I am reverting back this Wednesday to a shorter blog post to free up a bit more time to advance other writing projects. Here are some snippets on Germany and Italy that caught my eye this week. And a link to an essential video about Venezuela. And some music in a sad week (musically).
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.
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.
I decided to write an extended blog post today (Wednesday) because events in Italy are so interesting. My usual short post on a Wednesday will resume next week. George Soros is now saying that “everything that could go wrong has gone wrong” in Europe and a financial collapse is in the wind (Source). I doubt the latter but agree with the former assessment. All the flaws in the original neoliberal design of the Eurozone have been revealed and all the reasons why those flaws were created in the first place remain in place. Nothing has changed since 1977 when the MacDougall Report concluded that the cultural and national differences between the (then) Member States of the European Communities were too great to allow an effective monetary union to be created. That assessment and the earlier work of Pierre Werner in his 1970 Report were ignored as the neoliberals in France and Germany rushed headlong to Maastricht. France thought it would have a chance to dominate and Germany was distracted by unification but still firmly in charge of what would be allowed in the new monetary system and what would not. Now, one of the biggest nations – Italy – is is turmoil as the damage of being part of the Eurozone slowly but surely erodes its capacity to deliver anything remotely like prosperity and its social and political system starts to collapse. Italy must leave the Eurozone – the sooner the better. And, that will bring a reality check for the whole disaster and encourage other nations to push for an orderly dissolution.
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.
It is Wednesday and so I am only writing a few thoughts today for the blog, preferring to spend the day writing other more detailed academic material and doing final edits on our next Modern Monetary Theory (MMT) textbook (current publication date with Macmillan, November 2018). But I wanted to briefly reflect on the discussions over the last week about trade which seem to have sparked some emotion and disagreement. In particular, there has been a lot of misrepresentation of the MMT position and also a lot of mistaken reasoning. After that I will go back to listening to some post minimalist piano music.
Regular readers will recall that Thomas Fazi and I published an article in the Jacobin magazine (April 29, 2018) – Why the Left Should Embrace Brexit – which considered the Brexit issue and provided an up-to-date (with the data) case against the on-going hysteria that Britain is about to fall off some massive cliff as a result of its democratically-arrived at decision to exit the neoliberal contrivance that the European Union has become. There was an hysterical response on social media to the article, which I considered in this blog post a few days later – The Europhile Left loses the plot (May 1, 2018). In recent days, two British-based academics have provided a more thoughtful response in the Jacobin magazine (May 18, 2018) – Caution on “Lexit”. Here is a response which was co-written with Thomas. As a general observation, I noted some prominent progressive voices citing their attack on us enthusiastically, one even suggesting it landed “some good punches” after taking “a while to warm up”. Well, I can assure Andrew that my face (nor Thomas’s) was the slightest bit puffy after reading the critique.
I was going to write about the situation in Timor-Leste after its national elections were held on Saturday. But I will hold that over for another day as I get some more information. So today, I think we can learn a lot from an issue raised in the Bloomberg article (May 14, 2018) – Kuroda’s Stimulus Saves Japan $45 Billion, Easing Debt Pressures – which discusses the QE program in Japan and introduces several of the basic errors that mainstream financial commentators make when discussing these issues. The article traverses all the usual suspects including the misconception that numbers in official accounts are ‘costs’ to government and that smaller numbers in official accounts mean the government can put larger numbers in other accounts than it might have been able to. These articles are as pervasive as they are erroneous. Hopefully, as the precepts of Modern Monetary Theory (MMT) spread and are understood more journalists will endure scrutiny of the rubbish they write and the public commentary and debate will progress towards a more reasonable – realistic – appraisal of what is going on in the world of finance and money. This article is one of the worst I have read this year so far. And there have been some real terrors!
I have received many E-mails and direct twitter messages overnight and today following the ‘debate’ on Real Progressives yesterday, where trade issues and related financial transactions were discussed. I saw that section of the debate (after the fact) and concluded that only one of the guests knew what happened when nations exported and imported. But it appears that readers of this blog who listened to the debate were confused by what they heard. So, today, by request, I aim to clarify a few of these issues. They are in fact fairly simple to understand once you trace through the transactions carefully, so it is a surprise that basic errors were expressed in the ‘debate’. So here is the way Modern Monetary Theory (MMT) helps you understand trade transactions.
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.
One of the ways in which the neoliberal era has entrenched itself and, in this case, will perpetuate its negative legacy for years to come is to infiltrate the educational system. This has occurred in various ways over the decades as the corporate sector has sought to have more influence over what is taught and researched in universities. The benefits of this influence to capital are obvious. They create a stream of compliant recruits who have learned to jump through hoops to get delayed rewards. In the period after full employment was abandoned firms also realised they no longer had to offer training to their staff in the same way they did when vacancies outstripped available workers. As a result they have increasingly sought to impose their ‘job specific’ training requirements onto universities, who under pressure from government funding constraints have, erroneously, seen this as a way to stay afloat. So traditional liberal arts programs have come under attack – they don’t have a ‘product’ to sell – as the market paradigm has become increasingly entrenched. There has also been an attack on ‘basic’ research as the corporate sector demands universities innovate more. That is code for doing the privatising public research to advance profit. But capital still can see more rewards coming if they can further dictate curriculum and research agendas. So how to proceed. Invent a crisis. If you can claim that universities will become irrelevant in the next decade unless they do what capital desires of them then the policy debate becomes further skewed away from where it should be. That ‘crisis invention’ happened this week in Australia.
Australia is currently being shocked on a daily basis with the revelations in our Royal Commission on Banking, which show that our financial services sector (banks, insurance companies, financial planning, etc) is deeply corrupt, with criminal behaviour clearly rife. Hopefully, many of the top executives and board members of these firms will be prosecuted and do time. Another ‘bank’ that has totally lost any sense of moral compass, not to mention effectiveness, is the World Bank. Its behaviour over the years has been scandalous. Earlier this year we learned that its so-called ‘Doing Business’ strategy deliberately manipulated its reporting to undermine a democratically elected government (Chile). And, last week (April 26, 2018), the World Bank released the Working Draft of its upcoming – World Development Report 2019: The Changing Nature of Work – where it attempted to pressure governments into widespread labour market deregulation, which if carried through would further disadvantage workers and further redistribute national income towards profits. The World Bank has outlived its purpose. It is now a seriously dangerous international institution and progressive governments should set about defunding it.
My blog post last week – On the path to MMT becoming mainstream (April 17, 2018) – discussed the way in which the language and concepts that have been developed by the Modern Monetary Theory (MMT) authors are now permeating mainstream narratives and the media. While this has increased the pushback and hostility from both the Right and Left opposition to MMT, it is also a sign that the public understanding of the way in which the monetary system works and the policy options available to currency-issuing governments, is improving. Most recently, there is been a flurry in the US media discussing employment guarantees, which is a welcome relief from the previous saturation coverage of impoverished UBI ideas. It is fabulous, that at the policy level, the idea that the state can eliminate mass (involuntary) unemployment if it so chooses is becoming more acceptable. That’s down, in part, to the great work being done there by my MMT colleagues. There are also derivative public sector job creation proposals getting ‘airplay’ which I do not consider to be MMT-inspired nor are what I would call Job Guarantee initiatives, but which are still, to their credit, raising awareness of the need for the state to ensure there are sufficient jobs for all rather than dispatch citizens who are unable to find work to the unemployment queue. The push back is increasing and that is a sign that dissonance is being felt by the neoliberals who oppose the state taking responsibility for mass unemployment and using its fiscal capacity to render it a thing of the past. Many of the critics from the Left do not have the courage to come out and say they prefer the alternative to a Job Guarantee, which is entrenched unemployment. That leaves them carping away with no legs to stand on. The Right objections are venal as they always are – they want mass unemployment to persist to dampen wages growth and allow more real income to be captured by the top-end-of-town.
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.
It is Wednesday and just a brief comment on current affairs today. Tomorrow I will have Part 2 of my response to the German attack on Modern Monetary Theory (MMT). Nations more often and not claim to identify with a value system that is intended to bind the citizens together. It is a fine line between this and nationalism. The US for example, claims to be the land of the free, although that is a patently ridiculous thing to hold out given the nature of its society. Australia has long traded on the claim that it elevates sportspersonship, fairness, honesty above all else. In a sports’ obsessed nation, we hold ourselves out to be ‘fair but tough’. We play very hard – competitively – but honour sporting traditions. At times, this claim is at the sanctimonious extremes and we regularly criticise other sporting nations for what we perceive to be rule breaking – even rule stretching doesn’t escape our ‘holier than thou’ media and commentators. That myth has now been exposed. In fact, our most elevated national team – the Australian cricket team – has demonstrated that it stoops to deliberately conceived cheating (not spur of the moment) in order to win. And now these revelations are obvious, the national scandal that has followed, reveals how out of touch we have become with what has happened to our Society in this neoliberal era.
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.
I have been (involuntarily) copied into a rather lengthy Twitter exchange in the last week or so where a person who says he is ‘all over MMT’ (meaning I presume, that he understands its basic principles and levels of abstraction and subtlety) has been arguing ad nauseum that Modern Monetary Theory (MMT) proponents are a laughing stock when they claim that taxes and debt-issuance do not fund the spending of a currency-issuing government. He points to the existing institutional structures in the US whereby tax receipts apparently go into a specific account at the central bank and governments are prevented from spending unless the account balance is positive. Also implicated, apparently, is the on-going sham about the ‘debt ceiling’, which according to the argument presented on Twitter is testament to the ‘fact’ that government deficits are funded by borrowings obtained from debt issuance. I received many E-mails about this issue in the last week from readers of my blog wondering what the veracity of these claims were – given they thought (in general) they sounded ‘convincing’. Were the original MMT proponents really overstating the matter and were these accounting arrangements evidence that in reality the government has to raise both tax revenue and funds from borrowing in order to deficit spend? Confusion reigns supreme it seems. Once one understands the underlying nature of the financial flows associated with government spending and taxation, it will become obvious that the argument presented above is superficial at best and fails to come to terms with the basic questions: where do the funds come from that we use to pay our taxes and buy government debt? Once we dig down to that level, the matter resolves quickly.
I have noted before that when someone asks me where I come from I immediately (and innately) respond Australia. If questioned further I might tell them I grew up in Melbourne, Victoria. Sure enough, I am a Victorian (with some of the cultural attachments that that denotes) but that affiliation is weak compared to my nationality. That doesn’t make me a xenophobe or a nationalist. It just says I am culturally from that geographic area. If I ask my friends from Italy, Spain, France, the UK, Germany, Belgium, Netherlands, Finland, Norway, etc the same question, they will answer they are from those nations. They never immediately respond by saying they are European. I can get them to say they are European but that is not their innate cultural association. The point is that there is really no such thing as a European citizen. They are all citizens of their individual Member States with little shared culture and quite diverse histories (not to mention languages etc). An interesting study came out from European economics think tank Bruegel last week (February 15, 2018) – Tales from a crisis: diverging narratives of the euro area – highlights the consequences of these differences and concludes that it makes “for an extremely challenging context within which to conduct a uniform monetary policy across different countries”. I would add economic policy in general to that assessment.
A few things came up late last week which demonstrate the neoliberal Groupthink is alive an well at the highest levels of policy in Australia (and elsewhere). First, there was a story that a report from an Australian Broadcasting Commission (ABC) journalist on the Australian government’s corporate tax cuts was withdrawn after publication by the ABC after receiving several complaints from senior government ministers including the Treasurer and the Prime Minister. The story was not even radical. The journalist who I have had dealings with is a neoliberal herself when it comes to understanding macroeconomics. Second, one of the claims that the neoliberals make is that central banks are now firmly independent and not part of the political process. This is all part of the depoliticisation process whereby governments absolve themselves of political responsibility for policies that harm the citizens by appealing to ‘independent’ external authorities (such as the IMF, or central banks). Well we know that the claim about central bank independence is not true both in terms of the way the monetary system operates but also in the conduct of various central bankers over the last few decades. Last week, the Reserve Bank of Australia governor once again demonstrated how politically independent he is NOT by invoking key mainstream neoliberal myths about deficits and grandchildren. And then an old hack and largely failed British Labour politicians got in on the act. The Groupthink is powerful but becoming increasingly desperate under the increasing pressure from citizens for more accountability.
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.