There is no internal MMT rift on trade or development

I was going to write about Jamaica today but this topic emerged that I thought I should deal with before I write about the home of reggae. In fact, some of the material is input into a reasoned discussion about Jamaica so it logically precedes it. With the increasing profile of Modern Monetary Theory (MMT), social media activists are wont to talk about MMT in various ways that, in many cases, do not bear resemblance to our work. But that doesn’t stop them claiming things about what we have written or said and then proceeding to say how this is a ‘big problem’ with MMT that they cannot accept. Then their own local commentators chime in reinforcing the point. It is obvious that the original writer hasn’t read our work or if they have they haven’t grasped it (including the nuance and subtlety) but still feels privileged to hold themselves out as experts to wax lyrical about the technical flaws in the said work. This gets amplified by the responses from the readership who have probably read even less – to the point that we end up with MMT being constructed as something ridiculous and foreign to its original. Sort of like start by saying you are discussing 2, call it 3 and say it equals 4. It is a problem because it confounds people and also gives those who oppose our work ways to further misrepresent it in the public debate.

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The mindless and myopic nature of neoliberalism

A short blog post as per my usual Wednesday behaviour these days. Fiscal austerity manifests in many ways, all of them unpleasant, destructive and unnecessary. Here is one of the more insidious ways that mindless cuts in government programs have long-term damaging impacts. In 2013, the Queensland State Government was taken over by a conservative extremist as Premier who thought it was a good idea to hack into sexual health programs targetted at indigenous communities. Over a few short years, this was just one of a huge number of social and health cuts that were made by that particular state government. More than 14,000 public service jobs were cut (a huge relative number). The State government fiscal deficit fell from a predicted $A6 billion in 2013-14 to $A2.58 billion. But like all these austerity cuts which deliver short-run reductions in public spending, the longer-term effects of the cuts lead to much higher amounts of public spending. Neoliberalism is not only mindless but myopic. I have made this point often in regard to infrastructure cuts. In the end, the government has to spend much more fixing the crisis the initial cuts create. Not a sensible strategy at all. The ‘chickens’ (manifestation) of those cuts in Queensland a few years ago are now coming home to roost. As predicted at the time, there is now a health crisis in the form of a STD epidemic moving across the north of Australia from east to west, purely because this idiot wanted to ‘save’ a few pennies. Now serious public cash is being required to put a brake on the health crisis he created. There are countless examples across the world over this neoliberal era of this same phenomena. Myopic and mindless.

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US labour market remains fairly robust

Last week’s (January 4, 2019) release by the US Bureau of Labor Statistics (BLS) of their latest labour market data – Employment Situation Summary – December 2018 – showed that total non-farm payroll employment rose by 312,000 and the unemployment rate rose by 0.2 points to 3.9 per cent on the back of a 0.2 points rise in the participation rate. The coincidence of rising employment and rising participation is usually a good sign as workers are being attracted back into the labour force by the increased job opportunities. We will see in the next few months whether that is a one-off blip or a sustained trend. If it is a sustained trend then the rise in unemployment as a consequence of the labour force growth outstripping employment growth will be temporary and sustained reductions in unemployment will then occur. While the US labour market is looking fairly robust there is still a substantial jobs deficit remaining which tells us that it remains some distance from full employment. There is room for expansion.

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The Brexit scapegoat

The UK Guardian continued its anti-Brexit bias in its article (January 4, 2019) – Brexit anxiety drags UK economy almost to standstill. Read the words which clearly mean – Brexit anxiety causes UK economy to stall. No nuance. No comparability. Just plain, unproven bias. Now, let’s be clear. The British economy has slowed considerably in the last quarter and the chaotic political behaviour among the British government is bound to be causing anxiety among voters. The British establishment is looking more comical lately than it usually does. But, as I have demonstrated previously, the trajectory of the British economy that is emerging pre-dates the Brexit referendum and has more to do with austerity biases in policy design and the state of private domestic balance sheets (accumulated debt positions) than it has to do with Brexit anxiety. Further, the data that the Guardian reports (the latest PMI results) also suggest that the Eurozone and Germany, in particular, are also recording similar declines in sentiment and activity. It is hard to blame Brexit on that.

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On holidays again …

I am travelling for most of today across land and water and so have no time to write anything coherent. So it is just a music day to welcome in 2019. Happy New Year to all and lets hope a few banksters go to prison, that a few politicians join them on corruption charges, that Italy tells the European Commission to jump and leaves the Eurozone, that the Gilets in France spread throughout Europe and bring down the whole disastrous monetary union, that Britain goes out without an agreement and that the British Labour Party gets some spine, sacks its New Keynesian advisors, and demonstrates how to actually run fiscal policy, and that … you get the drift.

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Greece “neither thrived nor struggled” – the financial press alt world

It is my last blog post for the year. And we leave the year with not much gained from a progressive perspective. The mid-term elections in the US just swapped deficit-terrorist Republicans (who have been compromised by the big-spending Trump) with ridiculous PayGo Democrats, who are intent on repeating all their previous mistakes. The Brexit negotiations reveal how appallingly compromised the Tories have become and how venal the European Commission is. The British Labour Party fiscal rule shows that the next British government hasn’t yet jettisoned its Blairite past and its New Keynesian economic advisors are dogmatically taking Labour down a path it will regret. Italy has been bashed into submission by the European Commission bullies, which a week or so later, choose to turn a blind eye to France breaking the rules, because the Gilets threaten the whole show. And Germany still accumulates massive external surpluses in violation of European law and nothing happens. Happy New Year.

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When two original MMT developers get together to discuss their work

Last week, Warren Mosler and I had one of our regular catchups and we discussed at length the state of play in Modern Monetary Theory (MMT). We are quite protective of it. We mused about how we started out on this Project and where it has gone. As old stagers do when they get together. We also reflected and compared notes on what the state of MMT is now, given the increasing visibility of the ideas in the mainstream media all around the world and the proliferation of social media activists who have chosen to identify and promote our ideas. There were aspects of that development that we identified as being of concern for us and other aspects which we considered to be a cause for optimism (celebration is too strong a word). We thought it would be a good idea to take a breath and document what we considered to be the essence of MMT – as a sort of checklist for people who want a fairly precise account of the body of work. I agreed to write this document after input from Warren. So, this is what we mean by MMT. What follows is my account of our conversation expanded to add meaning where required.

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British data confirms strong FDI continues despite Brexit chaos

Wednesday and a shorter blog post so that I have a little more time to do other things. I don’t know what topic attracts the most hate E-mails that I receive on an almost daily basis: my position on the Eurozone, my position on the EU generally, my position on Brexit, my position of surrender monkey social democrats (parties and people), or my work on Modern Monetary Theory (MMT). I guess I could count and build up a frequency distribution but I just prefer to delete them these days – the first few words give the game away. Save your time. This week, I have had a torrent of such E-mails telling me more or less “see, you claimed Brexit would be good, but it is a disaster”. Last time I checked Brexit hasn’t happened yet. All that we are witnessing is a conservative government of considerable incompetence in disarray after being bullied by the neoliberal, corporatists in Brussels into a ridiculous ‘agreement’ that changed hardly anything. But there were some interesting data releases in the last few weeks that bear on the Brexit question. I have been looking into them.

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Australian workers losing out under neoliberalism

The current conflict in France, while multidimensional, is a reflection that the neoliberal austerity system is not working for ordinary people. All sorts of cross currents feed in to this discontent, some of which (for example, distaste for foreigners/migrants) are clearly not to be encouraged. Most of the claims of the Gilets Jaunes are about the alienation, exclusion and poverty that they feel living in the neoliberal, corporatist EU world. A lot of so-called progressives are out there claiming this is a right-wing ruse advancing climate denial and anti-migrant sentiment. But I consider that to be a typical elite response to any EU discontent to avoid discussion of exit and the paint the critics as being stupid and/or racist. A replay of the Brexit accusations from the Remainers. But the writing is on the wall for the Eurozone countries. People will only tolerate being put down and oppressed for so long. And all is not well elsewhere. Even when a nation has its own currency and has the capacity to avoid the sort of stagnation that many European nations are now wallowing in, the universality of the neoliberal austerity bias is making life hard for not only the low-income cohorts, but, increasingly for the lower tiers of the ‘middle class’ (defined in income terms). Australian workers are feeling that pinch in the land of plenty.

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Greek austerity – a denial of basic human rights, penalty should be imprisonment

I have just finished reading a report published by the Transnational Institute (TNI), which is an “international research and advocacy institute committed to building a just, democratic and sustainable world”. The Report (published November 19, 2018) – Democracy Not For Sale – is harrowing, to say the least. We learn that in an advanced European nation with a glorious tradition and history an increasing number of people are being denial access to basic nutrition solely as a result of economic policy changes that have been imposed on it by outside agencies (European Commission, European Central Bank and the IMF). The Report shows how the food supply has been negatively impacted by the austerity programs; how food prices have been forced up at the same time as incomes have been forced down, and how collective and cooperative arrangements have been destroyed by privatisation and deregulation impositions. The Report concludes that the Greek State and the Eurozone Member States violated the Greek people’s right to food as a result of the austerity measures required by three Memorandums of Understanding (2010, 2012 and 2015). In other words, the austerity packages imposed on Greece contravened international human rights law. Not one person has gone to prison as a result of this deliberate and calculated violation of human rights.

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The Weekend Quiz – December 1-2, 2018 – answers and discussion

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.

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Britain should reject the Brexit ‘agreement’ but proceed with the exit

It is Wednesday, and only a short blog post beckons today. I have restrained myself from commenting on Theresa May’s unbelievable Brexit deal, which has the dirty paws of the European Commission all over it. Regular readers will know that if I had have been a voter in Britain in June 2016, I would have resolutely and happily voted in favour of Brexit. And if I was a British Parliamentarian now I would vote to reject the ‘deal’ and force the Brexit on British terms. I will write a little more about that in a further post. But today, I just want to pass comment on the extraordinary UK Guardian article from Phillip Inman – A leftwing UK post-Brexit is as likely as a socialist Rees-Mogg (November 24 2018) – which summarises the problem quite well. I say ‘well’ because it illustrates the progressive surrender that has allowed the neoliberal era and monstrosities like the European Union to persist. You can see it all over the place – surrender that is. The Democratic obsession with Paygo in the US. The British Labour fiscal rule in Britain. The ‘we will have a bigger surplus’ boast from the Australian Labor Party, when there is around 15 per cent underutilised productive labour. Inman’s article is encouraging the Left in Britain to lie down and surrender to the dictates of the neoliberal, corporatist machine that is the EU. It presents an impoverished vision of the future and a disgustingly vapid depiction of the possibilities that a truly progressive British Labor government could achieve once it jettisons the neoliberal frames.

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The ‘fiscal contraction expansion’ lie lives on – now playing in Italy – Part 2

This is the second and final part in my discussion about the latest attempts by the IMF and notable New Keynesian macroeconomists to keep the ‘fiscal contraction expansion’ lie alive. The crisis in Italy is once again giving these characters a ‘playing field’ to rehearse their destructive ideas that rose to prominence during the worst days of the GFC, when the European Commission and the IMF (along with the OECD and other groups) touted the idea of ‘growth friendly’ austerity. Nations were told that if they savagely cut public spending their economies would grow because interest rates would be lower and private investment would more than fill the gap left by the spending cuts. History tells us that the application of this nonsense caused devastation throughout, with Greece being the showcase nation. The damage and carnage left by the application of these mainstream New Keynesian ideas are still reverberating in elevated unemployment rates, high poverty rates, broken communities and increased suicide rates, to name a few of the pathologies it engendered. In their article – The Italian Budget: A Case of Contractionary Fiscal Expansion? – Olivier Blanchard and Jeromin Zettlemeyer, from the Peter Peterson Institute for International Economics continue to argue the case for austerity in Italy as the only way to engender growth. In this second part of my analysis of their argument I show that there is little evidential basis for concluding that Italy is a special case. I argue that imposing fiscal austerity on Italy will turn out badly. The broader conclusion is that the mainstream economics profession has learned very little from the GFC. For them the story stays the same. It is one that we should reject in every circle it arises.

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The ‘fiscal contraction expansion’ lie lives on – now playing in Italy – Part 1

Pathetic was the first word that came to mind when I read this article – The Italian Budget: A Case of Contractionary Fiscal Expansion? – written by Olivier Blanchard and Jeromin Zettlemeyer, from the Peter Peterson Institute for International Economics. Here is a former IMF chief economist and a former German economic bureaucrat continuing to rehearse the failed ‘fiscal contraction expansion’ lie that rose to prominence during the worst days of the GFC, when the European Commission and the IMF (along with the OECD and other groups) touted the idea of ‘growth friendly’ austerity. Nations were told that if they savagely cut public spending their economies would grow because interest rates would be lower and private investment would more than fill the gap left by the spending cuts. History tells us that the application of this nonsense caused devastation throughout, with Greece being the showcase nation. The damage and carnage left by the application of these mainstream New Keynesian ideas are still reverberating in elevated unemployment rates, high poverty rates, broken communities and increased suicide rates, to name a few of the pathologies it engendered. But the ‘boys are back in town’ (sorry Thin Lizzy) and Blanchard and Zettlemeyer are falling in behind the IMF and the European Commission against the current Italian government by demanding fiscal cutbacks. It will turn out badly for Italy if the government buckles under this sort of pressure. It once again shows that the mainstream economics profession has learned very little from the GFC. For them the story stays the same. It is one that we should reject in every circle it arises. This is Part 1 of a two-part analysis of the latest incarnation of this ruse my profession inflicts on societies.

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Japan still to slip in the sea under its central bank debt burden

President Trump banned a CNN reporter only to find his position overturned by the judicial system. Well CNN is guilty of at least one thing – publishing misleading and alarmist economic reports about Japan. In a CNN Business article last week (November 13, 2018) – Japan’s economy has a $5 trillion problem – readers were told that the Bank of Japan has no “dwindling options to juice growth if a new crisis hits” because “it’s now sitting on assets worth more than the country’s entire economy”. The real story should have been that the Bank of Japan continues to demonstrate the categorical failure of mainstream macroeconomics and, conversely, ratify the core principles of Modern Monetary Theory (MMT). That is what the Japanese experience since the early 1990s tells us. And all the stories about special cases; cultural peculiarities, closed markets, etc that the mainstream economists wheel out when another one of their predictions about how Japan is about to sink into the sea as a result of its public debt levels, or that interest rates are about to go through the roof because of the on-going and substantial fiscal deficits; or that inflation is about to accelerate because of the massive monetary injections; and more, are just smokescreens to divert our attention from the poverty of their analytical framework. The Japanese 10-year bond trade is called the ‘widow maker’ because hedge funds who try to short it lose big. The Japanese monetary system is my real-time, non-linear economic laboratory which allows all the key macroeconomic propositions to play out live. And MMT is never very far off the mark. Try juxtaposing New Keynesian theory against Japan – total dissonance.

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The flexibility experiment in Portugal has largely failed

Portugal has been held out by the Europhile Left as a demonstration of how progressive policies can manifest in the European Union, even with the Fiscal Compact and the Stability and Growth Pact (SGP). In 2015, after the new Socialist government took over with supply guarantees from the Left Bloc (Bloco de Esquerda) and the Portuguese Communist Party (PCP) and The Greens (Partido Ecologista “Os Verdes”), it set about challenging the austerity mindset that has blanketed the European continent in stagnation. Things improved in 2016 with increased government spending. But by 2017, the European Commission had reasserted its austerity mindset and the supposed flexibility that the Left were hoping and which Portugal had briefly embraced in 2016 was gone. And we learned that the neoliberal bias of the Eurozone and its fiscal rules dominates any progressive ambitions that a nation state might entertain. Another blow for the Europhile Left. The lesson: start looking at and supporting exit if you are truly serious about restoring a progressive policy agenda in Europe.

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EU Services Notification Directive will undermine democracy within cities

In a blog post last week – Financial services agreements – the EU as a neoliberal, corporatist project (November 13, 2018) – I wrote about the way the EU compromised the capacity of elected Member State governments to advance the well-being of their nations by the way they negotiate trade arrangements in services, particularly with respect to the financial services sector. For all those Europhiles that regularly deny the core agenda of the EU is to compromise democratic outcomes in favour of capital, that analysis, alone, should be sufficient to discourage those thoughts. Of course, that isn’t the only manifestation of this neoliberal, corporatist bias in the way the EU has developed over the last decades. I mostly conduct my analysis at the macroeconomic level but I am also interested (as my publication record demonstrates) in urban and regional analysis. At the level of the European city, the EU is behaving in the exactly the same way – to curb that ability of city authorities to render their cities favourable environments for the residents who live there.

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EU forecasts are notoriously poor

I am travelling most of today to distant climes. And it is Wednesday, my alleged shorter blog day. Apart from some scintillating music suggestions today, I foreshadowed in Monday’s blog post, which analysed the British national accounts, that I would make some statements about the EU forecasts released in their latest – European Economic Forecast. Autumn 2018 – (published November 8, 2018). The forecasts posited that the UK would be among the two worst performers for 2019 in terms of Real GDP growth, accompanied by the waning Italy. And within seconds of the forecasts being published, social media was a light with those opposed to Brexit, using the forecasts to claim that Brexit would be a disaster – again! Brexit may still turn out to be a disaster. But these forecasts should be treated with a grain of salt – they are ideological in nature and the forecasting performance of the EU has not been good.

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Financial services agreements – the EU as a neoliberal, corporatist project

I have been reading the new book by Costas Lapavitsas – ‘The Left Case Against the EU’ – which has been recently published. It is solid and clearly explains why the EU is not an institution or structure than anyone on the progressive Left should support or think is capable of reform any time soon. It has become a neoliberal, corporatist state and hierarchical in operation, with Germany at the apex bullying the weaker states into submission. Divergence in outcomes across the geographic spread is the norm. It is also the anathema of our concepts of democracy both in concept and operation. It is more like a cabal of elites who are unelected and, largely unaccountable. By giving their support to this monstrosity, the traditional Left political parties (social democrats, socialists etc) have been increasingly wiped out such is the anger of voters to what has become a massive coup by capital against labour. These are the themes that Thomas Fazi and I also explored in our recent book – Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto Books, 2017). I also just finished reading an interesting report – Financial Regulation challenged by European Trade Policy – published by the Veblen Institute and Finance Watch (October 2, 2018), which examines “the impact of European trade policy on financial regulation”. It is essential reading for those progressives who still think that Britain should remain in the EU. If they understand the research findings they would change their minds.

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British growth strengthens in September quarter 2018

On Thursday (November 8, 2018), the British Office of National Statistics (ONS) released the – GDP first quarterly estimate, UK: July to September 2018 – data, the first release under their new publication model, which is designed to improve “the accuracy and reliability” of the initial (formally denoted the “preliminary”) release. The next update will come in December and the expectation is that there will be less revisions, which is a good thing for those trying to assess where things are at. Remember, also that national accounts data is a rear-vision view of the economy – where its been rather than necessarily where it is at, although the two ‘views’ are obviously linked. The third-quarter national accounts data shows that Britain grew by 0.6 per cent, with “all four sectors” contributing to what is a strong result. But, under the headline, are mixed trends: household consumption spending continues to grow with rising debt, although wages growth appears to be moving finally; business investment was negative; and net exports “contributed 0.8 percentage points” with a strengthening of exports. What the data tells us at this stage is that Britain continues to defy the claims that a meltdown is imminent as a result of Brexit. There appears to be a resilience that is driving relatively strong growth. And, for all those who have been hammering the point that Britain is the worst-performed (in growth terms) of the EU Member States, they will have to revise their scripts. Britain is now growing much faster than many other European economies.

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