AFR does hatchet job on Kohler MMT push

The AFR has today used a journalist to declare that a journalist has no authority to discuss MMT (I mean, how would he know?):

Out there, on the wild fringes of economics, modern monetary theory is picking up momentum.

MMT, as it is known, is a panacea for troubled times. Government deficits don’t matter, printing money doesn’t drive inflation, and central bankers can’t be trusted.

Although MMT has few mainstream adherents in the economics profession, in Australia the non-theory theory has picked up an influential disciple: Alan Kohler, a former editor of this newspaper and the face of the ABC’s finance coverage.

Kelton and the other MM theorists offer a devilishly attractive solution to the economy’s travails. Her book, The Deficit Myth, argues that governments can print and spend money without any long-term damage to the economy, and therefore should freely spend during the current recession, and well into the future.

The pandemic is a dangerous time for economy policy. Federal debt will reach $1 trillion by the end of next year, according to private sector estimates. Once the recession ends, society will need to turn its mind to which Australians are going to be responsible for the war-like bill.

MMTers argue that famous examples of money printing-driven hyperinflation – the Weimar Republic’s monetary policies helped trigger World War II – failed in execution rather than theory. The Germans should have turned off the presses when the economy could grow no faster, they say.

…Now that the ABC has decided to abolish the position of national economics correspondent, which was being used for reporting trips to Europe, perhaps it might appoint a trained economist to lead coverage of the defining economic event of our lives?

Serious times require serious analysis.

Sure does. So why doesn’t the AFR provide some instead this throwaway ad hominem?

Because the AFR was so selective in its hatchet job, Alan has published his answers to its questions on the matter independently:

Bubbles with winners like banks and real estate that the AFR can’t do without. No wonder terrified arrogance is its only riposte.

For the record, MMT as policy regime is not set in stone in any way. It could take the form of anything we like. My own idea is to use the central bank to fund giant Manhattan Projects for the public good rather than specific income streams for this or that specific group. One of those projects might be a new national business newspaper freed up from the influence of interest groups (who knows what that might achieve).

MMT does not need to undermine the inflation target.

MMT does not need to be unduly influenced by pollies.

MMT does not need to destroy capitalism as we know it.

Indeed, in part, MMT is about providing enough inflation that we get higher interest rates and give the economy back its cost of capital, the key to reviving the dynamism and inclusiveness of our liberal capitalist system.

Houses and Holes
Latest posts by Houses and Holes (see all)


  1. I’m thinking Kohler and his MSM MMT mates are neck deep in debt and looking for an inflationary bailout…..whilst arguing, of course, that MMT is not or will not be inflationary. Hansonomics.

  2. Afr, the useful idiots, putting out the debt scaries again. Debt scaries are required to keep the dumb masses religiously paying their mortgages.

  3. PaperRooDogMEMBER

    Whoever wrote that AFR piece obviously hasn’t read or hasn’t understood MMT, you can tell that from the 2nd para, as it’s dead wrong!

    • Aaron Patrick.

      Flick him an email asking why he thinks it’s appropriate to write an article on something he clearly hasn’t a grasp of or why he’s commenting on a book he hasn’t read.

      [email protected]

      • Just tried him … he’s on leave until July 12.

        Thought they’d get him to lob one over and them send him packing for a fortnight.

        Classic AFR. Setting the national business agenda, as paid for by business.

    • not really – but ‘where the money ends up’ is the difference that makes the difference

      • + many

        Would you like:
        a) a direct increase in aggregate demand (i.e. QE for the people)
        b) an indirect mechanism mediated by capital markets that’s not proved very successful in doing but inflate asset prices (i.e. QE for the financial institutions)

        • BabundaMEMBER

          And to quantify just how unsuccessful it’s been…the BoE estimated that all of 6% of the UK’s first round of QE actually found its way into the real economy

      • “Indeed, in part, MMT is about providing enough inflation that we get higher interest rates and give the economy back its cost of capital, the key to reviving the dynamism and inclusiveness of our liberal capitalist system.

        This is the pivotal point. Capitalism, without price signals, is a car without wheels. Few mainstream commentators seem to realise that an economy whose participants are prepared to lend money at zero interest rates is, quite fundamentally, broken.

    • drsmithyMEMBER

      Is MMT any different to QE? Other than where the money ends up?

      This is like asking whether there’s any difference between a nuclear bomb and a nuclear power station because they both use fission.

      • Simple not true and would strongly suggest you learn about MMT before making further assertions. Stephanie Kelton’s new book “Deficit Myth” a good place to start.

    • QE is NOTHING like MMT and is NOT consistent with an MMT Lens. All the MMT researchers I am aware of regularly argue against QE and debunk the monetary economic theory upon which it is founded. Here is a link to a discussion by Bill Mitchell, one of the architects of MMT, about QE from 2009

      • BabundaMEMBER

        MMT prints money to lift demand. That is also the aim of QE. Bill simply makes the point that QE is a monetary instrument, MMT is fiscal (deficit spending). But when you boil it down they’re both trying to do the same thing. MMT just does it better because the new money is injected directly into the real economy.

  4. Aaron Patrick has form. Lots. He is well known for doing hatchet jobs on commentators who cross his constituents. He did an appalling one on John North.

  5. Unless the newly printed money is used to reduce the private debt load, I don’t see how the economy would cope with rising interest rates. Unfortunately, opening the fiscal floodgates, backed by the RBA, would be a signal to everyone that asset prices are going to keep rising and would actually encourage people to borrow more in anticipation. Once the inflation genie is out of the bottle it may not be so easy to put back in.

  6. The inflationary crisis was not a major cause of WW2. The major economic cause were the austerity policies pursued by the Weimar republic and Japan following the 29 collapse and depression. Paradox of thrift.

    Sneaky AFR

    • simon woodMEMBER

      I thought the major cause of WW2 was the punitive peace treaty Germany had been forced to sign. The Treaty of Versailles didn’t just blame Germany for the war—it demanded financial restitution for the whole thing, to the tune of 132 billion gold marks, or about $269 billion today.

      • The Treaty of Versailles was absolutely a cause of grievance. The hyperinflation (1923) was a symptom of the attempt to pay of the reparations but itself was far less significant an event than the deflationary crisis after 1929. Saying that hyperinflation caused WWII is a long bow, but I absolutely agree with your point.

        The National Socialists rose to power putting forward a Keynesian stimulus program following the 1929 crash and depression. Both the SDP and the CDU were promoting austerity policies. The Nazis won democratically through the ballot box on the basis of these policies.

        The Japanese finance minister in 1930s attempted to implement a program of austerity in response to the deflationary crisis, including cuts to military spending. In response to these cuts, the Japanese military attempted to assassinate the finance minister, who died shortly after as a result of injury. Eventually, the finance minister position was filled with a military stooge, and the printing press was unleashed for the purposes of armament.

        Austerity doesn’t work. Earlier this year, Frydenberg said “this is no time for ideology” when discussing the government spending program. More recently, he did a 180 and said that “Australians know that there is no magic money tree”. They are shamelessly lying to the public. They know their ideas are rubbish, which is why when it comes to a crisis, they bail on them without hesitation… and thank Dog for that.

        • simon woodMEMBER

          Thanks for your great response to my comment. I really enjoyed reading it. You make some very salient points about the dangers of austerity.

  7. Jim's Central Banking

    Great post David.

    Just talking about MMT is exposing many a filthy neo-lib apologist: the AFR, the Kouk, and all manor of useless muppets that have been persistently wrong for there entire working lives, yet still manage to grift a crust from their dumb ideas.

  8. Stewie Griffin

    While it might be nice to think of MMT being used as a giant Manhattan project, the reality is likely to be that it will simply become a giant inequality pump, ensuring that the productive endevours of society are simply used to continue servicing the enslaving debts that our current cultural overlords wish to see preserved rather than written off.

    When they talk about printing just enough to avoid inflation, what they mean is just enough money will be created to ensure that the debt economy doesn’t become destablised.