By John Haly  

In July, Treasurer Jim Chalmers announced an independent review of the Reserve Bank of Australia, and in September, the Bank Review panel released Issues Papers and calls for Public Submissions. The Review Panel – comprising Renée Fry‑McKibbin, Carolyn Wilkins and Gordon de Brouwer. As I said to the panel, I have written it as though writing to Treasurer Jim Chalmers. The closing date was the 31st of October, and because this will make for a long article, I will simply say, what follows, is my submission.

* * * * *

Dear Minister Chalmers,

Thank you for the opportunity to contribute to this review of the Reserve Bank of Australia.

Themes

This submission covers Monetary policy frameworks such as adherence to the NAIRU and neoclassical “gold standard” mentality over that of monetary sovereign fiat economies. It covers RBA and Government communications about the Finance Franchise myths on Banking, in general. It is critical of the Board composition based on bias in inappropriate neoclassical education and the selection of business representatives instead of economists trained in the issues of fiat economies. Finally, it reviews the Interaction of monetary and fiscal policy with respect to RBA’s performance in applying monetary policy where fiscal policy is more appropriate. As a former employee of the Reserve Bank, I have some knowledge of the inner workings of the Reserve Bank.

I understand the review of the Reserve Bank of Australia is underway to improve monetary policy and its success at realising its goals, governance by the Board, culture, leadership, and recruitment practices. Such a broad range of objectives has yet to be approached since the smaller incidental 1981 Campbell inquiry and before that, presumably at its inception in 1960.

Curtin

Over the last century, Australia’s Central Bank and economy have undergone many changes. In the previous World War, the Curtin Government asserted Commonwealth power over banking, which led to Ben Chifley’s later decision to legislate to nationalise the banks, effectively asserting Commonwealth control over money and credit as per the Commonwealth Bank Act of 1945. However, such nationalisation was later defeated in 1949, as the book “Curtin’s Gift” by John Edwards says on Pg 141.

“Though the postwar Menzies Government amended Chifley’s central banking legislation to reintroduce a board, the Commonwealth’s last-resort power to direct the bank was retained in the legislation and remains today. The Commonwealth Treasurer has conferred on the bank an independent authority to make monetary policy, but it is a conditional independence to pursue a policy of low inflation, sustainable output and employment growth.”

Curtin had also argued for two other changes,

1. Commit to a full employment policy to improve living standards and raise national development.
2. a floating exchange rate to free Australia from the fixed exchange rate with the British pound

Ben Chifley implemented the Full employment policy following Curtin’s full employment paper being submitted to Cabinet in March 1945. Until the rise of Neoliberalism in the 1970s, unemployment would remain dominantly at 2% (notably without substantial inflation).

Unemployment rate and NAIRU

This leads to the Reserve Bank’s first failure, which is its commitment to the NAIRU. Interestingly Albanese’s claim of the Job Summit was to seek a “Full Employment Summit”. But unfortunately, the neo-liberals of both the political Party and the Bank adhere to the conservative myth of the NAIRU. Instead of a NABIER – as a better alternative perspective, the Bank incorrectly suggests we are already “fully employed”. [See Prof Mitchell’s analysis: Never trust a NAIRU estimate]. A goal that has been achieved if you conclude ABS measures domestic unemployment, which, as you can see from the graphs and my articles covering what should have resulted from the Job Summit [my article and graphs: Stagnating Summit’s Shortfalls]. This is why “what gets measured” is essential. I will not go into detail about the shortcomings of the ABS statistics as they are probably already well known, and if not, the article aforementioned herein, should inform you.

Raising interest rates as a strategy to deal with inflation is problematic at best. The link between spending and interest rates is unreliable and unpredictable. Interest rates affect both supply and demand. Economic modelling of “supply and demand” is only relevant to highly atomised markets with many participants, like the primary sector. Secondary and tertiary sectors of the economy follow different models. Changes in interest rates can have a reverse effect on inflation. Higher interest rates only affect people with variable interest rate debts. They don’t affect fixed interest rate debt and people with no immediate financial obligation. Higher interest rates increase the income of creditors and redistribute income to the wealthier, rentier class, exacerbating inequality. Fourth, higher interest rates reduce the incentive to undertake debt and may cause “distress borrowing” to service existing debt or keep businesses afloat. The resulting Ponzi balance sheets do a disservice to the economy, and all of the above, risk yet another recession. The government should be applying fiscal, not monetary, policy to these issues rather than letting the Reserve Bank’s adherence to a disproven NAIRU theory collapse the economy into greater inequality.

FIAT economy

Paul Keating’s floating of the Australian currency in 1983 meant Australia entered a new economic space. We became a monetarily sovereign, fiat economy no longer tied to another currency or a gold standard (which even America had abandoned with the collapse of the Brenton Wood decisions in 1971). The implications of which even the Bank of England acknowledges even if neither our government’s political rhetoric nor Reserve Bank acknowledge. [Bank of England video: Money in the modern economy: an introduction – Quarterly Bulletin].

Instead of shifting into this new space and engaging with this new paradigm of fiat economies, the neoclassical economic conversation stayed with the decades-old “gold standard” economics model. Still, neoclassical economics guides the decisions of the Reserve Bank’s mission to “pursue a policy of low inflation, sustainable output and employment growth.” [“Curtin’s Gift” by John Edwards pg 142]

Problematically, even Board members of the Reserve Bank need to understand the basics of a modern monetary system. [Prof William Mitchell: The RBA has no credibility and the governor and board should resign]. The Reserve Bank’s role as the currency issuer for the government has been misunderstood by business board appointees blinded by the tunnel vision of their experience as currency users in the business community.

Most of the Board are business people (five in number), three are neoclassical economists (Dr Lowe, Michele Bullock, and Ian Harper), and Dr Steven Kennedy is economics adjacent given his Doctorate was in the Economic Determinants of Health, which is not precisely about the Banking systems. None of the Board has any formal training in the economics of fiat economies or Modern Monetary economies, although that isn’t to say their experience on the Board has yet to give them insight. Some suggest the RBA is best served with Board members selected based on expertise in modern monetary fiat economics rather than as political appointees because of their relationships with former Prime ministers.

To this day, neoclassical economics still guides the decisions of the Reserve Bank’s mission to pursue a policy of “low inflation, sustainable output and employment growth” but has universally failed to achieve what Curtin (and even Menzies) did for nearly three decades.

Banking is widely misunderstood as a heavily regulated franchise industry acting as an intermediary between scarce private capital and borrowers. Modern finance is relatively scarce, and depositors are the source of money supplied to borrowers. [Cornell Law School paper: “The Finance Franchise”].

Misperceptions

This is among many common public and media misrepresentations of the banking system. In these areas, it should be incumbent upon the government to educate the public through public broadcasting so that the expectations upon the Reserve Bank are properly evaluated. These myths include:

• Banks can only lend out money they have from depositors.
• Credit is an extension of a money multiplier based on deposit reserves.
• Quantitative Easing is printing free finance into the money supply.
• Federal Treasury deficits are a liability to taxpayers.

At a Keystroke

Money in Australia’s economy has two sources. First, that which the Government Treasury supplies through its fiscal agent, the Reserve Bank. In short, that money is spent into existence by the Federal Government. This money is called “Vertical” money, which exists as an Exchange Settlement Account between the Reserve Bank and the Private banks. As the public is not a joint holder of that account, it is not available for lending to the public. Its only purpose is for interbank transactions.

Secondly, a larger pool of credit via lending is generated “ex nihilo” in the economy through private banking, referred to as “horizontal” money. [Also, the Bank of England video: Money creation in the modern economy – Quarterly Bulletin]. When banks lend, they create deposit IOUs within that bank. Bank’s customer deposits are their liability, and the loan is their asset created by keystrokes. Deposits are fundamentally an IOU from the bank. Similarly, when a bank makes a loan, they generate an IOU deposit for the lender at that bank. The complementary asset for the bank is the loan. Banks create money for borrowers and profit (the interest) for themselves.

Unlike the banking franchise myth, deposits or reserves do not create or limit loans. The perpetuation of this myth in public debate and political pronouncements does a disservice to the public good.

Deposits/Reserves relevancy

Credit creation is simply about a bank finding a credit-worthy customer with whom it can create a digital deposit as an account with that bank with the expectation of future interest payments. The loan to the borrower becomes a bank asset, with an accompanying liability created by a computer entry, which generates the deposit for the borrower. None of the aforementioned Bank reserves is touched, and neither are deposits. The exchange settlement Account reserves are used only when the borrower spends that deposit in another bank. The reserves held at the Central Bank of the lending bank are transferred to the account of the person being paid in the other bank. This is how all bank transfers work; by using the central bank’s reserve accounts.

Instead of adequately describing this in High School and economics education, the government needs to explain how the monetary system works adequately. The government and a properly educated Board of the Reserve Bank need to address these realities.

Regarding my familiarity with this, I worked at the Reserve Bank between September 2001 and October 2002, where I worked on both the operations and technical security teams at the Reserve Bank. In that capacity, I aided reversing the RITS system’s previous outsourcing of AlphaServers operating OpenVMS, previously managed by AustraClear/SFE. Back then, the money churned between banks via their reserve accounts oscillated between $9 to $16 billion daily. The monitoring of that transfer between private bank accounts is the RITS system at the Reserve bank running on an Alpha-VMS mainframe that monitors all account exchanges between banks, which is the system I helped bring back in-house.

Quantitative Easing

In a financial crisis – such as the Pandemic – excessive needs for Exchange Settlement Reserves become evident. The overused strategy of Central banks globally during the Pandemic has been Quantitative Easing. Despite the talk of “printing money”, that is a red herring. Printing money depends on the demand for cash in the private sector – generally around 3% – and never reaches a point where it even approaches a small portion of the digital money supply. Hard currency demand during the Pandemic reached 17%. Digital money is the normality between the Reserve Bank and the private banking systems.

Quantitative Easing affects the money supply by increasing the banks’ ESA reserves at the Reserve Bank. This is done by the Reserve Bank repurchasing Treasury bonds from the private non-bank sector (i.e. pension funds and asset managers) and the private banks. The purchases from the private banking sector rise in digital money extend the ESA reserves. Many private sales of Government Bonds mean more money is circulating in the private sector that may be used to pay off bank loans, reducing the likelihood of borrowings. Technically, increased reserves, while facilitating extensions of interbank transactions, have no direct impact on any credit creation expansion.
Precisely what area of the economy Quantitative Easing serves is also of concern, as “employment growth” wasn’t one of them. The inequality of protecting financialised assets amongst the wealthy ruling class financial markets rather than the working class who lost jobs in the millions. As Adam Tooze, in his recent publication, “Shutdown”, observes

“For the central bank, that meant holding interest rates down. Once again, it came down to financial markets. As far as anyone could figure out, QE worked by driving government bond prices up and yields down. Lower interest rates helped to encourage borrowing for investment and consumption. Lower yields also prompted asset managers to reallocate funds from Treasury markets, where prices were driven up by central bank buying, to riskier assets, like equity and corporate bonds. This boosted corporate borrowing and the stock market. It increased financial net worth and boosted demand.

The supportive cooperation between central banks and treasuries in the common struggle against the coronavirus was thus, the central bankers adamantly insisted, no more than an incidental side effect of their frantic and clumsy efforts to manage the economy by way of financial markets. Despite the relentless accumulation of government debt on their balance sheets, the central bankers insisted that this had nothing to do with financing public spending. Their priorities were to manage interest rates and ensure financial stability, which in practice meant underwriting the high-risk investment strategies of hedge funds and other similar investment vehicles. Rather remarkably, they insisted that tending to financial markets was a more legitimate social mission than openly acknowledging the highly functional, indeed essential role they played in backstopping the government budget at a time of crisis.” [pg 149]

When Financial markets become more important to the Reserve Bank than the well-being of the vast majority of Australians, then the bank’s philosophy is served and managed by too many businessmen and women with a neoliberal ideology to serve the interests of the few above that of the whole economy. As Curtin espoused, the Reserve bank’s original social mission is to “pursue a policy of low inflation, sustainable output and employment growth”. This mission has evidently fallen, by the way, because of the people chosen to run the Board of the Reserve Bank.

Taxpayer’s money?

Finally, It can be demonstrated simply by viewing the balance sheets (irrespective of the accuracy of dollar amounts) of the entities known as

• the Treasury,
• Reserve Bank,
• the collective private banks and
• the collective non-bank private sector

that the federal deficit of the Treasury is the surplus of the Australian economy’s private (and foreign) sector. Deficits are just the government’s way of provisioning the private sector. If a government wishes to pull the spending of an economy back and throttle the growth of an economy, it pursues a surplus for the Treasury, depriving the private sector of funds. John Howard, for example, achieved that when he throttled back the economy to provide the Treasury with a surplus. Consequently, the private sector, desperate for money, borrowed heavily from the Banks. Private debt expanded considerably under John Howard. [See here: The Howard impact or here: Debt, home repossessions portent for Australia poll]. But of course, Mr Chalmers, you should already know this.

Simplified Australian monetary system

Taxpayers are not on the hook for a government’s treasury deficit as that deficit just boosted taxpayers’ finances. The government’s debt is your problem, not ours, since the Treasury and Reserve Bank issue the dollar (which taxpayers don’t because that is a crime called “counterfeiting” with which you would charge us). The currency-issuing government can pay their debts off any time they choose by issuing the dollars to cover them. Admittedly the wedging by political opponents and the Murdoch media would require of this government political courage, not financial inability.

Knowledge is power

The problem is, if submissions for a public review of the functions of the Reserve Bank are to be effective, it is incumbent on the reviewers to have a realistic appreciation of how the banking system works and the Reserve Bank’s role in our financial system. Holding to the public franchise myth, the NAIRU myth, and the Taxpayer funds myth, as many in the media (and possibly members of the Bank Board), will limit the usefulness of any submissions. Providing faulty recommendations to politicians who frequently use the analogy of a household budget to describe how fiat economies work is a recipe for disaster and subsequent legislative policies that will hamper the workings of the Reserve Bank to aid post-pandemic financial recovery.

So we need governors and heads of departments within the RBA who know and understand inflationary causes, recognise the differences between supply vs demand causation and know that raising interest rates is an over-zealous intervention that cures symptoms by killing the patient.

Thank you for the opportunity to submit this letter for your review.

Yours sincerely,

John Haly.
(Auswakeup Media)

This article was originally published on AUSTRALIA AWAKEN – IGNITE YOUR TORCHES.

[Correction: An earlier version of this article was not “absolutely pedantic accurate” as inflation from 1945 to 1970 was so small compared to what followed, as to be negligible, but as it wasn’t nonexistent, the phrase at the end of the section on Curtin has had the word “substantial” added.]

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By John Haly  

“Climate change takes centre stage in Australia’s election” was proclaimed in 2019, but then the party of Climate scepticism took the stage. The polls failed to predict the election outcome on the 18th of May 2019, and “climate” wasn’t on the agenda. Even more of a climate denialist than Tony Abbott, denialist Scott Morrison held all the Aces and dealt Bill Shorten a knockout blow few saw coming.

Here we are in 2022. The French are casting an eye across the Indian Ocean, where once submarines they might have manufactured were to travel to their final destination in Australia. France 24 proclaims, “Australia’s federal election: Climate change becomes top concern for voters“. They noted, “The environmental crisis is high on voters’ minds, and smaller parties and independents are gaining momentum by riding a wave of disillusionment over the conservative coalition’s lack of climate action.” But, after suggesting minor parties succeeding and hung parliaments are the future of the Australian parliament, one must wonder, do these minor parties really have the policies that could shake the foundations of our nation?

Single issue agendas

It is easy to find articles that review how the major parties will address Climate change. But perhaps less so conspicuous is the position of all the parties. But pick an issue that you rate as necessary, such as Queer Rights, and you can find a particular interest group ready to “dish the dirt” on your favourite issue. So, is there someone in your circle of associates prepared to do it on various topics? If you are looking for that someone, you have come to the right article and the correct author.

Multiple Parties and Issues

The political Compass reading of Australia political positioning in 2022

Think again, though, if you thought one should give any credibility to the ABC’s vote compass. I have previously addressed the errors of the ABC tunnel vision in my “Voting values” article. I refer to the international perspective from “The Political Compass“, which does it for every national election in western democracies. They represent their analysis of the classic Right-left / authoritarian-progressive abscissa and ordinate graph. Their results for Australia in 2022 came out recently. They placed the main parties in that two-dimensional framework for any party that has previously received a seat at the political table.

These evaluators did not look at every party that sought a guernsey at the political table (irrespective of their likely success).

The AEC informs us that, fundamentally 37 registered parties are seeking to place candidates into parliament. When the Morrison government introduced legislation that lifted the membership threshold for registering a federal political party from 500 to 1,500, some 40 parties found themselves in trouble. Some parties ceased to exist, such as the Australian Workers Party, which I evaluated as having the best range of progressive policies in 2019. Other parties (Science, Pirate, Secular, and Climate Emergency) deregistered their original name and formed their own coalition as the new Fusion Party. Others like the TNL (The New Liberals) went on a successful membership drive. So just like the last election, I began the long task of assessing the policies of 37 parties, some of whom did not exist when I last devoted myself to this task. Some old parties developed new guidelines there were no signs of three years ago, and others dropped policies I had assumed were entrenched from 2019.

In this election, I evaluated 24 specific ideological premises, starting with Climate Change mitigation and ending alphabetically with Worker’s Rights. The list of issues I evaluated from each party was:

1. Climate mitigation
2. Drug Reform
3. Economy
4. Education
5. Employment
6. Energy
7. Environment
8. Gender equality
9. Government accountability
10. Healthcare
11. Housing and cost of living
12. Immigration & refugees
13. Indigenous
14. Industrial relations
15. Infrastructure
16. LGBTQ rights
17. Media Management
18. Monetary principles
19. Poverty and inequality
20. Public transport
21. Security/ Foreign & Domestic
22. Social justice
23. Superannuation & pensions
24. Worker’s Rights

The ABC’s Overton Window on politics in 2022

Some of these issues came from a list of policies generated by ABC’s vote compass analysis of what participants were interested in from back in 2019. I then added a few other policy agendas or, in some cases, split issues. For example, I split climate issues into direct mitigation separate from environmental issues.

I documented how I defined each of these with a series of questions about each issue and assessed the contents of each party’s policies. You can find that at: http://auswakeup.info/issues/election-issue-2022.pdf.

Another table was created with columns for 37 parties with 24 rows for each issue.  From this, I began writing notes or abbreviating the lists of policy positions each party gave to that issue. That took a good while, as parties don’t necessarily neatly describe their policies in the categories I generated. In some cases, they had policies whose classes I didn’t evaluate. The PDF for that is at http://auswakeup.info/issues/party-comments.pdf, but you will have to zoom in to get all the detail. Don’t try examining this on your tiny smartphone screen. It is important not to mislead you. I have not listed all the party’s policy positions, and I may have missed some. Some party’s policies are very comprehensive, and when I realised I had enough to make a reasonable assessment, I moved to the next issue. It took me over a week to do what I have done, so I did not wish to get bogged down in extraneous detail.

As I completed the assessment to the point where I had a broad summary for each party, I scored the results and moved to the next party’s website.

Pecuniary Interests Register

First off, I should address my allegiances. As a Journalist, I am a current member of a registered political party that, while still in existence, has no stake in the federal election. I am a founding member of the Arts Party. They voluntarily deregistered from the national sphere well before Morrison changed the rules. They are still registered at the State level, where the executive decided to focus their efforts. I also spent two and a half years on the executive of the Real Democracy party developing and building it. It was a social democratic party that based its economic policy on Modern Monetary Theory. In 2019 we gave up on the hope of ever getting it registered.

My philosophical framework

I would consider myself a socialist, although the family that brought me up, would be better described as “Small-L” liberals. When at 18 I went off to vote for the first time, my Father, after telling me how they voted for the local Liberal candidate, asked me for whom I voted? My disrespectful reply was, “Well, at least I cancelled out one of those votes!” My Father was aghast but fortunately loved me enough not to disown me.

This is the lens through which I evaluated and scored each party. You can take my notes and re-evaluate how you might score them per your own principles.

Scoring

I rated each party’s position on the 24 issues from minus one to three.

• -1 : my assessment of the party’s position is that I hold it is deleterious to our society, economy and country. For example, climate denial/recalcitrance always got a minus one, as did evident anti-vaxxer ideologies and support for the crime of offshore refugee detention positions.)
• 0 : means no policy was mentioned on this issue or was either relatively insignificant or aspects were so mixed between deleterious and reasonable as to cancel one another out. For example, Katter’s lousy policy on creating a new class of Blue Card that applies only to Indigenous communities. Still, he also has an excellent approach to inalienable title deeds issued to First Australians.)
• 1 : represents the bare minimum or basically a reasonable approach but nothing to write home about. For example, Kim for Canberra says, “religion should not be used to discriminate against others in any context” which, while good, is the bare minimum for Social Justice issues)
• 2 : it means good but needs improvement or doesn’t cover the entire scope of the issue. The Reason party has good pro-renewable energy policies and divestment from fossil fuels. Still, there are no specific strategies around subsidisation, phasing from one to another, and energy security, which is a commonly missing aspect.
• 3 : a great set of policies for this area, perhaps complete or so little missing as to suggest the party would likely progressively fill any gaps in the future. For example, the comprehensive policy for Indigenous people comes from the Indigenous Aboriginal Party of Australia.)

Integrity

Evaluating a policy position has to assess the integrity of the claim. If the party lacks integrity or has a record of lying to gain a political advantage, that has to discredit their claim to a policy. So, for example, when the Liberal party claims to have a policy to “back small businesses with tax incentives”, I have noted that is not so if they are removing the Low and middle-income earner tax offsets. If you want a good laugh at Josh Frydenberg trying to spin it, watch Richard Denniss disassemble his claims on YouTube.

An alternate example might be the new housing policy for young first time home buyers to use 40% of their superannuation. I noted in my matrix that Morrison had already “allowed superannuation depletion by 3 million people” when he permitted people to access these funds during Covid in lockdowns rather than funding them through Job Keeper. Now Morrison suggests taking even more out of superannuation to support the housing crisis. Which even the “Investment Magazine” thinks is a bad idea. They expressed their concerns in their article “Deposit dipping into super not the answer to housing crisis” Sufficient to say, despite what Morrison claimed was a good policy, on the issue of “housing and cost of living“, I awarded the Liberals a negative one rating.

Weighting the results

In addition to direct scoring, I have weighted my scoring also. I have doubled my initial scores for four policy areas I believe are crucial for this election. Those four areas are:

1. Climate mitigation.
2. Economic monetary principles (MMT).
3. Corruption and accountability management.
4. The Rights of the Working Class.

This should be the climate election; 2019 was not. Catering to the neo-liberal economic principles based on the Monetarism theories of economic models developed by Adam Smith, Friedrich Hayek and Milton Friedman and promoted by Alan Greenspan, Robert Murphy, Paul Krugman and Jonathan Hartley is deplorable. It fails to recognise that we are an economically sovereign nation that issues our currency that everyone else uses. Instead, we should be following the post-Keynesian theories based on John Maynard Keynes and regenerated as the Modern Monetary models promoted by Prof Bill Mitchell, Stephanie Kelton, Pavlina Tcherneva and Warren Mosler. Books to read on this include “Doughnut Economics” as espoused by Kate Raworth, Stephanie Kelton’s “Deficit Myth“, “Reclaiming the State” by Prof Bill Mitchell and “Job Guarantee” as written by Pavlina Tcherneva. Corruption in politics costs society and business, and a Federal ICAC with teeth and divestment from corporate political donations are research subjects my wife specialises in and about which she has written extensively. As for Worker’s rights, well, I am, after all, a socialist, so I think that is important. However, while no Australian party declares the workers should seize the means of production as they did in Spain in 1936. Some of us see the value of a less violent uprising that might achieve that goal.

My results

So now that all my caveats, preferences, prejudices, etc., are loudly proclaimed, here are my resulting scores. Presented both with and without my weighting, which is published in the PDF located at http://auswakeup.info/issues/party-policy-scores.pdf.

You can print it off, and using the data in http://auswakeup.info/issues/party-comments.pdf, you can restore it in accordance with your own values. (Note: you will need to print the latter on A2 sized paper for it to be readable)

Preferences

Some results were unexpected. Parties I scored highly in 2019 have dropped better policies for poorer ones, by which I was disappointed. But then parties that were fair before have lifted their game in 2022. Due to this exercise, I have changed my mind about which parties and the sequencing I will vote for them. “What gets measured, gets managed“, as my small-liberal voting Father often said. He was right in some things, and I honour his memory by respecting that advice.

Use the power of preferential voting

The last warning or advice from this article is, for heaven’s sake, Australians, stop being so lazy as to abdicate your choices to party preferences, and choose your own preferences – number all the boxes. Understand how preferences work and use them to your advantage. Even if your best choice doesn’t receive a place at the political table, they might get enough funding from the AEC to keep going. Your preference vote will move to the next party in your choice of preferences until it settles on a winning party. That is the power of preferences, so don’t buy into this propaganda that you can’t vote for minor parties because this is a crucial election (they all are). It is not necessary to vote first for a likely winning party as that constitutes bandwagon voting and diminishes the power of your Australian preferential vote.  Your vote will still get to that party! With all the potential corrupt corporate donations, the duopoly of Labor and Liberal doesn’t need the AEC money, but a smaller party with better policies does.

Summary

My three highest-scoring parties, irrespective of my weighting (but also including it), are TNL (The New Liberals), Socialist Alliance and the Reason Party. Conversely, the three lowest scorings, all of which have accumulated a negative score over 24 areas of evaluation, are Pauline Hanson’s One Nation, the Nationals and the Liberal Party.

Saturday the 21st of May 2022 is upon us this week. Choose wisely!

This article was originally published on AUSTRALIA AWAKEN – IGNITE YOUR TORCHES.

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The time has come to expose the great fraud that has been perpetrated on the West in the last forty years. Once we have even a surface-level understanding of Modern Monetary Theory (MMT), the great lie that is Neoliberalism will come crashing down.

Now, this has been outlined and discussed in detail by far greater minds than my own; this is not original to me. But I thought it might be useful to offer a brief description of MMT, how it works and then use these basics to expose the great Neoliberal fraud.

MMT, Part One: Currency and Its Relationships

In every economy that has its own currency (Australia, the US, the UK etc), every entity in that economy has one of two relationships to that currency. One is either a user or an issuer. Obviously, the federal government is the monopoly issuer of currency (hence counterfeit money laws). So the government issues the currency, and everyone else (including state and local governments and the citizenry) uses the currency.

Currencies such as the Australian Dollar, the US Dollar, the Pound etc are called Sovereign Currencies or Fiat Currencies. This means that when the government goes to do something, it simply goes to the central bank (the Reserve Bank in Australia or The Federal Reserve in the US) and says ‘we need this amount of money to be created’ and the bank, through several keystrokes, brings that currency into existence. Similarly, the relevant bank accounts of the recipients are also augmented using keystrokes. This may seem counterintuitive, but think about it this way. Consider the recent spending of $3.5b on tanks. Are we to believe that the government went to a physical bank vault filled with stacks of $100 notes? In light of the amount of money spent by the government on the regular, this would be impractical. Government spending is essentially EFTPOS on a grand scale.

MMT, Part Two: Tax Does Not Fund the Government

Since the government simply creates (issues) the currency it uses, government spending is not ‘paid for’ in that sense. It does not need tax to fund its spending since it is spending currency it issued itself. Tax revenue, I say again, does not fund the government. This lays to rest the zombie lie that a government has to ‘live within its means’ or ‘has a budget like a household’. Households do not issue their own currency, so this statement is a lie. Government ‘living within its means’ is naught but a lie designed to justify cutting funding for things neoliberals do not like, such as universal healthcare, education, pensions and generally anything that benefits anyone making less than $250k per year.

I should be clear: taxation does not fund federal government spending. It is true that tax does fund state and local government since these entities are still currency users (recall it is the federal government that issues the currency).

MMT, Part Three: The Purpose of Taxation

A natural follow-up might be to ask

If  tax does not fund [federal] government spending, why have tax at all?

I think the best answer to this was provided in a New Economic Perspectives article

[Another] reason to have taxes is to reduce aggregate demand. If we look at the United States today, the federal government spending is somewhat over 20% of GDP, while tax revenue is somewhat less—say 17%. The net injection coming from the federal government is thus about 3% of GDP. If we eliminated taxes (and held all else constant) the net injection might rise toward 20% of GDP. That is a huge increase of aggregate demand, and could cause inflation

What this seems to mean is that the act of ‘taxing’ a unit of currency serves to eliminate it from the economy. Taxation seems to have the purpose of being a sort of ‘inflation break’, removing a certain amount of currency from the economy to prevent too much currency from flying around which could lead to inflation.

The Other Great Zombie Lie: How Will You Pay For It?

You have doubtless heard some version of this whenever a policy is proposed that would help the peasants. Any talk of, for instance, raising Newstart is met with loud screams of ‘HOWYIGONPAYFRIIIIIIIIIIT’ (how are you going to pay for it) or ‘we cannot afford it’. It is unclear whether those asking making these asinine statements are not aware of the fiat currency the Australian Federal Government uses, or if they are being deliberately deceptive. I leave that decision up to you all individually.

Not only is ‘how will you pay for it’ a ridiculous statement, but its application is also highly selective. Have you ever heard this question, or some variant of it, asked around, say, the military budget (pick your country, but the Americans are the most egregious)? How about corporate subsidies? How about politicians’ own outrageous perks and entitlements?

It is almost like they know that they have a fiat currency and intentionally lie to the people about ‘debt and deficit’ whenever they do not like something, typically for ideological (or corrupt) reasons. Whether it is funding Medicare (consider Mr Morrison’s recent removal of more than 900 items), investment in renewables or anything else the Liberal National Coalition is (in my opinion) paid to oppose, they become penny-pinchers when their ideology gets in the way. Yet hypocritically when it comes to war, corporate looting of the treasury and their own perks, they are reckless. Enough.

Conclusion: The Great Fraud

Since the advent of Reagan and Thatcher, politics in the west has taken a very selfish, individualistic turn. Pulling yourself up by your bootstraps is a popular Neoliberal mantra. Government has to live within its means is another. MMT shows that the very idea that a government has ‘limited means’ has narrow basis in reality. It is a monopoly currency issuer. It is, in a very real sense, not possible for a government with a fiat currency to ‘run out of money’.

I have said this before, but it is worth repeating: When it comes to helping the people, it is not money these sociopaths lack, it is the will to do it.

Governments with fiat currencies have all the money they could ever need. They could do so many wonderful things to improve society in so many ways. Means is not the issue. Conviction is. MMT, with its focus on fiat currencies, helps to expose the great hypocrisy at the core of the Neoliberal disaster of the last four decades. In an economy with a fiat currency, the use of fear-mongering about ‘debt and deficit’ to suppress policies that could help broad swaths of the population is dishonest beyond measure.

Epilogue: Still Learning

I am very much still learning about MMT, and doubtless, I have gotten some things wrong here. I encourage you to check out this podcast for detailed discussion of the theory and its applications. I hope this piece has provided a basic discussion of MMT and given some insight into the rot that is Neoliberalism.

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When treasurer Josh Frydenberg abandoned the Tony Abbott mantra that “you can’t fix the economy unless you fix the budget,” it was clear that something within the mindset of the treasurer and the government, had changed. They realised that the reverse was true.

No longer do they believe that debt is a disaster, or that deficits are bad. Not now, under the current Covid climate. Funny how things you do for the sake of expediency and political advantage, finally catch up with you.

Long gone is the soft target of Labor’s predilection for high spending there to exploit. Not even the Murdoch press can play with that one anymore. Covid has blown that one right out of the window.

No longer will the mantra, “how are you going to pay for it,” work either. Funny how both the conservative press and the ABC are now running spending stories without referring to the levels of sustainable debt.

Economic gurus everywhere are now reviewing and revising their reporting strategies to accommodate the changed circumstances that reflect more closely the MMT reality of sovereign debt…that it isn’t debt at all!

The government balances its books by issuing bonds to cover spending that exceeds taxation revenues, but knows all too well, that those bond sales are no more than a smokescreen to hide the fact that the Reserve Bank provides the money for all government spending, regardless of the outcome of any bond sale. It simply creates the money out of thin air.

There is no difference between a $1 trillion debt and a $2 trillion debt. It’s what you spend it on, that matters.

Now, some in the press, have woken up to that reality too. So, what is the government doing now? They are embracing the reality that full employment is the key to a successful economy. Who would have thought?

Up until now, the thought has been that a certain level of unemployment was necessary to combat inflation. Not anymore. Employment is now the key driver.

Get people back to work, manufacturing, producing, distributing, delivering, servicing,  and voilà! No longer does one need to worry about balancing a budget. Over time, that will happen automatically. Who would have thought?

For a government who won an election in 2013 on the flimsy fantasy of a “debt and deficit disaster,” this 180-degree turnaround seems to have been achieved without a scintilla of a backlash. What a stroke of good fortune that has been.

‘’How good is that’,” we could imagine the PM, Scott Morrison saying to his cabinet as they engineered the dismantling of the job keeper program.

There is a certain irony here, that journalists are struggling to address because in doing so, they reveal their own shortcomings.

Notwithstanding the insensitivity the government has shown towards the needs of various sectors within the national framework, they are now happily prepared to dole out the dollars to those very sectors they despise, knowing full well that their hypocrisy in a Covid-conscious electorate, will go unnoticed.

How good is that? And it is all because the conservative side in the political arena has adopted the “don’t worry about the debt” mentality. Why have they done this?

Because they now realise that it is not real debt!

The problem for Labor in this otherwise snippet of good news, is that those who would most likely change their vote and punish the government for their dishonesty, are currently so self-obsessed with their larger bank accounts and wondering what to spend it on, that they are blind to this fundamental policy reversal, or couldn’t care about it anyway.

Comment bon est ca?

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Ministerial phlebotomy: Evasion of the bleeding obvious. Oh no, now we are being told how to think about it – doing the hokey-pokey!

Political leaders, chief medical officers and journalists who think that they can defend the position of giving the same vaccine safely to everyone, regardless of the evidence emerging that people with certain blood clotting disorders (and possible heart conditions, other blood and circulatory disorders and treatment regime interactions) or unknown genetic predispositions by comparing the risk of death in road traffic accidents or contracting COVID-19, need to go back to school and learn about basic human bioethics, if not the process of scientific inquiry itself.

And as for sermonising desperate marketplace or ‘legal eagle’ politicians like Morrison and Hunt, they should just keep their ministerial phlebotomy and mouths shut on the subject, since if you have no empathy for others’ true-life experiences you are not going to learn them in a mandatory training module, just as you won’t learn ethics and how to manage ethical dilemmas from not listening to other people’s including women’s concerns. You just don’t have the goods, the prerequisite character and traits to learn it in the first place, other than pretending you do, yes, Mr Morrison I am speaking particularly to you.

The difference between an RTA statistical probability or a public health COVID-19 risk analysis of death or serious harm/injury and reality, is:

(1) they are statistical probability calculations not individual real life events, assessment of medical risk or causation analysis (not even an RCA we might be familiar with in our public health system). They are politically manufactured probability statistics and guesswork to advise politicians when the facts are not known;

(2) You can choose to drive defensively, carefully or minimise your exposure to the risk and stay at home, use public transport or practice good social distancing, use of PPE and mediate your risk;

(3) if you are in a known or emerging risk group, you can be provided with an alternative risk management strategy like another vaccine, rather than just be told to grin and bear it; and

(4) if by consequence you have no choice on an alternative vaccine which doesn’t expose you to that risk, you have no choice but to continue running the gauntlet, restricting your life choices and freedoms vicariously for everyone else’s benefit or die at a calculated probability much higher than the general population either through a ‘one size fits all’ vaccination program (with 4-20 day blood clots) or heightened exposure to COVID-19 vulnerability (no government acquired vaccinated immunity).

The real problems Morrison and our compliant and captive Chief Medical Officer are facing are:

(a) burying their heads in the sand to start with and maintaining their stance, telling us we are still acquiring the facts when they should know full well that certain facts are already known – There is clearly a problem with AstraZeneca and blood clotting for certain people no matter how small this group may be and initial large sample phase 3 trials comparing clotting and death outcomes to a control group of the general population (unvaccinated) do not eliminate the possibility of cause and effect such as VIPIT (vaccine induced prothrombotic immune thrombocytopenia). To date this is all we have and any decent researcher would know public announcements declaring public safety for all is flawed scientific reasoning, advice and conclusion till we test the relevant variables at play. The fact that the time interval between AZ administration and reports of clotting are consistent is highly significant, not pointing to false conclusions of random probability or unrelated events, which Morrison with his new found medical knowledge and chief buddy have been ignoring. The fact that these events have not arisen or been reported in other common vaccines like Pfizer, Moderna or Johnson and Johnson are also significant. The fact that a host of nations have raised their concerns only with AstraZeneca in the light of this emerging data – these are all facts which a well briefed and responsible Prime Minister would know;

(b) sliding down their explanation from ‘denial’ to ‘defensive rationalisation’ and now ‘we are exploring’ or the excuse ‘the situation is fluid and changing’ over the time it has taken for them to acknowledge there is a problem, is blind arrogance and hypothesising after the horse has bolted, yet still not providing us with a rational or viable provisional risk management strategy, is just morbidly fascinating and unacceptable. Still, they hustle and bustle as one nervously glances to another and the other smiles smugly prattling on about ‘facts’ – actually just one random and irrelevant fact of non-supply; and

(c) constantly telling us or distracting us with an unrelated issue of breakages in supply chain, focusing on blaming the EU for blocking exports when they have nothing to do with this issue. When in fact the real problem is government ordering and procurement – they put all their eggs in one basket and banked their money and investments (with a whiff of corruption, quiescence, incompetence or neglect at least) on AstraZeneca and CSL domestic manufacture. They should have ordered and secured an alternative supply of vaccine a long time ago, even if relatively tiny but hugely practical, Moderna or Johnson and Johnson for instance, or even now dispense a small portion of Pfizer for medical determination, but are too pig-headed to admit or consider it, while still they procrastinate. But choice, biodiversity and intelligence aren’t among Morrison’s marketing strengths, especially when it comes to the horror of empowering others or advancing Australia’s interests.

Let’s face it they both fucked up! Anyone with an ounce of intelligence knows they fucked up, so admit it. But don’t short-change us on ethics and coercion by telling everyone they have a duty to take the AstraZeneca vaccine because it is the only one we’ve got other than those to whom there is close to zero risk, which is most of the population who have little to worry about.

Do not scapegoat the few as ‘anti-vaxers’ or tell them they are jeopardising the national vaccination program or quash their voice because they happen to be a nurse, a woman or just someone who has capacity to show critical thinking, ethical reasoning and empathy with the worried few, and stand up with courage in the crowd – especially when you choose only to face a camera or the Opposition at Question Time, where you can control or dictate the conversation, rather than face that friendly crowd.

Print: Ministerial phlebotomy – John Bull c.1808, British Museum

Do not sweep the tiny ‘unknown’ group under a bus for the sake of the majority for that is not responsible democracy, that is in point of fact a microvariant of medical iatrogenesis and public health neglect – it is the application of poor and flawed scientific and ethical reasoning which the Liberals are so renowned for on almost every issue from climate change, employment, coal, health and disability to MMT. You do not sacrifice the safety of a minority for the majority (or the inverse for that matter which the Liberals do all the time) when there are clear practical mediating social strategies and solutions available. That is just rampant ignorance, populism, propaganda and evasion of the bleeding obvious, not to mention a corrupted interpretation of social ethics, morality and informed government.

But what the fuck would Morrison (or Hunt) know when it comes to medicine, nursing, women, ethics or anything in the universe let alone intelligence or life on earth?… Perhaps Morrison should talk it over with Jen!

Oh no, even journalists and editors are telling us how to think about it, what’s next tourist directors, lawyers and government regulators, bankers and TV celebrities on sunrise telling us how to do the hokey-pokey? Of course, everyone has an opinion on something, it’s all John Bull!

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In a recent Letter to the Editor of the NT News, I mentioned my weekly sessions outside NT Parliament House.

[As an aside, it never ceases to surprise me that most of my letters get published in a Murdoch paper, and it is interesting to see how the resulting complaints about my views on the need for climate change action are slowly reducing, as the reality becomes more and more widely accepted.]

On another contentious issue, Alan Kohler’s Insight in today’s paper (21/10/20) drew attention to the tacit acceptance by international authorities of Modern Monetary Theory (MMT) while, in the same article, reporting ‘“I don’t subscribe to MMT,” Treasurer Josh Frydenberg said last week.”

Anyway – back to the chink of light – our youth!

On session 38 today, I had a visit from a very articulate 20 year old who had noted mention of my sessions and came to see me – expecting a 20 – 30 something year old!

He still stayed, and we had a very lively conversation!

We had a long chat, during which he asked me how I saw us making progress. When I mentioned the need to persuade governments to act, he countered with a plan for people power.

He drew attention to the idea that if everyone with bank accounts with the Big Four, or with superannuation and/or other investments, including shares, in dirty fossil fuel industries, and who wanted change, were to move out into clean investments, the pressure against the fossil fuel entities would be sufficient to completely change the viability of fossil fuels.

That is crudely worded, but I am sure you can see that if shareholders sensed that the winds of change were blowing, they would dis-invest in fossil fuels and – BINGO!

I am sure we overlook the potency of people power – it is the power of many individuals, acting in unison to achieve a common good.

Although not recommended as a perfect model, and I am not a promoter of violence, but the French Revolution worked, because enough people had had enough of being downtrodden and impoverished.

I am not normally a fan of the dirt file mentality but there comes a time when exasperation at people’s ignorance of the deception and downright evil behaviour of those in power has to be highlighted.

Many of us are convinced by science that global warming is really happening, that we must take action on it, but those currently in power appear to have no concern about anything which adversely affects their god – the economy.

Many of us are aware that the longer we wait to take effective action, the less likely it is that rising global temperatures and the resulting and increasingly adverse climate events, will be consistent with a truly acceptable lifestyle for future inhabitants of the planet.

We are, I am sure, all aware that climate disasters to date have done massive damage which is far from having been remedied. And please note – THAT HAS DAMAGED THE ECONOMY!

Those made homeless or having their livelihoods destroyed by last southern summers’ fires are yet to get back on their feet, despite promises from on high!

(I stress the ‘southern summers’ because in the tropics we have the ‘Wet’ – which is not always wet enough to replenish the dams and the groundwater – and the ‘Dry’ – which has been getting both hotter and more humid.)

Does your bank have shares in fossil fuels? What sort of interest rates does it pay? I suspect that for most of them it is next to nothing unless you have really large amounts invested. How about a local credit union? How does it compare?

Many of us have shares in Telstra – suckers! – but if you or your superannuation or pension fund have shares in other investments, do they include fossil fuels?

If we personally cannot be bothered to do our own due diligence, then we are being hypocritical if we complain about others failing to act appropriately.

Perhaps the finance advisers in some of the charity organisations could assist in this one, by doing some research and providing the resulting information to the public.

But – to return to the dirt file – we have all listened to members of the Coalition throw accusation after accusation at the ALP. And we are all resigned to the fact that politics is a dirty game and many politicians are out and out sleazy.

But have you checked this out?

It is a long read, and might have been better constructed, but it reminds us of much that we have – and should not have – forgotten.

Before I close – a reminder: sun and wind and hydro are far from being the only sources of renewable energy. So much of the Australian population live on or near the shore line, yet how much use do we make of tidal power – particularly in the NW of Australia where the tidal range is really significant?

Stop talking about piping water and gas about the continent and start thinking seriously about piping renewable energy!

Start by looking at some of this guy’s ideas and let your imaginations roam freely! And then act to save the only planet we already have!

Please remember – ‘time is of the essence’ is a good legal saying which is very pertinent as we near the end of another year without action!

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The 2020 Federal Budget projects a deficit of some $213 billion – a far cry from the previously projected surplus. An already sluggish economy – hit now by Covid-induced economic collapse – left no option but massive stimulus – lest the nation sink into a Depression.

In a way it is encouraging that the government has thrown away the book on neo-liberal orthodoxy to some extent. A contractionary budget would have been disastrous. A notable amount of the stimulus (about $6 billion) comprises wage subsidies aimed at the young – with the aim of supporting some 450,000 jobs. The plight of the older unemployed – thrown onto the Jobseeker scrapheap – is another question. In the largest single measure over $26 billion in tax breaks will be delivered to business to write off the value of new investment by June 2022. There will also be a $4.9 billion “loss carry-back scheme” enabling businesses “to claim refunds or offsets on taxes in previous years.” Importantly, the third round of tax cuts – aimed at high income earners – has not been brought forward – in a win for Labor and the Greens. But the business sweeteners are not consistently tied to job creation and job retention – so for all that money there are no guarantees for workers. According to ACTU President, Michelle O’Neil, the government also projects zero wage growth even if there is economic growth in the coming years.

In Aged Care, $1.6 billion will provide 23,000 home care packages. But this is below demand, and there are no big plans to reform residential care. Perhaps this will come with the final findings of the Aged Care Royal Commission and the next election: but the need is urgent and ought not be put off. In fact it is dubious the Conservatives will find the money for comprehensive Aged Care reform: Home Care and Residential packages to meet demand; with quotas for Aged Care Workers and registered nurses, a winding back of user pays, exercise and GP visits for all residents, and an emphasis on quality of life. It will be up to Labor and the Greens to put up a fight, though disappointingly Labor has known about these problems for over a decade, and is only making the right noises now with the focus provided by the Royal Commission. We are talking many billions of dollars annually to make a difference over the long term.

‘The Age’ reports that “about 11.5 million workers will get up to $2745 more in their pay packets this financial year.” Though the raising of the threshold of 32.5 per cent to $120,000 from $90,000 is arguably badly targeted.  And support for pensioners and the unemployed is insufficient, with a total of $500 in payments to Aged Pensioners meant to bring relief and fuel spending. More for those on  low incomes and welfare would have a greater stimulatory effect, and would contribute to fairness. On the other hand the low income tax offset will rise from $445 to $700 in a modest but welcome measure.

Importantly, of the new spending measures only $6.7 billion is going to the states for new infrastructure. Including other infrastructure measures the figure is closer to $10 billion extra over ten years. The government’s main emphasis is in providing support and incentives to ‘kickstart’ business as opposed to measures directly supporting consumption at the low and middle ends; although increased business confidence would support jobs. The Budget measures emphasise the ‘supply side’ but neglects the ‘demand side’ when it comes to low income earners, the unemployed and pensioners. The opportunity to permanently raise Jobseeker appears to have been neglected, and many jobs will be lost with the premature withdrawal of JobKeeper.

Of most concern, stimulus is not a ‘black hole’. Getting people spending and back to work is part of a ‘virtuous cycle’ which can restore growth and rejuvenate the government’s balance sheet. With record low interest rates the time has never been better for investment, and the Government could have done more here.

The economy’s pre-existing weaknesses have not helped; but a Labor Government could not have avoided a Covid recession. As Labor has argued it will be putting the case for ‘better bang for our buck’ in the stimulus. This should mean more emphasis on those on low incomes and welfare, and providing support where it will grow spending and investment in jobs most vigorously.  Too many businesses will be pocketing these ‘sweeteners’ without necessarily creating jobs.

In response to the Budget, Anthony Albanese has committed to further child care subsidies and half a billion to refurbish public housing. We need wage subsidies for child care and early education workers as well however. And also subsidies for consumers of child care and early childhood education. Both as a matter of fairness (for child care and early education workers – and women workers more generally); to get more women working, and to attract talented educators into the field. Also with housing out of reach for so many people a big investment (into the billions) in public housing now could both stimulate the economy and promote affordability.

Modern Monetary Theory supposes government can issue currency to ensure a ‘full employment guarantee.’ Such stimulus is part of the picture, but can be limited by inflation and currency devaluation. Though inflation seems unlikely in the current environment. Redistribution can’t be done properly and fairly without tax; but MMT has something to contribute to this debate. The government’s projections on unemployment are nowhere near ambitious enough.

If Labor was in government this kind of stimulus would be derided as an ‘irresponsible’ ‘cash splash’. Consensus that stimulus is part of the way forward in times of economic weakness is at least a good thing in itself. It sees Conservative arguments against the Rudd stimulus of the Global Financial Crisis (GFC) blown metaphorically out of the water. Labor governments of the future will be able to point to the current effective consensus on SOME form of stimulus to help justify their own efforts when governing in times of downturn or stagnation. Which will inevitably come as part of the capitalist cycle.   But this government’s emphasis on the ‘supply side’ of the equation is nowhere near discriminatory enough.

This article was originally published on ALP Socialist Left Forum.

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I was reminded of this old adage, when I heard it reported this morning, on ABC radio, that the new approach to mental health should be to prepare people to cope better with the adverse effects of the present stressful situation, as compared with treating those who have already developed mental health issues.

Then, later in the day, I read Alan Kohler’s Insight article on page 33 NT News, (12/08/20), Covid-19, needs inquiry, fiscal fix – which should be compulsory reading for anyone with any involvement in economics. (I am sure this article can be easily obtained from other News Corp publications, even though it is probably pay-walled for non-subscribers.)

If I were to be unkind, I would suggest that Scott Morrison is deliberately waging war on universities because he thinks he knows all the answers and does not want to admit that there might be – let alone really are – many people who are far more knowledgeable than he is, on the areas which are vitally important in establishing a new order which might deliver us from the current crisis situation.

To a large extent, since everyone has grown up knowing that doctors know more about the human body than do most laypeople, expert medical advice has been accepted in relation to the COVID-19 pandemic.

Because it is caused by a novel coronavirus, approaches to controlling the pandemic have changed as knowledge has grown. To wear or not to wear a mask has become a contentious issue, partly because of the reasons put forward for doing so.

An infected person wearing a mask is less likely to infect others if wearing a mask. And people can be infected without showing symptoms.

Wearing a mask will reduce the probability of becoming infected – but not guarantee total success.

PPE is worn by most health care workers, yet even some of those become infected, sometimes because removing PPE carelessly can enable the virus from infected patients to be transmitted.

It really is a silent enemy.

Look at what has happened in New Zealand after 100 days of no infections!

It is hard to change the habits of a lifetime. In many cultures, greeting a family member or friend automatically involved making contact. Yet this is the quickest way to pass on an infection.

Human beings, by their very nature, mostly enjoy company, yet one person in a group may be infectious and pass on the infection to all within the group. The larger the group, the greater the number of infections.

Then we come to the issue of needing to be concerned about others, not just ourselves.

If you unwittingly get infected, before any symptoms show – if they ever do – you can pass that infection on to everyone you spend time with.

Without a mask, every time an infected person breathes out, they send a spray of microscopic particles which can be inhaled by anyone in their vicinity – or land on their skin, clothing or nearby surfaces and find their way into the bloodstream of those nearby.

Insisting on having fun, in company, risks spreading a virus which not only might kill someone, particularly but not exclusively an older person, or it might infect someone who goes through a nightmarish illness from which full recovery is not guaranteed.

And that is just the medical side.

In order to reduce the extent of infection spread, the Commonwealth government closed down many business and social activities and tried to persuade mortgagors and landlords to allow mortgagees and tenants some latitude in relation to payments due.

Not all states have necessarily followed up on necessary directions and legislation and not all mortgagors or landlords have seen fit to comply.

Given the thousands who are currently out of work or struggling with a reduced income,  I do not know who gains anything if mortgages are foreclosed or tenants evicted.

Hold it!

Remember how reducing taxes and allowing millionaires to pay minimum tax has led to a massive wealth gap?

Millions – probably billions or even trillions are stashed away in tax havens, ready to be poured into buying property in a market where house prices will be dropping, at least initially.

The buyers can still make use of negative gearing and can afford to sit on their property empire as long as it takes.

They will recoup little in the short term, but that is no problem as they have more than enough to ride out the crisis.

Government MUST intervene to ensure this currently hidden wealth is put to better use than further impoverishing the already poor!

Alan Kohler’s article is important in at least two regards.

One is the point about re-thinking the whole economic approach and the other is the issue of Modern Monetary Theory.

We are hearing too many horror stories about debt and disaster without realising that the solution is in our hands.

When I studied economics, two early units were microeconomics and macroeconomics – simplistically the household and business aspects vs the issues affecting countries and governments.

I am fortunate in being retired, with an adequate pension from a secure source which is topped up by a portion of the Age Pension.

When I received my two $175 relief payments, I was not in desperate circumstances and I understood that the money was intended to go back into the national economy to stop the wheels from grinding to a stop.

So I passed it all straight on to the Asylum Seeker Refugee Centre.

Kon Karapanagiotidis, CEO of the ASRC, and his valiant group in Melbourne are struggling to help many who have no other means of support, having been continuously ignored and ill-treated by government…Every cent I sent will have already been well spent!

I tell this story, not to make myself out as a do-gooder, but because the government desperately needs people to spend, while the stagnant wage issue, preceding people’s losing their jobs, means that people can barely afford to buy necessities, let alone spend up big to boost the economy.

I do not doubt that some, not necessarily all, of the really wealthy, are also philanthropists, but there is a mass of wealth – in property and tax havens – which will not get back into circulation, unless the government persuades those holding it, that now is the time to invest in the country’s future.

We have accepted medical advice.

We need to accept advice from climate scientists, because, while a reduction in travel (including by aircraft) and industrial has serendipitously reduced greenhouse gas emissions, it is not enough to allow us to postpone action to further reduce levels.

Gas is a fossil fuel. It might pollute slightly less than coal but fools rush in!

Alan Kohler has provided a very valid suggestion as to how to get some effective economic advice – which is incredibly important at this stage of the crisis.

To be talking now about reducing support payments, without first analysing the impact on rent and mortgage payments, and making more certain arrangements with the banking industry, would be negligent to a possibly criminal extent.

What good are empty houses which people cannot afford to live in?

Get real!

Some of you, reading this, might agree with the underlying theme but assure me that it will never happen.

I am maybe a foolish optimist, but I cannot see any government brazenly pursuing policies that will end in the destruction of society.

If enough people with appropriate expert knowledge can show them that investment for the future, using money held by the already wealthy, plus using MMT approaches to issuing bonds, in order to ensure people can receive enough to survive AND enable the economy to recover, then the government might even survive the next election – perhaps the message might get through!

I end as always – this is my 2020 New Year Resolution:

“I will do everything in my power to enable Australia to be restored to responsible government.”

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COVID-19 has hit the Australian economy hard. By some estimates the Australian economy will shrink by approximately 7 per cent in 2020. Maybe more. That’s a virtually unprecedented recession.

Shutting down workplaces: hospitality and tourism, higher education and some manufacturing: comes at an enormous cost.

We can’t put a price on peoples’ lives and peoples’ health. But many people will need to sacrifice to ‘spread the burden’ of funding recovery.

Some have suggested a ‘HECS-style loan’ for those unemployed as a consequence of this crisis.

Because this discriminates, it is unfair. Richard Denniss – speaking on ABC radio – is correct about this. Though I think he is wrong about HECS more broadly. Income contingent loans to pay for government support of individuals during the crisis would mean a veritable ‘labour market lottery’ as to who was left with debt. Denniss agrees with this much. But also ‘income contingent loans’ have a longer history of losing their progressivity as governments reduce thresholds to help pay for other endeavours – such as ubiquitous corporate welfare.

Also, will the government temporarily increase corporate tax during the recovery period to service debts incurred supporting the private sector during the crisis?

The government’s stimulus has provided a lifeline for many.

But one rational assumption is that the economy won’t simply ‘snap back’ at the end of a six month period; and as a consequence the government cannot afford to ‘step back’ and just let the private sector ‘fill the breach.’ The real economy doesn’t work like this.

Richard Denniss of The Australia Institute thinks the Economy will not simply ‘snap back’ after the COVID-19 Crisis. A long term government role is required (Image from thenewdaily.com.au)

In hospitality and tourism, the structural effects on the economy could last quite some time. We don’t know whether there will be a ‘second wave’ or whether we will ‘break the back’ of the spread in this country. But global travel will take years to ‘get back to normal’, and the US and the UK are still deep in crisis. The ACT and Northern Territory also understandably want to reap the benefits of wiping out the virus, and don’t want it reintroduced from interstate.

On the other hand, the crisis provides an opportunity to broaden and deepen the public sector to create the ‘economic infrastructure’ around which recovery will occur. Make strategic infrastructure investments, as well as structural improvements in public services; unemployment services; in Health, Aged care and disability services; in welfare, transport, communications, arts. The NDIS needs to be more accessible, with ‘consumers’ interests protected more vigorously. The CES (or ‘Centrelink’ these days) should be refunded as a ‘one stop shop’ for job-seekers – but without the usual harassment and humiliation. Homelessness could be addressed ‘head on’ with a big investment in public housing. Fix the NBN with ‘fibre-to-the-home.’ A big public investment in renewables. And coming out of the crisis: Have an active industry policy which strategically supports and invests in high wage manufacturing.

This is also an ideal opportunity to progressively reform welfare across the board; and lift job-seekers out of poverty.

On ABC radio high speed rail was inferred as perhaps a ‘dubious investment.’ But it could drive growth in the regions, with a flow on of jobs and affordable housing. As well as containment of urban sprawl and the transport crises that ensue from that.

The simple truth is that the public sector might have to pick up the slack on the economy for some time to come if there is to be any chance of a recovery. And if we navigate this in the right way it can present an opportunity.

Modern Monetary Theory (MMT) holds that as the issuer of the currency the government can create money at will to invest and ensure a ‘full employment guarantee.’ Though this is limited by real economic constraints concerning the scale and nature of goods and services actually produced in the economy at the end of the day. In some instances there might also be inflation; and you cannot ‘create money’ to fund an infinite influx of imports.

But full employment is in everyone’s interests: so long as there is an ‘efficiency dividend’ which provides benefits for all; and so long as consultation with unions ensures there is no endless ‘wage-price spiral.’ Higher employment has a ‘multiplier effect’ on the broader economy that also makes debts easier to service. At the same time, the wage share of the economy has been falling for decades; and long term there is a need for a structural correction which could also create extra demand in the economy.

As part of this picture there should be reform of the labour market improving compensation in low-paid jobs – either with regulation, or through the social wage (or both). Modern Monetary Theory has been somewhat skeptical of the role of taxation, claiming it ‘takes money out of the economy.’ But this need not be the case if all that money is spent; if indeed there is a stimulus. Taxation also allows for a much more finely targeted redistribution of wealth: which should be desirable for progressives.

As MMT theorists also recognise, state governments in Australia cannot issue currency.

The current public health crisis is going to cause much more pain before it is overcome. But the right kind of policies on investment, industry policy, welfare and stimulus can minimise that pain, and even help ensure in the end we come out of the crisis stronger.

This article was originally published on the ALP Socialist Left Forum.

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Professor Bill Mitchell’s blog, dated 22 November 2018, “Japan still to slip in the sea under its central bank debt burden” gives MMT advocates all the ammunition they need to present a case for greater fiscal participation in the economy.

It signals quite clearly that government spending, not monetary policy (RBA interest rate management), is the more effective tool to bring about full employment and maximise the use of Australia’s available resources.

For nearly 30 years now, the Bank of Japan, the nation’s central bank, has been buying government debt (deficit spending), to the point where its current holdings are now greater than the country’s GDP.

However, despite massive injections of ‘created money’ into its monetary base, Professor Mitchell says, “inflation (in Japan) remains low and despite low interest rates, economic activity is hardly booming.”

Mainstream economists seem unable to connect this reality with their more dire predictions that Japan’s fiscal policy over this period, must lead to hyperinflation. It has done nothing of the sort.

For the past 30 years, mainstream macroeconomists the world over, have been predicting the demise of the Japanese economy, claiming it will slip into the sea, that its debt burden is unsustainable, that there are limits to the amount of assets the Bank of Japan can buy.

What has happened is that, “the Bank of Japan continues to demonstrate the categorical failure of mainstream macroeconomics and, conversely, ratify the core principles of Modern Monetary Theory (MMT).”

Each time their predictions have been proved wrong they have been forced to invent excuses, such as closed markets and cultural peculiarities. It’s all hogwash!

What these Economists are really concerned about, is that by buying government debt and keeping interest rates low, the Bank of Japan is effectively preventing the commercial banks using the bond market to make profits.

By not issuing bonds to offset government debt, it is depriving the commercial banks off a risk-free asset from which they can make money. The BOJ has “effectively killed regular trading in the once lucrative bond market.”

It has defied claims that currency-issuing governments like Australia, are captive to the yields in play on secondary bond markets.

How terrible is that?

Australia currently has 5% of the workforce, or 700,000 people looking for work with a further 800,000 working less hours than most would prefer. This represents a huge underutilisation of available resources, yet our government and the media, via their economic “experts” claim our economy is humming along nicely. More hogwash! Our economy is underperforming.

By way of comparison, Japan’s unemployment rate as at September 2018 was just 2.3%

To the further detriment of our underperforming economy, it is just what our government wants. It might appear that they are concerned at the slow rate of growth and the low wages growth, but deep down, captive as they are to the demands of the big end of town, they do not want full employment, or any significant wages growth.

Such economically beneficial activity would impact on the profits of commerce and industry, the source of their political funding. It is corporate welfare by stealth. The state of the Japanese economy, proves that decades of deficit spending and huge injections of money into what was a stagnant economy, does not risk inflation when the injection is correctly targeted.

There is no reason why we, in Australia, cannot do this and achieve full employment, a higher GDP, which itself will attract further private investment and in the process, improve living standards for all Australians.

We can do this, if we can change the mentality that dominates current mainstream economic thinking. But, at the moment, our prime minister is so intent on fuelling an outbreak of anti-Islamic sentiment, for no other reason than to attract votes, that our economy is destined to continue underperforming.

As Bill Mitchell says, “All those commentators who claim that accelerating inflation would result if governments abandoned debt-issuance but continued to run deficits, have been repeatedly shown to be wrong.”

What will it take to get this simply message across to those in treasury who have the power to change government thinking?

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As a committed advocate of Modern Monetary Theory and one who thinks it should be renamed, Modern Monetary System, for reasons I will explain, there have been occasions when I have felt a sense of futility, trying to explain something so simple, but finding myself unable to convince even those who should know better.

Firstly, MMT should be referred to as MMS because it is no longer a theory. It is the way our fiat economy was set up to operate and does operate today. Its implementation took place in 1983 and the fact that it has never been used as it was intended, does not mean it is theoretical.

The fact that we still fear deficit spending, strive to balance budgets, lust for surpluses and consider bond issues as debt, is a hangover from a past era, that of the gold standard.

The fact that we fail to fully utilise our available resources, consider 5% unemployment near full employment, shy away from providing the necessary infrastructure for our industries and neglect our national health and education needs, when each of these represents real jobs and growth opportunities, is a travesty of mismanagement and failed leadership.

Last night’s Q&A which highlighted the difficulties experienced by those reliant on the NDIS, gave us a clear indicator that the government is not even spending its own budget allocation on this vital piece of infrastructure. The NBN rollout is just another example of this failed leadership.

And it seems that no matter how clear and concise we are in explaining the economic reality of MMT, successive governments still cling to the gold standard mindset. Why?

Michael Pascoe’s article in ‘The New Daily’ today, sheds some light on the truth of the matter. In discussing the latest on the never-ending tax debate, something the entire country is heartily sick of hearing, he points to what the government is really doing in pursuing this matter.

He writes, “In the short term, it’s a formula in keeping with the Institute of Public Affairs’ prescription for a new Australia – an Australia with less government, richer rich and fewer controls on markets – especially the labour market.”

He goes on to say, “The IPA has emerged as not just the favoured right-wing think tank, but the government’s guiding light. It is too tempting to not again repeat one of John Kenneth Galbraith’s many golden quotes:
“The modern conservative is engaged in one of man’s oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness.””

We have known from the beginning of the Howard years, and perhaps from some of Paul Keating’s decisions, that it is the rich who run the country. They run it for the rich and they get the best results by supporting conservative leaning parties and their politicians.

Trying to establish a tax system, using confected figures to present fairness and equality, as Scott Morrison has done suggesting average workers are expected to earn six figure sums in a few years’ time, displays a height of arrogance as bold as his government’s self-serving aspirations.

It is a disgrace. But, we know that if you tell a lie, big enough and often enough, people who don’t know any better, will be inclined to believe it. And therein lies the difficulty with people like me who are trying to explain MMT to the average person in the street. How could anything so simple be right. It must be more complicated than that, surely. No, actually it isn’t.

As Michael Pascoe says so eloquently in his article, “In the longer term, flattening our progressive tax system is a tiny part of one of history’s repeating cycles: wealth and power being used to entrench and extend wealth and power until it becomes unsupportable.”

Notwithstanding the difficulties of explaining MMT, there is progress. But it is painfully slow. Much like the NBN. However, one day we will get there, even if it is only a partial implementation. The alternative is the status quo, which, for those who haven’t yet worked it out, is all about keeping the average worker at arm’s length from the rich.

And that really is an unsustainable option.

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