There are seven graphs in the paper. An Excel spreadsheet was involved. Shonky stuff alert! R&R are back with another attention-seeking effort after they were disgraced when their Excel manipulation that just happened to generate ideologically-convenient results was discovered to be shonky (in the extreme). This time is not different though. As in all their so-called historical insights the pair conflate monetary regimes across time and at points of time, which means most of their conclusions are erroneous. While their insolvency threshold has zero credibility now they also still hang on it, if only by implication. And they claim that repression is when residents of free nations enjoy parking their savings in risk-free, interest-bearing government bonds, instead of taking risks with commercial paper. Sounds like free choice to me. Is suggest R&R take some R&R and let governments get on with expanding their deficits and reducing unemployment. The public debt ratios will take care of themselves.

In the opening sequence of the HBO series, Newsroom, the anchor is participating in a public forum at an East coast US university (in Boston). During the Q&A, he is asked by a student (“a sorority girl”) in the audience, who is suitably bright-eyed and full of American blather, “Is America the greatest country in the world?” He initially blusters but the convener of the forum pushes him for a “human moment” and what follows is 3 classic minutes of TV, starting with “its not the greatest country in the World, Professor, that’s my answer” and concluding with “So when you ask what makes us the greatest country in the World, I don’t know what the fuck you are talking about. Yosemite?”. He then said among other things that “We used to be …”, “we stood up for what was right”, “we waged wars on poverty, not poor people”, “we aspired to intelligence, we didn’t belittle it” and more. The latest shenanigans in the US Congress where the GOP representatives have become a mindless rabble is certainly testimony to the sort of things the mythical Newsroom anchor was talking about in the series. The Sydney Morning Herald article (October 16, 2013) – US shutdown stalemate enters realm of the absurd – reports on how the GOP reps do not “agree either on tactics or strategy” and Boehner announced to the press that there had been “no decisions about what exactly we will do”. This is one day before the lunatic right-fringe of their party is intent on causing mayhem. My prediction – some ridiculous deal will be done and the US government will not default. We will see. But today I am providing a little glimpse into examination processes by using what might have been a first-year answer to an examination question to highlight some important points. I hope you enjoy the little window into life at a university.

There was an article in the UK Guardian (Australian) edition last week (September 27, 2013) which carried the title – Can Labor be blamed for rising unemployment?. The Labor government, which was tossed out of office in Australia on September 14, had been in power since late 2007. They inherited an unemployment rate of 4.4 per cent (which dropped 3 months later to 4 per cent on the tail end of the growth phase), an underemployment rate of 6.2 per cent (total labour underutilisation rate of 10.7 per cent), a participation rate of 65.6 per cent and an employment-population rate of 62.7 per cent. By the time we got sick of them, the unemployment rate was 5.8 per cent and rising, the underemployment rate was 7.8 per cent and rising (total wastage was 13.7 per cent and rising), the participation rate had dropped to 65 per cent (some 114 thousand workers exiting the labour force because of the lack of jobs), and the employment-population ratio had dropped to 61.2 per cent (a loss of 285 thousand relative jobs). The labour force increased by 1147 thousand over this time but employment only rose by 934 thousand, which meant that unemployment rose by 161 thousand more than if the relative scales had been maintained from November 2007. So is Labor to blame for this? Of-course it is – it was the currency-issuing government for 6 years or so. Any rise in the unemployment rate is the fault of the national government because it alone as the complete capacity to offset any reductions in employment arising from other sources such as global financial crisis, the slowdown in the Chinese economy, an appreciated Australian dollar and whatever else. The author of the Guardian article, while mounting a reasonable fight against the conservative view of the changing labour market, feels unable to admit that basic truth. So the Labor Party is obviously to blame because it was in government and could have prevented the rise in the unemployment rate.

Metaphors! They are more than a fancy way of emphasising some point – that is, their power goes beyond meagre linguistic construction. The research suggests they are part of our deep mental or neural capacity, which we draw on to sort out facts and ideas. They are conceptual devices intrinsically linked to the way we think abstractly. Metaphorical language reinforces our ideology (worldview) and so it is no surprise that political parties have become very interested in framing their messages using simple and common metaphors which resonate with the way we feel about things. George Lakoff, a cognitive linguist, considers we do not make our political choices on the basis of rational dissection of competing facts and arguments but rather respond to central (or grand) metaphors with reinforce our worldview. We thus consider facts or argument within that framework of thought. I am doing a bit of work in this area as a way of understanding why central Modern Monetary Theory (MMT) propositions (which are so patently obvious and have strong explanatory capacity) evade acceptance among people, even those who express liberal perspectives (in this context meaning – are open to new ideas).

On September 7, 2013, the federal election in Australia saw the incumbent Labor Party deposed in fairly categorical terms and replaced by the “born-to-rule” conservative coalition (Liberal and Nationals). The Labor Party had been in power for two terms since 2007 after defeating the conservatives even more categorically, who had, in turn, been in power for 11 years. The Labor Party stormed to office in the 2007 federal election, taking 22 seats of coalition (and a further 1 from an independent) to hold 83 seats (primary vote 43.38 per cent, and two-party preferred 52.70 per cent). The conservative coalition was reduced to 65 seats (in the 150 seat lower house). The conservative Prime Minister lost his own seat so great was the rout. Between 2007 and 2013, the Australian Labor Party squandered that lead and in the process we had three Prime Ministers (2 different) as the Party factions conducted an internecene war. After last Saturday’s defeat, one of the Labor Prime Ministers (who had been deposed in June 2013 as a result of her total failure to win electoral appeal) wrote her assessment of the state of Labor as a result of the electoral defeat. The article – Julia Gillard writes on power, purpose and Labor’s future – is an extraordinary exercise in self-denial, despite much of it providing an assessment that I would agree with. But in the big issue – of economic credibility, Ms Gillard demonstrates why her Party was unfit to govern and why the conservatives are back in power and beginning yet another period where the rights and outcomes of workers will be attacked and dragged down. But this has only happened because of the monumental failure of the Labor Party to present a progressive alternative at a time when they had the Australian voters eating out of their hands.

Japanese economist Richard Koo recently (July 9, 2013) published his latest report on the world economy – Japan, US, and Europe face different issues – which updates some of the latest data available from the economies listed in the title. I am sorry that I cannot link to the Report as it is a subscription service (thanks to Antoine for my copy). I discussed some of Richard Koo’s ideas and how they sat with Modern Monetary Theory (MMT) concepts in this 2009 blog – Balance sheet recessions and democracy. While the basic concept of a balance sheet recession is important to grasp and the policy prescriptions that flow from it clearly point to the need for more fiscal stimulus, once you dig a little deeper into Koo’s conceptual framework you realise that he is very mainstream – more insightful than the average mainstream economist, who typically fails to even grasp the reality of the current situation, but mainstream nonetheless. And that means there are some things in his theoretical framework that are plain wrong when applied to a modern monetary economy