RBA monetary policy decision defies logic

Well, as I write this late in the Kyoto afternoon, Donald Trump has just made a victory speech after an incredible day of election outcomes unfolding. As I wrote last week, the only moral and reasonable position for a progressive to take in this election would be to vote for Jill Stein and send a strong message to the two major candidates that they were totally unelectable. I reject the claim that that strategy would just deliver a victory for Trump. However, the Democrats can’t really deflect blame like that for their horrendous policies in relation to the Israel issue and more. So the US faced a Hobson’s choice and I hope progressive parties elsewhere heed the message of Harris’s loss. But today I want to write a bit about yesterday’s (November 5, 2024) decision by the Reserve Bank of Australia (RBA) to hold their cash rate target interest rate (the policy rate) constant. With inflation falling quickly, there is no logic to that decision. The RBA keep claiming that there is excess demand in the economy but that is an unsupportable claim given the evidence.

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Government job creation programs deliver significant (net) long-term benefits

On April 5, 1933, US President Roosevelt made an executive decision to create the – Civilian Conservation Corps (CCC) – which was a component of the suite of government programs referred to as the – New Deal – that defined the Federal government’s solution to the mass unemployment that arose during the early years of the – Great Depression. These programs have been heavily criticised by the free market set as being unnecessary, wasteful and ineffective. Critics assert that no long-term benefits are forthcoming from such programs. However, those assertions are never backed by valid empirical evidence. A recent study by US academics has provided the first solid piece of evidence that the CCC delivered massive long-term benefits to the individuals who participated in it. And these benefits considerably outweigh the dollars outlaid by the government. I discuss that research today. The results also point to the effectiveness of a Job Guarantee program.

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State of Climate 2024 Report signals worse is coming – like very nearly now

This is my Wednesday blog post on a Thursday, given that I spent yesterday dealing with Australia’s latest CPI data release. So today I consider a range of topics in less detail, which is my usual Wednesday practice. Today, I comment on the latest ‘State of Climate 2024’ Report just released in Australia. I also consider the view that underneath all the regional wars at present where war lords fight to gain control of failed states is a voracious surplus extraction system we just happen to call Capitalism. And then some other items that have interested me this week. And a music segment.

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Australia – inflation rate falling fast, the RBA has overcooked it again

Today (October 30, 2024), the Australian Bureau of Statistics (ABS) released the latest – Consumer Price Index, Australia – for the September-quarter 2024. The data showed that the annual inflation rate rose by just 0.2 points in the quarter and has fallen to 2.9 per cent on an annual basis. The ABS also released the – Monthly Consumer Price Index Indicator – which considers movements in September alone and the annual September-to-September inflation rate was recorded as 2.1 per cent (down from 2.7 per cent in August), which means that the inflation rate is dropping fast and will soon be well below the lower bound of the RBA’s targetting range – which means the RBA has overcooked it again! The Monthly Indicator is less accurate though than the quarterly figure in that it contains less overall price information (less goods and services are surveyed). The major expectations series all show expected inflation to be in decline and well within the RBA’s target zone. Using the RBA’s own logic, interest rates should now be cut.

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Classic deception from the Australian Treasurer

There is a pattern. Start with an aim which usually involves advancing the interests of some powerful lobby group. It is known that if the citizens realise that there is special pleading going on they will not be supportive. The solution – create some metaphorical language that will help convince us that the aim is worthwhile and legitimate. Then add a dose of ‘technical’ sounding language and some ‘scientific’ sounding concepts (for example, NAIRU), which ensures that only the metaphors, which have common parlance, resonate and the ‘detail’ is not challenged. Especially exploit the fact that most people are too embarrassed to question so-called ‘experts’ for fear of being humiliated for displaying ‘ignorance’. That is how fictional macroeconomics becomes mainstream and that is how we all become passive agents in spreading the fiction. The Australian Treasurer was at it again over the weekend after he had been rubbing shoulders with other Finance Ministers, Chancellors, and Treasurers in Washington D.C. at the annual IMF/World Bank meetings, which are akin to those evangelistic religious festivals where everyone is geedup – with a sense of self-importance and sanctimonious zeal.

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These claimed essential fiscal rules in the UK seems to be disposable at the whim of the polity

Regular readers will know I have been a long-time critic of the fiscal rules that successive British governments have invoked as part of a pretence that they were being somehow responsible fiscal managers. The problem was that in trying to keep within these artificial thresholds, governments would do the exact opposite to what a responsible fiscal manager would do, which is preserve the integrity of public infrastructure, ensure public services reflected need, and steer the nation in a direction where it was able to meet the challenges that beset it. This period of ‘fiscal rule’ domination has been defined by relentless fiscal austerity and a degradation of living standards as successive governments pursued the neoliberal agendas. Now, it seems the British Labour government is finally realising that it cannot achieve its aims while retaining the fiscal rules they so tenaciously claimed were essential. Back when John McDonnell was the shadow chancellor I told him the rules were unachievable given his policy ambitions. His support crew – academics and apparatchiks vicariously slandered me for running that line. They were wrong and the current decision by the Chancellor to alter the rules proves that. But it also proves how ridiculous these rules are anyway.

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The EU is in terminal decline

Some Wednesday snippets. First, I juxtapose the political machinations that the EU President is engaged in to consolidate and expand her power within the European Commission with the reality that Member State governments are becoming dysfunction because social instability and political extremism are rife. Then I reflect on my experience as Chancellor of Britain – a great success I should say, although I was told I had broken all the rules. It tells one how stupid the rules are. Then, finally, some music to enjoy.

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