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ECB denial is just embarrassing

I was asked by an Austrian friend the other day if I could provide some questions to a journalist friend of theirs (András Szigètvari from Der Standard) in who was about to interview Sabine Lautenschläger who is Member of the Executive Board of the ECB and former Vice-President of the Bundesbank. I dutifully complied and the – Interview with Der Standard – was published on April 1, 2019. April 1 is known as April Fools’ Day, a tradition that spans continents and culture. In Germany, apparently, April 1 is a day where ridiculous stories are told at the expense of the listener, to elicit uproarious laughter (so-called “Aprilscherz”) (Source). I won’t be as unkind to assert that Ms Lautenschläger was acting out the tradition even though what she was saying could easily be mistaken for a planned ruse. Perhaps the joke was on her!

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    Australian government’s fiscal statement – pitiful and irresponsible election ploy

    This morning, I declared that I was angry on a multitude of levels. I am part of a local community group that is fighting greedy developers, corporate real estate speculators and a compliant local council over an outrageous abuse of planning. That really gets me mad. NSW, the state I reside in mostly, just re-elected a corrupt conservative government, largely because the former leader of the Labor opposition couldn’t keep his hands out of the clothing of a female journalist and his successor mouthed off about Asians taking our jobs. Bloody hell, the Labor Party had it won, and then lost it. Angry. Then we go a little higher in the hierarchy to the fiscal statement (aka ‘The Budget’) which the conservative Australian government brought down last night. And outrageous piece of chicanery and economic malpractice. What is worse is the head of the Federal Opposition’s policy think tank – the John Curtin Research Centre – put out an Op Ed late last week accusing the Conservative government of not doing enough to “address debt” and shirking “serious, structural repair” and not having a public “debt ceiling”. What the F&*k! Did the IMF write this piece? The ‘think tank’ claims it is a “social democratic think-tank dedicated to developing ideas and policies for a better Australia”. Yes, folks that is what social democracy means in Australia – neoliberalism! More on the fiscal statement in what follows. And if I wasn’t already hugely mad enough with all of that, I read that the British Labour Party is desperate for Britain to stay in the Single Market – lock-stock-and-barrel. What! This is the most advanced expression of neoliberalism. I guess it is consistent with their ridiculous ‘Fiscal Credibility Rule’ that keeps the current Labour Party firmly in the Blairite tradition – scared to death of those creeping, amorphous financial markets and so lacking in confidence that they hang on to the grim lies that Dennis Healey introduced to Labour narratives in the mid-1970s. Mad as hell about that! And then we get to Brexit central. The people voted in a majority to LEAVE! It was a correct decision for the long-term, progressive future of Britain. The cosmopolitan liberals couldn’t cope with the idea of, maybe, having to queue up at the border of the 27-nation European Union when they go on their next ski holiday. Their answer – vilify the voters who knew the EU was the exemplar of neoliberalism and do everything to stop the departure. Enter a totally incompetent Tory government to oversee the departure and you get an almighty mess. For once I agree with the former Bank of England governor – Britain should get out next week with no deal and announce a major fiscal stimulus to keep the economy moving while adjustment occurs. So I am glad I have a full head of hair! Then I read another plethora of anti-MMT pieces and my humour improved. A bit of comedy is always important!

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      New Blog Theme from today

      Dear Readers: I have finally been able to complete (or in the process of) a new Theme for my blog, which makes it fully responsive to different screen sizes and easier for reading. I have been trialling it for some…

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      The effectiveness and primacy of fiscal policy – Part 3

      This is the final part of my three-part series on the why I have confidence in the primacy of fiscal policy over monetary policy and eschew any proposals, by other Modern Monetary Theory (MMT) advocates or others, to replace the so-called ‘independent’ central bank, with an ‘independent’ fiscal authority, which they seem to think would take the ‘politics’ out of fiscal policy decision-making and focus it on advancing the well-being of the people. Such a proposal is not core MMT. It is an opinion that, in my view, is based on deeply flawed logic and would would constitute the continuation of the neoliberal practice of depoliticisation and further increase the democratic deficit that is common in our nations these days. In this final part, I extend the reasons that progressives should oppose such outsourced decision-making and, instead, advocate the introduction of processes that always make our elected politicians fully responsible for the decisions they take on our behalf. Our polity should be always be held accountable for those decisions and not be allowed to defer responsibility to an external source (like an ‘independent’ central bank or fiscal authority).

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        The effectiveness and primacy of fiscal policy – Part 2

        This is the second part of a three-part series discussing the political issues that give me confidence in the primacy of fiscal policy over monetary policy. The series is designed to help readers see that the recent criticisms of Modern Monetary Theory (MMT) as being politically naive and unworkable in a real politic sense have all been addressed in the past. In Part 1, I gave examples of how ‘agile’ or ‘nimble’ fiscal policy can be when an elected government has it in their mind to use their spending and taxation capacities to change the direction of the non-government economic cycle. It is simply untrue that fiscal policy is inflexible and cannot make effective, well-designed policy interventions. In this second part, I will address aspects of how such interventions might be organised. Specifically, some people have advocated that MMT might replace the so-called ‘independent’ central bank, with an ‘independent’ fiscal authority, which they seem to think would take the ‘politics’ out of fiscal policy decision-making and focus it on advancing the well-being of the people. The intentions might be sound but the idea is the anathema of what progressives, interested in maintaining democratic accountability would propose. I consider such an independent fiscal authority would constitute the continuation of the neoliberal practice of depoliticisation and further increase the democratic deficit that is common in our nations these days. Politicians are elected to take responsibility and make decisions on our behalf. They should be always be held accountable for those decisions and not be allowed to defer responsibility to an external source (like an ‘independent’ central bank or an external fiscal authority).

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          The Weekend Quiz – March 30-31, 2019 – answers and discussion

          Here are the answers with discussion for this Weekend’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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            The effectiveness and primacy of fiscal policy – Part 1

            I did an interview overnight with a WSJ journalist from London on the ‘political’ aspects of Modern Monetary Theory (MMT). This blog post covers some of that conversation, although I started writing this a few weeks ago. Regular readers will recall I was promising a post about the ‘nimbleness’ of fiscal policy. That promise instigated the request from the WSJ. When I write about Modern Monetary Theory (MMT), I try to be careful to distinguish between what we might consider the core MMT principles (theory, description, accounting) and the imposition of my own values (political and otherwise) that is informed by those core principles. That separation is important and should (but doesn’t) stop others misrepresenting the core principles by appealing to proposals that might flow from the value imposition. An example of this separation (and confusion), a topic which I receive many E-mails from people which seek clarification, is the concept of setting up an independent fiscal authority. The proposal to establish such an authority is not a core MMT principle. It might reflect an opinion that has been expressed by someone writing about MMT but that is as far as it goes. For the record, I am deeply opposed to establishing such an authority. It would constitute the continuation of the neoliberal practice of depoliticisation and further increase the democratic deficit that is common in our nations these days. Politicians are elected to take responsibility and make decisions on our behalf. Can we trust them? We have elections to deal with those issues. Should technocrats rule? Technocrats do not stand for election. They give advice but have no democratic responsibility. Is fiscal policy agile enough to be an effective source of counter-stabilisation against the non-government spending cycle? That is what this blog post is about. This is Part 1 of a three-part series. Part 2 will be published on Monday.

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              Bid-to-cover ratios and MMT

              It is Wednesday so very little blog writing today. One question I often get asked is what would happen if the bond market investors in a nation stopped bidding for the debt instruments being offered in the regular auctions. Interestingly, overnight I was sent some news from a Deutsche Bank information service written by their New York-based Chief International Economist, who signs himself off as “Torsten Sløk, Ph.D”. It related to these issues. The problem is that Dr Sløk seemed to want to take a snide shot at Modern Monetary Theory (MMT) and just made a fool of himself. It goes on. This is what the point is.

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