More Neo-Liberal Idiocy

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Glenn KAugust 5, 2016 at 6:59 am

Bingo. John, every LNP and a lot of ALP voters need to understand this simple concept. Only then can we drive change in our pollies. Mind you, as long as our treasurer doesn’t get it, our country will continue to be screwed
StephenAugust 5, 2016 at 7:31 am

It’s wrong to think facts or reality have anything to do with it. Neo Liberalism is not a science it’s a belief system and like all such systems you do not change to suit reality very easily or allow facts to cloud your views unless dragged kicking and screaming and then always looking for an opportunity to go back.
You try to change the world to suit what you believe it should be.
Usually what you believe it should be is what benefits you with either authority power control money status or all of these.
Racism political belief bigotry are belief systems and work the same.
You will never sway them with facts.
FreethinkerAugust 5, 2016 at 9:09 am

When you read articles like this there is no much hope to see a change any time soon.

Australia, globalisation and the neoliberal permanent revolution
https://libcom.org/news/australia-globalisation-neoliberal-permanent-revolution-04042016
michael laceyAugust 5, 2016 at 9:32 am

As Stephen has stated Neo Liberalism is not a science it is a dogma!
KronomexAugust 5, 2016 at 9:46 am

“Proper targeting of taxation helps to re-distribute the purchasing power of the rich to the poor. It can also direct spending away from undesirable resources such as tobacco.” The unspoken LNP mindset is the poor prop up the rich and redirecting spending away from the undesirable processes (poor and lower classes) and redirect it to the rich. Business as usual for Malcontent Turnbullshit and his cronies.
FreethinkerAugust 5, 2016 at 1:23 pm

I am not so sure if I agree with you John on your comment, quote: “More importantly though, it should be mandatory reading for neo-liberal politicians.”

IMO the majority of the politicians that have the power or influence in the Coalition and the ALP know very well about the theory of neoliberal economy policies and are using them as a tool to achieve what it is in their own interest or satisfying their ideology.
IMO we cannot assume that all of them are so ignorant that are not aware about the history of failures in many countries that implemented neoliberal economic measures.
It is well documented that neoliberal policies were implemented in some countries in South America in the later 1960’s to try to emulate the results in Germany after the second war.
They were also implemented in full in Chile by Pinochet and emulated by the military juntas in Argentina and Uruguay.
Economists and politicians world wide were impressed” by the results, that were so much for the benefits of the few that we only can think that those that approved them were drive by the extreme right ideology.
Regan and Margaret Thatcher were among those politicians .
Rodolfo Walsh a well known Argentinian journalists write an open letter on the 24 of March 1977 to the military junta describing the results of the neoliberal economy “reform” implemented by them. The next day he was kidnapped and murdered.
In point 5 and on he describe the results, it is good document to read for those that are interested in foreign history and also taken into consideration that back in the 1950’s and early 60’s Argentina was a economy among the most important in the world like Australia it is now.
The letter is here: http://www.historyisaweapon.com/defcon1/walshopenletterargjunta.html

Also, “Neoliberalism and the. Moral Economy of Fraud”, Edited by David Whyte and Jörg Wiegratz. is a good book to read.

Just wonder if Pauline and Jacqui Lambie will be able to digest this information………
wamAugust 5, 2016 at 4:38 pm

‘Let us not delude ourselves the GFC is over and good times are ahead. Its impact will be with us for some time yet.’

With mike cash and suss on everything being ultra zealous to please the boys who put them in their portfolios. That line is one of the scariest I have ever read from you and your writers.

if the concept was simple it would be a slogan!
Until it is, stephen rules.
Belief that little johnnie was the best ever treasurer and the bestest ever ever PM is ingrained in gold.
The ordinary voter even believes that the rabbott was right about the debt crisis.
To show this is absolute rubbish requires education beyond their capacity to listen much less understand.
Education by the media is by slogans and cartoons. QED!!!!!
ps why the women senators???Are diludbraX and mal, bob, derren au fait???
lawrencewinderAugust 5, 2016 at 6:00 pm

I fear that they who should know this, do! They deliberately misinterpret the economic principles to advantage a few. They’re lick-spittles in the service of greed.
paulwalterAugust 5, 2016 at 8:41 pm

So easy…I wanna cry.

For more on the sort of thing John Kelly is talking about, try people like Quiggin and Nicholas Gruen
Andreas BimbaAugust 6, 2016 at 8:52 pm

The Labor Party leadership need to move away from neo-liberalism just like Jeremy Corbyn in the UK and Bernie Sanders or Jill Stein in the US have. Even Trump and Hillary Clinton have abandoned aspects of neo-liberalism such as the TPP and totally free trade. The UK Conservatives are also well to the left of our rubbish Liberal and National Parties.

If the duopoly cling to neo-liberalism then they must be swept from power by the Greens, the national successor to NXT and the ethical micro parties and independents.

Neo-liberal politicians are on the wrong side of history just as the US coal industry has found itself on the wrong side of history.

Only a small portion of the population need to be won over to abandon neo-liberalism and the trends are good.

Monetarism has ran out of options as interest rates approach zero or even go negative. Fiscal policy is the only answer and may even be demanded by the elites as they start to panic about declining wealth.
Matters NotAugust 6, 2016 at 10:22 pm

Only a small portion of the population need to be won over to abandon neo-liberalism

May I suggest that 99.9% of the population wouldn’t be able to provide an intelligent definition of ‘neo-liberalism’. Nor could they explain ‘laissez-faire economic liberalism’. The average punter simply doesn’t understand these concepts and what is more important they have no desire to attempt an understanding of same.

Not suggesting for a moment that these ‘shorthands’ have no value (they do) but somehow we need a much better choice of language to change things that matter.
Alan BairdAugust 6, 2016 at 11:03 pm

Damn good article, straight from the shoulder, and some good replies as well. Particularly pleasing to see the clear recognition of Labor’s general adoption of this dull and persistent ideology among the replies. Too many Labor enthusiasts deliberately overlook or ignore Labor’s lack of alternative to the Conservatives, especially if and or when Labor has assumed power and subsequently underwhelmed with action on redressing the woeful opportunity imbalance that’s occurred over the last 40 years. There have been a few instances of policy improvements lately and if this became generalised I could back Labor far more enthusiastically. I had assumed Shorten would do the usual “I am a Labor robot” routine that got Gerard Henderson’s vote for Kim Beasley as Best Labor Opposition Leader, one of the most unpleasant compliments ever given. Shorten did rather better than that and Gerard would NOT be feeling positive about Bill at all, which is as it should be.
Michael JonesAugust 8, 2016 at 11:06 pm

“As Mitchell points out, Japan is now paying a negative interest rate on its bond issuance and has no problem selling those bonds. Neither would Australia. Even if it did, it could still spend without taking on debt.”

The Japanese circumstance is entirely different to Australia. The Japanese government has to borrow from the Japanese population and spend their own money on their behalf, because people there are so frugal that the entire economy would grind to a halt if the government didn’t do this. The loony situation exists where Japanese investors would rather lend at a loss than spend their money is just a symptom of this, and a very cautious view of the risks associated with other investments.

In contrast in Australia people don’t save enough for the government to borrow from Australians, so they borrow it from overseas and that is where the interest payments go. That would be ok if productivity gains from government investment outweighed the interest costs, but right now we are borrowing just to cover recurrent expenditure on all the stupid entitlements that we have afforded ourselves without regard to the future. The productivity benefits of those entitlements are questionable to say the least.

And even when governments do build projects that are supposed enhance productivity growth, they build them in the wrong places, gold plate them and generally find ways to stuff them up. The Productivity Commission did a report on that last year, we waste billions on suboptimal projects that won’t pay themselves back

That is why a healthy skepticism of debt is a good thing, we should be looking to fund prudent new expenditure from the enormous savings that we could realise if we were disciplined, rather than constantly digging into the magic pudding of debt
Matters NotAugust 8, 2016 at 11:50 pm

MMT would ‘beg’ to disagree. But given your extensive reading, you would know that. But maybe not.
Michael JonesAugust 9, 2016 at 1:07 am

“MMT would ‘beg’ to disagree. But given your extensive reading, you would know that. But maybe not.”

Never heard of it before now despite studying three years of economics at uni, Googled it and it looks like a crank theory to justify an ideological commitment to borrowing. There is always somebody willing to commit economic vandalism to politically capitalise on the “me now” reflect of the average voter. That hasn’t changed since Keynes advocated robbing our children with his infamous statement that “in the long run we are all dead”. Some things never change.
Andreas BimbaAugust 9, 2016 at 1:26 am

@Michael Jones

National governments with their own sovereign currency like Australia and Japan do not need to borrow from anyone to fund any national government deficits. They can just ‘create’ money on a computer spreadsheet at no cost. Our federal government using the RBA/Treasury is the currency issuer and can issue or create as many $A as it likes. As a fiat currency, the $A is just a token like monopoly money.

Currently the Australian and Japanese governments fund national government deficits by issuing treasury bonds or similar securities to the private sector but this need not be the case. The interest expense incurred as bonds mature is in reality a pointless subsidy of the financial sector and that money would be better spent on education, health care or critical infrastructure for example. Currently the interest rate offered for new bonds is very low but in the past the interest rate has been high.

Spending of ‘created’ money does however come with constraints. If too much is spent into the economy then their is a risk of inflation but this will only occur if any additional spending (or tax cuts) are in excess of the productive growth capacity of the economy. As long as there is idle productive capacity, unemployed or underemployed or unmet business opportunities then there is scope for productive growth. The fact that the human mind has limitless capacity for creativity, invention, problem solving and innovation, means that there will always be the potential for economic growth. Economic growth also does not necessarily mean growth in the consumption of natural resources and in fact can be a driver for the transition of the economy to true sustainability if it is managed correctly.

As our federal government is a currency issuer, the federal government debt is not a true debt and is effectively just a record of additional $A issued into the economy. This ‘debt’ does not and should not be paid back. Balanced federal government budgets are inherently contractionary and surpluses are even more contractionary. State and local government debt and business and personal debt are in fact debt as we commonly understand it as these parties do not have currency issuing powers and so must be careful to ensure that any interest expense and any repayment of principal is servicable.

MMT economist Warren Mosler recommended in his book ‘The 7 deadly innocent frauds of economic policy’ a US federal government deficit of 5% of GDP as a starting point to drive down unemployment and underemployment in the US. Applying the same to Australia for simple comparison purposes gives a federal deficit of A$80 billion p.a. which compares with Morrison’s last budget deficit of about A$33 billion.

http://moslereconomics.com/wp-content/powerpoints/7DIF.pdf

https://www.youtube.com/watch?v=glAP_8g2beA

http://www.abc.net.au/news/2016-07-29/extended-interview-with-steve-keen/7673820

http://www.theaustralian.com.au/business/opinion/deficits-dont-have-to-be-a-drama-ask-our-pms/story-e6frg9qo-1226912369536

http://cuffelinks.com.au/federal-government-budgets-and-their-impact-on-the-stockmarket/
Andreas BimbaAugust 9, 2016 at 1:44 am

@Matters Not

The punters do not necessarily need to learn what neo-liberalism means in order to change their vote. Many will learn but other methods such as stunts and humour as used by Nick Xenophon, or Trump’s methods or of those of Sanders can be effective. Bill Clinton’s and Barack Obama’s election campaigns were successful with the ordinary ignorant punter. Only a few % of the electorate need to switch away from the apalling Liberals and Nationals for a change in government.

@Michael Jones

National governments with their own sovereign currency like Australia and Japan do not need to borrow from anyone to fund any national government deficits. They can just ‘create’ money on a computer spreadsheet at no cost. Our federal government using the RBA/Treasury is the currency issuer and can issue or create as many $A as it likes. As a fiat currency, the $A is just a token like monopoly money.

Currently the Australian and Japanese governments fund national government deficits by issuing treasury bonds or similar securities to the private sector but this need not be the case. The interest expense incurred as bonds mature is in reality a pointless subsidy of the financial sector and that money would be better spent on education, health care or critical infrastructure for example. Currently the interest rate offered for new bonds is very low but in the past the interest rate has been high.

Spending of ‘created’ money does however come with constraints. If too much is spent into the economy then their is a risk of inflation but this will only occur if any additional spending (or tax cuts) are in excess of the productive growth capacity of the economy. As long as there is idle productive capacity, unemployed or underemployed or unmet business opportunities then there is scope for productive growth. The fact that the human mind has limitless capacity for creativity, invention, problem solving and innovation, means that there will always be the potential for economic growth. Economic growth also does not necessarily mean growth in the consumption of natural resources and in fact can be a driver for the transition of the economy to true sustainability if it is managed correctly.

As our federal government is a currency issuer, the federal government debt is not a true debt and is effectively just a record of additional $A issued into the economy. This ‘debt’ does not and should not be paid back. Balanced federal government budgets are inherently contractionary and surpluses are even more contractionary. State and local government debt and business and personal debt are in fact debt as we commonly understand it as these parties do not have currency issuing powers and so must be careful to ensure that any interest expense and any repayment of principal is servicable.

MMT economist Warren Mosler recommended in his book ‘The 7 deadly innocent frauds of economic policy’ a US federal government deficit of 5% of GDP as a starting point to drive down unemployment and underemployment in the US. Applying the same to Australia for simple comparison purposes gives a federal deficit of A$80 billion p.a. which compares with Morrison’s last budget deficit of about A$33 billion.

http://moslereconomics.com/wp-content/powerpoints/7DIF.pdf

http://cuffelinks.com.au/federal-government-budgets-and-their-impact-on-the-stockmarket/
Andreas BimbaAugust 9, 2016 at 11:13 am

Sorry for the dual posts above. There was a problem with the AIMN site at the time.

@ Michael Jones (1:07am)

MMT is not economic vandalism and in fact Milton Friedman’s Monetarists are economic vandals for perpetuating the lies about national government deficits and debt for countries that have their own sovereign currency.

The economic ideology of Monetarism was designed to redistribute wealth into the hands of the powerful corporations and capital controlling elite and is a part of neo-liberalism. This was a response to the perception of excessive ‘socialism’, protectionism and union militancy of the mid 1970’s.

Although the first decade or two of neo-liberalism may have had some value, the downside has been high levels of unemployment, extreme hardship for many and lower living standards, or at least marginal gains, for at least 90% of us. Now even much of the affluent elite have reached an economic growth plateau as the demand for goods and services on a per capita basis has stagnated and sources of lazy wealth like property and share market speculation and tax evasion reach there limits.

The increase in unemployment was unnecessary and counterproductive. There were some efficiency gains for some privatisations and some rationalisation of social services but in general costs to consumers have increased and the levels of services declined. For example the electricity generation, distribution and electricity retailing sector in Victoria.

Countries like Germany, Japan and the Scandinavian countries have much less wealth stratification and more cohesive societies and dynamic highly advanced economies. The excesses of Monetarism and neo-liberalism were in general not implemented there. Singapore is similar.

Modern Monetary Theory economics is a little confusing but it does reflect how macroeconomics do work in an economy with its own sovereign currency. The MMT economists have attempted to change the economic terminology or language to remove some of the loaded existing economic language that is more appropriate to household budgets and this confuses many so in order to learn one has to read a bit and make an effort.

MMT macroeconomics is very similar to Keynesian deficit spending by the national government except that the deficits are generally ongoing and are adjusted to keep unemployment and underemployment near to zero indefinitely. In some economic circumstances such as for Norway currently, the MMT economists recommend a national government surplus but this is unusual.

Michael if you think Keynes was an economic vandal then so we’re Chifley and Menzies or all US governments from FDR to Nixon who all practiced Keynesian economic stimulus along with industrial/economic development policies as well as considerable immigration policies which all helped to enlarge the economic pie for everyone, increasing living standards and keeping unemployment very low. The links that I provided on the Australian government deficits since federation provide substantial evidence that supports the case for Keynesian stimulus.
Michael TaylorAugust 9, 2016 at 11:28 am

Andreas, for some reason the comments had been caught up in spam. This can often happen with comments that contain multiple links. Our apologies.
Michael JonesAugust 9, 2016 at 1:37 pm

Andreas, thanks for the articles. Printing money to prop up an economy isn’t a new idea and from an economic perspective it is an equally poor one as governments trying to borrow their way out of economic trouble. The positive outcomes of an economic downturn is to encourage people and businesses to shed the bad financial habits, work habits, unrealistic expectations of material wealth and outdated ideas, that they have accrued during the good times and look to how they are going to be more productive in the future. Keynesian approaches to economic policy (which is really all that MMT looks to be a variation of) are as likely as not to just allow people and firms to delay the inevitable and make the necessary changes harder in the long run.

The only reason that we really should use Keynesian stimulus measures is that people will not tolerate being left destitute during a downturn so we need to take the edge off the adjustment. I am of the view that that is the humane thing to do, people are always more important than dollars, but it always comes at a cost and should be used sparingly. The economic foundations of Keynsianism, such as sticky prices and the necessity for governments to spend money to take up surplus capacity, are bullshit. People and firms will take lower prices/wages if they have to, trust me, I’ve been out of work and at that time my wage expectations were in no way “sticky” …. you take what you can get under those circumstances. Surplus capacity is best absorbed by allowing firms the flexibility to employ people more productively to meet future demands, not by propping up existing outdated work practices, and encouraging poor investments and asset price bubbles through artificially lowered interest rates.

Regarding your comment on Germany, Japan and Scandanavian countries being dynamic economies, that is simply a claim that continually gets repeated in these debates that doesn’t stack up when subject to analysis. In reality those economies are quite different to eachother. Japan has been economically stagnant for over 20 years, it did very well after WW2 but now suffers from protectionism of many traditional industries and an aging population. Admittedly it already had a high standard of living so it isn’t a dramatic problem for the average citizen.

The Scandanavian countries are not a homogenous group, Norway has well invested oil wealth so could be considered a success and Denmark benefits from being a branch office to the much larger German economy, but Sweden has not been a dynamic performer since the late 80s. Sweden’s good economic performance over the 20th century can largely be put down to not getting involved in other people’s wars but rather profiteering from them, by selling war material to both sides. Not a bad strategy from a national economic perspective that layed the foundations for growth up until the 90s, but after that the weight of excessive debt, welfare entitlements and regulation caused a lot of economic problems that despite market based reforms in the early 90s, have yet to be resolved. Sweden has had considerably higher unemployment than Australia throughout the GFC, it got to over 9% and now it is still 7.6%. Hardly a model we want to follow.

Germany is doing well but that is because of labor market and welfare reforms last decade improving microeconomic performance that you would call “neo-liberal”, as well as by stacking the rules in Europe to suit its own businesses through the European parliament. Prior to that it was a basket case.

And Australia didn’t really do very well under Chiefly and Menzies, not as well as we could have at least. Our growth during that time was propped up by exploiting the “peace dividend” associated with the post-WW2 environment, it masked poor comparative performance to what we could have achieved had we opened up our economy earlier and contributed to our inability to cope with the global economic problems of the 70s and 80s. We have done far, far better in the 30 years since thanks to the reform efforts of Messrs Hawke, Keating, Howard and Costello and that is a lesson which we would be very unwise to unlearn.
Andreas BimbaAugust 9, 2016 at 6:24 pm

@ Michael Jones (1:37pm)

It looks like we have a good MMT/Keynesian vs Monetarism discussion happening here.

I don’t agree that the MMT approach is simply counter cyclical stimulation of the economy to escape recessions. This is what Rudd did after the GFC which is fine as far as it goes and I suppose reflects the Keynesian approach but the MMT economists would not have tried to return to a balanced federal budget or surplus, they would have continued with moderate deficits for as long as there was idle economic capacity.

There is nothing to fear from these deficits as they should be funded by created or printed money. There is no debt to be repaid and no interest expense and no inflation as long as the deficits don’t go beyond economic growth capacity. What are you afraid of with this approach?

Businesses will still succeed or fail. Some entire economic sectors will either evolve or disappear as the currency appreciates assuming a generally healthy national economy. Recessions may still occur but are far less likely under conditions of MMT or Keynesian stimulus. If the nation were to become fat, lazy and uncompetitive due to the avoidance of recessions, which I doubt, exports would fall, imports would rise and the $A would simply devalue until relative competitiveness was restored. Hardly a problem. Unemployment can remain low at all times.

Recessions are not the panacea you maintain. Many good businesses fail usually because of reduced demand and higher levels of debt and an increased reluctance of lenders to lend. People being unemployed and underemployed wastes human resources, reduces consumption demand and reduces the capacity of businesses to develop or expand. In house training is usually cut, apprenticeships or traineeships cancelled and basically the future is sacrificed to save the present.

In regard to the economies of Japan, Germany and Scandinavia, I agree they are more diverse and complex as you mention.

Japan’s last 20 years have been sub par but their crazy property price speculation bubble burst (this will happen to us soon), they suffered from a falloff in demand for exports due to the global GFC and they had a dose of stupid contractionary Monetarism under Abe. Some of their economic stimulus spending was corruptly or poorly spent such as those horrible steel expressways. In general however Japan has always managed extremely well considering their lack of natural resources, and employment has never been high by our standards.

On Sweden, although an advanced social democratic nation, they have never really adopted the Keynesian stimulus approach as far as I am aware. They have also gone down the Monetarist or neo-liberal path for the last two decades and have virtually abandoned their military, until recently, and have suffered a downturn in many parts of their economy. Their extremely high levels of personal tax has however reduced and they have had good success with developing their higher level R&D intensive industry sectors. Even their unemployed have always been very well supported by government services unlike ours.

On Germany we are in agreement. Do you however accept that German governmental planning was an essential part of the success? Note also their banks have degenerated during the last 2 decades as they moved away from the old model of supporting manufacturing in the main to a more American or Anglo style of ‘creative” financing. Many are close to failing as a result.

I agree most of Hawke’s and Keating’s reforms were beneficial but the ‘recession we had to have’ was probably inept economics. Unemployment was unnecessarily high and an MMT approach would have delivered much better outcomes for all. As for Howard and Costello, they in the final analysis were a disaster and Australia would have been much better off with Keating.
HarquebusAugust 9, 2016 at 6:48 pm

Debt is borrowing from the future. It brings forward tomorrow’s spending too today. Sooner or later, there is going to be a reckoning as debt repayments overcome discretionary spending and stifles growth which, we are now seeing.

What is the underlying cause of today’s economic malaise?
It’s called The Law of Diminishing Energy Returns and it is a physical phenomenon that is not factored in political and economic ideology and is why, politicians and bankers are failing in their absurdly idiotic quest for infinite compound growth.

Never throughout history has a fiat economy not collapsed and for the first time in history, all currencies are fiat.
The GFC ain’t over. It has only just started and it is going to kill a lot of people.

I think that it is you that doesn’t understand John Kelly.
Michael TaylorAugust 9, 2016 at 6:59 pm

“The GFC ain’t over … I think that it is you that doesn’t understand John Kelly”.

Huh? John distinctly said the GFC wasn’t over.
Matters NotAugust 9, 2016 at 7:06 pm

Debt is borrowing from the future.

Not for me. In fact, monies borrowed were for investments for the future. And they paid paid off. ?

I encouraged my offspring to do that as well. And it paid off for them also. Maybe we were just ‘lucky’? ?

Harquebus have you, personally, ever been in debt? And if not, then why not? ?

Have you ever invested in anything? And if the answer is yes, then how did you manage that without ‘debt’. The world wants to know. ?

Can you name any (significant) companies that never had debt?
Neil of SydneyAugust 9, 2016 at 7:11 pm

As for Howard and Costello, they in the final analysis were a disaster and Australia would have been much better off with Keating.

You have got to be kidding. Debt tripled under Hawke/Keating from 6% of GDP to 18%. If Keating was not thrown out in 1996 it would have tripled again and we would have hit the GFC with debt at 60% of GDP.

Hawke/keating were an economic disaster. Unemployment was at 11% when Keating won the 93 election. The best thing Keating did was compulsory Superannuation. But it is not working. People are still going on the pension. What some people do is after retirement use their lump sum payment to buy a nicer home, use up all the Super and then go on the pension.
Michael TaylorAugust 9, 2016 at 7:13 pm

Oh dear, it’s going to be a long night.
Matters NotAugust 9, 2016 at 7:18 pm

Andreas Bimba

bubble burst (this will happen to us soon),

I’ve been hearing about this ‘crash’ for years. Steve Keen even ‘climbed a mountain’ when his prediction failed to materialise all those years ago. Since then I have been ‘in and out of property’, sitting on the sidelines waiting for this ‘crash’. But it refuses to happen. Values continue to rise.

Where is the ‘evidence’ this ‘crash’ is inevitable. Just askin …

As for NoS ? ?
Michael JonesAugust 9, 2016 at 7:50 pm

Yes Andreas, it is a good discussion, thanks.

What you are describing is monetization of debt, that isn’t a new idea either. The key mistake that you are making is to suggest that just because we have idle capacity, printing money won’t lead to inflation. Despite what we are taught in economics schools, that there is a direct inverse relationship between inflation and unemployment in the form of the j-curve, that does not play out in real life. The fact that we currently have an annual 1% inflation rate at the same time as a 5.7% unemployment rate should tell you that. If you have ever seen an attempt at plotting a j-curve from real data, you will see that the relationship between inflation and unemployment is very weak, with there being a lot more to the problem of unemployment than that.

Rather, long term unemployment is a consequence of a number of factors. These include microeconomic policy matters including taxes and regulation which make employing workers more difficult for business and spending programs which reduce the incentive for workers to seek work. Structural unemployment is also an issue, with skills gaps and regional variations preventing workers from obtaining work.
Really all that the monetization of debt amounts to is to impose an effective tax on savings, by reducing their value at the same time that the value of government debt is reduced. I see from the original article that the assumption seems to be that governments can invest that debt in productive capacity better than the private sector can. I would suggest to you with somebody who has considerable direct experience in government investments, that this is an incorrect assumption. The lack of a commercial imperative on governments and political incentives to spend on things that do not stack up in terms of gain in social welfare (aka – pork barrelling), are too great and billions are wasted as a consequence. If you don’t want to believe me there is a mountain of evidence available, the recent Productivity Commission Inquiry into Infrastructure would be a good way to start and if you want something a bit more left of centre, take a look at some of the Grattan Institutes recent work on transport investment by governments.

Aside from wasting money, effectively taxing savings to spend on poor government programs has other negative impacts. First of all it reduces the incentive for individuals and firms to save, as they receive poor interest rates, and increases their incentive to invest in risker investments, whose return is made artificially higher than it should be because of very low or zero interest rates. That creates not a risk but a certainty of asset price bubbles and crashes down the track.
Secondly, by effectively keeping interest rates to zero, it removes the ability of central banks to “keep their powder dry” and to respond to shocks by reducing interest rates. It also prevents them using an effective inflation targeting regime to maintain business confidence and to facilitate wage adjustments.

Thirdly as I have already indicated, it prevents the nation from learning from more challenging economic times. The lesson doesn’t need to come as hard as “the recession we had to have”, that was worse than it needed to be because Keating manipulated interest rates and spending around the electoral cycle, rather than according to economic need. The contribution he made as Treasurer was in his longer term policy achievements around things like tariff reductions and national competition policy, as a short term economic manager he was a disaster. I disagree on your critique of Howard and Costello. Aside from anything else Rudd wouldn’t have had nearly the sort of money to spend on the stimulus package had it not been for them and the financial system reforms that they put in place (ASIC and APRA) were acknowledged as the best in the World, even Wayne Swan said so. Those two reforms alone saved us from a far worse time during the GFC, though of course Rudd and Swan blew far to much money on stupid spending during the stimulus package and should have allowed the crisis to have a moderate impact on Australia, to allow some learning.

On this, if the lessons are not learned we will become fat and lazy, as I believe that Australia already has to an extent, and the consequence in the long run will be a lot rougher. You only need to look at the Southern European countries that have buried themselves under mountains of debt in recent years to see how painful delaying the inevitable with government spending can be. As part of a currency union their currency can’t fall to allow them to trade out of a recession, but then they have free immigration in a much larger job market which in a rarified macroeconomic model like you are describing should pick up the excess capacity. However, in the real world economics deals with people, not numbers, and the simple adjustments to the economic model equal massive dislocation and social problems for the people affected. By minimizing the impact of the dead hand of government on the economy, we allow people the opportunity to make difficult but necessary changes in a more efficient, productive and ultimately less painful manner than if governments unnecessarily interfere.

So in summary I don’t agree with the MMT approach at all and I think that if it was ever followed, it would lead us into disaster. I also think it is important to remember that macroeconomic models are just that, models that only describe the economy in a very rarified manner. I prefer a toolbox approach to economics, taking what works from different theories and always remember that we are dealing with people rather than numbers.
Michael JonesAugust 9, 2016 at 7:53 pm

“Not for me. In fact, monies borrowed were for investments for the future. And they paid paid off. ?”

I think he is talking about government debt. Bureaucrats tend to be a tad less careful with your money than you are … :-).
FreethinkerAugust 9, 2016 at 7:54 pm

Michael TaylorAugust 9, 2016 at 7:13 pm
Oh dear, it’s going to be a long night.

Yes, some posts reminds me the happy hour on the caravan parks…..
HarquebusAugust 9, 2016 at 7:57 pm

“Let us not delude ourselves the GFC is over and good times are ahead.”
Sorry I misinterpreted and wouldn’t say “distinctly”.

Let us not delude ourselves that the GFC is over and good times are ahead.
or
Let us not delude ourselves, the GFC is not over and the good times are not coming back.

My apologies on that one Mike however, I still think that you do not get it. Fiat enable debt can not create the resources we need. It can only paper over their declining quality and availability and only for so long.

EROEI and the Law of Diminishing Energy Returns trump economic ideology every time.
Michael TaylorAugust 9, 2016 at 8:05 pm

“I still think that you do not get it”.

But Harquebus, I haven’t even said anything. So I’m not sure what it is that I do not get.
Michael JonesAugust 9, 2016 at 8:21 pm

“Yes, some posts reminds me the happy hour on the caravan parks…..”

LOL! I don’t know whether my posts are amongst those that remind you, but I hope you don’t mind that I am going to steal that line sometime in the future :-).
Matters NotAugust 9, 2016 at 8:22 pm

Michael Jones:

think he is talking about government debt

Possibly. That wasn’t made clear. Just a general statement. I am moving towards the end of my time and yet I still ‘invest’, each and every day (but not in the property market at the moment). Further, I am not like ‘government’ however, whose time has not, and probably never will, come.

Governments who are not investing (big time) for the future are derelict in their duty. Forget this ‘debt’ bullshit. Governments should be about ‘investing’ and while money is ‘cheap’ (even in the conventional sense) their investments should be much larger. So much needs to be done in regards to physical, intellectual and social infrastructure.

We have spare ‘labour’ power, underutilised technology and the like but still we hesitate. Why?
Michael JonesAugust 9, 2016 at 8:29 pm

“Governments who are not investing (big time) for the future are derelict in their duty. Forget this ‘debt’ bullshit. Governments should be about ‘investing’ and while money is ‘cheap’ (even in the conventional sense) their investments should be much larger. So much needs to be done in regards to physical, intellectual and social infrastructure.”

As per my response to Andreas, that is all good in theory but the reality is that governments make pretty poor investors. They are supposed to invest to create social welfare gains, but money inevitably gets wasted on non-productive spending to buy votes. It is just the nature of the beast, we are better off leaving money in the hands of people who value it because it is their own.
Michael TaylorAugust 9, 2016 at 9:23 pm

No, Michael J, we were referring to Neil of Sydney.
Matters NotAugust 9, 2016 at 9:59 pm

all good in theory but the reality is

So ‘reality’ is ‘atheoretical’? Could you please expound on how (your) ‘reality’ is actually arrived at without a theory being involved?

But you do go on:

reality is that governments make pretty poor investors.

Maybe? And the evidence is? Maybe you have a link? Further, what conceptual framework are you bringing to bear here? Economic, social, political – but maybe it matters not?

They are supposed to invest to create social welfare gains

Really? Perhaps you have a link for that as well? Re the Role of Government that’s not ‘theoretical’?

I won’t go on. Entertain the possibility that your three years studying economics might have been – nonsense. A waste of time. An exercise in ‘thinking’ down a particular and peculiar track. But that possibility …
Michael JonesAugust 9, 2016 at 10:17 pm

MN, if you bother to read my previous posts you will see that I have pointed Andreas in the direction of a couple of very substantial sources of evidence about how governments are making poor infrastructure investments. If you decide that you would like to inform yourself, rather than just being smart like you are now, you might like to go and read up on them.
Matters NotAugust 9, 2016 at 10:30 pm

Sorry Michael Jones, I think you miss my point. But I am not surprised.

‘Evidence’ is always rooted in ‘theory’. Do you agree? If not, then what? Divine inspiration?

Are you suggesting that ‘substantial sources of evidence’ aren’t ‘theory’ free?
HarquebusAugust 9, 2016 at 10:40 pm

Sorry Michael. I meant to write “John”.
Michael TaylorAugust 9, 2016 at 10:43 pm

No worries.
Andreas BimbaAugust 10, 2016 at 12:54 am

@ M. T.
No problem re the spam filter. I need to limit my posts to one link. Pity it’s not possible to edit posts indefinitely as there is always an error or two. Maybe Santa will give AIMN a new host platform given how big it has become??

@Harquebus
No sane business or government that wants to expand should operate without debt. It’s not stealing from the future but investing for the future.

National governments that have their own sovereign currency and are therefore the currency issuer are uniquely positioned to fund any deficits with created money which costs nothing, attracts no interest and does not need to be repaid. In addition spending the created money into the economy is not inflationary provided the economy grows by a proportionate amount. I know you will never accept this ‘something for nothing’ logic but many very smart economists do.

In regard to ‘The Law of Diminishing Energy Returns’ I have responded to this a few times and don’t accept it. The quantity of solar energy reaching the earth is huge and there are many methods of capturing it for electricity or heat that have ample rates of return on the energy required for manufacture and installation. Even if all solar energy was removed from the equation, there is still geothermal sources and various forms of nuclear power so I don’t think the lights will go out.

@Neil of Sydney
Loyal to the Liberal Party to the end? Federal government debt is not the problem that you (and unfortunately most Australians) fear. Both Japan and the US have much larger national government debts than ours as a % of GDP but this debt is of no consequence apart from the interest incurred. Quantitative easing can be used to replace Treasury bonds with ‘created’ money and so avoid the interest expense. The US FED has been doing this a lot in recent years, are they mad, is the world now going to self destruct, I don’t think so. Note also how the Republicans have generally abandoned all the panic of the recent past about the US federal government debt. Maybe they have realised the federal government debt is not so dangerous after all for governments that can issue the currency?

I agree the superannuation system is not working well. Bill Mitchell, Australia’s top MMT guru believes the whole super system is a waste of resources and we would have been better off directing the taxation revenue lost from the super contributions concessions and all the massive management fees to increasing the aged pension. If people want more retirement income then they would instead need to arrange their own personal investments with managed share funds probably being the main component.

@Matters Not
On when the Australian property market will start to decline and end in a crash? If I were you I would keep sitting on the sidelines for at least till the end of 2017. Of course no one knows but these two recent articles from Robert Gottliebsen add to the gloom as it discusses the decline in Chinese investment into real estate in Australia, the US and Canada. He also mentions new investors from Hong Kong replacing the mainland Chinese investors.

Another factor is the recent lowering of interest rates by the RBA and to a lesser extent the banks combined with a tightening of the lending criteria by the banks, that may increase the rate that mortgages are repaid a little?

http://www.theaustralian.com.au/business/opinion/robert-gottliebsen/real-estate-rattled-as-chinese-capital-flows-ebb/news-story/47327ffbe9aacc3db3dfbc16801c3a20

The other article is on my next post due to AIMN host restrictions.

@Michael Jones
It’s late and I will respond later to your key points.
Andreas BimbaAugust 10, 2016 at 12:58 am

The 2nd article on the Australian real estate bubble:

http://www.theaustralian.com.au/business/opinion/robert-gottliebsen/chinese-buyers-are-starting-to-rescind-on-apartment-contracts/news-story/85bca62df3c98693e1ad6832a9cd9b65
Andreas BimbaAugust 10, 2016 at 1:05 am

This recent article from Bill Mitchell about fiscal vs monetary policy is relevant:

http://bilbo.economicoutlook.net/blog/?p=34121#more-34121
Michael JonesAugust 10, 2016 at 9:00 am

I agree that the superannuation system is broken. It should allow people to accrue enough to replace the pension so that future taxpayers won’t have to support them and then it should require them to take it as a pension. Beyond that it is not the responsibility of the Government to force people to save large sums of money until they are 65. People who have more than they need to be independent of the pension in retirement should be exempt from compulsory contributions, allowed to use their money as they see fit and the tax concessions should be used to flatten income tax rates. That would provide people with the opportunity to invest the money more innovatively than the standard blue chip sticks and money market products that Super fund managers mainly use.
Michael JonesAugust 10, 2016 at 11:13 am

Just checking up on my macroeconomics terminology because it has been a while since I have used it, and I was of course referring to the Phillips Curve rather than a J Curve.
Neil of SydneyAugust 10, 2016 at 1:15 pm

Both Japan and the US have much larger national government debts than ours as a % of GDP but this debt is of no consequence apart from the interest incurred.

AS usual i have to repeat myself. Big difference between us and the USA/Japan. They have lots of fat cats who are willing to lend their govts money.

WE don’t have enough fat cats in Australia so we have to go offshore to fund our debt. That means interest payments on our debt go to overseas investors. I believe we have to get 70% of our debt from foreigners. It is much lower for the US/Japan
Möbius EckoAugust 10, 2016 at 1:40 pm

$US

USA: Per Capita = 60,340 %GDP = 114
Japan: Per Capita = 24,000 %GDP = 60
Aust: Per Capita = 52,596 %GDP = 95

This is all debt, public and private. Public debt is all levels of government.

This is also relevant: http://www.abs.gov.au/AUSSTATS/abs@.nsf/mf/5302.0/
Neil of SydneyAugust 10, 2016 at 3:00 pm

Mobius

You are doing the leftoid sidestep. Private debt ie Qantas buying A380’s creates revenue. Govt debt is usually a waste of money.

But the reality is whether private or govt, 70% of our debt comes from foreigners. That is why Andreas Bimba is so wrong.
Möbius EckoAugust 10, 2016 at 3:20 pm

Do you have the source to the 70% claim and what that foreign debt is made up of please?

Then why is the outgoing RBA governor saying that this government needs to go further into debt and spend on infrastructure?

And isn’t government infrastructure an investment that creates revenue? It’s revenue is certainly counted that way over it’s projected lifetime.
Neil of SydneyAugust 10, 2016 at 3:36 pm

For Federal debt

he sale of CGS is not restricted to Australian residents. As at the December quarter 2015, 63.5 per cent of total CGS on issue was held by non-residents of Australia (Chart 3). The proportion of CGS held by non-residents rose significantly between 2009 and 2012. The proportion has fallen from historically high levels in 2012 but remains elevated.

OK i was wrong. Foreign Federal debt has fallen from 70% to 63.5%

http://budget.gov.au/2016-17/content/bp1/image/bp1_bs6-3.gif
Andreas BimbaAugust 11, 2016 at 10:29 pm

Even our RBA Governor – Glen Stephens and his successor in about a month – Philip Lowe are talking about the possible use of ‘created’ money in the form of quantitative easing and ‘helicopter money’ and the need for fiscal policy that involves deficit financing (initially using bonds) to build critical infrastructure.

Well Liberal friends, balanced federal budgets are heading to the shredder for the near to medium term future.
Matters NotAugust 11, 2016 at 10:57 pm

Great link Andreas. Is that a penny dropping in the background that I hear?
Neil of SydneyAugust 11, 2016 at 11:02 pm

Well Liberal friends, balanced federal budgets are heading to the shredder for the near to medium term future.

Yep the world has gone mad.
Matters NotAugust 11, 2016 at 11:24 pm

NoS is an expert on ‘madness’. So take note.

And laugh. Loudly.
Möbius EckoAugust 12, 2016 at 7:50 am

You always do this NoS, post responses with no context. Can I please have a link to the article that contains that image? I tried looking for it and went through the woeful 2016-17 budget papers but couldn’t find it.

Typical of the fluck up that is this government is that they have a Glossary page for their budget papers but CGS is not in it.

Are Commonwealth Government Securities really foreign debt? I ask out of ignorance.

http://debtreview.treasury.gov.au/content/discussion/html/ccsmreview-04.asp
Andreas BimbaAugust 12, 2016 at 10:25 am

On the federal government ‘debt’, a bit over 60% of it is owed to foreign banks and other financial institutions but it is all denominated in $A. As the federal government via the RBA/Treasury is the currency issuer any interest expense can be met through money ‘creation’, or by issuing more bonds. There is no risk of insolvency.

NofS apparently has a paranoid fear of foreign debt but it really makes no difference whether it is owed to locals or foreigners apart from the interest going O/S.

Even better would have been to fund all federal deficits with created or helicopter money in the first place. The current government bond debt can be eliminated over time using QE which is a different form of created money.

As recommended for decades now by the MMT economists the federal deficit should be adjusted up and down to keep involuntary unemployment and underemployment near to zero and keeping inflation at low levels.

This is all achievable and bit by bit the conservative or monetarist economists are being won over as now they have reached a brick wall for further growth using monetary policy and all the so called efficiency methods like cuts to government services, privatisations (most increased costs and lowered service quality), labour market flexibility, import competition (disaster for local manufacturers and food/minerals processors) and tax cuts for the wealthy mostly due to over generous concessions and rampant tax evasion.
Michael JonesAugust 17, 2016 at 12:51 am

Andreas, mate, NofS’s “paranoid fear” of foreign (public) debt is very well founded. It comes down to your basic formula for Gross Domestic Product.

GDP = C + G + I + NX

G is for government expenditure and if future governments have to send interest payments overseas for money that we borrow, GDP goes down and future generations are poorer. That is macroeconomics 101. The only way to offset the loss of wealth to Australia is if the money is invested in projects where the benefits outweigh the costs, but as we know governments aren’t very good at that so it can’t be relied on.

The rest of your of your last comment has me shaking my head in disbelief, not at you because I suspect (I hope anyway!) that you don’t have a substantial economics education, but that there is a school of economics still spruiking this sort of complete and utter shit. Nothing in life is free, we can’t just pay off government debt by printing money or that money will not retain its value and foreign banks will no longer want to lend to us when we really need it.

And we can’t squib further microeconomic reform because we regard it as too hard or “unfair”, poorly functioning markets will not just soak up extra labour because we adjust money supply. I would challenge you to find me a single “conservative or monetarist” economist of any note who has been won over to that idea!

Fundamentally these theories come from people who can’t stand the idea that capitalism is the best way to deliver most of our wants and needs and that that means that business, rather than governments, are best placed to control the bulk of resources in our society. It offends their sense of equity that business leaders should be so wealthy, when in reality most of that wealth is invested in enterprises which give the rest of us us the goods and services that we want as well as jobs. So they back engineer these bullshit justifications for governments to take control of economies which have never worked before and are not about to now.

The sad thing is that nowdays a lot of people are entitled and stupid enough that they might fall for it. With that in mind, Bloomberg recently put this advice out to people who want to protect the value of their investment portfolio in the face of socialists screwing up our economies.

http://www.bloomberg.com/news/articles/2016-08-02/how-to-protect-your-portfolio-from-the-looming-war-on-inequality

Basically it says to take your money out of financial assets like stocks and bonds and put them into real assets like real estate, commodities and precious metals, which provide some protection against the sort of problems people like your MMT loonies would create if they were ever put in charge of the hen house. Scary huh, business people telling people not to invest in business … doesn’t bode well for the future me thinks.
Andreas BimbaAugust 17, 2016 at 3:01 pm

@ Michael Jones
I will do a point by point on your comments but I have quite a few other things needing my attention so it may take a few days. Based on your comments I feel you have not put the time into reading the links I have given previously. For example if you read between the lines on what Glen Stevens has said and that document from NAB (link below) that I gave a link to, concepts like QE and ‘helicopter money’ are mentioned. This is not black magic or a left wing or Greens conspiracy. The concepts of Modern Monetary Theory are all sound and it is the existing Conservative or Monetarist macroeconomic narrative that is substandard and is struggling to find answers on where to head now with record low interest rates, low business investment due to stagnant consumption demand and still very high ‘real’ levels of unemployment and underemployment.

Even some Libertarianist economists are realising MMT has a better theoretical foundation and that optimal national government deficits can be used for additional government expenditure, or tax cuts or both. Have a look at the last link below. MMT is not left or right wing, it is politically neutral but can be used to serve the purposes of both the ‘small government’ economic model or the more state interventionist ‘social democratic’ model. In fact the type of government is irrelevant and MMT can even be applied to the ~100% state owned ‘communist’ economic model or the ~100% single entity kingdom/feudal/megalomaniac/corporation owned economic model.

http://business.nab.com.au/wp-content/uploads/2016/06/2016-06-10-Helicopter-Money.pdf

http://www.theaustralian.com.au/business/economics/wake-up-to-budget-deficit-crisis-warns-rbas-glenn-stevens/news-story/5113ed09ae60af7f97964aa973b6c98c

https://www.youtube.com/watch?v=TVvhhlbIGUw

Modern Monetary Theory
Michael JonesAugust 18, 2016 at 2:14 am

Andreas, there are instances where central banks will use quantitative easing to stimulate demand, but things have to be dire before that is advocated, as has been the case in the GFC in the US with interest rates at zero. In contrast you propose that central banks print money as the central tool to address unemployment all the time. I challenge you to find a single conservative economist who agrees with that entirely different proposition.

I would also strongly suggest that selectively quoting people like Glen Stephens to support your argument amounts to intellectual dishonesty. In the article below and probably in plenty of others like it, Stephens explicitly talks about the limits of monetary policy and the need for further labour market reform to improve economic growth. You can’t use him as a source when he supposedly supports your beliefs on MMT on one hand, while discounting him when he contradicts your opposition to market based reforms on the other.

http://www.smh.com.au/federal-politics/political-news/forget-reform-and-go-for-growth-reserve-bank-governor-glenn-stevens-tells-national-reform-summit-20150826-gj7yg2.html
Andreas BimbaAugust 18, 2016 at 11:42 am

@ Michael Jones – Are not the libertarianists conservative or are they just radical, small government, individual freedom supporting, right wingers? As I mentioned the Modern Monetary Theory economic approach is politically neutral but MMT economists like Bill Mitchell are definitely in favour of using this form of macroeconomics for social equity purposes.

I am well aware that Glen Stephens is a conservative main stream neo-liberal economist and as I oppose most of the excesses of neo-liberalism I won’t quote or support these aspects as most are not really about efficiency or productivity but easy money for a well connected crony capitalist elite. For example Australia’s electricity generation, distribution and retailing sector which is very often a cash cow for the owners while generally delivering a much more expensive and inferior service compared to the originally semi government operated sector – that still used the private sector for the supply of most equipment, construction and contract work.

The urgent need to transition to clean energy is now much more difficult because our electricity sector is so fragmented and in private and usually ideologically ‘uncooperative’ hands. This compares with France where they successfully transitioned their state owned electricity generation and distribution sector from coal use to nuclear power a few decades ago with minimal job losses and dislocation and did this very cost effectively and safely.

The fact that such an influential person as Glen Stevens is even talking about the ‘remote’ possibility of non-conventional economic policy is an important acknowledgement that monetary policy is reaching its limits in a low or even negative interest world. He is encouraging debate and lateral thought.

International politics and the self interest of the capital controlling elites, who are now worried about low growth and instability; are also moving in the direction of fiscal policy and ongoing national government deficits that stimulate economic growth and consumption and that fund wealth producing infrastructure and productive capacity that arises out of increased consumption, much like the post WW2 period.

Most conservative economists still support the monetarist or neo-liberal approach, as does Glen Stephens but many are recognising that this approach is not delivering. They should at some point also accept that the last two or three decades of neo-liberalism have been largely a failure that has in the main just enriched the elites at the expense of the majority and has done serious damage to most of the developed world, especially the major english speaking nations.

Totally exposed free trade was also in general a mistake as this was either a race to the bottom – to the lowest cost supplier like China or Thailand, or the most comprehensively subsidising and usually closed market supplier nations like Germany, Japan or Korea. Moderate trade protection of key industry sectors that were deemed important enough to retain by much of the developed world, for example automotive manufacturing, would have delivered better overall worldwide growth as nations like the US, the UK and Australia would not have had such massive economic dislocation and consumption demand would have continued to increase rather than decline. Moderate trade protection does not prevent competition from lower cost supplier nations but allows the developed world supplier to compete even when faced with higher labour, environmental, taxation and regulatory costs and to attract investment. Even the lower cost supplier nations benefit from higher consumption demand in the developed world, (unemployed or underemployed Australians and Americans generally don’t have much capacity for discretionary spending) and by direct investment in these moderately protected markets. High levels of automation, innovation and business efficiency however remain essential for business success and healthy competition is not negated.

The Greens philosophy of technical and social innovation, balance, holistic and consensus based solutions and socially inclusive progress for all, as well as the mandatory requirement of environmental sustainability, provides the best economic approach. If the Greens were to formerly adopt Modern Monetary Theory macroeconomics, the associated genuine full employment policy and an economic development policy similar to Singapore’s or that of Japan or Germany in the post war period adapted to the current era, then they would have set the groundwork for eventual electoral success. Even now many Greens policies have rippled through the Australian political process.
Andreas BimbaAugust 22, 2016 at 9:58 pm

HOW THE SYSTEM OF MONEY REALLY WORKS.

Quotes from the article:

By the chill of late 2009, the United States had reached what was to be the greatest recess of Great Recession. The financial crisis and subsequent “debt deflation,” when creditors extinguish their liabilities by demanding debtors forfeit their assets, had annihilated almost a quarter of the total net worth of U.S. households—and more than half of all black wealth. Unemployment had reached 10 percent. America’s homeless shelters and food banks were overrun.

It is the political consequences of full employment that Boehner’s chief constituency, the capitalist class, cannot abide: in its great power-struggle with capital, labor can possess few more potent tools than full employment. Bosses depend on what Friedrich Engels called “the reserve army of labor,” the pool of unemployed and underemployed people, to force workers into a ruthless competition for productivity. A scarce job is a dear possession for a worker, and a source of continual worry and workplace dis-empowerment. By contrast, “tight” labor markets augment workers’ bargaining position in the perennial struggle for wages, rights, and the collapse of workplace hierarchy. Abundant employment opportunities make quitting a bad job not such a terrifying prospect. Full employment mops up the reserve army of labor, redistributing the terror upward.

A politics based on guaranteeing, as a matter of human rights, a state of full employment—a Next political-economy—would finally put the monetary System the Populist farmers wanted to the use for which it was intended: ensuring a dignified life to ordinary people. This could be accomplished, for instance, through a job guarantee, a universal basic income, and universal public provision of housing, education and healthcare, which our monetary system is plenty capable of facilitating.

http://www.thenextsystem.org/monetarily-we-are-already-in-the-next-system-we-just-dont-act-like-it/
Andreas BimbaAugust 22, 2016 at 11:01 pm

MMT economist Bill Mitchell answers almost every criticism of MMT macro-economics thrown at it by classical, post Keynesian and whatever other kind of economists out there.

http://bilbo.economicoutlook.net/blog/?p=34200#more-34200