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.
Its my Friday lay day blog where I just wander around in the time I allocate to writing this blog. The venality of neo-liberal governments is never far from the surface. The more successful ones manage to mostly hide the nasty stuff they get up to from the general public or assuage public concern via their spin doctors. Sometimes, an outrageous decision breaks out of the cocoon of spin and demonstrates the sheer bastardry of the political elites. That happened in Australia over the last week when it was announced that the Australian government was providing $A4 million to the University of Western Australia to set up a new think tank under the influence of a Dane Bjørn Lomborg – who has been described as a “sceptical environmentalist” (Source). Our Prime Minister has favourably quoted Lomborg’s work in his own work and is the Australian leader who abandoned the carbon tax and thinks continued use of “coal is good for humanity” (Source).
Finland has been one of the Eurozone nations taking a hardline on Greek austerity and have consistently refused to support on-going bailouts of Greece. At the weekend, Finland went to the polls and tossed out the incumbent government and put in its place a centrist party that stood on a platform of a wage freeze and further spending cuts, allegedly to restore Finland’s competitive position. If that prospect wasn’t bad enough, the Centre Party will have to enter a coalition with the party that came second in the polls – the Finns Party, which is a ragbag anti-immigration group that wants Greece kicked out of the Eurozone. It is possible that Finland’s Parliament will not support any further European Union bailouts for Greece. Apparently Finn’s are buying the line that further and intensified austerity is necessary because of rising labour costs have undermined Finland’s capacity to compete in international markets as the demise of Nokia, so the narrative goes, illustrates. The last thing that Finland needs right now is more austerity.
Here are the answers with discussion for yesterday’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.
There was a story in the Australian press (April 8, 2015) – ‘Impossible choices’ to be made as human cost of foreign aid squeeze measured – that not only exposes the deep flaws in economic reasoning that accompany neo-liberalism’s emphasis on austerity but also makes one ashamed to be Australian. The problem, however, is not Australian-specific. The neo-liberal paradigm rules the World at present and humanity generally is the victim, particularly those most disadvantaged in material terms. The cuts announced by the Australia federal government to our Overseas Aid Program in the next three years will be the largest shift in provision of aid in our history. The projected cuts are now starting to manifest in concrete terms as aid agencies start to cancel programs and lay off staff. Once again the myths of neo-liberal macroeconomics leads us to accept governments doing appalling things in our name.
Australia is demonstrating at the moment the monumental bind that neo-liberal (Monetarist) thinking has reached with respect to macroeconomic policy. By extolling the virtues of monetary policy as the only viable counter-stabilisation tool and eschewing the use of fiscal policy (biasing it towards austerity and the falsely virtued goal of fiscal surpluses), the policy making environment has created an economy that is susceptible to asset price inflation (particularly housing) and stagnant growth with rising unemployment. This experience is common across other economies and to break out of the destructive malaise, there will have to be a major shift in policy awareness – away from the exclusive use of monetary policy to work against the private spending cycle and towards fiscal policy as the only effective counter-stabilisation tool the government has available. The global financial crisis was caused by the elevation of monetary policy and the stagnation that has followed continues the problem.
Here are the answers with discussion for yesterday’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 yesterday’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.
Its the Friday lay day blog – and we will be brief today. There was a proposal aired in the ABC’s The Drum series (March 26, 2015) by an ABC finance journalist suggesting that – Maybe we need to subcontract the budget process. My response was “why don’t we just subcontract out democracy to a dictator and be done with it”!
On Tuesday (March 24, 2015), the European Court of Auditors, which is the EU’s independent external auditor and aims to improve “EU financial management”, released a major report – EU Youth Guarantee: first steps taken but implementation risks ahead (3 mb). The Report reflects on the experience of the program which was introduced in April 2013. When the European Commission proposed the initiative I wrote that it was underfunded, poorly focused (on supply rather than demand – that is, job creation) and would fail within an overwhelming austerity environment. The Audit Report is more diplomatic as you would expect but comes up with findings that are not inconsistent with my initial assessment in 2012.
There were regional elections in the autonomous community of Andalusia (Spain) over the weekend which saw the Spanish Socialist Workers’ Party (PSOE) hold onto power. The results showed that the left-wing political party – Podemos – which received nearly 8 per cent of the Spanish vote (5 seats) at the European Parliament elections in May 2014, was third in the Anadulusian election, gaining 15 of the 109 seats. The parallels with Syriza in Greece are now routinely being made. I am forming the view, however, that unless things change rather dramatically in Greece, Syriza may actually end up only undermining progressive agendas in Europe as they self-destruct under the iron fist of the Troika (I do not use the terms “the institutions” or the “Brussels Group”). This is of great interest to me at present because I am sketching out a 2016 book project at present with a co-author, which broadly focuses on the demise of the left and social democratic movements in the World, although we might pare the scope down with more discussion to concentrate on Europe. Of particular interest is the morbid inferiority of the French left relative to the Germans in the Post World War II period and the way in which American Monetarism has infiltrated and built on that inferiority. Much of the design of the monetary union can be understood through that sort of lens. So a broad canvas right now but that is always the case. Of immediate interest, though, is the possibility that Syriza will set progressive causes back rather than become the spearhead for a sweeping change in Europe and the end of this destructive era of neo-liberalism.
Here are the answers with discussion for yesterday’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.
In September 2013, when the current Conservative government took office in Australia we were told that “At last, the grown-ups are back in charge” (Source). It was the arrogance of the victors who also presumed a sort of divine right to rule as conservatives. They strutted around the media and public events claiming that now was the time to sort things out and to impose fiscal austerity. The economy was already slowing and unemployment had started to rise again as the Labor government had gone back to their now neo-liberal orthodoxy after the success of the fiscal stimulus in 2008 and started cutting into discretionary public spending. They lost office but left an economy that was faltering again and heading towards slump not boom. The conservatives took over with a mission to achieve a fiscal surplus and unleash private spending on the back of the confidence they claimed would accompany the fact that the ‘adults’ were back. They should have read John Maynard Keynes who worked out long ago that a government should never impose austerity in a slump. They didn’t and things have got worse. It was obvious they would. Keynes was right.
Here are the answers with discussion for yesterday’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.
Its my Friday lay day blog which is designed to divert my attention elsewhere. I have now had a chance to read the 170-page – Intergenerational Myth Report 2015, issued by the Australian Treasury yesterday. The whole nation has become caught up in the doom and gloom that the conservatives are putting out about the projected deficits for the next 40 years. Not a fiscal surplus in sight. But at the same time, all this is based (using their own logic) that we will be back in a steady inflation, full employment Australia within 5 years and sustain that state for the projection period out to 2054-55. Question: What would be so wrong with that? Of course, that statement just assumes their own logic. The projections however are not mutually consistent and there is insufficient information about net export trends for us to understand whether a fiscal deficit of 6 per cent of GDP in 2054-55 (on current legislation) is suitable or not. But again, if that size deficit is producing full employment and price stability why all the ‘sky is about to fall in’ unless we produce fiscal surpluses as quickly as possible? Answer: this is a nonsensical political exercise and has little to do with economics.
Wasn’t Chuck Norris the muscle-bound guy with big guns and stuff who blasted the hell out of people and causes a lot of havoc? Well, apparently, he thinks he knows something about macroeconomics. In an article in the right-wing conservative media outlet WorldNetDaily (February 22, 2015) – Ready for a new U.S. Constitutional Convention? – Norris reveals what a knucklehead he really is. The article seems like an exercise in how many scary words, phrases and metaphors about government fiscal policy a writer can get into each sentence. Once you get over that there is nothing of substance left. Mr Action Man clearly needs to do some weights and leave the economics commentary to those who know even more than the slightest thing about it. American politics is once again come around to the more or less regular Balanced Budget Amendment (BBA) cycle. This is a regular comedy event that occupies Congress and all the commentators for a while as they reveal how little they know about the consequences of their grand plans for American prosperity. If they ever took it seriously it would be a disaster for the US economy and the people that depend on it.
Some time ago I wrote a blog – The German model is not workable for the Eurozone (February 3, 2012) where I outlined why Germany’s export-led growth strategy could not be a viable model for the rest of the Eurozone nations. More recent data shows that Germany is not even working very well in terms of advancing the prosperity of its own citizens. A recent report (in German) – Der Paritätische Gesamtverband (HG): Die zerklüftete Republik (The Fragmented Republic) – shows that poverty rates are rising in Germany and there is now a dislocation emerging between unemployment and growth and poverty rates. The reason is clear – too much neo-liberal labour market deregulation and ridiculously tight fiscal policy. Both failing policies that Germany continues to insist should be adopted throughout Europe. It would do the other Member States a service if they banded together and rejected the ‘German poverty model’.
“Don’t mention the war”! was a classic line from the episode – The Germans – in the comedy Fawlty Towers. Basil Fawlty implored his meagre staff to stay silent in case they offended some German tourists staying at his hotel. His attempt at self-censorship failed and led to hilarious consequences. I was reminded of the sketch (see it below) when I was reading the – Greek finance minister’s letter to the Eurogroup (February 24, 2015). Apparently, it is now a case of ‘Don’t mention the Troika’, ‘Don’t mention the Memorandum’ and never ever talk about the ‘Lenders’. The bullying threesome (European Commission, ECB and the IMF) are now known as “the institutions” and the “Memorandum” (the bailout package) is now to be called “The Agreement” and the “Lenders” have been recast as the “Partners”. Okay, and that is progress. The Reform package surely lets the Greeks choose which nasty policy they will implement but it is still nasty. Yes, it “buys them time”. The damage from massive unemployment and poverty eats into people every day. 4 months is a long time when you are on the street starving. And by the time this agreement is done – will the Germans be happy to unleash billions of euros via the European Investment Bank to allow the Greek government to continue running fiscal primary surpluses and keep pumping interest income on outstanding debt into ‘foreign’ coffers? Pigs might fly.
Last week, the peak body representing small business in Australia, the Australian Chamber of Commerce and Industry (ACCI) called on the Federal Government to hand over free labour under the guise that “making coffee” will enhance the skills of the workers. The free labour they want to get their hands on are the unemployed on income support. They want the Government to continue to pay the below-poverty income support but force the recipients to work in small and medium-size businesses “making coffee or serving customers” as a solution to youth unemployment. This is the same group that thinks the pay of the lowest-paid workers (like kitchen hands, cleaners etc) should be cut. They also claim that rising unemployment in Australia is being caused by structural rigidities in the workplace (job protection, occupational health requirements etc). There is a wide-ranging attack on workers going on at the moment. This is just one aspect of this attack. Austerity is forcing more onto the unemployment pile. Once there they are being increasingly subjected to pernicious policy requirements (see yesterday’s blog – Job Services Australia – ineffective and rife with corruption – scrap it!). Then employer groups lobby government to cut wages and conditions and scrap regulative environments that protect workers. It is an important era for social democrats. Either we regain some political equanimity and coherence or we continue to call parties Socialist that impose austerity and talk about being ‘pro-business’, while attacking pensions, wages, and employment.
The ABC – Four Corners – program tonight will highlight the corruption and inefficiency within Australia’s privatised labour market services sector. The program – The Jobs Game – will screen at 20:30 Eastern Standard Time. I participate in the program although the extent of that participation is at the time of writing not known. I did about 2 hours of filming for it in December. Unfortunately, the ABC geo-blocks its iView service which allows Australians to watch past programs via the Internet. If the program is available via YouTube I will post a link. The flavour of the program is summarised in this promotion piece published by the ABC News service today (February 23, 2015) – Government recovers over $41 million worth of false claims after ‘rorting’ of Job Services Australia scheme. The Guardian newspaper will also publish an article based on this blog for tomorrow’s edition (sometime during the day). So the issue is getting out there finally after successive Governments have been trying to hide the issues. After all, its ideological baby is terminally ill and they don’t want to admit that.