Kouk continues pointless self-immolation

Whacko stuff. Friday morning Kouk was in high dudgeon about lack of stimulus:

The social and mental health costs of this dismal state of the labour market is huge. The economic costs are similarly large.

The good news is the problems can be addressed and with good policy settings, fixed.

…Which brings us to the policy outlook.

There are policy levers the government can pull and push to underpin better economic conditions.

In simple terms, injecting cash into householder pockets will support spending and with that economic activity. Government funded spending on housing, transport infrastructure, local government and regional projects, incentives for business investment are all candidates for policy action.

But by lunchtime he was pounding away at the Government for its profligate latest borrowing:

Then this morning he’s out with this, which could bridge the obvious contradiction in his first two outbursts, but won’t:

Err, you know, this:

“In simple terms, injecting cash into householder pockets will support spending and with that economic activity. Government funded spending on housing, transport infrastructure, local government and regional projects, incentives for business investment are all candidates for policy action.”

Alan Kohler continues to do far better:

Please stop tipping petrol on yourself, Kouk.

David Llewellyn-Smith
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Comments

  1. Moments like these you need a Minsky

    ……and a bigger DeLorean to take mainstream economists back to the future.

    Mark Blyth seems to have had a paradigm shift, last year, in a talk called “So, Can We Have It All”, he stated MMT was only appropriate to US because it held the reserve currency, he even considered it might negatively effect other economies. He’s recently become an MMT advocate.

    Mark Blyth interviews Stephenie Kelton – Do Deficits Matter (MMT Explained)

    “What it says is, look, this is how the plumbing of the financial system really works. This is basically how governments really finance themselves, once you realise that the policy space for what you think we can and can’t afford really changes drastically.

    Your book Stephanie is doing a great public service and turning over some ridiculous shibboleths which held back public policy and thinking about what we should do with the economy for as long as I have been around”.

    The current set of monetary operations are a function of law rather than economics — which is to say that the Federal government has chosen arrangements which constrain its own spending (both in terms of volume and procedures).
    As to why it would choose this particular set of such constraints, I suggest you look to who governs on behalf of whom …

    The truth is in the details — the explanation of the legalities, and the multiple-entry accounting.

      • Moments like these you need a Minsky

        “I suggest you look to whom governs on behalf of whom”.

        I believe you are correct, under the current regulatory practice private debt (includes: issuance for house speculation) would expand if the treasurer desired it. I’d suggest the current administration (and those past) are epistemologically predisposed to achieving this outcome.

        House prices would not simply rise as an outcome of the treasury using its fiscal capacity, unless other factors bear upon the availability of real resources relating to housing.

        A democratic society should have a say in whether it desired house prices to act as they have done in the past or legislate away from that outcome. Now, which set of epistemological precepts, recruited in the form of a political program informs the status quo?

        • Bear Bullwinkle

          As monetary expansion has become more and more extreme, asset prices have risen very dependably and in tune with the size of deficits, no question the process will continue and accelerate with MMT unless the government directly kills the housing market and it isn’t going to do that.

          You’ll use MMT to pay for people to live in public housing once MMT ensures that they will never be able to afford a house, or even apartment.

    • Jumping jack flash

      “…he stated MMT was only appropriate to US because it held the reserve currency,”

      True for a lot of things, but if they do it first we should also be ok.
      Just like the interest rate manipulation in the late 90s that started this whole mess.

  2. Stewie GriffinMEMBER

    MMT will destroy society in EXACTLY the same manner that lower interest rates have destroyed society – it locks in the Status Quo.

    Lower Interest rates to ‘combat’ recession and provide stimulus were always meant to be temporary, as they were meant to return to normal rates after the recession – they never have, because they were purposefully combined with a policy to increase debt levels.

    Similarily, now debt saturation levels have been reached, MMT will never provide the stimulus to climb out of the debt hole we are in, because the purpose of MMT will not to be eradicat debt, but simply to ensure it continues to be serviced.

    “Please Sir, can I have some more MMT – the walls of my prison are crumbling and the chains of debt bonds are rusting”

    • Jumping jack flash

      Of course it will. It is simply the extension of the current paradigm.

      There’s only a couple of rules around debt, and a couple of rules around debt eligibility. MMT is simply playing with those rules, but the end result is simply more debt created and attached to assets, at the same level of economic everything else.

      Their problem is the growth. They need to go fast and hard to get the debt growth they need to sustain the debt. So far it hasn’t been nearly enough.

    • BabundaMEMBER

      You can work on the numerator (debt) or the denominator (GDP). MMT does the latter, Steve Keen’s fanciful debt jubilee does the former. Why is one better than the other?

      • Stewie GriffinMEMBER

        Keen’s Debt Jubilee is fantasy, under sound money there have always been periodic Debt Jubilee’s – they’re called Bankruptcy.

        If I go broke owing a million dollars it is my problem, not the banks.

        If a million people go broke owing a million dollars it is all of our problem i.e. society’s problem.

        The answer – debt repudiation. Enslaving debts with no ability to be repaid get cancelled, those who were enslaved are freed from their debts, after losing their collateral. If they have their skill set, education or experience to begin again (If not eg retirees, then there is the pension -hold that thought). Commercial debts that can be repaid are renegotiated – collateral may or may not be sold up, depending on the viability of the underlying asset the debt was meant to be servicing.

        Only AFTER debts have been repudiated and in order to “restart” the economy should MMT be trialed for a period – print to your hearts content in order to stimulate and ensure that pensions are paid and unemployment benefits are paid. The removal of debt from the economy will once again make assets reasonably affordable in relation to working incomes.

        Without Debt repudiation all that is going to occur is that the existing ‘system’ will be saved – do you think once the economy is running again the Govt is not going to return to mass migration and crushing wages? Where is the inflation that is going to otherwise destroy debts going to come from? Zero interest rates have failed to produce it so why the hell does anyone think MMT is going to produce it if all the other economic variables that we are currently operating under remain in place?

        MMT under the guise that it is being sold is there to achieve one thing and one thing only – ensure enslaving system debts continue to be serviced.

        • Bear Bullwinkle

          Lower interest rates DO produce inflation that crushes debt. Your mortgage on a house bought in 2004 has been well and truly crushed by asset price inflation, brought on by low interest rates.

          • Stewie GriffinMEMBER

            LOL – that is asset inflation and it was a one time bribe of thirty pieces of silver to the Boomers that saddled the economy with the aggregated debts in the first place. Inversion of interest is how you get people or society to accept policies that are fundamentally bad for them, exactly the same ground work is taking place now with MMT. Enslaving a society isn’t work that can be done in a single day.

          • Bear Bullwinkle

            Didn’t say it’s a good thing. It’s a bad thing. But our monetary policy does create inflation. Just because it’s not CPI inflation doesn’t mean there’s no inflation. If MMT is anything like the left wing free-for-all most of its advocates want, then we’ll get CPI inflation too.

          • Stewie GriffinMEMBER

            If MMT is anything like the left wing free-for-all most of its advocates want, then we’ll get CPI inflation too.

            Look, I’ll admit it is possible – but I doubt it. We’ve had over a decade of the lowest interest rates EVER and its failed to produce a single basis point of inflation in anything other than asset prices. I really can’t see any reason why MMT would generate any inflation either, while the current mix of progressive social policies (mass migration) and diversity, remain in play.

            Asset inflation – sure, I can see that game being played for a little longer thanks to MMT, just as it has with low interest rates. A sliver of the exisiting population will benefit, just like the Boomers benefited. They will see their interests being aligned with the 0.01% who are the main benefactors of ‘saving the system’. But what happens to those who come after the “Neo-Boomers” who initially benefit from MMT asset inflation – ie their kids? They will face exactly the same problem as young people today do – ever higher asset prices, low wages and the need to take on enslaving debts merely to partake in the necessities of life.

            Without debt reform MMT is diabolical – it ensures enslaving debts continue being serviced. Period.

          • Bear Bullwinkle

            There’ll be inflation because everyone will be poor AF as a result of the government’s economic and migration policies and the second a left-wing government comes to power, they’ll do unlimited spending on so much BS trying to bring people up to the middle class that inflation will result from sudden massive demand that didn’t exist before.

            Also our sh!t economy may result in a weak AUD which will result in imported inflation when the government starts throwing it around like confetti.

            The single and only reason why inflation is low is because none of these monetary policies result in demand outside of investment assets. MMT is departing from the policy of keeping money away from the plebs and will create CPI inflation.

    • Bear Bullwinkle

      MMT is outsourcing government expenses to everyone in the form of inflation. Because the money mostly went only to the rich before, there wasn’t CPI inflation, just asset price inflation. Non-asset owners were screwed, but nobody cares about them. When we go full bore MMT, there will probably be CPI inflation.

      • Stewie GriffinMEMBER

        Follow the money – were will it end up in debt saturated economy? Servicing debt.

        Without first carrying out debt repudiation all it will do is hold the status quo in place.

        MMT is like the Underpants Gnomes quest for Profit:

        1. Print Money;
        2. ????
        3. Reduce debt.

        The reality will be this:

        1. Print Money;
        2. Economy continues Operating;
        3. Debts continue being serviced.

        Sound money prevents enslaving debts.

      • MMT is Money For People ….while all the assets and factors of production are already owned by someone else.

        Why would one expect the outcome to be any different to a situation where the Money For People arrived as additional debt (as we’ve had for decades), rather than MMT?

        I don’t see a reason. Do you?

        I say Stewie is right – MMT-MFP will most likely lock in the status quo. Asset prices will rise further, so those holding assets will win.

        Those not already holding assets will lose, because even more debt will be required to acquire those assets.

        And the lenders will be saved.

    • Agree Stewie, although I think the Fed’s last abortive attempt to raise interest rates is just an indication of how out of their depth in the unstoppable debt spiral they are.

      MMT is a last desperate attempt to save the old system which was dead in the water long before covid and which the virus has simply revealed in all it’s necrotic glory. What the world is actually faced with is panic on a scale not seen since the 1930s.

      As Paul Mason of the New Statesman says, oil is finished, globalization is finished, free-market capitalism is being replaced by state ownership and democracy by authoritarianism, (which the likes of Scummo, Boris, Trump are seizing on with relish).

      For the next few years I expect we’ll go through the same death throes as the 1930s – depression, debt and house price implosion, massive unemployment, food insecurity, famine and civil unrest, even war, as governments of all persuasions cling to economic strategies, institutions and theories that are unsustainable.

      The world is at a bifurcation point.

      On the one hand is the current neoliberal and CCP rush to restore and bring forward even more of the same environmentally vandalistic construction and consumption mania that’s brought us to this point of economic, political and ecological collapse, or on the other, a move to less of everything – less travel, tourism, unnecessary consumption, inbuilt obsolescence, etc and a move to more genuine skills, smaller communities, renewables, regenerative farming and decentralisation.

      I guess this is the New Green Deal, but the imperative is to make the economy sustainable by the planet, which may for a time necessitate more massive borrowing and a UBI and lead to what to to some, will be a smaller, greyer, less exciting world, but ultimately may lead to job and community satisfaction, sustainability, equality and a world only warmed by 1.5 degrees.

      Which road we chose will determine either the survival of humanity, or chaos and the collapse of civilisation and humanity’s possible extinction. Sounds dramatic, but I really think that’s where we’re at.

  3. Poochie the Rockin DogMEMBER

    Mmt seems inevitable at this point. How else will they get the money needed to stimulate the economy besides running up massive deficits. Then we go from massive amounts of bank issued debt to massive amounts of government issued debt, only there’s no limit on government debt as it won’t be limited to housing (and thus housing inflation) – it is much more inflationary. So given prior government competence I guess we have to look forward to wheelbarrows of money and bread at $100 a loaf

    • You would think these Politicians would apply a critical risk lens over the whole situation, and apply a Mazlov ( ?? Dont know if spelling is right, but seen this posted before and looked it up) lens over that, kind of like when you go to specsavers to get your glasses, to arrive at the best solution.So , I am guessing this is what Stewie has done, looked at the risks, applied these and come out with the best answer..I maybe just a farmer, but I read a lot here, and it stimulates the thought processes…pity our pollies dont apply some type of logic…a lot of kneejerking is all I see…

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