Latest Europhile advocacy beggars belief – surrender sovereignty to regain it

Today, I have a lot of travelling coming up. So time is tight. Regular readers will know my views on the Eurozone. I have held those views since the late 1980s when I was a young lecturer. Nothing has changed to change my opinion. It is an unmitigated disaster. And, in the face of all evidence to the contrary, the Europhiles on the Left and the Right continue to put out propaganda trying to defend their monstrosity. Here is a selection of the latest input from the elites on how the EU is the salvation of democracy and sovereignty and yet Eurozone Member States are to be treated like high risk car drivers – paying more for a pittance of fiscal protection from the technocrats. It really beggars belief.

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Basic income guarantee progressives cosy up with the worst CEOs in the world

A short blog post today (Wednesday and all). I am working on the revisions to our Modern Monetary Theory (MMT) textbook that will be published by Macmillan-Palgrave in November 2018. We have all the editorial and external reviews available now and are working through the editorial process to complete the final version. Mostly clarifications and style issues. There will be a slight rearrangement of chapter order and emphasis but nothing major. In the meantime, some thoughts on UBI and some music for today. A more detailed blog post will come along tomorrow.

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My response to a German critic of MMT – Part 3

This is the third (and final) part of my response to an article published by the German-language service Makroskop (March 20, 2018) – Modern Monetary Theory: Einwände eines wohlwollenden Zweiflers (Modern Monetary Theory – Questions from a Friendly Critic) – and written by Martin Höpner, who is a political scientist associated with the Max-Planck-Institut für Gesellschaftsforschung (Max Planck Institute for Social Research – MPIfG) in Cologne. Today, we will discuss inflation and round up the evaluation of his input to the debate. The overriding conclusion is this. As a researcher, I am instinctively driven to dig deep before I make public comment. It is easy to think you have an idea that is novel and then venture forth with it. One usually finds, fairly quickly, once you start digging into the literature, that the idea is anything but novel. Modern Monetary Theory (MMT) has been around for around 25 years now (give or take) but has really only gained traction in this era of social media (blogs, tweets, YouTube, etc). Many of the issues raised in the Makroskop article have been covered extensively over the last 25 years. Many academic and non-academic articles have been written by us on these issues. Thus, if my response here is not sufficient, then I urge readers to consult the massive literature we have built up for further clarification.

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The Weekend Quiz – March 31-April 1, 2018 – 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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Neoliberalism corrupts the core of societal values

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.

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Corporate Australia – the mendicants who want more!

Over the last few months, we have had the Australian Treasurer clogging up the media with his relentless claims that Australia has no choice but to cut corporate tax rates to keep up with the rest of the world (this is after Donald Trump started the ball rolling). The Federal government is trying to eliminate the resistance in the Senate (Upper House) to their proposal to cut corporate rates from 30 to 25 per cent. The Treasurer is a really pathetic figure – a non-economist, mouthing platitudes over and over about matters that he has little understanding and which the research evidence doesn’t support anyway. Then, last week, the ultimate public purse dependents, big business sent the members of the Senate a letter (a sort of blackmail letter) claiming if the Senators stopped blocking the legislation, then their corporations would go on an investment, wage increasing, employment creating binge. It was sickening to read and listen to. These mendicants are trying to convince us that the only thing stopping an investment boom or wage increases is a 5 cents in the dollar tax impost that tax data reveals many of them don’t pay anyway. It was hypocrisy parading as blatant self-interest. These characters have no shame.

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My response to a German critic of MMT – Part 1

Makroskop is a relatively new media publication in Germany edited by Heiner Flassbeck and Paul Steinhardt. It brings some of the ideas from Modern Monetary Theory (MMT) and other analysis to German-language readers. It is not entirely sympathetic to MMT, differing on the importance of exchange rates. But it is mostly sympathetic. I declined to be a regular contributor when invited at the time they were starting the publication not because I objected to their mission (which I laud) but because their ‘business model’ was a subscription-based service and I consider my work to be open source and available to all, irrespective of whether one has the capacity or the willingness to pay. But I have agreed to contribute occasionally if the material is made open source, an exception to their usual material. Recently, the editors approached me to respond to an article they published from a German political scientist – Modern Monetary Theory: Einwände eines wohlwollenden Zweiflers or in English: Modern Monetary Theory – Questions from a Friendly Critic. The article constitutes the first serious engagement with MMT by German academics and thus warrants attention. Even if you cannot read German you will still be able to glean what the main issues raised in the German article were by the way I have written the English response. The issues raised are of general interest and allow some key principles of MMT to be explicated, which explains why I have taken the time to write a three-part response. Today is Part 1.

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The Weekend Quiz – March 24-25, 2018 – 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 – subdued and weaker in 2018

The latest labour force data released today by the Australian Bureau of Statistics – Labour Force data – for February 2018 shows that the Australian labour market labour market has weakened at the start of 2018. Employment growth was again very modest in February 2018 and participation only marginally rose. The rise in unemployment was due to employment growth failed to keep up with the underlying population growth although the slight uptick in participation exacerbated this a bit. The teenage labour market stood still although this cohort did participate in the overall full-time employment growth. Further, underemployment rose marginally as did the broad labour underutilisation rate in the three months to February 2018. Overall, my assessment is that the Australian labour market has a lot of slack remaining. It is not close to full employment yet.

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Donald Trump’s tariff hikes are not good policy

I am generally not in favour of trade protection. I grew up in a country that had very extensive protection (tariffs, import quotas) on manufacturing goods, which was justified on a number of grounds – capacity to shift to defense industries; stable employment; and more abstractly, an expression of becoming a ‘modern’ nation, leaving our agrarian roots behind. The initial move to impose high tariffs was that a young industry would take time to develop – the so-called infant industry argument, which goes back to the 1790 Report on Manufactures written by American economist Alexander Hamilton. The problem is that the infant never really grew up and the tariffs just became a cosy rent-sharing margin for unions and multinational corporations. Meanwhile consumers paid excessive prices for deficient-quality motor vehicles (among other products). It is clear that as trade opens up there are workers and regions that lose – and lose badly. The answer is not try to reinvent the past through protection. Rather, it is to use the government’s fiscal capacity to create new opportunities in these regions to ensure that workers disadvantaged by import competition can transit into new jobs with stable incomes. That option is often overlooked because modern governments have become obsessed with austerity. And, as I argue below, that obsession will in the context of Donald Trump’s tariff hikes, work against the European nations that are running ridiculously large current account surpluses.

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Eurozone policy failures laid bare

On March 13, 2018, the OECD released its latest Economic Outlook with accompanying “Interim projections” as at March 2018) suggesting that the current growth phase will continue through to next year as consumer and business confidence improves and translates in higher investment rates. The OECD, however, forecasts that growth in the Eurozone will decline over the next two years. The major Eurozone nations (France, Germany and Italy) are not witnessing the growing investment expenditure. The Eurozone might be seeing a little sunshine creeping out from the very dark clouds. But it is far from recovered and the future is ominously black. Key cyclical indicators remain at depressed levels, which means that when the next cycle hits, the Eurozone will be in a much worse position than before. And the reason: the fundamentally flawed design of the monetary system with its accompanying austerity bias. The reform required is root-and-branch rather than a prune here and there.

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Now people pay to work for free

I am back on my regular pattern which means there will be no detailed Wednesday blog – just some snippets if anything. This morning, I did a radio interview on the national broadcaster (ABC) about the growing spread of unpaid work experience. It was clear the interviewer thought that work experience was a good thing. I indicated that it was a creeping disease that has become part of the neoliberal agenda to erode the rights of workers. In Australia, this disease has morphed into a cost-shifting exercise where employers have pushed their responsibility to train their workforces onto the public education system and are now demanding payment from students to allow them to undertake so-called ‘work experience’. Increasingly, this practice is become built-into educational programs, which compromises the quality of the education. But while it is dressed up in mighty descriptions such as ‘preparing our youth for an exciting future’ it amounts to nothing more than unpaid work. The latest iteration is that now people pay to work for free. Our trade unions are largely silent on this scandal.

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US labour market – strengthened in February but still not at full employment

On March 9, 2018, the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – February 2018 – which showed that total non-farm employment from the payroll survey rose by 313,000 in February. The Labour Force Survey data also showed a relatively strong net employment gain (785 thousand (net) jobs were created) in February 2018. The labour force was estimated to have risen by 806 thousand with participation rising by 0.3 points. The BLS thus estimated that unemployment rose by 22 thousand and the official unemployment rate was unchanged at 4.14 per cent. There is still a large jobs deficit remaining and other indicators suggest the labour market is still below where it was prior to the crisis. Finally, there is no evidence of a wages breakout going on. Taken together, while the US labour market has strengthened in the first two months of 2018, it is still some distance from being at full employment.

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Europhile reform dreamers wake up – there will be no ‘far-reaching’ reforms

I have now escaped the near-Arctic chill and back to warmer climes for a little while. While I was in Finland though, the Finnish news media was agape over the – Joint Statement – released by 8 Finance Ministers from the smaller Northern EU Member States (March 6, 2018). The statement released by the finance ministers of Finland, Denmark, Estonia, Ireland, Latvia, Lithuania, the Netherlands and Sweden aired their views on how the Eurozone (EMU) might develop. Nobody should be under any delusion that significant reforms are going to come soon. These characters are locked into the austerity mindset and any claims that a new Macron-Merkel partnership will take the EMU into more progressive territory should be viewed as blind hope rather than bedded down in any realistic understanding of what is likely or possible.

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The Weekend Quiz – March 10-11, 2018 – 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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Workers’ parties in NZ and Australia compete to be the most neoliberal

The Italian elections were held last Sunday (March 4, 2018) and the results are devastating for the Europhiles that think that the EU and the Eurozone, in particular, can be reformed to bring the people together in some sort of democratic paradise. Anti-establishment parties including the far right Lega Nord (who want to expel all migrants) have made spectacular gains. This follows elections in several nations where rather extreme results have emerged. What is apparent is that social democratic parties have started to lose electoral supports in large swathes and, in some, cases are now diminished and ruined forces. After hearing what the Shadow Treasurer in Australia said yesterday I can only hope the same electoral whitewash of the Australian Labor Party occurs at the next election. The message from the various national elections is pretty clear. Voters have seen through all the neoliberal nonsense that they have been bombarded with over the last decades and the miserable actual outcomes that have followed in terms of things that matter for peoples’ prosperity – jobs, real wages growth, income security, public services and infrastructure etc. They are sick of seeing the top-end-of-town walk off with the largesse while government’s attack the poorer elements in the name of ‘budget repair’. The neoliberals have pushed their luck to far. Sunday’s Italian result is just part of the evidence mounting to support that view. But, back in the Southern Hemisphere the Labour government in New Zealand the Labor opposition in Australia do not seem to have understood the trends. They are still thinking it is clever to ape the neoliberal nonsense about fiscal surpluses, AAA credit ratings and war chests to help fight future recessions. Sad sad sad.

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Poverty among the unemployed now close to 50 per cent in the EU

Last week, Eurostat released it updated data covering people who are at risk of monetary poverty. In the press release/news page (February 26, 2018) – Almost half the unemployed at risk of monetary poverty in the EU – we learn that 48.7 per cent of unemployed persons in the EU “were at risk of poverty” in 2016, even “after social transfers” were taken into account. The situation has deteriorated significantly since 2005 as a result of the impacts of the GFC and the policy response taken by the European Commission and the Member States (under the EC’s thumb). While the usual suspects perform badly on these indicators (Spain, Greece, Italy), a stark result is that 70.8 per cent of German unemployed persons are at risk of poverty. This proportion has jumped from 40.9 per cent in 2005 (a 29.9 percentage point shift). So, even in the strongest Eurozone economy, the policy frameworks are delivering terrible outcomes. Increasing divergence and inequality and rising social exclusion are the most striking characteristics of the 13 years of European Union history since 2005. It doesn’t look like a policy bloc that any sensible nation should aspire to be part off (or remain within).

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The Weekend Quiz – March 3-4, 2018 – 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 New Keynesian fiscal rules that mislead British Labour – Part 3

This is Part 3 (and final) in the series which examines the robustness of claims made by two British academics about the desirability of the British government (particularly Labour) adopting further fiscal constraints on their flexibility to advance well-being in that nation. Part 3 further develops the critique and focuses on the validity of tightening voluntary constraints on government and outsourcing key parts of the fiscal policy development process to so-called ‘independent’ fiscal councils or boards. We conclude that these suggestions would further entrench the neoliberal dominance of government policy and reduce its capacity to serve the wider interest. In effect, taking this sort of advice would be counterproductive for British Labour, which really needs to to further break out of its recent Blairite neoliberal past and present a truly progressive manifesto to the British people that will force the Tories to move closer to the centre and squeeze the extreme right-wing elements. This will require more than articulating progressive-sounding social and environmental policies. It will require more than proposals to renationalise the railways. Effectively, British Labour has to reframe the macroeconomic debate and eschew the sort of reasoning that the mainstream of my profession offers. It must, in my view, embrace Modern Monetary Theory (MMT) principles to free itself from the shackles of all the neoliberal mumbo jumbo that the New Keynesians continually offer as economic verities. The reality is the the New Keynesian approach has one output – an elaborate litany of lies.

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The New Keynesian fiscal rules that mislead British Labour – Part 2

This is Part 2 of my Three Part exposition of how the standard New Keynesian approach to the specification of fiscal rules will generate poor advice for politicians desiring to achieve progressive socio-economic goals. The paper I am using to represent the New Keynesian approach has, by all indications, been somewhat influential in the formation of the macroeconomic approach currently being espoused by the British Labour Party. In that sense, the critique aims to disabuse the Labour politicians and their apparatchiks of building policy options based on fake economic knowledge, and, instead, embrace the principles of Modern Monetary Theory (MMT), which provides an accurate depiction of how the monetary system actually operates and the policy options for a currency-issuing government such as in Britain, and the likely consequences of deploying these options. The one major lesson that comes out is that the New Keynesian approach is an elaborate fraud. It plays around with so-called ‘optimising’ models asserting human behaviour that no other social scientist believes remotely captures the essence of human decision-making, and then derives conclusions from these models that are claimed to apply to the world we live in. Prior to the GFC, these ‘models’ didn’t even consider the financial sector. The fact is that nothing of value in terms of specifying what a government should do can be gleaned from a New Keynesian approach. It is barren.

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