Italy should lead the way out of the euro-zone

One of the major demands that the Germans made on its partners leading into Maastricht in 1991 was the need for a politically independent central bank that was focused on price stability alone. This was claimed to be essential because it would stop politicians imposing so-called short-termism onto monetary policy (read: caring about people who might be unemployed or otherwise in need of fiscal assistance), which would compromise the inflation fighting process. These unaccountable, unelected central bank boards were then free to do what they wanted and demonstrated a willingness to use unemployment as a policy tool rather than a policy target to ensure economies were as close to deflating as possible, irrespective of what that meant for economic and employment growth. It is, of-course a farce to think that a central bank can be independent anyway either in a political sense or an economic sense. But the neo-liberal hype about independence was to ensure governments could absolve themselves of the public ignominy of rising unemployment and the political costs that went with that, and, instead, blame the central bankers. The bankers had no political constituency to manage or groom and could hide behind the ever-present paranoia about hyperinflation to ‘justify’ their policy approach. But the central bankers are ‘independent’ only when it suits them. Or should we say ‘independence’ is a one-way street. If the politicians dare to comment on monetary policies there is a hue and cry. But central bankers feel they can provide advice to the democratically elected governments whenever they choose and the media hardly blinks. Hypocrisy has no bounds.
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    Posted in Eurozone | 7 Comments

    Ireland national accounts and inversion

    Apparently, the mangy cat that was the Celtic Tiger is about to become the Celtic Tiger again. One of many reports that suggest Ireland is about to have a “here we go again” boom – The mauled Celtic Tiger is ready to roar again (UK Telegaph, July 5, 2014) – claimed last week that while “few Western nations suffered more than Ireland” as the GFC unfolded, it is now “perhaps” about “to stage a convincing recovery”. This statement followed the release of the “latest GDP rebound, driven by a 1.8pc rise in exports over the first quarter and an inventory turnaround”. I am not yet convinced nor should I say was the journalist in question. The so-called recovery is very tentative and domestic demand remains weak. Further, as before the crisis, a substantial portion of the growth is being repatriated offshore to foreign owners of capital. Moreover, a new phenomenon has crept into the picture – the so-called ‘tax inversion’, which makes it harder to disentangle what is actually happening with the Irish National Accounts.
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      Posted in Eurozone | 4 Comments

      Saturday Quiz – July 5, 2014 – answers and discussion

      Here are the answers with discussion for yesterday’s quiz. The information provided should help you understand the reasoning behind the answers. 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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        Saturday Quiz – July 5, 2014

        Welcome to the Billy Blog 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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          When climate change denialists merge with fiscal austerians

          It is Friday, my blog lay day, so no real blog. I am editing my Europe book and up in the North of Australia today dealing with various projects I have been working on. But here is an example of what happens when climate change denialists merge with fiscal austerians. Mindless and damaging confusion! Here is my non-blog for today!
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            Posted in Friday | 7 Comments

            Australia’s lowest wage workers continue to trail behind

            The Fair Work Commission, the Federal body entrusted with the task of determining Australia’s minimum wage handed down its – 2013-14 decision – on June 4, 2014. The decision meant that more than 1.5 million of our lowest paid workers (out of some 11.6 million) received an extra $18.70 per week from July 1. This amounted to an increase of 3 per cent (up from last year’s rise of 2.6 per cent). The Federal Minimum Wage (FMW) is now $640.90 per week or $16.87 per hour. For the low-paid workers in the retail sector, personal care services, hospitality, cleaning services and unskilled labouring sectors there was no cause for celebration. They already earn a pittance and endure poor working conditions. The pay rise will at best maintain the current real minimum wage but denies this cohort access to the fairly robust national productivity growth that has occurred over the last two years. The decision also widens the gap between the low paid workers and other wage and salary recipients. The real story though is that today’s minimum wage outcome is another casualty of the fiscal austerity that the Federal Government has imposed on the nation which is destroying jobs and impacting disproportionately on low-paid workers.
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              Posted in Labour costs | 2 Comments

              New economics – not much will change at the current rate

              My upcoming book about Europe is tentatively called ‘European Groupthink: denial on a grand scale’. I have covered the concept of Groupthink before but I have been thinking about this in relation to the economics curriculum, given our textbook is entering its final stages of completion. When I was at the iNET conference in Toronto in early April, there was much to-do about the so-called ‘exciting’ new developments in economics curricula being sponsored by iNET at their Oxford University centre (CORE). Forgive me for being the ‘wet blanket’ but the more I spoke to people at the conference the more I realised that the neo-liberals were reinventing themselves as ‘progressive’ or ‘heterodox’ and hi-jacking the reform process. I mentioned this to one of the iNET Board members who I shared a flight with back to San Francisco. He seemed taken aback. My expectation is that very little of substance will change in this new approach to economics. It will dispense with the most evil aspects of the current dominant framework but will remain sufficiently engaged with it that we will not see a truly progressive teaching approach emerge that can deal with evidence and real world facts. People are scared to break out of the ‘group’.
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                Posted in Economics | 9 Comments

                Pre-crisis dynamics building again in Britain

                The UK Guardian article – Britain’s economy returns to pre-crisis strength earlier than expected (June 30, 2014) was interesting, especially in the light of the major revisions that the Office of National Statistics has announced, which suggest the loss of real output during the crisis was somewhat less (but still very large) than was previously indicated in the official data. One commentator was quoted as saying that the “recession was still huge even if it has now gone from perhaps 10 to 9.9 on the Richter scale”. But when a national statistical agency makes announcements like that people with vested interests in talking the economy up jump and the Government is no exception. The problem is that while growth has firmed over the last three quarters it is mostly due to an increase in private sector debt and a dramatic drop in household saving. There is still support for growth from the Government, which suggests that the austerity hasn’t been as severe at the macroeconomic level as the rhetoric might have indicated. The growth dynamics in the UK are looking decidedly like the pre-crisis build-up, which doesn’t augur well.
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                  Posted in UK Economy | 10 Comments

                  The BIS remain part of the problem

                  The Bank of International Settlements published its – 84th BIS Annual Report, 2013/2014 – yesterday (June 29, 2014). Their message is that governments (particularly central banks) have been too focused on reducing short-term output and employment losses at the expense of a long-term focus on the financial cycle, the latter, which is in their view, essential to restore “sustainable and balanced growth”. I beg to disagree.
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                    Posted in Economics | 12 Comments

                    Saturday Quiz – June 28, 2014 – answers and discussion

                    Here are the answers with discussion for yesterday’s quiz. The information provided should help you understand the reasoning behind the answers. 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 | 1 Comment