Thursday, 29 January 2015

Around the Traps 30.1/15

It is time for Around the Traps.
Quite a bit in the European section due to Greece. I will update on the weekend.

Northern America
 Andrew Gelman ( Mainly Stats)
Genial Dave Giles (Econometrics)
nutting yet. Bad Dave
Dianne Coyle (Quirky + Book Reviews)
Vox Wonk

Wednesday, 28 January 2015

Fiscal Consolidation

I notice Judith Sloan got her knickers in a knot about when does a country undertake fiscal consolidation.
The answer is pretty easy. fiscal consolidation or austerity should be undertaken when times are good just as Keynes said way back in 1936.

The last time Sloan wrote about this topic The Kouk showed her figures were all contrary to those in the budget papers. I then looked at all Labor budgets but couldn't find in any Budget or MYEFO where Sloan could have got her figures from. We can be thankful she hasn't done that here! We should also note she never told us where she got those figures from.

I have to say there isn't a lot more one needs to add to this piece from the Kouk.

One might also add this from Simon  Wren-Lewis on Europe.

If a country under-takes fiscal consolidation too soon it risks destroying any recovery. We saw this in the USA in 1937 , in Japan in 1990s and even here when Wayne Swan brought down the most restrictive budget in history. Swam actually cut NOMINAL not just real spending.
Unfortunately for him and Australia with nominal GDP weak from the falling terms of trade it simply made the economy weaker and hence the budgetary situation got worse after getting better. The Deficit which fell from 2.9% of GDP to 1.2% of GDP consequently rose over 1% of GDP.  Even with low wage growth and stalling revenues we have a deficit of 2.5% of GDP! wow.

When you undertake fiscal consolidation you reduce the structural deficit. This impacts on the cyclical part of the budget which is far larger. Thus if you undertake austerity too soon then the economy will weaken.
Fiscal policy is quite potent. You fiddle with it at your peril!

Alas the peroxide princess believes national budgets are just like household budgets.
Some people are just like the Bourbons. Never learn, Keep on making the same mistakes.

Tuesday, 27 January 2015

Is Tony for the high jump?

Yesterday was interesting. both John Quiggin and Sinclair Davidson wondered where however both got their wonderings wrong.

John thought out loudly about Bishop replacing Abbot. He seemingly forgot her disastrous time as Opposition spokeswoman on Treasury. if she was to be put in as leader then Hockey would be removed as treasurer but Turnbull could not replace him as the right wing would not wear that.
Way too many problems for a change.

Davidson wants all AOs to be replaced by knighthoods and Dames. however given that Angus Houston still wants to be known as Angus and NOT Sir we can reasonably assume knighthoods in Australia are an embarrassment.
More so when you award one to the Queen's husband and is clearly inferior to the umpteen titles he already has. What exactly he has done in service for Australia is unclear. His best supporters said yesterday he was patron of a lot of causes in this land, A patron is merely a figurehead who does no work at all.  Oh dear.

The great problem the Liberals have is that there are NO people who one could say are leadership material. Moreover they are unlikely to do anything until much closer to the next election. Indeed by the time they think they may lose it could well be too late.

I still think the most important thing to examine on whether the government is re-elected or not is whether nominal GDP rises and gets back to trend levels. If it does the government will win. If it doesn't they will not.

Monday, 26 January 2015


Greece will have a new government elected on a platform of anti-austerity.

Now let us get its straight as Kruggers shows Greece has certainly done a lot to improve its budgetary position.
However as Tony Yates shows it cannot go alone.
The problem in Europe is that the new Government are not all that radical.It is the Germans who are very radical and very wrong.

The BIG problem is Europe is that the Germans , like the bourbons, have learnt nothing about their failures. Until the Germans stop living in their delusions and understand what is occurring in the real world Greece ( and Europe) will continue to idle.

Simon Wren-Lewis  makes, as usual, some sensible suggestions.

Sunday, 25 January 2015

Industrial Relations

The Productivity Commission will be examining the Industrial Relations system.

This is no bad thing. It is always good to review how things are going, to see if improvements can be made etc. There is no reason to think the Commission will not do a decent job in examining the present set up.

Critics of the present system such as Steve Kates, Judith Sloan and Gerard Henderson have egg all over their faces. They believe the previous government re-regulated the Industrial Relations systems.
However in the three key areas nothing has changed. We have not seen industrial disputation rise. Wages are not substantially above where we might expect them to be indeed they are growing slower than have ever been recorded and unemployment is not higher than otherwise might have been i.e. the NAIRU has not risen.

I would like to see similar action taken to what the Nationals did in New Zealand when they had only 96 pages of legislation. This improved the flexibility of the labour force , reduced the NAIRU and did not have the intention of destroying trade unions that Work Choices had. Indeed Work Choices was the greatest re-regulation we have witnessed in recent times.

I await the findings with great interest and hope.

Saturday, 24 January 2015

Cat Stevens

I never liked Cat Stevens a lot whilst most of my school  mates did.

This is the one song I did like.

On the road to find out.

Quite interesting lyrics

Thursday, 22 January 2015

Around the Traps 23/1/15

It is time for Around the Traps again.
Busy on the weekend but will try to update on Sunday

Northern America
Andrew Gelman (Mainly Stats)
Genial Dave Giles ( Econometrics)

Dianne Coyle (Quirky + Book Reviews)
Vox wonk