The Asian Century White Paper – spin over substance

Yesterday, the Australian Prime Minister launched the latest Federal Government statement, the – Australia in the Asian Century White Paper. The White Paper is full of jargon and superficial tags – such as “Australia’s 2025 aspiration”. While I am not critical of shorthand statements to capture a policy aim, when the substance that lies below the tag is either missing or based on false premises, then the hollowness of the policy statement is revealed. Such is the case in this document. It is littered with neo-liberalism and like previous statements, such as, “by 1990 no Australian child will be living in poverty”, which was made by a previous Australian Prime Minister in 1987 – to his regret ((Source). The pledge was not only impossible to achieve given the scale of the problem faced and the time before the pledge was due but the explicit embrace of neo-liberalism by that government also rendered the goal impossible. Poverty rates and inequality have increased since then as successive governments – Labor and conservative – have abandoned the government responsibility to achieve the related goals of full employment, equity in income distribution and broad social inclusion in economic outcomes. Yesterday’s White Paper release just continues that trend.

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Sectoral balances – Part 3

I am now using Friday’s blog space to provide draft versions of the Modern Monetary Theory textbook that I am writing with my colleague and friend Randy Wray. We expect to complete the text by the end of this year. Comments are always welcome. Remember this is a textbook aimed at undergraduate students and so the writing will be different from my usual blog free-for-all. Note also that the text I post is just the work I am doing by way of the first draft so the material posted will not represent the complete text. Further it will change once the two of us have edited it.

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The US labour market has improved but more stimulus is required

On Tuesday I provided some analysis in this blog – US labour market is in a deplorable state – of the latest US Bureau of Labor Statistics Employment Situation release for September 2012. Today, I add some more calculations and analysis that I didn’t get time to write up for that blog. The UK Guardian article (October 17, 2012) – US jobs data reveals economy is bouncing back strongly from recession – would appear, on first appearances (comparing titles), to be at odds with the message I imparted in the Tuesday blog. But on closer inspection you will see that the message is consistent across both pieces of analysis. And what I provide today will bring that concordance into relief.

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Australian government funding increased cancer incidence

One of the complaints that critics of a Job Guarantee raise is that it might compete with the private sector for labour, which they say would be unfair given the unequal capacities of the two sectors (government allegedly has an advantage) and the undesirability of allocations being based on so-called “non-market” criteria. Mostly these complaints reflect the fact that the critic hasn’t read any of the relevant literature about Job Guarantee design and rationale (it employs workers which have no private sector bid). However, when the government becomes a speculator balancing risk and return in private capital markets and, in doing so, contributes to asset price bubbles and uses its financial might to “distort” market outcomes, it is praised for being financially prudent. Welcome to the hypocrisy of the Future Fund, Australia’s so-called sovereign fund. But it gets worse. We have now learned about the types of products that the Future Fund is investing in. It comes down to the Australian government promoting increasing cancer incidence in our nation. And all because they lie about their economic capacities as a sovereign currency-issuer.

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Saturday Quiz – October 13, 2012 – answers and discussion

Here are the answers with discussion for yesterday’s quiz. The information provided should help you understand the reasoning behind the answers. 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.

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Australia continues to endure a very weak labour market

Today’s release by the Australian Bureau of Statistics (ABS) of the Labour Force data for September 2012 reveals a labour market that is weak and failing to produce jobs to match the pavce of the underlying population growth. Many commentators are suggesting today’s figures are not that bad – but that just shows how far we have lowered our expectations of what good is. It is unambiguously bad when an economy that is meant to be in the throes of the once-in-a-hundred-years mining boom cannot even generate employment growth to match the population growth. It is true that participation rose this month which added to the rise in unemployment. But the trend performance of the labour market is flat and these monthly shifts are fluctuating around that flat trend. The data is not consistent with any notions that the Australian labour market is booming or close to full employment. The most continuing feature that should warrant immediate policy concern is the appalling state of the youth labour market. My assessment of today’s results – worrying with further weakness to come. The government has no case to make for its pursuit of a budget surplus in the next fiscal year.

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A lost generation in Europe is being deliberately created by the elites

I am “on the road” again today so short of time (as usual). But yesterday, Eurostat released the latest labour force data from the EU and the Eurozone for the month of August 2012. It showed that the labour market continues to deteriorate and youth unemployment in some countries is heading into unprecedented territory. I have examined various speeches that representatives of the Troika have made when discussing fiscal austerity over the last few years and I have failed to find any specific reference to the the labour market collapse. There is lots of talk about fiscal consolidation and the need to maintain confidence with the “investors” (the bond market recipients of corporate welfare). But very little focus on the real human tragedy – which is epitomised by the rising joblessness. There is a huge disconnect operating between the policy makers and the people. I saw something of the way the European policy makers live and interact during my recent trip to Brussels. They should get out more and travel to Greece and see what is happening on the street where there are now more than 55 per cent of the 15-24 year olds unemployed – and without very many future prospects.

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The moronic activity of the rating agencies

It is a public holiday in NSW today – Labour Day – to celebrate the 8-hour day although for many workers that victory is now a thing of the past as labour market deregulation bites harder on the hard-won conditions that workers enjoyed during the full employment period. I am also ailing (with “the bug” that is “going around”) and I have two major pieces of work to finish (one completed this morning). There is also a birthday in my immediate family and so I am partying tonight (in relative terms). So all that means a shortish blog. I was giving a talk in Perth last week about the absurdity of state (non-currency issuing) governments running down public infrastructure because they refuse to borrow all in the name of preserving their AAA credit rating from the corrupt ratings agencies. The obvious question seems to evade people – why have AAA credit rating if you refuse to borrow. The ridiculousness of the ratings game raised its head again last week when one of the ratings agencies threatened to downgrade the British Government’s rating. It is clear that the agency is probably needing a revenue boost so tried to attract some publicity. If I was the Chancellor I would have told them to buzz off and to stress how irrelevant they really are. But the reaction was typical – angst and worry. For what? Nothing. The only thing it demonstrated was how mislead the public are and how mindless this “dark age” that we are living through at present really is.

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Saturday Quiz – September 29, 2012 – answers and discussion

Here are the answers with discussion for yesterday’s quiz. The information provided should help you understand the reasoning behind the answers. 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.

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Scotland should vote yes in 2014 but only if …

I am in Perth today speaking at a public service employees union congress. The talk is based on a major report we have just finished tracking the implications of public spending cutbacks in Australia on the volume and quality of public service delivery. We did several case studies – one of which was child protection – and the cutbacks will lead to increased child abuse in Australia without doubt. The story is pretty grim and I will write about it once the Report is made public by the commissioning party. But with travel (Perth is a long flight from anywhere and I have to get back to Newcastle tonight – 6 hours) and commitments I haven’t much time to wax lyrical on my blog. But I have been meaning to write about the upcoming Scottish referendum on independence from Britain and it fits a nice theme with yesterday’s blog – The demise of social democratic parties – they are all neo-liberals now – where I argued that good intentions come to naught if the economic policy paradigm used is erroneous. I would recommend the Scots vote yes at the 2014 referendum. But only if they introduce their own unpegged, floating currency and avoid any talk of joining the Eurozone. Further, the yes vote should be conditional on the government committing itself to achieving full employment on the back of their newly created currency sovereignty. Then the yes vote will improve welfare for the Scottish people. If they continue to use the British pound – then nothing will be gained.

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The Celtic poster child demonstrates the failure of austerity

The IMF boss claimed yesterday that her organisation believed that austerity and growth “can be reconciled and should not be mutually exclusive” (see analysis in blog). She lied just like the IMF has been lying regularly since the crisis began. She also claimed that the IMF forecasts have been trending down. The fact is that they keep revising them down because they are continually wrong. They want to dress their austerity bullying up in a favourable light by claiming growth will be higher. The reality is always different and growth, quite predictably, comes in lower. Their poster child – Ireland – was the first nation to succumb to the austerity narrative. The latest national accounts from Ireland released last week continue to provide a bleak outlook on what is happening there. Austerity is killing the economy – slowly but surely. Joseph Stiglitz said that fiscal austerity is tantamount to economic suicide. Ireland is leading the way. Despite massive austerity, Ireland is still going backwards and people are becoming poorer. Claims that Ireland’s austerity approach provides a model for other nations to follow because it produces growth cannot be sustained from the data. Further, as I will show in another blog – the poor economic performance is making it impossible for Ireland to achieve the ridiculous fiscal benchmarks that the Troika have imposed on it. It is folly all round. Pity the workers and the common folk.

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Fear of inflation scales new heights

The scaremongering about inflation and higher interest rates continues to flood out of the mainstream economics community. The conversation has become a little more sophisticated since the claims in the early stages of the crisis that the fiscal and monetary policy innovations introduced by governments would be inflationary. Now we are hearing stories about longer lags – channelling Milton Friedman who also fell foul of the evidence more often than not. So inflation is just around the corner rather than coming tomorrow. As in the past, the mainstream macroeconomics has a serious credibility problem. It is no wonder it keeps making erroneous predictions. It begins with an erroneous construction of reality. It is all downhill for them after that.

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Australia – a deteriorating labour market with all the indicators in decline

Today’s release by the Australian Bureau of Statistics (ABS) of the Labour Force data for August 2012 reveals a deteriorating labour market with all the indicators of merit in decline. Total employment fell, labour force participation fell and hours worked fell. Unemployment fell but only because the decline in the labour force outstripped the decline in employment – which means that the decline in unemployment was due to an increase in hidden unemployment. A decline in unemployment driven by a rise in hidden unemployment is not virtuous. Certainly this data is not consistent with any notions that the Australian labour market is booming or close to full employment. The most continuing feature that should warrant immediate policy concern is the appalling state of the youth labour market. My assessment of today’s results – worrying with further weakness to come. The government has no case to make for its pursuit of a budget surplus in the next fiscal year.

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Climate change – Australian government further entrenches the market myth

I have very little time again today so I will have to type quickly. Yesterday, the Australian government announced it has scrapped its proposed $15 per tonne carbon price floor as part of the new Carbon Tax that it brought into law in July 2012. With the introduction of the carbon price in July 2012, the biggest polluters pay $A23 per tonne for the carbon they emit. The Government plans to allow this system (the Carbon Tax) to evolve into an emissions trading scheme (ETS) on July 1, 2015 so that instead of setting the price for carbon the government will set the quotas and let the market set the price. Yesterday, the Government made one significant change to their proposed 2015 move to an ETS. It announced that from July 1, 2015, Australia will partially link its carbon pricing system to the European Union Emissions Trading System (EU ETS). This move only entrenches the mistakes that are evident in the first proposal. Quite apart from the problems of a pure ETS, the schemes that are proposed are so politically compromised that their “market credentials” vanish. The problem of carbon emissions should be approached via rules-based regulation rather than a half-cocked neo-liberal market-based solution which will reward big polluters, lawyers and hedge funds.

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Accounting smokescreens excite the conservatives

I haven’t much time today as I have been travelling most of the day. But the news is that Japan – soon after its government announced it would increase taxes to “rein in the deficit” is now facing a dramatic slowdown as a result of the on-going crisis in Europe and the slowdown in the Chinese economy. Perfect time to increase taxes really! But today we revisit (for the nth time) the way in which conservatives get excited by the accounting smokescreens that have been overlaid onto the monetary system to obscure certain fundamental capacities of government. The excitement or should I say – hysteria – then leads to pressure being put on policy makers by the billionaires that control the media – and, invariably – leads to poor policy choices being made. So for the nth time – the US social security system cannot go broke. The “financial gaps” that are wheeled out to prove that it will become insolvent are just accounting structures that can be altered by Congress anytime they want. If the accounting systems led to the system being in jeopardy then Congress would quickly assert their intrinsic capacities.

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5.4 into 1 does not equal 5.4

I am doing a bit of cleaning up old filing boxes each day now as the date I will be moving offices approaches. It is actually an interesting process – looking through boxes and articles that have been stored away for some years now. Today, I came across an article that was in the US Magazine Challenge (March-April, 1982) entitled The Guilds of Academe and written by one Jack Barbash, who was an academic at the University of Wisconsin. It discussed the way in which the economics profession protects its belief system from criticism and avoids, as far as possible, addressing real world problems. The mainstream will talk as if they are addressing a real world problem – such as entrenched unemployment – but when you realise the models they are dabbling with you know that they are really talking about nothing real at all. This leads onto a forthcoming book by some British conservative MPs who have the temerity to argue that the British unemployment problem is due to the workers being to idle and diverted by pop music to bother working. You know instantly that the underlying model has come from a mainstream economist who hasn’t recently looked out the window or read any data.

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Some of the 20 are now rats deserting the sinking ship

Here is a list of my professional colleagues who have learned nothing in the last 5 years. That is no surprise because they didn’t learn very much before that about how the monetary system works anyway. If their ideas were to be implemented I would guess that very few of them would publicly recant and admit they were wrong. They would obfuscate, deny, misconstrue but they wouldn’t admit they were wrong. At least prospective students have a good list of departments to avoid should they wish to study economics in the US. Keep it handy for future reference. Back in February 2010, there was a letter by 20 economists supporting the Tory proposals for fiscal austerity published in the Sunday Times. It was an unashamed attempt to influence the result of the May 2010 election. A week later 60 economists wrote that the 20 were nuts. It seems that some of the 20 rats have now deserted the Tory ship but won’t really tell us why.

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Australian labour market – just creeping along

Today’s release by the Australian Bureau of Statistics (ABS) of the Labour Force data for July 2012 reveals a fairly flat labour market with modest gains in employment and hours worked which were sufficient to outstrip the underlying labour force growth and so unemployment fell by 2,500. That decline in unemployment was aided by a declining participation rate. In other words, some of the decline in unemployment was due to a modest increase in hidden unemployment. Certainly this data is not consistent with any notions that the Australian labour market is booming or close to full employment. The most continuing feature that should warrant immediate policy concern is the appalling state of the youth labour market. My assessment of today’s results – positive outcome but very weak (mostly flat) trend. The economy is just creeping along when it comes to creating jobs.

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Europe is really having a lost decade

I am sick of reading about Europe’s lost decade. For example, in the UK Guardian article (July 27, 2012) – Spanish recession to last until 2014, IMF warns – the economics editor Larry Elliot says that the IMF is “Predicting a lost decade of growth for the eurozone’s fourth biggest economy”. The lost decade terminology emerged to describe the experience of Japan in the 1990s after its spectacularly damaging property crash. But I think it is offensive to use the term in relation to the Eurozone crisis. We are not seeing a lost decade emerge Japanese-style. Rather, we are witnessing a self-imposed humanitarian disaster driven by the ideological arrogance of the Euro elites (aided and abetted by the OECD and IMF). The experience of Japan in the 1990s was nothing compared to what these elites are doing in the name of neo-liberalism. Journalists should stop making the comparison and, instead, call the current crisis in Europe for what it is.

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British solution to unemployment – make them work for free

There was a story in the UK Guardian yesterday (July 29. 2012) – Million jobless may face six months’ unpaid work or have benefits stopped – that described how the failed neo-liberal British government is following the path that the conservatives followed in Australia in attempting to “manage” the unemployment that their flawed policy regime created. The Australian approach has failed dramatically and imposed considerable hardship on the most disadvantaged citizens in our midst. The same approach is unfolding in Britain and it to is already looming as a failure.

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