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Travelling all day today …

There will be no blog post today as I am travelling for the next 24 hours or so to Europe via LA. I have a detective novel to read – well 79 in fact, I have just started the complete Maigret series written by Belgian author Georges Simenon – so in the spirit of that great song from the Who – I hope I get finished with the series before I get old! And regular transmission will probably resume from Paris on Tuesday. While I am flying I will not be attending to comments that need moderation. So it might be some time before you see your comment published (or not). I hope to see many MMT people at one or more of the events where I will be speaking in the next two weeks – the details are overleaf.

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The Weekend Quiz – September 14-15, 2019 – 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.

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Germany to play smokes and mirrors again

Germany is proposing some more smokes and mirrors so that it can maintain its position as the exemplar of fiscal responsibility by obeying its ‘Debt brake’ yet inject significant deficit spending into its recessed economy, which is starved of public infrastructure spending. They are proposing to set up new institutions which will be funded by government-guaranteed debt and spend billions into the economy while ensuring these transactions do not show up on the official fiscal books of the German government. The only financial constraint these new agencies will be bound by are the European Commission’s Stability and Growth Pact rules. But because the allowable spending difference between the ‘Debt brake’ and the SGP is huge (but still well below what is needed to redress the years of austerity and infrastructure degradation) and so will provide a much-needed stimulus to the ailing German economy. Meanwhile, the Germans will tell the world how thrifty they are and how they obey their own rules. And then they can say that all other Member States should also stick to the rules. Meanwhile, the smoke and mirrors are going hammer and tong to create spending growth that bears no resemblance to the allowable growth under the Debt brake. The Debt brake then is just a sham. The upside is that needed public spending will enter the economy which tells us that the Debt brake should never have been introduced in the first place. Such is life in the EU – a daily circus.

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On visiting Japan and engaging with conservative politicians

It is my Wednesday blog post and my relative ‘blog day off’. But there has been an issue I want to write briefly about that has come up recently and has become a recurring theme. I am writing today to put the matter on the public record so that spurious claims that arise elsewhere have no traction. As our Modern Monetary Theory (MMT) work gains popularity, all manner of critics have started coming out of the woodwork. There is now, quite a diversity of these characters, reflecting both ends of the ideological spectrum and places in-between. The mainstream economists and those who profess to be ‘free marketeers’ bring out their big guns pretty quickly – inflation and socialism/Stalinism. Standard stuff that any progressive proposal to use government fiscal policy gets bombarded with since time immemorial. Easily dismissed. More recently, those who claim to be on the ‘progressive’ side of the debate have become more vociferous in their attacks, sensing, I suspect, that MMT have supplanted their relevance as the defenders of the anti-neoliberal wisdom. These characters resort to all sorts of snide-type attacks ranging from accusations of anti-Semitism (which I have covered previously), siding with Wall Street, ‘America-first corporatist sycophants’ (latest ridiculous book from G. Epstein as an example), giving succour to fascists and the Alt-Right, and that sort of stuff. Today, I want to address that last claim, which recently has been raised by a number of so-called progressive critics.

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UK productivity slump is a demand-side problem

I have recently had discussions with a PhD student of mine who was interested in exploring the cyclical link between productivity growth and the economic cycle in the context of the intergenerational debate about ageing and the challenge to improve the former. The issue is that sound finance – the mainstream macroeconomics approach – constructs the rising dependency ratio as a problem of government financial resources (not being able to afford health care and pensions) and prescribes fiscal austerity on the pretext that the government needs to save money to pay for these future imposts. Meanwhile, the real challenge of the rising dependency is that the next generation will have to be more productive than the last to maintain real standards of living and if austerity undermines productivity growth then it just exacerbates the ageing problem. My contention has always been the latter. That governments should use their fiscal capacity now to make sure there is a first-class education and training system in a growth environment to prepare us for the future when more people will have passed the usual concept of working age. This question also is hot at the moment in the Brexit debate in Britain and in this blog post I offer some empirical analysis to clear away some of the myths that the Remainers have been spreading.

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US labour market – weaker than 2018 with occupational polarisation evident

Last week’s (August 2, 2019) release by the US Bureau of Labor Statistics (BLS) of their latest labour market data – Employment Situation Summary – August 2019 – reveals a labour market performance that is below the performance achieved in 2018 although there has been considerable month-to-month volatility. The US labour market is still adding jobs, albeit at a slower pace than last year. The Broad labour underutilisation ratio (U-6) remains high even though the official unemployment is plumbing new (recent) lows. And there has been a significant hollowing out of jobs in the median wage area (the so-called ‘middle-class’ jobs), which is reinforcing the polarisation in the income distribution and rising inequality.

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The Weekend Quiz – September 7-8, 2019 – 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.

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The Weekend Quiz – September 7-8, 2019

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.

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An MMT-Green New Deal and the financial markets – Part 2

This is Part 2 of the series I started earlier this week in – An MMT-Green New Deal and the financial markets – Part 1 (September 2, 2019). In the first part, I discussed Chapter 12 in John Maynard Keynes’ General Theory, published in 1936, where he outlined how the growth of financial markets was distorting investment choices and biasing them towards speculative wealth-shuffling exercises, which had the potential to destabilise prosperity generated by the real economy (production, employment, etc). His insights were very prescient given what has transpired since he wrote. He was dealing with what we would now consider to be a tiny problem given the expansion of the financial markets over the last three decades. In this part, I am briefly outlining what I think an MMT-Green New Deal agenda would encompass in the field of financial market changes. The MMT association is that such an understanding opens us up to appreciate a plethora of policy options that a strict sound finance regime rejects or neglects to mention. That policy proposals and reform agenda I outline here reflects my MMT understanding but also, importantly, my value set – what I think are important parameters for a futuristic progressive society. So we always have to separate the understanding part from the values part (although that is sometimes difficult to do). The point is that a person with a different value set who shared the MMT understanding could come up with a totally different agenda to deal with climate issues and the need for societal restructuring. You can see all the elements of my thinking on this topic under the category – Green New Deal – which also contains a long history (now) of relevant commentary. Most of my writing on the topic are about the societal aspects of the GND transformation rather than the specific climate issues. That is obviously because I am not a climate scientist. But as I signalled in Part 1, I am about to announce a coalition (in the coming week I hope) which does include climate science expertise to broaden the capacity of the MMT-GND agenda.

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