Madness continues – macro conditionalities on regional transfers in Europe

When 17 countries together have failed to grow for the last 12 months and each successive quarter has seen the growth rate fall increasingly (-0.1 per cent June 2012, -0.7 per cent September 2012, -1.0 per cent December 2012 and -1.1 per cent March-quarter 2013) and the same 17 countries have seen the collective unemployment rate rise (or remain static) for the last 24 months from 9.9 per cent (May 2011) to 12.2 per cent (May 2013) when is it appropriate to conclude that the macroeconomic policy mix is wrong and substantial changes need to be implemented. Answer: Yesterday! Further, why would those same countries decide to implement further policy changes, which will not only make it harder to grow but go against the whole idea of the collective in the first place? Answer: Besotted by destructive neo-liberalism. Welcome to Europe and macroeconomic conditionality on regional funding.

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Case Study – British IMF loan 1976 – Part 6

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.

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Australia’s “change” of government inherits old destructive narratives

Australia recently acquired a new (old) Prime Minister and a new Treasurer (Chris Bowen) as a result of the on-going machinations within the Australian Labor Party. It seems to have done the trick – at least at present – with the two-party preferred vote split 50-50 now instead of 42-58 in favour of the moribund conservatives who were steaming into office, it seemed, with no credibility at all – just a generalised dislike for the previous PM and her cabinet. Within two days, however, of taking his post, the new Treasurer agreed that it was the Government’s policy to drive unemployment up by maintaining its totally inappropriate (and failed) strategy to achieve a budget surplus. This was in the same week as more disastrous labour market data has been released. It seems that our “change” of government has just taken on all the old destructive narratives of the “former” regime. One neo-liberal Treasurer walks out and a clone walks in.

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Saturday Quiz – July 6, 2013 – answers and discussion

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.

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Case Study – British IMF loan 1976 – Part 5

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.

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Latest Australian vacancy data – its all down to deficient demand

The continuing obsession among policy makers combines fiscal austerity and deregulation (particularly of labour markets) as the hope for prosperity. I know these are just catch cries that aim to obfuscate the underlying intent which is to redistribute real income away from workers. But even that conspiracy theory has certain problems when you realise that business doesn’t necessarily do very well in general when economies are locked in a recessive mire. The structural reform argument goes that growth can be engendered by deregulating the labour market to remove inefficiencies that create bottlenecks for growth even when fiscal austerity is slashing aggregate demand and killing growth. The 1994 OECD Jobs Study the provides the framework for this policy approach. The only problem is that it failed even before the crisis emerged. But with policymakers intent on slashing aggregate demand, which they know will kill growth, they have to offer something that they can pretend will generate growth. The structural reform agenda has zero credibility in the same way that fiscal austerity has zero credibility. The latest vacancy data from Australia continues to provide an evidential basis for rejecting both conservative agendas.

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Saturday Quiz – June 29, 2013 – answers and discussion

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.

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US government should look to France and increase its deficit

Yesterday (June 26, 2013), the – US Bureau of Economic Analysis – published the third estimates (revising the second estimates published in late April – US National Income and Product Accounts – for the March-quarter 2013. The substantive changes in the revisions are that the US economic growth rate has been revised down from 2.4 per cent to 1.8 per cent per annum once the more complete data has become available. Personal consumption spending has been revised downwards, and exports declined rather than the initial assessment of an increase. The second estimates revealed a slowing economy in the face of the fiscal drag coming from the government sector, principally the federal government. At the time of their publication, it was clear that the outlook was not optimistic given that this data seemed to exclude the impacts of the “sequester”. We considered that those impacts would manifest more clearly in the June-quarter data. The third estimates now confirm that the lag in the sequester impacts has been shorter than previously thought. The US economy clearly slowed quite sharply in the first-quarter 2013 under the weight of the fiscal drag. The output gap is now over 10 per cent with signs of deflation emerging. The danger is that the US will head towards zero growth as the sequester impacts become more pronounced. The US federal government should increase their net spending rather significantly at present to avoid this downward trend. The US just has to look across the Atlantic, where the data now shows the French economy is now back in recession as a direct result of fiscal austerity.

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Since when did the BIS become the Neo-liberal Ministry of Misinformation?

One despairs when a sober institution gets ahead of itself, usually because they make hiring mistakes, and start to think they know stuff. This is an organisation that is steeped in statistical analysis and should have a very good idea of empirical regularities. They know that interest rates have been “essentially zero” in Japan since the 1990s and they know that what hasn’t happened as a consequence. They know that central banks have been “expanding their balance sheets” (now “collectively at … three times their pre-crisis level”) and what hasn’t happened as a consequence (inflation). But as the neo-liberal paradigm has concentrated its control of the policy debate, this organisation has morphed from playing a useful role as a coordinator of central banking into a propaganda unit pumping out misinformation and outright lies and distorting the public debate. Welcome to the Bank of International Settlements, which is now firmly ensconced with the likes of the IMF, the OECD, the ECB, the EU, the World Bank, and others as being part of the problem the World economy faces.

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British Labour – light years away from 1945 on another planet

The problem of living in Darwin some of the time is that the normal day to day travel that one engages in while pursuing professional life becomes very onerous. It is a four hour flight to any of the capital cities (whereas most were around 1 hour or so from Newcastle). Further, the flight schedules are crazy because Darwin Airport has no curfew (because there is no residential areas nearby) and so you catch planes to and from, say Melbourne at 1.45 in the morning, fly all night, then have to hit the ground running to meet work commitments. This part of Darwin life is very austere. Talking about austerity – in a much more significant way, however – I read that Mr Ed Miliband, thinks he is the 2013 version of Clement Atlee and he can do great and radical “Labour” things in Britain while pursuing a neo-liberal economic austerity program. My immediate reaction was who does he think he is kidding. Sadly, the British Opposition leader seems to think his party can defy basic accounting – that is, reinvent the rules of addition and subtraction – as he tries to present himself as a small target but one imbued with traditional British Labour Party values. The point of this blog is to explain why this neo-liberal bluster is so anti-1945 Labour, without dwelling too much on history. My personal austerity (flying overnight last night) has impinged on my time to wax lyrical today!

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Case Study – British IMF loan 1976 – Part 3

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.

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Real wage cuts do not stimulate employment

In last week’s blog – Massive real wage cuts will not improve growth prospects – I considered the mounting evidence that austerity is leading to massive cuts in real wages for workers in Britain without commensurate gains in employment being evident. I have been doing some detailed work on the movements in employment and real wages in Britain over the last decade or so and today some of the more accessible work is presented. You will soon see that the mainstream view that cutting real wages is good for the economy is as absurd as the argument that a fiscal contraction expansion is the path to prosperity. Both policy options are the path to entrenched unemployment and increased poverty rates – exactly the outcome that has befallen the British population as a result of their moronic government policy stance.

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Full employment is still low unemployment and zero underemployment

You won’t see much debate or coverage of the desirability of making full employment the central goal of economic policy these days. The politicians, infested with neo-liberalism, do not admit they have abandoned full employment as a policy goal. Instead, they lie and wheel out various flawed analyses that try to make out that full employment now occurs at much higher rates of labour underutilisation in the past. Norway tells us that that proposition is a lie. In Australia, the government still tries to suggest that a state where more than 14 per cent of available labour is idle in one way or another represents close to full employment and a justification for fiscal austerity. We believe them because we have been seduced by the lies and our educational systems have downplayed critical scrutiny. But until we cut through the swathe of lies and misinformation we won’t get back to the bountiful state of full employment where not only workers enjoy higher incomes but dignity becomes a priority. Whatever else the liars say, full employment is still a state of very low unemployment and zero underemployment.

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Saturday Quiz – June 15, 2013 – answers and discussion

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.

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Saturday Quiz – June 8, 2013 – answers and discussion

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.

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Case Study – British IMF loan 1976 – Part 1

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.

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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.

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No joy for Australia’s low paid workers

The Fair Work Commission, the Federal body entrusted with the task of determining Australia’s minimum wage handed down its – 2012-13 decision – today. The news was not good for more than 1.5 million workers (out of some 11.6 million) who are reliant on award wages in Australia (that is, low-paid workers). These workers are typically found in the retail sector, personal care services, hospitality, cleaning services and unskilled labouring. They already earn a pittance and endure poor working conditions. The FWC gave the lowest paid workers an extra $15.80 per week (a rise of just over 2.6 per cent), which will at best maintain the current real minimum wage but denies this cohort access to the fairly robust national productivity growth that has occurred over the last two years. The decision also widens the gap between the low paid workers and other wage and salary recipients. The real story though is that today’s minimum wage outcome is another casualty of the fiscal austerity that the Federal Government has imposed on the nation which is destroying jobs and impacting disproportionately on low-paid workers. The FWC cited rising unemployment as a reason for its mean pay rise.

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Buffer stocks and price stability – Part 5

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.

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OECD predicts that pigs will fly

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.

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