Welcome to The Weekend Quiz. The quiz tests whether you have been paying attention or not to the blogs I post. See how you go with the following questions. Your results are only known to you and no records are retained.
Sunday (July 1, 2018) was a very sad day in Australia because it marked the second phase of the cuts to penalty rates for workers in the lowest paid sectors of the Economy. The Fair Work Commission (FWC), which is the quasi-judicial tribunal that sets wages in Australia including legally binding minimum wages and conditions, bowed to the relentless pressure from employers (and the conservative federal government) and decided to cut penalty rates for some of the lowest-paid workers in Australia. The cuts which will eventually savage take-home pay for these workers were phased in from July 1, 2017 with the final cuts coming in 2020. The phasing in process where saw Sunday wages will fall from 200 per cent to 150 per cent over that period was justified by the FWC because the cuts would be extremely damaging to the prosperity of the low-paid workers impacted. Anyway, we have just passed the first year of the cuts and this week marks the second phase. Given we received the latest employment by industry data in the last fortnight, we can undertake some detailed analysis to see whether there is any evidence to support the employers’ claims that the cuts would benefit jobs and hours of work in the impacted sectors (Retail Trade and Accommodation and Food Services). You will not be surprised to read that the opposite seems to be the case, although the generally poor results for the industries that are sensitive to the penalty rate cuts cannot be attributed directly to those cuts. But the evidence is very strong – the cuts to penalty rates have hurt low paid workers and driven then towards or over the poverty line with no positive effects being evident in terms of employment or working hour gains.
Its Wednesday, so a relatively short blog post today. We are just about finished the final responses to the editors from Macmillan on the manuscript for the next Modern Monetary Theory (MMT) textbook, which I am now reliably informed will be published in February 2019. Today, two short topics. First, the disgraceful and on-going propaganda from the UK Guardian about the “Brexit process”. Second, a report released today in Australia showing the damaging effects of a financial sector that is not properly regulated. And then some event announcements and then some music to restore our equanimity.
In examining the implications for an exit from a currency union, one of the issues that arises is the proportion of public debt that is issued under foreign law. This is a separate issue to the implications of foreign-currency denominated debt. Both issues are problematic and compromise a government’s capacity to remain solvent. I covered the former issue to some extent in my 2015 book – Eurozone Dystopia: Groupthink and Denial on a Grand Scale – when I was considering different strategies for exit. There has been some further research on the question of foreign law debt issuance by the ECB and its Working Paper No. 2162 – Foreign-law bonds: can they reduce sovereign borrowing costs? – published June 2018, has relevance. It is clear that a government reestablishing its sovereignty has the upper hand, especially if it has issued debt under its own legal system. Which is why the likes of the IMF and the European Commission has been keen to increasingly pressure governments to issue debt under foreign laws under the ruse that this is a show of faith to the private bond markets. Once again the increasing bias towards foreign-law debt is all about privileging private capital over the interests of citizens in national states. What is absolutely clear is that a sovereign government should never issue debt instruments under any legal system other than their own. What is even clearer – such a government has no need to issue any debt at all.
Last week, the Eurogroup met in Brussels and given all the Macron-Merkel buildup – see my blog post – The Meseberg Declaration – don’t hold your breath waiting (June 26, 2018) – the Europhiles were tweeting their heads off building themselves up into a ‘reform’ frenzy. If we were to believe half of it, then Germany was rolling over and about to agree to reforms that would put the Eurozone on a sound footing. Even progressive Europhile commentators held out hope of some big changes. Well not much happened did it. Like virtually nothing of any substance emerged from the meeting and matters were deferred (again) to December. Ho Hum! This is the European Union after all. At the same time, new voices encouraging an Italian exit appeared in the last week. Regular readers will know that in lieu of some unlikely turn of events in Europe where the elites about face and set in place effective reforms, I maintain that unilateral exit remains the superior option for an individual nation such as Greece or Italy. I am on the public record as arguing that given the size of the Italian economy in relation to the overall Eurozone economy, Italy should demonstrate leadership by finalising a negotiated exit with Brussels that minimises the damage for all parties. That would become the blueprint for other nations to regain their currency sovereignty and escape the Eurozone madness. Another voice joined that line in the last week.
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 blogs I post. See how you go with the following questions. Your results are only known to you and no records are retained.
On June 24, 2018, the Bank of International Settlements (BIS) released their – Annual Economic Report 2018 – which contains their latest analysis of the global economy including the risks they think the current growth process faces. It is full of myth and like previous statements from the BIS it only serves to perpetuate the policy mentalities that caused the global financial crisis. These multilateral organisations (including the BIS, IMF, World Bank, OECD etc) have become the harbingers of the neoliberal ideology. In doing so, they have breached their original charter. They should be dissolved and replaced with new institutions within a revised international framework. We sketched that framework in our current book – Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto Books, 2017).
It is Wednesday, so just a (relatively) short blog post today. I am using the time today to further scope out the material and logic for my next book with Thomas Fazi, which we hope to publish sometime in 2019. I will provide more details on that project soon but it is intended to be the followup to our current book – Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto Books, 2017). So, today, a bit of that sort of flavour. In 1977, the Young European Federalists, which has long campaigned for European integration, released its Manifesto, which coined the term “democratic deficit”. While they intended it to be a concept to advance their pan-European intentions, the idea resonates strongly in the current climate and can be used to support a return to grass roots democracy aimed at reclaiming the nation state from the neoliberals and the progressive pretenders who have become infested with neoliberal ideas. In the last week, we have seen two notable events. First, the entrenchment of the colonial status of Greece under the watchful eye and collaboration of so-called ‘socialists’. Second, the magnificent success in today’s New York Democratic Primary election by a truly progressive candidate. These events are diametrically opposed. The former tells you what is wrong with traditional progressive political parties. The latter tells us that we can do something about it.
France and Germany signed an agreement last week (June 19, 2018) – the so-called Meseberg Declaration – which saw Europhiles shouting out that Germany has finally bowed to pressure from Emmanuel Macron and agreed to reforms of the Eurozone. Commentators applauded the ‘momentum’ that the ‘Declaration’ introduced to the European integration debate, although they admitted the shifts were slower than a snail might achieve on a bad day. Soon after the ‘Declaration’ was released the revolt of the so-called Hanseatic League of nations broadened as three more Member States joined the rebellion. The 12 rebel states (see below) have told France and Germany in no uncertain terms that many of the key propositions in the Meseberg document – particularly to create a Eurozone budget capacity – will not be acceptable. The ridiculous part of this is that the Germans have only signalled European-level budget changes that would actually cut the current fiscal capacity. So not only are the Europhiles wrong on the importance and substance of the ‘Meseberg Declaration’, but the 12 rebel states have signalled that many elements of the minimal agreement that the French and German came to last week are unacceptable. This is the EU reform process we are talking about. Don’t hold your breath waiting for anything to happen.