I read an article in the Financial Times earlier this week (September 23, 2023) -…
It is Wednesday and I offer a few snippets for readers today. I have a number of projects on the go at present and time is short today. Apart from introducing a stunning guitar player (now long dead) that very few people have ever heard of but is one of my favourites (what does that say?), I ask the question: Why does anyone read the New York Times? I also announce the development and publication of our latest Employment Vulnerability Index (EVI) now in its third iteration. You can look at colourful maps as a result of this work! And tomorrow I will be trawling through employment losses around the world. All along the path to releasing my 10-point plan later next week.
I don’t know why anyone reads the New York Times
I was sent this article – No Fight Over Red Ink Now, but Virus Spending Will Force Tough Choices (published April 18, 2020) – a few days ago and wondered why anyone is writing this sort of stuff.
It gives air to and is representative of the dangerous ignorance that abounds, which, if it gains traction in the coming year or so, will derail economic recovery (should we solve the health issue) and significantly exacerbate the damage that will be caused by the lockdowns etc.
The basic premise is:
1. “The deficit hawks have had their wings clipped” – they don’t dare at present rail against the fiscal expansion. In the US case, that is, in part, not because of the size of the intervention but mostly, probably, because trillions have been directed at the top-end-of-town (corporations, Wall Street) and only a pittance is providing support for the millions entering poverty because of job loss.
2. I am also unsure whether the journalist’s construction that the US government has thrown “open the spigots in an unstinting effort to protect both American lives and the nation’s financial underpinnings.”
My reading of the data at present is that there has been a very poorly resourced response to the medical emergency and a totally inadequate fiscal response to support the poor who are without work or never had work.
3. The journalist though cannot help himself with the “Something will eventually have to give” story line.
This is the amorphous scaremongering that the fiscal conservatives introduce all the time when they cannot really tell you what that something is or when the give comes but still use the uncertainty to invoke fear among the masses.
The mainstream economists who are usually ready to offer their nonsensical opinions at any chance have also been quiet but you know what they will unleash in the coming months.
All the lies:
(a) Bond yields will rise making government spending more expensive and risking insolvency.
(b) Interest rates will rise because the government is competing for scarce funds in the (mythical) ‘loanable funds market’.
(c) That accelerating inflation moving to hyperinflation is just around the corner.
None of which will happen as a consequence of the fiscal stimulus provided by the government(s).
4. Then the journalists quotes some fiscally conservative Republican Senator who offers another platitude:
My problem is, we should have been fixing the roof when the sun was shining. But we didn’t.
Progressive Europhiles also use this metaphor too and I wrote about it in their context in this blog post – Fiscal policy paralysis and ECB credibility in tatters (June 18, 2019).
What does it mean?
The journalist informs us that the Senator:
… was referring to the period before the outbreak, when the economy was booming and the deficit was already projected to skyrocket to an estimated $1 trillion for 2020.
Well obviously they think the federal US fiscal deficit was too large before the crisis. And given the low unemployment that had been achieved, they think the federal government should have imposed austerity on the economy to ‘save up’ currency to meet the current crisis.
They don’t stop to think for a minute that the reason that the unemployment rate was relatively low and the economy had been growing was because Donald Trump DIDN’T impose austerity, and, instead, continued to provide fiscal support to the economy.
That sort of basic macroeconomic logic is a step too far for them.
The ridiculously created – US Committee for a Responsible Federal Budget – published a recent report (I won’t link to it to save you wasting time), which is notable for the size of the numbers they report.
As if these numbers have much meaning. They attach no intrinsic meaning to them – they are just large and the reader is meant to be scared – just as you would if you confronted a ‘cliff’ that was high above the beach and you had to get to the beach.
The Report says deficits and debt will be “unsustainable” in the US.
The journalist’s take is that “In other words, the bill will come due, as it always does”.
He must have a different historical recollection than I because, even though I am a foreigner and live in Australia, I am not aware of any major fiscal catastrophe in recent US history (post 1971) that required pernicious austerity being invoked to ‘pay back debt’ or save the government from insolvency.
And the idea that the rising deficits now will “make budgeting in the future extraordinarily difficult” is equally asinine.
As the coronavirus crisis has demonstrated – even with the deficit which the journalist says is “estimated $1 trillion for 2020” – the journalist writes:
… any flimsy barriers to spending that remained were demolished in an instant …
Reflect on that a moment.
The logic in one paragraph dismissed (unknowingly) by the logic in the next!
And after all that, the “future generations” enter the narrative, as they always do, and so we read that taxes are going to have to go up.
There is no differentiation between tax rates and tax revenue.
The latter will go up when growth resumes. The latter doesn’t have to do anything in relation to raising funds to reduce the deficit.
Oh, and I nearly forgot, the article would not be the complete disaster unless it got to the storyline:
The spending surge … could prompt inflation, and it also leaves the nation far less prepared in the event of another emergency.
Perfect although he didn’t include the bond yield-insolvency point. We will give him 8/10 for that lapse.
The journalist is listed as having been a “chief Washington correspondent and a veteran of more than three decades of reporting in the capital”.
Employment Vulnerability Index (EVI) Version 3.0
In the last few days, I have completed the development of our – Employment Vulnerability Index 3.0 – in partnership with Professor Scott Baum (Griffith University).
I wrote about this in these blog posts:
1. EVI update (August 13, 2009).
2. The CofFEE/URP Employment Vulnerability Index – with updates (March 17, 2009).
The EVI identifies the small regions (akin to suburbs) across Australia that are most vulnerable to job losses as a result of the economic crisis.
We created the series at the onset of the GFC to better guide policy on where stimulus measures should be targetted.
We developed an economic model to predict the employment vulnerability suburb by suburb. The EVI covers all the Capitals and major regional cities – that is, around 70 per cent of the total population.
The EVI revealed those ‘suburbs – Red Alert and Amber Alert suburbs – which are most exposed to potential job losses and least well placed to escape disadvantage associated with increasing unemployment.
The high risk suburbs included the traditional working class suburbs.
But what was disturbing is that we have also identified a new arena of socio-economic disadvantage that will emerge as a result of the current crisis. The new arenas included the mortgage belt suburbs that have grown on the periphery of our major cities.
So the neo-liberal debt binge that preceded the GFC became a noose in these types of suburbs when the economy headed into the downturn.
We also identify those suburbs that have Medium low risk (light blue) and, in turn, Low risk of job loss (dark blue).
Subsequent analysis of the relevant data at the time demonstrated that our EVI groupings stood up well as a predictive framework. The interesting deviations were traceable to the impacts of the fiscal stimulus packages brought in my the federal government. The risk assessment forecasts were based on a no intervention assumption.
EVI 3.0 extends this analysis in several ways, which will be discussed in the major report we will release early next week.
We have taken the new ABS weekly employment data (taken from the Australian Tax Office payroll series that is now available) to tweak the weightings of the index to see whether the unusual nature of the crisis – forced lockdowns etc – alters the analysis much.
The answer is that it doesn’t but there are some interesting variations which will be documented in the final report.
My research centre – Centre of Full Employment and Equity (CofFEE) – hosts the EVI 3.0 site and allows those curious to see the coloured maps (the graphic above is a snapshot for a part of Melbourne) and detailed rankings across the vulnerability groups and community profiles.
I should add that another group within Australia has recently published what they call an EVI, which appears to be similar to our concept. They have been asked to desist given that we hold the intellectual property rights to the concept and acronym and legal recourse will be sought should they decline.
Call for MMTed Support
I imagine the current crisis will put a halt on people donating to causes.
And I am very appreciative of the financial support that is so far come in. We have been trialling technologies and putting the pedagogy together. I will be announcing a special session soon (which will be held next Friday).
So we are making progress in developing the program that will become – MMTed.
I ran my first Masterclass in London recently and it was well attended. I received good (useful) feedback from several people which will help tune the way we run these face to face classes.
The planned further Masterclasses (May in Australia, June in Europe, September in the US) are on hold while we assess the state of the world. But I hope we will be able to offer them sometime this year.
And on-line curricula is being developed.
But we still need significant sponsors for this venture to ensure that we can run the educational program with negligible fees.
If you are able to help on an ongoing basis that would be great. But we will also be appreciate of once-off and small donations as your
You can contribute in one of three two ways:
1. Via PayPal – which is our preferred vehicle for receiving donations.
The PayPal donation button is available via the MMTed Home Page or via the – Donation button – on the right-hand menu of this page (below the calendar).
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Please help if you can.
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Music – Classic blues guitar – Fenton Robinson
I was listening to this album this afternoon while trying to figure out some json code for layering maps – a sort of retrospective interlude wth one of my favourite guitar players.
The song is – As the Years Go Passing By – and I think a lot of aspiring blues guitar players attempt this piece early on because it is the classic slow blues form with all the scope that that offers.
But no-one playes it better than the original (although Albert King’s version was also great), which was recorded in 1959 by – Fenton Robinson – who is one of the most ignored Chicago blues players in history.
And it doesn’t make sense, given the way he could play – and he was an early electric guitar blues exponent.
This version was a re-recording that he did in 1977 for Alligator Records on his album – I Hear Some Blues Downstairs, the second album of three that he recorded for this emerging blues label.
His band included virtual unknowns – Bill Heid (piano), guitarist Steve Ditzell, bass player Larry Exum, and Ashward Gates Junior (drums).
Here is the – Original 1959 recording – by Fenton Robinson. You can easily hear how recording and production techniques had improved over the space of 15 years or so.
There is extraordinary talent that never achieves the recognition they deserve, although for all fans of the Blues Brothers movie, his major contribution – Somebody Loan Me a Dime – was used.
He died young (62) of cancer.
That is enough for today!
(c) Copyright 2020 William Mitchell. All Rights Reserved.