Germany attacks its unemployed!

Australia is not alone in mistreating our disadvantaged and unemployed citizens. As a portent of things to come in Australia after July 2005, tough new labour market reforms came into law in Germany on January 1. The Hartz IU reforms received a bit of European press in the last few days. I read two stories over the last few days, one in the German paper Bild am Sonntag (BamS) under the heading – Hartz-IV-Chaos! Kann ich meine Stütze bar abholen? – and another from the French daily Le Monde that provided some useful insights into the how a country that refuses to provide enough work for its citizens turns on the same.

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Euro zone madness continues

In the UK Financial Times article by Darryl Thomson, Dollar falls to fresh lows in thin festive trade posted December 24, the continued slide of the USD against the Euro is put down to “disappointing US economic data” (mostly sharp slowdown in new home sales). However, a so-called currency strategist claims it is the “deficits rather than the data which were weighing on investors minds”. The hoary old neo-liberal twin deficits attack on public spending is making a comeback.

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Debt worsens

Recently released ABS Statistics show that household debt has hit a record $815 billion but the growth is slowing as the property slowdown deepens.

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Australian government tax cuts – the most vulnerable are being hoodwinked

I am still catching up after being away in the UK last week. I will reflect on that trip in another blog post. So, today, we have a guest blogger in the guise of Professor Scott Baum from Griffith University who has been one of my regular research colleagues over a long period of time. He indicated that he would like to contribute occasionally and that provides some diversity of voice although the focus remains on advancing our understanding of Modern Monetary Theory (MMT) and its applications. Today he is going to talk about income tax cuts and cost of living relief. Over to Scott …

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Special pleading from Japan’s fossil fuel financing megabanks reaches new heights

In our new book – Modern Monetary Theory: Bill and Warren’s Excellent Adventure – which will be launched in the UK next Wednesday, we devote a chapter to what we refer to as the Japanese irony. This relates to the fact that while the conduct of policy in Japan is justified in mainstream terms, the more extreme policy settings that emerge produce outcomes that expose the deficiencies of the mainstream theories. At present, we are observing more examples of this. The latest matter of interest in Japan (from my watch) is the pressure the three megabanks are putting on the Bank of Japan policy makers to push up bond yields and interest rates. There is no reason based in financial stability concerns or community well-being for the Bank of Japan to agree to their demands. They just amount to special pleading from Japan’s fossil fuel financing megabanks for more corporate welfare to boost their profits.

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Central bankers live in a parallel universe

It’s Wednesday, which means a few (sometimes unrelated) items are discussed or analysed. Today, we see that real wages in 16 of the 35 OECD countries are still below the pre-pandemic levels, which tells us among other things that the inflationary pressures were not wage induced. Further, a speech yesterday by the Federal Reserve boss demonstrated quite clearly how central bankers fudged the whole rate hike narrative. And after all that, some music from the 1960s.

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Bank of Japan is making losses on its balance sheet – so what?

Sometimes when I am reading some story or analysis about the economy I sense a sort of glazing over effect – I just read the words as they appear on the paper and it is not until after I have read the entirety that I sort of have to pinch myself and realise that this is an attempt at serious journalism. The realisation that I have just read the most extraordinary nonsense that one could devise to present to readers then sinks in. I then wonder how a journalist could be so stupid as to actually construct and article in that way and seek so-called ‘expert’ commentary from an array of highly paid economists and bankers to support the nonsense. Who are they trying to fool? Well almost everyone is the answer. Why does this sort of journalism continue other than the lurid headlines sell products and that is what journalism has really become? I don’t accept that all these characters are part of a massive conspiracy to deceive the rest of us. Obviously, some of the players know clearly that they are manipulating the truth to advance their own agendas – like when bank economists continually claim interest rates have to rise (which they know will just boost the profits of the companies they work for). But the better way of thinking about this mass deception is that we have all been captured by the fictional world created by economists, who themselves are mostly trapped by the Groupthink that is impressed on them during their university days. Whatever the explanation, it still amazes me how stupid we all are for accepting this nonsense as serious commentary.

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I make a prediction about the relationship between US government debt and impending crisis

Over time we observe a pattern of idiocy in the financial press, where different fictions, dressed up as allegedly shattering propensities, are regularly cycled through in succession, each one getting headlines for a day or so, only to be replaced by the next sensationalised issue. So-called experts or corporate bosses are wheeled out and make horrendous predictions that one country or another is entering a catastrophe of its own making – too much government spending, too much debt, or some other policy position – is usually fingered as the culprit. None of the predictions ever come to pass and the media never follow up to reflect on why. They are too busy pushing out the next headline and the next issue, which, in turn, will be replaced by something else, and then something else, and so on, until the initial prophesy of dooms is recycled, despite failing dismally to engage with the real world when it was last aired. And this pattern has unfolded over decades. Who ever checks the veracity of the predictions? How does the reputation of these so-called experts survive continual failure? The problem is that most of us believe this fiction and elect politicians and accept poor economic policy based on the fictional world we live in. Anyway, I have a prediction … read on.

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The European Union has been designed and run to maintain the corporate interests of the elites – no surprises there

After the Far Right National Rally (RN) took the prizes in the recent European Parliament elections and seriously dented the electoral appeal of Emmanual Macron’s grouping, the French President decided to follow the British script and dissolved the French Parliament and called a snap election, the first round of which will take place on June 30, 2024 and the second round a week later. Far right parties also did well in Germany, Italy and Austria, but all the talk of a sharp swing to the right in Europe was overstated, given that in other nations, the Right vote was not as strong. The deals to give the European Commission presidency to VDL for another term were then in full sway. And within days we started to observe some strange behaviour in the bond markets with the 10-year bond spreads against the German bund rising sharply with accompanying warning bells from the mainstream politicians – some even venturing to claim in France’s case that it would experience a ‘Truss moment’ if Macron was not returned to office, despite his government floundering due to its poor policy making. None of this should come as a surprise. The European Union is the most advanced example of neoliberalism, given that the ideology is built into its legal structures and the institutions are required to enforce it. There are countless examples, of the main institutions – the Commission and the ECB – acting individually and together to drive political outcomes that they deem to be desirable from the perspective of maintaining the status quo. All the angst in the last few weeks about interference in the upcoming French election is really surprising given the track record of these bodies. The whole system has been designed and run to maintain the corporate interests of the elites. Pure and simple. The current situation is no exception.

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RBA denial about profiteering demonstrated they are just part of the ideological machinery supporting neoliberalism

In April 2023, the then governor of the Reserve Bank of Australia gave a speech to the National Press Club in Sydney – Monetary Policy, Demand and Supply = the day after the RBA decided to end (for a month) its rate hikes after hiking the previous 10 meetings of the RBA Board, the body that determines monetary policy settings. The inflation rate had been falling for some months by this time yet the RBA was still hanging on to its narratives that the rate hikes were necessary to “combat the highest rate of inflation experienced in Australia in more than 30 years”, despite, for example, the Bank of Japan holding rates constant and experiencing a more rapid decline in its inflation rate as the supply constraints abated. The RBA had vehemently claimed that wage pressures were mounting, which had to be curtailed and denied categorically that there was any profit gouging or margin push involved in the inflationary pressures. There was no evidence at the time to support their claims about wages and nominal wages growth has remained moderate since. However, there was ample evidence, both in Australia and across the globe that corporations were taking advantage of the supply constraints to push their profit margins out. A recent report released by Oxfam Australia report (June 19, 2024) – Cashing in on Crisis – demonstrates that profit and price gouging was instrumental in creating and sustaining the inflationary pressures. The RBA was in denial all along and demonstrated that they are essentially just part of the ideological machinery supporting neoliberalism and the extraction of greater profits at the expense of workers.

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The delusional RBA has everyone convinced that they are the reason inflation is falling

It’s Wednesday and as usual I present commentary on a range of topics that are of interest to me. They don’t have to be connected in any particular way. Today, RBA interest rate decisions, COVID and some great music. Yesterday, the Reserve Bank of Australia (RBA) held their target interest rate constant. In their media release (June 18, 2024) – Statement by the Reserve Bank Board: Monetary Policy Decision – the RBA claimed that “higher interest rates have been working to bring aggregate demand and supply closer towards balance”. The journalists duly digested the propaganda from the RBA and throughout yesterday repeated the claim relentlessly – that the RBA had done a great job in ‘getting inflation down’ and now was attempting to ‘navigate’ a sort of knife edge between effective inflation control and the increasing probability of recession. It was an amazing demonstration of being fed the narrative from the authorities, and then, pumping it out as broadly as possible through the mainstream media channels to the rest of us idiots who were meant to just take it as gospel. Not one journalist that I heard on radio, TV or read questioned that narrative. The emphasis was on the ‘poor RBA governor’ who had a difficult job protecting us from inflation and recession. Well, my position is that the decline in inflation since the December-quarter 2022 has had little to do with the 11 interest-rate hikes since May 2022 and more to do with factors changing that are not sensitive to domestic interest rate variations. Further, the impact of two consecutive years of fiscal austerity (the Federal government has recorded two fiscal years of surpluses now) has mostly been the reason that GDP growth is approaching zero and will turn negative in the coming quarters at the current policy settings.

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Tracing the British Labour Party’s fears of The City – Part 1

When I met with John McDonnell on October 11, 2018 at his Embankment office block in London he was then the Shadow Chancellor. The theme of the meeting was dominated by the concerns (near hysteria) about the power of the City of London (the financial markets), expressed by his advisor, a younger Labour Party apparatchik whose ideas are representative of the bulk of the progressive side of politics in Britain. The topic of the meeting centred on the fiscal rule that the British Labour Party chose to apparently establish credibility with the financial markets (‘The City’). I had long pointed out that the fiscal rule they had designed with the help of some New Keynesian macroeconomists was not just a neoliberal contrivance but was also impossible to meet and in that sense was just setting themselves up to failure should they have won office at the next election. Essentially, I was just met with denial. They just rehearsed the familiar line that the British government has to appease the financial interests in The City or face currency destruction. That fear is regularly rehearsed and has driven Labour policy for years. It wasn’t always that way though. As part of preliminary research for a book I plan to write next year I am digging into the history of this issue. What we learn is that the British government has all the legislative capacity it needs to render The City powerless in terms of driving policy. That raises the question as to why they don’t use it. All part of some work I am embarking on. The reason: I am sick to death of weak-kneed politicians who masquerade as progressive but who bow and scrape to the financial interests in the hope they will get a nice revolving door job when they exit politics. A good motivation I think.

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Australian labour market – mixed signals but probably still in a weakening phase

Last month’s Labour Force data release for April 2024, revealed that the Australian labour market was starting to weaken in the face of the fiscal squeeze (the government announced a second successive annual fiscal surplus on Tuesday) and the 11 interest rate hikes since May 2022. Today (May 16, 2024), the Australian Bureau of Statistics released the latest – Labour Force, Australia – for April 2024, which shows that there are mixed signals which make it hard to say categorically where things are or where they are going. Total employment growth was positive and the participation rate increased, which usually signals a strengthening labour market. But full-time employment fell and monthly hours worked were static. Further both the unemployment rate and the underemployment rate rose, which indicates weakness, notwithstanding the fact that the participation rate increase accounted for some of the rise in unemployment. Moreover, there is now 10.8 per cent of the working age population (1.58 million people) who are available and willing but cannot find enough work – either unemployed or underemployed and that proportion is increasing. Australia is not near full employment despite the claims by the mainstream commentators and it is hard to characterise this as a ‘tight’ labour market.

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Degrowth will require humans shovel less energy … into our bodies

I haven’t much time free today and with the federal government’s fiscal statement coming out tomorrow night and wage data and the labour force data coming out Wednesday and Thursday, respectively, it is going to be a full week. Given I am using all my time to finish the manuscript for my next book which has to be delivered to the publisher on June 1, I am writing very little here today. But there was some interesting data released by the Australian Bureau of Statistics (ABS) last week that bears on my general theme of degrowth, in a roundabout sort of way. The data from the – National Health Survey 2022 – is very revealing and shows how far people will have to go to adopt degrowth behaviours at a personal level. And just so you know, while I wrote about health matters last week and will again today, I don’t intend to make it a regular habit on a Monday.

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COVID-19 myopia – it actually costs more to have no acute care protocols in place and more people die as a result

I regularly scan research output from disciplines other than economics that I think impacts on economic matters. On April 17, 2024, a new study from medical researchers at the Burnett Institute in Melbourne, working with staff at the Department of Health and Human Services, in Victoria published a pre-print in The Lancet – Admission Screening Testing of Patients and Staff N95 Masks are Cost-Effective in Reducing COVID-19 Hospital Acquired Infections – which continues to show that public health policy in Australia is failing and part of that failure is the myopia that ‘sound finance’ principles engenders. I have written before about this myopia where governments think they need to cut back on spending because they are ‘short’ of funding and end up having to spend more over time because the initial spending cuts cause massive (and predictable) problems. We have seen this phenomenon in many situations (several cases are cited below). This new research puts an end in my view to the debates about hospital and more general health practices in the Covid era and exposes how the lack of political leadership, a refusal to fund public education, and poor hospital practices – mostly due to alleged funding shortfalls – have turned Australian hospitals into death zones. And while the authorities are telling the public they are ‘saving taxpayers’ money’ the reality is that the pubic outlays to deal with the problems they are creating by this austerity will be multiples of what would be required to implement sound policy now and avoid those longer-term problems.

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The yen, podcast, and book announcement – all on International Workers’ Day

It’s Wednesday and today I consider the current yen situation which is causing some hysteria in the financial media even though there is not much to worry about. I also provide access to my latest podcast with the Washington-based Bad Faith, which traverses issues of class, the demise of the Left, Modern Monetary Theory (MMT) and degrowth. And the book announcement – pre-orders are now available. And finally an anthem for International Workers’ Day.

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Japan’s municipalities disappearing as population shrinks

I have just finished reading a report from the Population Strategy Council (PSC) of Japan – 令和6年・地方自治体「持続可能性」分析レポート (2024 Local government “sustainability” analysis report) – that was released last week April 24, 2024). The study found that around 40 per cent of the towns (municipalities) in Japan will likely disappear because their populations are in rapid decline as a result of extremely low birth rates. The shrinking Japanese population and the way in which local government areas are being challenged by major population outflows (to Tokyo for example) combined with very low birth rates makes for a great case study for research. There are so many issues that arise and many of which challenge the mainstream economics narrative concerning fiscal and monetary impacts of increasing dependency ratios on government solvency. From my perspective, Japan provides us with a good example of how degrowth, if managed correctly can be achieved with low adjustment costs. The situation will certainly keep me interested for the years to come.

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From the archives – my early statements on the need for degrowth and the resistance they received from progressives

As part of a another current project, which I will have more to say about soon, I was trawling through early Internet archives of the Post Keynesian Thought (PKT) listserv archives and was reminded that I began my degrowth journey many years ago. Going back in time and coming across things that one has written is an interesting experience. In this case, I reflected on my changing narrative style, my naivety in places, and the continuity of my thinking over the course of my academic career. The following discussion is the product of my archival research for another project of the Post Keynesian Thought (PKT) discussion list archives. It has been an interesting exercise and brought back interactions, personalities and the like that I have forgotten about. Many on that list have since died (sadly). But what is established is that 30 or more years ago there was widespread resistance still within the progressive economics community to the idea that the destruction of the planet would require major systemic change. This resistance bears on the debates now between the dominant ‘green growth’ group who think capitalism aided by global financial capital can achieve the changes necessary to meet the climate challenge and the degrowth camp who want fundamental system and behavioural change. My writings in 1995 placed me firmly in the latter cohort.

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What is responsible government spending?

Today, I am fully engaged in work commitments and so we have a guest blogger in the guise of Professor Scott Baum from Griffith University, who has been one of my regular research colleagues over a long period of time. He indicated that he would like to contribute occasionally and that provides some diversity of voice although the focus remains on advancing our understanding of Modern Monetary Theory (MMT) and its applications. Today he is going to talk about what responsible government spending should look like. Anyway, over to Scott …

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Japan sinks into recession – but there is more to the story than the mainstream narrative would care to admit

Last week (February 15, 2024), the Japanese Cabinet Office released the latest national accounts estimates for the December-quarter 2023 – Quarterly Estimates of GDP for Oct.-Dec. 2023 (The First preliminary) – which showed that the economy had slipped into an official recession (two consecutive quarters of negative GDP growth) and in the process had moved from being the third largest economy in the world to become the fourth behind the US, China and Germany. According to the media release – 2023年10~12月期四半期別GDP速報 – the quarterly growth rate was -0.1 per cent (annual -0.4 per cent). Domestic demand was weak, contributing -0.3 per cent while net exports contributed +0.2 per cent. Part of the story is related to a ‘valuation drop’ because the yen has depreciated in recent months, undermining the value of exports and increasing the value of imports. But while there is some hysteria in the ‘markets’ and the mainstream economics commentary about the result, caution is required because the data will be revised (it was only preliminary) as more data comes in and it is highly possible for the negative to become a positive. But, I also take a different perspective on this from the dominant narrative in the media as you will see if you read on.

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