The Weekend Quiz – September 23-24, 2017

Welcome to The Weekend Quiz. The quiz tests whether you have been paying attention or not to the blogs I post. See how you go with the following questions. Your results are only known to you and no records are retained.

1. If the inflation rate is steady and the central bank maintains a constant nominal interest rate, then the public debt ratio will rise if the government deficit doubles (say, from 2 to 4 per cent of GDP) although Modern Monetary Theory would not place any special importance in that increase.

2. Progressives have pointed out the slow or non-existent growth in real wages over the last decades. What they demand is that the rate of growth in earnings is faster than the growth in labour productivity. Is this sufficient to achieve their aim of real wages growth?

3. A fiscal surplus may not suggest that the national government is trying to slow the economy down and contain inflation.

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    4 Responses to The Weekend Quiz – September 23-24, 2017

    1. Lance says:

      Two outa three! Demoted from top Dude! Again!

    2. Simon says:

      “What they demand is that the rate of growth in earnings is faster than the growth in labour productivity. ”

      What they demand is that wages at least keep up with the cost of living. That’s not unreasonable, especially when the government lies about the need for austerity.

    3. Dingo says:

      It is often suggested that full employment is adverse to capitalism.

      This made me dig around for some insights into what exactly we are referring to when we say ‘full employment’

      The first discovery I made (and this is based on Australia), is that on average each individual has a ratio of 25% of unproductive debt to income. What this equates to as a serviceability ratio I am not sure, but I worked out that if each person who is employed full time reduced some of their unproductive debt and was then able to give up 3 hours of employment, this would create just in excess of 21 million hours of labour per week, and if then divided by the unemployment rate, would give each unemployed 30 hours a week of employment. In other words, there would be zero unemployment without creating one new job.

      But this begged the question – are some people’s occupations reliant on people going into debt? and the answer would appear yes, and this then made me realize that unemployment is a market in itself as there are literally hundreds of thousands employed because of the fact that there is unemployment (centerlink, job network providers etc, short term lenders etc) not to mention all those who devote their time voluntarily in support of these people. What would happen to all these occupations (both paid and unpaid) if there was full employment?

      This made me also ask, is it really full employment that capitalists do not want, or is it rather that with full employment (especially full time employment) more people would have surplus money and this would enable them to accumulate more in financial assets, thereby creating more competition in the financial wealth space? I know it is often claimed that big business don’t like full employment because a) it means government is meddling and they don’t like this, and b) with full employment labourers get more of a say, and are less frightened to stand up for themselves. These are plausible and make sense, but wouldn’t competition in the financial wealth space also bring profits and yields down or otherwise contribute to busts and capitalists would not like this?

      This led me to the question of idleness. It seems that idleness is seen as an evil and yet technology is worshiped. Doesn’t technology itself create idleness in the sense that it enables more production with less labour? And as a result, does this not then mean that in order to get people out of being idle (because of technological advances) we have to basically make more stuff that people really don’t need just for the sake of making sure people are employed?

      In Australia, the average welfare recipient gets around $15K a year, and yet Australia on average produces $70K in GDP per capita and a lot of this stuff seems pointless. Do we really need to be producing so much stuff just so we can ensure there are less ‘idle’ people?

      But this made me also think of something. Why not give a lot of the unemployed research tasks as a means to get them from not being idle? This would be working for the government and I think there is a definite need for it. Just one example would be researching into food preservation. In a time where food production is becoming an issue due to population growth, I don’t see too many people talking about food preservation as a means to off-set this problem. Instead we are getting people telling us we should consider eating insects. Quite a strange thing to suggest when the whole purpose of politics and economics is supposed to be aimed at raising our living of standard.

      But anyway, I just thought I’d throw this out there.

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