Raise the Rate: Thrive on Twenty-Five

For an extended amount of time economists have been arguing for an increase in real wages.

If we take 1970 as the index year for minimum wage, we can see up until 2016 that productivity grew by 184% and wages grew by 137%. There is a 47% difference between the two.

Source: http://www.global-isp.org/wp-content/uploads/PN-117.pdf

We can see from looking at the graph that productivity and wages were fairly consistently in line with one another until the early to mid-eighties.

Alternatively, we could bring that year forward to 1997 where we can see at least wages and productivity were roughly in line but how consistent we do not know as the chart does not go far back enough but this time around there is clearly a 19% difference between the two. This chart is up-to-date until 2021.

Source: https://mobile.twitter.com/Dan_Nahum/status/1435093314986934273/photo/1

Or again we can do it from the year 2000 where the wages and productivity grew at 113 & 125% respectfully – that’s only a 12% difference up until the year 2018. In this chart, we can see real wages flatlined in the early 2000s.

Source: https://aicd.companydirectors.com.au/membership/company-director-magazine/2018-back-editions/november/economist

So in all three cases if we take today’s minimum wage which we know hasn’t kept up with productivity.

$20.33*1.12= $22.77

$20.33*1.19= $24.19

$20.33*1.47= $29.89

Now if we take the average of these we get:

$76.85/3 = $25.62

It is fairly clear that we can make a case for the Federal Minimum Wage to be at least $25 per hour. We could go higher and ask for $30 per hour.

In the interest of wage justice, it is my petition to make the Australian Federal Minimum Wage set to $25 per hour so workers can reclaim their quality of life that has been eroded since at least the eighties. Join me in providing independence, security and dignity for all of our people.

Sign the Australian Real Progressives petition at Thrive on 25!

We don’t believe it will happen overnight but we believe it will happen.

P.U.S.H. Persist Until Something Happens!

How the RBA is Deliberately Crushing the Little Guy

Okay, lots happening behind the scenes, so apologies for the lack of posting, but here’s an article to make up for it.

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The Reserve Bank of Australia (RBA) raised interest rates again this week, claiming the move is necessary to keep inflation low and stable. But according to proponents of modern monetary theory, the RBA’s rationale is misguided. When the RBA raises rates, it is directly increasing the very measure of inflation it claims to be controlling. With wage growth stagnating and supply-side factors driving many price increases, higher interest rates will only slow growth, reduce government revenue, and diminish private-sector income. This undermines the RBA’s stated goal of sustainable employment and economic opportunity for all.

The RBA’s dogged focus on an arbitrary inflation target forces unemployment to rise and penalizes borrowers to privilege lenders’ interests. It’s based on an outdated “loanable funds” view suggesting higher rates attract saver funds and curb inflation. In reality, the RBA creates money electronically, so costs are not a real constraint.

As amateur MMT economist Darren Quinn notes, “Interest rate targeting results in deliberately creating unemployment to control inflation. This is unethical and counterproductive.”

Rate hikes redistribute income to banks and investors, depriving households and businesses.

Data shows mortgages have increased over $2,600 yearly from rate hikes, with another $4,000 hike expected if rates reach 4% – the prevailing view of experts like Centre for Future Work Policy Director Greg Jericho. For a $500,000 mortgage, repayments would rise $400 monthly. This policy disproportionately affects those who are struggling financially and benefits lenders, despite the fact that unemployment caused by the RBA’s actions is the real threat to price stability. When sustaining community welfare, should be policy’s goal, an understanding of money as electronically created by central banks for public purpose is essential.

It’s time to rethink RBA policy based on how modern money works, not discredited theories. Rather than weakening growth to control inflation, policy should support full employment and distributive justice. The RBA should invest in opportunities and well-being for all, not deprive the vulnerable to privilege powerful interests. An evidence-based approach recognizing monetary operations’ real potential could achieve stated goals, not continue producing results opposite rhetoric. With inequality deepening and recession risk rising, revamped policy improving living standards through job creation and investment in human potential is needed – not tightening harming most to advantage the few.

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And yes, I did quote myself!

Darren Quinn: A Personal Story

How I came to the Modern Money view.

How I came to the Modern Money view. I wrote this roughly three years ago – three years in October.

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I am a 40 year old white male that has slipped through the cracks due to my lack of knowledge and support over the years.  

I have had great difficulty in finding work and good social and romantic relationships.  At the time of writing I do not drive.  This is because I only learned in the last two years that to get your Ls learner licence all you have to do is pass a written test.  I am good at those sorts of tests.  This is something I should have known since I was 15/16 but I did not.  At no point during my life – until recently – was I informed of this.  It was just assumed that like all other teenagers that I would like to drive and thus learn to drive.  At that age I was not the most confident person and was the victim of much emotional bullying.  All I really knew at this point and for much of my life after was rejection.

The Internet wasn’t what it is today back then and barely a blip on most people’s radar.  I completed my Higher School Certificate and went looking for work.  I took a resume into every local business including when bank branches still accepted a paper form.  I never ever heard back from any of them.  I did this for six months before studying business and office administration where I learnt to keyboard type and many other skills.  So I tried applying for all those related jobs and once again all I received was rejection letters.

From high school bullying and social rejection to rejection for every job I ever applied for.  Hope breeds eternal misery.

So I tried my luck in doing a Bachelor of IT.  It took me longer to complete than I liked but still no work could be found even after volunteering myself for work experience for some big companies in the web hosting industries in the ACT.  Those companies got some short-term free labour and I was still not considered to be put on as a paid worker.  One positive interview for the Attorney-General’s department where the interviewers made me the most relaxed I have ever been in an interview and it was a welcome distraction and I even got the job.  Oh wait!  No I didn’t.  For one reason only, the employee that was leaving the role decided not to leave.

So here I am a social and economic pariah.  Can you imagine the damage that does to your confidence over 30 years?  Eventually I was diagnosed with anxiety and depression that was derived from all my traumas in home life, school life and work life having experienced a number of what they call small t traumas that ended up having a cumulative effect.

During this time I was quite naïve and perhaps still am in some ways as I believed what I was taught in school about civics.  That in parliament that legislation is debated on its merits and made into law so from about 2004 to 2009 I followed politics quite heavily and was active under a pseudonym on most political blogs.  One day economic journalist Peter Martin linked to Bill Mitchell blog and it intrigued me.  Somewhere in there I realised that the merits of anything are rarely debated and most people are hell bent on their own ideals – their own ideology.

Bill Mitchell’s blog gave me a crystal clear explanation of unemployment and why it was not my fault. You might even argue that is when my recovery truly began.

So I managed to switch my main focus from politics which was affecting me negatively to economics which seemed to be the language of public policy that politics is derived from.  

In my early days I was always a studious student and I applied that to the things written on Bill Mitchell’s blog and I really could not fault his logic.  I tried a number of times but I was usually satisfied with the answers.  I then discovered Warren Mosler, Stephanie Kelton and a number of others and then the Modern Money Network began and much more.

Before I fully understood Modern Money, I was drawn to the concept of the Job Guarantee as it was a decent wage offer for suitable living and I have been drawn to it ever since.  Once you understand Modern Money’s Job Guarantee and how the Modern Money scholars came to that conclusion you realise unemployment is a policy choice and the government deliberately keeps people unemployed.

There are many social costs to that but I won’t go into that here.

Officially of October 2019 we have an unemployment rate of about 5.3%.  I am one of them.  It is a bit difficult to deal in partial numbers so let’s call that 5%.

I learnt a quick parable back in the day that explained the joblessness figures.  The short version is if you have 100 dogs that are trained to find 95 bones. You’re always going to have at least 5 dogs without a bone.  Perhaps these dogs are not trying hard enough. So they implemented various forms of training and tests for the dogs that weren’t coming back with a bone.  No matter what they did there was still always a matter of at least 5 dogs coming back without a bone and not necessarily the same dogs either.

This is exactly the way the employment/unemployment system is set up.  There is a deliberate policy to keep many Australians unemployed and then the stigmatising effects of saying they’re not trying hard enough or not all jobs are advertised or they should move.  This would not change any outcomes ultimately.  There would still be 5 dogs without a bone or 5% unemployment even for those that desire to work.

A guaranteed job with decent wages and benefits would make all the difference to me.  I would be able to afford to eat after I pay all my bills including my housing costs.  I would be able to afford to travel to meet like-minded people.  I would be socially included.

All the things that I was told were my fault are not my fault; it is a feature of the system.  I have since sought treatment for my disorders and am on the path to recovery but I very much desire to be paid for any working activities I partake in so I can be more fully included in society.

Thankfully I am now more confident and in the early days of a relationship but my view on Modern Money has not changed as they are the only honest scholars I have found.

Keen/Mosler Follow-Up

Eric Tymoigne outlines the potential pitfalls of when dealing with foreign transactions, the external economy but notes there are workarounds. See the image below taken from the Levy Institute.

^{Mitchell, W. F. 2000. “The Job Guarantee in a small open economy.” In E. Carlson and W.F. Mitchell (eds.), The Path to Full Employment (supplement to volume 11). The Economic and Labour Relations Review. Sydney: Industrial Relations Research Centre, UNSW.}

^{Wray, L. R. 2007. “The Employer of Last Resort programme: Could it work for developing countries?” Economic and Labour Market Papers 2007/5. Geneva: International Labour Office.}

^{Kaboub, F., and F. Aliriza. 2019. “Modern Monetary Theory: A tool for the Global South?” Interview at the Rosa Luxemburg Foundation. Accessed July 16, 2021 at https://www.rosalux.de/en/publication/id/41284/modern-monetary-theory-a-tool-for-the- global-south/}

^{Sylla, N.S. 2020. “Modern Monetary Theory in the Periphery: What does MMT have to offer developing nations?” Interview at the Rosa Luxemburg Foundation. Accessed July 16, 2021 at https://www.rosalux.de/en/news/id/41764/modern-monetary-theory-in-the- periphery}

Reconciling Keen and Mosler

The US Real Progressives had a friendly debate between Steve Keen and Warren Mosler in 2018 on monetary transactions in trade surplus and current account surplus economies. You can see this in the first 10 minutes of this video. You can stop when Steve Keen says “Oh C’mon!” if you like.

From hereon out they continue to disagree.

What we can see is that although the process starts as money creation, the desire to get rid of currency risk pares that back to a simple exchange of savings.

Anatomy of an FX transaction

So in an attempt to reconcile these two positions, I used Neil Wilson’s Anatomy of a FX transaction and approached both Steve Keen and Warren Mosler separately. I approached them separately to avoid any bias towards or against America and Bill Mitchell. Wilson’s example uses a transaction between the UK and Norway.

I approached Mosler via email and Keen via Twitter.

Keen tweeted:

A "like" was all I had time for beforehand. Yes it makes sense to perceive it that way.

— Dr. Steve Keen (@ProfSteveKeen) February 28, 2022

Mosler wrote:

That’s for a specific situation where two clients each do their own fx transaction with their bank,

with the banks assuming subsequent fx risk. 

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So despite the media circus on RP, the two guests actually agree.

Neil Wilson writes:

What we can see is that although the process starts as money creation, the desire to get rid of currency risk pares that back to a simple exchange of savings.

So look at that no reserve currency involved and no antagonism to one of the co-developers of MMT.

Immediately after the debate, Bill Mitchell had up a post explaining the FX transactional mechanics identically to Mosler. It is easy to see in the images laid out below. Click ont he images to go to Bill’s site.

After all these steps in the transaction, what has changed is the ownership of the Yen and the Australian dollars – no new Yen and no new dollars have been created. There is no new net money creation as asserted by Keen in the opening video.

Recently, US Real Progressives have followed this up with their Macro N Cheese podcast with Steve Keen and Michael Hudson, linked below:

I confess to not having listened to it all since for me it was blood boiling erroneous as I like to think I demonstrated in good faith above.

A few weeks later US Real Progressives followed up with a Macro N Cheese podcast with Bill Mitchell on Imports and Exports. Also linked below.

Even more recently Bill was at the Levy Institute Summer Seminar where Professor Mitchell presented on Thirlwall’s law and how the external economy fits into Modern Monetary Theory MMT. I have placed it below but it echoes all the sentiments we have already covered.

Overall it recognises the financial constraints, real resources constraints and political constraints. Ultimately we are talking about political constraints. This aligns with what I wrote in my FAQs as quoted below.

What about Balance of Payments Constraints/Crises?

It depends. It depends on a lot of political factors and choices of both domestic and foreign nations.

Balance of payment crises are usually but not always a political confection of those who own or hold sway over particular foreign currencies along with political sanctions. Balance of payment issues are nearly always a political power play by an actor. However, there are developing nation situations where it can occur naturally due to inappropriate political choices.

None of these events negate anything espoused by Modern Monetary Theorists.

I highly recommend the Thirlwall’s law video above and clicking on the FAQs link to do the further reading.

Thank you for taking the time to read, watch and listen to this today.

Think Big, Think Different, Think MMT!

Ailing Albanese

Financial Review Headline April 13, 2022
https://www.afr.com/politics/federal/albanese-says-1t-debt-makes-jobseeker-rise-untenable-20220413-p5ad53

“If we are fortunate enough to form government, we will form government at a time when debt is heading towards $1 trillion, whereby you can’t repair all of the damage or do everything that you want to do immediately.

“You will be fiscally responsible, and one of the things I am being careful to do is all of the policies that we put out are fully costed.

“We can’t do everything given the circumstances in which we are in.”

Fin Review April 2022

As anyone that has been following Australian Real Progressives for some times knows, this is absolute 🐂 💩.

First of all the National Debt is just the net money supply – to put that simpler – the money in your pocket and bank accounts. So if the $1 trillion of debt is a concern to you, you are asking the government via the Australian Taxation office and other agents to take that money out of your pocket. Ask yourself…

So now we know the National Debt is not a real issue. The lives of many people living below the poverty line on Jobseeker is a real issue.

Do we have the means to fulfil their needs?

Of course we have the means. It is quite simple. Prime Minister Albanese could have done it on day one. It is so easy, I have already written about it. Now all we have to do is make sure Prime Minister Albanese, Treasurer Chalmers, Employment Minister Burke & Social Services Minister Rishworth gets the memo.

We don’t have to wait for the Jobs and Skills summit or the October Budget to get the job done. As our friend Jengis has shown us in his post on a Rational Debate on Spending:

special appropriations—a provision within an Act (that is not an annual appropriation Act or a supply Act) that provides authority to spend money for particular purposes (e.g. to finance a particular project or to make social security payments). Special accounts are a subset of special appropriations.

So it really is as simple as I wrote:

In particular reference to jobseeker payments that is section 1068 and change column 3B to $1235.38 and correct the other columns (e.g. couples) with which whatever multiple is in use.

All it would take is a simple vote!

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