour that was described in the model. No upward sloping marginal costs curve it was constant/downard sloping. (so its not true even within the neoclassicals own mechanics).
The factory owners explain that factories are built with significant excess capacity, and are also designed to work at high efficiency right from low to full capacity. (this holds even for small business with few machines)
eg: Food manufacuring in Australia sees 30% of the food wasted because it remains unsold.
http://www.abc.net.au/radionational/programs/scienceshow/ozharvest-reduces-waste-and-hunger/4576102
Rather than chasing a mytical phillips–>NAIRU curve instead follow the evidence inflation episodes coincide with supply shock. In the near future global warming will cause supply shocks hence employment/inflation argument is going to become more untennable.
Sam,
If there really are so many “underutilised skilled people out there” that demand can be raised without exacerbating inflation, then demand is not at what Bill calls the “inflation barrier”. I.e. AD should be raised so that it is at the maximum feasible level and as far as possible should be kept there, shouldn’t it?
And assuming it IS AT that level, then the demand resulting from orders for the materials, capital equipment etc needed for JG schemes will be inflationary. However, that problem can be solved by allocating JG people to EXISTING employers. That way, capital equipment and materials used stays more or less constant while numbers employed rises.
But that raises another problem: public sector employers aren’t brilliant at employing the less skilled (think hospitals, schools, tax offices, local government offices).
Re supply shocks, I fully accept that they can spark inflation: maybe even the majority of inflationary episodes – I’m not expert on that. But that doesn’t alter the fact that if AD rises far enough and fast enough, an economy sooner or later hits the inflation barrier.
“Public sector employers aren’t brilliant at employing the less skilled”
Actually they can be quit good at it if they put their mind to it. There are lots of non skilled work needed to be done within the public sector. Sweden used to have all sorts of unskilled people doing important things side by side with skilled people in hospitals, schools, tax offices, local government offices. That changed when new public management became the way to run things, together with the neoliberal massive austerity program during the 1990:s swedish banking crisis, where the government thought it could save money by sacking people.
Cleaners, janitors, taking care of children and elderly etc. many of those chores either disappeared, or was supposed to be purchased from firms, with the result that it isn’t done at all, or not as good, or far too seldom done due to the restriction new public management imposed on local budgets.
I notice there is a suggested implementation of the JG at the link below. I’m not sure how many people are aware of this. I’ve heard criticism’s of how would this work in practice.
Might be useful to point people more often at this. Also, does it need an update (2006) or everything still relevant?
http://e1.newcastle.edu.au/coffee/pubs/wp/2006/06-15.pdf
Simsalablunder,
Yes, Sweden used to be a trail blazer when it came to imagineative employment systems. I agree it’s a pity they’ve back-tracked on that. Do you have any links to literature on how they got temporary subsidised employees (aka JG, sort of) into schools, hospitals, etc?
These sort of jobs were considered real jobs were one saw work needed to be done and it was the outcome of a full employment policy, which where abandoned during the 90s crisis. From these created needed jobs, it was of course much easier to seek another job in private or public sector, if one chose to do so. In that sense it works as the JG is said to work as I understand it, that is you move on to better job offer if can you find one.
There were also a temporary job solution called beredskapsjobb which came about 1930, but was less and less used as real permanent jobs were created along the way. Beredskapsjobb were a sort of top up solution under which even odd artists could do their thing in the 1980 and get paid a decent salary as long as it was considered beneficial for the public. How that and the work was defined were more or less a discussion between the employment office, the artist and perhaps a third part from public or private sector depending on what was supposed to be done.
At the same time the unemployment insurance covered 80% of lost salary and it was fairly easy to get extended.
Beredskapsarbete also gave the opportunity for those who didn’t have unemployment insurance of 80% to earn one.
None of the above made people in general choose not to work. Unemployment were low with all these safety goodies and solutions. Nor did it make people choose to be artists instead of whatever other career choice they saw in their future. It was during this era Sweden was called the humble bee -it wasn’t supposed to fly but did so anyway and the reason for it is given here at Bills blog.
I don’t have any links but there is a short Swedish wiki page about Beredskapsarbete. On that page there’s a link to a paper I haven’t read, so I don’t know its content. There ought to be a lot written about it though.
@DR NRL
I don’t think i have the time left to address all your questions,but Thanks for that,i think
I’ll attach a couple to even up,I think for the full transcript
Where he’s (Glenn) obviously had his “I think” hat on,and in acting like the guarded expert under it ,i think he also seeded to becoming the likeness of saying ‘X is an unknown and the rest is a sewage leak under pressure,i think
However pressured was not what he seemed i think, more that this interview turned out just another step to his case toward the Gate of youth,for as to be forever young and his or their transitional innovations,to what might be better explained as his purple patch of youth construct i think,pictured with little clouds on the horizon where he’s prepared to lend a coin to save a coin in a hope to passing through it.However
I think in following this Arty-cul is his now familiar tendencies to kick us into the black.Accounts
for the fact that he may never be able to get back to writing quarterly reports containing hairy yellow lessons as to why a basket of bananas at $7/kg is bad for borrowers and therefore the country alike..I think i and with the mountainous mining booms now in the background as pictured,where in and after the final continued transition to black, and he may well end up in it’s eventual non-innovative flare back to what looks like an original game,now titled “Forever the gate,young of youth” back where it all began,same Hat, just belittled to brim confidence,in ending FFF,it..I think
http://www.google.com.au/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&cad=rja&uact=8&ved=0CCUQtwIwAQ&url=http%3A%2F%2Fwww.youtube.com%2Fwatch%3Fv%3D4PDAsohvSiM&ei=V1KNVPuVKqXemAXj0ICgAQ&usg=AFQjCNE4uaUi5t0Bsp33y6ypBTYYntOMXQ&bvm=bv.81828268,d.dGY
http://northcoastvoices.blogspot.com.au/2014/12/the-political-message-abbott-government.html
Thanks for the reply Ralph (sorry late reply busy weekend)
“””I.e. AD should be raised so that it is at the maximum feasible level and as far as possible should be kept there, shouldn’t it?”””
“””And assuming it IS AT that level, then the demand resulting from orders for the materials, capital equipment etc needed for JG schemes will be inflationary.
However, that problem can be solved by allocating JG people to EXISTING employers.”””
I dont disagree with any of this. As it stands this is implementation specific so becomes an position of semantics. Eg: JG implementation will be different in USA/Australia/Europe States and im sure government could instantiate
a badly designed JG that causes enough aggregate demand > supply to change the rate of core inflation.
It could be caused just as easily by delegating such functionality to the private sector too is inflationary.
In light of how manufacturing of commodoties, education, local government operate that they will reach an inflationary threshold. Especially in Australias case. (where in many cases the factories, offices, hospitals were only recently switched off).
Manufacturing of commodoties are unitary/discreet expansion of capacity in commodity manufacturing does not fit the neoclassical idea of ‘adding workers which contribute a certain measurable productivity until a threshold’ is at odds with modern manufacturing. (as already stated)
Furthermore: the models used in neoclassical economics always going be wrong about inflationary market pressures because their models dont include time/rate of change and follow an auction style clearence system paradigm where all bids are simultaneous.
In the case of thei percieved effects on demand by welfare/minimum wage they often describe the behaviour that welfare recipients ‘bid’ starting at ‘0’ on a given commodity. (micro-economics multiplied out to absurdity). How many people bid at the grocery store, kmart etc? The paradigm is wrong in the first place.
“””But that raises another problem: public sector employers aren’t brilliant at employing the less skilled”””
Except where they are. Even training medical staff (nurses can operate at training capacity within hospital system within 3 years/depending on the degree and level of training required).
This is why public servants exist, national offices of statistics exist. Government has historically run JG (best effort) style programs before and not hit the inflation barrier.
“””Re supply shocks, I fully accept that they can spark inflation: maybe even the majority of inflationary episodes – I’m not expert on that.”””
Why not look at supply shock inflation too? Become an ‘expert’ on this after all it is the causality of inflation every economist likes to use in defense of stupid ideas like NAIRU.
Kelton/new economic perspectives have graphs showing causality for inflation from oil, wheat, water etc supply shocks. The full employment +inflationcausality data reads like white noise.
“””But that doesn’t alter the fact that if AD rises far enough and fast enough, an economy sooner or later hits the inflation barrier.”””
Define fast enough? This has broken down into an argument of semantics. So why not operate at that level of abstraction:
http://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/3235.02013?OpenDocument
There is always young people feeding into the working/training age in any given population JG can be targeted to give regions with higher unemployment therefore have more JG places.
The minimum purchasing power of the JG has been modelled to show (like in the past) it can be used effect inflation (as with all the other options at governments disposal like taxation).
Overall i get the impression you are not ideologically opposed to JG in any way just that at some ‘nearer’ point in time? 1 year? 3 years? there is an inflationary effect. (I dont agree with this as JG will instantiate capacity simultaneous to demand)
The larger question is that literally tomorrow any given government could instantiate some form of JG and start reversing effects on socitey which could easily be described as a crime against humanity. Would you stand against this based on a ‘what-if’ worst case scenario?