Jacob Greber kidnapped by aliens!

We are sorry to report that the AFR’s US correspondent has been kidnapped by aliens and felt the cold kiss of a rectal probe today:

Australia’s treasurer hunkers on the top floor of his department’s Langton Crescent HQ in Canberra putting final touches on the government’s finances.

…The reason? Inflation has reappeared, seemingly out of nowhere after decades of respite. Years of unfettered deficit spending funded by central bank money “printing” has produced an overheated economy.

…A visit by US President Alexandria Ocasio-Cortez several years earlier convinced parliament to strip Martin Place of its interest rate-setting powers.

Aaaand cut!

This is some whack combination of monetarist black fantasy and simple false analogy. About as realistic as my own headline.

The world does not have an inflation problem. We’ve printed trillions to try to create one and gone absolutely nowhere. If we did have higher inflation we’d all be better off with the current onerous debt load foisted upon us by blood-sucking monetarists getting nicely eroded away by rampaging wages. It ain’t coming.

Neither is any removal of central bank powers. Nor is MMT on the verge of killing the private sector, plunging us into the Weimar Republic or killing unemployment (sadly).

MMT is a tool. It can be used for good or bad. Just like traditional monetary or fiscal policy.

In the circumstances of secular stagnation it makes perfect sense to use it. Especially since it can address wealth imbalances, aid deleveraging and prevent trade wars, all while lowering unemployment. If it works then wind it back.

No aliens, no probes, no fallacies.

Houses and Holes
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  1. We have inflation. Asset price inflation. To say that is not inflation is to ignore about half of your cost of living.

      • Not disagreeing with you, but doesn’t that assume that the extra money flows into wages, and not end up somewhere else? Else, it suffers the same trickle-down-is-good problems, doesn’t it…?

    • The scale of the GFC bail-outs, a gross miss-allocation of printed money to benefit the very entities who created the problem to start with, provides an excellent indication of just how much money you can pump into an economy with no inflationary affect:

      the War on Terror has cost America about $5.6 trillion since 9/11, or about $32 million an hour.

      The bailouts probably dwarf that effort. Most studies suggest it was a world-war-level mobilization of cash, a generation of savings used to plug a single hole.

      The Special Inspector General of the TARP put the gross government outlay at $4.6 trillion, with over $16 trillion in guarantees. Bloomberg concluded the rescue expenditure was $12.8 trillion. Fortune (which saluted the investment as hugely profitable for America in the end) put the number at $14 trillion. The Levy Institute at Bard College did probably the most extensive study, and put the number at $29 trillion.

      If a fraction of that money had have been directed to households – those that were in the trenches of this economic bloodbath – then the outcome would have been very different. If more institutions failed and their debts devalued or written off, not bought dollar for dollar by mates running the Fed, the outcome would have been vastly different. Instead unimaginable sums of money was used to ensure the banks, insurers and others survived to their great profit:

      The bank-state merger brokered 10 years ago this week socialized the risks of the financial sector, and essentially converted Wall Street into a vehicle for annually privatizing a big chunk of America’s GDP into the hands of a few executives. The same people who were minutes from being (deservedly) destitute 10 years ago are now a permanent aristocracy.

      Just look at the numbers. The average finance-sector salary last year was over $375,000, or five times the rate of the rest of the private sector. While the rest of the economy mostly ran in place, just the average Wall Street bonus grew 17 percent in 2017, to $184,220, or about three times the median income for an American household.

      We don’t run capitalist economies these days, as Chris Becker’s excellent post during early January (I think it was) so eloquently described. Nothing short of an economic collapse and a civil uprising will fix this wherever it has burrowed in. It is the paralysis tick on society, where the only growth is seen in the parasite, as the beast it feeds upon remains stunted and weakened.

  2. SupernovaMEMBER

    Finland used MMT for UBI and cancelled it after 3 years……seems the Govts additional “electronic digits” laundered into the unemployed bank accounts created significant addiction problems within the recipient population. Secondly cannot work out how MMT-UBI for everyone will continue to adjust Australia’s hyper-inflated property prices.

    • Not so keen on UBI. Think it;s based a false assumption that robots will steal all the jobs. They will lift productivity and release income rather.

      MMT directed at public programs makes a lot more sense and avoids addiction problems as well. I would go for massive R&D spending to created new shit to solve the world’s problems. Most of it would be waste but some pearls would appear and make it worthwhile as it repaired the underlying structural problems of inequality and peak debt.

    • Got a link?

      UBI recipients only claimed an average of 121 euros in sickness allowances in 2017, compared with 216 euros for non-recipients.


      So they felt happier and saw the doctor half as often. The recipients were already on the dole anyway, and removing the job search requirements made them feel healthier – putting in a UBI literally saves money (no wonder most economists want UBI).

      The UBI recipients were also more confident about getting a job than non-recipients, but the trial did not last long enough to see if they actually get a job.

      A UBI would give Aussie tenants an upper hand over foreign “students” who live 10 to a house and work here for $2/hour.

      Maryland introduced a bill to establish a UBI

      Portugal legalised drugs in 2001.

  3. Adambendickerson

    End comments are rather confused. MMT is not a ‘tool’. MMT is a theory that claims to accurately describe the functioning of sovereign monetary systems. It is either an adequate description or an inadequate description of such systems (i.e., it is either true or false).

    • Meh. You can frame it any way you like. In reality it is just accounting identities of GDP. In political terms it is either a monetarist disaster or a tool to lift demand.

      When you get enough repair and interest rates are much higher then stop it.

  4. So the world printed lotsa money after the gfc and we didn’t get “inflation”. Are you sure about that? Massive asset price inflation and the worst levels of inequality in generations is what I witnessed. I don’t see how MMT will result in anything different in practice. I can get why the MMT has traction as an ideal but ideals don’t translate into the real world very well. Communism is another wonderful ideal, we could try that again too, we just have to do it right this time!