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New feudalism seems to forget about the capitalists

It’s Wednesday and I am now more or less settled in my new office which has the sun coming in from the north-east. I was talking to someone yesterday about various things and the topic of neo-feudalism or new feudalism entered the conversation – as you might expect (-: I am deeply suspicious of adding ‘neo’ or ‘new’ to any conceptual term for reasons I will explain. And if you don’t want to know about that then just skip to the end and listen to some great music, as I have been today while working.

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The growing incidence of financial insecurity and inequality

I am in the final stages of moving office and it has been a time consuming process. And one of my regular research colleague, Professor Scott Baum from Griffith University, who occassionally provides blog posts here, sent me some research which he had written up in blog post form and with time short today, here is Scott’s latest guest spot. Today he is going to talk about a new analysis of financial insecurity that we are currently doing.
So in Scott’s words …

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Australian labour market – emerging signs that tight fiscal and monetary policy is killing prosperity

It’s been a big data week and after the US inflation data that I analysed on Monday, and the Australian wage data (analysed yesterday), we have the Australian labour force data release by the Australian Bureau of Statistics – Labour Force, Australia – for July 2023 today (August 17, 2023). The July result shows a weakening situation (although the rotation in the sample contributed to this somewhat). Employment fell (particularly full-time) and unemployment rose to 3.7 per cent (up 0.2 points). There are now 10.1 per cent of the available and willing working age population who are being wasted in one way or another – either unemployed or underemployed. That extent of idle labour means Australia is not really close to full employment despite the claims by the mainstream commentators. As I noted yesterday, wages growth is declining and modest. We will see next month whether this weakening is, in fact, a trend consistent with other indicators (retail sales, etc). Given inflation has been in decline since last September and there is no wages pressure, there is no reason for policy settings to be trying to push people into joblessness. That is just an act of bastardry and ideological zealotry.

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Australia – real wages continue to decline and wage movements show RBA logic to be a ruse

Yesterday (August 15, 2023), the Australian Bureau of Statistics released the latest – Wage Price Index, Australia – for the June-quarter 2023, which shows that the aggregate wage index rose by 0.8 per cent over the quarter (steady) and 3.6 per cent over the 12 months. This represented a slowdown over the 12 months on the previous quarter’s result. If we consider the rate of increase in the CPI in relation to this nominal wages growth then in the June-quarter the two were equal and so real wages were steady. However, over the last 12 months, real wages have fallen by 2.4 per cent using the CPI measure. But the ABS note that the CPI is not a good indicator of cost-of-living changes and they have produced special time series based on expenditure patterns for selected groups including employees. If we use the Employee Selected Cost of Living Indicator we find that real wages fell by 0.7 points over the June-quarter 2023 and by a stagerring 6 points over the 12 months. That puts the Treasurer’s spin that the latest data is a good sign into perspective. Further with the gap between productivity growth and real wages increasing, the massive redistribution of national income away from wages to profits continues. Further, the RBA continue to claim there is a threat of a wages breakout and so interest rates have to keep rising to create the necessary unemployment increase to prevent that from happening. It is just a ruse. There is no sign of a wages breakout.

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US inflation in retreat as housing policy is exposed as a failure

The US Bureau of Labor Statistics released the latest US inflation data last week (August 10, 2023) – Consumer Price Index Summary – which showed that overall monthly inflation to be 0.2 per cent and mostly driven by housing. And, once we understand how the housing component is calculated then there is every reason to believe that this major driver of the current inflation rate will weaken considerably in the coming months. The rent component in the CPI has been a strong influence on the overall inflation rate and that has been pushed up by the Federal Reserve rate hikes.

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The conflicting role played by education in social mobility and class reinforcement

Sometimes everything comes together in unintended ways. That has happened to me this week. I am moving office tomorrow, and I am also moving home, and if that wasn’t enough, I received a call from a union I help out with advice who wanted some urgent work done. The major employer had presented a sort of ‘take-it-or-leave-it’ offer that if accepted would see the workers more than 8 per cent worse off in real terms at the end of the 4-year agreement than they were when they last had their pay adjusted. This sort of offer – at a time the RBA is claiming the labour market is incredibly tight just beggars belief. Anyway, the point is that I have very little time this week for blog posting. Some years ago I read a research report that demonstrated that standard economics programs at our universities breed people with sociopathological tendencies who elevate greed above empathy. There is clearly some self-selection bias because the studies have never really isolated the impacts of the teaching programs from the tendencies of the students going into the programs. But as one who has been through the mill from go to woah (PhD) the standard mainstream curriculum is pretty grim and most students in my years just went along with it. I was thinking about this when I read a Discussion Paper (No. 1938, July 2023) from the Centre for Economic Performance at LSE entitled – Are the upwardly mobile more left-wing?. After I had read that paper, I noticed a UK Guardian article (August 6, 2023) which carried the headline – Are richer people really more rightwing? – which discussed the LSE research and I thought that was a curious perversion of the original title.

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US labour market – ‘steady as she goes’

Last Friday (August 4, 2023), the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – July 2023 – indicated a rather ‘steady as she goes’ outcome. A slightly weaker employment outlook compared to the beginning of 2023 but overall a very stable situation. There is no sign of recession and no sign that the misguided Federal Reserve interest rate rises are causing rises in unemployment. More evidence that monetary policy is not an effective tool.

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No change in monetary easing from Bank of Japan until wages growth increases

The media and the phalanx of mainstream economists from banks etc, the latter of which have a vested interest in interest rates rising in Japan for various reasons, are constantly predicting that the Bank of Japan will relent to the ‘market pressure’ and reverse its current monetary policy stance and fall in line with the majority of central banks. While the concept of ‘market pressure’ is held out as some economic process – something inevitable to do with basic fundamentals governing resource supply and demand – it is really, in this context, just gambling positions that speculators have taken in the hope that the Bank will relent and reward their bets with stupendous profits. So last week, the Bank of Japan announced that it was changing its policy towards Yield Curve Control (YCC), which set the cat among the pigeons again. This is what it was all about.

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Ratings downgrade on US government debt is as ridiculous as it is meaningless

It’s Wednesday and there are a few topics that warrant some comment. But at the top of the topics were headlines this morning shouting out that the US treasury bonds had been downgraded by one of those self-serving credit rating agencies, as if it was an event worthy of some import. The journalists obviously do not understand anything if they think that decision was important. The ratings downgrade on US government debt is meaningless and the rating agency involved just wants to boost its revenue by sounding important. After I explain all that we will have a quiet musical reflection to finish the day.

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