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The Weekend Quiz – June 20-21, 2020 – 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 – June 13-14, 2020 – 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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ECB asset purchase programs are the only thing keeping Member States solvent

I haven’t had time yet to fully work through the decision by the European Commission yesterday to provide grants and loans to struggling Eurozone countries. I will comment on that when I have had time to understand the implications and be in a position to provide fair comment. It seems to be a vastly inadequately response in quantum, on top of an existing lack of fiscal support. But more on that another day. Today, I am investigating the latest data from the ECB. On May 26, 2020, the ECB released its bi-annual – Financial Stability Review, May 2020 – which seemed to excite some journalists to advance narratives that ‘sovereign debt’ investors (although none of the Eurozone nations are sovereign) will soon become spooked by the sharp rise in public debt levels in Europe, which will “threaten to undermine private-sector spending” and stall any growth prospects. The quote is from a Financial Times article (May 26, 2020) – ECB warns of challenge for eurozone from soaring public debt – which followed the release of the ECB’s Review. The elephant is, of course, the ECB assets and its ability to control all yields on public debt at will.

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The Weekend Quiz – May 16-17, 2020 – 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 – May 9-10, 2020 – 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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MMT critiques need to get more inventive – it’s getting boring

It is getting to the stage that one gets bored reading critiques of Modern Monetary Theory (MMT) by leading mainstream economists. As the critiques have escalated over the last few years, I can safely say that not one has really said anything: (a) that the core body of work we have developed hasn’t already considered and dealt with – about 20 years ago!; (b) which means, none of the long line of the would be demolition team has achieved their aim. And when they write Op Ed articles that basically just say – oh, MMT economists ignore “the demand for money” and “MMT falls flat on its face” when inflation emerges as part of the emergence out of this crisis, I get bored. Really, is that the best they can come up with. The latest entreaty in the boring stakes comes from Willem Buiter, who seems to have left the commercial banking sector and gone back into academic life. His latest Op Ed – The Problem With MMT (May 4, 2020) – is not his best work. Boring is the best descriptor. Why did he bother? Did he think he had to establish his relevance. He would have been better concentrating on the archaic mess that his mainstream framework is in. Anyway, sorry to end the week like this.

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Bank of England official blows the cover on mainstream macroeconomics

It is quite amusing really watching the way orthodox economists who know the game is up work like gymnasts to avoid actually spelling out directly what the facts are but spill the beans anyway. Last week (April 23, 2020), an ‘external member’ of the Bank of England’s Monetary Policy Committee, one – Gertjan Vlieghe – gave a speech – Monetary policy and the Bank of England’s balance sheet. If the message was taken seriously, then the way monetary economics and macroeconomics is taught in our universities should change dramatically. At present, there is only one textbook that seriously caters for the message that is inherent in the speech – Macroeconomics (Mitchell, Wray and Watts). The speech leaves out important insights but essentially allows the reader to appreciate what Modern Monetary Theory (MMT) has been on about, in part, for 25 years.

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The Weekend Quiz – April 11-12, 2020 – 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 Bandwagon effect – caution not credit is needed

We all know what the – Bandwagon effect – is. There is a lot of research literature in social psychology trying to understand why people who believe one thing one minute, suddenly ditch that belief system and appear to be proponents of a new belief system, often, in total contradiction to their previous views. The effect is related but distinct from the Groupthink phenomenon which I have written about extensively in relation to the way mainstream economics has maintained a hold on the public debate despite being unable to explain anything useful. Whatever the underlying explanations – social norms, conformity pressures, information cascades and the rest of it – the ‘Bandwagon effect’ is rampant at the moment among economists. It appears that everyone has become an expert on Modern Monetary Theory (MMT) and want to drop the term into their Op Eds, media articles etc despite, in many cases, writing in the not to distant past, ridiculous mainstream articles that are the anathema of MMT. I give those who are jumping on the bandwagon no credit at all. The reason is that these sort of shifts are dangerous. They typically misrepresent our work and attempt to interpret it within the old paradigm, which just leads to the general public, especially where the commentator has a high public profile, being mislead … as usual. Everyone, apparently is an MMTer now. But from what they say we know that is not the case. And just as this cohort swing to save face in what is a glaringly obvious empirical rejection of all the mainstream predictions and theoretical constructs, they will swing again and start talking about ‘budget repair’ and ‘inflation’ and ‘debt burdens on our grandchildren’ when the dust settles and the elites push to regain their dominant position. We should not be lulled into creating liaisons that are not sustainable or based on a true shift in view.

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These worn out debt narratives – Stop It! It’s ridiculous!

Today is Wednesday and I have been tied up a lot with various meetings – all on-line these days. I don’t enjoy them as much as face-to-face, given that I spent a considerable part of each day in front of my computer or with my head in books and so the human contact is a welcome variation. But needs must, as they say. Anyway, just a few snippets today, being Wednesday. I can say that in between all this Zooming and writing, I have now nearly put together a complete on-line learning system which I am now trialling. This will be the support platform for – MMTed – which I hope to make operational sometime in the coming months. One of the issues that I touched on yesterday, which is now starting to crawl out of the slime, is the “what will happen to all the debt when the crisis is over” story. And, it is not just a narrative being promoted by the Right or the conservatives. The Federal Labour Party spokespersons and those hanging around the edges have started to push the narrative. As the Prime Minister told us the other day in relation to the people who are panic buying “Stop it! It’s Ridiculous!” I think he was actually talking about those (morons) who are starting the deficit hysteria before the deficits have even actually risen much. For their own health, I urge them to “stop it”. Imagine how apoplectic they are all going to be once the deficit goes to 10 per cent or more and the RBA is buying up all the debt. My god.

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“We need the state to bail out the entire nation”

Major developments across the globe in monetary and fiscal policy keep happening on a daily basis at present. We are now hearing conservatives, who previously made careers out of claims that government deficits would send nations broke and more, appearing in the media now claiming “We need the state to bail out the entire nation”. Not too many economists are pushing the line that the market will deal with this crisis. They all the want the state to be front and centre as their own personal empires (income etc) becomes vulnerable. In a normal downturn there is not much sympathy for the most disadvantaged workers who bear the brunt of the unemployment. Now it is different. This crisis has the potential to wipe out the middle classes and the professional classes. And suddenly, who would have thought – the nation state is apparently back, all powerful and being begged to intervene. It is wake up time. Now no-one can be unclear about the fiscal capacity of the state. They now know that politicians who claim they don’t have enough money to do things were lying all along. They just didn’t want to do them. And when this health crisis was over we have to demand that the governments continue to lead the way financially and work out solutions to the socio-ecological climate crisis. No-one can say there is not enough funds to do whatever it takes. We all know now there are unlimited funds. The question must turn to the best way to use them. I also provide in this post some further estimates of the labour market disaster that Australia is facing as part of the development of my 10-point or something plan. It is all pretty confronting.

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Some lessons from history for the design of a coronavirus fiscal intervention

This post continues my thinking and analysis of the issues relating to the design of a fiscal intervention by the Australian government to ameliorate the damaging consequences of the coronavirus dislocation. Today, I delve a little bit back in history to provide some perspective on the current fiscal considerations. Further, I consider some of the problems already emerging in the policy response. And finally, I consider the lessons of history provide an important guide to the sort of interventions that the Australian government might usefully deploy. While the analysis is focused on Australia at present, the principles developed are portable across national boundaries. And the underlying Modern Monetary Theory (MMT) understanding is applicable everywhere there is a monetary system. This series of blog posts are building up to the production of my 10-point or something plan to address the crisis.

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Conversation with William Mitchell and Noel Pearson, Newcastle, December 15, 2019

Today’s blog post is shorter than usual but you do get to access a hour-long video where I talk with Indigenous leader and activist Noel Pearson about Modern Monetary Theory (MMT), how it impacts on his perceptions of options to improve indigenous well-being in Australia, and how it informs a new collaborative venture we are in the process of putting together – JUST2030 – as a response to the socio-ecological crisis that three decades of neoliberalism and the fiscal obsession with surpluses has created.

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The Weekend Quiz – March 7-8, 2020 – answers and discussion

Here are the answers with discussion for this Weekend’s Special Birthday 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 – February 22-23, 2020 – 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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Eurozone 2020. Don’t mention the War!

I guess I cannot avoid commenting on the European Commission’s recently released (February 5, 2020) – Economic governance review – which, allegedly, “seeks to assess how effective the economic surveillance framework has been in achieving three key objectives: ensuring sustainable government finances and economic growth, as well as avoiding macroeconomic imbalances; … promoting convergence in Member States’ economic performance.” The short answer is that the framework has failed on all fronts. The Member State fiscal situations are always mostly teetering on the edge of insolvency and only the ECB has been bailing them out; macroeconomic imbalances that really matter, such as the on-going illegal German external surpluses persist, and divergence is the Eurozone norm. Why? Another simple answer: because the architecture of the currency union is deeply flawed and biases the economies to crisis and makes them vulnerable, in an existential sense, to fluctuations in global activity. Why would they have done that? Answer: the triumph of neoliberal ideology over reason.

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Governments can always control yields if they desire

Today, I am in the mountains north of Melbourne (Healesville) talking to the – Chair Forum – which is a gathering of all the Superannuation Fund Board chairs. I am presenting the argument that the reliance on monetary policy and the pursuit of fiscal austerity in this neoliberal era, which has been pushed to ridiculous extremes around the globe, has culminated in the socio-economic and ecological crisis that besets the world and is pushing more and more policy makers to express their doubts about the previous policy consensus. I will obviously frame this in the context of Modern Monetary Theory (MMT), given that our work has been the only consistent voice in this debate over a quarter of the century. What economists are suddenly coming to realise has been core MMT knowledge from the outset.

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Be careful of what parades as academic research (Uber)

It is Wednesday and I have a long trip by plane and road to Victoria where I am speaking at a major business conference in the mountains outside of Melbourne tomorrow morning. So only a few things today that I have been thinking about. Remember the 2010 film – Inside Job – which documented how my profession had become corrupted by the financial services sector into producing, allegedly, independent research reports extolling the virtues of deregulation etc and not admitting they were being paid for by the beneficiaries of the propaganda masquerading as research. It shows how corruption runs deep in the economics profession to accompany the incompetence that mainstream macroeconomists display. Well, I have been following an unfolding story about how Uber has decided to draw on that corrupt tendency for their own gains. It is not a pretty story. And then we have the so-called social media trend of cancel culture which is meant to be about matters of principles but leave the proponents caught up in a rather dirty pool of hypocrisy.

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Britain continues to defy Project Fear

Regular readers will know that I have been following the path of the British economy post-Referendum in 2016 to see whether the doomsday that the Remainers predicted was likely. It became colloquially known as ‘Project Fear’ as mainstream economists, so-called progressive economists who had their snout in the Labour Party as advisors (and we know where that took the Party), institutions like the Treasury and the Bank of England, all pumped out a sequence of terrible predictions about what would happen to the British economy should the Leave vote succeed. The predictions started in the lead up to the June vote. Immediate recession was forecast. That didn’t happen. Then new forecasts came out – with longer term disasters predicted. As each prediction horizon passed without disaster, the predictions morphed, new horizons were introduced, more nuanced analysis was presented. And, as nothing much has happened to ratify their fears (and lies), the Project has abated somewhat. The latest data shows that the Project is as moribund as it ever was.

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The Weekend Quiz – January 25-26, 2020 – 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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