The Weekend Quiz – March 7-8, 2020 – answers and discussion

Here are the answers with discussion for this Weekend’s Special Birthday 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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Bundesbank remits record profits to German government while Greek health system fails

I am back into my usual patterns, which means that I plan to write less on a Wednesday for my blog than other days. I have a number of projects underway at present – academic and advocacy – and I need to devote writing time to those. Given that yesterday I wrote about the Australian National Accounts data release and today I have to travel a lot, it is another case of Thursday becomes Wednesday and I offer some snippets. I will write a detailed account of my view on how to deal with the coronavirus from an Modern Monetary Theory (MMT) perspective next week. But today I want to highlight something that just ‘goes through to the keeper’ (cricket reference meaning no-one pays attention to it) but is significant in understanding what is wrong with the Eurozone. I refer to information that is contained in the latest – Annual Report 2019 – released last week by the Deutsche Bundesbank. If you juxtapose that with another report on the Greek health system you get a fairly clear view on what is wrong with the whole EU set up.

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Australian National Accounts – continued weakness and highly vulnerable to recession

We have had a long drought. Massive bushfires. Floods. And, now, the coronavirus to deal with. The latest release by the Australian Bureau of Statistics of the – December-quarter 2019 National Accounts data (March 4, 2020) – allows us to see some of the impacts of the bushfires, given it is a rear-vision view of where the economy was at in the last three months of 2019. The next quarter’s data (due early June) will start to tell us about the coronavirus effects. Today’s data confirms what we have been tracing for several quarters – the Australian economy is grinding to a halt with private business investment continuing to decline and only a falling household saving ratio keeping Household Consumption expenditure moving in the face of flat income growth. The data shows that annual GDP growth of 2.2 per cent remains well below the historical trend rate of between 3.25 and 3.5 per cent. The weaker performance started in the last 6 months of 2018 and has continued through 2019. Further, as the recent favourable terms of trade (as a result of the Brazilian environmental disaster) have reversed, Real net national disposable income is now falling, signifying falling material living standards. As a result of the falling terms of trade, exports have shrunk and will shrink further on the back of the virus impacts. In an environment where household debt is at record levels, the risks of unemployment are rising, wages growth remains stagnant, and business investment continues to contract – the recent negative shocks from fire, flood and now the virus expose the economy to a major contraction. The overall picture is not good and the future is looking rather dim at present. An urgent and major shift in fiscal policy towards expansion is definitely required.

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The central bank independence myth continues

One of the enduring myths that mainstream macroeconomists and the politicians that rely on their lies to depoliticise their own unpopular actions continue to propagate is that of ‘central bank independence’. This is the claim that macroeconomic policy making improved in the ‘neoliberal’ era following the emergence of Monetarism because monetary policy was firmly in the hands of technocratic bankers who were not part of the political cycle. As such, they could make decisions based on fundamentals rather than the requirements of the political cycle. The corollary was that vote-greedy politicians, who operate on short-term political cycles, would be willing to compromise the ‘longer-term’ health of the economy to splurge on populist programs that might increase their chances of re-election. As a result of the mismatch between the political cycle and the, longer, economic cycle, the neoliberal solution was to make monetary policy independent of the political cycle. Except, of course, it didn’t and cannot. The latest scaremongering about the ‘loss’ of central bank independence was published in the UK Guardian last week (February 28, 2020) – From the Fed to Bank of England, central banks must up their game. The author is a former deputy governor of the Bank of England Board and former director general of the CBI. The interesting point about the article was not the further elaboration of the myth, but, rather, his assessment that the chances of reforming the European Union treaties in any direction “are vanishingly small”. Read: zero. From the mouth of the elites. I hope our Europhile Left colleagues absorbed that bit, at least.

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The Weekend Quiz – February 29-March 1, 2020 – 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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Our sequel to Reclaiming the State in now in progress

As parat of my recent European speaking engagements, I went to Rome on February 5, 2020 to speak at the Italian Senate on Modern Monetary Theory (MMT) and the dysfunctional state of the European Union. The next day I had long discussions with one of my co-authors, Thomas Fazi, who I wrote – Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto Books, September 2017) with. We have been working on the sequel to that book for some time, and, in the process, have had to work through some difficult issues on which there has been some degree of difference in our viewpoints. While I was in Rome, Thomas and I also recorded a video of a conversation where we talk about our sequel. We provide that video here as well as a brief discussion outlining some of the major issues that the book will address.

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Rounding off the Masterclass in London last weekend

Last Saturday, I held an MMT Masterclass or Teach-In in London. It was an experimental session because I wanted to see what level of difficulty people would find useful as we work on developing the pedagogy and materials for MMTed, which is intending to provide free teaching resources for those interested to learning Modern Monetary Theory (MMT) from first principles. Given the time constraints, I didn’t quite finish Module 1. So I thought I would provide the slides here with a written explanation of what I would have said so that you get the complete context and application of the concepts that we developed together during the class. So this blog post completes the lecture. Thanks to all those who attended and to those who have sent me the requested feedback. This will help us improve the material and presentation approach.

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The Weekend Quiz – February 22-23, 2020 – 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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Australia labour market – getting worse as unemployment and underemployment rise

The Australian Bureau of Statistics released of its latest data today (February 20, 2020) – Labour Force, Australia, January 2020 – which continues to show that the Australian economy is in a weak state with a fairly moderate labour market performance being recorded for the start of 2020. The culprit – the Australian government – which is starving spending by its obsessive pursuit of a fiscal surplus. Employment growth was weak – 0.1 per cent and failed to keep pace with the underlying population growth. As a result, unemployment rose by 31 thousand persons and the unemployment rate rose by 0.2 points. Hours worked fell by 0.45 per cent. The only bright spot was the rise in full-time employment. The really worrying sign was the rise in underemployment – sharply up by 0.3 points to 8.6 per cent. The total labour underutilisation rate (unemployment plus underemployment) rose sharply to 13.9 per cent (up 0.5 points). There were a total of 1,905.2 thousand workers either unemployed or underemployed. This is a deplorable result. My overall assessment is that the Australian labour market remains a considerable distance from full employment and that that distance is increasing. This persistence in labour wastage indicates that the policy settings are too tight (biased to austerity) and deliberately reducing growth and income generation. There is clear room for some serious fiscal policy expansion at present. The Federal government is willfully undermining our economy with its irresponsible policy position.

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British Labour seems to think that HM Treasury can dominate the elected politicians

It is Wednesday in Australia and my usual blog-light day to give me more time to write other things. Although, today (in Europe as I type) I had a long flight from Athens to Paris where I am speaking to the French Senate Commission at a reception this evening. I also had to leave Athens early, so when I reached Paris and found my hotel, I took off to the Jardin du Luxembourg for a 10kms run (laps of the grounds). My trip to Athens was very successful and I will be in a position to talk about that in the weeks to come once some work has been finalised and the plan developed. But today, I want to briefly comment on a story from the Guardian’s Larry Elliot (February 14, 2020) – PM’s Treasury power grab doomed to fail, warn former insiders – which reported that some Labour Party ‘insiders’ (aka gutless morons who won’t publicly take responsibility for spreading rumours) had determined that the current government ministers would not be able to win a power struggle against the powerful H.M. Treasury, who would withhold crucial information from the government to maintain their hegemony. What? The inference was that “the Treasury’s independence” – that is, in other, more accurate words, the right of unelected and unaccountable technocrats to impose their right-wing, neoliberal austerity ideology on the democratically-elected government – was a Labour ideal that should be preserved and that those awful Tories were trying to assert democratic control of its public service institutions.

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Japan national accounts – sales tax rise, growth collapses – as night follows day

In my blog post – Japan about to walk the plank – again (September 30, 2019) – I predicted that the decision by the Japanese government to increase the sales tax from 8 per cent to 10 per cent on October 1, 2010 would undermine non-government spending and growth and was totally unnecessary anyway. The government had fallen prey to the deficit terrorists who have been consistently bullying them into believing that their fiscal position is about to collapse and the bond markets would desert them. Funny that! The Bank of Japan has been buying the bulk of the public debt issued over the last several years anyway. The reality is that, given the instability of world conditions (US-China trade, European slowdown, Brexit, and, more recently, the Corona virus impacts), the Japanese government should have been increasing its fiscal deficit. Yesterday (February 17, 2020), the latest national accounts data from Japan tells us the damage that this policy folly has inflicted. Every time the Japanese government has hiked the sales tax (1997, 2014, 2019) real GDP growth has plummetted and pushed the economy into recession. In the final quarter of 2019, Japan’s growth rate slumped by an annualised 6.3 per cent, driven by a massive 11.1 per cent decline in consumption spending and capital investment decline of 14.1 per cent. Sure enough, Typhoon Hagibis was also a factor but it is undeniable that the sales tax hike was instrumental. The Spanish philosopher George Santayana had it in one when in his first volume (1905) of his book – The Life of Reason: The Phases of Human Progress – said: “Those who cannot remember the past are condemned to repeat it”.

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The Weekend Quiz – February 15-16, 2020 – 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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Eurozone 2020. Don’t mention the War!

I guess I cannot avoid commenting on the European Commission’s recently released (February 5, 2020) – Economic governance review – which, allegedly, “seeks to assess how effective the economic surveillance framework has been in achieving three key objectives: ensuring sustainable government finances and economic growth, as well as avoiding macroeconomic imbalances; … promoting convergence in Member States’ economic performance.” The short answer is that the framework has failed on all fronts. The Member State fiscal situations are always mostly teetering on the edge of insolvency and only the ECB has been bailing them out; macroeconomic imbalances that really matter, such as the on-going illegal German external surpluses persist, and divergence is the Eurozone norm. Why? Another simple answer: because the architecture of the currency union is deeply flawed and biases the economies to crisis and makes them vulnerable, in an existential sense, to fluctuations in global activity. Why would they have done that? Answer: the triumph of neoliberal ideology over reason.

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The Weekend Quiz – February 8-9, 2020 – 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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The old guard trying to stay relevant and failing

I am doing the Thursday is Wednesday trick again today, given that I posted Part 2 of my detailed response to enquiries about MMT and what I term the MMT Project yesterday, and that I have promised myself to use Wednesday’s for other writing. I am also quite busy in Helsinki today with commitments so only a short post today. So just a brief comment on the latest fiasco from ‘Mr Spreadsheet’ Kenneth Rogoff as he stares into the abyss of irrelevance and is trying to hand on like grim death to any shred of credibility. He has none. If he ever did, the spreadsheet scandal finished it. But he never did anyway.

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The Weekend Quiz – February 1-2, 2020 – 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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The Weekend Quiz – January 25-26, 2020 – 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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Australian labour market – full-time jobs shrink as quality of work falls

The Australian Bureau of Statistics released of its latest data today (January 23, 2020) – Labour Force, Australia, December 2019 – which continues to show that the Australian economy is in a weak state with a fairly moderate labour market performance being recorded for December 2020. The culprit – the Australian government – which is starving spending by its obsessive pursuit of a fiscal surplus. While unemployment fell by 0.1 points as a result of the employment growth, full-time employment also fell. So all the net job opportunities created were part-time which suggests that the quality of the overall employment mix has deteriorated. In the last six months, 74 per cent of net employment change has been in the part-time labour market. The broad labour underutilisation (unemployment plus underemployment) is at 13.4 per cent and has been stuck around that level for months. There is no dynamic – policy or otherwise – present, which will see this massive pool of available labour brought back into productive use anytime soon. That alone, is a indictment of failed policy. The unemployment rate is 0.6 percentage points above what even the central bank considers to the level where inflationary pressures might be sourced from the labour market. The Government is thus deliberately inducing deflationary tendencies into the economy and it is the workers that are bearing the brunt. My overall assessment is that the Australian labour market remains a considerable distance from full employment. This persistence in labour wastage indicates that the policy settings are too tight (biased to austerity) and deliberately reducing growth and income generation. There is clear room for some serious fiscal policy expansion at present. The Federal government is willfully undermining our economy with its irresponsible policy position. The impact of the bushfire crisis is likely to start being felt in next month’s figures.

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The Weekend Quiz – January 18-19, 2020 – 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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The Tories in Britain have a clear way forward – thanks to the Labour Party hacks

How things are changing. After the British election in December, the policy terrain in the UK has shifted such that the Tories are now being lectured to about the dangers of a stimulus package, while British Labour seems to be promoting leadership candidates that mostly were part of the problem that led to their failure. In the latter context, we are seeing King or, should I say Queen makers, who I would have thought were unelectable trying to influence the leadership choice. And former Labour advisors tweeting and what have you about what Labour should be doing when it was their advice that got the Party into the mess it is currently in. Meanwhile, the Tories have an almost open field to finish the first stage of the Brexit process off, and, secure the ongoing support of the voters that abandoned Labour in the election. The Tories will have restored sovereignty to Britain and freed themselves from the restrictive, neoliberal environment of the European Union. Now don’t get me wrong, I have no truck for the Tories. And all along, I considered that Brexit would deliver great outcomes for Britain in the hands of the Labour party as long as they simultaneously abandoned their neoliberal obsession with fiscal rectitude, as expressed by their ridiculous Fiscal Credibility Rule. Labour will now have to rue their ill-conceived abandonment of the Leave voters in favour of the cosmo Remainers. For now, the Tories have open slather – the worst of the outcomes possible. However, the only attenuating factor is that Boris Johnson is a smart operator and will be keen to ensure that the voters in the Midlands and the North remain Tory on an ongoing basis. That means he will have to do abandon the Tory austerity bias and invest billions into the regions that have been torn apart by his parties obsession with fiscal surpluses. That might, for a while, provide some good news for Britain.

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