The Weekend Quiz – August 19-20, 2017 – answers and discussion

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.

Read more

Australian labour market – stumbling along with no definitive trend

The latest labour force data released today by the Australian Bureau of Statistics – Labour Force data – for July 2017 shows that total employment rose only modestly (27,900) while full-time employment contracted. Part-time employment rose by 48,200 reversing the decline from last month. As a result of a rise in the participation rate (0.1 points), unemployment rose by 1,100, and the official unemployment rate decreased by less than 0.1 pts to 5.6 per cent. Underemployment rose to 14 per cent as monthly hours of work declined with the fall in full-time employment. The broad labour underutilisation remains high at 14 per cent with unemployment and underemployment summing to 1,812.6 thousand persons. The teenage labour market showed a slight improvement but remains in a poor state. Overall, my assessment of the Australian labour market is that it remains in an uncertain state. There is no definitive trend yet.

Read more

Australia – real wages growth zero and the rip-off of workers continues

When the Australian Bureau of Statistics released its latest wages data in May (for the March quarter) we learned that real wages were falling as a result of nominal wages failing to keep pace with the modest inflation rate. Today (August 16, 2017), the ABS released the – Wage Price Index, Australia – for the June-quarter 2017. For the sixth consecutive quarter, annual growth in wages has recorded its lowest level since the data series began in the December-quarter 1997. Nominal wages growth in Australia was just 1.9 per cent in annual terms and equal to the inflation rate of 1.9 per cent. So on the back of real wage cuts in the March-quarter, workers enjoyed zero real wages growth in the June-quarter. This is in the context of on-going productivity growth, which means that the profit share in national income rose again as real unit labour costs plunged. But employment growth also remains flat. This represents a major rip-off for workers. The flat wages trend is also intensifying the pre-crisis dynamics, which saw private sector credit rather than real wages drive growth in consumption spending. Further, the forward estimates for fiscal outcomes provided by the Australian government are now not achievable, given the flat wages growth. There is no way the tax receipts will rise in line with the projections, which assumed much stronger wages and employment growth than will occur under current austerity-type fiscal settings.

Read more

Japan is different, right? Wrong! Fiscal policy works

Japan is different, right? Japan has a different culture, right? Japan has sustained low unemployment, low inflation, low interest rates, high public deficits and high gross public debt for 25 years, but that is cultural, right? Even the mainstream media is starting to see through the Japan is different narrative as we will see. Yesterday (August 14, 2017), the Cabinet Office in Japan published the preliminary – Quarterly Estimates of GDP – which showed that the Japanese economy is growing strongly and has just posted the 9th quarter of positive annual real GDP growth. Private consumption and investment is strong, the public sector continues to underpin growth with fiscal deficits and real wages are growing. The Eurozone should send a delegation to Tokyo but then all they would learn is that a currency-issuing government that doesn’t fall into the austerity obsession promoted by many economists (including those in the European Commission) can oversee strong growth and low unemployment. Simple really. The Japan experience is interesting because it demonstrates how the reversal in fiscal policy can have significant negative and positive effects in a fairly short time span, whereas monetary policy is much less effective in influencing expenditure.

Read more

Jacques Delors – a failed leader not a champion of a prosperous Europe

It is amazing how history is revised when it is convenient. It is also amazing how the same events, that from my perspective are rather clear, can be diametrically interpreted by others, who want to run a different agenda. A good example of these phenomena can be found in a recent UK Guardian article (August 11, 2017) – Jacques Delors foresaw the perils of austerity. How we need his wisdom now. When I saw the headline I thought it must have been an article seeking to elicit some sort of deep irony. Jacques Delors – perils of austerity – wisdom – all in the same title. Ridiculous. Through the lens I view the work of Jacques Delors I can only see the abandonment of a progressive social vision, the unnecessary surrender to neoliberalism, and then, a bit later, as an inevitable consequence of these shifts – the disastrous and dysfunctional creation of the Eurozone with all its embedded and destructive austerity biases. The unfortunate fact is that the UK Guardian article was deadly serious. Oh dear!

Read more

The Weekend Quiz – August 12-13, 2017 – answers and discussion

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.

Read more

The chickens are coming home to roost for Europe’s so-called powerhouse

When I was in Portugal a few years ago (Porto mainly), I noticed taxi drivers at the rank queue who would get out of their cars when the front of the queue changed and push them to the next spot in the queue. It was like something one would see in a very poor nation without fuel. But then austerity had created poverty in Portugal and the taxi drivers were just trying to eke out a living as best they could and make as many savings as they could along the way to spread the meagre receipts they earned as far as possible. But then that was just Portugal, right! They have been living beyond their means for years and needed the reality check that austerity brought, right! They should follow Germany’s lead and tighten their belts and enjoy low unemployment and the strongest economy in the Eurozone, right! But, of course, the reality is different. Germany has become so obsessed with recording fiscal surpluses that its trucks can no longer transit important bridges and so the export model is being undermined. It is so obsessed with screwing its own people and overseeing an increasing bias to precarious work with low pay that the future retirements of their workforce is in jeopardy. The chickens are coming hometo roost in a big way for Europe’s so-called powerhouse. No other nation should follow its lead.

Read more

Falling enrolments in mainstream economics programs is a desirable outcome

If you have had the misfortune to study economics formally at university then you will recall sitting through endless and tedious lectures where the instructor asserted some superior knowledge about psychology and human behaviour. If you had combined the economics study with studies in psychology and sociology, you would have soon realised that what was being taught in your economics course was total nonsense. There was an article in the Fairfax press recently (August 6, 2017) – Crisis in high school economics a threat to national wellbeing – ruing the declining enrolments in secondary school economics programs. The point is that these courses are typically more damaging than useful and the contention of the journalist that we are reducing the quality of the economic debate as a result of less people studying economics is problematic. The typical economics program is simple indoctrination into a set of neoliberal principles that allow poor policy to continue despite it delivering disastrous outcomes. There is a crying need for more economic and financial literacy, but that requires an entirely different approach to be adopted rather than jamming more kids into the existing courses and having them come out dangerously brain dead.

Read more
Back To Top