Search Results for “euro” – Page 68 – William Mitchell

The case to defund the Fund

Imagine a patient that goes in for surgery to fix an in-grown toe-nail. She comes out in a wheelchair after the surgeon has trimmed a little more than expected from the toe. The result is she loses her whole leg in the operation. When challenged, the surgeon says that they underestimated how much damage would be caused when they starting trimming the toe-nail and realised too late that they had actually cut her leg off by mistake. The surgeon also admits that they had major differences of opinion with the other specialists involved in the assessment about the extent of the cutting required and the degree to which the surgery would deliver relief to the patient but chose not to disclose that to the patient before hand because they didn’t want to risk slowing down the rush to surgery. After all, surgeons know only one thing – cutting and stitching. The one-legged patient sues the surgeon under tort and the authorities prosecute under criminal law. The surgeon is found guilty of criminal malpractice and negligence, is ordered to pay out millions to the patient and is sent to prison. The reality of professional risk. While the analogy is not perfect it leads to this sort of question: Why should professional economists working for the IMF, the EC and the ECB be above the professional standards and accountability that apply throughout the professional world?

Australia March quarter National Accounts – looking ugly

Today’s Australian Bureau of Statistics – Australian National Accounts – for the March-quarter 2013, shows that real GDP growth was 0.6 per cent, unchanged from the Dcember-quarter 2012. The annualised growth rate of 2.4 per cent is now well below the trend rate between 2000 and 2008 and there is now a 4.2 per cent gap between actual growth and trend. This will widen in coming quarters and it is the reason the unemployment rate is rising. The stunning reversal of fortunes in the leading mining state of Western Australia is a feature of today’s data release. It is now in recession. The strong mining states (WA, NT) are now converging on the poorly performed East Coast economies. Much is being made of the contribution of Net exports (1 percentage point) but most of that (0.7 points) arose from a decline in imports as a result of the collapse in capital goods investment (mining related). Public Investment also dragged growth by 0.9 percentage points indicating that fiscal austerity is a major reason for the output gap. Overall, the outlook is decidedly ugly.

72% youth unemployment – the crowning glory of the neo-liberal infestation

It seems like everything is getting smaller in Germany. I read today that Germany’s longest word (63 letters) has been abandoned. It also seems that their jobs are getting smaller and more people are being forced into them. The so-called “mini-jobs”. Meanwhile Europe’s crowning glory and austerity’s greatest achievement lies a little south of the mini-job kingdom. Eurostat’s latest – Regional labour force data – tells us that in some regions in Spain and Greece, the unemployment rates of the 15-24 year olds have topped 70 per cent and will continue to rise. There are now an increasing chorus in the media from politicians and financial market types who are trying to dress all this up as good news. Apparently, the Greek share market is booming. The agenda is clear – if they can somehow convince the world that the devastation of Greece is “good news” then it will reduce the growing resistance to austerity that is starting to broaden the debate. The elites don’t want any moderation. So they have to re-construct devastation to appear to be bringing good outcomes. The madness continues. Tell the 15-24 year olds in Dytiki Makedonia that things are going along swimmingly!

May 30, 2013
bill
Economics
8 Comments

Its an amazing world where the neo-liberals go from one ridiculous economic policy failure (plan) to another as if we are totally without any understanding of what they are up to. The latest examples include the German talk about how growth oriented they are and their sudden concern for the youth unemployment emergency that they now say needs immediate attention. Of-course, this “emergency” has been staring them in the face for nigh on five years and is the creation of their policies. Now they cry crocodile tears and promise a few measly billion in structural assistance, which won’t even scratch the surface of the problem they created. And they have the audacity to think they have credibility. Another example, is the decision by the ruling elites in Brussels to give France, Spain, Poland and Slovenia a further two years to kill their economy and this is being constructed as lenience. So bash your economy to hell slighly more slowly than before and everyone is meant to think that is credible. Why do we tolerate these morons? Then we have the OECD who waste trees by producing their Economic Outlook, which came out yesterday.

May 29, 2013
bill
Economics
8 Comments

We will start with a quiz question today. Its a very hard question so you will have to think long and hard to get the right answer. If you were the government and had the choice of spending $A114,975 per annum (or $A315 per day) to derive zero benefit and cause significant harm to both society and individuals or spending $A63,074 per annum (or $A173 per day) to derive significant benefit with virtually zero harm being caused which option would you take? While the dollar figures are calibrated for the Australian situation, neo-liberal governments around the world have been able to convince us that the first option is superior. There is no logic to it but reflects the extension of the logic that individuals are responsible for themselves and there is no such thing as a macroeconomic or systemic constraint on individual choice and behaviour. It is that folly that is causing all the strife at present and will ultimately bring the system down.

I don’t care if every fact is correct

I thought it was hysterical when back in 2009 and 2010 there were papers written and conferences held which carried the theme of the “lessons learned from the crisis”. For example, the – 6th ECB Central Banking Conference (November 2010) – had an array of leading mainstream economists and central bankers telling us what it was all about despite these same characters previously representing a body of work that told us the macroeconomic problem (cycles and unemployment) had been solved. There were lots of papers, Op Eds and media commentary (every day on Fox News and its ilk) warning us of the worst unless governments imposed austerity. Even as recently as the last US election, the “skies are about to fall in” message was prominent and dominated the Republican campaign. Millions of people are unemployed as a result of these economists having sway with policy makers. The evidence denying their predictions etc started to slowly trickle in around 2008 and as the years of this madness have passed the evidence is now a dam break. At this point, the mainstream just talk among themselves and continue to bank their high salaries and take on lucrative consultancies. Denial of facts is their ultimate recourse.

May 23, 2013
bill
Economics
36 Comments

The economics journalists were out in force again today in Australia after being fed their latest copy from the neo-liberal propaganda machine. In this case, the propaganda was in the form of the first report published yesterday (May 22, 2013) from the newly established Parliamentary Budget Office – Estimates of the structural budget balance of the Australian Government 2001-02 to 2016-17. The Report estimates that huge unsustainable budget deficits and has led to a flurry of media activity all just repeating what the PBO told them was the message. I wonder if any of the journalists have actually read the report in detail particularly the Appendix where the technicalities are exposed. Technicalities is too strong a word because it suggests there is something robust going on. Nothing could be further from the truth. This is another shoddy attempt to bias the public perception towards thinking the current (pitifully small relative to the scale of the problem) budget deficit is problematic.

Argentina and Greece – credible analogy or not?

There was a article in the UK Guardian yesterday (May 21, 2013) – No, Argentina is not a ‘cautionary tale’ for the eurozone. The basic tenet of the article, written by a Greek journalist is that there is no applicable analogy that can be drawn between the experience of Argentina during its crisis in 2001-2002 and the current crisis in Greece. The author rejects any attempts to draw a comparison because Greece would have to introduce a new currency and this would mean no-one would agree to hold it and this would prevent Greece from purchasing essential imports. The author claims that all Argentina had to do was break a pegged arrangement. My view expressed in this blog is that while there are technical differences in the way the monetary system would change in Greece if it abandoned the Euro and what happened in Argentina, the similarities between the two cases are greater. There is an applicable analogy and it scares those who want to hang onto the Euro at all costs.

It’s all been for nothing – that is, if we ignore the millions of jobs lost etc

The fiscal austerity imposed on the southern European nations such as Greece and Spain has been imposed by the Troika with two justifications. First, that the private sectors in these nations would increase spending as the public sector cut spending because they would no longer fear the future tax hikes associates with rising deficits (the Ricardian argument). The evidence is clear – they haven’t. The second argument was that massive cost cutting (the so-called internal devaluation) would improve the competitiveness of the peripheral nations, close the gap with Germany and instigate an export bonanza. It was all about re-balancing we were told. The evidence for that argument is clear – it was a lie. The massive impoverishment of these nations and the millions of jobs that have been lost and the destruction of a future for around 60 per cent of their youth (who want to work) has all been for nothing much. As was obvious when they started.

May 20, 2013
bill
Economics
13 Comments

There was a time, in better days, that the evening news had news, sport and weather. Then, at some point, around the 1980s the national news started to host a Finance segment. Sometimes these segments are meagre reporting of what happened in the share markets. Even that benign news is symptomatic of the way neo-liberalism has infested our daily thinking and made the common folk feel part of the game that they are really can never be part of – wealth creation. At other times, the finance segments introduce economic theory and analysis as if it is news. Then the insidious nature of the neo-liberal propaganda machine becomes stark. But the starkness is lost on most because they think it is news and we have been led to believe that what gets pumped out at 19:00 on the national broadcaster (and other times by other broadcasters) are facts. Facts don’t lie do they? Well, when it comes to finance segments they are mostly lies.

Incroyable! – France – cap-in-hand and grateful – and sinking fast

Mr Barroso, European Commission President has a way with words. In January 2013, he declared “that the existential threat against the euro has essentially been overcome”. More recently (April 3, 2013) he pronounced “that the EU has come through the worst of the crisis”. Really? And, just yesterday he was at it again, lecturing France on the need to hack into welfare payments and worker protections. Meanwhile, Eurostat released the first-quarter 2013 National Accounts publication – Euro area GDP down by 0.2% and EU27 down by 0.1% – a few hours after Barroso was on French radio delivering his threats. The data is shocking which is a euphemistic way of saying _ _ _ _ _ _ _ (fill in your own expletive). There are now 10 Eurozone nations in recession. The overall monetary union has been contracting for six consecutive quarters (that is, 1.5 years). And the situation will deteriorate even further. When does someone conclude that the current policy framework is a total failure and causing massive permanent damage? When will these lug heads in Brussels realise they are not only destroying the fabric of prosperity but also jettisoning their political aspirations – for one Europe? Amazing.

A Budget that reduces growth and increases joblessness – for no sound reason

Last night, the Federal Government brought down the – 2013-14 Budget – claiming it was a responsible response to the circumstances it faced (declining world growth, declining terms of trade and persistently high exchange rate) and that it emphasised growth and jobs. Neither claim is remotely correct. It is a pro-cyclical budget – that is, a contractionary budget that builds on the contractionary fiscal shift in 2012-13, which by its own arithmetic reduces growth and causes the unemployment rate to rise. It will damage employment growth and increase poverty rates. It reflects a failure to acknowledge the state of the economy (4 per cent output gap) and to implement the correct counter-cyclical fiscal response (a significant rise in the projected budget deficit). It might have some education and disability spending in it. But even in those areas the spending is inadequate and, in the case of education, based on a neo-liberal view that the federal government should be funding the private schools, which, in general, educate the children from wealthy and high-income families. Overall, a destructive fiscal plan given the state of the economy.

May 14, 2013
bill
Labour Force, Politics, Unemployment Benefits
13 Comments

Tonight is the Federal Budget night. Tomorrow’s blog analysis could be as long as “its appalling”. We already know that. So I might take a day off and leave it at that. Some of the policy changes announced already are certainly appalling. Regular readers will know I have been keeping tabs on the way the Federal unemployment benefit in Australia has failed to keep pace with the poverty line and the Government has refused to do anything about it. At present, the single unemployment benefit stands at $35.50 a day which is well the single unemployed poverty line of $A64.10 per day. For married couples the unemployment benefit is currently at $56.47 per day, while the corresponding poverty line is set at $79.99 per day. While the Government has been under intense pressure from a number of different sources (including the typical welfare lobby groups, the OECD (not typical) and even right-wing columnists (definitely not typical) to address this disgrace. It has resisted any rise in the benefit and continually claims it is about jobs not welfare and is in the process of creating work. Not much action seems to happen on that front. Tonight’s budget will announce their latest offering in this regard. They are going to allow the unemployed to earn an extra $A19 per week before their benefits is cut. It claims it cannot afford any more because it has run out of money and needs to get back to surplus as soon as possible. The reality is that it can never run out of money, it needs to triple the current budget deficit to address the growing output gap, and is once again failing the most disadvantaged Australians that it professes it care about. The Government is also comprised of serial liars who will be decimated in the upcoming Federal election because their political support base has shrunk so much because they stand for nothing that is worth supporting.

Neo-liberalism – the antithesis to democracy

I recall a professor in my student days (formal that is, given we are always students if we remain open) telling a postgraduate class that economic development could only occur if the social democratic pretensions of the left, including tolerance of trade unions, were suppressed – “in the interests of progress”. He laughed and said that it was no surprise that the most right-wing nations grew the fastest. His poster child was South Korea. I recalled that experience when I read two articles recently in the UK Guardian. They are reflections on how neo-liberalism is really the antithesis to democratic ideals. The so-called free markets have nothing to do with freedom or political inclusion.

May 10, 2013
bill
MMT Textbook
13 Comments

I am now using Friday’s blog space to provide draft versions of the Modern Monetary Theory textbook that I am writing with my colleague and friend Randy Wray. We expect to complete the text during 2013 (to be ready in draft form for second semester teaching). Comments are always welcome. Remember this is a textbook aimed at undergraduate students and so the writing will be different from my usual blog free-for-all. Note also that the text I post is just the work I am doing by way of the first draft so the material posted will not represent the complete text. Further it will change once the two of us have edited it.

MMT Fiscal Principles

This is a background blog which will support the release of my Fantasy Budget 2013-14, which will be part of Crikey’s Budget coverage leading up to the delivery of the Federal Budget on May 14, 2013. This blog provides some general principles that should govern the design of a budget.

Saturday Quiz – May 4, 2013 – answers and discussion

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.

Australia output gap – not close to full capacity

A national media organisation (Crikey) invited me to be one of their Fantasy Budget providers this year and this is a background blog to the preparation of my Fantasy Budget 2013-14 for Australia, which I will publish next Monday. In this blog I consider the state of the Australian economy in terms of output gaps. The Australian government is keen to claim that the economy is operating close to or at trend real output – sometimes the Prime Minister or Treasurer – and senior Treasury officials, will replace the descriptor “trend output” with “full employment”. They make that claim to justify imposing fiscal austerity on the economy, which is expressed by their most recent goal to achieve a budget surplus in the current year. They have been pursuing that strategy for several budgets now after taking appropriate steps in 2008 to allow the budget deficit to rise significantly to head off the looming disaster associated with the global financial crisis. While the stimulus was not large enough at the time it did save the economy from the type of chronic recession that most of the advanced world remains stuck in. But, once recovery was established, the conservative ideology returned and the fiscal stimulus was withdrawn too quickly and an austerity plan implemented. At the time, it was clear that they would fail to achieve a surplus because in attempting to do so they undermined the recovery, and, their tax revenue growth. Other international events (a slowing of the terms of trade and an overvalued dollar) have compounded their poorly crafted fiscal strategy. The reality is that the Australian economy is now performing well below trend and the divergence is increasing. The labour market is also producing grossly inferior outcomes and we are clearly a hundreds of thousands of jobs short of what a reasonable definition of full employment would require. The budget deficit is too small not too large and the direction of policy in the coming year should be expansionary not contractionary.

Austerity as law not political discretion

I agree that we should have speed limits and other traffic regulations to prevent mayhem and carnage on our roads. There are other laws I agree with such as protecting children from sexual predators and laws protecting citizens from police brutality and processes to allow us to monitor and prosecute corruption in public office etc. They all make sense to me. Many other laws I would scrap because they are petty infringements on our liberty. But I would never enshrine a particular fiscal policy stance in law or even in codes such as fiscal rules. Such practice defeats the purpose of having the fiscal policy capacities, which is to respond to economic circumstance such that public purpose including full employment can be maintained at all times. Creating legal frameworks that stop governments from exercising their discretion are not only counter-productive but also highly destructive as we are seeing now in the Eurozone. I prefer the people to be able to tell politicians what they should be doing in this respect not judges. However, the Euro elites have been moving towards making austerity law and eliminating political discretion that disagrees with them. And, come to think of it, when some judges disagree with them on a matter of law, the EU elites just instruct their puppets to ignore the courts and proceed as before.

Unemployment is skyrocketing – but we have treaty obligations!

And that is the problem. The Treaty (of Lisbon) and all the related Eurozone legalities that define the way the Brussels bureaucracy interacts with the member states is incapable of delivering prosperity to its citizens. In the last week, a senior Dutch economics official (boss of very conservative Centraal Planbureau) has delivered a wake-up call to European policy makers. In his departing press briefings the CPB chief, who is no Keynesian (rather he is a rigid supply-sider) has called for flexibility with respect to the application of the fiscal rules and an easing of the planned austerity because his nation’s economic performance is deteriorating fast. The Southern malaise is now impacting on the richer, more smug northern nations, as it always was going too. Many economists remain in denial of what is happening. It is 2013 not 2009. The world has been caught up in this crisis for 5 years. It is an entrenched crisis and the data is now showing us that the recent manifestation of the crisis is being driven by fiscal austerity. The initial impacts of the GFC were large but recovery had commenced and have now been killed off by the fiscal zealots. While the departing CPB boss called on the Dutch government to ignore the Stability and Growth Pact rules for the next few years, he also observed, that the nation had “treaty obligations”. That is the problem. These obligations prevent responsible fiscal positions, which in the current circumstances, would suggest budget deficits of several more percent of GDP than the 3 per cent rule being fully supported by the ECB.