There was an article in the Melbourne Age this morning (August 12, 2014) – As jobless numbers climb, RBA is perilously close to a rare mistake – that is running a theme that is increasingly being played out by the financial commentators. Basically, that monetary policy saved the world from the GFC but that central bankers may lose their resolve and hike interest rates too quickly. While I certainly do not advocate interest rates going up anywhere (that I am familiar with), what seems to be forgotten is that monetary policy is relatively useless at encouraging growth. It was fiscal policy that saved the world.

My upcoming book about Europe is tentatively called ‘European Groupthink: denial on a grand scale’. I have covered the concept of Groupthink before but I have been thinking about this in relation to the economics curriculum, given our textbook is entering its final stages of completion. When I was at the iNET conference in Toronto in early April, there was much to-do about the so-called ‘exciting’ new developments in economics curricula being sponsored by iNET at their Oxford University centre (CORE). Forgive me for being the ‘wet blanket’ but the more I spoke to people at the conference the more I realised that the neo-liberals were reinventing themselves as ‘progressive’ or ‘heterodox’ and hi-jacking the reform process. I mentioned this to one of the iNET Board members who I shared a flight with back to San Francisco. He seemed taken aback. My expectation is that very little of substance will change in this new approach to economics. It will dispense with the most evil aspects of the current dominant framework but will remain sufficiently engaged with it that we will not see a truly progressive teaching approach emerge that can deal with evidence and real world facts. People are scared to break out of the ‘group’.

I got on a plane on Monday and flew many hours. I was in search of the public debt overhang. I read and read many articles during my journey to the other side of the planet (where these overhangs are apparently sighted on a daily basis). But in the cold (very) early (very) hours of today, I concluded my mission was a failure. The rumours of a public debt overhang, whatever that might be, remain just that – the mumbling gossip that passes for truth once the public start spreading it. In the world of facts, such an overhang eludes specification. In January 2013, at the annual American Economic Association meeting (January 4-6, 2013) in San Diego, there was a panel session with a number of allegedly “leading” economists. Their deliberations were apparently public endorsement of the claim that government debt had reached a dangerous overhang and would undermine growth prospects for the future. The policy options were limited and all involved harsh fiscal austerity – or in IMF speak “growth friendly fiscal consolidation” (which is my nomination for the joke phrase of 2013). The problem was that a few months later the IMF released a major update (October WEO) where they appeared to deny the presence of a “tipping point” – some dangerous threshold that public debt should not exceed (R&R-style). So here is how it all unfolded …

In the opening sequence of the HBO series, Newsroom, the anchor is participating in a public forum at an East coast US university (in Boston). During the Q&A, he is asked by a student (“a sorority girl”) in the audience, who is suitably bright-eyed and full of American blather, “Is America the greatest country in the world?” He initially blusters but the convener of the forum pushes him for a “human moment” and what follows is 3 classic minutes of TV, starting with “its not the greatest country in the World, Professor, that’s my answer” and concluding with “So when you ask what makes us the greatest country in the World, I don’t know what the fuck you are talking about. Yosemite?”. He then said among other things that “We used to be …”, “we stood up for what was right”, “we waged wars on poverty, not poor people”, “we aspired to intelligence, we didn’t belittle it” and more. The latest shenanigans in the US Congress where the GOP representatives have become a mindless rabble is certainly testimony to the sort of things the mythical Newsroom anchor was talking about in the series. The Sydney Morning Herald article (October 16, 2013) – US shutdown stalemate enters realm of the absurd – reports on how the GOP reps do not “agree either on tactics or strategy” and Boehner announced to the press that there had been “no decisions about what exactly we will do”. This is one day before the lunatic right-fringe of their party is intent on causing mayhem. My prediction – some ridiculous deal will be done and the US government will not default. We will see. But today I am providing a little glimpse into examination processes by using what might have been a first-year answer to an examination question to highlight some important points. I hope you enjoy the little window into life at a university.