Last week, the Federal Reserve chairman Ben Bernanke received endorsement for a further term from the US Senate Committee on Banking, Housing and Urban Affairs (popularly known as the US Senate Banking Committee). There is much controversy about this re-nomination along the lines that he was Chairman as the crisis unfolded and he did nothing about it until it was too late. There is also angst about his refusal to provide Congress with specific information about institutions that the Federal Reserve bailed out. These issues are not unimportant. But the strongest reason why he should be dispensed with is that his public statements leads any informed analyst to conclude that he doesn’t really understand the monetary system. From a modern monetary theory (MMT) perspective his comments on the monetary system are as sophisticated as the most flawed mainstream macroeconomics textbook.

Today I continue my theme from yesterday which focused on how retired politicians and bureaucrats in the US are massing using resources from rich conservative interests to undermine the capacity of the US government to fulfill its legitimate responsibility to increase employment and raise living standards. In today’s blog I reflect on an excellent US PBS Frontline program which looks back at the days when the neo-liberals led by Alan Greenspan and his gang were ruling the world. The current crisis that has undermined the employment and income prospects for millions around the world is directly attributable to their ideological zealotry. The unfortunate thing is that the gang members are either still in power or reinventing themselves as credible commentators. It doesn’t augur well.

What do you get when a bunch of former politicians who have an inflated sense of self-importance and cannot stay out of the public glare? Well one answer is nonsense. The related answer is the so-called Pew-Peterson Commission report Red Ink Rising, which was released in December 2009 with the by-line “A Call to Action to Stem the Mounting Federal Debt”. And with the Copenhagen climate change talks being the big public interest story of the week it was only a matter of time before soon goon started mapping the public debt-hysteria debate into the climate change debate to bring home the message to all of us that we are doomed unless we do something drastic. Its been quite a day down here!

Today the Australian Bureau of Statistics released the September quarter National Accounts data which gives us the rear-vision mirror view of how the economy has been travelling while we have all been speculating. The good news is that real GDP continued to grow. The bad news is that the Australian economy is creeping along the bottom. It just managed to keep its head above zero line in the September quarter courtesy of the strong public investment associated with the now, daily-maligned, fiscal expansion. The labour market was clearly spared the worst by declining productivity. As productivity returns to more reasonable rates of growth, unemployment will rise unless GDP growth turns significantly upwards … quickly. Having said all that – there is nothing in today’s data to warm the frozen hearts of the conservative deficit-haters. They should just find a ship to get on and boost our exports.

Today’s Australian newspaper, sadly our national daily carries a story – Stimulating our way into trouble – by Griffith University professor (and ex-federal treasury official) Tony Makin. I pity the students who have to study with him. The article continues the News Limited campaign against the government stimulus package and demonstrates the extent that is prepared to use the services of so-called experts (that is, titled mainstream economists) who seem prepared to grossly mislead the readership to advance their ideological strategy. Whatever it takes seems to be the strategy. Anyway, once again the mainstream macroeconomics textbook is called upon to make policy statements.

The political debate in Australia is never very inspiring. But in the last few days it has reached new heights … that is, lows. The Federal Opposition has now decided to address its rock-bottom political support by changing its shadow front-bench significantly and installing some of the most conservative members they could drag out. The strategy is clearly to “talk tough” and “take the fight up to the government” and all that sort of thing. The only problem is that it is already turning the public debate into a comedy show. I predict this conservative configuration will talk their way into oblivion much faster than the previous shadow cabinet. In the process, we will have plenty to laugh about.