Every so often you want to write about a subject but then find out someone has beat you to it.
Grog's Gamut has a good article about the fallacies behind the whining on the labour market.
He also has a good article on why the is no wage breakout as all.
Wages are doing little, Industrial disputes have done little and of course NAIRU hasn't thus changed.
Like most of the time the critics of the labour market have no evidence to back up their claims only slogans,
Wednesday, 21 November 2012
Monday, 19 November 2012
Fiscal Policy
Let us examine fiscal policy again.
Just to be helpful this is what CBA research has come up with.
12/13 13/14 14/15
$b $b $b
Budget balance at May budget 1.5 2.0 5.3
changed economic parameters -1.9 -5.0 -3.9
implied starting point -0.4 -3.0 1.4
policy decisions 1.4 5.1 1.9
budget balance 1.1 2.2 3.3
So the major problem has been economic parameters changing for the worse. In this we know what it is. Taxation revenues being much lower than one would expect. The government has made policy decisions which have meant the budget would be balanced.
This means fiscal policy has been contractionary for some time now. In other words it is detracting from GDP growth.
The public sector is making way for the private sector as Keynes said they should at this stage.
Moreover it is not detracting too much from economic activity as to produce a slowdown.
It is highly noticeable that most critics of fiscal policy never address this potential problem. Implied in their criticism is that fiscal policy should be much tighter. In some cases very much tighter.
It is not in the nation's interest to create either a slowdown or a recession.
At present cash rates are 3.25% and it appears the RBA is wary of letting them go below 3%. The $A has not fallen to levels one should expect given where commodity prices are.
The world economy is a different place to one would normally expect so tighter fiscal policy other than what has been announced does not seem appropriate at present.
Just to be helpful this is what CBA research has come up with.
12/13 13/14 14/15
$b $b $b
Budget balance at May budget 1.5 2.0 5.3
changed economic parameters -1.9 -5.0 -3.9
implied starting point -0.4 -3.0 1.4
policy decisions 1.4 5.1 1.9
budget balance 1.1 2.2 3.3
So the major problem has been economic parameters changing for the worse. In this we know what it is. Taxation revenues being much lower than one would expect. The government has made policy decisions which have meant the budget would be balanced.
This means fiscal policy has been contractionary for some time now. In other words it is detracting from GDP growth.
The public sector is making way for the private sector as Keynes said they should at this stage.
Moreover it is not detracting too much from economic activity as to produce a slowdown.
It is highly noticeable that most critics of fiscal policy never address this potential problem. Implied in their criticism is that fiscal policy should be much tighter. In some cases very much tighter.
It is not in the nation's interest to create either a slowdown or a recession.
At present cash rates are 3.25% and it appears the RBA is wary of letting them go below 3%. The $A has not fallen to levels one should expect given where commodity prices are.
The world economy is a different place to one would normally expect so tighter fiscal policy other than what has been announced does not seem appropriate at present.
Thursday, 15 November 2012
pot pouri
here are a couple of posts which are interesting
Dave Altig from the Atlanta Fed makes some interesting points about the 'fiscal cliff.
Noah Smith writes about Macro-economics and freshwater 'thought'
Jonathan Portes writes about bond yields , budget deficits and public debt.
Calculated risk has the latest USA inflation CPI readings
Dave Altig from the Atlanta Fed makes some interesting points about the 'fiscal cliff.
Noah Smith writes about Macro-economics and freshwater 'thought'
Jonathan Portes writes about bond yields , budget deficits and public debt.
Calculated risk has the latest USA inflation CPI readings
Wednesday, 14 November 2012
Gregory Peck
Gregory Peck starred in three of the best movies I have seen.
To kill a Mocking Bird was a movie based on the law and the court room. It still stands up well today.
Twelve O'Clock high was a thinking man's war movie. Peck changes a US squadron of bombers based in England . He eventually goes nuts though.
A Big Country is the thinking man's western. I couldn't do the movie justice so just watch it and enjoy it.
no gunfights though. Great cast!
To kill a Mocking Bird was a movie based on the law and the court room. It still stands up well today.
Twelve O'Clock high was a thinking man's war movie. Peck changes a US squadron of bombers based in England . He eventually goes nuts though.
A Big Country is the thinking man's western. I couldn't do the movie justice so just watch it and enjoy it.
no gunfights though. Great cast!
Favourite TV Programs
I have four programs I just love and I came to all of them by accident.
They are:
The Virginian,
The Mentalist,
Castle and
Jag
If you are curious about any of them then just look up wikipedia.
The Virginian is a Western but a sensible one. The title comes from the foreman of the ranch that the series delves on. We never get to know his name. Other characters in it was Trampas, Steve Hill, Randy Benton, Emmet Ryker ( only character not be to be on the ranch and my favourite).
One thing they had in common was that they were all fast guns.
The Mentalist is about Patrick Jane a former 'psychic' who assists the CBI by being able to read people and situations. The head of the team is Teresa Lisbon. A gal with a terrific body but a plain face.
The series is all about Patrick Jane (our own Simon Baker). There is no 'love interest at all.
Castle is about a a best selling author ( Richard Castle) helping out the NYPD. The head cop he works with is Kate Beckett. If you do not believe hairstyles can be the difference between a woman being attractive and a babe then check out Stana Katic's hairstyle. Once she has long hair she is absolutely gorgeous.
Naturally Castle and Beckett like each other and eventually fall for each other.
JAG is about lawyers in the US Navy. Sarah McKenzie is front and centre played by Catherine Bell. without doubt she is the most beautiful woman I have seen. She plays a woman who is both tough and vulnerable. The Series ended with her and Harm getting married.
(Catherine Bell is the only female I have seen who looks much better with short hair. Stana Katic is the typical female who looks much better with long hair. They are both beautiful women.)
The Virginian had a bad last season. Called the men of Shiloh it completely changed the emphasis of the series and it wasn't hard to understand why it stopped.
JAG on the other hand had a terrible first series. Once love not sex became the main ingredient for its characters and we saw both investigations and courtroom scenes it got better and so did the scripts.
Not much to say on the other two but they appear to be both near the end.
I only saw the Virginian on early morning on 7 mate before hurrying to work. I taped it after that. I haven't seen all the episodes.
I watched JAG because my wife like it. I like it as well. I have seen all the episodes. Last episode was a bummer.
I caught the Mentalist only by seeing an add for it on TV and since I liked Simon Baker from the Guardian I watched it. My two boys love it.
I caught Castle late one Sunday night and have been taping it ever since. I have to catch up on earlier episodes.
They are:
The Virginian,
The Mentalist,
Castle and
Jag
If you are curious about any of them then just look up wikipedia.
The Virginian is a Western but a sensible one. The title comes from the foreman of the ranch that the series delves on. We never get to know his name. Other characters in it was Trampas, Steve Hill, Randy Benton, Emmet Ryker ( only character not be to be on the ranch and my favourite).
One thing they had in common was that they were all fast guns.
The Mentalist is about Patrick Jane a former 'psychic' who assists the CBI by being able to read people and situations. The head of the team is Teresa Lisbon. A gal with a terrific body but a plain face.
The series is all about Patrick Jane (our own Simon Baker). There is no 'love interest at all.
Castle is about a a best selling author ( Richard Castle) helping out the NYPD. The head cop he works with is Kate Beckett. If you do not believe hairstyles can be the difference between a woman being attractive and a babe then check out Stana Katic's hairstyle. Once she has long hair she is absolutely gorgeous.
Naturally Castle and Beckett like each other and eventually fall for each other.
JAG is about lawyers in the US Navy. Sarah McKenzie is front and centre played by Catherine Bell. without doubt she is the most beautiful woman I have seen. She plays a woman who is both tough and vulnerable. The Series ended with her and Harm getting married.
(Catherine Bell is the only female I have seen who looks much better with short hair. Stana Katic is the typical female who looks much better with long hair. They are both beautiful women.)
The Virginian had a bad last season. Called the men of Shiloh it completely changed the emphasis of the series and it wasn't hard to understand why it stopped.
JAG on the other hand had a terrible first series. Once love not sex became the main ingredient for its characters and we saw both investigations and courtroom scenes it got better and so did the scripts.
Not much to say on the other two but they appear to be both near the end.
I only saw the Virginian on early morning on 7 mate before hurrying to work. I taped it after that. I haven't seen all the episodes.
I watched JAG because my wife like it. I like it as well. I have seen all the episodes. Last episode was a bummer.
I caught the Mentalist only by seeing an add for it on TV and since I liked Simon Baker from the Guardian I watched it. My two boys love it.
I caught Castle late one Sunday night and have been taping it ever since. I have to catch up on earlier episodes.
Budgets the cyclical and Structural parts
The budget has two basic parts to it.
The cyclical and structural parts. Both are estimates.
the largest is the cyclical. In good times there is more taxation , less social security etc.
The smallest but most significant is the structural part of the budget. It is this part that plainly either boosts the economy or takes away from it.
Treasury has naturally written on this.
The key part to remember is that changes in the structural part of the budget will effect the cyclical part of the budget.
Done the right way it combines with it. As the economy gets stronger and stronger you need to boost the structural surplus. This means the cyclical surplus will also be large.
What they have done in Europe is the complete opposite.
One little point is the effect of the structural part of the budget will be determined by whether it was deliberate or not.
If, as in Europe or even here, the structural deficit increased because tax revenues have changed and are considerably less then the effect on GDP will be negligible or even nought. If a Government spends money on infrastructure for example then the impact will be considerable.
The best way to see what way fiscal policy is going is to look whether it is adding or detracting from GDP.
If the structural deficit has increased but the budget is detracting from GDP then you know the structural deficit isn't worth looking at.
Greece is a good example to look at when looking at these two parts of a budget.
I said earlier they are only estimates. Ireland is the best example of what can happen with estimates. Before the GFC hit them Ireland's budget was in surplus and the structural deficit was around 0.5%. In essence it was balanced. (It should have been in surplus.)
After the GFC hit the country that small deficit suddenly rose substantially to around 6% of GDP.
This was all due to tax revenues or lack thereof.
Yet fiscal policy was detracting from GDP!
The cyclical and structural parts. Both are estimates.
the largest is the cyclical. In good times there is more taxation , less social security etc.
The smallest but most significant is the structural part of the budget. It is this part that plainly either boosts the economy or takes away from it.
Treasury has naturally written on this.
The key part to remember is that changes in the structural part of the budget will effect the cyclical part of the budget.
Done the right way it combines with it. As the economy gets stronger and stronger you need to boost the structural surplus. This means the cyclical surplus will also be large.
What they have done in Europe is the complete opposite.
One little point is the effect of the structural part of the budget will be determined by whether it was deliberate or not.
If, as in Europe or even here, the structural deficit increased because tax revenues have changed and are considerably less then the effect on GDP will be negligible or even nought. If a Government spends money on infrastructure for example then the impact will be considerable.
The best way to see what way fiscal policy is going is to look whether it is adding or detracting from GDP.
If the structural deficit has increased but the budget is detracting from GDP then you know the structural deficit isn't worth looking at.
Greece is a good example to look at when looking at these two parts of a budget.
I said earlier they are only estimates. Ireland is the best example of what can happen with estimates. Before the GFC hit them Ireland's budget was in surplus and the structural deficit was around 0.5%. In essence it was balanced. (It should have been in surplus.)
After the GFC hit the country that small deficit suddenly rose substantially to around 6% of GDP.
This was all due to tax revenues or lack thereof.
Yet fiscal policy was detracting from GDP!
Monday, 12 November 2012
Polls
Who are the best people to look at when examining polls here in Australia.
I think possum is possibly the best however another good one is here.
Either way with around one year to go until the next election we do not know with any confidence who will win.
We do know from 'qualitative polling' ( better known as using focus groups) that the hyperbole Tony Abbott used when criticising the ETS is now working against him as he turns out to be quite wrong.
Gillard is getting a bit of a lift but not enough as yet.
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