At Melbourne airport last night the Qantas jets looked resplendent with their red flying kangaroo and the “Spirit of Australia” logos. I chuckled to myself about the sheer audacity of an airline that continues to promote itself as if it is our “national carrier” yet is systematically trying to undermine aspects of our culture that we value highly. It is dangerous territory to try to define a national identity. But in Australia we continually emphasise fairness as a hallmark of our national aspiration. Yet, reality is often different to our romantic perceptions and imagery. This blog is an extended version of an Op Ed I wrote for the Fairfax media today on the Qantas dispute, which has gained some attention abroad and been the topic of choice in Australia over the last week. The reality is that the gung-ho union-hating management of the airline are now engaged in a death battle with the union movement and aim to destroy working conditions once and for all and turn the airline into a cheap, low quality outfit principally flying out of Asia while still trading on the fact that we consider it to be (as a historical artifact) an Australian icon. The only way forward for Qantas is for the Australian government to nationalise it and get it flying in the national interest.

The only question I have been toying with today apart from all the other ones is whether it was the big bazooka or not. The Melbourne Age article (October 28, 2011) – Euro summit fires ‘bazooka’ at debt monster – lead me to believe that the big one had come out, but then the Financial Times article (October 28, 2011) – Merkel’s mantra works without ‘big bazooka’ – suggested the bazooka was left in the rack. Perhaps the bazooka was brought into action but the big bazooka was left at home. That conclusion would reconcile things nicely. It is very confusing though isn’t it. About as confusing as trying to work out what the EMU leaders might define as leadership. The way I understand it the only bazooka that the EMU has at their disposal refused to play ball and stayed at home in Frankfurt. The result – no matter what the political spin is and no matter how much the governments pledge to put into the EFSF or claim they can get from the Chinese the situation remains – they are recursing back to insolvency. None of the member governments can ultimately stump up the euros when Italy, then France or any other member state requires bailing out. In the end, they will be picked off one by one. I guess they did bring out some sort of bazooka – but just aimed it at themselves.

Economists have a strange way of writing up briefing documents. There is an advanced capacity to dehumanise economic advice and ignore the most important economic and social problems (unemployment and poverty) in favour of promoting non-issues (like public debt ratios). It reminds me sometimes of how the Nazis who were brutal in the extreme in the execution of their ideology sat around getting portraits of themselves taken with their loving families etc. The training of economists creates an advanced state of separation from human issues and an absence of empathy. Such is the case in a October 21, 2011 document – Greece: Debt Sustainability Analysis – which is labelled STRICTLY CONFIDENTIAL by its authors and was intended as input to the upcoming meeting of the Eurozone leaders – which is in fact the EU/ECB/IMF – aka and hereafter referred to as the “Troika”. As I read the document – in all its luridly obscene detail – I wondered what if economists were personally liable for their advice? The jails would be full of bankrupted economists. I am sure that the Troika economists would plead “only following orders” but then we have heard that before too.

As the Occupy Wall Street movement grows and is spreading to other cities in the US and other cities around the World, my profession is “feverishly” trying to discover the “financial sector” to plug into their New Keynesian models. The global financial crisis caught them out badly. Now they are fixing that “deficiency” up and we will all be better informed again once the boffins do their work. That is what the Bank of International Settlements is trying to tell us anyway. As usual, the BIS is part of the problem rather than being part of the solution. The OWS movement is a recognition of that and anything the mainstream macroeconomists dish up will only inflame the resistance further. It is becoming clear that more people daily are saying “we will not pay for your crisis”.

Day 3 in the Land of Austerity (LA LA land). I sometimes enjoy a regular little private activity now which I call for want of a better term – “I told you so” – and which involves going back to articles that were written prior to the crisis about macroeconomic trends and having a laugh about their contents. Today I thought I might share one of these articles with you because it came up in a telephone conversation I had today with a British journalist who was seeking background on a story they were writing. Their contention was that the ECB is in danger of going broke. I suggested (nicely) that they would be better off focusing on the mating habits of frogs in the Lake District of England than writing a story like that. Here is why I said that.

Today I am writing from Austerity Land a.k.a Europe. I know Britain is also austerity land but it has its own currency and will be able to reverse direction more easily as the political sentiment moves against them. I know the US is also trying to emulate the austerity lands but so far the deficit is sufficient to maintain some vague sense of growth there and the politicians haven’t really been able to agree on anything. But in Europe the politicians and central bankers are systematically demolishing their economies – one step at at time – and pushing the system ever more closer to collapse. It is only the extraordinary “outside the rules” intervention of the European Central Bank that is keeping the EMU from collapsing virtually immediately. The Australian ABC News is carrying a story (September 13, 2011) – Shares hit 2-year low as Eurozone crisis deepens. The message of that article is being repeated in various languages over here in Europe across the mainstream media. There is an advanced state of denial over here – a denial that the problem is the Euro itself. How could a currency be a problem? Answer: when it is foreign to every government that uses it. Whatever we conclude about who pays taxes in Greece or who doesn’t; about whether certain public servants have excessively generous pay and conditions or not; about whether workers in one nation are lazier than workers in another; none of these mini-debates focuses on the issue. The problem is that when a nation surrenders its currency-issuing capacity and starts borrowing in a foreign-currency then it is open to solvency risk and cannot respond easily to a negative demand shock of the proportions that we say hit the world in 2007-08. Setting up a monetary system with those intrinsic features ensured that the EMU would enter crisis when the first significant negative demand shock arrived. It was not if but when. Now the same logic that got the EMU into this mess is also prolonging the crisis and denying the region of much-needed growth.