Australian inflation trending down – where are all the gold bugs?

There was a time, in better days, that the evening news had news, sport and weather. Then, at some point, around the 1980s the national news started to host a Finance segment. Sometimes these segments are meagre reporting of what happened in the share markets. Even that benign news is symptomatic of the way neo-liberalism has infested our daily thinking and made the common folk feel part of the game that they are really can never be part of – wealth creation. At other times, the finance segments introduce economic theory and analysis as if it is news. Then the insidious nature of the neo-liberal propaganda machine becomes stark. But the starkness is lost on most because they think it is news and we have been led to believe that what gets pumped out at 19:00 on the national broadcaster (and other times by other broadcasters) are facts. Facts don’t lie do they? Well, when it comes to finance segments they are mostly lies.

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US labour market – the recovery is now stalling

The US Bureau of Labor Statistics published the latest – Employment Situation – September 2015 – on October 2, 2015, and the data shows a weakening labour market overall. At least it will silence the squad that are calling for higher interest rates for a time. The data shows that after 7 years of recovery mode employment growth is now starting to slow and it is likely that the change in employment in 2015 will be less than the annual change last year. All the main indicators were weak – employment, participation fell, hours of work fell, earning growth was zero – which is consistent with an overall slowdown. In seasonally adjusted terms, total payroll employment increased by 142,000 in September while the Household Labour Force Survey data showed that employment fell by 236 thousand. In the first 9 months of 2015, the average monthly change in non-farm payroll employment has been 198,000 whereas the corresponding figure for 2014 was 260,000. The unemployment rate was unchanged at 5.1 per cent but would have been higher had not the participation rate fallen by 0.2 percentage points to 62.4 per cent. The participation rate is now at its lowest level since September 1977 The other sign that the labour market is weaker is that the Employment-Population ratio fell slightly to 59.2 per cent (from 59.4 per cent). There is also evidence that a significant proportion of the jobs that are being created are in low pay, precarious areas of the labour market.

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Universities should operate in an ethical and socially responsible manner

I was first really exposed to the concept of what social responsibilities a university has when I was a student at Monash University in the early 1970s. The issue was the University’s decision to allow the napalm-producing company, Honeywell to use the Monash Careers and Appointments office facilities on campus to conduct interviews and recruit potential graduates. I was reminded of this dispute the other day for two reasons. First, I did a radio interview for the national broadcaster (ABC) where I was asked about the decision by the Newcastle City Council (my local council) to divest itself of fossil fuel investments (see story – Newcastle Council abandons fossil fuel investments). This is a global trend. This was a shock to some, given that Newcastle is the largest coal exporting port in the world and there are major coal mines nearby up the Hunter River valley (the river flows into the Pacific Ocean at Newcastle). Second, around the same time, we learned that the University of Newcastle, my homeinstitution, had awarded a lucrative contract to Transfield Services, who hold the contracts to provide welfare and garrison support services in the offshore prisons (detention centres) which the Australian government established to ensure that asylum seekers who try to reach Australia by boat never reach the mainland. These prisons house families including young children for lengthy periods. There is strong evidence that the detainees incur mental illnesses and other health issues from the isolation. There have also been allegations against Transfield staff in relation to rapes and sexual assaults on detainees. These instances raise questions about the responsibilities of public institutions such as universities to operate according to acceptable community standards which makes the decision by the University of Newcastle (NSW) to enter into a commercial arrangement with Transfield rather odd indeed.

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PQE is sound economics but is not in the QE family

The conservative forces including those ‘Tories’ that are within the British Labour Party (aka New Labourites) continue to gather their forces to counter the growing threat posed by Jeremy Corbyn to their secure world as neo-liberal, Tory-lite hopefuls. They are part of a phalanx of critics, including mainstream economists who seek to diminish his credibility. At the extreme end of this bunch are the evil ones who have accused Corbyn of being antisemitic and a friend to Islamic terrorists. I am reliably informed that the same tactics have been deployed against Bernie Sanders in the US. It tells us that desperation has replaced any sense of decency or reason. It also tells us that the Tory-lites are finally seeing the evidence that their day in the sun has gone and they are being cast into irrelevance. Not before time, I should add. But all is not clear on the Corbyn front either. Today, I want to discuss what appears to be a major economic policy proposal – the so-called People’s Quantitative Easing (or PQE). There are elements of a good idea in this proposal but the QE reference and the resulting language is all wrong, in that it betrays as lack of understanding of the difference between a monetary

policy operation and a fiscal policy intervention. The concept should be re-framed so that a consistent narrative can be provided and that a good policy proposal gains the wings it needs. PQE is a wealth generating policy which is in contradistinction to QE which just shuffles wealth portfolios.

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Governments do not need the savings of the rich, nor their taxes!

In Chapter 24 of The General Theory of Employment, Interest and Money, Concluding Notes on the Social Philosophy towards which the General Theory might Lead, John Maynard Keynes confronted the issue of the “arbitrary and inequitable distribution of wealth and incomes” in capitalist economies. The argument he advances in that Chapter of his 1936 book contains guidelines for the progressive left that some just cannot seem to grasp. In short, governments (as our agents) do not need the savings of the rich to ensure that society prospers. There was another interesting contribution in 1946 from the American statistician and economist – Beardsley Ruml – who wrote that “Taxes for Revenue are Obsolete”. The progressive left would be advised to study his work and stop building political policy platforms on the claim that governments needs to make the rich pay their fair share of taxes so that adequate public services and infrastructure can be provided. The incomes and taxes paid by the rich are largely irrelevant to the capacity of a national, currency-issuing government to provide first-class public services and infrastructure. It is time to re-frame the debate and the way in which progressive political forces state their policy aspirations. This bears on the current interesting struggle in Britain for the leadership of their Labour Party.

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Jeremy Corbyn must break out of the neo-liberal framing

Two articles in the UK Guardian this week summarise what is going on with the British Labour Party at present. The first (August 3, 2015) – Jeremy Corbyn’s supporters aren’t mad – they’re fleeing a bankrupt New Labour – refutes the notions propagated by the previously dominant ‘New Labour’ factions that the Left of the Party are in some way mad, deluded, or otherwise sick. Instead, it argues the Left are part of a new “grassroots political movement” reacting to the bereft nature of New Labour which is without a “clear vision, or a set of policies, or even a coherent distinct set of values”. The second article (August 3, 2015) – Corbyn’s economic strategy would keep Tories in power, top Labour figure says – provides proof of concept. It is written by the Shadow Labour Chancellor Chris Leslie and reflects an abysmal understanding of macroeconomics that only a deluded free-marketeer would dare suggest had anything to do with reality. The article demonstrates that the top echelons of the British Labour Party parliamentary wing are caught in the destructive neo-liberal Groupthink economics that not only caused the GFC but has also led to austerity being the norm for policy makers these days. And there is no doubt that it is a failed doctrine and not worthy of a progressive opposition. The new “grassroots political movement” is reacting sensibly to the intellectual carnage at the top end of their Party and lets hope it is triumphant and purges these ideas from Labour forever. But, first, it must break out of the neo-liberal framing that is pervasive in its first major statement.

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Friday lay day – some IT considerations of a Greek exit

Its my Friday lay day blog – and today we have a little digression in IT matters. The WWW site Naked Capitalism that has been less than hostile towards Modern Monetary Theory (MMT) perspectives over the last several years seems to have a fix against any notion that an exit by Greece from the Eurozone madness is a viable alternative. The logic evades me. Yesterday (July 23, 2015), they reproduced an article – Once Again on the IT Challenges in Converting to the Drachma – which is written from a ‘left’ perspective and the author claims to be one of the very few people who has any “inkling of the problem”. The author explicitly referred to my recent blog – A Greek exit is not rocket science – and noted that I had not referred to IT wants in my discussion. The arguments presented rely on a very old literature that was written for a different problem altogether – the introduction of the euro and the replacement of 11 separate national currencies and accounting and business systems. The challenges relating to that problem were solved and the knowledge is intact. Further, business systems have become much more homogenised and sophisticated since then. The exit of one Member State to create a new currency is a much smaller IT challenge. I wonder why Naked Capitalism chooses to lower its standard by on-publishing this sort of stuff.

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Australian coal sector being undermined by responsible Chinese policy

Earlier this week, the US National Oceanic and Atmospheric Administration published its – Global Summary Information – June 2015 – which reported that in the period January to June 2015, the globally-averaged land and sea surface temperatures were the highest for those months since the data was first collected in 1880 (135 years). I am not a climate change expert but the array of data that I have looked at from a statistical perspective tells me that what the experts are saying with respect to global warming and climate change is probably correct – it is happening and it is happening relatively quickly. The conservative Australian government remains in denial of the global trends with respect to climate change. It is introduced various policies that have made us a national disgrace – such as, abandoning the mining and cut taxes introduced by the previous government, defunding a research institute set up to provide information about climate change, and instructing a public ‘Green Bank’ to not fund wind or solar projects. This week, the government has been castigated by a British Tory MP, who said that its approach to climate change was not that of a ‘conservative government’ and bordered on delusion. But the most important piece of data this week has been the latest figures from China that show that dramatic restructuring away from coal consumption is rapidly taking place which will undermine the viability of the Australian coal sector in the coming decade. So the ‘market’ is going to force change in Australia when it would be much better for government to plan an orderly transition away from coal.

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The origins of the ‘leftist’ failure to oppose austerity

I note the calls for more discussion on the trap that the ‘left’ has made for itself by buying into the globalisation/political capture myth. As I have noted previously, I am currently researching a new book on this topic which might appear in 2016 but more likely early 2017, such is the delays in publishing. My current research is focusing on the 1960s and 1970s. I am exploring the deep infighting within the French state between the ‘Keynesians’ in the planning ministry and the ‘Monetarists’ in the finance ministry, which shaped the way the French ‘left’ dealt with issues of monetary integration and the like. I am also tracing the evolution of ‘left’ macroeconomic thinking, or rather, the absence of it, in the late 1960s as the Bretton Woods fixed exchange rate system collapsed and fiat currency freedom was taken up by governments around the world. In 1973, after several years of work, American sociologist James O’Connor published his book “The Fiscal Crisis of the State”, which was considered by many on the ‘left’ to explain why the Keynesian policy era had failed. This book and the derivative literature that followed it was extremely influential among ‘left’ scholars and effectively negated their capacity to challenge, what by the mid-1970s, was becoming the Monetarist resurgence. We can trace back the failure of the ‘left’ to fight against austerity to this period. This is just part of the work I am doing on this topic at present.

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Time to expand public service employment

Back in 2010, in the early days of the GFC, the then Australian Labor government was weathering a conservative storm for daring to introduce a large-scale (and rapid) fiscal stimulus. The package had several components but the most controversial were the decision to introduce a homeinsulation program to create jobs quickly but leave a residual of green benefits (lower energy use in the future). The program had problems but still produced fantastic macroeconomic benefits. It was little wonder that the program stumbled operationally given its complexity and the degraded capacity of the Federal public service, which has been degraded by several decades of employment cuts and restructures under the neo-liberal guise of improving ‘efficiency’. However, that mantra might be finally turning. An article in the right-wing Australian Financial Review (June 14, 2015) – Time to end outsourcing and rebuild the public service – made the extraordinary argument for that publication that public service employment had to increase to allow the government to do what the Federal Communications Minister calls “the legitimate work of the public service”. Wonders never cease.

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Friday lay day – Minimum wage in Australia creeps up

Its my Friday lay day blog but no rest for the wicked today. The Fair Work Commission, the Federal body entrusted with the task of determining Australia’s minimum wage handed down its – 2014-15 decision – on June 2, 2014. Here is my annual review of that decision plus some. The decision meant that more than 1.86 million of our lowest paid workers (out of some 11.6 million) received an extra $16.00 per week from July 1. This amounted to an increase of 2.5 per cent (down from last year’s rise of 3 per cent). The Federal Minimum Wage (FMW) is now $656.90 per week or $17.29 per hour. For the low-paid workers in the retail sector, personal care services, hospitality, cleaning services and unskilled labouring sectors there was no cause for celebration. They already earn a pittance and endure poor working conditions. The pay rise will at best maintain the current real minimum wage but denies this cohort access to the fairly robust national productivity growth that has occurred over the last two years. The decision also maintains the gap between the low paid workers and other wage and salary recipients, who themselves are suffering a major wages squeeze as corporate profits rise. The real story though is that today’s minimum wage outcome is another casualty of the fiscal austerity that the Federal Government has imposed on the nation which is destroying jobs and impacting disproportionately on low-paid workers.

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Saturday Quiz – May 30, 2015 – 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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The rise of non-standard work undermines growth and increases inequality

One of the on-going themes that emerges from the neo-liberal commentariat is that fiscal deficits undermine the future of our children and their children because of the alleged higher implied tax burdens. The theme is without foundation given that each generation can choose its own tax structure, deficits are never paid back, and public spending can build essential long-lived infrastructure, which provides benefits that span many generations. The provision of a first-class public education system feeding into stable, skilled job structures is the best thing that a government can do for the future generations. Sadly, government policy is undermining the future generations but not in the way the neo-liberals would have us believe. One of my on-going themes is the the impact of entrenched youth unemployment, precarious work and degraded public infrastructure on the well-being and future prospects of society as neo-liberal austerity becomes the norm. This theme was reflected (if unintentionally) in a new report, release last week by the OECD – In It Together: Why Less Inequality Benefits All. The Report brings together a number of research findings and empirical facts that we all knew about but are stark when presented in one document.

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The existential crisis of Labour-type political parties

At one point in my student days anyone who wasn’t reading Marx on a particular day, was reading Satre, Camus and Merleau-Ponty, among others, at least in the groups that I mixed in. But then they were also reading Dostoyevsky. Whichever way – they learned a lot about class conflict and existentialism. Labour-type political parties might reflect on the concept of an existential crisis because the declining electoral fortunes around the World are of their own making and reflect a lack of identity and certainly little ‘essence’. These parties have lost their meaning and purpose of existence and everyone knows it. The reasons are relatively straightforward. They have bought into the free-market myths and demeaned the role of the State. They now only argue about how much fairer their version of fiscal austerity will be relative to the conservatives, never challenging the underlying lies that drives the austerity agenda in the first place. Here are some lunchtime thoughts on the matter.

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Friday lay day – government and central bank venality

Its my Friday lay day blog where I just wander around in the time I allocate to writing this blog. The venality of neo-liberal governments is never far from the surface. The more successful ones manage to mostly hide the nasty stuff they get up to from the general public or assuage public concern via their spin doctors. Sometimes, an outrageous decision breaks out of the cocoon of spin and demonstrates the sheer bastardry of the political elites. That happened in Australia over the last week when it was announced that the Australian government was providing $A4 million to the University of Western Australia to set up a new think tank under the influence of a Dane Bjørn Lomborg – who has been described as a “sceptical environmentalist” (Source). Our Prime Minister has favourably quoted Lomborg’s work in his own work and is the Australian leader who abandoned the carbon tax and thinks continued use of “coal is good for humanity” (Source).

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Inflation benign in Australia with plenty of scope for fiscal expansion

A few weeks ago (April 8, 2015), I wrote a blog – Monetary policy is largely ineffective – which detailed why fiscal policy is a superior set of spending and taxation tools through which a national government can influence variations in activity in the real economy. In today’s blog I will consider two recent bits of evidence that reinforce that viewpoint. Today’s inflation data issued by the Australian Bureau of Statistics clearly indicates that there is plenty of scope for further interest rate cuts within the logic of the central bank’s inflation targetting strategy. But monetary policy is trapped in Australia at present between the need to expand the economy (for which it is largely ineffective) and the worry that further interest rates cuts will push housing prices up further. Second, economic activity is faltering and unemployment has risen because the Government refuses to take discretionary action to increase the fiscal deficit to support higher spending levels. They are firmly caught up in the neo-liberal obsession about the need for surpluses and where they are likely to make concessions is in tax cuts for high income earners – based on the so-called trickle down hypothesis. Some recent research from the US, however, demonstrates fairly categorically that tax changes at the top end of the income distribution have negligible effects on economic activity. This is in contradistinction to changes in disposable income at the bottom end. They are very powerful in terms of stimulating or undermining employment and output.

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Australian labour market – holding steady in a weak state

Today’s release of the – Labour Force data – for March 2015 by the Australian Bureau of Statistics shows that the Australian labour market was stronger than in recent months but overall remains relatively weak. There was some modest growth in employment for the second consecutive month and better full-time employment growth. Employment growth just kept with the growth in the labour force (new entrants and a slight rise in participation) which meant that the fall in unemployment was virtually zero. The unemployment rate fell from 6.15 per cent to 6.12 per cent (1,500 persons). The teenage labour market remains in a parlous state and requires an urgent policy problem that the Federal government refuses to recognise or deal with. In general, there remains a need for more job creation stimulated by an increased federal government deficit.

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Saturday Quiz – April 11, 2015 – 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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Fiscal surplus by 2017-18? A mindless goal guaranteed to cause havoc and fail

Its sad when politicians lie just to get political points as they face declining popularity. We saw last week that the Australian Prime Minister started attacking indigenous Australians for living in areas that they have occupied, one way or another, for somewhere up to 80,000 years. He claimed these settlements were “lifestyle” choices and people could no longer expect government support if they wanted to indulge in such choices. 80,000 years for a culture that has a deep connection with the ‘land’ is quite story compared to the Anglo settlement in Australia of 226 years for a culture that connects via iPhones! The PM was playing into the hands of the racist Australians who think the indigenous population here are skivers and drunks and should get no state support. They ignore that this cohort is one of the most disadvantaged peoples of the World. In the last few days, the PM has been lying about the state of government finances and pledging to that “the government will have the budget back in balance within five years”. There was no mention of what this might imply for the real economy. I am surprised that the conservatives haven’t learned from the previous Labor Government who made continual promises of surpluses but failed each time – largely because they didn’t understand that they cannot control the fiscal outcomes no matter how hard they try. And when they do try and run against the spending desires of the non-government sector, they just cause havoc and damage and fail to achieve their goals anyway. Stupid is not the word for these sorts of promises.

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