Australia’s response to climate change gets worse …

Just when you thought that the Australian Government’s response to climate change – the proposed emissions trading scheme (ETS) which promises to generously exempt or compensate the heavy polluters – was bad enough, it was announced today that it will also now indefinitely exclude agriculture from the ETS. The decision is purely political as was the earlier decision to exempt agriculture until 2015. All the Government is doing is appeasing the Opposition so that it can get the legislation through the Senate. The Opposition recently revealed that the majority of their parliamentarians deny there is a climate change problem. Why would you want to trade concessions with them? But the fundamental problem lies in the fact that the neo-liberal market-based paradigm is a totally unsuitable framework for dealing with climate change.

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Employment falls – better put interest rates up again

Here is today’s mystery question: when is it imperative that interest rates should rise? Answer according to most business economists in Australia: when official unemployment creeps up, underemployment rises; participation remains subdued, 88 per cent of the modest employment rise measured in persons is part-time, total employment in hours falls, and you have 26.4 per cent of your 15-24 year olds idle. The real answer: none of these commentators have the slightest sense of national priorities in terms of advancing public purpose and providing an adequate future for our youth. Talk about intergenerational burdens. All the focus is on the so-called debt overhang we are leaving our children. The biggest overhang we are leaving is our support for a government that refuses to provide enough jobs for them.

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Its all a matter of construction

A story in today’s media reminded me that the way we construct a problem significantly affects the way we seek to solve it. The story – Change or lose drought assistance, farmers told (and the related Editorial) – appeared in The Australian newspaper. They indicated that on-going drought assistance to farmers would have be accompanied by significant changes in farming practices. This is a major shift in our policy thinking but still begs the question of why we have such inconsistent ways of thinking about policy problems and their solutions.

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Progressive movements bound to stall

I was going to write about manufacturing today in the light the Campaign for America’s Future staging of Building the New Economy conference in Washington DC today. I started investigating what it was about. It raises a lot of issues what a progressive position should constitute. However, I got way laid by other things which were also interesting and will leave my blog about the demise of manufacturing for another day. But what this conference demonstrates to me is that we have a long way to go before we get a united progressive understanding of the way the modern monetary system works. And until we have that understanding, no real progress will be made reforming the economy. We will always be trading off tax cuts for spending increases and all that sort of mainstream mumbleconomics and feeling defensive any time a deficit arises. And then today, I started reading the latest report from the IMF …

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Another cost of the budget surpluses

The previous conservative Australian government ran budget surpluses for 10 out 11 years between 1997 and 2007 and lauded them as the exemplar of fiscal prudence. Of-course, from a modern monetary theory (MMT) perspective it was clear that the fiscal drag embodied in this strategy undermined the capacity of the domestic private sector to save (given the current account deficits) and forced growth to be dependent on the increased indebtedness of the household sector. It was an unsustainable strategy. It also coincided with the government destroying significant components of private wealth as they paid out government bonds and slowed the issue of new debt to a trickle. The previous treasurer talked relentlessly about getting the public debt monkey of our backs. Well apart from it never being on our backs in the first place, we are now seeing some hidden manifestations of this squeeze on private wealth.

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Criminal negligence … (n)OTT

Today’s blog is short. I returned home today to a mountain of things to do and missing luggage. In this day of computer networks and claimed security I fail to see how airlines cannot match every person who has a seat with a bag in the hold. They claim they take bags off when there is a no show so why do they lose bags? Anyway, all my papers from last week’s meetings are in the bag and my favourite coat so I am hoping it turns up. On the blog front, several readers have written to me in the last few days asking me about the rising risk of sovereign defaults that financial markets are apparently “pricing in”. In particular, so-called influential traders are now claiming that the US and Japan are approaching situations reminiscent of “countries on the verge of a sovereign debt default”. Sounds dire. We better investigate – but only for a short bit because I am tired from my journeys.

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Being careful not to swear in Dubai

At present I am in transit in Dubai waiting to fly home to Sydney after a week or more away in Central Asia. I am definitely being careful to avoid any public swearing, which means I am not reading any economics or business reports in public spaces. With the worry that I might swear out aloud and get stuck here, I judiciously completed all my reading in the privacy (assumed) of my hotel room at the airport. Lucky. Imagine what would have happened if I had been reading this article – David Cameron’s tonic to snap us out of recession – out on the concourse?

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Current accounts and currencies

Its Sunday morning in Kazakhstan and cold. My meetings in Almaty are over and I am heading home today via Dubai (backwards to go forwards). It has been a long week and it hasn’t been helped by the fact I have come down with a heavy cold. But overall a lot was accomplished, not the least being the startng dialogues with the Central Asian government officials. I have also been thinking about the book on economic development that we have started working on (with a colleague at the Asian Development Bank). In this context, today’s blog is about development, trade and modern monetary theory (MMT). Many readers have asked me to comment on recent articles in the Australian press about our current account situation. So-called experts (not) are claiming the budget balance has to be cut back quickly to avoid an external crisis. The reality is that they fail to understand what the current account balance is about.

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A plague is ahead …

Today, we step down from the heights of the modern money-debt deflation debate and consider macroeconomic developments which demonstrate the deficit-debt hysteria is ramping up here. I may come back to the debate in later blogs but I think the issues have been well considered. While the debate has uncovered some useful issues that I often get asked about (particularly in relation to the accounting and definitional matters) it also demonstrated that very simple and unthreatening concepts get conflated into horror stories if we let the dominant neo-liberal ideology control the way we think and the language we use. Also, I know I promised a G-20-IMF blog and that will emerge but some things emerged today that need commentary.

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Why are we so mean to the unemployed?

With unemployment rising in Australia as the downturn continues and no sign that strong employment growth is about to absorb the new entrants plus those currently without jobs, I was reflecting today on just how mean we are to those who are bearing the brunt of the downturn. In part, this thinking was also conditioned by my field trip out to North-West NSW on Monday and Tuesday (I will report separately). Unemployment out there is rife and the jobless have little hope. So I started to look into our unemployment benefit regime today. In the May 2009 Federal budget, while other pensioners enjoyed a generous increase in payments, the unemployed missed out on any increase. So why does so-called Labor Government have neither the creativity to generate jobs nor the generosity to help those that suffer the consequences of their failed macroeconomic policies?

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Rising insolvencies – is unemployment a cause?

Today I have been examining bankruptcy data. The popular notion is that bankruptcy rises during a recession. Many are arguing that this recession will drive higher rates than ever because of the extent of household debt. These are all conjectures that form part of the popular folklore but rarely formally investigated. So this blog summarises some introductory work I have been doing to investigate this notion more fully. It will at least settle some issues.

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The rising future burden on our kids

The public debate is constantly distorted by claims that cannot be substantiated. One such claim is that the current period of budget deficits is building a stock of future claims on the well-being of the future generation – our kids. Accordingly, the neo-liberal deficit terrorists claim that the best thing we can do for the future generation is to avoid running deficits. My view is that we have been imposing a huge future burden on our children but this would be larger if we tried to run surpluses now. In fact, the years of surpluses exacted a huge toll on our children’s prospects that they will have to endure for years to come.

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SBS Insight program tonight – The Battlers

This afternoon I am off to Brisbane to appear in tonight’s SBS TV Insight Program, which is focusing on unemployment. The program airs live from 19:30 tonight on SBS One. The on-site location for tonight’s show is Logan City, which is south of Brisbane on the way to the Gold Coast. In the work I did with Scott Baum at Griffith University earlier this year developing an Employment Vulnerability index, we identified the Logan City area as having a concentration suburbs which we considered to be at high risk of job loss. So SBS decided to conduct a ground level exploration of the sorts of considerations that expose a region to job loss and to develop narratives that inform us of how people in battling areas cope with economic downturn. While the topic is depressing it is excellent that one of our national TV broadcasters is actually elevating it to national importance.

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Would the Job Guarantee be coercive?

I was a speaker at the Sydney Greens Forum yesterday and today I am on a panel with Bob Brown at the Greens National Conference in Adelaide. Regular readers will know that in the past months we have been engaging with the Greens after I wrote – Neo-liberals invade the Greens. The initial reaction towards me was hostility but that soon gave way to a more reasoned engagement which I have found to be extremely beneficial. That is why I accepted invitations to speak at their functions. While there is a long way to go in fully articulating a modern monetary paradigm within the context of the generally sophisticated social and environment policy that The Greens have already developed I think the possibilities are now there. One issue that does emerge in my discussions is that of whether a person should have to work under a Job Guarantee approach to full employment. That is, should the Job Guarantee be compulsory?

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The world is going insane I think

The world seems to be going more insane every time I check. I have this naive belief that we bother to elect governments because we understand they can do things (as a collective) that we cannot do very easily (as individuals). I also assume we all think our elected governments will broadly use their fiscal powers to pursue an agenda that will advance public purpose – that is, seek ways to improve our standard of living and ensure all citizens participate in the bounty that the economic system generates (including sharing the losses when it doesn’t so generate). Of-course, I know that our polities basically govern to keep themselves in power. But there is the occasional election. Anyway, recent events suggest that governments seem to be able to construct popularity by taking actions that do us harm.

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Why don’t mainstream economists get modern money if it is right?

Today, I am in Sydney giving a talk at the ACTU Jobs Summit and pretty short of time. I was also motivated by the Temporary Leader of the Opposition who announced on his Twitter site yesterday that his dog, Mellie had just updated her Blog. Yes Malcolm’s dogs blog keeps us up to date with all their goings on including watching the Tour de France. So if he can do it so can I except I don’t like pets. So I thought I would introduce a Guest Blogger spot so that whenever someone I know, who doesn’t want to create their own infrastructure has something interesting to say, they will be able to say it. So today’s guest blogger is Victor Quirk. This is what he has to say. I’ll be back tomorrow.

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D for debt bomb; D for drivel …

I had to double-check over the weekend whether I had actually read an article in the Fairfax press – Alarming debt bomb is ticking – given that my flu-ridden state was playing havoc with the clarity of my eyesight. Upon checking today, I concluded that I had read it. It is one of those articles that uninformed readers will consider erudite given the technical language it uses but which in fact is so misinformed at a theoretical level that it is has to be considered pure propaganda. It is sad that this sort of techno-mumbo-jumbo nonsense gets any space in our leading daily newspapers. I would rather more cartoons or brain teasers if they are struggling to fill their pages. Even an advertisement about the latest skin cream that not only eliminates wrinkles but also increases the reliability of the left-hander at Nobby’s would be better (Nobby’s = surf break)!

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The labour market is turning … down!

The monthly wait for the Labour Force data is over and we now know that how all the confusing messages coming from various indicators in the last few weeks are playing out in the labour market. Today’s data suggests that the labour market is starting to now turn for the worse. While today’s 5.8 per cent headline unemployment rate was less than the prediction by most economists (5.9 per cent), employment growth has fallen 3 out of the last 4 months and the in last month this descent quickened. The broader rate of labour underutilisation (sum of unemployment plus underemployment) is now worse at a comparable point in the cycle than it was in 1991 or 1982. That is a sign that things are sick and the employment growth slowdown is a sign that the situation will become sicker.

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Compact with Retrenched Workers – not a job in sight!

Current problem: jet lag. I keep saying to myself – 1 day for every time-zone. I have a week to go! Today I have been in Brisbane discussing the Functional Economic Regions geography which I have created to improve spatial analysis in Australia. The new geography is now being used by other social scientists because it represents an improvement on the standard geographical boundaries that ABS uses to disseminate regional data. I might write a blog about this one day although it is very technical and rather dry. But life as a researcher is “10 per cent inspiration and 90 per cent perspiration” although for me the 10 might be a little lower! After all I am a stupid modern monetary theorist! But today’s blog is about the Compact with Retrenched Workers – the latest policy joke emanating from Canberra.

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California IOUs are not currency … but they could be!

I seem to be stuck in the US at the moment – blog-wise. I can assure you I escaped their shores at the weekend and am now freezing in Newcastle, NSW. But I still have reading left over from hanging around US book shops last week. One story that is very interesting at the moment is the plan by the Californian State Government to begin issuing IOUs (reserved warrants) because it has “run out of cash”. As far as I can work out the IOUs will not become a second currency (alongside the USD) but one simple extra announcement by the State would be enough to allow California to be sovereign in their IOUs. What do you suppose that extra complication might be?

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