There is nothing new under the sun

The debates that are played out in the parliaments around the world at present about the state of public finances are not new. The debates, which are amplified by the media who typically do not understand the issues involved yet mostly take a conservative position because they can sell more products (papers, on-line access etc) that way, appear to be pressing and all sorts of emergency language is used. The characters who write these doomsday scenarios mustn’t ever reflect on what they say from one day to another relative to the historical record. Their arguments against the use of budget deficits and invoking doomsday scenarios regarding public debt reduction are not new. Given many of these conservatives are also into the bible (pushing evangelical diatribe) they might have reflected on – Ecclesiastes 1:9 – which noted that “What has been will be again, what has been done will be done again; there is nothing new under the sun”. Indeed not. One character in history with a penchant for religion (Mormonism) however had some insights in the operations of government budgets and public debt. He was also a long-time former Chairman of the Board of Governors of the US Federal Reserve System.

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Saturday Quiz – July 27, 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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Austerity fails – its in the numbers

The latest Eurostat public finance data for Europe on July 22, 2013 – Euro area government debt up to 92.2% of GDP demonstrates the failure of the Euro policy agenda on its own terms. It is clear the indecency of the policy elites is reflected in the way they use nomenclature. Massive rises in unemployment and poverty is called modernisation or labour market reform. The argument bifurcates at that point. How can you argue with someone who thinks like that? But we all know what a financial ratio is. They are without nuance. A public debt ratio is what it is. And when the leaders say they are doing everything they can to reduce them and the cost all this “modernisation” is a price worth paying to reduce the public debt ratios we can conclude that they are failing if the debt ratios continually rise as they impose harsher austerity (sorry, increase the degree of modernisation). That is what the hard numbers are shouting. And that means that someone in Europe should just blow the whistle and call time is up and get rid of the whole swathe of policy leaders.

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The ultimate boondoggle courtesy of slack government policy

Workers, particularly low-paid ones, are regularly sent up in comedy or satire. The 1959 British movie – I’m All Right Jack – was an acidic attack on the British trade union movement although it also parodied the stuffy upper-class British industrialists as well. In 2003, a British author Magnus Mills published the book – The Scheme for Full Employment – which is a satirical attempt to deride Keynesian full employment policies. Boondoggling and leaf-raking is the term that invokes the ultimate put down by the conservatives who laud the virtues of the private sector and accuse the public sector of creating waste and sloth every time someone proposes that the government introduce a large-scale job creation program to alleviate the dreadful damage that mass unemployment causes. Well the New York Times investigative team has discovered the ultimate boondoggle that has been made possible because of slack government policy. And, it involves our friends in the financial markets – those so-called productive, entrepreneurial free marketeers.

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Saturday Quiz – July 20, 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 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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The British agenda to bring workers to their knees is well advanced

In Australia, 84 per cent of jobs created in the last 6 months have been part-time and underemployment has risen since February 2008 (the low-point in the last cycle) from 666.3 thousand (5.9 per cent) to 908.6 thousand (7.4 per cent). And this is a period that the spin doctors in government and the media told us was our once-in-a-hundred year mining boom bringing rich bountiful futures to all. The only problem is that the future workers (our 15-19 year olds) have endured an absolute contraction in employment in the 5 years since early 2008. The Government hasn’t embraced the full-on austerity that is failing Britain but has still overseen a contraction in fiscal policy which is now damaging growth and creating an increasing pool of low-paid, insecure jobs as full-time employment vanishes. In Britain, the situation is even more dire with a Government hell-bent undermining the prosperity of it citizens. The British Trades Union Congress (TUC) released an interesting report last week (July 12, 2013) – The UK’s Low Pay Recovery – which shows that “eighty per cent of net job creation since June 2010 has taken place in industries where the average wage is less than £7.95 an hour”. The British Chancellor is looking increasingly cocky lately declaring that Britain is “out of intensive care”. From the data I examine most days, nothing could be further from the truth.

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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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Saturday Quiz – July 13, 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 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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Australian labour market – weak and deteriorating

Today’s release by the Australian Bureau of Statistics (ABS) of the – Labour Force data – for June 2013 signals a deteriorating situation. Employment growth was about zero and full-time employment continued to contract. 84 per cent of jobs created in the last 6 months have been part-time. Unemployment rose by 23,700 and the unemployment rate rose 0.2 points to 5.7 per cent. This data signals an urgent need for fiscal stimulus to reverse the negative trend. Unfortunately, with both sides of politics locked into an austerity mindset the situation is likely to deteriorate further.

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In a few minutes you do not learn much

There was an article in the New York Times at the weekend – Warren Mosler, a Deficit Lover With a Following – which seems to have attracted some attention. The attention has spanned from the vituperative personal attacks on the article’s subject, all of which would seem to be factually in error, to claims that proponents of Modern Monetary Theory (MMT) are “just nuts”. The latter assessment apparently was drawn after a few minutes consideration by a US economist. I don’t think one learns very much in a few minutes. But the output over the years of the particular economist quoted by the NYTs tells me he hasn’t learned much after presumably many hours of study. I suppose that if you are mindlessly locked into the mainstream macroeconomics textbook models then that is to be expected.

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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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Christmas is in decline in Greece

The alternative title for today could have been my award to the Euro elites for the title as Champions of Europe – for their consistent record-breaking feats – month after month – the unemployment rate rises. Eurostat reported on Monday (July 1, 2013) that – Euro area unemployment rate at 12.2% – up from 11.3 per cent in May 2012. That is an additional 1.4 million workers out of work in the 12 months. Unemployment is nearly reaching 20 million in the Eurozone. 3.5 million under 15s are now unemployed in the Eurozone (23.9 per cent up from 23 per cent in May 2012). Youth unemployment stands at 59.2 per cent in Greece, 56.5 per cent in Spain and 42.1 per cent in Portugal (and rising in all three nations). Talk about leaving a legacy for our grandchildren. Anyway. I thought I might just refresh my understanding of the Greek data today and ask some questions. What comes out is that Christmas is in decline in Greece – at least in a material sense. Which would be good if it was for the right reasons – that is, a renewed enlightenment towards non-material values. The problem is that it reflects a devastated economy being overseen by some bullies who not only fail in their own jobs but also want to make sure millions do not actually have jobs. The question (and there are a multitude of ways we could ask this) is Why?

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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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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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Labour costs are not driving Australia’s competitiveness

Australia is caught in a bizarre warp at the moment. We have a national election in September and the incumbent Labor Party is heading for obliteration with the Party conducting an internal power struggle that defies description. The Prime Minister is deeply unpopular and is being poorly advised (as evidenced by the sequence of strategic disasters). The politician she deposed as PM is popular with the people but hated internally and he also proved to be a policy disaster. The current PM should step down to limit the electoral damage that will be wrought on the Party in September (that is, save some seats) but she won’t and the other character won’t challenge because he is behaving as the wrecking ball – bitter, revengeful and, most significantly without sufficient support (just). Its a tragic comedy of epic proportions. The Opposition is gliding into power without coherent policies and will reinstate the agenda it pursued when last in power (1996-2007), which means attacks on welfare and unions and handouts to the rich. Anticipating the change are the employer groups which are increasingly claiming they are being disadvantaged by excessive wage outcomes in Australia. Same old. It doesn’t help when the media produce headlines such as “Labour cost growth hits business hard”, which are not sustained by any coherent analysis that follows. It is a bizarre time.

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Saturday Quiz – June 22, 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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