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.

Read more

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.

Read more

Saturday Quiz – January 19, 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.

Read more

IMF locked into circular (religious) logic again

Earlier this year the President of the European Commission declared that “the euro crisis is a thing of the past” (Source). As with most things the President says the reality is different to his political speak. The latest news is that Germany went backwards in the fourth-quarter 2012 as the on-going fiscal austerity chokes any hope of growth. The data continues to negate the logic that emerges from agencies such as the IMF. In recent days, the IMF, fresh from admitting what amounts to professional malpractice (see – The culpability lies elsewhere … always! for example) – has just published a paper that seeks to classify governments as to whether they are fiscally prudent or profligate. As you will see these concepts might be bandied about in religious meetings but have no meaning in the way the IMF seeks to apply them to the real world economic debate. They are loaded terms that are defined without reference to anything that matters. The problem is that the policy advice that follows from this sort of irrelevant analysis causes massive damage to the lives of people by undermining the capacity of economies to meet the needs of these people.

Read more

Saturday Quiz – January 12, 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.

Read more

Saturday Quiz – January 5, 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.

Read more

When you’ve got friends like this – Part 10

In wishing us all happy new year, Jared Bernstein also pounded his readers with a confused macroeconomic logic, that if applied, would in all likelihood make their new year (collectively) worse. His article (December 29, 2012) – My Views on Spending Cuts and Entitlements – is another one of those cases when friendly fire shoots the progressive movement in the foot. You can read the previous editions of this theme – When you’ve got friends like this – to see what the problem is. In fact, I think I am being rather reasonable in only having this series extend to Part 10 so far. Given what is out there parading as progressive macroeconomic thinking the series might have been much longer than that by now. The simple point is that a truly progressive social agenda has to be grounded in solid macroeconomic principles. Trying to carve out a progressive agenda within a mainstream macroeconomic framework undermines the credibility of the former and plays straight into the hands of the conservatives.

Read more

Saturday Quiz – November 24, 2012 – 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.

Read more

Win-win – US budget deficit expands and supports growth and private saving

The Sydney Morning Herald carried an AFP story today (November 14, 2012) – US deficit hits $120b as fiscal cliff nears – which reported the latest US Treasury Department figures which showed that “the US budget deficit rose 22 per cent in October from a year ago, to $US120 billion ($A115.56 billion), as spending far outpaced revenue”. At which point I thought – how lucky the American people are that the Government deficit is still expanding and supporting growth unlike the expanding deficits in Europe which are expanding because of a lack of growth. It is an astounding achievement for the US people. Unfortunately all the signs are that the American polity doesn’t actually understand that their in-fighting, which has allowed the deficits to continue growing, has been good for the nation. Had they actually cut the deficits or failed to pass the debt limit extension, the US economy would be in the doldrums just like Europe. The problem now is that the political debate will reach some conclusion pretty soon and the harbingers of doom are growing stronger. But for the time being with the US budget deficit expanding and supporting growth and private saving it is a win-win.

Read more

The problematic basis for deficit phobias

With the natural disaster in the US now in its clean up stage the discussions have turned, in a predictable way, to “how will the US pay for this especially when it has huge deficits and debts and has to fall off a fiscal cliff anyway to stop the sky from falling in” – and narratives like that. Remember when Hurricane Irene struck in 2011? The resurgent Republicans tried to push through bills, which would have required matching cuts in other federal spending. The other Sandy reminder is that when the chips are down who do we all turn to? Government. What do you think would have been the current state, if the Republican contender was President and followed through on his promise to scrap FEMA and put emergency relief in the hands of the private sector, which apparently does things better? Chaos at best is the answer. The fact is that the federal government will be able to provide whatever financial assistance is required beyond private insurance payments. The only constraint that might hamper the recovery is the availability of real resources, which can be brought to bear. Further, it seems that the whole fiscal crisis beat up, even with the terms of the mainstream paradigm, is a beat-up, courtesy of some spurious work done by the Congressional Budget Office, that much-quoted, but seemingly, errant organisation.

Read more

When you’ve got friends like this – Part 9

The progressive side of politics is at the best of times, fragmented. The conservatives are much more organised and fund various “think tanks” very generously. These think tanks then provide the arguments upon which the conservative attack on government intervention is justified. Various multilateral agencies – such as the IMF and the OECD – are co-opted into this conservative putsch. But occasionally there is some major piece of work that is hailed as the progressive manifesto. A 2011 offering – Crisis, Slump, Superstition and Recovery: Thinking and acting beyond vulgar Keynesianism – is now being held out as a model for British Labour to follow. However on closer examination it becomes obvious that this offering is another one of cases when friendly fire shoots the progressive movement in the foot. You can read the previous editions of this theme – When you’ve got friends like this – to see what the problem is. The simple point is that a truly progressive social agenda has to be grounded in solid macroeconomic principles. Trying to carve out a progressive agenda within a mainstream macroeconomic framework undermines the credibility of the former and plays straight into the hands of the conservatives.

Read more

Saturday Quiz – October 6, 2012 – 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.

Read more

Scotland should vote yes in 2014 but only if …

I am in Perth today speaking at a public service employees union congress. The talk is based on a major report we have just finished tracking the implications of public spending cutbacks in Australia on the volume and quality of public service delivery. We did several case studies – one of which was child protection – and the cutbacks will lead to increased child abuse in Australia without doubt. The story is pretty grim and I will write about it once the Report is made public by the commissioning party. But with travel (Perth is a long flight from anywhere and I have to get back to Newcastle tonight – 6 hours) and commitments I haven’t much time to wax lyrical on my blog. But I have been meaning to write about the upcoming Scottish referendum on independence from Britain and it fits a nice theme with yesterday’s blog – The demise of social democratic parties – they are all neo-liberals now – where I argued that good intentions come to naught if the economic policy paradigm used is erroneous. I would recommend the Scots vote yes at the 2014 referendum. But only if they introduce their own unpegged, floating currency and avoid any talk of joining the Eurozone. Further, the yes vote should be conditional on the government committing itself to achieving full employment on the back of their newly created currency sovereignty. Then the yes vote will improve welfare for the Scottish people. If they continue to use the British pound – then nothing will be gained.

Read more

Accounting smokescreens excite the conservatives

I haven’t much time today as I have been travelling most of the day. But the news is that Japan – soon after its government announced it would increase taxes to “rein in the deficit” is now facing a dramatic slowdown as a result of the on-going crisis in Europe and the slowdown in the Chinese economy. Perfect time to increase taxes really! But today we revisit (for the nth time) the way in which conservatives get excited by the accounting smokescreens that have been overlaid onto the monetary system to obscure certain fundamental capacities of government. The excitement or should I say – hysteria – then leads to pressure being put on policy makers by the billionaires that control the media – and, invariably – leads to poor policy choices being made. So for the nth time – the US social security system cannot go broke. The “financial gaps” that are wheeled out to prove that it will become insolvent are just accounting structures that can be altered by Congress anytime they want. If the accounting systems led to the system being in jeopardy then Congress would quickly assert their intrinsic capacities.

Read more

Saturday quiz – July 14, 2012 – 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.

Read more

Saturday quiz – July 7, 2012 – 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.

Read more

Revisionism is rife and ignorance is being elevated to higher levels

Sometimes I read things and consider either I live in a parallel universe or the writers do. I always conclude the latter. There is an increasing number of articles and commentaries coming out which aim to re-write history in favour of the writer’s reputation or that of his/her mates. Revisionism, which includes the practice of personal reincarnation is rife at present. Everybody seemed to predict the crisis. Even those that clearly in their own writing didn’t have a clue that the trouble was coming predicted it. As part of this process, key organisations that should be learning from the crisis such as the BIS are demonstrating that they are in an educational void. They have become just another propaganda machine. And so the crisis continues as ignorance is elevated to higher levels.

Read more

We do have a choice – we just need to identify it

I went for a walk at lunchtime through a main shopping area where I am working today. In the past you saw Sale signs twice around twice a year – post Xmas and mid-year. The advertised discounts at this time were modest except for some enticement items that might have been discounted by 30 per cent or so. You may check this out going through archives of Catalogue AU. You rarely saw Closing Down/All Stock must go signs. You rarely saw massive discounts – such as 80 per cent off and the like. Times have changed and there seems to be a permanency to these sales and the discounts are huge. Previously well-to-do shopping strips are now slowly being punctuated with empty shops so the Sale/Closing Down signs are now interspersed with For Lease signs. And Australia is meant to be going through a one-in-a-hundred years mining boom and the Government tells us we are doing so well that they have to undermine aggregate demand by running a surplus to give the economy room to grow even more. The problem is that our political leaders are in denial and continually bombard us with lies to perpetuate their ideological stances which work against the well-being of the majority of citizens. It is clear that the system is failing and that means we have a choice. The problem is that we first have to identify that we have that choice.

Read more

Saturday quiz – June 2, 2012 – 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.

Read more

Not everybody can de-lever at the same time

The title reflects fact not opinion. However, most commentators still fail to grasp that reality. In the current economic climate it means one thing – imposing fiscal austerity in the hope that governments can reduce debt levels will fail and bring with it devastating consequences for the non-government sector. It is the latter sector that has reduce its debt exposure and under current institutional arrangements that means the government sector has to increase deficits (and debt) not other way round. The simple fact is that when private spending is subdued the government sector has to run commensurate deficits to support the process of private de-leveraging by sustaining growth. Those advocating fiscal austerity or those who claim that the amount of outstanding private debt is simply too large for the Government to replace with public debt fail to understand the basic tyranny of the sectoral balance arithmetic. Put simply, not everybody can de-lever at the same time.

Read more
Back To Top