Welcome to The Weekend Quiz. The quiz tests whether you have been paying attention or not to the blog posts that I post. See how you go with the following questions. Your results are only known to you and no records are retained.
The Australian Bureau of Statistics (ABS) released of the latest labour force data today (December 15, 2022) – Labour Force, Australia – for November 2022. The labour market continued to improve in November 2022 with employment rising relatively strongly by 64,000 (0.5 per cent) on the back of strong full-time and part-time employment growth. The participation rate also rose by 0.2 points, which meant the change in the labour force was larger than the change in employment, and as a consequence, official unemployment rose. There is some evidence that more people are taking on extra work to cope with the cost-of-living pressures. While all this suggests a fairly tight labour market, the underlying (‘What-if’) unemployment rate is closer to 5.1 per cent rather than the official rate of 3.4 per cent. There are still 1,325.5 thousand Australian workers without work in one way or another (officially unemployed or underemployed). The only reason the unemployment rate is so low is because the underlying population growth remains low after the border closures over the last two years. But that is changing as immigration increases.
It’s Wednesday, and I have two things to write about briefly before exposing readers to some more music. First, the evidential base for my ‘this inflationary period is transitory’ narrative gains more weight. The latest CPI data from the US Bureau of Labor Statistics shows that inflation has peaked in the US and falling rapidly in the goods sector, which started this episode off. The second topic relates to measuring progress in the development and spread of new ideas. It is often difficult to know how far a new framework has penetrated the broader debate. But sometimes things happen that remind me of how far we have to go in changing the framing and language surrounding fiscal capacity and the related topics, that Modern Monetary Theory (MMT) has brought to the fore. We finish with some calming guitar playing.
We kid ourselves when talking about change. I see a lot of Op Ed material recently from the so-called Left that seems to suggest, for example, that those concerned about climate change are really just handing the keys to capital who will use the appetite for ‘change’ to impose punitive policy shifts that will damage the poorer households and communities, while at the same time, strengthen the elite control over income distribution and governments. There are elements on the Left that also think we can ‘heal’ Capitalism – somehow by redefining what ‘capital’ means. This morphs into an assertion that the major problem is that private banks can create credit at will such that we have allowed ‘allowed the credit commons to be privatised’, which in turn drives an unsustainable need for growth to continue to pay interest. I will comment more on that idea in another post – as part of my Degrowth series. But the relevant point here is that Capitalism has created institutions that work to perpetuate the power relations that define who owns capital. These institutions extend to the multi-lateral, government funded organisations such as the IMF and the World Bank, who now function quite differently to the way they were originally conceived. I was thinking about that while reading the latest World Bank publication – International Debt Report 2022 (released December 6, 2022) which captures what is really wrong with Capitalism and leads one to conclude that ‘healing’ requires killing the patient!
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.
Welcome to The Weekend Quiz. The quiz tests whether you have been paying attention or not to the blog posts that I post. See how you go with the following questions. Your results are only known to you and no records are retained.
In discussions about the significant differences that we have observed over the last 30 odd years between the conduct of economic policy in Japan and elsewhere, the usual response from mainstream economists, when challenged to explain the outcomes in the former nation, is that it is ‘cultural’ and cannot be applied elsewhere. I always found that rather compromising because mainstream economics attempts to be a one-size-fits-all approach based on universal principles of maximising human behaviour. So, by admitting ‘cultural’ aspects to the discussion, this is tantamount to admitting that the ‘market-based’ micro founded approach to macroeconomics is incapable of explaining situations. That is the first black mark against the veracity of mainstream theory. But when one prods further, it becomes clear that the term ‘culture’ is fairly vacuous and blurred in this defense of the mainstream framework. I respond by pointing out that essentially the monetary system dynamics in Japan are identical to the way the system works elsewhere. The institutions might have subtle variations but essentially the operations are so similar that the ‘culture’ bailout doesn’t help resurrect the appalling lack of predictive accuracy when it comes to examining the macroeconomics of Japan. Cultural aspects, however, are crucial to understanding the differences. The trick is understanding how these monetary and fiscal institutions are managed. This is where the cultural aspects impact. And, while I have learned a lot about Japanese cultural nuances, some of the more important ‘cultural’ drivers are transportable to any nation – if only we cared enough and valued people in the same way.
The Australian Bureau of Statistics released the latest – Australian National Accounts: National Income, Expenditure and Product, September 2022 – today (December 7, 2022), which shows that the Australian economy grew by 0.6 per cent in the September-quarter 2022 and by 5.9 per cent over the 12 months to the end of September 2022. Growth is being driven largely by continued growth in household spending (which has not yet succumbed to the cost of living squeeze exacerbated by the interest rate rises). There was a modest contribution from private capital formation. The terms of trade declined sharply signalling a negative contribution from net exports and declining real net national living standards. There was growth in employee compensation (the wage measure from the national accounts) of 3.2 per cent but that was largely due to administrative decisions (for example, minimum wage increases) that impacted in this quarter rather than being the result of market pressures.
Now I am back in Australia for a while, I am using this time to continue my studies in the Japanese language to better prepare myself for when I return there to work in 2023. I have to learn 2056 Kanji characters for a start. So unless there is some major issue that has to be dealt with on a Tuesday, my blog will be silent on Tuesdays from now on.
Last Friday (December 2, 2022), the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – November 2022 – which suggested that the US labour market showed signs of slowing further, with payroll employment growing by just 263,000 net jobs. The labour force measure showed employment and labour force growth turning negative as the participation edged down. The result was that the official unemployment rate remained largely unchanged – with both the demand and supply side falling in proportion. The quit rate is stable which suggests that the US labour market is in a sort of holding pattern – slowing weakening but not consistent with the Federal Reserve type narratives. There are also no fundamental wage pressures emerging at present to drive any further inflation spikes. Wages growth appears to be reactive to inflation rather than propelling it. Wages growth appears to be reactive to inflation rather than propelling it. The claim that wage pressures are now pushing inflation is untenable given the data.