Welcome to the Billy Blog Saturday Quiz. The quiz tests whether you have been paying attention over the last seven days. See how you go with the following questions. Your results are only known to you and no records are retained.
Its my Friday lay day and I am catching up on reading today. But one thing I have had to complete by today is the introduction to the German Translation of my friend Warren Mosler’s 2010 book – The Seven Deadly Innocent Frauds of Economic Policy. The publisher wanted an introduction for the German readership that helped them relate the discussion in the book to the reality in Europe – given that the Economic and Monetary Union is a perverted hybrid of a fixed exchange rate/fiat currency system that works for no-one really. So you may be interested in reading my introduction. Then a dose of the master guitarist completes my Friday blog.
Today’s release of the – Labour Force data – for October 2015 by the Australian Bureau of Statistics once again brings into question the validity of drawing assessments about the state of the labour market on the basis of monthly changes in the data. Today’s release shows that employment increased by 58,600 (0.5 per cent) which is the largest monthly rise since March 2012 – and quite unbelievable really. The ABS estimated that unemployment fell by 33,400 to 739,500 and the unemployment rate dropped 0.3 percentage points to 5.9 per cent. Perhaps a signal on how volatile the data is, the ABS estimated the teenage participation rate rose by 0.8 percentage points, again rather fanciful. The cautious position is to look at the trend over the last several months and that suggests that the labour market has improved a little (Employment to Population ratio has been steadily rising). However, the teenage labour market remains very week with no discernible upwards trend revealing itself yet. If the forecast ed decline in private investment occurs over the next 12 months, then this slight improvement in the labour market data will be just a little blip in an unfolding nasty story.
I live in a Federation where the national government has the currency-issuing capacity and the states rely on their taxation and borrowing capacities to fund their spending. Our system is subject to significant vertical fiscal imbalances in that the Australian Constitution and subsequent decisions gives the major taxing capacity to the federal government but the large spending responsibilities remain at the state level. There are also significant ‘horizontal fiscal imbalances’ between the states and territories due their different capacities to exploit their own tax bases. As a result, there is a complicated system of federal-to-state transfers to ensure that all states have the capacity to deliver infrastructure and services of an ‘equal’ standard to all citizens. In particular, state governments face problems in providing adequate infrastructure while many of their decision deliver windfall gains to land owners where major infrastructure projects are adjacent (such a train or road system). While Modern Monetary Theory (MMT) considers such national infrastructure projects are best funded at the national level where the national government faces no financial constraints (given it is the currency issuer), the reality is that state governments also engage in infrastructure development. As a second-best technique to ensure that states do not play the austerity card and deprive their regions of essential infrastructure development, a system of Value Capture can be beneficial. It is a progressive tax system that can also reduce the tendency to real estate asset price bubbles.
In Greece, the national unemployment rate has been around (or higher) than 25 per cent since 2013 so it is little surprise that mortgage defaults has spiralled and people are selling of family heirlooms to wealth antique dealers in Switzerland to cover daily costs. A Geneva-based dealer told the Financial Times in June (Source) that “For buyers there are opportunities that only come along when there’s a real economic upheaval . . . in Greece it hasn’t happened since the second world war”. So the vultures are enriching themselves as a result of peoples’ misery. Its the market! No it isn’t. Its an incompetent government looking after themselves and allowing their citizens to go down the drain. Just yesterday, the Greeks have agreed to tougher foreclosure measures (as part of the bailouts) which will see impoverished Greeks lose their last vestige of dignity – their homes. And the latest European Commission – Autumn Economic Forecasts – (released November 5, 2015) portend a very sorry future for Greece and the Eurozone generally.
Last week, I re-read an article from May 1, 2012 by Abraham Newman – Austerity and the End of the European Model – that was published in Foreign Affairs. The article carried the sub-title “How Neoliberals Captured the Continent”. The author is a US political scientist and observed that given the unprecedented austerity that the European politicians have inflicted on their nations with such damaging consequences, the “Tea Party loyalists in the United States should be green with envy”, The hard-line US Republicans don’t go close to their European brethren. The thrust of the article was that independent of the short-term effects of the austerity it “will transform Europe’s political economy in the long term, lending credence to neo-liberal ideas of limited government and loosely regulated markets. The irony of this transformation is that it reinvigorates the very ideas that helped cause the financial crisis in the first place …” This is a theme that I share. It is also a starting point for a very interesting essay I read last week by Slovenian lawyer Bojan Bugaric – Europe Against the Left? On Legal Limits to Progressive Politics – published May 2013. I have been seeking to understand these perspectives more deeply as part of my larger book project concerning the demise of the European left.
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.
Welcome to the Billy Blog Saturday Quiz. The quiz tests whether you have been paying attention over the last seven days. See how you go with the following questions. Your results are only known to you and no records are retained.
Its my Friday lay day blog and I am working on various projects today so I will cut this blog relatively short. Two things came up this week that I thought were interesting but only require a noting by way of blog entry. The first was a report about a mini-Job Guarantee type program in the New Mexico city of Albuquerque, which is demonstrating that public job creation programs can change peoples’ lives for the better when there is no hope and no other opportunities. The second story I read that was interesting was the Wolf Street Report (October 24, 2015) – Barcelona Threatens to Print Parallel Currency, Madrid Seethes – which discussed the plan by “Barcelona’s left-wing city council plans to roll out a cash-less local currency that has the potential to become the largest of its kind in the world”. The austerity-mavens in Madrid and their puppet masters in Brussels will be having conniptions at the prospect.
On September 19, 2015, the Italian Prime Minister, Matteo Renzi and the Minister of the Economy and Finance, Pier Carlo Padoan presented to the Italian cabinet (Consiglio dei Ministri) an updated fiscal (‘budget’) document – Nota di Aggiornamento del Documento di Economia e Finanza 2015 – which has received widespread attention in the media. The response to the update can be summarised in two statements: (a) the Italian government is abandoning austerity in the coming year and running an expansionary fiscal policy; and (b) the European Commission through the Ecofin (Committee of Finance Ministers) is showing admirable flexibility in allowing the Italian government to ‘relax’ their previous fiscal adjustment plan in order to safeguard economic growth. However, some commentators have challenged the notion that the September changes are indeed expansionary, pointing out that the fiscal deficit projected for 2016 might be higher than the earlier projections but is still smaller than the 2015 outcome. What should we make of all that? Well, neither assessment conveys what is actually happening.