Bill Mitchell Modern Monetary Theory Macroeconomic research, teaching and advocacy

Time 2020-10-05 20:09:01

Web Name: Bill Mitchell Modern Monetary Theory Macroeconomic research, teaching and advocacy

WebSite: http://bilbo.economicoutlook.net

ID:71532

Keywords:

Monetary,Theory,Modern,

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On October 2, 2020, the US Bureau of Labor Statistics (BLS) released their latest labour market data Employment Situation Summary September 2020 which shows that while employment continued to grow, the rebound has moderated significantly. Further, the unemployment rate fell by 0.5 points to 7.9 per cent but only because the participation rate fell by 0.3 points, which saw less workers in the labour force. If the participation rate had not fallen, then there would have been only a marginal improvement in the unemployment situation. The sources of that participation decline are not disclosed. The problem facing the US is that the lack of economic support from the Federal government means that the huge pool of unemployment will take years to reduce and the damage will accumulate. How far the recovery can go depends on two factors, both of which are biased negatively: (a) How many firms have gone broke in the lockdown? (b) Whether the US states will have to reverse their lockdown easing in the face of a rapid escalation of the virus in some of the more populace states. I do not see appropriate policy responses in place at present. From abroad, it looks like the US government is stepping back when it should be engaging in supporting all incomes and introducing large-scale job creation programs.Spread the word ... Here are the answers with discussion for yesterday’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.Spread the word ... As governments grapple with the dissonance that the pandemic is causing them realising that their old mainstream economics narratives are not going to cut it any more but still reluctant to admit that and pass onto a new phase of creative policy making we are observing these contradictions in both statements about fiscal policy and monetary policy. The Australian government, for example, is convinced tax cuts are required but have observed that recent tax cuts, before the pandemic hardly stimulated any spending. Further research from the US is demonstrating that payments to households under the Coronavirus Aid and Economic Security (CARES) Act may not have resulting in the spending boost that was modelled as part of the policy design. And then on the monetary policy front, central bankers like Madame Lagarde are strutting around making grand statements about becoming flexible with their definition of price stability (that is, saying they will allow for higher inflation before they increase rates) despite not being able to remotely meet their current stability levels with deflation looming. I covered a statement along similar lines from the US Federal Reserve Bank boss recently US Federal Reserve statement signals a new phase in the paradigm shift in macroeconomics (August 31, 2020). It all adds up to what happens when a paradigm is shifting and the old school are caught out no longer able to really offer anything of use but hanging on to their status nonetheless. Pragmatism usually passes them by as it will in this case.Spread the word ... Its Wednesday so a shorter blog post today with an interview I recently did with financial market educational professionals, the i3 (Investment Innovation Institute) where I cover a range of topics of current interest from an Modern Monetary Theory (MMT) perspective. Then we get down with some very cool music. And that is it. And I turned off the debate today in the US after 5 or so minutes and wondered what the hell that nation has become. None of the contenders is electable would be my conclusion.Spread the word ... This is Part 6 of my on-going examination of the concept of ‘duty to work’ and how it was associated with the related idea of a ‘right to work’. Neoliberalism has broken the nexus between the ‘right to work’ responsibilities that the state assumed in the social democratic period and the ‘duty to work’ responsibilities that are imposed on workers in return for income support. That break abandons the binding reciprocity that enriched our societies and has spawned a solid argument for a basic income. But the solution to the problem is to reinstate the link between opportunity to work and the societal benefits of work, especially as it enhances the material well-being of the least advantaged. In this part, I explore that theme.Spread the word ... Last week, there were some rather significant shifts in the public discourse surrounding macroeconomic policy and challenges made to the orthodox economics taboos that have been used to prevent governments from acting in the best interest of the citizens. First, the Australian treasurer broke away from the government s previous obsession with fiscal surplus pursuit to announce that for the foreseeable future it was only going to concentrate on jobs and growth. In his statement, he basically refuted all the mainstream macroeconomic claims about fiscal deficits higher interest rates, lower private investment, lower growth, lower private sector confidence etc. There is really nothing left of the mainstream position now and any politician or economist that tries to resurrect the debt and deficit narratives of the past will find it hard gaining the same politician traction that they were able to garner some years ago at the height of the neoliberal period. And, if that was not enough, a former Federal treasurer attacked the high priests of the central bank, demanding they buy up government bonds and help the government run Mountainous deficits to achieve full employment. The flood gates opened just a bit more after those interventions along the way to jettisoning all the mainstream nonsense that should have been abandoned decades ago.Spread the word ... 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.Spread the word ... On Tuesday (September 22, 2020), the ABS released the latest data for Weekly Payroll Jobs and Wages in Australia, Week ending 5 September 2020 which gives us the most up-to-date picture of how the labour market is coping with the on-going restrictions. This data provides more accurate estimates of the impact of the harsh Stage 4 restrictions that have been imposed in Victoria to address the Second Wave of the coronavirus. Overall, payroll employment has fallen by 0.9 points since July 25, 2020, when the lockdowns began in earnest. Unsurprisingly, payroll employment fell in the six-week period ending September 5, 2020 in Victoria by 2.8 points. Employment has also fallen in NSW by 0.5 points in the last 6 weeks. The Victorian case is about lockdown. NSW is in decline because of failed macroeconomic policy, which goes to the performance of the federal government. The fact that the first recovery period failed to regain the jobs lost was an indicator that the policy intervention was insufficient. The second-wave job losses tell us clearly that more needs to be done by the Federal government. I provide some clues as to where an extra $100 billion might be spent below.Spread the word ... Sponsorships Sought MMTedWe are currently seeking sponsors for our educational venture - MMTed. Any help will be much appreciated.MMT Macroeconomics Textbook March 2019Now available for purchase For details.2017 bookReclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal WorldCo-authored with Thomas Fazi.PurchaseGo to the Reclaim the State Project Home Page for more details.2015 bookEurozone Dystopia: Groupthink and Denial on a Grand Scale 2015Edward Elgar CatalogueChapter 1 – for free.2008 bookFull employment abandoned: shifting sands and policy failuresAvailable from Edward Elgar UKGoogle Books LinkOther BlogsNew Economic PerspectivesWarren MoslerBruce McFarlingHeteconomist

TAGS:Monetary Theory Modern 

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