Kohler kicks MMT hornet’s nest

Alan Kohler went all MMT yesterday:

The RBA’s bond holdings represent only about 11 per cent of the government debt, well short of what the Fed or the ECB and Bank of Japan are doing, but it’s also true that the RBA has effectively financed all of the JobKeeper program with new money.

Is that bad? No, it’s good. In fact, why should future taxpayers fund any of the 2020 pandemic rescue stimulus?

That idea is based on the fallacy that the government is like a household or a business, and that what it borrows must be paid back. What’s the difference? Simply that a government issues its own money.

…Modern Monetary Theory, or MMT – for that’s what we’re talking about – does not suggest that the government has a magic pudding.

In a new book on the subject, called “The Deficit Myth”, economist Stephanie Kelton says: “Just because there are no financial constraints on the federal budget doesn’t mean there are no real limits to what the government can (and should) do. Every economy has its own internal speed limit, regulated by the availability of our real productive resources … If the government tries to spend too much into an economy that’s already running at full speed, inflation will accelerate.

“There are limits. However, the limits are not in the government’s ability to spend money or in the deficit, but in inflationary pressures and resources in the real economy. MMT distinguishes the real limits from delusional and unnecessary self-imposed constraints.”

Quite right. There are other limits too: fairness, meritocracy and the normatives of capitalism. But it’s fundamentally true.

That stirred up a hornet’s nest of Coalition stupid:

A reminder that Tim Wilson is Chair of Standing Committee on Economics yet he has no idea how the monetary system works.

Next in was Finance Minister Mathias Cormann, glorifying in monetary ignorance:

Finally, James Paterson, Chair of Finance and Public Administration Legislation Committee, Chair of Parliamentary Joint Committee on Corporations and Financial Services, Deputy Chair of Finance and Public Administration References Committee, knows how climb the greasy pole. Kick the ABC:

The Coalition has potentially more to lose in an MMT world given its only claim to economic management is restricting government debt. But the stupidity actually deepened on the Labor side with Stephen Koukoulas hanging out the dirty laundry not once or twice but all day:

So, Kouk didn’t know what MMT was, still doesn’t know what it is but has judged it harshly nonetheless.

MMT as an economic system is what Alan Kohler described yesterday. It’s the basic understanding that all money is created by government fiat, either by itself or by banks which it has authorised to do so on its behalf.

As such, for any government issuing its own currency there are no debt limits. It can print as much dough as it likes, whenever it likes. Either the central bank can buy government debt or just give people money direct.

That might or might not result in inflation depending upon a lot of factors but so long as you have a central bank with an independent inflation target then it won’t end in disaster for prices or currency.

The stickier questions are around equity, that is, how to distribute such largesse. And agency, that is, what happens to people’s motives when they are given free money.

MMT as a policy regime is obviously open to legitimate debate and could very well result in a government deciding not to go all MMT.

But, as usual, the pet shop has escaped its cages, flown mad, and pooped all over itself before it even understands what’s under discussion.

David Llewellyn-Smith
Latest posts by David Llewellyn-Smith (see all)

Comments

  1. You can’t blame them for being openly ignorant about MMT, it’s not their fault.
    How could they possibly run it when they don’t even understand it (neither do I).
    Finally, it is “modern”, so not exactly Tories’ cup of tea.

  2. Fun thought of the day, Tim Wilson and James Paterson are likely to be in Parliament for the next 30 years.

  3. If i recall steve keen did a few articles on this very subject. sorry i dont have any links but if anyone else recalls correct me if i am wrong. I think he was able to show the possible inflationary effects negligible from money printing if it was used either to service the govt debt and/or put into productive assets like creating new manufacturing industry etc. In short as long as it was not used to inflate the price of speculative assets like stocks, land and housing.

    • ‘…as long as it was not used to inflate the price of speculative assets like stocks, land and housing’
      And if it were, what recourse do citizens have against politicians, central bankers, bankers and unelected journalists, voting?

  4. In the absence of an ability to run a controlled experiment, economics falls rather short of being scientific; requiring the ability to test hypotheses, run a controlled experiment etc. What it’s not short of is a peanut gallery of ideological champions and army of incredibly ordinary politicians who chant mantras as if they are received wisdom and proven truth. There is no proven truth and law in a complex and chaotic system. But when reason and logic is also thrown from the car we descend into the economic equivalent of a ‘how many angles can fit on the tip of a needle’ argument. Much better for some if we use the household budget myth so that soothsayers and thickheads like Tim-bloody-Wilson and Richie Rich Paterson can bang on about a false equivalence. Any politician who thinks government finance and deficit should be managed like a big household budget is a dangerous fool who is going to roger the nation to death with austerity. Now that will be the tipping point for social chaos and a breakdown of order the likes of which we have never seen.

  5. DominicMEMBER

    Stephanie Kelton, lol, has introduced an old concept dressed up in new clothes and presents it as a major economic breakthrough. The more things change the more they stay the same.

    You cannot create new wealth by printing money – anyone with an intellect marginally higher than a tree stump knows that. When you print money, you redistribute wealth. As long as everyone understands that then I’m good.

    • migtronixMEMBER

      How do you redistribute without taking anything from anyone?

      As long as you can answer the logical flaw in your assertion I’m good.

      • Mig your position would be fine if we lived in a barter system – we do not. we live in a system designated specifically by money. If you are going to disagree with that you are just being facetious.

        As such if you are worth $100 – printing more money dilutes that $100. It really is that simple.

        MMT theory is absolute cronyism of the worst kind.

        • Exactly. The government cronies who have fist dibs on the money will take the largest share. Those whose wealth is mainly stored in assets (ie the wealthy) will do much better than wage earners and those whose assets are mainly cash (ie the poor)

          • fitzroyMEMBER

            Disagree Mig. It is all about the theft of purchasing power. The spoils,go to those closest to the presses. China is the prime example of MMT

          • migtronixMEMBER

            How is that redistribution???? This BS is what the government does every the AEC “redistributes” electoral boundaries BECAUSE of the dilution of voting owing to mass immigration.

            Its not redistribution, its dilution.

      • DominicMEMBER

        No logical flaw. You just to need to understand how the redistribution works. The clue is in the purchasing power of the dollars in your bank account and those with which you are paid. It’s really not difficult.

    • What part about the government spending first to provision itself is hard to understand, distribution of that is a political animal and not indicative of the monetary system. More than enough history to show the agency behind what skews politics to serve special interests with a huge ideological plank in their eye.

      • No one is saying government can’t print money. People are saying governments can print money and that has been done many times in the past – all the way back to ancient Rome and ancient Greece we have examples of governments just printing money – AND CAUSING RAMPANT INFLATION.

        Zimbabwe and Weimar Germany being the recent examples.

        Davids argument is specifically that

        That might or might not result in inflation

        Do you seriously think that a government which has been handed the ability use uncontrolled MMT money printing is going to use that in a “controlled manner” – you must be absolutely kidding. Mind blowing levels of crazy.

        • Again if you can’t bother to verify what the MMT group has and is saying, but resort to fear tactics, its not a MMT problem.

          • Mate give it a rest. David ackowledges the problem in THIS VERY POST – its acknowledged by everyone.

            You are basically saying “there is no problem with MMT theory” which is risible. Again – you like to use big sentences and read lots of intellectual books – problem is you don’t understand any of what you have read and it just comes out as mish mash.

            Others also read, understand what is being said – and are critical of it.

            MMT theory at its core is Marxist theory – that’s what it is – government controlled and allocated resources. A command economy.

            Unless you are going to change your views and just decide that MMT money printing can be handed to private corporations and citizens to do with as they please – which wouldn’t surprise me with your total lack of clarity.

            So there it is – the government just issuing commands for whatever they want built with no constraints on that – except inflation – which is only a problem if you don’t understand MMT theory – so its never a problem.

            Lols.

          • DominicMEMBER

            There is nothing to debate here, skip. You’re just wrong. Man up and admit it.

          • Look at your dialect, don’t confuse it with logic or facts.

            Just from the stand point of using the wrong metrics to observe, not a gold standard, too legal, you seem to miss the outcome of M-M(i)-M and then attempt to pin all the outcomes on currency. Better yet your sort was operating completely blind for decades, but prattled on anyhow giving dicta from above.

            Then again your sort was imported into the U.S. and the U.K. to fight the ev’bal communist socialist gate way Keynesian thinking … by industrialists of the day E.g. incentivized to promote a predetermined out come.

    • Dominic just the distribution vectors over decades makes your statement absurd, corporatist giveaways and wealth set freebees. Then again who funded your ideological camps missives pray tell.

    • PaperRooDogMEMBER

      Depends, if the government prints money to fund full employment in productive activities by those who would otherwise be unemployed (and drawing the JobSeeker etc) it would stimulate the economy, increase the velocity of money etc & more wealth would be created. Arguablyy this may be on the margins given many of these people may not be highly skilled, but even then the increase in social, mental etc well being and associated reduction in social costs of health care, prison, welfare etc would likely be beneficial.

      • DominicMEMBER

        No Roo, money printing to fund ‘full employment’ is basically another way of saying ‘welfare’.

        It does not stimulate the economy – it causes structural damage and ultimately undermines economic progress, which leads to more money printing to pay out to the disadvantaged and so on – until money printing results in massive inflation and an outright implosion of the economy.

  6. Might or might not end up in inflation.
    If Australia had MMT, would Australia have higher or lower shelter prices than it otherwise would without MMT?
    How independent is the RBA inflation rate when the RBA tries to actively interfere with the shelter price discovery by lobbying government and and interfering with private data?

    • working class hamMEMBER

      Good point. So much number manipulation going on for the “good” of the people.

    • ErmingtonPlumbingMEMBER

      If Asset/property price inflation was used to calculate the CPI number how much higher would interest rates been over the last few decades,…mmm?
      Who has the power to decide such things is so much more relevant than any economic ideology, One may or may not adhere to, and all of which are mostly theoretical BS

      • I have an off topic question for you Ermo,

        I have replaced a broken toilet seat, can I chuck it in the recycling bin? I checked all the council info and it doesn’t give a firm answer.

        • Well that just killed my deep thoughts on MMT!
          PS – just wait until tonight and frisbie it into your neighbours yard (everyone has at least 1 neighbour they dont like).

        • ErmingtonPlumbingMEMBER

          God love ya.

          My old dunny seat is Light green and made of that old bakelite stuff. Its the Original seat I suspect on top of an early 1960s pink china toilet pan.
          Modern toilet seats are no where near as comfortable as my old friend of 23 years and I will lament the day when it finally “Sh!tes itself”

  7. migtronixMEMBER

    “Coronavirus: Bank of England rescued government, reveals governor
    Andrew Bailey has told Sky News that if the Bank had not intervened the government would have struggled to fund itself.”

    https://news.sky.com/story/coronavirus-governor-says-bank-of-england-saved-britain-from-effective-insolvency-12012369

    ” 2/ He also confirmed that the financial system is still utterly broken 10 years later and central bankers and regulators still haven’t got a clue.

    Incredulous hack misses all that information as like the rest of the industry hasn’t got a clue.

    Great stuff.”

    https://twitter.com/danieljohnsalt/status/1275136185761964032?s=19

  8. Two things David – please let go of the meritocracy concept as it how we got into this mess in the first place E.g. it becomes a self perpetuating gate keeper system which limits uplift to all except the first in best dressed – history is quite clear on this.

    Second “MMT as a policy regime” MMT is not a policy, policy is what comes out of MMT description of the currant monetary system:

    Alan Kohler
    @AlanKohler
    Just to be clear, MMT is not a policy to be implemented. It simply observes that there are no financial constraints on gov spending, since governments create their own money. The constraints are in the resources of the economy, which are limited.

    With that it should be remember the big issue is private debt and consumer debt being the major cause of financial crisis for last 200 years – at least, but you’ll get that with neoliberalism driving the bus for so long.

  9. GunnamattaMEMBER

    The politicians and the Kouk are missing the point…….

    The simple fact of the matter is that conventional or orthodox monetary policy has failed around the world, and for nearly 40 years the only ‘Economic growth’ it has engendered seems to have been consumed by the 1%.with a human shield of those lifted from dire poverty to something marginally above that (who have been lifted by governments – mainly China and to some extent India – which have scant regard for orthodox monetary policy).

    Anywhere in the developed world, the US, EU, Japan, Australia, Monetary Orthodoxy as we have known it has delivered a small number of outcomes over and over. These are

    1. a vast increase in debt carried by everyday people (for houses, for education, for insurance, for speculative purposes)
    2. a vast increase in the marginalisation of the work most of them are doing
    3. a vast pulling forward of future demand to feed to today (which ultimately runs out of demand and becomes deflationary)

    The NeoLiberal agenda has tied that Monetary Orthodoxy to.

    The removal of public ownership of infrastructure [particularly energy] and the embedding of private ownership of social and societal assets, and the embedding [via contracting out of services] of interests acting only in their pecuniary interest on the public teat.

    and

    The wholesale corporatisation of institutions (vocational and tertiary education for starters) providing economic advancement opportunities to individuals.

    We are right now in the death throes of that NeoLiberalism. It has been on the respirator of hitherto unfathomable quantities of debt since 2009 and has never shown a skerrick of greater life since then. All we have done is feed the 99% to the 1%. More tax cuts, more trickle down, and more ‘deregulation’ which all equals more corruption, more faux accounting, more buyout of the media and more buyout of the political process.

    These 10 watt nutjobs touting Venezuela or Zimbabwe or Weimar Germany never recognise the above and the cost of the ‘status quo’ to ordinary people. None of them worry about the debt they have loaded ordinary Australians with over the course of a generation. How many Australian households were double income and financially stressed in 1990 again? And WTF is their intellectual basis for their position? A batch of B Comms and BA and LLB ? And are they are trying to tell us they have some deeper understanding of how the financial system works? What utter bull! WTF has Senator Patterson done with his life again apart from spend it as as a tongue insert in the cheeks of some elected official who has risen to become the elected official with someone else as the tongue insert.

    They have about as much grasp on the workings of contemporary finance and capitalism as priests of the Middle Ages had on the operations of the ‘God’ or ‘Heaven’ and they are running the same dogma line – dont do X or you will rot in hell [one way or another]. Of course people came around to questioning Papal infallibility and eating meat on Fridays, and asking about the abuse of children, and taking contraception, and giving women rights. The LNP politicians, in particular, have about as much grasp of every day reality as the those defenders of walls who would walk around effigies of whatever saint was in vogue. Of course they are touting Venezuela or wherever. We should be thankful they have told us to stop it or we will go blind (which we almost certainly wouldnt do). Is the process by which money is created – and Kohler has described it well – any less obscured by ritualistic mumbo jumbo than the worshipping practices of any religion? How many contemporary Australians still believe in fractional reserve lending?

    Break the shackles – print like buggery. But we had best get used to a lot of whining from those who have shilled for the beneficiaries of our corrupted present.

    They are tied to a corpse however. The stinking bloated putrifying remains of contemporary capitalism is floating face down in the water.

    The change and the evolution from this point wont be one of a perfectly formed policy which everyone agrees will certainly ‘work’. It will be of a decisionmaker somewhere who tries something in extremis which appears to work. On MMT or any other ‘unconventional’ policy Kohler is right, what we have has palpably failed – the Tories arent even arguing this case credibly any more – and we need to try something else.

    As with every ‘something else’ it will involve trial and there will be some errors – but we could hardly say we havent had major errors with what we have had, could we? From there it will become what can be made to work, and as an Ex IR man (and arch pragmatist) I would observe that almost everything or anything can be made to work. Contemporary orthodoxy has been made to work by deforming society with a ‘user pays’ mindset when not all being used has been acknowledged, not all being sought has been gained and the only certainty has been price – where does ‘investment’ end and ‘speculation’ begin?. Well lets change the certainty.

    On MMT itself I certainly think it can work, and can be made to work. My reservation of it has always been about how we make the change from what we have. Those of the ilk of the Taylors of the Corrmans and the Pattersons of this world have made the present so spectacularly failed that the opportunity cost of making any change is that much smaller.

    • You are like so many consumed with Marxist ideology. That we can create a perfect world if we just fix “this”. That “solutions” are to be found. This is the post-modernist idealism of Marxist theology.

      Here is the reality – humanity and society are on a fixed trajectory of hierarchy – there can be no dispute. Once you introduce MMT theory as a genuine option then your above “issues” with the state of the world will be translated into the future inequities, and then and ever halving of inequities. Where ever they are found, no matter how small – they will need to be addressed with MMT.

      Why should someone have access to the best health care while others don’t. Easily fixed with MMT. And education. And community facilities.. And housing. And transport. And recreation – we should all be able to go to the gym, to go surfing, to go sailing – a yacht for everyone !

      Where are the boundaries to MMT ? In politicians ideology? Where do we draw that line – do we hand it to an “independent” authority ? Imagine that – here are new sporting facilities paid for with MMT for every single electorate that votes LNP – hang on ? Didn’t that JUST HAPPEN ???

      So now lets have them for ALP electorates !! Sorry – MMT has to stop, you know – inflation.

      OK – lets build hospitals in Toorak, South Yarra gets a new MCG and a fast train from South Yarra to Double Bay – UNDER GROUND !! No – Footscray can’t have it because inflation.

      • GunnamattaMEMBER

        It is 0620. There are 33 comments under this piece and you have seven of them.

        You Sir need to stop it, or you will go blind.

        The past is dead mate. By all means go into hyper post. Give us an effigy, or a piece of the true cross!

        • ErmingtonPlumbingMEMBER

          Seems we have a sycophant IPA troll.
          The constant use of The “Marxist” pejorative is a bit of a giveaway.

          • GunnamattaMEMBER

            I hope he comes back.

            I couldnt speak on behalf of the IPA but when I see punters babbling on about Marxism and Communism I do wonder what they know about either communism or Marxism or the subject they are discussing when they bandy about the terms.

      • Jumping jack flash

        You miss the point.
        There is NO INFLATION because it is debt.
        You can’t inflate anything with debt because it needs to be all repaid plus interest.

        The 00’s debt bubble and the resulting collapse of the economy 20 years later proves this. The debt must be repaid, plus the interest. Nonproductive debt is deflationary, not inflationary. The debt must constantly grow to counter the deflationary effect of the interest.

        If anything MMT will cause massive deflation, not inflation, due to the interest.
        We may end up with higher taxes to repay the banks which will be deflationary.

        Of course, the central bank can print away the deflation/interest, arriving at a grand total of zero, which is not inflationary, and I think this is what they do.

    • migtronixMEMBER

      “, in particular, have about as much grasp of every day reality as the those defenders of walls who would walk around effigies of whatever saint was in vogue.”

      Gold! That’s why I’m all good with tearing down statues

  10. Just issue greenbacks……no need to erect a new church to give intellectual cover. If we are not game to deal with the US $ 100 trillion dollar amount of bad debt in the world disaster is inevitable and private savings are toast if not in real assets.

  11. I’m not sure how Modern MMT actually is.

    “Economic theories are based in varying degree on implicit assumptions regarding the structure of society, with the result that the economic theories of former times often include statements and descriptions of mechanisms which today seem not only irrelevant but even wrong. One of the most important of the now-forgotten laws of economic theory is Gresham’s Law.
    This is hardly discussed in modern theory, being regarded nowadays as little more than a curiosity. ”
    https://www.tandfonline.com/doi/pdf/10.1080/03585522.1966.10407650

    • Yes to you and gunna … the currant crop of groomed political operatives makes change difficult, not that much of the government has been outsourced to think tanks et al. Thing is with events like AGW you can’t PR manipulate it forever and other countries are moving to deal with it, not to mention this virus ripping the curtain away for all to see.

  12. QE is a quasi monetarist policy and not indicative of MMT, MMT clearly states that without productivity attached you’ll get the bad sort of inflation – you know a JG rather than a UBI.

    Please do your diligence before ascribing things to MMT which it has clearly stated to the contrary.

    • Don’t condescend to me mate you read a lot of books which is very obvious in the way you just regurgitate it, your obsequious devotion to “The Shock Doctrine” being a great example, but you don’t really understand what you have read – also incredibly obvious in the confused mish mash you put out.

      I have done my due diligence thanks mate. And like every single other economist on earth – including MMT THEORISTS – its inflationary.

      Productivity is irrelevant – the only way productivity reduces the massive inflationary impact of MMT is if we are not producing enough widgets. The planet has a productivity over supply by a factor hundreds.

  13. Of course conservatives and others are attacking MMT.

    They are not silly, they smell a threat.

    The MMT crowd want to use the current monetary model for the general public interest…..as they see it. You know, doing good things for poor people and the general well being.

    What conservative wants that to happen?

    The problem for MMT is that the current (last 40 years in particular) monetary model is designed to do EXACTLY what it does now. Make richer people richer by inflating their price of their assets.

    MMT recommends operating the current privatised public money model in a “new way” ….well good luck with that.

    The first step in fixing the problem is NOT insisting (as banker apologist lefties do) that the current monetary model is a tool that can be used for good.

    The first step is fundamental reform of the current model and that means breaking the private bank monopoly on deposits at the Central Bank.

    The general public must be permitted to operate accounts at the central bank and the balance sheet of the central bank should expand to accommodate the demand for such deposits.

    Why should the private banks be the only ones to get access to 100% risk free deposit accounts at the RBA.

    It is outrageous when operating accounts has never been simpler for a bank and its customers.

    This single step will start to reduce the current strangle hold the private banks have on what should be a public utility……public money.

    Plenty more to do after that but anything less is just window dressing.

    • GunnamattaMEMBER

      Its like being at the pub and listening to some wanker rant on and on about being a “Sovereign Citizen” and explain how the government has no control over you because you did not “agree”.

      Or like being on a blog when some wanker starts gibbering on about ‘what everyone knows’ or brings in Fiji or ‘communism, or fixed trajectory of hierarchy.

      I think you need to adjust your nipple clamps

    • migtronixMEMBER

      I love how Lowe blames too much savings for low interest rate. Why doesn’t he raise the interest rate and offer some income from those savings instead of buying government debt?

      • Yep.

        That too much ‘savings’ produces low interest rates is such bull dust. Central Banks are manipulating interest rates. It’s what they do to manipulate demand for debt peddler product lines.

        Make the banks work to attract investors is the key.

        Losing their monopoly on deposit accounts at the RBA is a very simple first step.

        Pulling the public guarantee on bank deposits is the second.

    • Jumping jack flash

      Now if the government starts getting hold of some cash and the wherewithal to use it, they will need a much more competent bunch in the seats than the current crop of clowns they have now

      Can you see any of them, from any party or persuasion, actually operating and being responsible for essential services for their constituents?

    • Jim's Central Banking

      We need a one issue political party to run on this. Give it a catchy name and do a lot of bank bashing and it would get a senate seat of two. That’s when the fun starts.

  14. Surprised the mother of MMT Pauline Hanson hasn’t bought into the argument. Hansonomics. Cant believe all her detractors are now buying in – Kouk, Kohler, any politician with a heartbeat etc etc.

    • Nice angle jimbo… MMT is racist. As are all research papers from the Bank of England.

      Now that we know it’s racist, I suppose we have a moral obligation not to consider it. Makes sense.

  15. DreadnotMEMBER

    Its telling that in the RBA paper ‘What is Money’, the section on How Money is Created is weak cause it only deals with ‘loans create deposits’ using credit extended by private banks that needs to be ‘paid back’ but does not deal with ‘government deficits also create deposits’ by injecting government created money that does not need to be ‘paid back’ into the non-government private and household sectors. The pay back can only come with the obsession with attempting to manage the economy to achieve a government surplus or balanced budget (austerity) that destroys money through excess taxation and constraining needed spending.

    • Jumping jack flash

      They only tell you as much as they want you to know.
      I haven’t watched it but I bet you the word “interest” isn’t used except in the context of savings accounts.

  16. i really do feel we have entered the twilight zone of this mania. we are debating the meaning of our destruction. long gold, guns and ammo. short humans.

  17. From my understanding the key isn’t the printing with no debt.

    It’s where it goes first.

    We saw the difference fairly clearly during the GFC. Kev gave us 900 which bailed out the businesses and banks (after all, the cash basically stayed in the banking system), the US gave the corporations trillions.

    The sugar rush for us was much more sustained like a low-GI carb. Long enough to tide us over before China’s stimulus took over.

    There was practically no sugar rush in the US.

    Our people spent it, increasing the velocity of money. Theirs hoarded it.

    Practically, as I see it, the only other real difference is that we currently pretend we’re going to pay it back, whereas MMT foregoes that pretense. Presumably MMT expects the central bank to mop it up Volker style if it gets out of hand.

    So, in summary, if you DID do MMT, you’d be best to hand it to the people over institutions, and have a somewhat hawkish RBA – especially for banking interest policy related to lending for our problem child, housing. Higher rates, but higher inflows could plausibly drive consumer inflation, and balance out the debt problems without asset price inflation.

    Frankly, it’d be a soft debt jubilee. Something Keen and others have argued for.

    Keynesian counter cyclical policy without the pretense of paying it back.

    • Hill Billy 55MEMBER

      clarity of thought goes a long way to illuminating the process to be undertaken, thank you.

    • slowmoeMEMBER

      Leaving labels and theories aside, let’s run a thought experiment and appreciate the importance of the sequence of events and specifics (go back and re-read your favourite Austrian economist).
      Step 1: issue every taxpayer a $100,000 credit in their ATO account
      Step 2: allow this credit to be used in only a few ways, for example: extinguish part of a mortgage debt or deposit in superannuation account.
      What would the impact be on CPI? on financial markets? on the real economy?
      It would depend on the emergent system outcome of millions of individual decisions. If taxpayers all pay off some mortgage debt AND do not borrow against the new equity, therefore do not spend more, you have no impact on CPI.
      If all taxpayers deposit in their super accounts, then stock market rockets up (especially if those accounts are managed passively)”.
      The balance sheet impact would be higher public leverage and lower private leverage (healthier private balance sheets).
      Very slight changes to steps 1 and 2 could have vastly different outcomes, isn’t that obvious?
      Hence, the printing of money is not necessarily CPI-inflationary.
      Am I missing something?

    • Once again its pointless to opine about MMT unless you make the effort to understand it. Otherwise people like you say stuff that is inaccurate E.g. MMT would use taxes before fiddling around with Volcker style IR.

      I recommend checking before one wonders off into the fog of ignorance – http://neweconomicperspectives.org/

  18. Jumping jack flash

    I’m glad that Kohler pointed out the most obvious fact that has been ignored over the past 30 years, that governments shouldn’t be run like households and barely like businesses. They are far different beasts.

    Howard created and then stoked the lie that governments shouldn’t have debt. This was conjoured up by because it was the only thing he could think of at the time to throw some dirt on Labor.

    But somewhere along the way the government was able to only acquire 0.5 trillion shiny debt dollars, while the Quiet Australians wound up with nearly 5 times that!

    A bit unfair if you ask me. Especially since people make up the economy, not the government, nor business.