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Do Not Obsess About Debt, Obsess About the Vitals

By Darren Quinn

Professors Edmond, Holden, and Preston are mistaken in that Modern Monetary Theory (MMT) says we should not worry about budget deficits. The effects of budget deficits are significant. As Stephanie Kelton, the most well-known MMT economist in the world, says, we should focus on the deficits that matter. The jobs deficit, the environmental deficit, the deficit of affordable housing for homelessness, and many more. The financial deficit from the budget is the private sector surplus, the money in your pocket and mine.

Keynes used financial praxis to argue for fiscal stimulus in severe recessions, and since financial praxis is always and everywhere an MMT phenomenon, Keynes used MMT.

The professors are also mistaken to say that it is a well-accepted idea that the spending comes first. Many politicians and commentators who talk as if the government spending is like a household budget are economists or have worked in the central bank and Treasury, among other public service jobs. So the television talking heads like financial commentators and public-facing economists such as Stephen Koukoulas and Saul Eslake are not saying these things.

The professors have not been paying attention if they think MMT proponents and economists do not explain when the inflation constraint binds. Every time MMT talks about real resources and their availability, MMT proponents are talking about inflation constraints. The real resource constraint is the inflation constraint.

It is a truth universally acknowledged that central banks do not have a working theory of inflation. Therefore, they must be in want of an excellent post-Keynesian economist like Joan Robinson or an MMT economist like Australia’s Bill Mitchell. After all, those economists have a working theory of inflation that matches reality.

The professors claim that conventional economics has a comprehensive analysis of what causes inflation; however, they would have to elaborate on this to prove that claim. Perhaps the professors are just thinking of the debunked monetary and neoclassical theories of inflation. Daniel Tarullo, a former Federal Reserve Bank board member in the United States, explains [The Financial Times, paywalled] that central banks do not have a working theory of inflation.

MMT has always acknowledged that inflation can occur below full employment, as currently demonstrated through the coronavirus pandemic and the Russia-Ukraine conflict, with Australian unemployment at 3.5% and still 1.3 million people looking for work. As the professors should know, bottlenecks can occur in various sectors from spending before full employment is reached. This congestion can occur in the form of a resource shortage in a greater supply chain of production. It is currently being demonstrated by the lack of oil and natural gas supply in the Australian production chain.

If the Ukraine conflict had not affected oil supplies, then automotive fuel would not have been ever-increasing in price. The price increase was alleviated by the temporary excise cut in fuel. Who would have thought that reducing prices reduces inflation? Inflation is a measure of prices, so of course, lowering prices reduces inflation.

What about price rises for natural gas? These rises have occurred because we have sold our industries off to foreign owners who demand world prices for our gas instead of us owning our energy industry and setting our own prices. Putting aside environmental concerns with these fossil fuels, we are not in control of our energy resources. What we need is an Australian strategic reserve of our energy, owned by Australians and priced in Australian dollars. We briefly saw this achieved when the government activated the Gas Supply Guarantee Mechanism.

As stated earlier, we should focus on the deficits that matter, so yes, if you want to implement policies from the Green New Deal or a larger social safety net with increased social security payments, they should be argued for on their own terms. This conflicts with the professors agreeing that spending comes first (meaning that there is no purely financial constraint) but then saying that implementing any given progressive policy may cause politically unacceptable inflation. MMT explains that keeping an eye on resources and/or expanding capacity in domestic production can minimise inflation risk.

It is worth noting that neither Treasurer Chalmers nor Finance Minister Gallagher has formal training in economics or finance, but they have public service experience in these fields. These Labor ministers have concerns about increased expenditure on Health, NDIS, Aged Care, and Defence. It is an exaggeration to say these are a political concern. As the professors have previously explained, they are reasonable goals that the public can argue for on their own terms.

The professors have not disputed nor disproved Modern Monetary Theory but, in effect, agreed with it. It is clear that Modern Monetary Theory’s time is now. The time to flick the switch is now!

Darren is a leader in educating people in modern macroeconomics. He played a founding role in educating Australians via social media channels and has engaged some prominent Australians on commentary about Modern Monetary Theory. Darren is a member of Modern Money Australia, Australian Real Progressives and has been involved with the Modern Money Network. You can see more of his work at and

You can find him on Twitter @AusMMT @dquinn03


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  1. Phil Pryor

    We all wonder, at high and low levels, with or without qualifications and experience, what makes the economy work well or not. It seems that reserve banks would only hire and nurture orthodoxy in people and procedures. It seems that the rare brilliance of a Keynes whom I’ve studied, (among many) but inadequately, is a rarity, a man believed and followed at high levels for some effect, but subject to “fashion” or alternative opinioneering. The surge of Friedman, Krugman, Hayek, others, led to Thatcher, Reagan, new determination to be greedy as if good would follow. Unrestrained celebration of material wealth followed, moral restraints declined, a greedy society asserted itself, self interest claimed to justify all this. Crisis in 2008 has not been enough to thwart this, so that 2022 sees a forthcoming problem era, likely long, slow, deep, nasty to most citizens. There should be social democracy, so I think, much more than plutocratic and pseudo-aristocratic predominance. Ben Chifley was “Keynesian” and one of our best thinking leaders, though barely trained. Let us listen to such as Quiggin and Mitchell, and never to Merde Dog opinionist plods and plops.

  2. Clakka

    The sell-off of assets and resources to ‘investors’, has seen them accumulating to invest in taking over more of the same and their own kind, until they accumulate a putrid pile so high it obscures their view of the world. So they slip their mates in to run the show, and but for banking and wanking, they don’t know what to do either, except threaten the politicians and government, demanding demand at any cost. But with no money, and nothing left to sell but spin, the government and aspirants shrug and go through the left-overs and motions.

    While they wallow in the shadow of the putrid piles, besotted by their own spin, and at the edge of going down the gurgler, there’s an outbreak of confusion over pulling the levers of demands or demand. WTF, no trickle-down, gorged and stranded, the only cure will be an immediate fiscal enema followed by a strict diet.

  3. A Commentator

    I’m not on board with MMT.
    By definition it is a theory, and has not proven to be without risk.
    ~ At what point does the debt to GDP ratio become of concern? At 250% , at 500%?
    ~ Can MMT proponents guarantee that there will be no adverse of unintended consequences (from high public debt) for future generations?
    ~ Does high public debt limit the policy options for future generations? Are we limiting their ability to respond to their own crises? Are we limiting their ability to finance their own future programs?
    ~ Is there any government (with a sovereign currency) that prefers high public debt to low?
    ~ Why is it that it appears that those that express the greatest concern about an unsatisfactory environmental legacy are willing to risk leaving an unsatisfactory financial/debt legacy?

  4. Andrew James Smith

    Agree with A Commentator that MMT is experimental and raises more questions than answers, e.g. where has it been implemented then if so, how far can you go before markets react negatively e.g. Truss & Kwarteng trying to implement radical right libertarians policies that even financial markets found to be both unpalatable and unworkable.

    If one goes further it could be deemed to be a ‘libertarian trap’ i.e. using MMT to compromise a nation’s economy severely, to then be replaced by ‘libertarian’ policy solutions for the 1%?

  5. RomeoCharlie29

    Not being an economist, I don’t understand MMT but I do see the effects of a neoliberal approach to economics and wonder at some of the so-called orthodoxies. For example I look at the RBA‘s seven rate rises which , far from curbing inflation, seem to be exacerbating it. Lowe wrings his hands, cries crocodile tears over the impacts on the poor, yet goes on his merry way making things worse for the battlers. I think it’s time to look again at the way the CPI is calculated, especially as it seems some of the most volatile measures aren’t included.

  6. A Commentator

    I’m afraid Darren, that I can’t see that the linked article addresses those issues.
    But thank you for drawing it to my attention

  7. Andy56

    I am not conversant with MMT but i do think we are currently playing football with a cricket bat.
    The economy is in all sorts of dilemas. From housing thats rediculously priced to the $130b we take out in super contributions each year. Its a total dogs breakfast and we are flying blind. We have a government lead economy and we have the let it rip economy. One set of rules just cant apply to both. Governments are suppose to deliver necessary services for the stability of society and so should have its own agenda and not be tied up with policies that are strictly irrelevant. The let it rip economy has its supply and demand concerns with no moral obligations. But no money theory is going to work on both simultaneously. Its like the ” great unifying theory” that is unachievable. If you are not prepared to see what we have with open eyes, how can you fix it or understand it? The role of governments has outpaced the theories. i dont subscribe to governments taking over the ecomomy as you would in a ” communist” theory and i dont subscribe to governements being rendered redundant In the ” capitalist” theories. I also think that treating gvernment as if they are one with the other economy to be rather simple simon ideals that leads us to bad decisions.

  8. andy56

    i see in the age today somebody is calling for the RBA to restructure, to use unused levers ie limit money lending for housing. About bloody time we put the sledgehammer away and used some nuanced thinking. Current practices are insane when you think about where we are.

  9. Darren

    A Commentator – it was only addressing your use of word “theory”. Your use of theory would be better described as hypothesis. Theory has a particular meaning in the sciences.

    There are many different examples of scientific theories in different disciplines. Examples include:

    Physics: the big bang theory, atomic theory, theory of relativity, quantum field theory

    Biology: the theory of evolution, cell theory, dual inheritance theory

    Chemistry: the kinetic theory of gases, valence bond theory, Lewis theory, molecular orbital theory

    Geology: plate tectonics theory

    Climatology: climate change theory”

    In science, a theory is not merely a guess. A theory is a fact-based framework for describing a phenomenon.

  10. Canguro

    GL, I don’t expect he’ll be deeply mourned.. there’ll be crocodile tears as there always are when deservedly unlikeable aresholes do the world a favour and draw their final breath; obits will be written full of the usual saccharine untruths; nastinesses will be glossed over or ignored entirely, and yet another papering over of yet another ultimately nasty character will serve to act as a wrap. Given the dominance of ALP governments now the status quo, it’ll be deeply disappointing if there’s a successful push for a state funeral. The best outcome is gone & quickly forgotten, or if not forgotten, remembered as the man who set the goons with guard dogs onto the waterfront workers.

  11. Darren


    MMT is not something you implement. It is primarily a description. From that understanding you can suggest MMT informed policies.

    Bill Mitchell, the Australian MMT economist explains it well here

    It’s a long read so you may wish to jump to this passage: “ The point to understand is that MMT is a system of thought that allows us to understand how a fiat currency monetary system operates and the central role that government can play in a modern monetary economy.”

    As for markets behaving negatively, think about when Facebook (the market in this analogy) tried to face down the Australian Government over having to pay news publisher for the news content Facebook published. Who won? It’s important to remember who sets and enforces the rules.

    As for the ideology of MMT it is apolitical. You could argue, as I previously did, that the last 40-50 years is right-wing applied MMT leading to that 1% trap you mentioned.

  12. A Commentator

    It is also interesting that organisations such as GetUp advocate MMT.
    I find it incongruous that they rely on the fact that experts in the discipline of climate science agree on anthropological climate change to support their policies, but they dismiss the fact that experts in the economic discipline overwhelmingly express serious misgivings about MMT.
    MMT lacks the evidence to justify its application.
    It risks transferring potential problems associated with our profligate public spending, without resourcing it, to future generations.

  13. Terence Mills

    Alzheimer’s is a terrible debilitating illness and to have been ‘battling over a long period of time’ and to die at age 72 is very sad.

    I didn’t agree with his politics but thank you Peter for your service to the Australian people. Hopefully, we will find a cure for this dreadful disease.

    My thoughts to his family who have had to live with this distressing decline of a loved one.

  14. Phil Pryor

    M M T is descriptive and not prescriptive. No dogma needs to be attached and it may be used and abused in guiding action in any direction by involved people of all drives and positions. Money creation, issuing, budget balances, deficits, inflation, debt, all this will remain a challenge perhaps needing specific tailored solutions, with no guarantees. Remember this.., the USA paid for W W 2 up to 26% with money printing. One can only tax, raise bonds, or print money. The money printing in unusual times was used immediately to expand work, circulating “instantly” and with some rationing, controls and shortages, did not cause noticeable inflation. The money was an “instant bond”, allowing the funding of and creation of “instant work”, where there had been none or less. Immense floods of actual goods, services, equipment came into being, reflecting the dollar value just created. This bears no comparison whatever with situations well known in say, Weimar Germany or Zimbabwe.

  15. Darren

    Andy56 It’s a matter of understanding the government is a currency monopolist. Hopefully this helps facilitate that understanding

    Andy56 @ 8.13am

    Yes, that is essentially APRA’s job to ensure a certain standard of lending criteria is met.

  16. Darren

    It is also interesting that organisations such as GetUp advocate MMT.
    I find it incongruous that they rely on the fact that experts in the discipline of climate science agree on anthropological climate change to support their policies, but they dismiss the fact that experts in the economic discipline overwhelmingly express serious misgivings about MMT.
    MMT lacks the evidence to justify its application.
    It risks transferring potential problems associated with our profligate public spending, without resourcing it, to future generations.

    Well, that’s a fundamental misunderstanding of MMT.
    If we look at “experts” in the economic discipline – why didn’t they see the 2008 recession coming when MMT & Post-Keynesians did?

    What happens if oil goes up? Inflation will go up
    What happens if rents go up? Prices & inflation go up
    What happens if wages go up? Prices & inflation go up

    What happens if in interest rates go up?

    Prices and inflation go down!!

    Cue canned laughter

    See Romeo’s comment above

  17. A Commentator

    Darren, it have read a range of articles and opinions about MMT. One of the standard and predictable responses is that economists didn’t forecast the GFC
    This is silly and incorrect. Economists largely did warn of the risk a significant economic downturn.
    Perhaps not all warned of the time and magnitude.
    Just as there are tolerances/ranges in the forecasts of climate scientist in the timing and magnitude of temperature increase and climate change.
    MMT is an interesting hypothesis, it lacks the evidence to confidently rely on it.

  18. Fred

    What I find funny is that any economist thinks they actually have an understanding good enough to be able predict what is going to happen. The world’s economic system is enormously complex with a huge number of factors and noise sources. Simplified models are not going to be accurate. In a world with algorithmic trading, hedge funds bigger than some economies, pack mentality, loopy politicians/treasurers, OPEC, pandemics, etc., etc., economic forecasts have about as much accuracy as weather forecasts. Yes we know it’s getting hotter overall, but local conditions may differ for reasons yet to be understood. Did the economists predict Putin’s war a year out? No. Remember “Back in Black”, except we never were, and then came Covid19. Predictions of the inflation rates in the next years are at best fanciful, whether arrived at via MMT, the Reserve Bank or your favorite astrologer/tarot card reader.

  19. Andy56

    Darren, you make an assertion. Can you back it up? What assumptions have you made?
    I dont wish to be rude, but lets get on the same page here. What is it that we are describing? Since there are few facts but lots of assumptions, lets lay them all out.

  20. Andy56

    Thanks for the video Darren, It was informative. There are assumptions made at the start and this would be my first call to criticise. JG, yea well it seems is very much like a UBI with mutual obligation. Just the terminology implies different things. MMT does have a fetish about government with no real explanation of how the ” let it rip” economy operates only how they interface, ie money supply and rules. Lots of good points along the way.

  21. Darren

    A Commentator, clearly I disagree with you in regard to the evidence.
    If anything, the evidence is against neoclassically-based neoliberalism, but that is a separate discussion from this piece.
    Your assertions are certainly an interesting hypothesis.

    Have a Modern Money day!

    Andy56 @ 9.23pm. You will have to clarify your intent. My only assertion is MMT is a description of macroeconomic operations.
    Everything else follows from that.

    Andy56 @ 9.42am Well, you would have to lay out those assumptions before I could comment instead of just saying assumptions exist.
    In some respects, the JG is like a BI but we are all doing reciprocal work for one another every day – think of any meaningful or productive work you do and what you get someone else to do in return. Many UBI proponents are arguing to be paid for informal work, e.g. domestic care. So are JG proponents, but it becomes an official “job” under a JG. There is a lot of talking past one another in these groups since both are based on Tony Atkinson’s Participation Income.

    The role of government is just a matter of fact, not so much a fetish. You would have to explain in more detail what you mean by how “let it rip” economy for me to comment further.

    Thank you for taking the time to look at the video.

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