Last week (January 20, 2022), Eurostat released the latest inflation data – Annual inflation up to 5.0% in the euro area – which followed the release from the US Bureau of Labor Statistics data (January 12, 2022) – Consumer Price Index Summary , the latter, which shocked people, given that it recorded an annual inflation rate of 7 per cent before seasonal adjustment. The Euro area inflation rate over the same period was published as 5 per cent. It is obviously hard to see clearly through the data trends given the amount of pandemic noise that is dominating. But I stand by my 2020 assessment (updated several times since) that we are still seeing ephemeral price pressures as a result of the massive disruption the pandemic has caused to production, distribution and transport systems. In a sense, I am surprised the inflationary pressures have not be greater.
It’s Wednesday and so some short discussion and news then some jazz, the latter being the highlight. I read an interesting research paper yesterday from the – Conseil d’Analyse Économique (CAE) – which is an French-based organisation that brings together professional researchers “to enlighten the government’s choices in economic matters by comparing points of view and analyses”. It operates under the authority of the French Prime Minister. Its latest public report under its – Focus – series – The effect of COVID certificates on vaccine uptake, health outcomes, and the economy (published January 18, 2022) – presents some very interesting empirical results pertaining to the impact that the enforcement of Covid vaccination certificates has had on the rate of vaccination uptake, on health outcomes (short-term) and on GDP growth rates. I consider the research (methods etc) to be credible and the results are in accord with an array of evidence that other researchers are coming up with.
It’s Wednesday and I have been digging a bit into what appears to be a growing coalition opposing lockdowns, mask wearing, vaccine rules, and vaccinations in general. The claims are that none of these things work and that the economy is better off without them. I am not writing today about these matters (I have in the past) but rather about the nature of these coalitions. One of the things that has held back progressive causes in the past is the tendency of social democratic type interests to adopt the mainstream macroeconomics, which not only limits what they can do but exposes them to accusations that the government will run out of money and cause inflation if they have ambitious programs. The pattern of progressive interests aligning with non-progressive voices is thus not new. I am seeing it again in the context of the public health debate, which, in part, explains why our world is in such a Covid-mess. It isn’t all bad today – there is some nice music to finish, being Wednesday.
It’s Wednesday and a shorter blog post, which includes the latest from Turkey and some music. The mainstream narrative against Modern Monetary Theory (MMT) has been ramped up significantly in recent weeks as a result of events in Turkey, where, up until yesterday, the currency had depreciated significantly. The screams for interest rate rises from bankers etc (of course! they profit or protect foreign debt exposure) have been deafening. But the most recent monetary policy decision was on December 16, 2021, when the CBRT reduced its policy rate (the one-week repo auction rate) from 15 per cent to 14 per cent. The ‘markets’ can’t really get a handle on the current government’s thinking because it is running against the mainstream in several ways, including cutting rates to reduce inflationary pressures (see Press release on Interest Rates – from the CBRT). Overnight a big swing happened after the government made a significant fiscal policy announcement. That will further confound the markets who were forced to scramble to close out short-selling positions as the lira appreciated by around 25 per cent in one day. The fiscal squeeze worked. You couldn’t make this stuff up.
It’s Wednesday so not much today. I offer some comments on the latest data release from Germany (not good) and the probability that the new German finance minister will be anything other than a dangerous dud. An announcement about the edX MMTed course (coming back). And then Blind Willie Johnson serving up Great Depression angst.
Given my inflation report yesterday, I have shifted my usual Wednesday light blog post day and music feature to today. The economic debate has moved in recent years from ‘when is the government going broke’ to ‘hyperinflation is approaching’. It amazes me how puerile the economic commentary is as journalists and economists seeking headlines trot out headlines about how bad something (insert: insolvency, inflation, whatever is the latest craze) is going to be and what needs to be done about it. Nothing much happens in the real world and they keep their jobs and begin the next mania. Replay. And so it goes. It seems though that within this fictional world, that masquerades as informed economic commentary, subtle changes are underway. Governments worked out that during the GFC, the only weapon they had that would save the system was fiscal policy. They also worked out that large-scale bond buying by their central banks complemented the effective use of fiscal policy and didn’t deliver all the maelstrom that the mainstream New Keynesian textbooks predicted. The pandemic has accentuated that. And now there is this sort of stand-off between the ‘markets’ that were given too much latitude in the pre-GFC period and governments. The market players, who have become accustomed to manipulating government policy to ratify their speculative bets, which delivered massive profits to the hedge funds and the like, are now confronting central banks and treasuries that actually have power and cannot be bullied into delivering such policy ratification. That is progress and interesting to observe.
Last week, I did a seminar with a Melbourne financial market group (Wattle Partners), who I regularly help in their education programs. It took the form of an informal (somewhat structured) conversation about Modern Monetary Theory (MMT) and more practical applications of the MMT understanding. There were several questions from the audience that we didn’t get time to answer in the allotted time so today I am honouring my agreement to provide answers, which might be of interest to the broader readership, if only to reinforce knowledge. The video of the interaction is also available now and you can watch it here.
Its Wednesday and just a few items today. I have a fair number of commitments today and some writing deadlines. But I thought a brief comment on a Financial Times article last week (April 30, 2021) highlights how paradigm shift creates wedges in those devoted to the degenerative paradigm. Some embrace change more than others. Some hang on to any thread to maintain their credibility. We might write something about Modern Monetary Theory (MMT) and power tomorrow. That should appeal, eh!
It is Wednesday and I have had lots of unscheduled commitments (that just come out of the blue) to attend to today. So not much writing. I did have time to read the latest IMF – Fiscal Monitor, April 2021 : A Fair Shot – which was published on April 7, 2021. The schizoid nature of this institution continues to evolve and it will be hard for the austerity mavens to unambiguously use it as a cover for their arguments when they resume their call for public sector spending cuts etc. Music follows.
It’s Wednesday, and our edX MOOC – Modern Monetary Theory: Economics for the 21st Century – ended its four-week run today. We are exploring making it available again in the coming months as well as floating an advanced course (see below). Today, I publish a short video where I answer the questions posed by students in the MOOC as part of our last week ‘Bill Board’. We asked students to pose questions and vote on which ones they thought should be prioritised. I chose the top (almost) 3 to answer. And then we have some music, being Wednesday.