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Tuesday, 11 September


The divide between mainstream macro and MMT is irreconcilable Part 2 Bill Mitchell Modern Monetary Theory

This is Part 2 of a three-part response to an iNET article (September 6, 2018) Mainstream Macroeconomics and Modern Monetary Theory: What Really Divides Them?. In Part 1, I considered what we might take to the core body of mainstream macroeconomics and used the best-selling textbook from Gregory Mankiw as the representation. The material in that textbook is presented to students around the world as the current state of mainstream economic theory. While professional papers and policy papers might express the concepts more technically (formally), it is hard to claim that Mankiws representation is not representative of what current mainstream macroeconomics is about. Part 1 showed that there is little correspondence between the core propositions represented by Modern Monetary Theory (MMT) and the mainstream. Yet, the iNET authors want to claim that the differences between the two approaches to macroeconomics only really come down to a difference in assignment of policy instruments jargon for MMT prefers fiscal policy while the mainstream prefers monetary policy as the primary counter-stabilising tool. Given the lack of conceptual and theoretical correspondence demonstrated in Part 1, it would seem surprising that there is really only just this difference in policy preference dividing MMT from the mainstream. If that was the case, then what is all the fuss about? Clearly, I consider the iNET article presents a sleight of hand and that the differences are, in fact, significant. So, in Part 2, I am tracing how the iNET authors came to their conclusion and what I think is problematic about it. This discussion will spill over into Part 3.

As an aside, I received several E-mails overnight of the hostile variety claiming that I was just cherry-picking quotes from Mankiws textbook to create a straw person representation of mainstream macroeconomics.

I was told that the iNET authors were operating at a much more sophisticated level than that expressed in undergraduate textbooks.

Well, sorry, but the iNET article explicitly says:

The economic analysis behind MMTs fiscal-policy argument is essentially the same as that used by orthodox policymakers and in undergraduate textbooks. The different conclusions drawn by MMT and the mainstream in policy do not come from a different understanding of the economy

It is better that you read things carefully before firing off personal invective via the E-mail system to people you do not know.

The iNET authors clearly think that the mainstream undergraduate textbooks provide students with an understanding of the economy and that MMT work is compatible with that understanding.

It is not. Not even remotely. Wh...


ALP TPP-11 caucus decision deeply disappointing, say community organisations AFTINET


September 13, 2018: By deciding to endorse the TPP-11 implementing legislation, the majority in the ALP Caucus has made a decision contrary to their own policies, and has deeply disappointed many community organisations, AFTINET Convener Dr Patricia Ranald said today.

AFTINET is a network of community organisations that advocates for fair trade based on human rights labour rights and environmental sustainability. Forty-nine diverse community organisations including church, public health, union, environment, aid and development, womens and human rights organisations wrote to ALP parliamentarians showing that the TPP -11 has many provisions which are contrary to ALP policy. These include special rights for international corporations to bypass national courts and sue governments in unfair international tribunals if they can argue that a law or policy will harm their investment. This is known as ISDS. The TPP-11 puts restrictions on future governments regulation of essential services and allows increased numbers of vulnerable temporary workers without testing if local workers are available.

We are disappointed that this decision has been made before the report of a Senate Standing Committee Inquiry due on September 18, and before a Senate legislation inquiry due on October 10.

We expect that the TPP-11 implementing legislation will be introduced into the Senate after October 10, and we will continue to advocate that the majority in the Senate vote against it.

We welcome Shadow Trade Minister Jason Clares announcement that the ALP will implement more transparent and democratic processes for trade agreements if it wins government, and that it will prohibit ISDS and removal of labour market testing in future trade agreements. However, this would not address these provisions in the TPP-11. Changes to the TPP-11 would require difficult negotiations once the deal is ratified, and it would have been more effective to delay implementation until such changes had been made, concluded Dr Ranald.

Download pdf here.


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Aussie Banks Prepare for Next Financial Crisis Daily Reckoning Australia

The big bad banks are back in the news again.

This time, however, its because of what one bank didnt do.

Last week, Westpac, ANZ and Commonwealth Bank all raised their home loan rates within days of each other.

Owner occupier or investor. It didnt matter which.

Rates went up.

Thats in spite of the fact that the Reserve Bank of Australia (RBA) hasnt increased the cash rate in two years.

Obviously, if three of the four major banks were increasing rates, it was only a matter of time for NAB to follow suit.

Except that NAB didnt raise rates.

And that may make NAB the riskiest bank in Australia right now.

Bumping up the cash on hand

The major banks arent the only ones increasing the mortgage rate. The smaller ones have as well.

Meaning that if NAB did increase rates, it wouldve been given some sort of cover to do so.

Yet in a surprising twist, NAB chose not to bump up the home loan rate.

We are listening and acting differently, said Andrew Thorburn, chief executive of NAB. We need to rebuild the trust of our customers, and by holding our NAB Standard Variable Rate longer, we help our customers for longer.

Once again, it gave our new Prime Minister, Scott Morrison, the chance to pretend he feels everyday people problems. He tweeted, Good call by @NAB not to lift mortgage rates. They seem to get it.

Yet, by congratulating NAB for not raising rates, Morrison ignores what is really happening with Aussie banks.

Theres a good reason why banks are raising rates when the Reserve Bank of Australia isnt.

Dear reader, I believe the Aussie banks are taking the opportunity to recapitalise.

In other words, Aussie banks are bumping up the coffers to protect themselves when years of dodgy loans finally rear their ugly heads.

Why 1% matters

International funding costs have gone up. Thats how the majority of banks are justifying their rate increases.

And that is true.

The bank bill swap rate (BBSW) is currently 0.5% higher than the 1.5% cash rate set by the RBA. This is the short-term lending rate our banks are charged by the wholesale funding pool.

What this means, though, is that major banks are paying around 2% to borrow internationally. Thats much higher than the RBA rate.

One viewpoint which has persisted since the royal commission is that the banks would rather absorb higher costs than risk aggravating the public further.

And that may very well be NABs take. The goodwill public relations exercise.

But heres the problem with that.

Not only will NABs position likely fail to last the bank leaves itself dangerously exposed to increasing costs.

Right now, most major banks in Australia are increasi...


Ethereum (ETH) Price Analysis: ICO Cashing out FUDs Impeding ETH Recovery "IndyWatch Feed Crypto"

A 33 percent dip in the last week means Ethereum sellers are stepping on the gas pedal. There are many theories around this rapid decline with most associating this dump with ICOs losing their patience and cashing out. Others are pointing to the influence of Bitcoin and the correlation between the two while some are merging this with mining woes and how unprofitable it has become. Either way, ETH like the rest of the market is on a down trend and trading below $200 with sellers aiming for $150.

From the News

Research has it that, in seven years time, cryptocurrency use would be a steadand we can see hints of that. Triggering this are events in Iran and Venezuela. There people are literally flocking to ETH, DASH and Bitcoin as a store of their life earnings in the face of run-away inflation and a melting economy. In numerous occasions, cryptocurrencies and individual coins as ETH were evidently bulwarks against government mismanagement and corruption. But, it could get better, more so when the coin become a main stay rather than a tool of speculation.

Backing this is a recent survey by SharePost showed that despite the market downturns, many are confident of a recovery and as the market bottoms, Australians are actually playing the contrarian card, loading coins which they believe would be much more valuable in years to come when they would be a stead in the global economy.

In fact with introduction of more stable coins as Gemini Dollar, which is backed one to one against the USD and overseen by the New York Department of Finance Service, their  creators are providing a lee way for investors to invest in crypto now that volatility has been contained. Gemini, an exchange by the Winklevoss Twins, allow users to deposit in USD and withdraw via their Ethereum based stable coin to an Ethereum address and vice versa. Whats unique about this new coin is that the smart contract has been certified to be secure and on a monthly basis, a publically certified auditing firm will run through the stable coin fiat account to ensure that pegging remains 1:1.

Ethereum (ETH) Technical Analysis

Weekly Chart

Ethereum (ETH) Technical Analysis...


The Perth Mint unveils 2019 Australian Bullion Coin Program "IndyWatch Feed Economics"

The Perth Mint unveils 2019 Australian Bullion Coin Program By Perth Mint via CoinWeek TDC Note Kooks and Pigs are looking awesome!! #### The Australian Lunar Series II bullion program comes to a close with designs celebrating the Year of the...

The post The Perth Mint unveils 2019 Australian Bullion Coin Program appeared first on The Daily Coin.


Exchanges Roundup: Startup Targets Crypto Micro-Investments, Kraken Denies Halifax Closure "IndyWatch Feed Crypto"

Exchanges Round-Up: Aus Start-Up Targets Crypto Micro-Investments, Kraken Denies Halifax Closure

In recent news pertaining to cryptocurrency exchanges, Perth-based Bamboo has announced it will launch an app designed to easily facilitate micro-investments in cryptocurrencies, Kraken has rejected an internet rumor that claimed the company had closed a Canadian facility amid security concerns, and Roboforex has increased the leverage available on its cryptocurrency markets to 1:50.

Also Read: Kucoin Expands Into Australia After $3M Bitcoin Australia Deal

Australian Startup to Facilitate Micro-Investments in Crypto Markets

Exchanges Round-Up: Aus Start-Up Targets Crypto Micro-Investments, Kraken Denies Halifax ClosureBamboo, a Perth-based startup, has announced its inte...


UK house price index +3.7pc Pete Wargent Daily Blog

Little Britain

Haven't checked in on UK housing for a while, with all the other political stuff going on in Blighty.

In spite of all the uncertainty, the UK now has a very low unemployment rate, with wages gradually picking up. 

The Halifax reported - in that uniquely British 3m/YoY sort of a way - that the average house price was +3.7 per cent in August 2018, up from +3.3 per cent in July 2018. 

The average house price is now 229,958, according to the Halifax index.

The number of first homebuyers continues to rise as has been the case for many years now - and now sits only 8 per cent below the peak of the preceding boom.

The Halifax cites Help to Buy as a key precipitating factor:

'The growth in first-time buyers means they have increased as a proportion of all mortgage financed house purchasers from 38% in 2008 to more than half (51%) in 2018. 

This share has picked up since 2013 when the Help to Buy Scheme was introduced, which has given 128,317 first-time buyers (81% of total purchases under the scheme) a step on to the housing ladder over this period.'


Omotenashi: The Business Norm Underlying Low Economic Productivity in Japan Pacific Money The Diplomat

One idiosyncrasy unique to corporate Japan prevents the reduction of unessential workers to improve productivity.

Monday, 10 September


Kucoin Expands Into Australia After $3M Bitcoin Australia Deal "IndyWatch Feed Crypto"

Ku Coin Expands Into Australia After $3M Bitcoin Australia Deal

Kucoin is expanding into Australia after it agreed to invest $3 million in Bitcoin Australia. The deal is seen as a win-win for both cryptocurrency exchanges, each seeking to expand into its own direction Kucoin establishing a niche in the rapidly growing Australian market. Bitcoin Australia is targeting the UK next.  

Also read: As Zimbabweans Struggle For Cash, Even The Countrys Only Bitcoin ATM Has Run Dry

Kucoin Gets Leg Up In Australia

Ku Coin Expands Into Australia After $3M Bitcoin Australia DealMr. Gan

Kucoin chief executive Michael Gan on Sunday announced the Singapore cryptocurrency exchange had injected $3 million into Bitcoin Australia in a deal that is expected to grow its footprint in Australia.

Now, I would like to inform you about our latest key partnership, Gan said in an update on Twitter. I have been told that some users noted that Kucoin has accomplished investing in Bitcoin Australia, a leading Australian cryptocurrency exchange. I want to confirm that this is true, he said.

Earlier, Rupert Hackett, Bitcoin Australias chief executive, told the ...


Brisbane median house price rises to $673,000 Pete Wargent Daily Blog

Brisbane closes the gap

The ratio of Sydney to Brisbane house prices recently came off a record high of 2.2, depending upon your preferred data source.

As this cycle progresses it wouldn't be surprising to see that ratio close back towards 1.

The REIQ reported today that Brisbane's median house increased by 0.9 per cent over the quarter and 2 per cent over the past year to $673,000.

That's the highest ever figure for Brisbane.

Brisbane's median house price has increased by just over 20 per cent over the past five years.

The figure for the Brisbane LGA was closer to 30 per cent. 

The median unit price increased by a somewhat slower 1.4 per cent over the most recent 12-month period to $405,000. 

The only area to record a decline in unit prices over the past year was Logan, with a moderate decline of 1.3 per cent recorded. 



Singporean Crypto Exchange Invests $3 Million in Bitcoin Australia for International Expansion "IndyWatch Feed Crypto"

Singapore-based cryptocurrency exchange KuCoin has marked its foray into Australia with a multi-million investment in a regulated domestic exchange, part of a new joint venture. The Australian Financial Review is reporting that KuCoin has invested the AUD $3 million investment in Bitcoin Australia, a domestic exchange that enables bitcoin trading and ethereum buying, enabling the Continued

The post Singporean Crypto Exchange Invests $3 Million in Bitcoin Australia for International Expansion appeared first on CCN


The divide between mainstream macro and MMT is irreconcilable Part 1 Bill Mitchell Modern Monetary Theory

My office was subject to a random power failure for most of today because some greedy developer broke power lines in our area. So I am way behind and what was to be a two-part blog series will now have to extend into Wednesday (as a three-part series). That allows me more time today to catch up on other writing commitments. The three-part series will consider a recent intervention that was posted on the iNET site (September 6, 2018) Mainstream Macroeconomics and Modern Monetary Theory: What Really Divides Them?. At the outset, the iNET project has been very disappointing. Very little new economic thinking comes from it its offerings are virtually indistinguishable from the New Keynesian consensus that dominates my profession. The GFC revealed how impoverished that consensus is. It has also given space for Modern Monetary Theory (MMT) to establish itself as a credible alternative body of theory (and practice). The problem is that the iNET initiative has been captured by the mainstream. And so the Groupthink continues. The article I refer to above is very disappointing. It claims to offer a synthesis between Modern Monetary Theory (MMT) and mainstream macroeconomics by way of highlighting what really divides the two schools of thought. You might be surprised to know that according to these authors there is not much difference only that mainstream economists think that monetary policy should be privileged to look after full employment and price stability and MMT economists (apparently) think fiscal policy should have that role. The authors claim that for the on-looker these minor differences are opaque in terms of outcomes (if the policies are applied properly) and suggest that there is really no reason for any debate at all. Accordingly, the New Keynesian consensus is just fine and the mainstream economists knew all the MMT stuff all along. It is an extraordinary exercise in sleight of hand engineered by constructing the comparison in terms of two approaches that cull the main aspects of each. The real issue is why would they waste their time. Degenerative paradigms (or research programs in Imre Lakatos terminology) typically try to absorb challenging paradigms that, increasingly have more credibility and appeal, back into the mainstream through various dodges special case, we knew it all before, really nothing new, etc. This is Part 1 of my response. It wont be an easy three-part series but stick with it and I hope it gives you a lot of insights into the abysmal state of the mainstream macroeconomics profession.

I wasnt surprised by the discussion. Resistance from the dominant paradigm is part of the evolution of a new idea.



Australia is not on track to reach 2030 Paris target (but the potential is there) "IndyWatch Feed Economics"

Progress in reducing Australia's emissions has stalled in most sectors of the economy and reversed overall. ClimateWorks Australia's Anna Skarbek looks at the country's chances of meeting its Paris commitment.


Time to join the generation game? John Quiggin

As regular readers will know, Ive spent a generation or more [1] deriding what I call the generation game the idea of dividing the population up into birth cohorts (categories based on year of birth) such as Boomers, X-ers and so on (Millennials werent invented when I started) and assigning them various supposed characteristics.  Most of the time, this exercise is little better than astrology. To the extent that there is any semblance to reality it simply reflects the fact that young people are, and always have been, different from old people.

But just as I have managed to get some traction with this idea, genuine cohort effects have emerged in politics in many countries. The sharpest case is Britain, where people over 65 voted massively for Brexit in the referendum and the Conservatives in the recent election, while those aged 18-24 went even more sharply the other way. As the map linked here shows, if only 18-24 year olds were voting, based on current polling data, the Conservatives would not have won a single seat. If only those over 65 voted, the Conservatives would win 575 and the combined opposition 54.

This is a massive difference and cant as far as I can tell be explained by differences in education, ethnic composition and so forth.  It also represents a huge shift on the part of older cohorts, who were part of the electorate that gave Labour three terms not long ago. While there is some tendency for people to become more conservative as they age, its normally much more limited than this.

The explanation in simple terms, is Brexit. Most of the time, elections involving competing visions of the future in the UK case, hard-line neoliberalism vs Third Way Blairism.  In the course of such debates, both sides routinely claim to be on the right side of history, to own the future and so on. By contrast, Brexit represented an appeal to a (partly imaginary) past, against the present and the future. With the exception of a handful of neoliberal ideologues, who saw Brexit as a path to a free-market future, most Leavers were motivated by nostalgia for the glories of the past, and were willing to sacrifice the interests of the young to make a gesture in that direction.

Whats true of Brexit is true, though not to quite the same extent, of the culture war politics that have now become dominant on the political right in much of the English-speaking world. Its driven in large measure by old men who lost the cultural battles of the 1960s and 1970s, and have never got over the fact.

The result is a situation where the right is appealing directly to members of older age cohorts with the result that young...


Australian State Pilot Puts Driver's Licenses on a Blockchain "IndyWatch Feed Crypto"

Australia's New South Wales government is turning to blockchain for a state-wide test of a driver license digitization program slated for November.


The Lucky Country is Out of Luck Daily Reckoning Australia

My analysis suggests that the Australian economy faces a grim future. And its my belief that you need to start preparing yourself for what I see as a coming recession down under.

If youre 27 years old or younger, Australia has not had a recession in your lifetime.

If youre under the age of 40, Australia has not had a recession in your adult lifetime.

Australias last recession ended in June 1991, over 27 years ago.

The economy shows no signs of entering a recession right now despite slowing growth in recent quarters.

During my first visit to Australia in 1982, I frequently heard Aussies use the term Lucky Country to describe their homeland.

The phrase was new to me but had been around for a long time. The term gained traction after 1964 as the result of the publication of a book, The Lucky Country, by Aussie native Donald Home.

The irony of the book title is that Home used it critically, but Australians have adopted it as a term of endearment.

Home argued that Australians were not particularly entrepreneurial or hard working. Instead they road on the coattails of Brits, Americans and Canadians who used their democracy and capital markets to create real wealth.

Australians were basically free riders on a system built by others.

What the Australians did have was abundant natural resources and physical distance from the problems of the world that enabled them to grow rich without doing much to earn their wealth or democracy.

This was mostly true in 1964, and not much has changed today.

Resources and property drove prosperity

A recent Economic Innovation Index published by The Economist ranked Australia 22nd in innovation, well behind tech powerhouses such as the US, Japan and Germany. Australia also fails to crack the top 20 in similar indices.

Despite that critical thesis, Australians adopted the title fondly. Their reasons are not different from the ones spelled out by Home, but the attitude is positive.

There is abundant natural resources such as gold, iron ore, bauxite, lead, coal, uranium, zinc, lithium and much more.

A moderate climate, a relatively small population about 25 million in the worlds sixth largest country by land mass a liberal immigration policy, the English language and a good rule of law have combined to make Australia one of the most prosperous countries in the world and a favoured destination for direct foreign investment.

Australians are not disturbed by being the Lucky Country.

Theyre just fine with that status. As a real Aussie would say, Good on ya.

Economic data backs up this attitude. Housing data is not the full measure of economic success, but its a good proxy for wealth creation and general prosperity. The chart below shows Australian population growth and the increase in housing prices since Aust...


Centre Alliance, Greens oppose TPP-11, Labor under pressure AFTINET

September 10, 2018: The Australian reports that Senator Rex Patrick has said the Centre Alliance will block the implementing legislation for the TPP-11 unless the deal is significantly amended, which would require re-opening of negotiations with 10 other countries.

The Greens have publicly opposed the TPP-11. The Katter Australian Party have also said they will oppose it, meaning that if Labor says no, the legislation will not pass the Senate.

The Australian Council of Trade Unions opposes the TPP-11, arguing it will weaken labour-market testing and empower multinational companies to sue governments using investor-state dispute settlement.

ACTU president Michele ONeil told The Australian on September 9: We believe its a bad deal for working people and encourage all parties to vote against the enabling legislation.

Two Senate inquiries into the TPP-11 are due to report on September 18 and October 10.

The Morrison government is pressing Labor to support the legislation. Labors caucus is debating a formal position on whether or not to support the TPP-11 this week. If the implementing legislation is not passed, Australia would not ratify the TPP-11 which the Turnbull government signed in March this year.


Nigel Farage, Melbourne, Australia! Pts 1& 2 (Videos) "IndyWatch Feed Economics"

Nigel Farage, Melbourne, Australia! Pts 1& 2 Videos Part 1 Part 2

The post Nigel Farage, Melbourne, Australia! Pts 1& 2 (Videos) appeared first on The Daily Coin.


Monday Message Board John Quiggin

Another Monday Message Board. Post comments on any topic. Civil discussion and no coarse language please. Side discussions and idees fixes to the sandpits, please.

If you would like to receive my (hopefully) regular email news, please sign up using the following link

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