I suppose Brexit is to blame for the fact that Britain is now growing faster than the major European economies. The latest ‘monthly’ GDP figures show that the British economy grew by 0.3 per cent in the three months to November 2018 and will probably sustain that rate of growth for the entire final quarter of 2018. This is in contradistinction to major European economies such as Germany (which will probably record a technical recession – two consecutive quarters of negative growth) with France and Italy probably following in Germany’s wake. I have made the point before that the growth trajectory of the British economy (inasmuch as there is one) is very unbalanced and reliant on households and firms maintaining expenditure by running down savings and accessing credit – which means ever increasing private debt burdens. With private credit growth weakening as the debt levels become excessive and the rundown of saving balances being finite, Britain will face recession unless the fiscal austerity is reversed. Earlier in 2018, the Guardian Brexit Watch ‘experts’ were continually pointing out that Britain’s growth rate was at the bottom of the G7 as evidence that Brexit was causing so much damage. So now European G7 nations are starting to lag behind, these commentators will have to find another ruse to pin their anti-Brexit narrative on. We also consider in this blog post some more Brexit-related arguments – pro and con – which reinforce my conclusion that a No Deal Brexit will not cause the skies to fall in.
Here are the answers with discussion for this Weekend’s Quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of modern monetary theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.
Welcome to The Weekend Quiz. The quiz tests whether you have been paying attention or not to the blog posts that I post. See how you go with the following questions. Your results are only known to you and no records are retained.
I was going to write about Jamaica today but this topic emerged that I thought I should deal with before I write about the home of reggae. In fact, some of the material is input into a reasoned discussion about Jamaica so it logically precedes it. With the increasing profile of Modern Monetary Theory (MMT), social media activists are wont to talk about MMT in various ways that, in many cases, do not bear resemblance to our work. But that doesn’t stop them claiming things about what we have written or said and then proceeding to say how this is a ‘big problem’ with MMT that they cannot accept. Then their own local commentators chime in reinforcing the point. It is obvious that the original writer hasn’t read our work or if they have they haven’t grasped it (including the nuance and subtlety) but still feels privileged to hold themselves out as experts to wax lyrical about the technical flaws in the said work. This gets amplified by the responses from the readership who have probably read even less – to the point that we end up with MMT being constructed as something ridiculous and foreign to its original. Sort of like start by saying you are discussing 2, call it 3 and say it equals 4. It is a problem because it confounds people and also gives those who oppose our work ways to further misrepresent it in the public debate.
A short blog post as per my usual Wednesday behaviour these days. Fiscal austerity manifests in many ways, all of them unpleasant, destructive and unnecessary. Here is one of the more insidious ways that mindless cuts in government programs have long-term damaging impacts. In 2013, the Queensland State Government was taken over by a conservative extremist as Premier who thought it was a good idea to hack into sexual health programs targetted at indigenous communities. Over a few short years, this was just one of a huge number of social and health cuts that were made by that particular state government. More than 14,000 public service jobs were cut (a huge relative number). The State government fiscal deficit fell from a predicted $A6 billion in 2013-14 to $A2.58 billion. But like all these austerity cuts which deliver short-run reductions in public spending, the longer-term effects of the cuts lead to much higher amounts of public spending. Neoliberalism is not only mindless but myopic. I have made this point often in regard to infrastructure cuts. In the end, the government has to spend much more fixing the crisis the initial cuts create. Not a sensible strategy at all. The ‘chickens’ (manifestation) of those cuts in Queensland a few years ago are now coming home to roost. As predicted at the time, there is now a health crisis in the form of a STD epidemic moving across the north of Australia from east to west, purely because this idiot wanted to ‘save’ a few pennies. Now serious public cash is being required to put a brake on the health crisis he created. There are countless examples across the world over this neoliberal era of this same phenomena. Myopic and mindless.
Last week’s (January 4, 2019) release by the US Bureau of Labor Statistics (BLS) of their latest labour market data – Employment Situation Summary – December 2018 – showed that total non-farm payroll employment rose by 312,000 and the unemployment rate rose by 0.2 points to 3.9 per cent on the back of a 0.2 points rise in the participation rate. The coincidence of rising employment and rising participation is usually a good sign as workers are being attracted back into the labour force by the increased job opportunities. We will see in the next few months whether that is a one-off blip or a sustained trend. If it is a sustained trend then the rise in unemployment as a consequence of the labour force growth outstripping employment growth will be temporary and sustained reductions in unemployment will then occur. While the US labour market is looking fairly robust there is still a substantial jobs deficit remaining which tells us that it remains some distance from full employment. There is room for expansion.
The UK Guardian continued its anti-Brexit bias in its article (January 4, 2019) – Brexit anxiety drags UK economy almost to standstill. Read the words which clearly mean – Brexit anxiety causes UK economy to stall. No nuance. No comparability. Just plain, unproven bias. Now, let’s be clear. The British economy has slowed considerably in the last quarter and the chaotic political behaviour among the British government is bound to be causing anxiety among voters. The British establishment is looking more comical lately than it usually does. But, as I have demonstrated previously, the trajectory of the British economy that is emerging pre-dates the Brexit referendum and has more to do with austerity biases in policy design and the state of private domestic balance sheets (accumulated debt positions) than it has to do with Brexit anxiety. Further, the data that the Guardian reports (the latest PMI results) also suggest that the Eurozone and Germany, in particular, are also recording similar declines in sentiment and activity. It is hard to blame Brexit on that.
Here are the answers with discussion for this Weekend’s Quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of Modern Monetary Theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.
Welcome to The Weekend Quiz. The quiz tests whether you have been paying attention or not to the blog posts that I post. See how you go with the following questions. Your results are only known to you and no records are retained.