It’s Wednesday and I am now ensconced in Kyoto, Japan for the months ahead. I will report on various aspects of that experience as time passes. Today, I reflect on a debate that is going on in Australia about the situation facing live musicians. Should promoters be able to employ them for poverty wages including ‘nothing’ while still profiting or should they be forced to pay the musicians a living wage. You can guess where I sit in the debate.…
We can change that to, "Everyone should be paid a living wage." Then we could have a debate over the various ways to accomplish this.
Bill goes on to say this.
My position is clear – any worker should be paid a living wage at a minimum.
Bond markets are finally getting interesting, with the Bank of England launching emergency purchases to restore order in the gilt market. Since I am not in constant contact with people trading gilts, I will just offer a tentative description of what seems to be going on, and what it “really means.”...Bond Economics
- The leakages and explosions at the Nord Stream and Nord Stream 2 pipelines take the European energy crisis to another level.
- Analysts are worried that the leakages and explosions on both lines are not an incident but linked to the launch of the Baltic Pipe.
- A disruption of Norwegian energy supplies to the European Union or the UK could lead to faster depletion of natural gas storage facilities in Europe this winter.
I was passed a link to the paper “Exchange Rate and Inflation under Weak Monetary Policy: Turkey Verifes Theory” by Gürkaynak, Refet S. and Kısacıkoğlu, Burçin and Lee, Sang Seok. (They used Turkey, and not the apparently preferred Türkiye.) It was claimed by a well known blowhard economist to tell us something about MMT — but to be clear, that was an assertion by someone who makes a living by being wrong about macroeconomics, and not the authors of the paper. Although it has some relevance to some debates about MMT, it is a stretch to say that is telling us much that is useful.…Bond Economics
Today, I am skipping my Japanese language class and heading to the airport. I am taking up a position at Kyoto University under a JSPS Invitational Fellowship. I am working with the team in the Resilience Unit there on a project studying the design of fiscal policy for building national resilience using Modern Monetary Theory (MMT) principles. Resilience is an important part of the degrowth and deep adaptation agenda and I will spend some months there working on with other researchers. The – Japan Society for the Promotion of Science (JSPS) is ‘Japan’s sole independent funding agency dedicated to the advancement of science’ and is overseen by the Ministry of Education, Culture, Sports, Science and Technology. I am very privileged to receive one of the invitations. So from tomorrow I will be in Kyoto and depending on commitments my blog posts might be a little less regular although I think I will be able to continue the usual output. Now, it is time to put my Tuesday languages class into action – along with Google translate! Some travelling music follows....Bill Mitchell – billy blog
No bueno….
Just three legislative days remain before funding runs out. https://t.co/xUQPZtzF10
— ABC News (@ABC) September 26, 2022
Everyone insisted that the Bank of England (BoE) needed to say something following the financial turmoil that began on Friday and continued over the weekend. The BoE has now spoken. Sounds pretty dovish to me....
Actually, the Bank concludes with, "accordingly. The MPC will not hesitate to change interest rates by as much as needed to return inflation to the 2% target sustainably in the medium term, in line with in its remit." (emphasis added). This is not all that "dovish." The BoE is saying it will act aggressively through monetary policy, which markets generally want to hear.
This is an example of single-variable-in a-linear-equation thinking, which is the basis of contemporary monetarism. This hypothesis (in a discredited theory) is that the interest rate set by the central bank as the independent variable determines the inflation rate as dependent variable in a linear function. While it is not a directly linear relationship owing to "friction," monetary policy is assumed to work with some unforeseeable lag as it works through the system (the same assumption as sanctions).
Single-variable thinking when dealing with complex adaptive systems like socio-economic systems is a logical fallacy underlying a "dogwhistle" or "meme" cognitive-affective bias. Central banks use it to influence expectations. It is a fallacy since, as Keynes observed, many more causal variable as involved as well as shifting circumstances, some of which are unforeseeable owing to emergence in a complex adaptive system. The number of variable and their relationships are unknown (epistemological uncertainty) and the emergence cannot be known from the initial conditions (ontological uncertainty).
The question is whether central bankers know this is a just dogwhistle that will influence the market even though there is little substance to it, or they actually think it works as assumed.
The LensThe LensCut taxes. Cry Broke. Defund the public sector....
GOP has goaded the Dems to sacrifice the current benefit to their political party in a defense of the Platonist theory of Monetarism…
"74% of Americans say that the economy is in a bad state right now — and not only that, you have independents thinking Republicans would do a better job handling the economy," says ABC's Rachel Scott.
— RNC Research (@RNCResearch) September 25, 2022
"That all points to an extraordinary set of challenges for Democrats." pic.twitter.com/3fZnAti2sj
The public debate is conditioned by who gets a platform in the mainstream media. Even those publications that purport to be informed and appeal to a more reasoned type of reader are highly selective in who they give a voice to. I see this as a huge constraint in advancing alternative ideas that challenge the mainstream narrative and the vested interests that support it. The problem is that on economic matters these vested interests have not only captured what we might call the conservative voice. They also dominate and craft the so-called progressive agenda such that Green groups and movements, for example, are indistinguishable on macroeconomic matters, which makes it hard to contest ideas that are abroad. The UK Guardian, for example, thinks it presents a progressive angle on issues and is ‘above’ the crudity of the tabloids. But it regularly gives voice to writers who promote macroeconomic fictions and refuse to give space to those who challenge these fictions. Today (September 26, 2022) for example, it published am article – Without radical tax reform, Australia faces an insoluble public finance problem – by one Satyajit Das, who gets regular Op Ed columns in the Guardian and appears regularly on Australian public radio. His analysis distorts the public debate. Selective platforming is a blight in our media....
This morning, I went (back) down the rabbit hole on the sterling crisis that supposedly drove the British government into the arms of the IMF in 1976. I’m not a historian of British economic history, but other MMT economists (and some non-economist MMT scholars) have written at length about the period. And I mean at length.…
It’s one thing when a bombastic TV personality goes on a mini-rant about “printing money” but it’s another when fellow scholars and academics go along with the misrepresentation of MMT. Pointing to some basket case economy—the Weimar Republic, Zimbabwe, Argentina, Venezuela, Sri Lanka, Turkey, or even the UK—and squawking about MMT might make for entertaining television, but you’re telling on yourself when you demonstrate such willful ignorance....How much is due to ignorance and how much about attacking a challenge to the conventional narrative?
Credit Suisse's annual Global Wealth Report.
- Credit Suisse found China's median wealth outpaced Europe's in its 2021 Global Wealth Report.
- The average Chinese citizen has a wealth of $26,752, around $60 more than the average European.
- Chinese wealth has surged in the past two decades, with median wealth per adult growing more than eight-fold.
China shifts US bond holdings offshore, potentially beyond the reach of any future currency sanctions, report
- China cut US debt holdings by 9% from the end of 2021 to July this year, according to Nikkei Asia.
- Meanwhile, the Cayman Islands saw a $38.5 billion rise in China's Treasury holdings, and Bermuda saw a $7 billion increase.
- China may be protecting dollar-denominated assets from any future sanctions like the kind that froze Russia's foreign currencies.
Liz Truss perhaps looking to do a Trump/Erdogon style smack down on the BOEs monetarist morons…
Boris Johnson's likely successor wants to review the Bank of England's mandate. And some are worried https://t.co/HbQx08y8p0
— The News with Shepard Smith (@thenewsoncnbc) August 31, 2022
Effect on 10 year financial asset prices of dumb monetarist Democrat people directing their dumb monetarist central bank people to increase the risk free policy rate to “fight inflation!” due to the goading of dumb monetarist GOP people whereby the US 10-yr this year goes from 1.6% in January to now 3.7% yesterday:
1.6%
3.7%
Same financial asset, price falls from 853 to 695 or about a 18.5% reduction… simply due to an adjustment in govt interest rate policy no “inflation!” fairy responsible or wtf these deranged monetarist morons brains can conjure up for them…
This policy adjustment has a similar effect on all financial assets stocks, bonds, CRE, annuities, etc… so here we are…
MAGA victory lap…. monetarist GOP 100% goaded the monetarist Democrats into trashing the US financial economy now a month before the midterms… UFB how dumb the Democrats are…
Yesterday, I wrote about so-called “Trussonomics,” asking, “Can Liz Truss Do It?” We had some idea what “it” was, but we have a clearer picture with the release of today’s so-called mini-budget.…The Lens
I normally stay away from commentary on budget statements, in that the analysis is mainly political in nature. In recent decades, the macro fiscal effects tended to be tepid and over-rated for political reasons. (The pandemic measures are the glaring exception, however, they were often enacted as stand alone measures and not part of the normal budgeting process. The same holds for the various fiscal measures enacted in 2008.) The recent “mini-budget” in the United Kingdom threw away that timidity. Since I have not been following the area closely, I will point you to Duncan Weldon’s piece, and offer a more theoretical response....Bond Economics
The global press is full of stories lately about how central banks are taking big losses and risking solvency and then analysing the dire consequences of government bailouts of the said banks. All preposterous nonsense of course. It would be like daily news stories about the threat of ships falling off the edge of the earth. But then we know better than that. But in the economic commentariat there are plenty of flat earthers for sure. Some day, humanity (if it survives) will look back on this period and wonder how their predecessors could have been so ignorant of basic logic and facts. What a stupid bunch those 2022 humans really were...
