British economic growth shows that on-going deficits work

In Australia, the Federal Treasurer announced today that they would be making further spending cuts to the fiscal position of the government in the mid-year statement to pay for “an increase in funding for security agencies” and its onslaught against ISIL. So education, health spending, income support etc will get the chop so we can make the world an even more dangerous place than it is currently at a time when unemployment is rising and economic growth falling. Another case of austerity madness combined with the mindless approach to dealing with the external threats from extremist groups. He should take a note from the British Chancellor’s book who is overseeing an expanding fiscal deficit and public debt ratio, despite the rhetoric to the contrary, and that on-going deficit is supporting growth, helping private households increase their saving ratio and is generally a good thing to behold. Austerity in the UK?- not if you consider the current data!
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    Posted in UK Economy | 7 Comments

    Another Eurozone plan or two that skate around the edges

    There was an article in UK Guardian last week (September 26, 2014) – Debt forgiveness could ease eurozone woes – which was interesting and showed how far the debate has come. The outgoing European Commissioner for Employment, Social Affairs and Inclusion, László Andor also gave a speech in Vienna yesterday – Basic European unemployment insurance: Countering divergences within the Economic and Monetary Union – which continued the theme from a different angle. While all these proposals will be positive rather than negative they essentially are not sufficient to solve the major shortcoming of the Eurozone – its design will always lead it to fail as a monetary system because they have not accepted that all citizens in each country have equal rights to avoid economic vulnerability in the face of asymmetric aggregate spending changes. That lack of acceptance means the political leaders will never create an effective federal fiscal capacity and the member nations will always be vulnerable to major recessions and wage deflation, which undermine living standards.
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      Posted in Eurozone | 13 Comments

      Strong public benefit from tertiary education in Australia

      There was an interesting article this morning in the Fairfax press (September 29, 2014) – OECD figures show public benefits more than individuals from tertiary education – which used the recently released – Education at a Glance 2014 – to compare private and public (social) returns from tertiary education. The results are that private net returns outweigh social returns in the majority of nations but not for the UK, Australia, Japan and Korea. The results have implications for the debate about who should fund tertiary education – the private individuals (or families) of those undertaking it or the government. They also highlight that one should be somewhat protean in outlook and avoid falling into Groupthink.
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        Posted in Economics, Higher Education | 6 Comments

        Saturday Quiz – September 27, 2014 – answers and discussion

        Here are the answers with discussion for yesterday’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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          Saturday Quiz – September 27, 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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            Friday lay day

            Its Friday lay day for me. I am up in Northern Australia until later today finalising my involvement in some projects that I have been part of. I was watching the TV in my hotel this morning after a run in the early morning humidity. There was a program on the Ebola crisis and how medical teams in Western Africa are so short of basic resources that the virus is spreading and becoming uncontrollable. The world is facing a major health crisis at present that is currently centred on the impoverished nations of West Africa. The struggle to combat the spread of the Ebola virus is being seriously hampered, if not imperiled by a lack of resources – simple things like disinfectants, drugs, staff etc. You might be wondering how the world could envision cutting the budget of the World Health Organisation, which is the prime institution charged with dealing with these sorts of crises. Well – fiscal austerity – take a bow! A class act.
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              Posted in Friday | 5 Comments

              Yet another solution for the Eurozone

              The basis of a fiat currency, which is issued under monopoly conditions by the government and has no intrinsic value (unlike say gold or silver currencies) is that it is the only unit that the non-government sector can use to relinquish its tax and related obligations to the government. That property immediately makes the otherwise worthless token valuable and demanded. If there was no capacity to use the currency for this purpose then why we would agree to use the government’s preferred currency? Recently, some economists in Italy have come up with a hybrid scheme to save the euro yet allow Italy to resume growth without violating the rules governed by the Stability and Growth Pact and without the ECB violating its no bailout clause, even though both violations have occurred in the last 5 years and been overlooked by the elites. The plan is similar to that proposed in 2009 by the Government in California. It has merit but ultimately misses the point. The Eurozone problem is the euro!
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                Posted in Eurozone, US economy | 10 Comments

                Time to ditch the export-led growth mania

                Last week, the former head of the Australian Treasury, Ken Henry gave a speech at the Australian National University entitled – Writing a New Australian Story – which received considerable press coverage. His message has relevance to all advanced nations who are engaged in a war on their population via fiscal austerity and attacks on workers wages and conditions as a enhancing so-called international competitiveness and engendering an export-led recovery. He considers these things are fine but not as ends in themselves and successive Australian governments have forgotten that message and undermined our national prosperity as a result. He believes it is time to reorient the public debate to focus on the challenges ahead rather than be mired in single-minded goals that only help a small sector of our society. I agree with some of what he says but we reach the same conclusions from an entirely different body of economic understanding. I had a 4-hour flight today on my way up to the North of Australia and this is what I wrote on the journey to keep myself amused.
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                  Posted in Economics | 19 Comments

                  Should we be concerned with a fall in the Nikkei?

                  Up until a while ago, it was the government bond market that was going to crash in Japan if the government didn’t do something serious about implementing fiscal austerity. The bond market is still very healthy and yields are very low around the world and in Japan negative on some government bonds and bills. With that scare campaign defeated by reality, the doomsayers are now moving into making predictions about equity markets. The latest is that the Nikkei is about to crash unless the Japanese government significantly tightens fiscal policy some more. Remember this is in the context of a 3 percentage points rise in the sales tax in April which left consumers flat and real GDP growth collapsed in the second-quarter as a result.
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                    Posted in Japan | 14 Comments

                    G20 meetings and structure part of the problem

                    There are parallel universes operating when it comes to neo-liberal politicians attempting to deal with reality. The G20 Finance Ministers and Central Bank Governors concluded their weekend talkfest in Cairns yesterday and you might be excused for thinking there is a jobs glut across their economies. As an aside, fortunately, this pathetic lot of individuals were meeting about as far north as one can go on the Australian continent, which meant they were kept out of the civilised parts of the nation where the rest of us live. Given Australia is currently hosting the G20 this year, the event gave our buffoon of a Federal Treasurer the chance to bathe in the limelight and deliver the major press conference.
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                      Posted in Economics, IMF, Politics | 5 Comments