Stop whining, start printing: VIC lockdown $12bn nothing burger

Via Scummo:

Combined with the damage of the stage three lockdown, it will cost the nation $10 to $12bn overall.

“This is a heavy blow, a heavy blow: 80 per cent of this economic cost is expected to be in the affected areas of Victoria, of around $6 billion to $7 billion in that state,” Mr Morrison said on Wednesday.

“The remainder represents a preliminary estimate, and I underline that, of the broader impact of confidence in other states and supply chain impacts from the shutdown of certain industries in Victoria.”

No, it isn’t. It’s nothing. Just print $12bn and shove into the economy via stimulus various. The RBA will buy it:

Graph 6: Bid-Offer Spreads

Given that the underlying cause of the market dysfunction was an urgent need to sell bond holdings and raise cash, the Bank decided to step in and provide the market with some liquidity. We did this by offering to buy government bonds at auctions. For each auction, we announced the amount we would purchase, which particular bond lines we would be willing to buy, and let counterparties bid to sell those bonds to us. The bonds we actually bought within that suite depended on the bids at auction, whereby we purchased those at the lowest possible prices (highest yields).

The choice of which bonds we offered to buy, and the overall amount, was informed by a number of sources including liaison with market participants, the AOFM, and the state and territory government borrowing authorities. We also assessed the extent of dysfunction based on some of the indicators I mentioned earlier, including which bonds appeared most mispriced.[8] The auction results themselves were also informative for subsequent auctions. For example, at some auctions we received a lot of offers to sell bonds, and those offers were priced ‘to sell’ (that is, they were offered at yields above mid-market levels). That was a good indication that there was an excess stock of bonds in that segment of the market clogging up dealer balance sheets. In such cases, we conducted further auctions in that part of the yield curve within quick time. On the other hand, if an auction did not receive that many offers, or the pricing we received was relatively unattractive, this indicated that there was no large supply-demand imbalance and, therefore, no pressing need for further auctions in that part of the curve.

The Bank’s purchases have had the intended effect: as we purchased bonds the imbalance of supply and demand was redressed. This was evident in a decline over time in the volume of attractively priced offers to sell.[9] It was also evident in other measures, including bid-offer spreads, mispricing along the yield curve, and the ability to trade in futures without moving the price. These all improved, to be close to pre-crisis levels. The general improvement in financial sentiment – aided by the range of other policies, both monetary and fiscal – is also likely to have played a role. In any case, since late April we have scaled back purchases significantly and have not needed to purchase any bonds for some time. We stand ready though to buy bonds if bond market conditions deteriorate significantly, or indeed, if needed to achieve the target of around 25 basis points for the 3-year AGS yield.

If it wants, it can later just cancel the liability. DEFICITS ARE NOW IRRELEVANT.

Go for virus elimination. Monetise the virus!

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


  1. MB and the RBA/establishment have something else in common: manage/survive the short term, bugger the rest.

    • A Melbourne Football Club premiership.
      Give me 1.5M and we can buy out Goodwin and #getclarko but still no guarantee.

  2. Wework Is broke

    Thank goodness the crazy proposals and rants above are relegated to these pages. If he held the levers of power we’d see first hand what Weimar Australis would be like. Scary stuff!

  3. Money printing and MMT are not costless exercises.

    It will debase the currency for starters.

    Chartal money = the end of the world.

    • I see this as a positive thing in a post COVID world. We need to decouple ourselves from the need of other countries in order to eliminate this virus locally and recover our lifestyle. What better way than a price signal making imports more expensive?

      • Last time I looked we don’t manufacture smartphones and impossible to restructure the economy to replace imports.

        The country can’t substitute at least 50% of it’s manufactured imports.

        • Think your tied too much to discretionary spending. So what if you don’t have the latest smartphone? Its not like a better “smartphone” has improved your quality of life somewhat.

          Australia is self sufficient in food, energy and resources. We have the means long term to start manufacturing again and create the supply for those goods if the “price is right”. It may not be the greatest “smartphone model” but to be honest in the grand scheme of things who cares – those things really haven’t improved our quality of life anyway compared say to the invention of the car, or washing machine. I’m a millennial in tech and even I have to admit on most economic and mental health metrics life was better before the current tech boom. We’ve been selling the country via high house prices and foreign land sales to finance our CAD which is mainly spent on overseas holidays and “smartphones” – I don’t see that as a very smart trade. For me this is the big silver lining to all this – we will become more local and tbh because we are human beings we will be happier for it with less mental illness, more stability, and more control over our own destiny.

          At least I could have a great lifestyle in a fair country and provide for myself and loved ones with a stable COVID protected job in a country with less death and a health system that copes. Willing to give up my “smartphone” for that.

          • The smartphone was just an example. We don’t have an advanced manufacturing capacity and autarky isn’t a practical policy response.

          • The “smartphone” was extending your analogy – substitute with anything we import and you will find; we are often trading “needed” goods locally for “want” goods overseas which in a pandemic isn’t the best trade. Until we lower our currency and give an incentive to invest in Australia and retrain staff to meet unmet demand for these currently imported goods manufacturing can’t return to Australia – I see this as a desirable of MMT (and MMT has its problems but this isn’t one of them at least from Australia’s perspective).

            I suspect the people complaining about MMT aren’t the people who want the best for Australia; they are the people who want to profit when everything crashes down (i.e. savers in direct cash) in some sort of schadenfreude. While I understand this I don’t think its good overall for future generations or quality of life. There’s more to life than money.

      • mikef179MEMBER

        I’ve just started reading the Deficit Myth and I have to admit it’s interesting so far. I’ve been on the fence with MMT for a long time now. Am interested to see whether this will push me over the edge. I have a feeling I will have a stronger opinion, one way or the other, when I have finished.

        • so…let me know when it addresses the bit about resultant effects in the Current Account like Current Account Deficits, resultant Foreign Ownership of key industries and resources – especially for countries like the US, Aus, NZ, UK et al who already run significant/severe and chronic CAD’s.

          • Flawse – I think it can be used to reduce foreign liabilities – of course this is when it actually starts affecting the currency. However I think this is actually something that may be desirable to wean ourselves off the globalised world which coincidentally is what is required for COVID localised elimination. As long as we are “in the pocket” of the global economy the temptation to open up and disrupt so many people’s lives will always be there with huge financial and health costs. It will be a disruptive change; but COVID always was.

            IMO the cost/benefit of globalisation in a post-COVID world no longer stacks up. That’s what I believe political leaders and “elite circles” don’t want us to realise. When they tell us to “live with the virus” – they benefit from the status quo even if it isn’t good for the average joe trying to live his life in the local community.

            And by average joe I mean people like the frontline nurse at constant fear of getting infected to the kids who can’t get a decent education because the virus and constant lockdowns. These are the people paying the current price of our need for a higher currency so what – we can have the latest gadget and continuing “online shopping” for stuff?

  4. While we’re printing for this, how about we print for every noble cause. Couple 100 billion a year for all medical research, ubi for everyone, 1 trillion a year each for the hospitals, another trillion for education, many trillions for military, at least 10 trillion for infrastructure, and so on. I mean if we can solve everything with extra printed money, how about we just do so and create utopia.

  5. Robert Johnson

    The dead hand of the Government replaces the efficient hand of the market… great.

    You can already see this in Europe where startups ostensibly working in technology sectors spend half their time chasing EU grants. Meanwhile US startups run rings around them.

  6. Aussies Not Doing The Right Thing

    MMT will be laughed at in textbooks (or however education is consumed) 50 years from now.

    “They thought you could just print their way back to prosperity. What?”

    Why don’t countries like Bangladesh use MMT to lift everyone out of poverty?

    • Zimbabwe and Venezuela, have already done it. I haven’t been there to see the Utopia, but, I imagine it must be most pleasant.

    • @ Aussies “MMT will be laughed at in textbooks (or however education is consumed) 50 years from now.”
      I dunno!!! The notion that all you need is a service economy and you don’t have to produce ANYTHING has been held now for at least over 50 years – it was taught when I was at uni and still remains the central theme of Western economics. Matter of fact it was taught that the more of your economy was service industry the more prosperous you are. Obviously, looking at the currrent Australian and other Western economic settings, that is still the ruling notion.
      MMT is but a minor extension!!!
      MB has joined the throng that believe that Foreign Debt, Foreign ownership of key resources and industries, and resultant loss of sovereignty matters diddlysquat. I don’t understand the change of course – political I guess.

  7. Hold on! Scotty and Joshie need to take their shoes and socks off so they can work out how to maximise the cash flow to their donors/mates. These poor businessmen had not been thinking about the implications of the COVID flareup.
    Once this is done, the money will flow (in the direction they want).

  8. Printing consumption will do wonders for resource depletion and ecological collapse.

  9. “No, it isn’t. It’s nothing. Just print $12bn and shove into the economy via stimulus various. The RBA will buy it:”
    Good quantitative analysis. I don’t have the answer but I’ll guarantee you this much – that simplistic MMT BS is not it.