In the last few days I have read more misinformation and downright lies from financial and economic commentators in the media than I have for the last year. The decision by the irrelevant S&P to get some attention for their corporate profit-making activities by downgrading US government debt has sparked a frenzy of nonsensical “analysis” which is as ridiculous as was the S&P decision. The fact is that the S&P decision is irrelevant as long as the US government makes it so. The danger is that the Government will think there is something to be addressed and the US economy will suffer as a result. As long as the US government realises who calls the shots the S&P decision will be irrelevant.

I would have thought the role of a Professor of Journalism at a university would be to teach students how to write copy and to research issues in the field of journalism. I would not assume that such a person would claim expertise in macroeconomics and start pontificating about national economic policy. But I was wrong – again. In this article (July 31, 2011) – American dream comes with a heavy cost – which was published in the Melbourne Age (but previously the UK Guardian) one Rosalind Coward proves how little she knows about economics. Contrary to the sway of media opinion from these “tin pot” experts – there is no federal public debt problem in the US.

With all eyes on the US wondering what would happen if the debt ceiling is not lifted you would think that bond markets would be losing interest in US government debt. If we trawled back through the debate over the last few years we could find many instances of commentators claiming interest rates would soar once bond markets ran out of patience with the rising US government debt. It was either that prediction or the other one – that all the “money” swishing around the system would cause inflation. Like some cult leader there was one self-styled US financial expert claiming that the Endgame was nigh. As the world didn’t slide into a void nor the debt-burdened US economy hyperinflate the date was shifted. Once, twice, thrice. Further, trying to overlay what is happening in the EMU at present onto US, UK, Japan or other sovereign nations is invalid. The monetary systems in place, in say the US, is vastly different to the system the ECB oversees when we focus on the member state level of the Eurozone. So it serves to remind people that none of the predictions the deficit terrorists have made have come true. The ideologues respond that it is only a matter of time. My reply, when might that be?

On the first day in her new job the IMF boss was interviewed by the in-house survey unit and asked to outline her agenda. She clearly thinks the IMF remains a centrepiece of the international monetary system. The evidence would suggest otherwise. The conduct of the IMF over its long history has not advanced prosperity and once the fixed-exchange rate system collapsed as unworkable the rationale for the IMF also disappeared. In trying to reinvent itself over the last 40 years, the IMF has become an exemplar of neo-liberal free market thinking and action and caused many of the larger crises that have evolved during this period. Its role in the current crisis exemplifies its culpability. It turns out that a leading mainstream economists also thinks it is time to shut the doors at 700 19th Street, N.W., Washington, D.C. 20431.

I have always been sceptical of the way the US Congressional Budget Office computes its structural deficit decomposition – that is, separates out the cyclical effects (the automatic stabilisers) from the underlying policy settings. I have written about that before. This came back to my attention span again today after I read a column in the New York Times (July 10, 2011) which reported that an “extraordinary amount of personal income” for Americans is now “coming from the US government”. That combined with a really stupid Bloomberg editorial yesterday (July 11, 2011) led me to investigate further. What I found hardly surprised me but reinforced how the American people are being let down by their leaders with the financial press mostly reinforcing the lies.

The US Bureau of Labor Statistics published the latest labour force data on Friday and the results can be summarised in one word – shocking. Meanwhile the so-called US political leadership met at the White House to determine how they could make sure the US labour market deteriorated even faster than the latest BLS data shows it is. Other senior White House officials appeared on American TV networks engaging in what can only be related to early teenage male behaviour – ours will be bigger than our opponents. The ours being the trillions they plan to cut from the US federal deficit. With the US labour market in clear decline and the top level talks being about trillions of cuts in public spending you can only conclude one thing – the US leadership has gone missing.

Today will be a relatively short blog as an attempt to honour my Friday promise to myself to make more space for other things I want to do. Further I have had some major hardware crashes at my research centre which have taken time today. But I had to comment on an Op-Ed article in the UK Guardian (June 30, 2011) – Public spending has not been cut, it’s just been stopped from rising – which was written by one Baron Desai. The good Baron tries to give us (and a fellow Lord) a lesson in macroeconomics. Unfortunately, before one starts lecturing they should first understand the topic. In this case, it is all about aggregate demand and the way government spending adds to that (including the operations surrounding government spending).

I am sitting in one of my “offices” – the little nook I have found at Melbourne airport that lets me work while waiting for planes – watching the video fo the US President’s recent Press Conference (June 29, 2011). I have “offices” like this at various airports. In the speech he berates the Republicans for refusing to show leadership in the current budget debate. My assessment is that after reading the full speech (the video goes for 67 minutes and 5 minutes is too long) – is that the US President outlined in the most categorical terms why he shouldn’t be in charge of the largest economy in the World. In the short time I have to write my blog today I will tell you why that is the case. But overall – as I noted the other day – it is looking more every day like a case of RIP USA.

I gave a talk about Modern Monetary Theory (MMT) today at a workshop on Stock-Flow consistent macroeconomics organised at the University of Newcastle by the economics group here. While I hold the research chair in Economics at this university I am not formally part of the economics group – my affiliation is with my research centre (CofFEE) which stands outside the Department/Faculty structure. So it was good to interact with the economics group. It is coincidental because the things I was talking about were being played out in the US and elsewhere (for example, Greece). The US conservatives are now pushing hard for a balanced budget amendment to the US Constitution. If they understood economics they would never consider doing that. If they succeed they will undermine US prosperity forever. It is a case of ignorance undermining prosperity which really describes a lot of what is going on at present in the public debates.

Overnight, the US Bureau of Labor Statistics released their latest Mass Layoffs data (May 2011) which showed that the number of mass layoff events in May increased by 2 percent. Further, another month went by and the US national unemployment rate remained unchanged at (a very high) 9.1 percent. There is very little happening to reduce it and the omens are bad. Also yesterday the US Federal Reserve decided to keep interest rates on hold in the 0 to 1/4 per cent range indefinitely and the Congressional Budget Office (CBO) released its 2011 Long-Term Budget Outlook. The statements accompany the central banks decision by its Chairperson Ben Bernanke about long-run fiscal problems and the very aggressive message in the CBO Outlook suggest that the politicians will continue to retard the US economic recovery and lock millions into entrenched unemployment and poverty. The US leaders are sure making a mess of things and the advice they are getting is appalling. The omens are clear – aggregate demand growth is desperately required to attack unemployment. But the land of the free is sliding further into oppression – self-induced by its political class.

I saw a bit of the recent US Republican candidates’ debate. It was extremely boring to say the least. If that field is the best conservative America can muster and Obama is the best the conservatives who think they are progressives can muster then que dieu nous aide. I thought the policy discussion from the candidates in the debate were woeful and I longed for Sarah Palin to walk in and say something sensible. But one influential commentator did find something rather interesting and pleasing about the debate. In this Wall Street Journal article (June 16, 2011) – Republicans Return to Reality – Peggy Noonan tells us that the GOP has at least demonstrated a new sobriety when it comes to policy. The reason? Read on. But my reaction is to draft a memo to the US Treasury – headline – E-mail me for my bank details.

I have very little spare time to write my blog today so this will truly be brief. Amidst all the riots in Athens as the Eurozone farce descents further into the mire, the UK Labour Force data came out yesterday (June 15, 2011). There are some who are saying that the data presents good news. A closer examination reveals nothing of the sort. Others are claiming that there isn’t really a problem of unemployment in Britain because the unemployed are largely unemployable. That is a familiar refrain after a deep recession as the labour market struggles to keep pace with the underlying population growth. The conservatives always try to redefine what we might call full employment and claim that a much higher unemployment rate is now indicative of full capacity. The same game is being played out in Australia where despite unemployment and underemployment totally 12.2 per cent at present the Reserve Bank governor had the audacity to claim there were not that many spare labour resources (like 1.3 million odd workers don’t count any more).

On May 17, 2011, the US Social Security Trustees Report and the US Medicare Trustees Report were released. The releases set the conservative deficit terrorists into a tail spin. They would have been better making a nice cup of tea, relaxing with a book and generally chilling out. In fact, the most interesting part of the US government’s Social Security Administration Home Page seems to be its Popular Baby Names search engine which allows you to plug in a name and find out how popular it has been over x years and its ranking by the year. My parents chose a name for me that remains popular. I don’t know whether that is good or bad. But playing around with that little toy is much better fun than reading the Trustees’ Report and the resulting hysteria in the media. The point is that these Trust Funds are just elaborate accounting smokescreens that ultimately mean nothing if one comprehends the financial capacity of the US government. They represent a case of a government creating a farcical structure to administer some program and then elevating the structure to a false level of importance that actually leads them to introduce policies which undermine the initial purpose of the program – and all without any basis. The time has come to tell the American people the truth.