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The Smokescreen of Ignorance

Professor Bill Mitchell wrote, in his daily blog this week, that, “the media input into our lives only reinforces the smokescreen of ignorance that we conduct our daily lives within.”

What a truism.

For most of us, our ignorance comes primarily from whatever media report we hear or watch and it either reinforces our existing bias, or we exclaim, “well, I wasn’t expecting that.”

There is also another smokescreen of ignorance; a document that is issued overlooking previous errors. It is generally a media release, parading as a truism, tweaked to become a foundation stone upon which so many other “truisms” are laid; even if it contradicts previous documents and stated positions.

For much of the last five years the International Monetary Fund (IMF), led by Madame Christine Lagarde, has been preaching austerity and savagely “bullying governments to run pro-cyclical fiscal policy (aka austerity) at a time when non-government spending was weak and weakening.” 

During that time, millions of people around the world lost their jobs unnecessarily. 

Now, it seems, there has been a change of heart. Now, in a carefully guarded statement that ignores the recklessness of the IMF’s previous gospel of austerity, Madame Lagarde is telling the world, “There is a strong case for domestic coordination across policies, with fiscal policy needing to do more in some cases.”

Lagarde_2652320bThe document is, “The Managing Director’s Spring Global Policy Agenda Decisive Action, Durable Growth April 2016” and in it, Madame Lagarde tells us that the outlook for the world economy has weakened further, risks have increased, the recovery in advanced economies (like ours) is moderate, emerging and developing economies are slowing further, risks to global financial stability have increased and a durable recovery is becoming elusive.

She now recommends, “those with fiscal space should commit to ease fiscal policy further, which would benefit them, and support global demand.” Which, in English means, SPEND, SPEND, SPEND. The very organisation that was telling the world to stop spending five years ago is now telling the world to start spending.

And what is this “fiscal space” she refers to? In the words of Bill Mitchell, “The only ‘fiscal space’ that has any validity for a currency-issuing government is the idle productive resources that are for sale in that currency.”

There appears to be a disconnect between the language used by Scott Morrison and Malcolm Turnbull when juxtaposed with the new language of the IMF. Granted they may not have read the IMF document and we are hearing a lot about “jobs and growth”. 

But we are still hearing plenty about living within our means and balancing the budget. It’s the sort of rhetoric that ignores the means by which jobs and growth are achieved.

The IMF have been ignoring it too, until now. But we have to give them credit for at least changing tack. It’s a pity they didn’t see the light back in 2010 when they ruined so many lives with their neo-liberal claptrap.

It’s a greater pity for the Australian economy that our dynamic duo in Canberra haven’t yet seen the light. Perhaps if they read the “The Managing Director’s Spring Global Policy Agenda Decisive Action, Durable Growth April 2016”, they might also change tack.

untitledWould it make any difference if they had? One suspects not. What we are looking at is a Prime Minister and Treasurer ignoring the fiscal space available to a currency issuing government. That space, expressed in human resources, is the unemployed, the people currently out of work, those who could be employed if the government wanted them employed.

The Coalition rhetoric is like a broken record and the problem is that if we keep listening to these ignoramus’, pretty soon we will have the European disease on our doorstep; an entire edifice of utter nonsense that was accepted as fact. The rhetoric has begun in earnest. The most used expression over the past few days is the one about spending taxpayers money wisely.

It suits us to hear politicians talk about how “our taxes” are spent. We like to think it’s our money. The “how governments spend our taxes” myth fits very nicely into the nonsense that is perpetrated worldwide by the neo-liberal groupthink that commands the media’s attention.

But what do we do when that same groupthink realises that their advice was nonsense and recommends a reversal? Do we dismiss them as frauds? The wording in the IMF statement shows they cannot bring themselves to recognise their failed former economic approach.

indonesia-regime-imf-world-bank-tuAbfySOne positive reference from Ms Lagarde is the recognition of the new Canadian government’s approach to increase deficit spending and so urges, “for a more growth-friendly composition of revenue and expenditure, particularly increased spending in infrastructure in some countries.” That’s what Canada is doing.

Perhaps there is time for our dynamic duo in Canberra to do an about face and take the advice of so many heterodox economists who have been pleading for increased deficit spending on infrastructure for the past five years, and which seems, finally, to have caught the ear of the now seriously damaged IMF.

17 comments

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  1. SGB

    Well, said John Kelly, absolutely correct.

    Unfortunately the people who need to understand this will not see it on AIMN, because the Right free market fundamentalists do not read AIMN, nor do their supporters.

    AIMN is seen by the right as a LEFTY media, and in no way considered as independent.

    We need to put the message out there in short bursts on Facebook because it has the biggest readership, even the pollies read it, when their minders tell them!

    I have sent messages to Chris Bowen on this and he still, tows the neoclassical economics line.

    SGB
    Ps I will not give up, it is too important a matter for the general public to be so ignorant about how money and taxes really work?

  2. paul walter

    It pairs in a strange way with the Sally Baxter piece. A century on, we can see how duped the masses were as to ww1, what will they say of us in a centuries time as to public perceptions and a “mediated” status quo?

    Would we cringe, if we were flies on the wall listening to a hypothetical conversation a hundred year’s down the track?

  3. totaram

    SGB: The text-book on Macro-economics by Bill Mitchell et al is now available. Do you think a copy of that sent as a present might have greater impact than some comments by SGB or totaram or John Kelly?

  4. stephentardrew

    The “move on nothing to see here” attitude is rife in right wing politics and that is how they avoid responsibility and admitting failure. Claim to be a conservative beholden to the past while denying the past has been a total and unmitigated failure. Meanwhile the people and opposition sleep on not grasping the nettle and realising that an attack on neo-liberalism is the only sound strategy that will defeat this endless misinformation and lying. If labor wins it will be through L-NP abject failure and not the presentation of an innovative up to date analysis of fiat currencies and the debt and taxation lies.

  5. diannaart

    First, they stopped listening to the humanists
    Then they stopped listening to the Scientists

    NOW they’ve stopped listening to the Economists?

    We are doomed.

  6. Backyard Bob

    The problem with listening to economists is that you can put ten economists in a room and get ten different opinions on the same issue. There’s no such thing as “the” correct economic model. The key to any given economic model is that of consensus to work within its parameters. At present, globally, we have a number of such models essentially competing with each other. That is not a recipe for global fiscal harmony.

    I keep telling everyone to just give me all the money and I’ll fix everything, but it’s not getting me anywhere…

  7. diannaart

    Well done you, Backyard Bob – you found another point of negation.

    Yes, it is true that consensus among economists is rare, however, more and more economists are speaking out against unregulated capitalism – which is why our ‘leaders’ have stopped listening.

    🙂

  8. lawrencewinder

    “Dynamic Duo”…… Like a pair of Skydivers holding hands as they hurtle downward in a flat spin and not realizing that they have no parachutes. True IPA madness.

  9. Backyard Bob

    diannaart,

    Oh, don’t worry, if there’s a point of negation, I’ll find it.

    Q: Did you hear about the constipated mathematician? A: He worked it out with a pencil.

    This is a pedantic point I know, but I think many economists are arguing for greater regulation of capitalism rather than arguing against “unregulated” capitalism because I’m not aware of such a thing ever really existing.

    Q: Why should the number 288 never be mentioned? A: It’s two gross.

    An economist is someone who doesn’t know what he’s talking about – and make you feel it’s your fault.

  10. Max Gross

    The IMF and World Bank have in no transparency, no accountability and no credibility. They are not organised along democratic principles and are a law unto themselves… unless the US vetoes them. Ignore them!

  11. diannaart

    Oh, don’t worry, if there’s a point of negation, I’ll find it

    Not worried, just not surprised either.

    An economist is someone who doesn’t know what he’s talking about – and make you feel it’s your fault.

    Not a narcissist, then?

  12. Salstarat

    What do economists and computers have in common? You really have to punch information into the both of them!
    What is even MORE appalling is that the huge, overwhelming majority of politicians in the western world have a law/economics background which means that they are a pack of unconscionable bottom feeders without one iota of ethics who think they know everything but, clearly, haven’t got a CLUE what they are talking about! God save us from bloody economists and lawyers! What politics REALLY needs is MORE PRACTICAL left-wing people in politics with a social science, scientific and/or educational degree and background. Politics are LITTERED with self-serving lawyers and economists who are only motivated by relentless greed and obsessed with profits at any price. Enough!

  13. Ray

    Emergency! Emergency ! from Dumbdown Central; Herald Sun Murdoch Media, “this is the best story we can do tonight as Conservatives are traveling so bad as this this is our best diversion story for the today “Calls for Release of Prince and Kylie song”. Emergency! Emergency! this a very important topic for our special readers; please read our very important article !? Boy Oh Boy what a joke !

  14. Jack

    diannaart ! First, they stopped listening to the humanists
    Then they stopped listening to the Scientists

    NOW they’ve stopped listening to the Economists? We are doomed.

    There are always stupid people; alwaysl; Flat Earth people Ignorant people. The young ones must get organized and radical as their future depends on it.

  15. totaram

    Backyard Bob: If there are economist giving different opinions on the same thing, surely you need to do a bit of your own investigation?
    When I got diabetes, I read up all about it, and even though there are different opinions about what is going on, at least I think I know what questions to ask and what tests might be useful.

    That is the point about John Kelly’s article. We are only hearing from the neo-liberal school of economics and we don’t have any different opinions from them, except in minor details. But whatever these people have been telling us over the years has turned out to be wrong, culminating in the GFC. Many of these people will now pretend that there was no GFC or it was just a minor glitch. We need to listen a bit more to the heterodox economists and see if their prognostications make more sense, especially against actual data of the past few years. If you do that you find that what the MMT crowd have been saying seems to make much more sense. Perhaps we should listen to them a little more?

  16. Brittle (@MissBHaviour)

    I wrote to both Turnbull and Morrison outlining the fact that Australia is a monetary sovereign (unlike Greece and other EU countries using the Euro), which meant affordability was not a constraint – only inflation. I also outlined sectoral balances and how credits in one sector necessarily mean debits in another (because if one side spends money, they incur a deficit and the other incurs a credit – both can’t simultaneously incur a debit or credit), and why a government surplus MUST come at a private sector deficit.

    I then asked if they did not agree with my synopsis, if they could point out how I was wrong and provide their counter argument, as well as why they thought driving the private sector into further debt to “save” dollars they have the authority to issue at will was a good idea.

    So far it’s been deathly silence all round.

  17. Pingback: The Smokescreen of Ignorance | THE VIEW FROM MY GARDEN

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