Today is the first day of the 12th Path to Full Employment Conference/17th National Unemployment Conference in Newcastle, hosted by my research centre. As host I am tied up in the event but here are some snippets. All of the presentations in the parallel sessions have been very interesting. I also note some economic news out from the Australian Bureau of Statistics today for October 2010 which provide more news that the Australian economy is growing only modestly. More tomorrow. UPDATE: Audio file now available.

I suddenly realised what has been going on all this time. They have been smoking some doobies – some real strong doobies and their heads are not what they used to be. How cool is that conclusion? It explains everything – why they typically miss the point of everything; why they say really dumb things most of the time; why they usually look half asleep; why they think down is up or up is down; why they continually think that what is good for them is bad for them and vice versa and all of that funk. I am so relaxed now – I actually thought there was a problem. But a bit of weed is doing it. I guess it is time for them to ease up on their intake though or their lack of concentration and awareness of reality will become entrenched. We need all the citizens we have thinking clearly and working together.

I am sick of reading or hearing how brilliant such and such economist is and how they should be regarded as oracles because of this “brilliance”. In all these cases, the reality is usually that these characters have left a trail of destruction as a result of applying their brilliant minds. The terminology is always invoked by financial commentators and the like to elicit some authority in the ideas of the person. Apparently, if someone is deemed brilliant we should take heed of their words and judgements. How could we ever question them? In this neo-liberal era, many such “brilliant” minds have been placed in positions of authority and their influence has shaped the lives of millions of people. The financial and then economic crisis has shown categorically that their mainstream macroeconomic insights are not knowledge at all but religious beliefs that bear no relation to real world monetary systems. But still these characters strut the policy stages – shameless – and, in doing so, continue to destroy the prospects for many. It would be good it they were truly brilliant and could see the destructive consequences of their religious zealotry. Oh to be truly brilliant.

Today I am heading into the lands of austerity – those scorched, barren places where people with increasingly hollowed out faces are being forced by their misguided polities to forego wages and conditions and pensions and their happiness because some neo-liberal told them that government deficits were bad and all that. I am off to London this afternoon (I am typing this on the train to Sydney) and then to Maastricht University where visit each year and my colleague Joan Muysken is located. I have been thinking about various efforts that have emerged in the recent period suggesting that a new progressive agenda (narrative) is required to reverse the onslaught of neo-liberalism. This is clearly a topic close to my own heart. I have been thinking about the development of an alternative economic paradigm for my whole academic career. So whenever I see some progressive efforts I am always interested. This blog considers that question. So now a long flight then I will report on how hollow those faces are becoming.

Every day now as the Australian federal election day approaches (August 21) the calls for fiscal austerity increase and the justifications become further removed from reality. I note The Greens, who are held out as our only hope are still running their neo-liberal line that budgets should be balanced over the cycle (see Neo-liberals invade The Greens! for more discussion on that). But the US political scene is even more moribund than ours if that is possible. Even the progressives are claiming there is a fiscal crisis. The facts speak otherwise.

There is a long tradition of economists writing Open Letters to the media in support or in opposition to some government policy stance. The conservatives write them. The so-called progressives write them back. Usually around election times. Often the underlying economics supporting the arguments is difficult to differentiate given they both seek to comment on budgets and fiscal policy. In that context, the differences become matters of degree rather than substance. So the progressives usually take a deficit-dove position where they consider deficits are good sometimes but the budget needs to be balanced over some business cycle. In that sense, the progressives are not different to the more reasonable conservative economists. Neither position is correct and the continual repetition that deficits are only useful in times of recession demeans the public debate. The public ignorance about monetary matters and the role of deficits is continually being reinforced by these letters. Better to tell the truth I think – as long as you know what it is!

It is now 2.15 am in Boston on a Thursday morning (16:15 Thursday afternoon in Australia East Coast). I always try to stay on Australian time when I make these short trips. It is hard while you are away but easier to adjust back when you get home. No real jet lag. Yesterday (Wednesday) I gave a Teach-In on the concept of fiscal sustainability to an interesting group of participants ranging from those with an active role in the financial markets to those with more general business interests. The participants came from all around as far as I can gather – many from New York which is a fair hike for a single day workshop. The discussion that followed my presentation was very interesting and while the concerns reflected the usual issues – solvency, exchange rates, intergenerational issues – the standard of debate was civilised. I don’t know how many Warren and I convinced to probe deeper but I hope we planted some seeds of doubt in the minds of the audience that the mainstream macroeconomics position is wrong and therefore untenable. After the Teach-In I read the BIS Annual Report 2009/10 – which signalled to me that they are now firmly part of the problem that we face when dealing with the task outlining fiscally sustainable policy positions.

Today (and yesterday – being Tuesday in Australia now) I have been travelling. If you grow up and live in Australia everywhere except the local beach is a long way away. Sometimes it would be very convenient to just to be able to buzz up to San Francisco from LA or from New York to Washington or from Brussel to Paris. Australians never enjoy that sort of proximity. So travel is part of our growing up. I am used to it but hate it. Anyway, it always allows me to catch up on reading (especially fiction), listen to a lot of music and write a lot. Today’s blog focuses on recent events in Australia but the truth is that the principles raised are universal. You hear the same debates and responses all across the globe. The theme today is how ignorance leads to bad policy – my usual theme. But I am a persistent type and I am observing (via my blog statistics) that as I pursue this repetitive strategy – grinding it out every day – more and more people are coming to the site and many (most) are probably staying (IP address analysis). I have managed to keep the gold bugs at bay – they target easier victories – and the standard of debate is generally high. So my role is to keep offering it up and watching the numbers grow. I am in Boston now and will be talking about fiscal sustainability to hedge fund managers and bankers. Penetrating their world is a good thing. And then on Thursday, I board the jet and retrace my tracks – but then I will be close to the beach again. You mostly can’t have it both ways.

Today I am writing about child cruelty. We would all react to child cruelty in the same way – it is repugnant and undermines the chances of the child maturing into a fully functional adult replete with capacities that promote self esteem and allow meaningful and enduring relationships. So what would we think of child cruelty when a high level government agency is engaged in it? What would we think of a government that was poisoning the minds of the young? Many Americans write to me accusing me of being a communist sympathiser and claiming that freedom was subjugated under those regimes via brutal indoctrination mechanisms embedded in their societal infrastructure. Maybe it was. But the Americans don’t actually have to look very far nor resort to history to find regimes that use indoctrination to oppress their citizens’ free spirits, including the intellectual development of their children. On Thursday, June 3, the Director of the US Congressional Budget Office wrote his Letter to a Seventh Grader. It contains pure indoctrination designed to develop fears about budget deficits at an early age.

There are several strands to the mainstream neo-liberal attack on government macroeconomic policy activism. They get recycled regularly. Yesterday, I noted the temporal sequencing in the attacks – need for deregulation; financial crisis; sovereign debt crisis; financial repression and so on. Today, I am looking at another faux agenda – the demand that central banks should be independent of the political process. There has been a huge body of literature emerge to support this agenda over the last 30 odd years. The argument is always clothed in authoritative statements about the optimal mix of price stability and maximum real output growth and supported by heavy (for economists) mathematical models. If you understand this literature you soon realise that it is an ideological front. The models are note useful in describing the real world – they have no credible empirical content and are designed to hide the fact that the proponents do not want governments to do what we elect them to do – that is, advancing general welfare. The agenda is also tied in with the growing demand for fiscal rules which will further undermine public purpose in policy.