I am Australian but not a proud one. That doesn’t mean anything other than I don’t consider nationalism to be a particularly appealing trait. I would perhaps defend our borders from attack and I prefer Australia winning at sport than the English (but not the West Indies!). But when I read a newspaper headline (March 24, 2011) – Australia tops index ranking for maintaining strong fiscal balance – I feel ashamed that I live in such a nation. Given the methodology that went into construct this index, Australia would be better off being down the bottom of the rankings – by choice rather than inaction. Just when you thought the public debate about fiscal policy couldn’t deteriorate any further … it plunges to new depths. This index is published in a new “study” (I would not actually give it the gravitas of a study) – is actually an exercise in reductio ad absurdum ad infinitum aka total BS.

I am travelling today and have commitments which will take me into the night. So I have limited blog time. But there is always something to say and while I might say the same thing often I figure that there are thousands of commentators to my one who all say the same (different) thing every day. Anyway today you will learn that the Japanese government can call on the central bank to buy its bonds whenever it wants. You will also learn how crazy the British government is and how obsessive compulsive behaviour locks a nation into slow growth and entrenched unemployment. We’re sticking to our strict fiscal rules – no matter what! Simple conclusion for today – the budget madness continues.

I am travelling today and haven’t much time to write and I have a day of library document searches ahead. But the input from economists over the weekend in relation to the devastating earthquake and tsunami in Japan last week has been nothing short of a total disgrace. Even as the news was unfolding the mainstream neo-liberal ideologues were out in force preaching that the Japanese government was now facing a major fiscal crisis and its capacity to deal with this event was severely limited. Imagine the reactions of the people in shock after the event to hear the news bulletins telling them that their government was crippled and unable to help. The reality is that the claims by the macroeconomists were not ground in any credible theory. It is bad enough they provide this mis-information and lies when unemployment is rising. But when thousands of people are feared dead it is nothing short of being obscene. Earthquake lies – all courtesy of our neo-liberal economist brethren.

I have said it before that when the facts get in the way of mainstream economic theory – which is just about always – the professors (my peers) tell their students that the facts are wrong. They have a pathological obsession with hanging on to their theories. Apart from the arrogance that accompanies this I have never really been able to work it out. As a tenured professor I could overnight become an adherent of the Austrian School or whatever and my job wouldn’t be threatened. A tradesperson who loses his/her skills has a problem. But academic life is different. We can explore new ideas any time we choose and take time to develop the news skills commensurate with these ideas. That, in part, is what research is all about. So it is more about their unwillingness to let go of what are essentially religious beliefs that leads the mainstream economists to constantly pump out rubbish and lie when they are found out (by the facts). The overwhelming fact is that the push for austerity is not based on any evidence-based understanding of how the system works. It is driven by stylised economic models that bear no relation to the real world and fail when confronted with data from the real world. As the clock ticks by – tick tock tick tock – the evidence mounts that nations that introduce austerity fare poorly.

I got of a plane this afternoon and learned about the devastation in Christchurch. I am feeling for my NZ colleagues today. I suppose some conservative idiots will claim the NZ government doesn’t have the money to do what is necessary to provide some relief. There is also strife in the Middle East as poverty and unemployment finally combine with a sense that governments in nations in that region are working against people rather than for them. In the UK and the US the governments are no longer working in the best interests of their citizens and public displays of anger are emerging (for example, Wisconsin). While the agenda of the oppressive regimes in the Middle East has always been clear the narratives of the conservatives in the advanced nations has always been hidden by a web of lies often supported by well-paid economists who urge us to accept austerity and deregulation because it will make us all wealthier. They tell us that the textbooks show that. The crisis has demonstrated to all that the textbooks are incapable of saying anything useful about the way the monetary system operates and the policy choices that a government running a fiat currency system has available to them. But as the conservatives are regaining control of the political processes after being shocked into silence in the early days of the crisis, it is clear they are overstepping themselves. They are continually claiming there is a fiscal crisis. But the reality is that their agenda – to crush unions and redistribute real income to capital – is becoming more transparent. That should be exposed by progressives and popular rebellions encouraged.

I have been sick today which is rare and have had trouble remaining vertical for very long. So the blog is a little shorter than usual. Just as well the subject matter might have disrupted my recovery. I note the UK economy is being deliberately sabotaged by its elected representatives which seems to conjure up a very weird construction of what we elect governments for. And in that context, the deficit terrorists are ramping up their calls for major fiscal retrenchment in the US. I thought Americans could read English – maybe they missed the British Office of National Statistics National Accounts release – it is pretty obvious – real GDP growth now negative again courtesy of a negative contribution from government in the December quarter. And the terrorists seem to want the same for the US. Its grim on both sides of the Atlantic.

The title of today’s blog comes from a speech given on January 12, 2011 by Richard W. Fisher, boss of the Federal Reserve Bank of Dallas – The Limits of Monetary Policy – which carried the sub-title – Monetary Policy Responsibility Cannot Substitute for Government Irresponsibility. It is a speech littered with ideological assertions parading as sensible public commentary. It will resonate with the deficit terrorists and reinforce the policy agenda that will only make the situation in the US worse not better. The ideas were echoed elsewhere in the world in the last week. Japan is considering hiking tax rates “because they want more private growth and less public net spending”. The (un)truth brigade have thus been out in force in recent days – spreading a litany of lies and falsehoods which only aim to perpetuate their irrational obsession that government economic activity is bad. I only wish they would just speak the truth.

Most of my blogs are about advanced nations. Many of these nations are being plunged back in time by misguided applications of fiscal austerity and even when growth returns they will take a decade or more to get back to the per capita income levels that prevailed prior to the crisis. Many children and teenagers in these nations will be denied essential education, training and workplace experience by the deliberate choice by their governments to entrench long-term unemployment and to starve their economies of jobs growth. But it remains that these nations are not poor in general and while people are losing houses and other items on credit only a small proportion will starve. Not so the poorer nations that I rarely write about. These are the nations where a high proportion of the citizens live below or around the poverty line. These are the nations that are at the behest of the IMF and suffer the most from their erroneous policy interventions. Today I reflect on how those nations have been going during this crisis. The bottom line is that the way the Fund reinvented itself and reimposed itself on the poorer nations after the collapse of Bretton Woods in 1971 has damaged their growth prospects and ensured that millions of people around the world have remained locked in poverty. Along the way … children have died or have failed to receive the levels of public education that any child anywhere deserves. There is no positive role for the IMF in its current guise.

Sometimes ex-IMF officials shed the burden of having been associated with that institution and make a creative contribution to the public debate. More often they do not and continue to perpetuate the errors that underpin almost all of the IMF’s output. If there was ever an institution that has passed its use-by date it is the IMF. Today, ex-IMF Chief Economist Simon Johnson (now at MIT) claimed that the way to assess fiscal sustainability is “whether a country has the political will to raise taxes or cut spending when under pressure from the financial markets”. You can imagine what I thought of that criterion! Not much but it is too late in the year to get really flustered and I have been listening to some pretty good music this afternoon. So for all those readers who have written in saying “doesn’t Johnson have credibility” and “therefore is what he is saying sensible” I have three words – No and No.