Some new research has given me hope that the politicians will soon be in a position to use the fiscal tools at their disposable to solve the economic crisis. We might call it the pigeon recovery. The ABC News reports that Pigeons can count and so I propose we round up a bunch of them from some of those nice European buildings ship them (humanely) to Brussels and the Eurotower and let them count up the unemployment numbers (well they might have to go to Eurostat in Luxembourg). Then they could calculate the real GDP and income losses and by way of a new Google Pigeon-to-English translator convey to the politicians the urgency of the situation and that jobs are created when people or governments spend and that income is created as a consequence and people become more prosperous. Then some homing pigeons could fly some Modern Monetary Theory (MMT) material to the offices of the politicians to give them something to read instead of the latest nonsense from the IMF or some other institutions that have forgotten that unemployment matters and financial ratios are of limited relevance. Once the pigeons have done their work – the Euro leaders will sit down and realise that an orderly break-up of the monetary union is the best long-term strategy for all of them. Speaking of which here are some “hard truths” for 2012.

Imagine you had a headache and some economist tells you that you can cure the headache by bashing your head against a wall. So you duly bash your head against the nearest brick wall and not only does it hurt (perhaps drawing blood depending on the severity of the blow) but you note the headache is now worse. The economist then concludes you didn’t bash your head hard enough and instructs you to stick to the “rule” and give it another try – only this time go harder. Blood is now flowing, the head is traumatised and the headache gets even more unbearable. Welcome to Greece which is being bullied by the Troika (EU, ECB and the IMF) in a similar way. The latest IMF medium-term forecasts for Greece reveal a staggering failure by that institution to understand causality and the impacts that their austerity programs have on real economies. Without a blush, the IMF presented the world yesterday with revised forecasts for Greece which reveal their previous forecasts will be around 100 per cent wrong over just over a 6-month horizon. That sort of error is beyond any accepted professional standards. The IMF’s response – bash your head even harder.

It is Friday and in Newcastle today it feels like Winter is back although I am aware that complaining about 19 degrees centigrade is somewhat disingenuous to the Northern Hemisphere and temperate region dwellers. But still we complain – more than one person today has said “isn’t it freezing”. So I have been bunkered down reading a lot. Which isn’t that much different to any other day real – hail, rain or shine. The European laboratory is dominating the daily news though and providing us with scripts that no professional playwright could conceive. This week we have seen the European Commission release its latest gee-whiz (you-beaut) plan to save Europe from itself and like all the previous announcements lots of speeches and photos were taken but the substance is missing. The only development that these plans seem to be leading to is a suppression of national democracy. That is my assessment of the EC’s latest proposal. From an economic perspective it maintains the rule – austerity begets austerity.

At Melbourne airport last night the Qantas jets looked resplendent with their red flying kangaroo and the “Spirit of Australia” logos. I chuckled to myself about the sheer audacity of an airline that continues to promote itself as if it is our “national carrier” yet is systematically trying to undermine aspects of our culture that we value highly. It is dangerous territory to try to define a national identity. But in Australia we continually emphasise fairness as a hallmark of our national aspiration. Yet, reality is often different to our romantic perceptions and imagery. This blog is an extended version of an Op Ed I wrote for the Fairfax media today on the Qantas dispute, which has gained some attention abroad and been the topic of choice in Australia over the last week. The reality is that the gung-ho union-hating management of the airline are now engaged in a death battle with the union movement and aim to destroy working conditions once and for all and turn the airline into a cheap, low quality outfit principally flying out of Asia while still trading on the fact that we consider it to be (as a historical artifact) an Australian icon. The only way forward for Qantas is for the Australian government to nationalise it and get it flying in the national interest.

I am currently quite interested in the formation of consumer expectations after being asked by a major financial institution to consider constructing a new series for them. So in developing the project I have been enmeshed in technical detail the last week or so. I am also interested in the way different polls are interpreted. In the last few days two major polls in the US have been released. They are broadly in agreement but there are some interesting differences. The other interesting aspect of the polls is that they provide further evidence against the way the mainstream of my profession thinks about the economy. They reveal that individuals are not likely to behave as Ricardian agents. The mainstream theorist claim that individuals will spend once governments cut deficits and politicians have used this assertion to justify imposing (or suggesting) harsh fiscal austerity. The reality is very different as these polls suggest.