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Presentation to Economic Society of Australia

It’s Wednesday and I just finished a ‘Conversation’ with the Economics Society of Australia, where I talked about Modern Monetary Theory (MMT) and its application to current policy issues. Some of the questions were excellent and challenging to answer, which is the best way. You can view an edited version of the discussion below and then enjoy The Meters.

Economic Society Presentation – May 25, 2022

Here is an edited version of the discussion including the Q&A section. The whole session ran for 52 minutes including introductions etc.

The production quality – resolution, sound, etc – is not the best because it was taken of a Zoom recording on low resolution. The video was created by the organiser – the Economic Society of Australia.

I did what I could to enhance the quality of this edited version – at times you will not cuts which corresponded sometimes to degraded audio.

Thanks to Belinda and Diane for their work in organising this.

Inflation may be peaking in Europe

There was also some consternation about the annual Euro area negotiated wage growth for the first-quarter which rose to 2.8 per cent.

The usual Pavlov reaction from mainstream economists was that it signalled a need for the ECB to intervene quickly and scrap its asset purchasing program and start hiking rates.

They should have read the latest – Deutsche Bundesbank Monthly Report – for May 2022 (in German).

In the opening chapter – Die Wirtschaftslage in Deutschland im Frühjahr 2022 (the economic situation in Germany for Spring 2022) – we read:

1. “Der deutsche Arbeitsmarkt entwickelte sich im ersten Vierteljahr 2022 ausgesprochen günstig” (German labour market is evolving well in the first quarter 2022).

2. “Damit kehrten jedoch auch die Engpässe von Arbeitskräften aus Vor-krisenzeiten zurück” (But the pre-crisis labour shortages returned) – why? because of Omicron (workers getting sick) and the Russian invasion.

3. “Die Tarifverdienste stiegen im Winter 2022 deutlich stärker als im Herbst 2021. Sie erhöhten sich gegenüber dem Vorjahr um 4,4%, maßgeblich wegen hoher Sonderzahlungen und Corona-Prämien. Die um solche Sonderzahlungen bereinigten Grundvergütungen legten hingegen lediglich um 1,6 % zu. Die Effektivverdienste dürften im ersten Quartal vor allem aufgrund im Vorjahresvergleich spürbar niedrigerer Kurzarbeit noch kräftiger gestiegen sein als die Tarifverdienste”

This is the important part – summarising – Winter 2022 negotiated wages rose more sharply than Autumn 2021 – 4.4 per cent annual.

Why?

“mainly as a result of high one-off payments and coronavirus bonuses”

“By contrast, after adjustment for such one-off payments, basic remuneration was up by only 1.6%.”

So once we take out this one-off boost in Germany, the Euro wide area negotiated wages outcome is likely to be around 2 per cent for the year – which I don’t need to remind anyone is very low and not pushing the inflation rate.

Further, the latest – Flash Euro PMI – came out yesterday (May 24, 2022), which provides a very current indication of what is going on.

The headline read in part “Cost pressures ease for the second month”.

Among other quotes:

1. “Factory output continued to be constrained by widespread supply shortages, with the Ukraine war and China’s lockdowns having exacerbated existing pandemic-related supply chain pressures.”

2. “Slightly slower rates of inflation were seen for both goods and services, principally reflecting the slower growth of costs recorded during the month.”

3. “there are signs that inflationary pressures could be peaking, with input cost inflation down for a second successive month and supply constraints starting to be less widely reported”.

The takeaway?

Transitory.

Once all these supply disruptions dissipate, inflation will fall rapidly.

Tragic farce of all time

Republican politicians in the US sending the victims of gun violence – including massacres of children – their ‘thoughts and prayers’.

Just ban the f**k**g guns!

Without the guns there can be no mass shootings.

Levy Summer Seminar 2022

I will be presenting in several sessions at the – Levy Institute 2022 Summer Seminar – which runs from June 11-18, 2022.

If you are interested in attending (I am not sure whether spaces remain) you can find details at the site.

This will be my first international flight since February 2020 and I have a good stock of masks at hand.

It will be great to reconnect in person with some of my MMT mates in the US and to talk MMT with those who seek to learn more.

Music – The Meters

This is what I have been listening to while working this morning.

One of the best funk bands of the 1970s was – The Meters – and they remain one of my favourites on my regular play list.

This track – Ain’t no use – is on their fifth studio album – Rejuvenation – which was released in 1973 and is a classic of its type.

I remember the day I purchased this album sometime in 1975.

You here their lines in so many records since such was the influence of this band.

The guitarist – Leo Nocentelli – has it down for sure.

All that syncopation drives a person crazy with delight.

That is enough for today!

(c) Copyright 2022 William Mitchell. All Rights Reserved.

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    This Post Has 8 Comments
    1. We shoud analyse the role of the media in the rising inflation.
      The media is disseminating corporate propaganda, which has been laid down in places like Davos, and with which, everybody’s in the media have to comply.
      And so, they have been telling us that war is coming, that we must not be afraid, because we are going to beat the Russians, who are barbarians, who deserve to die (never mind the barbarians that kill fourth-graders in US schools, the barbarians that execute journalists or the barbarians that just invaded Somalia),
      The indocrination happens before every war and it’s the usual brainwashing, necessary to get the masses to accept to be killed for the elites’ “causes-$$$”.
      But war is always associated with soaring prices of basic commodities, speccially food.
      So, what’s new?

    2. Great discussion,

      Running government budget surpluses under certain conditions acts like any tax, the way Warren Mosler describes taxes. That is to move workers from the public sector to the private sector. Without having to actually increase taxes.

      For me that is exactly how they have been used. Regardless of the fairy tales They have created to hide the fact.

      They slash the budgets of the government sector and use the ” how are we going pay for it question” to create job losses in the public sector, so the skills and real resources can be moved into the private sector.

      Just 2 examples but their are many many more in sectors where skills and training and education can take years to develop.

      Public broadcasting and healthcare.

      When they do everything they can to slash budgets in both public broadcasting and healthcare. They make really experienced people unemployed. It is exactly how they set up Aljazeera and Murdoch set up Sky. When at the start they got their employees from and in most cases at a lower wage. It would have taken them years to do it from scratch. To train students without any broadcasting experience to fill those roles.

      Once the new privatised companies become established they start selling parts of the public sector off that the Private companies then buy.

      Now when they slash the budgets in Public broadcasting the workers have nowhere to go and mainly become free lance. Offer their experience to smaller independent broadcasting companies. Who then sell their output back to Public broadcasting or Sky to be shown.

      Private healthcare was set up the same way by slashing the NHS budgets. Who now use Ex NHS staff to sell their services back to the NHS.

      You can go through the list of the public sector and see clearly this is how the majority of privatisations were carried out.

      To move workers from the private sector to the public sector they implement a tax. To move workers from the public sector to the private sector they run government budget surpluses under certain conditions. That has become their tool of choice.

      All just to profit from once there no profits to be made. Nothing to do with creating jobs as they destroyed just as many jobs at the same time. Nothing to do with creating competition to make public services cheaper.

      Nothing to do with saving government money that can then be used in the future that saves our children and grandchildren.

      Complete fairy tales created by the banks and the leisure class with capital to create as many opportunities as they can from which to extract rent.

      Think the process through of social housing from the start right though to the end. Same model has been used, as benefit payments for rent are now transferred directly into the hands of the rent seeker. After the budgets of social housing were slashed and the experienced skills and real resources were transferred to the private sector. Why some landlords only accept people on benefits they can charge as much as they can.

      Not just, so that your home grown rentier class can extract rent after turning the public sector into rent extracting monopolies. But foreigners can join the party and why the EU was set up the way it was and the EU treaties read like they do. Why the 4 freedoms are the corner stone of the system.

      When foreign train companies enter your country under the myth of competition. Where are they going to get the staff ? All foreign companies enter your country where are they going to get the staff ? Get the experienced staff from quickly and as cheap as possible ?

      It’s embedded in the treaties. All governments must try and run budget surpluses as soon as possible and not run deficits greater than a certain amount. Slash the public sector budgets To be able to move workers from the public sector to the private sector. Their version of Warren Moslers tax.

    3. That is exactly how they view a just transition in my opinon.

      Could be wrong and it won’t be the first or last time.

      But there is enough evidence to show the whole current economic paradigm was built on the foundation of the East India trading company. Running budget surpluses are used like any other tax.

    4. Professor – I hope you are using N95 masks or better. Be aware that research shows that N95 masks are only effective for about 2 1/2 hours if there are unmasked people around you that may be shedding virus particles..

      I recommend that you change your mask every couple of hours while on the plane and in the terminals.

      Be well, stay safe.

    5. “Just ban the f**k**g guns!”

      I imagine the response from the gun lobby will be something along the lines of “if only all school teachers carried 40mm grenade launchers, this would never have happened”.

    6. They have already said that. Well, give teachers guns.

      IMHO, requiring all teachers to carry a gun, would result in 50% of them quitting. They are self selected to want to help kids, or people in general. They are not like the police who are self selected to want to bully people and in the extreme case, shoot people. Some of them want to erve, but IMO it is less than 50%, or even 30%.

      I’m suggesting that the Dems push for steel doors on all public school classrooms and some other rooms, too. There is no anti argument that the Repuds can use since they voted for $40 B in aid for Ukraine. So, if they vote no, then it is a great campaign issue for the Dems. At least they are spending money to do something. As long as the doors are usually locked, this will help in most cases. Surprise in on the side of the shooter, so he can get into the school before they can get the doors closed and locked, so he can get into the closest classroom unless they are usually locked.

    7. Prior to the facts being presented some politicians even tried to falsely portray the shooter in Texas as a transgender woman in social media, don’t know yet how many were murdered or beaten over that.

      Events and politics there are being fueled by paranoia and hate. The idea of a cultural “melting pot” clearly doesn’t work, there simply is no point were a tenable alloy forms; best to accept that differences must coexist peacefully for a democracy to function.

      There are places were you can throw a stone between Canada, were multiculturalism is the rule, and the US; and yet in Canada there is far less of any type of violence between people with the exception of criminal gangs operating in the larger cities. A gun ban would do little to alter that.

      US politicians are able to use social issues as a tool to cover over the damage done by their unfair economics.

    8. > I recommend that you change your mask every couple of hours while on the plane and in the terminals.

      I believe that this is a misapprehension of that data – these tables that you’re referring to speak to the efficacy of “one-way” N95 masking. The point is that beyond full hardcore PPE, no mask is perfect and it remains possible/probable that after 2.5 hours wearing a non-fit tested mask in a normal indoor space where a person is unmasked and infectious, an aerosol containing the virion will breach your protection and you will be infected. It could be less, it could be more. There are lots of variables in play. This time is extended greatly if both parties are wearing an N95. But N95s will still “work” efficiently in ‘normal’ conditions for well over 2.5 hours (depending on other factors: if the mask is visibly soiled with dust etc., it won’t be as efficient) – closer to 20. I’m *pretty* sure that changing the mask on the plane won’t affect this 2.5 hr calculus.

      I wouldn’t get on a plane without an elastomeric (rubber gasket) mask that isn’t rated at least N99 or FFP3. 3M make some that are robust (with P3 bayonet filters that you can attach to them) but verbal communication is difficult when wearing them. Flo Mask Pro is one out of the States that comes well recommended, balancing protection, usability etc. quite well and rated N99. It has no exhalation valve though, so you’ll have to be mindful of condensation (a wetted filter compromises its electrostatic charge, which is one of the mechanisms that filters aerosols). Finally transmission is known to occur through the eyes albeit less common than breathing it in – glasses offer a bit of protection but if you’re really committed to not getting infected you might wanna go with safety goggles. Three cheers for Living With Covid!

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