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Covid exposes the reality of fake debt.

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.

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12 comments

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  1. Phil Pryor

    Money.., is it a tool, a god, a curse, a universal stimulant? Once money was related to perceived value and desire in metals and stones, valued, easily transportable or hidden or used for negotiation. Excesses of personal money often inflated fear of loss or lowered value, so pressure on consumption usually followed. Paper money, bonds, notes. etc., led to rapid inflations and goods were often inflexibly scarce. This is not so today, as, usually, people who get a little excess, e g., the pensioners who were given grants, or the tax refunds, large or small, these tend to go under the bed, into the wallet, savings accounts, for the ever threatening rainy day or usage in a more threatening possible future. Money can be a promissory bond, with “real” value as it fulfills its own inherent promise, so that USA money, printed, paid for 26% to 28% of WW2. Money earned by former impoverished and unemployed went straight around, doing good. Today there is excess potential in flows and stores of consumables, so let the money, debt, “blackness” not redness, continue. USA debt is now approaching thirty trillions and it’s not long ago that the incompetent snoozer Reagan got it from under one trillion to three. Yet, own a fist full of USA dollars anywhere in today’s world and you KNOW you have a load of desirable and actual value, People believe in it, and care little of the great debt behind its production and circulation. In Australia we need good plans, good pay, incentives not bribes, planning not cunning selective donor driven dribbles, real appled spending where you get value that will expand, and not dream of debt as if money were lost. Tax receipts are NOT lost if and when applied to produce expanding wealth from future utility. Money uselessly given to the Gerry and Solly class of leach IS LOST to all of us.

  2. Lawrence Roberts

    So we are going to get a Keynesian socialist budget, yet again Labor are not only having their cloths stolen but this time their pyjamas too. This budget has the added twist of electoral grants for marginal seats. How many swimming pools and sports halls can you use?

    To use a footballing metaphor; while I suspect the LNP all distrust or even hate each other, they do get United for a Grand Final. They get fabulous financial benefits if they win and some of them may lose their liberty if they were to lose. Every thing to play for!

  3. Ross

    Nothing has changed John. Both Labour and the LNP still run around in circles peddling who will pay the federal government debt nonsense. The world went off the gold standard in 1973 but few people and even fewer journalists seem to have noticed the shift to a Fiat Currency and what that shift has meant for government financing. The nonsensical debt and deficit scare tactic has worked for politicians and most economists for over forty years of neo-liberal dogma. Large cracks are starting to appear in the argument but don’t expect the neo-liberal austerity rules dogma to suddenly croak it, even though the pandemic has proved MMT to be more fact then theory.

  4. skip

    Budget smudget SMOKE AND MIRRORS

    Budget josh mismash budget MSM LIES

    here’s an excerpt from simon bermeeze (birmingham)’s:

    CONSOLIDATED FINANCIAL STATEMENTS
    FOR THE YEAR ENDED 30 JUNE 2020

    Operating statement
    The Australian Government’s net operating balance for the year ended 30 June 2020 was a deficit of $99.7 billion.

    For the year ended 30 June 2019, the Australian Government reported a net operating balance surplus of $3.2 billion.
    This deterioration in the net operating balance was driven by a decrease in revenue of $7.5 billion (1.5 per cent) in 2019-20 and an increase in expenses of $95.4 billion (18.9 per cent) in 2019-20.

    Information on the operating results, including the financial impacts of theCOVID-19 pandemic, are included in the Commentary on the CFS.

    Balance sheet

    The Australian Government’s net worth was negative $679.9 billion as at 30 June 2020.

    As at 30 June 2019, the Australian Government’s net worth was negative $545.2 billion.

    https://www.finance.gov.au/sites/default/files/2020-12/consolidated-financial-statements-201920.pdf

  5. Kaye Lee

    I have a somewhat different take on the lesson that should be learned from all this. The failed theory of supply side economics is what has been exposed.

    Jobkeeper meant a (temporary) significant wage rise for a lot of lowly paid people and the (temporary) increase in Jobseeker went someway towards (temporarily) allowing people to actually afford to live.

    Demand has kept this economy afloat, not supply. People have had a little bit more money to spend. (and China is paying a motza for our iron ore)

    Investors haven’t all of a sudden opened new businesses to employ people. (There are more people unemployed now than a year ago.) They are sucking the life out of the property market instead, paying down debt, and paying big share dividends and bonuses to CEOs.

    It’s not even about jobs so much as lifting people out of poverty. Increase welfare payments, increase wages – that, combined with investing in health, education and social infrastructure pays long term benefits. Making rich people richer does fuck all.

    Businesses need customers and the more customers they have, the more people they will employ and the greater the return to the government.

  6. Terence Mills

    It’s the iron ore price that worries me. A year ago it was $61.57 a tonne and now it’s surging to $204.35 a tonne.

    China is desperately looking for alternative suppliers in Brazil and Africa where they can stabilise the prices. The good times may not last much longer and as we seem to insistent in being belligerent with Beijing, this could all go pear shaped very quickly.

  7. Anke Skrandies

    Debt jobs debt jobs jobs debt debt jobs…sick and tired of that monunentally scratched record! Time and time again the government postulates that so and so many tens of thousands of jobs have been created, created? Created from what? Thin air? Many people are returning to work while Hospitality and Rural/Ag positions are screaming to be filled! Gee whizz wonder why, appalling rates, overtime cut, penalty rates cut to the bone, inconsistent piecework, appalling accomadation, non unionised ,even locked out! Retail workers were classified as essential as were farm hands during the peak of the pandemic yet still employment contracts are feeble inconsistent and favour the Employer and if a perspective employee wont sign try the next person…SHAME ON THE LNP SHAME ON THE NATIONAL PARTY… jobs, debt,jobs, debt debt and jobs but hey Creating Jobs…bastards

  8. Max Gross

    Bank account? What bank account?

  9. John Kelly

    Kaye Lee, you are right in everything you say. I can’t imagine how many coalition MPs are gnashing their teeth right now at how socialistic their party is acting. They hate it, but they know it is the only path to reelection right now. Once they are are returned to power, they will begin a reversal of these measures,

  10. wam

    spending is the key and for a lousy $28b they could give everyone a $1000.
    All but the rich will spend it ASAP and shops will make a killing not amazon etc but walk in shops.

  11. DrakeN

    The real point here is that few of the governing crowd actually believe in anything more than helping themselves to the country’s wealth.
    All the rhetoric is for the consumption of the feeble minds who are prepared to trust them.
    So much of what we do is built on trust, the greater part of it entirely unwarranted.
    And, we seem to have incredibly deficient memories.

  12. Geoff Andrews

    Is MMT only useful during a crisis – the great depression, GFC and now Covid – or can it be applied in more settled times.
    How did Hitler take Germany from being an economic basket case in 1930 to almost dominating the world in 8 years. If it wasn’t MMT, then who was the bastard who lent him the money? Whoever it was, he did his dough.
    I get the feeling that the economists who support MMT are in the minority and are considered to be fringe dwellers or are they the equivalent of the nineteenth century scientists trying to convince their cohorts that the theory of evolution was valid.
    Hopefully, these are all rhetorical questions.

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