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The Weekend Quiz – January 30-31, 2021 – 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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How come the principles supported austerity one day but fiscal dominance the next?

As part of the paradigmic turmoil that is confronting mainstream economists, we are witnessing some very interesting strategies. Imagine you establish a set of principles that are seemingly inviolable. They are the bedrock of the belief system, even though it is not called that. These principles then offer all sorts of predictions about, yes, the real world. They are without nuance. The predictions are so worrying, that politicians, whether they are knowing or not, proceed with caution in some cases, and, in other cases, openly damage the well-being of citizens because they have been told that shock therapy is better than a long drawn out demise into ‘le marasme’. The authority for all the carnage that follows (unemployment, poverty, pension cuts, degraded public infrastructure and services, etc) is these ‘inviolable principles’. Economists swan around the world preaching them and bullying students and others into accepting them as gospel. The policy advice is hard and fast. Governments must stay credible. Except one day they completely change tack and all the policy advice that established certain actions to be totally taboo become the norm. We observe things are better as a result. Does this mean those ‘inviolable principles’ were bunk all along? Not according to the mainstream economists who are trying to position themselves on the right side of history. Apparently, their optimising New Keynesian models can totally justify fiscal dominance and central bank funding fiscal deficits when yesterday such actions were taboo. Which leg are they trying to pull?

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Video – Political Economy thought and praxis post pandemic

It’s Wednesday and I have been tied up most of the day on things that keep me from writing. But I offer some comments on today’s inflation data from the Australian Bureau of Statistics which will help you understand that we have to be very careful in analysing that data because quite often CPI increases are driven by government policy which allows administered prices to rise. Short conclusion: a rising inflation rate does not signal a growing economy necessarily. I also provide details about my current lecture series at the University of Helsinko, which the broader public are invited to participate in. And then some fusion.

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It is a syndemic not a pandemic – broader policies are needed

There was an article in The Lancet from its editor (September 26, 2020) – Offline: COVID-19 is not a pandemic – which questioned the “narrow approach” that governments were taking to the coronavirus pandemic based on the assumption that “the cause of this crisis … [is] … an infectious disease”. His argument is a whole of medical professionals have become prominent in daily press briefings and the like as they trot out the results of epidemic models and news agencies interview “infectious disease specialists” every other day. But the reality is that “(t)wo categories of disease are interacting within specific populations” – COVID-19 and “an array of non-communicable diseases” which are “clustering within social groups according to patterns of inequality deeply embedded in our societies”. He thus used the term ‘syndemic’ rather than pandemic to highlight the socio-economic distribution of the pandemic and focus attention on inequality and other forms of socio-economic disadvantage which interact with biological dimensions to determine health outcomes. He focuses on co-morbidities but I would focus on poor working conditions, poor housing, inadequate nutrition, the stress of poverty and poor urban planning that segments populations into leafy, low-density suburbs and suburban hell-holes where people are crammed in like whatever due to social inequalities and deficient government policy interventions.

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IMF actions in Ecuador expose its venal motivations

There is clearly confusion among mainstream economists as the fractures in their paradigm are being revealed on an almost daily basis. And the more venal ideological motivations are also becoming clearer, that is, if they weren’t already completely transparent. On January 21, 2021, the World Bank published a Policy Research Working Paper – Does Central Bank Independence Increase Inequality? – which demonstrated that the way central banking has been conducted in this neoliberal era has been instrumental in the increasing income inequality that has manifested. A month earlier (December 21, 2020), we read that the IMF is waging a campaign against the democratically elected Ecuadorian government to further restrict its fiscal discretion as it struggles with a terrible pandemic situation, and set in place rules that will allow further resource plunder by foreign corporations. The latter really tells you that despite claims by mainstream economists that they have shifted away from the mainstream austerity bias, the truth is different. A quite remarkable juxtaposition that just demonstrates how confused this lot must be at present. Their attempts to cover their motivations in technical authority are clearly failing.

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The Weekend Quiz – January 23-24, 2021 – 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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Australian labour market – recovery plods on

The latest data from the Australian Bureau of Statistics – Labour Force, Australia, December 2020 – released today (January 17, 2021), shows that the labour market is still improving but the pace of recovery has slowed considerably.Employment increased by 0.4 per cent (50,000) in the month, which normally is a reasonable result but is nearly half the growth that was recorded in November 2020. Unemployment fell by 30,100 and the unemployment rate fell by 0.2 points even though the participation rate rose by 0.1 points. It is always a good sign when there is both employment and labour force growth with the former stronger than the latter. Underemployment also fell by 0.8 points and the broad labour underutilisation rate (sum of unemployment and underemployment) fell by 0.8 points. The main uncertainty now is that the recovery is slowing and the current (extensive) government support is due to end in the first-quarter of 2021. Given the labour market is still quite a margin from where it was in March 2020, the idea that the government would withdraw its fiscal support is not a compelling option. Overall, the recovery is still too slow and more government support by way of large-scale job creation.

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The pandemic is demonstrating that we can resist neoliberalism

A few snippets today, being Wednesday and my short-form blog day (sometimes). I will have a few announcements to make early next week. One will concern a streaming lecture I will be giving next Tuesday as part of my usual work in Finland this time of the year. The title of my talk will be: Political economy thought and praxis post pandemic. I give an annual public lecture in Helsinki but this time it will be coming from the East Coast of Australia, given the pandemic. Details about access will be coming early next week (Monday’s blog post). For now some comments on the pandemic.

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