IMF still away with the pixies

The abysmal performance of the IMF in recent years has been one of the side stories of the Global Financial Crisis. They have consistently hectored nations about cutting deficits using models that were subsequently shown to be deeply flawed. They bullied nations into austerity with estimates of multipliers that showed that austerity would yield growth when subsequent analysis reveals their estimates were wrong and should have shown what we all knew anyway – that austerity kills growth. Their predictions have been consistently and systematically wrong – always understating (by significant proportions) any losses that would accompany austerity and overstating the growth gains. At times, in the face of incontrovertible evidence they have admitted their failures. But a leopard can’t change its spots. The IMF is infested with the myths of neo-liberalism and only a total change in remit and clearing out of staff could overcome that inner bias. Their latest offering – Japan: Concrete Fiscal, Growth Measures Can Help Exit Deflation – is another unbelievable reversion to form.

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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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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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Australian PBO – another myth-making neo-liberal institution

The economics journalists were out in force again today in Australia after being fed their latest copy from the neo-liberal propaganda machine. In this case, the propaganda was in the form of the first report published yesterday (May 22, 2013) from the newly established Parliamentary Budget Office – Estimates of the structural budget balance of the Australian Government 2001-02 to 2016-17. The Report estimates that huge unsustainable budget deficits and has led to a flurry of media activity all just repeating what the PBO told them was the message. I wonder if any of the journalists have actually read the report in detail particularly the Appendix where the technicalities are exposed. Technicalities is too strong a word because it suggests there is something robust going on. Nothing could be further from the truth. This is another shoddy attempt to bias the public perception towards thinking the current (pitifully small relative to the scale of the problem) budget deficit is problematic.

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MMT Fiscal Principles

This is a background blog which will support the release of my Fantasy Budget 2013-14, which will be part of Crikey’s Budget coverage leading up to the delivery of the Federal Budget on May 14, 2013. This blog provides some general principles that should govern the design of a budget.

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Saturday Quiz – May 4, 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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The Australian labour market – 815 thousand jobs from full employment

This is a short background blog which will support the release of my Fantasy Budget 2013-14, which will be part of Crikey’s Budget coverage leading up to the delivery of the Federal Budget on May 14, 2013. The topic of this blog is the state of the Australian labour market and is an overview of the detailed monthly reports I provide to coincide with the release of the Labour Force data by the Australian Bureau of Statistics. To review these monthly reports please see the blogs under the – Labour Force – category.

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What part of the word failure don’t the Euro elite understand?

The – Eurostat homePage – today (May 1, 2012) told the story of policy failure. On April 30, 2013 there were two major data releases – Euro area unemployment rate at 12.1% and Euro area annual inflation down to 1.2%. Record unemployment and a contracting and very low inflation rate. That is recession. That is the average. Some nations are now experiencing the Great Depression Mark II. And still the policy leaders make public statements that things are easing because borrowing rates are down and fiscal consolidation is bringing deficits down. On May Day 2013 it would be appropriate for a major workers’ revolt throughout Europe to protest over the continued rise in unemployment and the failure of the elites to deal with it. The question that the riot could pose is: What part of the word failure do these leaders not understand?

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It’s simple math

Have you ever examined the Japanese yield curve? I check it on a daily basis. At present, it looks to have a normal shape (longer-maturities with slightly higher yields) than near-term assets. It is also quite low – like really low. The short-end around 0 and the long-end not much above it. It has been that way for a long time. If I assembled a group of economists – which we might call “distinguished experts” – and let them have the yield curve data and told them that inflation in this nation was low to negative and had been for two decades, and economic growth was mostly positive – and then asked them to write a story about the evolution of budget deficits and public debt ratios over the same period what do you think they would say? Alternatively, if we started with some other facts – like – increasing and relatively large budget deficits and the highest gross central government debt to GDP in the world – what would they say about inflation, growth and bond yields? The two sets of answers would be diametrically opposed to each other. The reason: because they don’t understand what drives the data. Their textbook macroeconomic models are totally wrong and have no explanatory capacity at all. It is really simple maths – a currency-issuing government can spend up to what is available for sale in that currency; can set yields and interest rates at whatever level is desires; does not need to issue debt anyway and so the notion of a financial collapse is misguided at best; and will cause inflation if it spends too much (defined as pushing the economy beyond its real capacity to produce). Simple really. Pity our “distinguished experts” didn’t see it.

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US President engaging in economic vandalism

Last week (April 5, 2013), the – US Bureau of Labor Statistics – released their latest – Employment Situation – March 2013 – which showed that in seasonally adjusted terms, total employment decreased by 206,000 in March and the labour force shrunk by a further 496,00 persons. The twin evils – falling jobs growth and declining activity. While the unemployment rate fell to 7.6 per cent (from 7.7 per cent) that is an illusory improvement. The fact is that the participation rate fell by 2 percentage points and thus hidden unemployment rose. The 290 thousand fall in official unemployment arose because the drop in employment was more than offset by the fall in the labour force. There is nothing virtuous about any of that. The facts are that it is getting harder again for Americans to get work and easier for them to lose it. The data is signalling a fairly poor outlook and hardly the time for the President to be submitting austerity budgets. But in the same week that the data came out, the President did just that. The latest budget submissions from the Administration, designed to placate the mad Republicans, is an act of economic vandalism.

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Saturday Quiz – April 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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Very unintelligent indeed

I had a long flight today and other things to catch up on after the Easter period. But the stunning news yesterday from Eurostat that the EU17 unemployment rate has now risen (in February 2013) to 12 per cent. Each month’s Labour Force data sets a new record peak for the Eurozone. Each month that unemployment rises, the real GDP losses that are being deliberately created by the existing policy regime mount. As I show in this blog, those losses are enormous and will never be regained – that income has been lost forever. The human dimensions of the crisis are also huge. And the evidence mounts that the conceptual underpinning of the policy framework doesn’t hold water. This is an extraordinary period of history where a flawed theoretical approach which doesn’t stack up when confronted with the data, is being used to create a flawed monetary system design, which has failed categorically when judged against any reasonable criteria of social purpose, and then the leaders impose even worse policy designs over that failure. Sometime in the future, humans will judge the current generation to be very unintelligent indeed.

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Saturday Quiz – March 16, 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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Learning standards in economics – Part 2

Today is Part 2 of my little mini-series on “Learning standards in economics”. It might appear to be a break in continuity from yesterday’s blog but when I get around to Part 3, I think you will see the way in which today’s discussion fits well. Last month (January 24, 2013), the Peter Peterson Foundation – which is just a propaganda front for people with too much money and influence designed to advance spurious ideas about the economy – released a statement – College Students Launch Campaigns Across the Country to Activate a New Generation on the Nation’s Fiscal Challenges. When I delved into what it was about the story became very mirky indeed. Teams of students are being assembled under the banner of what we might call the “we are self-important and want to show it” banner and being coaxed into action The essential part of education – the search for knowledge – is the missing part. The myth that the US government is going broke is the starting point not the enquiry.

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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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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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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.

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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.

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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.

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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.

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