In the Financial Times this morning there was a thought provoking article by Mort Zuckerman entitled The free market is not up to the job of creating work which is in stark contrast to another article – Goodbye, Macroeconomics, which appeared last week in the FT and was written by Eli Noam. The former seems to understand the depth of the problem and has the right priorities but doesn’t come up with the right policies. The latter raises some interesting points but just misunderstands the nature of macroeconomics.

I am now Dubai waiting for a flight to Almaty (Kazakhstan). I spent the time on the flight reading (including Stieg Larsson’s third book in his trilogy – The girl who kicked the hornet’s nest – hard to put down. I also listened to all the Rai CDs on the plane’s enterntainment system. I came upon this music about 15 years ago when I was listening to Studio Brussel (then my favourite radio station in Europe) driving back to Maastricht (where I was living) after a bike race down in Belgium. It was bizarre – middle eastern instruments and modes – interspersed with acid jazz, house and straight jAzz. The first song I heard sounded very algerian and then the sax player went wild. I thought I was just tired from the hard race – it was so not what I was expecting – but I mmediately became a fan. So I caught up with all of the current releases – courtesy of an Emirates flight. This little blog extends that cultural saturation.

The weekend’s Sydney Morning Herald carried a syndicated article from the UK Telegraph – Why the economy needs to stress creation over distribution – which bears on the recent discussion about financial market profits and executive packages. If we were to follow this remuneration pattern then things would be very different in the world. Probably for the better. It also shows how the explanations for earnings provided by mainstream economics textbooks are ridiculous in the extreme. Another reason to stay clear of those courses at University.

Ah Sunday. I don’t go to my office at the University. I ride lots of kms on my bike. I mix working at home on my research with digging in my food production system (garden). And … if I am stupid, I read the financial press and study the data trends. At that point, any sun that is around becomes a dark cloud and I sink into a malaise and wonder why modern monetary theory (MMT) ….

Earlier this week my professional association (which I decline to join) – the Economics Society (ACT Branch) awarded its inaugural Enemy of the State/Friend of the People award to a microeconomist for advocacy in defence of economics and its application to public policy. The stunt reflects the major historical revisionism that is now a daily occurrence and appears worse than anything that occurred in the communist states. Those who think they have an entitlement to make huge profits (helped by government guarantees) yet return to behaviour that brought the world economy unstuck are now in attack mode. There is denial, outright deception, constant hectoring. To redress this issue, I am now calling for nominations for the Modern Monetary Theory’s (MMT) Friend of the state, Friend of the people award. It will be awarded to all persons (we believe in collectives) who understand how our monetary system operates and how it can be managed via fiscal policy to serve public purpose and advance the welfare of the most disadvantaged.

Australia’s central bank governor is now appearing in the world press as something of a hero for putting interest rates up recently in defiance of world trends. Today he is featured in many finance home pages for his statement that the RBA cannot afford to be timid in putting rates up in the current months. This has raised expectations that we are in a race to get the target rate up towards their so-called neutral rate sometime soon. So almost rock star status for our central bank governor. Pity, the whole paradigm he is representing is destructive and helped get us into this mess in the first place. This blog explains why inflation targeting per se is not the issue. The problem is that fiscal policy becomes subjugated to the monetary policy dominance. This passivity manifests as the obsessive pursuit of budget surpluses which allegedly support the inflation-first stance. But this policy strategy is extremely damaging in real terms and will provoke another debt-bust cycle sometime in the future.

Several readers have asked me to explain in a little more detail what I mean by statements such as investment brings forth its own saving or government budget deficits finance non-government saving. So this blog is about those topics and takes you on journey from what you won’t learn if you study macroeconomics in a typical university through to a clearer understanding of the way macroeconomies work via modern monetary theory (MMT).