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 five questions. Your results are only known to you and no records are retained.
Today, I thought I would provide some background to the Euro crisis to advance some understanding of why the conservatives in Europe are advocating highly destructive solutions to their crisis. So I went back to some notes that I have accumulated over the years to try to put the sort of nonsensical fiscal rules that are now being proposed by very influential German economists into some sort of context. What you will see is that the context doesn’t in any way help to justify the rules. They are crazy by any reasonable assessment. But at least you will see them in a wider context. I hope.
The ECB is embarking on a major construction project to erect new building at the east end of Frankfurt, which will be completed on current plans by the end of 2013. It will replace the old wholesale market which supplied fruit and vegetables to Frankfurt and surrounds. One suspects the health of the citizens was better served in this former land use. I wonder what they will do with the new building when the Eurozone collapses. Perhaps it could be a nice retirement village for the executives who will be looking for something to do.
Today the Australian Bureau of Statistics released the Labour Price Index, Australia data for the March 2010 quarter and it shows that we are back on the path to suppressing real wages growth while productivity growth has picked up strongly. The ABS results show that the annualised growth to March 2010 was 2.9 per cent which was steady but down on the higher growth achieved during the expansion. This is barely keeping pace with inflation and well below labour productivity growth. In recent months, I have noted that commentators are increasing claiming that a wages breakout will lead to an inflation breakout unless the government quickly tightens fiscal policy. Today’s data provides more evidence that this argument is flawed and reflects ideological fervour rather than being grounded in the facts. Today, we also heard the speech made at the National Press Club by the Opposition Shadow Treasurer in response to last week’s Government’s budget. The conclusion from my analysis of that speech: there is no political choice in Australia. All the parties are lost in deficit hysteria and the rest of us will endure the costs.
Another day passes and lots more reading done. Some of it interesting but a significant amount of it tedious even enraging. I hum my mantras as I read to stay calm. But among the things I read there were some stand outs – not all of which I will have time to write about today. But this news report – Estonia Wants Stricter Euro Budget Rules – came in overnight, which caught my eye. Further examination, revealed how skewed policy priorities have become over the course of this economic crisis. The most costly things for an economy are ignored and aspirations that will impose future costs are promoted. Driving this policy agenda (madness) are the false messages that the IMF continually put out which spread a mélange of lies and non-sequiturs across the policy debate. I came up with a fiscal consolidation plan myself today as a result. I will disclose it later.
New York Times columnist and Nobel Prize winner Paul Krugman occasionally brushes up against an understanding of how the macroeconomy works. Some people actually have said to me that he does get it but chooses for political purposes not to disclose a full understanding of the basic principles of Modern Monetary Theory (MMT). Well in his most recent column – We’re Not Greece – published May 13, 2010, I think you can conclude that when left to his own devices he doesn’t have a clue about what is really happening in the macroeconomy. So today, we are exposing his mainstream (neo-classical) keynesian nakedness – he is now naked and without clothes.
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.
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 five questions. Your results are only known to you and no records are retained.
Yesterday I read an article by Noam Chomsky – Rustbelt rage – which documents the decline of the American dream and extends the malaise to Chinese workers. The hypothesis is that the workers in each country signed up for what they thought was a social contract where if they worked hard they would enjoy secure retirements. Then the meltdown undermines their jobs and they are forced to live on pitiful pensions. And while they watch the top-end-of-town enjoying the benefits of billions of bailout money from government the beneficiaries of these bailouts are leading the charge to take the pensions of the workers and turn them into “financial products” (privatised social security). This raises the concept of doublethink (a term coined by George Orwell) – which “means the power of holding two contradictory beliefs in one’s mind simultaneously, and accepting both of them”. That was what interested me today (in blog terms).
Australia’s economy is apparently booming. At least that is what all the current public rhetoric is suggesting. Wage breakouts are apparently looming and the Mining boom (is) too hot for Canberra to handle. Today the ABS released the Labour Force data for April 2010 and the data reveals that while there are positive developments in the labour market, employment growth remains sluggish and is barely keeping pace with the growth in the population. Unemployment rose a tad as a result. While the bank economists have hailed today’s figures as “stellar” and indicative of an economy “near full capacity”, I consider their judgement to be seriously impaired and biased. Conditions in the Australian labour market are, in fact, fairly subdued. As I said last month – with the declining fiscal stimulus and private spending remaining subdued – today’s data doesn’t represent a place we would want to be in for very long.