It's Wednesday, and as usual I scout around various issues that I have been thinking…
On Holidays …
My blog is on holiday until Wednesday, December 30, 2020 as I attend to other writing commitments. I am also doing a lot of calculations to see whether the current proposed US stimulus bill that the lameduck president is holding up as a last gasp exercise in power is sufficient given the output gap. This relates to comments that a Biden advisor made last week eschewing any notion of a $US2,000 cash payment to all Americans (including dependent children) on the grounds that it would overheat the economy. He has been systematically vilified by progressives but I haven’t seen any systematic analysis to see whether this statements hold up. Until Wednesday, all the best from my lockdown hub. But for today, some music to help us work better.
Music – Jazz from Ethiopia
This is what I have been listening to while working this morning. I decided to get into sync with the research I have been doing today on currency developments in Africa.
And, after all, jazz really came from a fusion of African musical elements with European traditions.
So where better to go but to the ‘father of Ethio-jazz’ – Mulatu Astatke – who is one of the great vibraphone players (not to mention his skills in conga drums, percussion and organ).
He is not a big name in Western jazz but to me, he has been a real pioneer and I love the sequence of his albums from early Latin elements (picked up while studying in the US) to his later work fusing pure African influences using Ethiopian instrumentation (such as the chordophone or Krar).
In that later case, the standard pentatonic scale (the Krar is tuned to it) was a perfect way to integrate more Western instruments into his style of jazz.
This song – Yèkèrmo Sèw (A Man of Experience and Wisdom) – is from the 1969 release – Ethiopian Modern Instrumental Hits (released Amha Record).
Amha Records – fled Ethiopia in 1975 after the military junta took over.
It was re-released on the 1998 volume – Éthiopiques 4: Ethio Jazz & Musique Instrumentale 1969-1974 (Buda records), which featured the music of Mulatu Astatke.
This CD is still available.
The song is based on the pentatonic scale in the minor key.
You can hear the impro from the 1960s Fender Rhodes piano – the sound that defined the late 1960s modern jazz sound.
And the fuzz box on the guitar. That was the most aimed for guitar invention that aspiring guitarists in the late 1960s wanted. What a sound!
This track is fusion personified.
He toured Australia in 2016 and I saw him playing at the Melbourne Jazz Festival with the Melbourne band the – Black Jesus Experience. Before COVID, this band would play each weekend at The Horn African Cafe in Johnston Street, Collingwood, just near the ‘centre of the world’ (well my world anyway).
Here is an interesting bio from 2018 – The father of Ethiopian jazz, Mulatu Astatke, remains a musician in motion.
That is enough for today!
(c) Copyright 2020 William Mitchell. All Rights Reserved.
The news says Trump signed the bill. I imagine the Biden advisor you mention is Lawrence Summers the former U.S. Secretary of Treasury and Harvard University President and The Great Brain of the Democratic Neoliberal Society. It will not take much of your vacation time to dispose of his statements. Enjoy the rest of it!
I will give my very unsystematic analysis right now- there is no inflation and many, many people in the US are hungry. Like knocking on doors hungry and lining up at charity food distribution places hungry. And behind on their rent. And their mortgages and utility bills. Facing evictions.
A two thousand dollar check to most everyone in the country is not the best way to address the need of those suffering the worst right now- but it is something that could be done quickly and it would help them immediately. Larry Summers doesn’t need the $2000. People in his situation are not going straight out to spend the $2000. But the people who really need it will spend it to meet some of their needs. The only way that would be bad is if it caused some large inflation spiral due to a lack of supply of food or utilities or housing. That does not seem to be the case- but that is where the more systematic analysis would be beneficial.
I look forward to your analysis Bill. Here in Canada price inflation seems to be restricted to our long-lasting and ongoing increase in house prices due to low interest rates, easy credit conditions and the secure incomes of the upper quarter of income earners. Other prices have not gone up much, if at all. The lack of inflationary pressures in the non-housing part of the economy has surprised me. Brian Romanchuk went through the CPI components item by item a few months ago to show why there was no inflation and it was pretty telling. Still, I would have thought that with supply chain problems and high demand for some items there would be some inflationary pressures, but it seems not.
@Jerry
@Keith
Interesting and useful notes in addition to Bill’s key words that I spotted – the “output gap”.
I notice the same situation here in Thailand. Where ever you go, there are perpetual sales signs everywhere and almost on everything, even in supermarkets – one sees big discount somewhere between 10 to 90% (but if you look closely, so are the quality and quantity of the products).
Further, I read sometimes ago on a post by Bill that the problem is not with the economy but the pandemic. Thus, the economic infrastructure or supplies are still there, only they are told to stop for the pandemic to pass (like a train crossing). Maybe this is why we see no inflation as there is no disruption of the supply and logistics. They just stand by for the green light to go again.
Coupled with the stable oil price (the real inflation driver in the mind of the producers and the likes anyway), there is no cause for concern.
And, through the lens of MMT, the desire to save, partly due to the level of uncertainty the future holds, with the wage growth of those who can work could be stagnated, compounded by the so called the budget constraint mind-set in general by the government, the demand and supply or price level will more likely to go down rather than up.
And if it can be any evidence, we have seen the last time there were cash hand-outs (in some countries), the level of saving went up drastically not price.
So, from my take, “hoarding” could be the main strategy right now among people (I acknowledge that some researches say that this is less so for the lower income groups).
Hence, there should be, or government should not worry about this particular policy, especially if it can be translated into providing a little bit of security, or a peace of mind, among the people in time of uncertainty (as well as real survival).
@verapot
It could well be, as you say, that people are not spending so there is little “demand pull” inflation. In Canada the federal government gave $500 per week for 7 months to everyone who experienced a drop in income regardless of their work status. The money was deposited in people’s bank accounts within days of their requests for it. Many part-time and “gig” workers received more in Covid special benefits than they earned at work. Figures show that quite a bit of debt was paid down. Conservative pundits are upset that low income workers got so much money and rather amazingly have said so publicly. No actual elected official, even Conservative, has dared repeat that concern since it would be the end of their political career.
I think it is a good thing that the government in effect paid off part of many people’s debt since personal debt levels in Canada are high and undoubtedly lead to much stress for the over-indebted. Our Prime Minister, channeling MMT ideas, even pointed out that the federal government can handle debt much more easily than the general population.
This government action adds an interesting possibility to Michael Hudson’s call for a debt jubilee. The federal government could pay part of the debt off. Of course Hudson’s point too is that the broad cancellation of debt would even up inequality by reducing the wealth and income of the wealthy as well as that of the financial and real estate sectors. The government action I related above would not do that.
Nonetheless I remain surprised there has not been more “supply push” inflation.