Another day – and some more evidence against fiscal austerity

Eurostat released the second-quarter 2012 National Accounts data for the Europe yesterday and, predictably, the recession is deepening in many countries. The Southern European nations saw their performance worsen and data shows that Spain’s house prices fell by 11.2 per cent last month (Source) and have fallen by 31 per cent since the crisis began in 2008. The deflationary impact of that alone would push the economy into recession. The Euro elites claim they will do everything to resolve the situation. And anything they do undertake – just makes it worse. Meanwhile, across the Atlantic, the Romney camp has put out a very suspect economic paper – authored by some notable suspects in the propaganda campaign the neo-liberals are sponsoring to prevent governments from acting responsibly. The economic paper has been categorically demolished – even in the mainstream media. So it is another day – some more evidence against fiscal austerity – and still the criminals maintain their grip on the throne.

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Saturday Quiz – August 4, 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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Saturday quiz – July 28, 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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Another macroeconomist who is blind

Everyday the major financial newspapers and magazines provide Op Ed space to so-called leading economists. For the majority of the public, it is these Op Ed articles that provide their interaction with my profession. It is a pity. The majority of the reasoning presented by these characters, most who occupied senior positions in US academic departments, is spurious to say the least. The public is thus being poorly educated (to put it mildly) on a daily basis and this represents a major problem for our democracies. Voting in elections is one thing. But when citizens are voting based on faulty understandings that they have derived from these economists, then what is the value of a free vote? Today I consider the views of leading Princeton economist Alan Blinder – who is another macroeconomist who is blind to the way the economy works.

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The CON merchants who buttress the neo-liberal ideology

Two things led to this blog today. First, the IMF has once again been lecturing the world on economic policy. In the Global Financial Stability Report and the World Economic Outlook Update – both released yesterday (July 16, 2012) the IMF has downgraded their growth forecasts again yet is hanging on to the myth that austerity is the path to resolution and that the deficit reductions underway are appropriately growth supporting. Doesn’t anyone in the IMF understand logic? One cannot on the one hand admit that growth is falling below previous forecasts yet on the other hand claim that policy which caused growth to slump is growth supporting. Second, Anna Schwartz died in New York on June 21, 2012. The two events can be linked.

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Saturday quiz – July 14, 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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If only they were operating in the tradition of Minsky!

In the last week, it was alleged that economists such as the IMFs Olivier Blanchard were alleged to be working in the tradition of Hyman Minsky, which by association inferred that they were on top of the crisis – foresaw it, understand why it occurred and offer the best ways out of the mess. Please read my earlier blog – Revisionism is rife and ignorance is being elevated to higher levels – for an introduction to this issue. I argued that this attempted association is plainly false and Blanchard’s monetary economics is more in the Monetarist tradition, which is the anathema to the endogenous money framework that Hyman Minsky worked within. This is no small issue. The economists mentioned are often in leading positions (media, universities, policy) and influence the way the public (and students) think about the policy choices available. By promoting erroneous understandings of the way the monetary system operates, such economists become part of the problem not the solution, no matter if they are currently opposing fiscal austerity. If only they were operating in the tradition of Minsky!

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Revisionism is rife and ignorance is being elevated to higher levels

Sometimes I read things and consider either I live in a parallel universe or the writers do. I always conclude the latter. There is an increasing number of articles and commentaries coming out which aim to re-write history in favour of the writer’s reputation or that of his/her mates. Revisionism, which includes the practice of personal reincarnation is rife at present. Everybody seemed to predict the crisis. Even those that clearly in their own writing didn’t have a clue that the trouble was coming predicted it. As part of this process, key organisations that should be learning from the crisis such as the BIS are demonstrating that they are in an educational void. They have become just another propaganda machine. And so the crisis continues as ignorance is elevated to higher levels.

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Saturday quiz – June 30, 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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The on-going crisis has nothing to do with a supposed liquidity trap

I was going to write about the so-called fiscal cliff today and would have shown that the only thing that might fall of the said cliff would be real GDP growth should the US Congress actually not extend the tax cuts and impose the spending cuts. The US economy would follow the lead from the British economy and double-dip in 2013 as sure as day follows night (or is it the other way round). The most elementary exposition of what we might call – ECO101 Macroeconomics – would tell us that. One person’s spending is another person’s income and so on. I note that some economists are arguing that ECO101 Macroeconomics is alive and well because it has had a an impeccable record in the current crisis. In my recent blogs – Fiscal austerity damages real growth and prolongs the financial downturn and Neo-liberalism has failed but we still don’t get it – I have argued that the mainstream of my profession has failed – both in anticipating the emerging crisis and providing credible solutions to remedy it. So have I overstated that claim, given that ECO101 Macroeconomics is the go-to approach at present? The problem is that while there are some leading economists who are arguing against harsh fiscal austerity at present at the basis of their reasoning is a thoroughly mainstream approach which has helped create the problem. I don’t think their version of ECO101 Macroeconomics provides the answers. There is some common ground with Modern Monetary Theory (MMT) but an even deeper incongruence.

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Benchmarking macroeconomic theory against reality

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. Anyway, this is what I wrote today which was highly constrained by meetings and travel for much of the day.

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Saturday quiz – June 16, 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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UE is needed rather than QE

And what is UE you might ask? Unemployment easing! As the major economies start to slow again (as fiscal stimulus is withdrawn prematurely), the calls are coming thick and fast for more quantitative easing. The Bloomberg editorial (June 8, 2012) – The Key to a Stronger Recovery: A Bolder Fed – was representative of this renewed call for the central banks to somehow stimulate aggregate demand to the tune of several percent of GDP in many nations. Like the latest bailout in Europe, the call for more QE is predictable. Neither initiative addresses the real problem with the relevant policy tool or change. What is needed is something much more direct. Why don’t we have a policy of unemployment easing (UE) where the treasury departments, supported by their respective central banks, immediately set about directly creating jobs and reducing the unemployment rates around the world. Putting cash (wages) into the hands of those that are most constrained (the unemployed) will do much more good for the economy than doing portfolio swaps with banks who will not lend to thin air! So we need UE not QE.

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Saturday quiz – June 9, 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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Saturday quiz – May 26, 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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Saturday quiz – May 19, 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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Saturday quiz – May 12, 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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Saturday quiz – May 5, 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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Saturday quiz – April 28, 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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When does the experiment end?

It is a public holiday in Australia today remembering our First-World War soldiers who died during the ill-fated invasion of the Gallipoli peninsular in Turkey. Anzac Day is part of the Australian legend about heroism and the ideals of mateship that are (dubiously) prominent in our culture. However, this part of our history (and legend) is now being scrutinised by historians and more documentary evidence emerges and it is clear that the conventional history of the campaign that Australia was fighting a heroic struggle in service of the British Empire is not supportable (for example, see this Op Ed for one of the alternative viewpoints that make the Gallipoli story rather mirky). I also have a lot of travel coming up later today and so my blog will be relatively short. I have been rounding up the latest data – surveys, national statistical office releases, bank statistics – from Europe and the UK, to see how the fiscal austerity experiment is actually going. The neo-liberal proponents of austerity all promised us that the private sector was ready and willing to fill any spending gap left by government net spending cuts (and then some) so that the austerity would actually increase growth. Any reasonable person disputed that promise pointing out that spending equals income and private spending was going no-where fast. The evidence is increasingly supporting the latter view. The question is – given the massive damage the austerity policies are having is – when does the experiment end?

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