The Weekend Quiz – October 1-2, 2016 – 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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Is there a case for a basic income guarantee – Part 4 – robot edition

This is Part 4 in the mini-series discussing the relative merits of the basic income guarantee proposal and the Job Guarantee proposal. It is the ‘robot edition’. The march of the robots is the latest pretext that basic income proponents (including the IMF now) use to justify their policy advocacy. There is some truth in the claims that the so-called ‘second machine age’, marked by the arrival of robots, is not only gathering speed, but is different from the first period of machine development with respect to its capacity to wipe out human involvement in production. But the claims are somewhat over the top. Further the claims that these trends are inevitable are in denial of the basic capacities of the state to legislate in the common interest. While the innovations in technology will free labour from repetitive and boring work and improve productivity in those tasks, there is no inevitability that robots will develop outside the legislative framework administered by the state and overrun humanity (even if the predictions of robot autonomy are at all realistic). We will surely need to develop a coherent adjustment framework to allow these transitions to occur equitably and where they are not possible (due to limits on worker capacity) alternative visions of productive work are developed?
Further, the Job Guarantee is a better vehicle for handling these type of transitions and creating new forms of productive work. Adopting a basic income guarantee in this context just amounts to surrender.

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Work is important for human well-being

I am now in Kansas City for the next several days, so blogs might come at odd times. I am getting close to finalising the manuscript for my next book (this one with co-author, Italian journalist Thomas Fazi) which traces the way the Left fell prey to what we call the globalisation myth and started to believe that the state had withered and was powerless in the face of the transnational movements of goods and services and capital flows. Accordingly, social democratic politicians frequently opine that national economic policy must be acceptable to the global financial markets and compromise the well-being of their citizens as a result. In Part 3 of the book, which we are now completing, we aim to present a ‘Progressive Manifesto’ to guide policy design and policy choices for progressive governments. We also hope that the ‘Manifesto’ will empower community groups by demonstrating that the TINA mantra, where these alleged goals of the amorphous global financial markets are prioritised over real goals like full employment, renewable energy and revitalised manufacturing sectors is bereft and a range of policy options, now taboo in this neo-liberal world, are available. One proposal that seems to have captivated so-called progressive political forces is that of the need for a basic income guarantee. As regular readers will know I am a leading advocate for employment guarantees. I consider basic income proposals to represent a surrender to the neo-liberal forces – an acceptance of the inevitability of mass unemployment. In that sense, the proponents have been beguiled by the notion that the state can do nothing about the unemployment. It is curious that they think the state is thus powerful enough to redistribute income. I also consider basic income proposals demonstrate a lack of imagination of what work could become and a very narrow conception of the role of work in human well-being. This blog will be the first in several (probably about four) where I sketch the arguments that will be developed (but more tightly edited) in the final manuscript.

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The Weekend Quiz – August 27-28, 2016 – 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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Modern Monetary Theory – what is new about it? – Part 2 (long)

In yesterday’s Part 1 of this two-part blog – Modern Monetary Theory – what is new about it? – I introduced the idea that a major new contribution of Modern Monetary Theory (MMT) to economic theory was in its treatment of inflation and the Phillips curve. This is part of a keynote presentation I will be giving at the International Post Keynesian Conference – which will be held at the University of Missouri – Kansas City between September 15-18, 2016. The keynote presentation is scheduled for Friday, September 16 at 17:00. The topic of my keynote presentation will ‘What is new about MMT?’ and will challenge several critics from both the neo-liberal mainstream and from within the Post Keynesian family that, indeed, there is nothing new about MMT – they knew it all along! I contest that when they say this they are lying and doing so to cover up the inadequacies of their own failed analytical frameworks whether they be mainstream or Post Keynesian.

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The Weekend Quiz – August 13-14, 2016 – 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 – August 6-7, 2016 – 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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Reforming the international institutional framework – Part 1

This blog continues the unedited excerpts that will appear in my new book (with Italian journalist Thomas Fazi) which is nearing completion. This material will be in Part 3 where we present what we are calling a ‘Progressive Manifesto’, which we hope to provide a coherent Left philosophy to guide policy design and policy choices for governments that are struggling to see a way beyond the neo-liberal macroeconomics. In this blog I examine how the international institutional framework has to be reformed to serve a progressive agenda where rich countries (and the elites within them) do not plunder then pillary poor countries. Central to this new framework is the abolition of the World Bank, the IMF and the OECD, all of which have become so sullied by neo-liberal Groupthink that they are not only dysfunctional in terms of their original charter but downright dangerous to the prosperity and freedoms of people. Former World Bank chief economist Joseph Stiglitz told journalist Greg Palast in an interview in 2001 that the IMF “has condemned people to death” (Source). I will propose a new international institution designed to protect vulnerable nations from damaging exchange rate fluctuations and to provide investment funds for education, health and public infrastructure. We will explore how new institutions protect themselves from developing the sort of dysfunctional Groupthink that has crippled the existing institutions. We will disabuse ourselves of notions that are popular among some progressive voices that a fixed exchange rate, international currency system is required. This will be a two part blog and will also have context for other blogs where I discuss reforms to the global financial system.

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Growth outlook deteriorating – and don’t blame the Brexit vote

Last week, National Accounts data for the June-quarter 2016 was published for the US and the Eurozone and we learned that the next slowdown is happening now, even though neither economy has yet fully recovered from the last downturn (the GFC). Data from the UK is similarly poor, which suggests to me that the Brexit hoopla (where everything bad is blamed on the Exit vote success) is misplaced. In the case of the US, there is now a marked slowdown underway and the growth rate has been in decline since the March-quarter 2015. Private consumption expenditure remained strong and there was a substantial decline in the personal saving ratio as households spent a much higher proportion of their disposable incomes to fund their growing consumption. The other standout result was the decline in Private capital formation (investment), for the third consecutive quarter and the fact that its rate of decline is accelerating signals a lack of confidence in the medium-term outlook by business firms. The government sector also undermined growth in the June-quarter 2016. With inflation still well below the implicit central bank target rate (2 per cent) and growth is faltering the outlook suggests that the federal government will need to increase its discretionary fiscal deficit to stimulate confidence among business firms and get growth back on track.

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The case for re-nationalisation – Part 2

There was an interesting article written in the London Review of Books (September 13, 2012) by regular contributor James Meek in – How We Happened to Sell Off Our Electricity (you need to subscribe to read it). It discussed how the obsession with privatisation in Britain, which was meant to reduce state control of this sector, has led to the state still being dominant in electricity production. The only problem for the British is that the French government now owns a large swathe of the ‘privatised’ British electricity industry. The outcome demonstrates the absurdity of the whole privatisation debate. This example is not unique. State-owned enterprises have eaten up inefficient privately owned firms all around the world as governments sell off public assets in the belief that prices will fall, services will improve and costs will be lower. The reality now some 35 years or so into the privatisation experiment is that none of these claims have been realised. In many cases, costs are higher and the privatised firms rely on higher public subsidies than was the case when the operations were completely in public hands. Prices are no uniformly lower after privatisation. Profit-seeking firms seek to gain by cutting costs and under investing in essential infrastructure, which leads to poor outcomes for Society (blackouts, poor repair times etc). And, millions of jobs have been lost in this cost-cutting mania. As a result, we argue that a ‘Progressive Manifesto’ must include the case for re-nationalisation of many sectors, which are intrinsic to advancing the well-being of Society. Progressive parties should start researching and demonstrating how this policy will take us into the next century where green, sustainable production is the norm and there are high levels of public service available from these key sectors, rather than allow critics to argue that the re-nationalisation agenda is just a return to the dark old days of inefficient state enterprises where cronyism, nepotism and corruption was rife.

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Irish national accounts – smoke and mirrors really

Last week (July 12, 2016), the Irish Central Statistics Office published updated – National Income and Expenditure Annual Results – which revealed that between 2014 and 2015, the economy grew by a staggering 26.3 per cent (while the implied inflation rate was 6.1 per cent – difference between GDP at current prices and GFP at constant (2014) prices). They had earlier estimated (based on incomplete data) that real GDP would grow by 7.8 per cent between 2014 and 2015. So quite a difference. In expenditure terms, the CSO, estimated that “exports grew by 34.4%” and “Gross physical capital formation” grew by 26.7 per cent between 2014 and 2015. Over the last several months, I have received many unsolicited E-mails from people I don’t even know, suggesting I might bring my blog to an end because I am quite obviously incompetent. The reason: I maintain that Ireland is not a poster child for austerity. So do these startlingly positive National Accounts data suggest that my critics are on the ball. Does it prove that that austerity has turned Ireland around. Well, it doesn’t prove anything of the sort. What it actually ‘proves’ is the familiar proposition that if you add something large to something small and express the change in percentage terms the result will be large. That is what the latest national accounts results demonstrate. A closer examination of the results then tell you what that ‘large’ thing is, which leaves one to conclude that Ireland hasn’t made very much progress at all. Okay, so you can now stop sending me E-mails lecturing me about how stupid I am and look in public! Thanks.

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Towards a progressive concept of efficiency – Part 1

Before I present the second part of my discussion about the relevance of re-nationalisation to what I would call a truly progressive policy agenda, we have to take a step backward. I note after the first part – Brexit signals that a new policy paradigm is required including re-nationalisation – there were a few comments posted (and many more E-mails received – apparently readers are happier berating me personally rather than putting their ideas out in the public domain) that I was advocating a return to the ‘bad’ old days of nationalisation where cronyism, inefficiency and trade union bastardry were the norm. The obvious next point was – how can I claim that is progressive and part of the future. In this two part blog (the second part will come tomorrow), I offer a framework for assessing these claims. Today’s blog foscuses on the neo-liberal vision of efficiency and reveals how narrow and biased towards private profit it is. In Part 2 (tomorrow) I will present the progressive vision and how it conditions the way we think of efficiency. Once we break out of the neo-liberal constructs and refocus our attention on Society rather than the individual then the way we appraise policy options also changes – it becomes enriched with new possibilities and understandings. We enter the progressive world and leave behind the austerity nightmare that neo-liberalism has created. We are then able to see how our old conceptions of nationalised industries or public sector job creation are tainted with these neo-liberal biases. And we are then able to see how policy initiatives that invoke scorn from the conservatives and many so-called modern progressives (obsessed with post modern constructs) have a vital role to play in a truly progressive manifesto. I split the discussion into two parts because the blogs are too long as they are.

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The Weekend Quiz – July 9-10, 2016 – 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 Italian bank crisis – another Eurozone mess

So several investment funds based on real estate in the UK have suspended trading to stop people withdrawing their funds. Who would have thought that in a vastly overvalued UK property market that people would start to reassess the value of these investments, especially after working out (gosh!) that the mismatch in maturities in these type of funds was more or less extreme? And so the Leave vote is now being blamed on crashing a market when all that is happening is that the real estate market is starting to correct back to something less ridiculous. And talking about ridiculous. The Italian government is now coming headlong into conflict with the, now ridiculous, European Commission on the impending crash of its zombie banking sector. You might have thought we were still back in 2008 or something. No folks, this is 2016 and the Eurozone problems just keep on going. The Italian banking crisis was always going to happen – it was just a matter of when. Why? Simply because the single currency experiment has failed and the policy making process and the institutional machinery is so detached from reality – as in all cases of Groupthink – that it can no longer respond in an effective way to changing circumstances. The Eurozone is still crippled by its flawed monetary design and in more recent years the migrant issue has come over the top to reinforce this malaise. The Brexit vote outcome reflects the consequences of this dysfunction and demonstrates that a world contrived by the elites to benefit themselves is not the world of reality where things have a habit of turning sour if the rest of us are suppressed.

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The British Left is usurped and IMF austerity begins 1976

We left the trail last time with James Callaghan telling the British Labour Party Annual Conference on September 28, 1976 that governments can no longer spend their “way out of a recession” and that the Keynesian approach was an option that “no longer exists”. He even suggested that the Keynesian approach to stabilising economic cycles was never valid. Meanwhile, his Chancellor, Denis Healey, by then convinced that Monetarist had validity, was working behind the scenes at the Conference to duchess or beat his colleagues in submission and accept the TINA approach to bringing in the IMF. They worked hard to construct the situation as a crisis of massive proportions although much of the ‘crisis’ was the result of their extreme reluctance to allow the pound to depreciate, to impose capital controls to stop the non-productive speculative outflows that were causing the currency to drop in value, and to accept that in the Post Bretton Woods era they no longer had to match their fiscal deficits with private debt issuance. But in doing so, the British government effectively created their own ‘funding’ crisis. Things came to a head in November 1976 within the Labour Cabinet, which was still deeply divided over the IMF issue. We finish this analysis of Britain and the IMF today by tracing events at the end of 1976 before providing a general summation of what it was all about.

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Why the Leave victory is a great outcome

The class struggle is back! Who would have thought. After years of being told by the likes of John Major and then Tony Blair that “the class war is over” (Blair) and the we now all live in “the classless society” (Major) the working class has fought back, albeit under the motivation of the looney, populist Right rather than a progressive left, who remain a voice for capital. Remember when we were told that the Left-Right continuum was irrelevant now in this global world where nation states had given way to grand communities (like the EU) and that, in this new post-modern world, we could all be entrepreneurs (meaning we sell our labour to a capitalist!). And now we know that class never went away. It might have been hi-jacked by the Right but it is there – and it is powerful. Planet Earth to British Labour – do something about it or wither away and make way for a progressive new organised working class movement.

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The Weekend Quiz – June 18-19, 2016 – 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 European Commission and ECB outdo themselves in their quest for absurdity

As the years have passed, I have become inured to the depths of absurdity that the European Commission and the political elites its nurtures go to justify their existence. The Maastricht exercise in the late 1980s and early 1990s was comical. The convergence process towards Phase III of the Economic and Monetary Union in the 1990s was established a new norm for craziness. Who would believe the stuff that went on. Then the Goldman Sachs fiddle to allow Greece to enter the Eurozone two years later than the rest. What! Then the Stability and Growth Pact fudges in 2003 when Germany (and France) were clearly in violation of the rules they had bullied the other Member States into accepting. Look the other way and whistle! Then the GFC and the on-going mess. By now the Commission and the Council were outdoing themselves in pursuing absurdity. It was a pity that millions of innocent citizens have had their lives wrecked through unemployment and poverty as a result. And, now, perhaps, this lot have exceeded their own capacity for nonsense. I refer to the latest Convergence Reports published by the European Commission and the European Central Bank. Hypocrisy has no limit it seems. The Eurozone and EU is now firmly entrenched in austerity and deflation and the policy makers think that is the desirable benchmark for others to aspire to. Who could have invented this stuff! And, in relation to the upcoming vote in Britain – how the hell would any reasonable citizen want to be part of this sham outfit (EU) if they had a choice.

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The British Cabinet divides over the IMF negotiations in 1976

This blog continues the discussion of the British currency crisis in 1976. Today we discuss the growing discontent within the British government over the need to negotiate the IMF loan in 1976. While it has been held out that Britain had no alternative but to impose austerity and allow the IMF to dictate policy, the fact is that an alternative was proposed which would have been a superior option.

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ECB’s expanded asset purchase programme – more smoke and mirrors

On January 25, 2015, the press release heading read – ECB announces expanded asset purchase programme. The ECB had decided to ramp up its quantitative easing (QE) program by adding “the purchase of sovereign bonds to its existing private sector asset purchase programmes in order to address the risks of a too prolonged period of low inflation”. We now have sufficient data to assess what has been going on under this program, and specifically under the public sector purchase programme (PSPP) components (one of three parts to the overall policy initiative). The conclusion is that the scheme has had very little impact on growth and inflation – which is no surprise. However, the pattern of purchases makes it clear that the ECB and the relevant National Central Banks (NCBs) have been engaged in a fiscal operation which has provided extensive debt relief to all Member States other than Greece. This is a demonstration of the European institutions once again engaging in smoke and mirrors (pretending to be operating within the ambit of the Treaties but openly doing the opposite) and behaving belligerently towards one nation (Greece) to ensure it stays subjugated.

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