Welcome to The Weekend Quiz. The quiz tests whether you have been paying attention or not to the blog posts that I post. See how you go with the following questions. Your results are only known to you and no records are retained.
On Tuesday (September 22, 2020), the ABS released the latest data for – Weekly Payroll Jobs and Wages in Australia, Week ending 5 September 2020 – which gives us the most up-to-date picture of how the labour market is coping with the on-going restrictions. This data provides more accurate estimates of the impact of the harsh Stage 4 restrictions that have been imposed in Victoria to address the Second Wave of the coronavirus. Overall, payroll employment has fallen by 0.9 points since July 25, 2020, when the lockdowns began in earnest. Unsurprisingly, payroll employment fell in the six-week period ending September 5, 2020 in Victoria by 2.8 points. Employment has also fallen in NSW by 0.5 points in the last 6 weeks. The Victorian case is about lockdown. NSW is in decline because of failed macroeconomic policy, which goes to the performance of the federal government. The fact that the first recovery period failed to regain the jobs lost was an indicator that the policy intervention was insufficient. The second-wave job losses tell us clearly that more needs to be done by the Federal government. I provide some clues as to where an extra $100 billion might be spent below.
Today is Wednesday and after several meetings and preparing for a workshop tonight I am powering away on some writing deadlines for academic-type articles etc. But, on Monday, I didn’t have time to finish the discussion on the pandemic trade-off between saving lives and protecting our material prosperity, particularly the future prosperity of the younger generations. And, just as it always is the case, the unfinished parts of the story I provided was picked up by a rather harsh critic. I chose not to make the comment public because while one of the points made was valid in part (as above), the general tenor was not a view I choose to publicise or give credence to. So today I will elaborate a little more because it also provides a lesson in data analysis, which many people would not really cotton onto straight away. And after we have mashed our brains on outliers etc, we can get funky with some music. Such is life on a Wednesday.
The German daily business newspaper Handelsblatt published an interesting article last week (September 17, 2020) –
Schäuble fordert Debatte über lockere Geldpolitik der EZB – which said that the former German Finance Minister and now President of the Bundestag was calling for a debate on the ECBs ‘loose’ monetary policy. He has circulated a letter and a discussion paper among the new discussion group within the Bundestag, created after the German Constitutional Court had ruled adversely in relation to the ECBs public asset purchase programs. The letter criticises the low interest rate policy of the ECB and the various asset purchase programs conducted by the ECB. It appears to be in denial with the state of affairs across Europe, which are heading catastrophic territory with the second wave of the virus gathering pace and authorities having to face the need for a second lockdown.
Many issues that become ‘hot topics’ in public debates are really non-questions despite the heat they raise. All sorts of experts advance views, television current affairs programs trawl over them with various of these experts making careers for themselves, politicians take up hours of their time and our time discussing them, yet, when you really break the issue down – there is nothing much to see. The seemingly very erudite debates, discussions, opinions are all based on false starting premises, which are assumed and rarely discussed. This sort of charade is all the legacy of living in the fictional world created by my profession, which has distorted public discourse so badly that we now have people saying old people should be allowed to die terrible deaths from COVID so the young people can have jobs. These are old people who worked all their lives to help build our nations, who fought in World Wars to defend our freedom from daunting enemies, old people who cared for us personally, and old people who mostly, probably, have the joy of life before them each day they open their eyes, just like any of us. The problem is that the whole construction is based on a false premise: being that there has to be widespread economic damage if we choose to protect the health of our peoples. That premise is based on the failure to understand that the currency-issuing government can attenuate any economic losses if it chooses to adopt appropriate economic policy interventions. The fact that real GDP and employment has fallen significantly this year is testament to a failure to use fiscal capacity. We should be better informed before we get into elaborate but flawed debates that essentially come down to turning one population cohort against another.
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.
Welcome to 600th edition of the The Weekend Quiz. The quiz tests whether you have been paying attention or not to the blog posts that I post. See how you go with the following questions. Your results are only known to you and no records are retained.
The latest data from the Australian Bureau of Statistics – Labour Force, Australia, August 2020 – released today (September 17, 2020) shows that employment rose by 0.9 per cent as the economy struggled to shift back into growth mode. In part, the moderate result was due to the impact of the Stage 4 restrictions in Victoria as that state dealt with the second virus wave. Victoria was the only state or territory to endure negative employment growth in August. As the virus situation is coming under control and the lockdowns are easing, Victoria will rebound fairly quickly – how far depends on the damage done during the closures. The lack of external migration is also seeing the labour force growth moderate significantly, which allowed unemployment to decline by 86.5 thousand on the back of the modest employment boost. Participation also rose. The reality is that if we take a broader view of the labour underutilisation rate (adding in the hidden unemployment who have left the labour force since March) to the official unemployed and underemployed, we find around 19.5 per cent of the available labour supply is not working in one way or another. Any government that oversees that sort of disaster has failed in their basic responsibilities to society. It must increase its fiscal stimulus and target it towards large-scale job creation. My overall assessment is: (a) The current situation can best still be described as near catastrophic; (b) The Australian labour market needs massive fiscal policy intervention targetted at direct job creation; (c) The pre-pandemic need for a fiscal stimulus of around 2 per cent has changed to a fiscal stimulus requirement of several times that; (d) The Federal government’s attempts to date have been seriously under-whelming and we will soon see the results of their withdrawal of the unemployment benefit supplement (a ridiculous decision); and (e) Any government that oversees that sort of disaster has failed in their basic responsibilities to society.
It is Wednesday so some snippets and some music – sad music this week because it signals the death of one of the great pioneers of Jamaican music last week. I am holding a Mini-Music Festival today – right here on my blog. Join in an celebrate a legend. But a few economics matters first pertaining to the Job Guarantee and the nonsensical arguments I have been seeing in the media about it being a system of enslavement and not better than a system that forces workers into unemployment.
Japan has a new leader of the ruling Liberal Democratic Party, who, given the majority of the LDP in the Diet will become prime minister in the coming days. He was interviewed over the weekend about the current crisis and the role that the Japanese government can play to attenuate the costs. He stated clearly that there was no limit to government debt issuance. The meaning of this statement is clear. The Japanese government should ignore claims that its public debt ratio is too high or is facing impending insolvency or bond-market revolts or any of the other manic predictions that economists who do not know better keep making. Instead, as Yoshihide Suga noted, the challenge is jobs and incomes. The only limits are real resource constraints and when there is a pandemic and rising unemployment, those constraints ease and the fiscal space for more net spending increases. At least one world leader understands that.