Further evidence that ECB monetary gymnastics have not stimulated lending

This morning I was reading the – The euro area bank lending survey – for the first quarter of 2016, published by the European Central Bank (ECB). This is a quarterly survey that the ECB conducts which was first published in 2003. It seeks to assess the extent to which banks are lending and the factors that are influencing that behaviour. The results published in the April 2016 edition relate to the first three months of 2016 and “expectations of changes in the second quarter of 2016”. Of particular interest was the inclusion of several ‘ad hoc’ questions (outside the normal survey design) that were designed to gauge “the impact of the ECB’s expanded asset purchase programme” and the “impact of the ECB’s negative deposit facility rate”. The results are fairly clear if you delve into the detail. From the April 2016 bank lending survey (BLS) we can conclude that the massive asset purchasing program and the negative interest rates have not significantly increased bank lending. We know why. It is a pity that the majority of commentators have not yet worked out the answer!
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    Posted in Central banking, Eurozone | 3 Comments

    Full employment = mass idle labour – detaching language from meaning

    In the Golden Egg by Donna Leon, which I was reading on a flight over the weekend, there was a discussion about language and meaning. The detective in question was musing about how crimes are described and concluded that when we “detach language from meaning … The world is yours”. The worst crimes become anaesthetised. In my professional domain (economics), this detachment is rife and leads to poor policy choices. One such example, which is close to the focus of my own research work over the years has been the way in which the mainstream economists have revised the concept of full employment. We now read that Australia, for example, is at “full employment” when its official unemployment rate is 5.7 per cent (1.7 per cent above its previous low in February 2008), underemployment is 8.4 per cent, and the participation rate is still a full 1 percentage below its November 2010 peak (meaning some 190 thousand workers have dropped out of the labour force). By any stretch, the total labour underutilisation rate (that is, idle but willing labour) is in excess of 16 per cent. But to some smug journalists who cannot even get their facts straight, that is ‘full employment’. Mainstream economics – detaching language from meaning and misleading a nation as a result.
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      Posted in Economics, Labour Force | 5 Comments

      The Weekend Quiz – June 18-19, 2016 – 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 – June 18-19, 2016

        Welcome to The Weekend Quiz, which used to be known as the Saturday Quiz! The quiz tests whether you have been paying attention over the last seven days. See how you go with the following questions. Your results are only known to you and no records are retained.
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          Posted in Saturday quiz | 2 Comments

          Australia, the part-time employment nation – further poor labour market data

          The latest labour force data released today by the Australian Bureau of Statistics – Labour Force data – for May 2016 show that those ominous signs that have been apparent for most of this year have brought the Labour market to a halt – stagnating with low to zero employment growth and static (slightly rising) unemployment at elevated levels. Trend employment growth has is slowly receding to zero. Total employment growth was virtually non-existent with only 17,900 (net) jobs created. Full-time employment remained unchanged after declining last two months. Almost all of the employment growth was part-time and most of that occurred in the teenage segment of the labour market, although that cohort went backwards in terms of full-time employment. Over the last six months, full-time employment has contracted by 44.4 thousand (net) jobs. Australia is becoming a part-time employer and that signals badly for the quality of work. Underemployment has also risen by 10 thousand or so since February 2016. The teenage labour market remains in a poor state and requires urgent policy intervention. Overall, with weak private investment now on-going, the Australian labour market is looking very weak and the Federal government should have introduced a rather sizeable fiscal stimulus in its May 2016 fiscal statement. This should have included a large-scale public sector job creation program which would ensure teenagers regained the jobs that have been lost due to the fiscal drag over the last several years. However, the Federal government appears incapable of addressing this dire issue. The current election campaign is bogged down in arcane and mythical discussions about running out of money and not being able to defend the economy if there is another crisis. Both major parties are constantly pretending they will be the best at “budget repair” (as if the fiscal balance is a car or something) even though the reality requires higher discretionary fiscal deficits at present. All make believe, while the real world does head towards another major rift. It should be up to the Opposition to shift the political agenda in the current election campaign. But, they are missing in action on these important issues.
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            Posted in Labour Force | 16 Comments

            The conspiracy to bring British Labour to heel 1976

            This is a further instalment in tracing through the British currency crisis in 1976 and its retreat to the IMF later in that year. Today we discuss the tensions within the British Labour Party at the time, the Callaghan Speech to the Blackpool Annual Labour Conference on September 28, 1976, the behind the scenes work by Denis Healey and some clandestine activity between the US and British bureaucracies which was aimed to bring Britain to heel, one way or another and to overcome its ‘immorality’ – yes, the US thought the fiscal deficits the Brits were running were immoral.
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              Posted in Britain, Demise of the Left, IMF, UK Economy | 5 Comments

              The European Commission and ECB outdo themselves in their quest for absurdity

              As the years have passed, I have become inured to the depths of absurdity that the European Commission and the political elites its nurtures go to justify their existence. The Maastricht exercise in the late 1980s and early 1990s was comical. The convergence process towards Phase III of the Economic and Monetary Union in the 1990s was established a new norm for craziness. Who would believe the stuff that went on. Then the Goldman Sachs fiddle to allow Greece to enter the Eurozone two years later than the rest. What! Then the Stability and Growth Pact fudges in 2003 when Germany (and France) were clearly in violation of the rules they had bullied the other Member States into accepting. Look the other way and whistle! Then the GFC and the on-going mess. By now the Commission and the Council were outdoing themselves in pursuing absurdity. It was a pity that millions of innocent citizens have had their lives wrecked through unemployment and poverty as a result. And, now, perhaps, this lot have exceeded their own capacity for nonsense. I refer to the latest Convergence Reports published by the European Commission and the European Central Bank. Hypocrisy has no limit it seems. The Eurozone and EU is now firmly entrenched in austerity and deflation and the policy makers think that is the desirable benchmark for others to aspire to. Who could have invented this stuff! And, in relation to the upcoming vote in Britain – how the hell would any reasonable citizen want to be part of this sham outfit (EU) if they had a choice.
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                Posted in Central banking, Eurozone | 38 Comments

                The 1976 British austerity shift – a triumph of perception over reality

                This is a further instalment in tracing through the British currency crisis in 1976 and its retreat to the IMF later in that year. Today we discuss whether it was the IMF that forced the change of direction for British Labour or all their own dirty work with the IMF just being used to depoliticise what Callaghan and Healey wanted to do (and were doing) anyway. We trace through the way the leadership of the British Labour government were building the case for austerity and the path they followed leading up to the request to the IMF for a stand-by loan. Far from being the only alternative available, the course taken by the Government was a triumph of ideology and perception over evidence and reality.
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                  Posted in Britain, Demise of the Left, IMF, UK Economy | 6 Comments

                  The Weekend Quiz – June 11-12, 2016 – 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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                    Posted in Saturday quiz | Leave a comment

                    The Weekend Quiz – June 11-12, 2016

                    Welcome to The Weekend Quiz, which used to be known as the Saturday Quiz! The quiz tests whether you have been paying attention over the last seven days. See how you go with the following questions. Your results are only known to you and no records are retained.
                    Read the rest of this entry »

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                      Posted in Saturday quiz | Leave a comment