In a sea of conservative media, two articles stood out this weekend which captures a debate that should be raging but will be quickly buried under the re-emerging neo-liberal hubris unless significant new alliances are formed. In recent weeks, as different economies are showing some signs of recovery, some key players within mainstream economics have been coming out in defence of the profession. They have been accusing critics of misunderstanding what economics is all about and saying that economists have actually saved the world. I covered some of this sort of positioning in Friday’s blog. In this blog I continue that theme but from a different angle. The conclusion is that if we want real change then “one should become more radical as one grows older”. We will see what that means as we go.

I mentioned in yesterday’s blog that there is a growing number of deficit-terrorists out there who are trying to appear reasonable to separate themselves from the more loony Austrian-school fringe. They are appearing reasonable by saying that “now we should have deficits” but soon (unspecified) “we will need surpluses” to “pay back the excesses”. That sort of spurious reasoning. Even some self-styled progressives who want us to think they are both reasonable people and knowledgeable commentators are starting to emerge within this broad camp. But in general their arguments reflect, at best, an ignorance of how the monetary system operates. This unholy gathering will prove to be very damaging to the need for a broader understanding of how these operations and how government fiscal interventions impact.

Today’s meeting in Almaty will be discussing how the CAREC countries, that I are working with at present via the Asian Development Bank, can best achieve regional cooperation and integration. The region is very interesting and I will report more fully when things are more clear. But the challenges these countries face are exacerbated by the grip that market liberalism has on them. This is especially to be understood in the context of the Soviet heritage of most of these countries. There is a curious mix of past and present which makes market liberalism even more dangerous. So what? Well, I have been asked by many readers about Latvia, another former Soviet satelite. The deep crisis that economy is enduring is a good example of how market liberalism has failed. Yet, depressingly, the solutions proposed involve more of the same. Modern monetary theory (MMT) clearly offers an alternative and much more productive alternative recovery path.

In Deficits saved the world you read that a Nobel Prize winner not previously associated with Modern Monetary Theory (MMT) is starting to come round. The article by Paul Krugman highlights some of the basic elements of the sort of macroeconomics that I have been writing about for years and which forms the basis of this blog. It shows definitively the point I make about the macro balances – that a government surplus will squeeze the non-government sector into deficit and vice versa. It also addresses the current policy debate which is getting swamped a bit by idiots who are saying that fiscal policy is not working and should be constrained to get the government budget back into surplus.

I had to double-check over the weekend whether I had actually read an article in the Fairfax press – Alarming debt bomb is ticking – given that my flu-ridden state was playing havoc with the clarity of my eyesight. Upon checking today, I concluded that I had read it. It is one of those articles that uninformed readers will consider erudite given the technical language it uses but which in fact is so misinformed at a theoretical level that it is has to be considered pure propaganda. It is sad that this sort of techno-mumbo-jumbo nonsense gets any space in our leading daily newspapers. I would rather more cartoons or brain teasers if they are struggling to fill their pages. Even an advertisement about the latest skin cream that not only eliminates wrinkles but also increases the reliability of the left-hander at Nobby’s would be better (Nobby’s = surf break)!

A regular reader sent me a recent financial market report written by Tokyo-based economist Richard Koo which raises some interesting issues about the association between prolonged recessions and democracy. Koo has achieved some notoriety in the last decade or more by coining the term “balance sheet recession” to describe what happened to Japan during its so-called “lost decade”. He also applies the analysis to the present global economic crisis. While he is not a modern monetary theorist, he recognises the need for considerable fiscal intervention and the futility of quantitative easing. So this blog is about all of that.

I am now in the US with a hectic week ahead. At present I am in Florida and for those who haven’t been here just imagine taking a landscape and pouring as much concrete as you can mix over as much of that landscape that you can access. Then once that sets, you build massive high-rise buildings and suburbs that span hundreds of kilometres and you have it. Oh, and plant a few palm trees as you concrete. But then there is surf nearby and before work this morning I am off to check it out. Anyway, in between other things I have been reading the so-called public debt exposition that appears in the latest issue of the The Economist Magazine. It will take a few blogs to work through it but here is Part 1. It might happen that there will be no Part 2 if I get so sick of reading this nonsense.