Welcome to the Billy Blog Saturday Quiz. The quiz tests whether you have been paying attention over the last seven days. See how you go with the following questions. Your results are only known to you and no records are retained.
I am now using Friday’s blog space to provide draft versions of the Modern Monetary Theory textbook that I am writing with my colleague and friend Randy Wray. We expect to complete the text by the end of this year. Comments are always welcome. Remember this is a textbook aimed at undergraduate students and so the writing will be different from my usual blog free-for-all. Note also that the text I post is just the work I am doing by way of the first draft so the material posted will not represent the complete text. Further it will change once the two of us have edited it.
Today’s release by the Australian Bureau of Statistics (ABS) of the Labour Force data for September 2012 reveals a labour market that is weak and failing to produce jobs to match the pavce of the underlying population growth. Many commentators are suggesting today’s figures are not that bad – but that just shows how far we have lowered our expectations of what good is. It is unambiguously bad when an economy that is meant to be in the throes of the once-in-a-hundred-years mining boom cannot even generate employment growth to match the population growth. It is true that participation rose this month which added to the rise in unemployment. But the trend performance of the labour market is flat and these monthly shifts are fluctuating around that flat trend. The data is not consistent with any notions that the Australian labour market is booming or close to full employment. The most continuing feature that should warrant immediate policy concern is the appalling state of the youth labour market. My assessment of today’s results – worrying with further weakness to come. The government has no case to make for its pursuit of a budget surplus in the next fiscal year.
As a researcher one learns to be circumspect in what one says until the results are firm and have been subjected to some serious stress testing (whatever shape that takes). This is especially the case in econometric analysis where the results can be sensitive to the variables used (data etc), the form of the estimating equation(s) deployed (called the functional form), the estimation technique used and more. If one sees the results varying significantly when variations in the research design then it is best to conduct further analysis before making any definitive statements. The IMF clearly don’t follow this rule of good professional practice. They inflict their will on nations – via bullying and cash blackmail – waving long-winded “Outlooks” or “Memorandums” with all sorts of modelling and graphs to give their ideological demands a sense of (unchallengeable) authority before they are even sure of the validity of the underlying results they use to justify their conclusions. And when they are wrong – which in this case means that millions more might be unemployed or impoverished – or more children might have died – they produce further analysis to say they were wrong but we just need to do more work. So who is going to answer for their culpability?
Day 2 in Darwin – hot – but back to business. Thanks for all the nice remarks. The IMF once again demonstrated why their entire public funding should be withdrawn by the contributing governments, who could spend it more usefully introducing direct job creation schemes. Once again they have downgraded their growth forecasts as if the situation has changed from when they last told us what they thought would happen. Nothing has changed except the IMF have worked out their previous forecasts were wrong. But then they could never have been right given the policy agendas that the IMF and its repressive partners (such as the EC and the ECB) are pushing on nations that deserve better. More generally, the failure of the IMF to produce reliable estimates is linked to the overall misunderstanding of the relative roles of fiscal and monetary policy that exists among commentators and economists. The neo-liberal dislike of fiscal policy skews the debate towards thinking that monetary policy will save the day. Unfortunately, an understanding of how monetary works and the current problem would not lead one to that conclusion. Only a significant renewed fiscal policy stimulus will arrest the decline towards recession. The IMF has one thing correct – the world economy is backsliding. But then we knew that a long time ago while they were still trumpetting the virtues of fiscal austerity and solid growth prospects.
Here are the answers with discussion for yesterday’s quiz. The information provided should help you understand the reasoning behind the answers. 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 Billy Blog Saturday Quiz. The quiz tests whether you have been paying attention over the last seven days. See how you go with the following questions. Your results are only known to you and no records are retained.
I am now using Friday’s blog space to provide draft versions of the Modern Monetary Theory textbook that I am writing with my colleague and friend Randy Wray. We expect to complete the text by the end of this year. Comments are always welcome. Remember this is a textbook aimed at undergraduate students and so the writing will be different from my usual blog free-for-all. Note also that the text I post is just the work I am doing by way of the first draft so the material posted will not represent the complete text. Further it will change once the two of us have edited it.
Yesterday, the Australian Bureau of Statistics published the August 2012 data for – International Trade in Goods and Services, Australia – which provided further evidence that the so-called once-in-a-hundred years mining boom that was meant to bring employment security and strong growth for years to come is waning – and quickly. Today’s retail sales figures are also in this vein. The Treasurer continued his bluster that they had to go for a surplus. And a prominent (former) banker came out and claimed the surpluses should be bigger – even though the economy is going backwards and non-government spending is incapable of supporting strong growth. He thinks were are on the path to Athens. He thought we could easily become Greece. When you think about it the transition from Australia to Greece is within the limits of human idiocy.