The British government has more than demonstrated its incompetence

Today’s article from the relics (my office clear out continues) is actually two articles. One by Arthur Okun and the other by fellow US macroeconomist Gardner Ackley. Both economists are now dead but during their careers were aware of the role of government in a monetary economy. They were antagonistic to the conservative views of economists that wanted to push fiscal rules such as balanced budgets. They understood that these views not only undermined democracy but also made it impossible for governments to pursue their legitimate goals of promoting public purpose. In the current environment, if they were still alive they would be castigating those who seek to impose pro-cyclical fiscal austerity. Their insights remain relevant today. Just think about yesterday’s public finance data release in Britain. The debt reduction forecasts from the British government are in tatters because tax revenue is collapsing further and welfare spending is rising. The operation of the automatic stabilisers is signalling that the British government has more than adequately demonstrated its incompetence.

Read more

5.4 into 1 does not equal 5.4

I am doing a bit of cleaning up old filing boxes each day now as the date I will be moving offices approaches. It is actually an interesting process – looking through boxes and articles that have been stored away for some years now. Today, I came across an article that was in the US Magazine Challenge (March-April, 1982) entitled The Guilds of Academe and written by one Jack Barbash, who was an academic at the University of Wisconsin. It discussed the way in which the economics profession protects its belief system from criticism and avoids, as far as possible, addressing real world problems. The mainstream will talk as if they are addressing a real world problem – such as entrenched unemployment – but when you realise the models they are dabbling with you know that they are really talking about nothing real at all. This leads onto a forthcoming book by some British conservative MPs who have the temerity to argue that the British unemployment problem is due to the workers being to idle and diverted by pop music to bother working. You know instantly that the underlying model has come from a mainstream economist who hasn’t recently looked out the window or read any data.

Read more

Public service employment programs – what really have we go to fear?

I was clearing out some old filing boxes today – I am moving offices soon – and came across a conference proceedings from 1976, which I had picked up somewhere in the 1980s when my own academic career really began. It was entitled: Directions for a national manpower policy : a collection of policy papers prepared for three regional conferences and published by in Washington by the US National Commission for Manpower Policy in 1976. There was a chapter in it that I recalled fondly by US economist Charles C. Killingsworth entitled Should full employment be a major national goal. He was a long-time advocate of public employment programs and understood how lacking my profession is when it comes to caring about people. In terms of public service employment programs – what really have we go to fear? Answer: not much, unless you don’t enjoy the most disadvantaged having a better life!

Read more

Saturday Quiz – August 18, 2012 – 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.

Read more

The labour market is not like the market for bananas

I am now using Friday’s blog space to provide draft versions of the Modern Monetary Theory textbook that I am writing with my colleague and friend Randy Wray. We expect to complete the text by the end of this year. Comments are always welcome. Remember this is a textbook aimed at undergraduate students and so the writing will be different from my usual blog free-for-all. Note also that the text I post is just the work I am doing by way of the first draft so the material posted will not represent the complete text. Further it will change once the two of us have edited it.

Read more

Some of the 20 are now rats deserting the sinking ship

Here is a list of my professional colleagues who have learned nothing in the last 5 years. That is no surprise because they didn’t learn very much before that about how the monetary system works anyway. If their ideas were to be implemented I would guess that very few of them would publicly recant and admit they were wrong. They would obfuscate, deny, misconstrue but they wouldn’t admit they were wrong. At least prospective students have a good list of departments to avoid should they wish to study economics in the US. Keep it handy for future reference. Back in February 2010, there was a letter by 20 economists supporting the Tory proposals for fiscal austerity published in the Sunday Times. It was an unashamed attempt to influence the result of the May 2010 election. A week later 60 economists wrote that the 20 were nuts. It seems that some of the 20 rats have now deserted the Tory ship but won’t really tell us why.

Read more

Another day – and some more evidence against fiscal austerity

Eurostat released the second-quarter 2012 National Accounts data for the Europe yesterday and, predictably, the recession is deepening in many countries. The Southern European nations saw their performance worsen and data shows that Spain’s house prices fell by 11.2 per cent last month (Source) and have fallen by 31 per cent since the crisis began in 2008. The deflationary impact of that alone would push the economy into recession. The Euro elites claim they will do everything to resolve the situation. And anything they do undertake – just makes it worse. Meanwhile, across the Atlantic, the Romney camp has put out a very suspect economic paper – authored by some notable suspects in the propaganda campaign the neo-liberals are sponsoring to prevent governments from acting responsibly. The economic paper has been categorically demolished – even in the mainstream media. So it is another day – some more evidence against fiscal austerity – and still the criminals maintain their grip on the throne.

Read more

Bundesbank showed the way in 1975

I read an interesting Brief from BNP Paribas (published August 7, 2012) today – The Bundesbank’s Bond Purchases in 1975 – which documents the seemingly hypocritical stance of the 2012 Bundesbank against the way it behaved in the mid-1970s. The short BNP analysis is in the context of the recent demands by the senior Bundesbank officials (including the chief Jens Weidmann) that the ECB refrain from purchasing Eurozone member-state bonds as a way to alleviate the current crisis. The point of the historical reflection is not, in my view, to bash the Germans for hypocrisy but to view their actions in 1975 as a sensible policy response to the growth crisis the German economy was enduring at that time. The same sort of action by the ECB would help the Eurozone get out of its growth crisis now. In 1975, the Bundesbank showed the way.

Read more

Japan thinks it is Greece but cannot remember 1997

Last week (August 10, 2012) the Japanese Parliament approved a bill to double the sales tax (from 5 per cent to 10 per cent) over the next three years. It is a case of déjà vu. We have been there before. The economy suffers a major negative private spending shock. The government’s budget deficit increases as tax revenue collapses. The outstanding government debt rises more quickly than in the recent past. The rising government deficit supports a recovery in real GDP growth. The conservatives start shouting that the government will run out of money, that interest rates will soar and inflation surge and life as we know will end. The government raises the sales tax and cuts back spending. Real GDP growth collapses, tax revenue falls and the deficit and debt ratio continue to rise. We are back in Japan in 1997 – but the only problem is that we are playing out the same story in 2012. The reason – Japan thinks it is Greece but has forgotten about 1997.

Read more
Back To Top