One Ferrari does not a recovery make

I thought that blog title today was appropriate given that Aristotle was Greek. Today I explore motor vehicle registrations – well to be exact, a single registration. That is a backdrop to a brief discussion about the OECD’s latest publication – Going for Growth 2013 Report – which takes the ludicrous to a new level. These organisations need to be closed and the cash that governments pump into them to provide very amenable – some would say, over the top – working conditions (high pay, no tax obligations, well supported travel, first class facilities etc) could be diverted into something more useful. Like provide some low-paid workers with jobs. Lets assume one OECD manager earns the same wage as about 20 low-paid workers per week. The trade-off 1 job lost for 20 gained sounds a good bet to me. Anyway, amidst all the talk about structural agendas and reform zeal there is an ugly truth. There has to an easing of the macroeconomic constraint that is preventing economies from generating enough jobs. Firms need to see spending before they will increase production. Making life harder for workers through cuts to wages, conditions of work, pensions and the like will not create a single job. I lie – at least one job. Some OECD official will get assigned the job of evaluating their work and then a renewed bout of lies will emerge clothed in techno-speak. I just know that one Ferrari does not a recovery make. It tells me that the world is turning for the worse.

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Progressive narrative should be human focused and uncompromising

I was reading an interesting article at the weekend (February 17, 2012) in The UK Independent – The Left should learn about plain speaking from George Galloway – which was about language and the way ideology is communicated. The use of nomenclature and communication methods is clearly central to the way a paradigm establishes itself and maintains its popularity even when its legitimacy in theoretical and empirical terms evaporates. The article points to the failure of the “left” to construct an alternative narrative that relates directly to the human experience. It demonstrates that the “right” can lie but relate those lies at a human level to gain traction. They appeal to our intuition which as I noted in this blog – When common sense fails – is bound to lead us astray. There was an excellent example of this in two articles recently. The left has become so paralysed by its embrace of management-consultant styled, neo-liberal techno-speak that it can no longer speak to us at the human level. With millions of people unemployed it should be a political no-brainer to address the concerns of that cohort to garner political support. Instead, so-called progressive governments and parties in advanced nations fall foul of the neo-liberal dialogue about “scroungers” and “dole-bludgers” and demonstrate their resolve by invoking harsh welfare-to-work policies. Nothing progressive will ever come from that surrender to neo-liberalism. That is what this blog is about today.

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Spain is not an example of reform success

There was an article in the Financial Times last week (February 12, 2013) – Europe’s labour market reforms take shape – that claimed that Spain was on the path to glory by hacking into rights of its workforce (that is, the 75 odd percent that still have jobs). It followed another Financial Times article (February 11, 2013) – Productivity is Europe’s ultimate problem – written by the deputy managing director of the IMF and redolent of the ideology that organisation spins as facts. Both articles are part of a phalanx in the conservative press that prefer to lie rather than relate to the facts. Apparently we have a new poster child – Ireland was the first one (now forgotten as it wallows in the malaise of fiscal austerity). Now, Spain is the go – a model for savage labour market reform and export led growth. Well it is a model – for how to ensure the unemployment rate and poverty rates continue to rise and you produce an economy that stops employing its 15-24 year olds. Some poster child! Spain is not an example of reform success. Rather, it demonstrates how misguided the policy debate has become and how a policy devastation is now being seen as good. Truly bizarre.

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Australian government – failing in its most basic responsibility

The Australian government is demonstrating to all of us that they are mishandling fiscal policy. The background is simple. Australia saw its growth vanish and unemployment start rising in December 2008 as the financial crisis spread into the real economy. The government responded, mostly correctly, and introduced a swift and significant fiscal stimulus. The economy resumed growth, the rise in unemployment was pegged (although there wasn’t enough done to generate sufficient jobs growth), and the budget deficit rose. Before the private sector had demonstrated it could take up the spending slack and support the growth process, the Federal government became obsessed with “returning the budget to surplus”, erroneously thinking that this would separate them, politically, from the Opposition. They were wrong. The imposition of fiscal austerity has caused economic growth to slow and tax revenue growth to fall well below projections (declining world commodity prices have also not helped). First, the government abandoned their surplus promise realising that the revenue side was not going to improve sufficiently. Now, they are implying they need to hike income taxes to cover the “revenue shortfall”. If they ever had any credibility as responsible fiscal managers then it is safe to conclude they have none now. Their continued claims about maintaining a “strict fiscal policy” (read: procyclical fiscal stance) are not only moronic but they are also leading to policies which are killing growth and employment.

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Mass unemployment – its all about demand

As I have said on enough occasions to earn the title of being a cracked record – the solution to mass unemployment is very simple – create enough jobs to satisfy the preferences for work of those who haven’t any. I attend a lot of meetings – here, there and everywhere – and listen to officials from governments and multilateral agencies say the same thing – “unemployment is a multifaceted, complex problem”. My response is always the same. No it isn’t. That sort of language – dissembling language – is just an excuse for saying that it doesn’t suit the dominant ideology to create the necessary jobs. Another simple fact is if the non-government sector cannot create the necessary jobs – well, ladies and gentlemen – there is only one other sector. Get over it. This blog reviews the latest release by the US Bureau of Labor Statistics of its – US JOLTS database – for December 2012. This data set sends some very clear and very simple messages about the causes of mass unemployment – and they all implicate the demand-side.

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I wonder what the hell I have been writing all these years

I have spent almost the entire time I have been in academic life – from the time I was a fourth-year student, onto Masters, then PhD and subsequently as an teaching and research academic – studying, writing, publishing, and teaching about the Phillips curve and the link between labour markets and inflation. I have published many articles on how full employment was abandoned and how it can be restored taking care to consider how an economy that approaches high pressure might cope with the increasing nominal demands on real output. I have advanced various policy options to resolve the problem of incompatible nominal demands on such output and provided the pro and con of each. I have published some very detailed papers on those questions and my recent book – Full Employment abandoned – went into all the tedious detail of how inflation occurs and what can be done about it. But, apparently, Modern Monetary Theory (MMT) ignores “the dilemmas posed by Phillips curve analysis” as one of its many alleged sins. I wonder what the hell I have been writing all these years

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Sport and doping – the spreading tentacles of capital

I ride a bike a lot. I raced a bike in European competition for many years. I also started the www-site – cyclingnews.com – which is now the largest of its type in the world. I started it as a way of bringing back news from Europe to my bike racing friends back in Australia who were starved of results and information about cycling. In the 1990s, I was regularly in contact with Lance Armstrong and spent time with him riding and recording his 1998 World Championship campaign in Maastricht. I knew team managers of some of the big teams and lots and lots of riders and other insiders. I know a lot about the insides of the sport – the bellissimo sport – the drug-riddled sport. One and the same. I also have a theoretical framework for analysing the practices in the sport that I think delivers understandings that go beyond the way the mainstream media react when some athlete tests positive to some substance that happens to be on one side of a very arbitrary and inconsistent line which demarcates legal and non-legal. Theses issues are dominating national news in Australia at present after the – Australiam Crime Commission – released the first of its reports on how drug and crime infested Australian sport is. It comes as no surprise.

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Saturday Quiz – February 9, 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.

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Australian labour market – still slipping backwards

Today’s release by the Australian Bureau of Statistics (ABS) of the Labour Force data for January 2013 reveals that the Australian labour market continues to slide. While total employment rose modestly (very), full-time employment fell for the third consecutive month and working hours also fell. The small rise in unemployment would have been much worse had not the participation rate fell again. The unemployment rate remained unchanged at 5.4 per cent but would have been at least 0.1 per cent higher had the participation rate not fallen. So both unemployment and hidden unemployment rose. The rate of employment growth is not sufficient to even keep pace with the underlying population growth. The data is not consistent with any notions that the Australian labour market is booming or close to full employment. The most continuing feature that should warrant immediate policy concern is the appalling state of the youth labour market. My assessment of today’s results – a failing economy with further weakness to come. The Government realised late in 2012 that its obsessive pursuit of a budget surplus was going to fail. It should now go one step further towards becoming economically responsible and reverse the direction of fiscal policy by introducing some significant direct job creation. The budget deficit is too low in Australia by perhaps 2-3 per cent of GDP.

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Unemployment and inflation – Part 1

Tomorrow the Labour Force data comes out in Australia and I will obviously be analysing that. Regular readers will note that of late I have been using Thursday and Friday to update you on the progress of our Modern Monetary Theory (MMT) text-book, which I am writing in liaison with my colleague and friend, Randy Wray. We are trying to get it completed for use in second-semester 2013 and so I am spending more time on it to meet that expectation. So today – it is text-book day given tomorrow we will be talking about how bad the labour market is (unless I am pleasantly surprised and the data is better than I expect). Today, I am moving on to develop the material on unemployment and inflation.

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US government has not exhausted its fiscal options

Today, I read a Bloomberg article – How the IMF Can Help Reduce Unemployment – which, in part, makes out that the IMF know what they are talking about when it comes to macroeconomic policy (that was the hilarious aspect). The article also claims that the US government has pursued “expansionary fiscal policy … aggressively but growth has remained too weak”. That claim, which surfaces most days, is being used to indoctrinate people into holding the view that fiscal policy has failed and there is little the government can now do other than turn it over the market (with very substantial handouts to the powerful lobby groups – of-course – but that isn’t really government spending is it – not like helping the pitifully poor unemployed who have no income and no power)! This theme repeats like a worn out record. The reality is that the US government didn’t give fiscal policy a chance to work fully. It was clear that the stimulus packages underpinned economic growth in 2009 and 2010 and led to an increase in private confidence (backed by growth in consumption and private investment spending). But the fiscal support was withdrawn too soon as the latest national accounts data clearly shows. The point is that the US government wasn’t aggressive enough, got cold feet too soon, and has never exhausted its fiscal options.

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The US labour market is still in a deplorable state

Last week (February 1, 2013), the – US Bureau of Labor Statistics – released their latest – Employment Situation – January 2013 – which showed that total “nonfarm payroll employment increased by 157,000 in January, and the unemployment rate was essentially unchanged at 7.9 percent”. The question is whether that is a good outcome or not in the scheme of things. The answer is that it remains a fairly bleak outcome especially when we consider the data more deeply. The economy is not growing fast enough to absorb the backlog of workers who were made unemployed in the downturn. There is massive waste now being endured by the economy and disproportionately being borne by the most disadvantaged workers in that economy. It is madness for the politicians to argue about debt ceilings and the rest of the irrelevancies when there is this much waste being created.

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Saturday Quiz – February 2, 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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Keynes and the Classics Part 9

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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Keynes and the Classics Part 8

While I usually use 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, today I am departing from that practice (deadlines looming) and devoting the next two days to textbook writing. 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 approach.

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Exploring directions in fiscal policy

This blog extends the discussion in yesterday’s blog – Exploring pro-cyclical budget positions – which is why I am running them on consecutive days. Not that I think any of my readers (Austrian schoolers and other conservatives aside) have memory issues! The discussion that follows focuses on ways in which we can interpret the fiscal stance of a government and hopefully clears up some of the confusion that I read in E-mails I receive from readers. I say that not to put anyone down but rather to recognise that the decompositions of budget outcomes and analysing the direction of fiscal policy on a period-to-period basis is not something that the financial press usually focuses on. In avoid detailed analysis, the press leaves lots of misperceptions unchallenged and often the wrong conclusions are drawn. I am not talking about policy preferences here. Just coming to terms with the facts is sometimes difficult for many commentators to achieve. But, of-course, the “facts” are also sometimes difficult to discover given that the methods used to produce them are often ideologically biased (I am talking here about the decomposition of the actual deficit into structural and cyclical components requires a full employment benchmark, which is where the fun starts.

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Saturday Quiz – January 26, 2013 – answers and discussion

The reference to Invasion Day in this week’s quiz title is in solidarity with the indigenous brothers and sisters in Australia. The other name for yesterday (January 26, 2012) is Australia Day, our national day. It marks the day that the colonists took over this land and declared it – Terra Nullius – or “land belonging to no one”, which explicitly denied the legal rights of the indigenous Australians who had lived here for more than 30,000 years prior to the colonists arrival. 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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Keynes and the Classics Part 7

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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Keynes and the Classics Part 6

While I usually use 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, today I am departing from that practice (deadlines looming) and devoting the next two days to textbook writing. 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 approach.

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ILO …. ILF … IMF

The International Labour Organization (ILO) released its latest – Global Employment Trends 2013 – yesterday (January 22, 2013), which carried the sub-title “Recovering from a second jobs dip”. The way things are going in policy circles next year’s ILO Trends report will be titled something like “Heading into a third jobs dip”. There has been a lot of focus in the last few days on how central banks are standing ready or are about to inject liquidity into their respective economies as a further attempt to boost jobs. The press reports I have read (about Japan, UK etc) never also mention that these monetary policy gymnastics (quantitative easing) do nothing as they stand for aggregate demand. Japan will pick up its growth rate in the coming year not because the BoJ is buying bonds but because the Ministry of Finance will be increasing the budget deficit via some large spending injections. Unfortunately, the UK is determined to ensure it has a quadruple(bypass!)-dip recession. The ILO reports highlights the results of the policy folly in very sharp terms but, unfortunately, still situates that organisation within the neo-liberal orthodoxy when it comes to macroeconomic policy. Their heart is at least in the right place, they just have to move their institutional brain – about 180 degrees.

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