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.
Yesterday’s fiscal statement analysis replaced my usual Wednesday news and music blog post, so that appears today. I have hardly any time today anyway as the commitments associated with that statement are queuing up. So, today I want to reflect on the sanity in Japan and the ECB before some Duke. So we now have an experiment underway again. Most central banks are buckling under the pressure the financial markets are putting on them to raise interest rates. But the Bank of Japan, and to a lesser extent the ECB are not. We will see how that plays out. I think the Bank of Japan has its finger on the pulse and the other central banks are going down the wrong path.
Last night (March 30, 2022), the Federal Treasurer released the annual ‘fiscal statement’ (aka ‘The Budget’), which revealed to everyone how cynical these exercises have become. The statement is normally released in May but the Federal government has to go to the polls then and they are so far behind the Opposition Labor Party in the opinion polling that they decided to bring forward the fiscal statement as a last ditch attempt to bribe the voters with pennies. I hope it doesn’t work. This is one of the most dishonest and incompetent governments we have ever had to deal with – and that is saying something given our history. While everyone is talking about the cash splash – it is offset by a range of cuts and dissipates in a few months anyway – just after the election. And the Government is once again revealing it has not foresight – to deal with the major challenges – climate, aged care, health care, higher education, social housing, etc. I can barely even write about the statement it is so bad.
Today, I am reflecting on the evolution of the body of work known as Modern Monetary Theory (MMT) and responding to many E-mails I get seeking clarification about things and some that keep getting things wrong. Some of the things I write today might introduce some dissonance, which just means that those feeling that have not really got to the bottom of the matter before and thought they knew what isn’t. This blog post also forms part of my – MMT Provenance – series where I trace the development of MMT in historical terms – who said what, who were there, who weren’t etc. And it is good sometimes to reflect on your work to see where it has gone and to wonder why. So, a bit of a different post today as we wait for tonight’s fiscal statement from the Australian Treasurer.
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.
The current period is really exposing what is wrong with the world order based on Capitalism. Those in the know have always understood that the system is not designed to advance human prosperity generally. At times in history, it has required the general improvement in material living standards to accomplish its aims – which are different from that improvement. So, it has tolerated a more equitable distribution of income and access to consumption purchasing power. But while the masses became complacement as they polished their big (oversized) SUVs, which sit in their driveways next to their big (oversized) motor boat and out the front of their big (oversized) house that is ill-designed for a carbon-neutral future, the bosses have been beavering away working out how to continue to meet their aims independent of us.
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.
With Russia now invading Ukraine and adding to the already highly disrupted supply chains linking products and nations, and the price fixers in OPEC and OPEC+ having a picnic on the uncertainty, inflationary pressures will continue to rise for the time being. Many commentators keep falling into the trap of saying that history is repeating itself – meaning that it is the 1970s over again. I maintain my position that this is not akin to what was going on in the 1970s although there are similarities – energy price rises accompanying war, etc. And if we make the same mistakes that were made in the 1970s now, then not only will the inflation persist but millions of workers will lose their jobs and their incomes.
Today’s blog post is a little different. Yesterday, the second running of our MMTed edX MOOC – Modern Monetary Theory: Economics for the 21st Century – came to an end after running for the last 4-weeks. This is a free course developed by the University of Newcastle and – MMTed – which provides an introduction to Modern Monetary Theory (MMT). The course is self-paced and contains a range of learning materials (videos, text, discussion forums, assignments, exercises, games, etc). After two years of offering, I thought you might like to see some statistics that relate to who participated in the course broken down by gender, educational background and geography. I have more data than I present today which I am examining as a way of understanding patterns of behaviour. We will use this data to improve our MMTed course offerings, as our funding base permits.
Last Friday (March 4, 2022), the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – February 2022 – which reported a total payroll employment rise of only 678,000 jobs and a rise in the participation rate. Fortunately, employment growth was strong enough to drive the unemployment rate down by 0.2 points to 3.8 per cent. The US labour market is still 2,105 thousand jobs short from where it was at the end of February 2020, which helps to explain why there are no wage pressures emerging. Real wages continued to decline. Any analyst who is claiming the US economy is close to full employment hasn’t looked at the data.
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.
Yesterday, I published a full analysis of the national account release in Australia, so today I am pretending it is my Wednesday ‘news’ blog with the music segment that seems to be popular. The news is all floods in Australia, death and destruction in the Ukraine and big talk (about 2 or more decades too late) from the Western governments. I note that the German government has confiscated a luxury yacht owned by some Russian ‘oligarch’ (don’t you just love their terminology) while stacks of other oligarch yachts are heading or are in the Maldives to avoid such a fate. Stupid question: if these oligarchs are so bad and their fortunes ill-gotten why have we waited so long to do something? Today we talk briefly about the resolve of the RBA to resist the gambling addiction of speculators in the financial markets. We also consider a discovery I made last week that top New Zealand economists seem to support Modern Monetary Theory (MMT), and then if that isn’t enough – some music.
Recently (February 22, 2022), I received the latest E-mail update from the IMF blog advertising their new post – Should Monetary Finance Remain Taboo? – which obviously attracted my attention. One of the most deeply entrenched taboos in economics relates to central banks directly facilitating government spending without any other monetary operation. In an important sense, the characterisation of ‘monetary financing’ by the mainstream economists is erroneous and leads to all sorts of fictions that undermine sensible and responsible economic policy making. But, we can work through those fictions to discuss what the IMF is talking about. Importantly, they find that this taboo, which has been broken during the pandemic in many countries (although Japan has been leading the way for decades) does not lead to enduring inflation or a rise in inflationary expectations. Another major plank of mainstream macroeconomics gone. That is something to celebrate.
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.
Yesterday (February 23, 2022), the ABS released the latest – Wage Price Index, Australia – for the December-quarter 2021. The WPI data shows that nominal wages growth remained modest to say the least. The data shows that the significant cuts to workers’ purchasing power continue, and, in my view, constitute a national emergency. While the conservatives are railing about inflation now and looking to target workers’ wages (further cuts), the evidence is that the wages side is not driving any inflationary pressures – the opposite is the case. The business sector, as a whole, thinks it is clever to always oppose wages growth and the banks love that because they can foist more debt onto households to maintain their consumption expenditure. But the reality is clear – there can be no sustained recovery for the economy post Covid without significant increases in the current rate of wages growth.
It is Wednesday and I have three live presentations to make throughout the day. So we will be brief today. The ABS released the latest Wage Price Index today which shows that annual wages growth in Australia was 2.3 per cent, compared to the official inflation rate of 3.5 per cent. I will analyse that data in detail tomorrow, given I am short of time today. But there was also disturbing data coming out of the UK last week on the wages front, which reflects a major imbalance in priorities and also tells me that there is no wage demands driving the current inflationary episode.
At present, the unemployment rate in Australia is 4.2 per cent and falling. If the rate of new immigrants remains low for a while as our external borders open, then it is likely the unemployment rate will fall into the 3 per cent range soon. What people are learning is that the claims made by mainstream economists that full employment was anything between 5 and 8 per cent (at various times to suit their arguments) was a lie. It just suited their ideological agenda and flawed theoretical framework to maintain that narrative. Of course, underemployment is still very high, which means that even if the unemployment rate falls further, we are still a way from being at full employment. But with prices accelerating at present, we are seeing calls for government to pursue an austerity fiscal approach, which would prevent the unemployment rate falling further. We have been here before. Today, I document a major turning point in Australian politics, when the Labor government became the first to abandon the national government’s commitment to full employment, a policy approach that had defined the post Second World War period of prosperity. So … back to 1974 we go.
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.
It is hard to imagine that so little progress has been made in dismantling the mainstream macroeconomics paradigm over the last decade within the institutions of government. We have had the GFC, and now, the pandemic to disclose what does and does not happen when governments engage in relatively large fiscal shifts, yet the fictional world that is taught in mainstream university programs and echoed in policy making circles keeps being rehearsed. While researching the literature on rates of return on public infrastructure spending for a project (book chapter) I am working on at present, I came across the starkness of the mainstream deception. They are still claiming that public spending damages private spending.
There was an informative article in the UK Guardian over the week (January 13, 2022) – Australia’s supply chain issues likely to continue despite drop in Covid cases – which documented the many ways in which the pandemic has led to difficulties in getting goods supplied to retail outlets or their destination (in the case of overseas mail deliveries). The majority of recent articles about the economy and policy options have erred on the side of the need for interest rate hikes and fiscal policy cutbacks, which assume the rising inflation rates around the world are the demand-side events. But it is obvious to anyone other than private bank economists who are lobbying for interest rate rises to increase the profits for their banks, or, mainstream economists, who oppose central bank bond-buying and fiscal deficits, that the cause of the problems at present is not being driven by an explosion of nominal spending – neither from the non-government sector or through fiscal policy. Here is some more evidence to support that conclusion.