Presentation to Economic Society of Australia

It’s Wednesday and I just finished a ‘Conversation’ with the Economics Society of Australia, where I talked about Modern Monetary Theory (MMT) and its application to current policy issues. Some of the questions were excellent and challenging to answer, which is the best way. You can view an edited version of the discussion below and then enjoy The Meters.

Economic Society Presentation – May 25, 2022

Here is an edited version of the discussion including the Q&A section. The whole session ran for 52 minutes including introductions etc.

The production quality – resolution, sound, etc – is not the best because it was taken of a Zoom recording on low resolution. The video was created by the organiser – the Economic Society of Australia.

I did what I could to enhance the quality of this edited version – at times you will not cuts which corresponded sometimes to degraded audio.

Thanks to Belinda and Diane for their work in organising this.

Inflation may be peaking in Europe

There was also some consternation about the annual Euro area negotiated wage growth for the first-quarter which rose to 2.8 per cent.

The usual Pavlov reaction from mainstream economists was that it signalled a need for the ECB to intervene quickly and scrap its asset purchasing program and start hiking rates.

They should have read the latest – Deutsche Bundesbank Monthly Report – for May 2022 (in German).

In the opening chapter – Die Wirtschaftslage in Deutschland im Frühjahr 2022 (the economic situation in Germany for Spring 2022) – we read:

1. “Der deutsche Arbeitsmarkt entwickelte sich im ersten Vierteljahr 2022 ausgesprochen günstig” (German labour market is evolving well in the first quarter 2022).

2. “Damit kehrten jedoch auch die Engpässe von Arbeitskräften aus Vor-krisenzeiten zurück” (But the pre-crisis labour shortages returned) – why? because of Omicron (workers getting sick) and the Russian invasion.

3. “Die Tarifverdienste stiegen im Winter 2022 deutlich stärker als im Herbst 2021. Sie erhöhten sich gegenüber dem Vorjahr um 4,4%, maßgeblich wegen hoher Sonderzahlungen und Corona-Prämien. Die um solche Sonderzahlungen bereinigten Grundvergütungen legten hingegen lediglich um 1,6 % zu. Die Effektivverdienste dürften im ersten Quartal vor allem aufgrund im Vorjahresvergleich spürbar niedrigerer Kurzarbeit noch kräftiger gestiegen sein als die Tarifverdienste”

This is the important part – summarising – Winter 2022 negotiated wages rose more sharply than Autumn 2021 – 4.4 per cent annual.

Why?

“mainly as a result of high one-off payments and coronavirus bonuses”

“By contrast, after adjustment for such one-off payments, basic remuneration was up by only 1.6%.”

So once we take out this one-off boost in Germany, the Euro wide area negotiated wages outcome is likely to be around 2 per cent for the year – which I don’t need to remind anyone is very low and not pushing the inflation rate.

Further, the latest – Flash Euro PMI – came out yesterday (May 24, 2022), which provides a very current indication of what is going on.

The headline read in part “Cost pressures ease for the second month”.

Among other quotes:

1. “Factory output continued to be constrained by widespread supply shortages, with the Ukraine war and China’s lockdowns having exacerbated existing pandemic-related supply chain pressures.”

2. “Slightly slower rates of inflation were seen for both goods and services, principally reflecting the slower growth of costs recorded during the month.”

3. “there are signs that inflationary pressures could be peaking, with input cost inflation down for a second successive month and supply constraints starting to be less widely reported”.

The takeaway?

Transitory.

Once all these supply disruptions dissipate, inflation will fall rapidly.

Tragic farce of all time

Republican politicians in the US sending the victims of gun violence – including massacres of children – their ‘thoughts and prayers’.

Just ban the f**k**g guns!

Without the guns there can be no mass shootings.

Levy Summer Seminar 2022

I will be presenting in several sessions at the – Levy Institute 2022 Summer Seminar – which runs from June 11-18, 2022.

If you are interested in attending (I am not sure whether spaces remain) you can find details at the site.

This will be my first international flight since February 2020 and I have a good stock of masks at hand.

It will be great to reconnect in person with some of my MMT mates in the US and to talk MMT with those who seek to learn more.

Music – The Meters

This is what I have been listening to while working this morning.

One of the best funk bands of the 1970s was – The Meters – and they remain one of my favourites on my regular play list.

This track – Ain’t no use – is on their fifth studio album – Rejuvenation – which was released in 1973 and is a classic of its type.

I remember the day I purchased this album sometime in 1975.

You here their lines in so many records since such was the influence of this band.

The guitarist – Leo Nocentelli – has it down for sure.

All that syncopation drives a person crazy with delight.

That is enough for today!

(c) Copyright 2022 William Mitchell. All Rights Reserved.