It’s Wednesday, and before we get to the music segment, I document some developments in the banking system which are not receiving much press at the moment. I refer to the fact that the rate hikes now being implemented by most central banks are not just allowing the commercial banks to widen spreads between deposit and lending rates which will generate significant windfall profits for the banks and their shareholders. The increasing interest rates are also delivering massive cash injections to the banks who hold reserve accounts at the central banks. Why? Because the quantitative easing programs from the past have resulted in a massive buildup of excess reserves which are liabilities for the central banks. They are paying support returns on those reserve, which are scaled against the rising policy target rates. So the payments have escalated significantly and delivering a massive corporate welfare boost to the banks while the same interest rate rises are causing hardship to borrowers, especially those on low incomes. And amazing redistribution of income towards the ‘champagne socialists’ all via our central banks.
This Tuesday report will provide some insights into life in Kyoto for a westerner in the age of Covid. This will be my last report as I am returning to Australia at the end of this week. I will return to my work in Japan in 2023 but now have commitments back in Australia. Today, we visit some temples, gardens and textile centres.
First, the Bank of England seems to have abandoned credibility. Not to be outdone, the fiscal policy makers in government have now joined in the absurdity of mainstream policy thinking by reimposing austerity at the same time as the economy heads into recession. Milton Friedman and his gang used to claim the problem of fiscal policy was that it was practiced in a ‘pro-cyclical’ manner, by which they meant that because of time lags involved in implementation, by the time a stimulus to deal with a recession was in place and impacting, the private economy was already on the upturn – so that fiscal policy was working to push the cycle harder in the same direction. They claimed that was inherent to the use of fiscal policy, which rendered it unsuitable for use as a counter-stabilising (-cyclical) measure. The fact that that claim (which is contestable) won the debate in the 1970s is why all the central bank independence nonsense entered the scene and why New Keynesians claim that monetary policy should be the tool of choice to stabilise spending fluctuations. Now, the Tories in Britain are deliberately using fiscal policy in a pro-cyclical way – pushing the already recessionary forces further into the morass. A totally unnecessary and patently dangerous action. It almost beggars belief that they are getting away with this and the Labour Party essentially just offers to tune up the governments ‘violin strings’ a bit.
This Tuesday report will provide some insights into life in Kyoto for a westerner in the age of Covid. Temples, visitors, grammar and more temples interrupted by a astronomic event. A week in Kyoto.
Here are the answers with discussion for this Weekend’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.
There is no doubt that the on-going pandemic has left a trail of economic problems including major supply constraints, the growing problem of long Covid and other issues that are challenging policy makers. They have been exacerbated by the behaviour of OPEC+ and the Ukraine situation. We now have a period of inflation, real wage cuts and most central banks doing their best to make matters worse. However, we now have a phenomenon that goes like this. In the UK, everything ‘bad’ that arises is apparently because of Brexit even if the trends were there before the move or the problems are being shared across all countries. I imagine even if the English cricket team loses it is because of Brexit. This phenomenon has generalised however. Now, we have the claim that all bad economic news is because governments ‘followed’ MMT or something akin to it. Those who are insecure about MMT because it does better at explaining the real world than the mainstream theories are the same as the Remainers who predicted that the British economy would crash badly in 2017 and then every year after that. To soothe their worried souls they consider any ‘bad’ news to be because of ‘MMT’ or in the case of Britain because of Brexit. Neither proposition has any foundation.
This Tuesday report will provide some insights into life in Kyoto for a westerner in the age of Covid. Today we discuss food and music.
This is Part 5 of an on-going series I am writing about the issues facing societies dealing with climate change and other elements which come together as a poly crisis. The series will unfold as I research and think about the topic more through my Modern Monetary Theory (MMT) lens. Today, I am concluding the analysis of the questions relating to the ageing society and the resulting skill shortages, that the mainstream narrative identifies as key ‘problems’ facing governments across the Western world. Like any issue, the way the ‘problem’ is constructed or framed influences the conclusions we come up with. Further, the tools use to operationalise that construction also influence the scope and quality of the analysis and the resulting conclusions. As I explained in Monday’s blog post – Degrowth, deep adaptation, and skills shortages – Part 4 (October 31, 2022) – the use of mainstream macroeconomics fails to deliver appropriate policy advice on these questions. But further, when we introduce multi-dimensional complexity – such as degrowth to the ageing society issue – the mainstream approach becomes catastrophic. MMT is a much better analytical framework for drilling down to see what the essential problem is and what are non-problems and thus creating the questions and answers that lead to sound policy. Today, I show why the existence of skills shortages really provides us with the space to pursue a degrowth strategy while not causing material standards of living to collapse. They are better seen as indicator of what is possible rather than a macro problem.
It’s Wednesday and so we have a few brief items relating to monetary policy and property scandals before a final music offering to calm our nerves.
This Tuesday report will provide some insights into life in Kyoto for a westerner in the age of Covid. Today it is report on an OTT (good way) historical procession in Kyoto to mark 1,100 years since the capital was established in this city. And some more action from the hills to the east of Kyoto, where the most magnificent gardens can be found. As well as some other things.
One of the ‘problems’ besetting the world at present, if the commentary in the mainstream press is anything to go by, is the existence of chronic skill shortages. Survey studies of the shifting demographics in Japan, for example, have produced ‘alarming’ results from a mainstream perspective. See for example, this OECD Report from 2021 – Changing skill needs in the Japanese labour market. I was at a meeting recently in Kyoto and it is clear that many firms in Japan are having trouble finding workers and many have even offered wage increases to lure workers to their companies. Further, many small and medium-size businesses are owned by persons who are over 70 years of age and that proportion is rising fast. The skill shortage scenario is tied in with the ageing society debate, where advanced nations are facing so-called demographic ‘time bombs’, with fewer people of working age left to produce for an increasing number of people who no longer work. The mainstream narrative paints these trends as major problems that have to be confronted by governments, and, typically, because of faulty understandings of the fiscal capacities of governments, propose deeply flawed solutions. I see these challenges in a very different light. Rather than construct the difficulties that firms might be facing attracting sufficient labour (the ‘skills shortages’ narrative), I prefer to see the situation as providing an indicator of the limits of economic activity or the space that nations have to implement a fairly immediate degrowth strategy. In the following two blog posts I will explain how this inversion of logic can become a crucial plank in the degrowth debate.
This Tuesday report will provide some insights into life in Kyoto for a westerner in the age of Covid.
There were two headlines on Australia’s national broadcaster, the ABC’s news site this morning that tell us that there has been little progress made in helping people better understand the way the monetary system operates and the capacities of the currency-issuing government within it. Both articles merely rehearsed the standard mainstream fictions, which makes them dangerous, in that they perpetuate the system that has held the world back from addressing its major challenges. By creating false ‘challenges’ and false ‘probabilities of crisis’, these stories delay action that is necessary to deal with the real problems of climate change, inequality, degradation of public infrastructure and services, the health crisis, etc
The other problem is that these ‘analysis’ columns pretend to be balanced with is a ruse to bestow legitimacy or authority on themselves. ‘Experts’, who are wheeled out to ratify the fiction, are just part of the Groupthink. It is a circular system of nonsense. Very disappointing.
It’s Wednesday and we have some snippets that really just make way for the music feature. Today, I consider the recent inversion of the US yield curve, which is typically a sign that recession is around the corner. We also learn that while most people are being hit with rising prices and flat wages, the banks are recording record net interest income as a result of their non-competitive, cartel like behaviour. And we wonder how more silly can the Swedish central bank prize in economics become. And then, after all that, we have the music feature to rescue the day.
This Tuesday report will provide some insights into life in Kyoto for a westerner in the age of Covid. Today, I report on stone fords across rivers, bears, monkeys, and more. All the before and after work action from Kyoto.
The British government has descended into high farce. It is rather embarassing to watch adults behave in the way they have conducted themselves in the last longtime. I also note that the usual suspects are out in force claiming (spuriously) that the economic turmoil that has beset Britain demonstrates categorically that Modern Monetary Theory (MMT) is deeply flawed and the real world is now teaching us that we should be discarded into the dustbin of history – or rather disgrace. These characters, which include so-called progressives think that hard core fiscal rules, like the British Labour Party took into the last election would have saved the day for Britain. I guess they are now mates with the IMF, who in their latest fiscal monitor – Fiscal Monitor – overnight (published October 12, 2022) – called for fiscal restraint. Also, central bankers who met in Washington over the last few days decided they had become the elected and accountable government making gratuitous threats that if fiscal policy wasn’t turned to austerity, they would punish citizens with further interest rate hikes. It is actually hard to find anything of sense in the current economic debate. It is despairing really.
This Tuesday report will provide some insights into life in Kyoto for a westerner in the age of Covid. The city is the old capital of Japan and was spared from the nuclear devastation that ended the Pacific War in 1945 because some US politician decided it was too culturally important to the Japanese (Source). It is a large city (1.5 million residents) nestled in a valley and surrounded by rather high mountains to the north, east and west. I am living near the Yoshida campus of Kyoto University, one of the best higher degree institutions in the world. My house is just near the – Kamo River – which runs north and south through the eastern side of the city.
It’s Wednesday where I examine in short a few items that came to my attention in the last week and then retreat into the music segment. Yesterday, the Reserve Bank of Australia raised interest rates for the sixth time since May 2022. This time the increase was 0.25 per cent and the current cash rate target is 2.6 per cent. The below-expected increment has been hailed as the first central bank to ‘turn’. It tells me the RBA is now scared it has gone too far in its ridiculous show of power. It is also obvious that spending is not really responding yet to the RBA move which means that they have no real idea of what the impact of their shift in rates has been. That is the problem with relying on monetary policy as a counter-stabilising tool – it works (if at all) with long lags and by the time you see any impact it might be too late.
This is the third part in a on-going series that I am writing about Deep Adaptation, Degrowth and related concepts, all of which are designed to provide some sort of pathway beyond the current mess that the world is in with respect to climate, inequality, poverty, excessive consumption, and excessive population growth. Today, I consider how Modern Monetary Theory (MMT) fits into the transition agenda and discuss the labour market dislocation that will accompany the transition to degrowth.