The Fiscal Sustainability Teach-In and Counter-Conference

In Washington D.C. next Wednesday (April 28, 2010) there will be two separate events where the focus will be on fiscal sustainability. The first event sponsored by a billionaire former Wall Street mogul under the aegis of the Peter G. Peterson Foundation (PGPF) promises to bring the Top leaders to Washington. It will feature a big cast well-known US entities (former central bank bosses; former treasury officials and more). It will be well-publicised and a glossy affair – full of self-importance. It will categorically fail to address any meaningful notion of fiscal sustainability. Instead it will be rehearse a mish-mash of neo-liberal and religious-moral constructions dressed up as economic reasoning. It will provide a disservice to the citizens of the US and beyond. The other event will be smaller and run on a shoe-string. The grass roots The Fiscal Sustainability Teach-In and Counter-Conference is open to all and will actually involve researchers who understand how the monetary system operates. Like all grass roots movements it requires support. I hope you can provide support commensurate with your circumstances.

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Saturday Quiz – April 17, 2010 – 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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Japan … just wait … your days are numbered

I was reading this IMF working paper today – The Outlook for Financing Japan’s Public Debt – which was released in January and was on my pile of things to catch up on. The paper is now being used by journalists to predict doom in the coming years for the Land of the Rising Sun. As I note, the stark deviation of the Japanese experience with the predictions of the mainstream macroeconomics models has given the conservatives a headache. As an attempt to reassert their relevance to the debate, the mainstream commentators are inventing new ploys so that they can say – yes we agree that the facts in the short-run don’t accord with our models but brothers and sisters just wait for what is around the corner. My assessment is that they have been saying this for 20 years already. In 5 more years, they will still be disappointed and still prophesying doom. They are pathetic!

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US federal reserve governor is part of the problem

The Federal Reserve Chairman Ben Bernanke gave a speech entitled – Economic Challenges: Past, Present, and Future – on April 7, 2010 in Texas. It emphatically demonstrated why he should never have been appointed to the position he is in and why his reappointment just compounds that initial mistake. While he has been largely quiet on fiscal matters over the last few years this speech outlines without doubt that he doesn’t really understand the monetary system he supervises and has an understanding that is seemingly limited to that found in any erroneous mainstream macroeconomics text book. The only other interpretation is that he does understand the system yet chooses to deliberately deceive the wider public so as he can support ideological attacks on government activity. Either way, he is part of the problem we face.

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The Australian labour market remains tepid

Today the ABS released the Labour Force data for March 2010 and the data reveals that employment growth is very tentative and unemployment is rising. Unemployment rates in the populous states have risen. Further, labour force participation fell which makes the situation even more sombre. The bank economists have claimed that this is a picture of a near booming economy with wage inflation and skills shortages becoming the main focus. I consider their judgement to be seriously impaired and biased. Amidst all the talk about strong employment growth and wage breakouts about to happen – conditions in the Australian labour market are, in fact, very tepid as the impact of the fiscal stimulus wanes. With the declining fiscal stimulus and private spending remaining subdued – today’s data doesn’t represent a place we would want to be in for very long.

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Hyperdeflation, followed by rampant inflation

The title of the blog is a little misleading but was too good not to use. I get to that five-year forecast (2010-2015) later in the blog but the first part is material that sets the scene. Yes, I am writing about deficits and debts … again! But new nuances come out in the public debate which need to be addressed. The conservative assault on government support for their economies at present is multi-dimensioned and is being pushed along by two main journalistic approaches. The manic Fox new-type approach which I realise is influential but is so patent and ridiculous that I don’t care to comment on it often. Then we have the approach adopted by journalists in so-called credible media outlets such as the UK Guardian. They dress their deficit terrorism up in arguments that the middle classes, who think they are far above Fox new rabble intellectually, will find convincing. But when you bring both approaches down to basics – rubbish = rubbish.

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Saturday Quiz – March 13, 2010 – 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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Extending unemployment benefits … an omen

As the danger of a global depression recedes, the themes I am picking up regularly now from commentators, politicians etc are all pointing back to the mainstream status quo version of the way the economy works, in particular, for the purposes of this blog the labour market. I expect to increasingly hear and read the rhetoric that dominated the public debates prior to the crisis – that unemployment is essentially a supply-side phenomenon reflecting choices made by individuals in the context of government welfare policy that distorts these choices in favour of not working. In this context, the simple act of extending unemployment benefits in the US has been controversial. This takes us back to the dominant debates over the last 20 years which saw governments all around the World pursuing policies that were antithetical to full employment and pernicious in their impact on the victims of their policy failures. Stay tuned – 2011 – the mainstream will be in full attack mode again – conveniently forgetting where we have been over the last 3 or so years.

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Would someone please put something in the water supply

When I read the financial and economic news every day I sense a global madness has emerged. Global political processes are becoming distorted by the types of debates that the conservative media companies and the mainstream economists are driving. Every day a new whacko proposition is suggested or entertained by governments. Old hatreds are also resurfacing as our economies labour on (or not labour to be more accurate!) in the face of a major private spending collapse accompanied by inadequate government fiscal responses. The collateral damage of the deficit terrorism is increasing and spreading and still the major political parties in most countries slug it out as to which one will deliver the most fiscal austerity. Would someone please put something in the water supply so that we can refocus this debate onto what is important. That was the plan in the late 1960s to chill everyone out and distinguish the meaningful from the nonsense. Something has to restore our sense of priorities. The longer this madness goes on the worse it is going to get. There is no sensible solution that will come from following the present path.

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Dumb is too kind really

I am now back in my normal office after a few days experimenting with a mobile office by the sea. Back in Newcastle I am still only a couple of minutes from the beach but somehow it was different being holed up in a little cabin. Anyway, on the way back down the coast this morning I was bemoaning the idiocy of the human race … again. Or rather cursing the vicarious way the elites exploit the lack of understanding in the community about economic matters to further their own ends. That is a better way of constructing the dilemma. Even some good intentioned souls are proposing “solutions” to non-problems which will worsen the actual problem. Other devious characters are continuing to reinvent themselves in the public sphere – presumably to get access to more personal largesse. Then whole blocks of nations are imposing penury on their citizens to make the “markets” happy while another national government has actually forgotten it is a currency-issuing government. All in a day’s work!

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Hyperbole and outright lies

Its been a big weekend for hyperbole which in this context is a polite term for outright hysterical lies. Today’s blog reviews a few of the choice selections from a weekend’s reading. It amazes me how people can even mis-represent their own research when they know the audience hasn’t even read it in detail. It also is interesting to follow the way the media commentators are trying to out-do each other in use of superlatives – how much catastrophic can a catastrophy get – sort of thing. The analogies, the adjectives … are all designed to transport uninformed readers into a particular ideological space where the conservative forces can garner more of the national pie than otherwise might be the case. Anyway, that is what today’s blog is about.

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Yummy at first then you get fat!

What do you do when you read strongly worded opinion pieces in national media outlets from people who hold themselves out to the public as experts in the area of interest and which reveal the writers are deliberately choosing to mislead their readers and/or haven’t a clue about the subject matter they are pontificating about? Answer: you write a blog and allow your frustrations to emanate into the ether! That’s what! Usually, mainstream economics commentators and macroeconomic textbooks hold out the analogy that the government budget is just like a household budget. So eventually the government has to pay the piper if they consume beyond its means and that means we all end up paying. Today, we had a new analogy enter the fray – the fiscal stimulus is like a box of chocolates. Yummy at first then you get fat! Lets proceed.

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We are sorry

On Friday (February 12, 2010) as Eurostats released the flash estimates of fourth quarter GDP for the EU (see below), the IMF released a new staff position note entitled – Rethinking Macroeconomic Policy. The bad news is the Europe is looking more like a region that is heading for a double dip recession. The even worse news is that that cretins at the IMF are claiming they know why they messed up in the past and how to address their failure. Stay tuned for a modified version of the same. The fact is that the IMF Report reveals they are as ignorant as ever of the workings of the modern monetary economy. So this revisionist exercise doesn’t signal a major paradigm stage.

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Doomed from the start

Today I have been studying data from the EMU economies where the individual member states surrendered their currency sovereignty and comparing it to other nations which have sovereign currencies (Australia, Denmark, Japan, the UK and the US). This is part of a larger project I am involved in. While the glare of the spotlight is currently on Greece and how the EMU handles the issue, most commentators conveniently forget that this problem has been many years in the making and is both a product of initial design folly and subsequent behaviour by some member states.

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When you’ve got friends like this … Part 2

… who needs enemies. Today’s blog is Part 2 in a series I am running about the propensity of self-proclaimed progressive commentators and writers to advance arguments about the monetary system (and government balances) which could easily have been written by any neo-liberal commentator. The former always use guarded rhetoric to establish their “progressive” credentials but they rehearse the same conservative message – the US has dangerously high deficits and unsustainable debt levels and an exit plan is urgently required to take the fiscal position of the government bank into balance. In doing so, they not only damage the progressive cause but also perpetuate myths and lies about how the monetary system operates and the options available to a currency-issuing national government.

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L’horreur economique

Tonight’s blog title L’horreur Economique is taken from one of my favourite (though depressing) books by a French writer (Viviane Forrester). I will discuss the book a bit at the end of the blog. But I was thinking about it (and re-reading it) today when I reflected on the US President’s most recent Radio address on the reining in budget deficits. We – collectively – have allowed the most grotesque set of lies, half-truths and irrelevancies to become the centrepiece of the public debate on the economy. The crisis exposed the lack of credibility that mainstream economics has and should have dispatched the ideas to the rubbish bin forever. Instead, as unemployment and poverty rates continues to rise the mainstream ideas are now taking centre-stage again. And the policies that result will be to our collective misfortune. It really is “L’horreur economique”.

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Questions and answers 1

I get a lot of E-mails (and contact form enquiries) from readers who want to know more or challenge a view but who don’t wish to become commentators. I encourage the latter because it diversifies our “community” and allows other people to help out. The problem I usually have is that I run out of time to reply to all these E-mails. I apologise for that. I don’t consider the enquiries to be stupid or not deserving of a reply. It is just a time issue. When I recommitted to maintaining this blog after a lull (for software development) I added a major time impost to an already full workload. Anyway, today’s blog is a new idea (sort of like dah! why didn’t I think of it earlier) – I am using the blog to answer a host of questions I have received and share the answers with everyone. The big news out today is Australia’s inflation data – but I can talk about that tomorrow. So while I travel to Sydney and back by train today, here are some questions and answers. I think I will make this a regular exercise so as not to leave the many interesting E-mails in abeyance.

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The progressives have failed to seize the moment

The news that the Democrats lost their long-held and iconic Massachusetts Senate seat has had the news services in apoplexy this week. One gets the impression from listening to the mainstream media, which is becoming more right-wing by the day, that the US President is on his last legs. The so-called progressive reaction seems to be that the “reform” agenda now has to be scaled back and a fiscal consolidation is required to steady nerves. While it is hard to actually see a progressive reform agenda in any country anyway, the more immediate danger is that the fiscal support that has been keeping our economies afloat all around the World will be withdrawn. The share markets are back, Goldman have record profits … so the crisis is over … That message dominates the business news. That the progressive side has not been able to take overwhelming command of the public debate, given the scale of the crisis and the fact that the neo-liberals/neo-cons etc have all been caught red-handed, is a stunning reflection of its obsequious and disorganised organisation. We need something very different to happen if things are not to revert to where they were.

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Its a hard road

As one dead-end traps the mainstream deficit terrorists’ relentless “hyperinflation is coming”, “the deficits are large and unsustainable” campaign another road is opened. New ways are found of pushing the same boring message. I read several papers and article today that all try to come up with a new tack – a new way of scaring the bjesus out of us and steer our minds towards what they assert is misguided government policy. They actually just don’t like any government claim on real resources because they think there is less for them then. Even when they don’t want to create jobs for the unemployed they resent government employing these people because it would just be a “waste of resources”. Its got worse as I read on. I tell you keeping up with all this stuff is surely going to be “a hard road till I die”.

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The complacent students sit and listen to some of that

Today I have been working in the Australia’s national capital Canberra. I have been discussing the work I am doing to develop a new geography for Australia based around the concept of functional economic regions with the Australian Bureau of Statistics which is currently seeking to revise their own geography along similar lines. You can find out about this work if you are interested via the CoffEE Functional Regions homepage. It will provide you with quite a different perspective on my other research interests beyond macroeconomics. Anyway, on the plane I was reading some monetary analysis and recalling a blog from the weekend by our favourite (not!) macroeconomics textbook writer. I started humming Take the power back to myself as I considered the damage this sort of textbook is doing to the minds of our students and the future policy makers.

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