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The Merkel failure

Its seems the conservative economics press is going through a hard time as it tries to wrest itself from its past litany of errors of judgement, backing the wrong horse, whatever. The latest example is The Economist Magazine, which ran a Leader Article over the weekend (September 25, 2021) = The mess Merkel leaves behind. It eviscerates the Merkel period for leaving Germany with a legacy that will cause headaches for future leaders and for the German people. This runs counter to the usual stuff the Magazine has offered about the soundness of Germany over many years as a bastion of stability and good financial management. It also provides a dose of reality to the raft of ridiculous glowing assessments of the Merkel years. In my view, she has overseen a government that has undermined its own prosperity, deliberately disobeyed the very rules it enforces on other nations in the Eurozone, and bullied leaders of other nations to enact dreadful policy shifts that have impoverished defenceless citizens. It is a cause of celebration that she is going not because we laud her work, quite the opposite. One failure less in public office.

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    The Weekend Quiz – September 25-26, 2021 – 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 Weekend Quiz – September 25-26, 2021

      Welcome to The Weekend Quiz. The quiz tests whether you have been paying attention or not to the blog posts that I post. See how you go with the following questions. Your results are only known to you and no records are retained.

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        Go Dees!

        Victorians (those from the State of) tend to like – Australian Rules Football – which is our eccentric own code that developed in Melbourne in the 1850s. Not all of us follow the game, but a huge number. We have tribal loyalties to football teams and play-act those passions out every weekend – with mock hatred for the opposition and the like. Some take it further than that and enter states that border on mental disease. But most don’t and they understand perspective – that it is just a game, a distraction in our lives. I follow the – Melbourne Football Club (MFC) – the Demons, the Dees, the Red and the Blue, which is the oldest club in the game having been founded in 1858. Tomorrow is a very big day for supporters of the Melbourne Football Club (MFC) because our team is finally in a Grand Final and has the chance to break the longest premiership drought in the history of the competition.

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          Job vacancies rising in Britain in mostly below-average pay sectors

          Part of my working day is spent updating databases and studying the additional observations. I learn a lot that way about trends and how far off the mark my expectations of a particular phenomenon might be. Today I updated various labour market datasets from Britain and did some digging into the relationship between vacancies and pay. It is clear that as the British economy opens up again, that unfilled job vacancies have grown very strongly over the Northern summer. While that is a good thing because it means there are opportunities for workers to gain employment, shift employment to better paying jobs etc, the message is no unambiguous. If the vacancy growth is biased towards low-pay work then the chances for upward mobility might be stifled. Such a trend might also reflect the fact that employers are now finding that their old practices of accessing vast pools of EU labour willing to work at low wages are being constrained and that will signal the need for a change in strategy, including restructuring, capital investment and better paid jobs. It is too early to discern which way that will go. But what I found while looking at this new data is that while job vacancies are booming, the majority of them are in below-average pay sectors. More analysis is needed to fully assess the implications. Here is where I started on this path …

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            Zero-hour contracts in the UK are an affront to progress

            It’s Wednesday and so not much blog writing today. I have a few writing commitments to finalise in the coming few weeks and I need some time to do that. So today I provide some working notes and analysis of the data on UK Zero-hour contracts after I updated my dataset today. Some advertising of upcoming events follows and then some great guitar playing. A typical Wednesday at my blog it seems.

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              ECB researchers find fiscal policy is very effective and more so if central banks buy up the debt

              The ECB published a Working Paper recently (September 2021) – Monetary and fiscal complementarity in the Covid-19 pandemic – which represents progress in the narrative. While the technical model that the ECB uses is just an ad hoc attempt to reverse engineer the reality so they can claim they can explain it, what is useful from the exercise is that the old mainstream narratives that fiscal policy is ineffective in providing permanent boosts to real output (or that austerity does not permanently damage the growth trajectory) can no longer be sustained. The taboo surrounding central bank purchases of government debt because they cause accelerating inflation can no longer be sustained. The claims that fiscal deficits drive up interest rates can no longer be sustained. Now the public debate just has to reflect that reality and we will have made progress. Of course, this is all core MMT – we knew it all along!

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                They never wrote about it, talked about it, and, did quite the opposite – yet they knew it all along!

                During the GFC, a new phenomenon emerged – the ‘We knew it all along’ syndrome, which was characterised my several mainstream New Keynesian macroeconomists coming out and claiming that some of the insights provided by Modern Monetary Theory (MMT) economists were banal and that their own theoretical framework already accommodates them. The pandemic has brought a further rush of the ‘We knew it all along’ syndrome. Apparently, mainstream macroeconomics is perfectly capable of explaining the fiscal reality the world has found itself in and there is no need to MMT, which, by assertion, is saying nothing new. These sorts of statements are not coming from Facebook or Twitter heroes who might have done a few units in economics or even acquired a degree in the discipline. They are coming from senior professors in the academy. The curious thing, which really lifts their cover, is that if you examine the academic literature you won’t find much reference to these sorts of ‘insights’ at all. What you find, and what students are taught, are a completely different set of propositions with respect to fiscal policy. So if they ‘knew it all along’ why didn’t they ever write about it? Why is their published academic work replete with conclusions that run contrary to the conclusions MMT economists make? You know the answer. These ‘knew it all along’ characters have just been caught out by the poor empirical performance of their paradigm and now they are trying to salvage their reputations and position by trying to blur history. They really should be sacked.

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                  The Weekend Quiz – September 18-19, 2021 – 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 Weekend Quiz – September 18-19, 2021

                    Welcome to The Weekend Quiz. The quiz tests whether you have been paying attention or not to the blog posts that I post. See how you go with the following questions. Your results are only known to you and no records are retained.

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