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Now for something completely different …

When in the past I’ve written about why the prevailing ‘debt and deficit’ narrative is neo-liberal rubbish, people responding to my blog have asked why it is so difficult to get commentators, progressive politicians and the pubic to accept this. Obviously getting the neo-liberals and their media cheer leaders to question that narrative is impossible; it’s in their DNA and their political lives have come to depend on it. But you’ll still find relatively objective commentators, to say nothing of Labor front-benchers, not buying into it. Why?

Clearly not because it is ‘true’, or makes economic sense, because it isn’t and doesn’t. It doesn’t take much understanding of economics to see that cuts in government spending, depressed business confidence and investment, flat wage growth and increasing unemployment suggest we’re going in the wrong direction, and that even easing the cash rate further isn’t going to help much. And it presumably isn’t that hard to see that at least some of this arises from political decisions, such as those embodied in the last budget.

Ah, but the commentators say. There is a structural problem. Revenue is down. Health and welfare costs are rising. We can’t afford the ‘nice’ things we want. Even if this is true – and there are those Modern Monetary Theorists who say it isn’t – dealing with it remains a political problem. Need more revenue? Change the taxation regime. Too much spending? Stop spending on wasteful things. We’ve all seen recently just how hard it is to increase taxation, or stop spending on people who’ve come to expect it. But who and what you tax, and who and what you spend on are political, not economic decisions. Labor is freaked by it, understandably so, given the success of axe the tax and Labor waste throughout Labor’s term in office, and at the last election. How can they escape the current pervasive narrative?

The only way to change the politics is to change the language we use.

Modern Monetary Theorists, who think that budget deficits are and should be the normal state of affairs, and presumably neo-Keynesians, who accept the necessity for budget deficits in some circumstances (like now) all have to contend with this problem of language. Professor Bill Mitchell, a leading MM Theorist, did a great job in this article in the Guardian on the ‘unemployment industry’. Following on from his appearance on 4 Corners program The Jobs Game, he slammed the privatised employment services sector, and the thinking behind it: ‘The unemployed cannot search for jobs that are not there. It is a cruel hoax to punish the victims of the jobs shortage.’ He also pointed out the particular use of the the language in which the debate is conducted: ‘Since January 2013, employment has grown by a pathetic 2.1%, while the working age population has grown by 3.7%. Yet the public narrative still focuses on the supply-side – the allegedly “lazy” and “unskilled” unemployed.’ He also criticised both Liberal and Labor for their use of terms like dole bludgers, cruisers, job snobs and more recently, leaners –all terms that blame the unemployed and suggest they depend on tax payers’ generosity.

Professor Mitchell has also tried more generally to change the way economics is discussed at a popular as well as at an academic level. In his blog in November 2013 titled How to discuss Modern Monetary Theory, he looks at ‘the use of metaphors in economics and how Modern Monetary Theory (MMT) might usefully frame its offering to overcome some of the obvious prejudices that prevent, what are basic concepts, penetrating the public psyche.’ I hope he won’t mind my sharing an amended version of a chart he included:

Focus of AttackMetaphorIntent
Government spendingLiving beyond means, maxed out credit cardIrresponsible, excessive, need to stop spending at once
Budget deficitBudget black hole, running out of money, ballooning debt and deficitGovernment budget like household budget, running out of money
Public debtMortgaging the future, burdening grandchildren, intergenerational theftNation is a badly managed insolvent firm, being horrible to children
Income supportWelfare dependency, dole bludgers, leaners etcLazy, undeserving, parasitical


These are the metaphors we day in day out from the LNP government and their supporters in the media, but regretfully also at times form more neutral commentators and the Labor front bench.

There’s much more to Mitchell’s post than discussion of these metaphors, including another table comparing mainstream – neo-conservative – macroeconomic prescriptions with MMT ones.

But the post also acknowledges that it’s one thing to recognise when the metaphors about the economy are serving a particular political agenda. It’s another thing to find different words. As Mitchell points out, ‘deficit’ always sounds bad, as something lacking, though a budget deficit can be either a useful tool or bad economic management, depending on the circumstances. Some of the other terms he thinks may be in need of different metaphors for explanation, or at least alternative terminology, are budget balance, budget surplus, public debt, government spending, government taxation, national income, Income support payments and full employment. Some of those commenting on the blog – and there are lots of them – recognise the need to ‘sell’ a different version of economics, but few have any really good ideas how. For example, if you can call government spending national investment, it is harder to equate it to waste, but it still doesn’t challenge the pervasive metaphor that government budget is just like yours.

Whether or not progressive politicians and commentators come to accept MMT, or remain neo-Keynesians, we still need different language to talk about what really happens in the economy, who wins and who loses, and what role political decision really play in it. If I hear the phrase ‘budget repair’ one more time, I’ll scream.

Any suggestions?


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  1. Fred Martin

    I have only recently become aware of Modern Money Theory and I must say that I have been shocked at how politicians have conned us into accepting that the Federal budget is like a household budget. The two have absolutely nothing in common. The scare tactics of debt, deficit, inter-generational theft, government maxing out a non-existent credit card, or even going bust is all rubbish. I think our politicians fall into two categories, one lot, who, like the public, have been fooled into believing this crap and the other, smaller lot who know it is lies but are using it to push their ideological agenda.

  2. Ian Ellis

    Keynes readily accepted ‘ capitalism’, but he warned several times about the downside of capitalism. Crudely summarised, his warnings were basically about the very nature of rich people (greedy, in the main), and how we should never accept that these people would happily allow their money to ‘trickle down’ to poorer people, would try every trick to avoid paying a fair share of tax, etc. Keynes also warned about very real dangers posed by ‘corporations’, explaining that a corporation is merely a piece of paper locked in a safe, and it obviously has no conscience whatsoever. J M Keynes was far more than today’s adenoidal, money obsessed ‘economist’. His greatest offering, to me, was his philosophy, his suggested means of coping with the built-in dangers posed by the concept of ‘money’ itself.

    With almost no public debate, the Keynesian focus on National Income was put aside, to be replaced with today’s rather infantile concept that is called ‘Market Economics’. It is easy to guess why this happened, and what sort of pigs caused it to happen. With several years of diligent study, even a moron like old Joe could begin to assimilate Market Economics.

  3. James Fitzgerald

    Well said and well written. There are 3 other important sociological points as well:
    A strong society will automatically include a healthy economy
    Our current economy is largely based upon over consumption
    Money, gold, items of value have only a perceived value
    Our society (and economy) will return to homeostasis once we focus on the above 3 points

  4. stephentardrew

    Great article Kay.

    The innate complexity of economics certainly lend themselves to well thought out metaphors however I would tend to defer to Bill Williams, Steve Keen and their ilk due to expertise. Keens engineering approach to economics is similar to Bill Mitchell’s so it seems progressive economist are best suited to redefine symbolism and meaning. Hermeneutics is a technical field which needs to link terms in a hierarchy of meaningful connectivity that is easily accessible for public discourse. There really needs to be a consensus statement by progressive economists that tie together the primary axioms of MMT and neo-Keynesianism.

    The chart from Bill is a great start. A counter chart that redefines these specific terms in relation to MMT etc would help clarify the issues.

    The problem as I see it is to simplify the left side of Bills Modern Money Theory categories to a similar degree as the Mainstream Macroeconomics in the linked MMT theory blog heading : Face to Face Mainstream and MMT.

    Maybe this is as good a place as any to start a general open debate.

  5. paul walter

    The sort of article you should read in the Australian or Telegraph. It is my bugbear of bugbears and neoliberalism is only an alibi for theft on an unimaginable scale.

  6. Michael Brooke

    A good essay. I, too, puzzle over why the prevailing fiscal narrative is not recognised as being stupidly incorrect. I came across Modern Monetary Theory years ago; I was a buyer for the Ramsay Corporation); and it was presented to a meeting by a senior executive. It was presented as a ‘common sense’ model. The executive, a young man, explained that the company was many millions in debt, and that running a deficit was a healthy and vigorous business strategy ─ he said, ‘keeps everyone on their toes; a lot of people have a vested interest in seeing we don’t go out of business.’ His proviso was, as it should also be with any organisation (government) running a deficit, that the sum of what was owed was equal to the sum of assets the organisation possessed. Simple as that. I know there are huge complexities buried within such simplicity. But what it points to is an understanding of what money is ─ money being no more than a measure of actual things (whereas, it seems to me, people like Hockey seem to believe money is in itself real, that a spreadsheet is as real as a tree or a machine or even a human) ─ I’m not sure if this is simply a problem of language. I suspect it is an educational issue ─ economics being taught as something separate to the actual world. The prevailing ‘debt and deficit’ narrative is neo-liberal rubbish ─ Is it? Or is it ‘reactionary’ resistance? In my view Abbott is not a conservative politician, but is reactionary, clinging fearfully to what he thinks he knows, terrified of what he doesn’t understand. He thinks with his gut which is mostly negative. The mystery is how did such a man get to be our prime minister?

  7. stephentardrew

    Here is a short list compiled from Bill Mitchells blog.: see Face to Face Mainstream and MMT


    Budget deficits are not bad;

    Budget deficits are not good;

    Budgets Surpluses do not contribute to national savings;

    Budgets do not need to be balance over the business cycle:

    Budget deficits need not drive up interest rates;

    Bond markets do not solely determine funding costs of government;

    Budget deficits do not mean higher taxes in the future;

    The currency-issuing government can always purchase whatever is for sale in its own currency. Such a government can never run out of its own currency;

    Budget deficits do not equal big government;

    Government spending need not be inflationary;

    There is no difference in the inflation risk attached to a particular level of net public spending when the government matches its deficit $-for-$ with bond issuance relative to a situation where it issues no debt.

    Intergenerational burdens are not linked to inherited budget deficits in the form of debt that have to be paid back. In fact a future generation cannot transfer real resources back in time.

    Employment is used to control inflation rate;

    Sovereign issuer of currency is never at risk of default;

    The taxpayer does not fund anything. Taxes are a device to free up real resources so our agent, the government can instigate a socio-economy program for our collective benefit.

    Humans are complex and rarely predictable, reason and emotion are inseparable. (I would add that sound empirical foundations, proofs and reason can constrain emotional fears and irrationality.)

  8. Kaye Lee

    Richard Denniss has written an excellent article…

    “A company that wants to expand rapidly usually does so out of debt, not earnings. BHP Billiton, for example, has been in debt for 130 years it has been in business. In fact, during the mining boom, a period in which its revenues were at an all-time high, its total debt “ballooned” by 300 per cent. By Joe Hockey’s standards BHP has not only been “living beyond their means” for their entire history, they were even unable to “balance their budget” when coal and iron ore prices were at all-time highs.

    BHP’s rising debt and ongoing deficits are not, however, evidence that the company is poorly run. Their seemingly “unsustainable” finances are simply evidence that Joe Hockey has no idea what he is talking about. BHP spent more than they earned during the mining boom because they were investing in multibillion-dollar mines that they expect to be profitable in the coming decades. Unlike BHP, or indeed anyone who has ever bought a house, Joe Hockey says it is irresponsible to borrow money to invest in assets that deliver long-term benefits.

    Australia has low levels of public debt. They are low by historic standards, low by international standards and very low by corporate standards. The CEO of the National Australia Bank, Cameron Clyne, once said that if Australia was a company it would be accused of “having a lazy balance sheet”. That’s corporate speak for not having enough debt. Put simply, if Hockey was a CEO he’d be sacked for his refusal to invest in growth.

    Spending more than you earn is not irresponsible, indeed it is often evidence that you are making good long-term plans. Anyone who has ever borrowed to buy a house, invest in their small business or even to fund their university degree has “lived beyond their means” according to Joe Hockey’s silly prescriptions for how to manage a nation state’s finances. The term mixed message is entirely insufficient to describe Hockey’s simultaneous belief that governments shouldn’t borrow for infrastructure but that students should borrow $100,000 for their degrees. From government!

    Joe Hockey’s simplistic mantra that we should live within our means is neither good short-term management nor good long-run strategy. Rather than behave like the Treasurer of the world’s 12th-largest economy he is acting like a cash-constrained sole trader who is worried he can’t get an overdraft.

    Australia’s future prosperity, like that of BHP’s shareholders, will not be determined by the size of our surplus, but by the wisdom of our investments. It is not our deficit that is unsustainable, it is the current Treasurer’s belief that spending less on education and infrastructure is in our long-term interests.”


  9. stephentardrew

    Great post and article Kaye as usual.

  10. Rosemary (@RosemaryJ36)

    An excellent article to clarify economic theory and practice along with valuable additions from the comments. One problem remains – ensuring that people like the leaders of our political parties read and act on that information!

  11. stephentardrew

    And from Kaye’s link:

    “But Abbott’s plans to double our population aren’t the only reason we should be borrowing more at the moment. Unemployment is rising, wage growth is at record lows and GDP growth is slowing. Put simply, we are heading for a recession and, apart from Tony Abbott’s pick for our new secretary of Treasury, virtually every economist who doesn’t work for a bank believes that austerity is bad for the economy and bad for society.”

    John Fraser is the fly in the ointment.

    Be warned.

  12. sandrasearle

    Great article Kay Rollison, also the comments too.
    The trouble is that most people only see & hear what they want to hear. How much money they earn & how much money they can spend.
    Macro-economics to them is totally a foreign language.
    Question is, how to get the people out there to listen to those that really know about what macro-economics is about & how it really works.
    Our current government haven’t got a clue. The ALP certainly got us through the GFC using the principles thanks to Wayne Swan.
    There is no trust in any pollies at the moment so how can any economic message be heard.
    We need people in government that we can trust, who know about good sovereign economics and there are none in this present government, that’s for sure.

  13. Wally

    All Tony Abbotts talks of terrorists really are true they just identify the wrong perpetrator. The LNP home grown Economic Terrorists are our biggest threat!

  14. diannaart

    Thanks Kay; changing the language from one of politically expedient abuse to a more realistic inclusive narrative is a necessary start.

    Tired of being treated like a dog, of seeing people who are pilloried because they do not fit some ideological wet-dream, playing to the lowest common denominator – Australia we are better than this.

  15. Jexpat

    In economics, as in most any other area of politics and public policy, the frames, memes and narratives one employs often make the difference between a persuasive presentation- and a neutral or even counterproductive one.

    Researchers and writers like George Lakoff:


    and Drew Westen:


    have written extensively about this (much to the consternation of progressives who stubbornly cling to the notion believe that they can simply use reason and argue from the evidence, dismissing the role of emotions and value judgments).

    Tim Southphommasane has written in a similar vein from a uniquely Australian perspective, turning perceived weaknesses into strengths:


  16. Pingback: Now for something completely different … February 28, 2015 Written by: Kay Rollison | winstonclose

  17. Matters Not

    John Fraser is the fly in the ointment

    Sure is. A big fan of ‘austerity’. Cites Britain as a good, positive example.

    Clearly he and I read different literature.

  18. James Fitzgerald

    The economy is merely a tool of society, in a similar way that language is. We can do without both, but society is better organised with them. What has become very clear, in the interest of neo-cons, is that they view society as a component of economics. These days, society is actually led by economics!! This is an absolutely bizarre concept.
    Another aspect worth considering is that the value of money, compared to the value of necessary objects, is gradually diminishing. If I bought a house in 1990 (Say, in Townsville, Qld) for $200k and sold it in 2010 for $400k, without extending rooms and without a new kitchen, the value of the house (as a useful object to provide shelter and comfort) has not changed at all. The value of money has actually halved because it takes twice as much to purchase the house. If a dim-wit like me can see the logic in these arguments. If a dim-wit like me can see that money does not have a real value, (only a perceived desirability), why is it that economists and politicians ignore or over look or hide these concepts? The arguments presented by MM economists could actually extend towards hobbling the economy away from determining how we, as a global society, conduct our lives. Money, Gold, Riches etc have no real value. They carry a perceived desirability. Nothing else.

  19. jimhaz

    I still find this idea of deficits not being that much of a concern as wishful thinking.

    Logically, on an overall basis, debt is more negative than non-debt. Why pay interest when it is dead money, money that could be employed to provide services or to invest in future income production.

    Of course everyone knows that at the micro level, debt can be good but it depends on what the borrowed money is spent on. It has to be spent on the areas that add the greatest value, otherwise the opportunity cost, will put you behind others that do choose the greatest added value, making you less competitive, making you get nowhere or go backwards. People just won’t be happy if the relative standard of living falls behind countries we were once above. We humans are status driven creatures.

    If it is not spent on value adding, not spent on structural improvements that will foster income gains, then the debt becomes an anchor – you just keep getting further behind as has been the case in much of the western world. Such value adding does include spending on social improvements – all the traditional government services we have the government for in the first place. A prevailing underclass of people experiencing severe hardship, does not engender the sort of environment where business will also flourish to extent it could otherwise. You need a happy society.

    Clearly with NIDS and Gonski and the aging population, the government is providing more services and is expending more on social matters. Obviously taxation has to increase. But immigration and job visas should also decrease substantially.

    Clearly the Job Services industry is a total disinvestment. All it has done is add a few people to the rich list, to the 1% and given churches a cash stream. Personally I feel the same way about the bulk of the finance industry – mostly disinvestment, mostly about syphoning off profit to the 1%. Bring back the CES.

    Clearly with a rising unemployment rate they have to do something about job creation. The bulk of direct gov job creation has not added long term value. I see it as disinvestment. Job creation has to be done by changing policies and spending on social and physical infrastructure that creates an environment for jobs growth.

    While the dollar was so high, debt in jobs creation would not have added adequate value – it made imports too cheap. Jobs creation may now though. Most income based value adding jobs entail exports. What annoys me about the high dollar is that I see it as having been partly avoidable, proper taxation of mining and control of the interest rate and changes to overseas investment policy could have flattened the rise by half. Once lost manufacturing does not come back.

    I do a BHR package. Building Housing Revolution 🙂 The aim being to take 1/3 off the relative cost of housing within 5 years. This would cause a “recession we had to have” as the income the baby boomers get through investment housing decreases markedly.

    They’d be also hit by severe changes to superannuation taxation to bring back the purpose of super to what it should be – forced savings for retirement for those who otherwise may not do so. This would hit our value detracting Finance industry and the bank shares would fall dramatically, increasing the effect of the recession. I’d attack the Finance industry further by creating a new “Commonwealth” bank to enforce true competition. Other taxation changes needed would hit overseas investors and deflate share prices and deflate superannuation values. There would be much pain, and much exaggerated hysterical doom and gloom ranting from the money obsessed, but overall it would lead to big improvements to those currently hard done by.

    When you have gangrene you have to cut the rotting flash away. Fixing things sometimes hurts. Ridiculous housing prices and ridiculous super tax concessions are deadwood. The recession would blow out the deficit but it would be fixable as the reinvestment of the money into industry would in turn lead to more income being produced. Our current growing deficit scenario is not like this – nothing is being fixed by the debt, no income will flow from it, and it has to fixed.

    The big question is, is in what industries should the government look to for jobs growth. Our choices are so limited due to the low costs in Asian countries and the domination by the US in many other areas. We had to get rid of car manufacture.

    As well as existing ones of tourism, primary produce, medical and so on, one of the first things I think we should do is to put 10 billion into large scale software development. I’d attack the SAP and Oracles of the world, by developing our own applications software for government agencies of all levels.

    Then I’d go to the experts, the academics, scientists, inventors, the growing export businesses and develop a jobs investment plan. Renewable energy technologies would certainly be in the mix.

    To compete we need a smarter Australia than we have at present. Universities would have a shakeup – I think everyone needing a degree to get a more or less a job they could mostly learn on the job, is simply wasteful, as it spreads the tertiary education money too thin and makes too many think they are worth more in wages than the reality. Places would be cut and the money saved would go to research and development and more practical basic level training for the currently unemployable (we must decrease boganism).

  20. vivienne29

    Excellent. I knew it of course. There is only one true comparison with the country’s budget and the household budget and that is the household with a mortgage. That comparison proves that the government debt is piddling. The BHP example from Kaye Lee really says it all. That also reminds me too of all the crap the Liberals write about ‘running a business’, real life and unionists know nothing crapo.

  21. juliefarthing

    It is all about oppression of the masses, to keep them in line so they won’t have the capacity to challenge what the government is doing to them i.e. taking away their freedom. We are two steps away from the Nazi labour camps. Step 1 involves getting as many people as possible to work for a pittance, and to rob them of their material comforts and their dignity. Step 2 doesn’t even warrant thinking about, although if you look at the way they are treating asylum seekers you will get the idea.

  22. Jexpat


    Interesting stuff.

    However, with respect to sovereign debt, ceteris paribus conditions are almost never present, and in any case the conditions are dynamic.

    Thus desirability or detriment is difficult to establish and subject to changing circumstances that can prove difficult to predict.

    What we can say is that, in general, in times of poor economic performance, deficit spending by government entities can plug the output gap between what the private sector would have produced vs. what it’s actually or projected to produce. In this way, we protect the overall economy from recession, and preserve aggregate demand.

    This is what the Rudd government actually did with impressive specifics- and it accomplished what it was designed and predicted to do.

    However, the general public’s eyes gloss over when we talk in those terms.

    We can also say in general that debt is “better” when interest rates (maintenance costs) are low. Hence, the “best” time to borrow and invest (i.e. where there’s the highest chance of positive rates of return over time) is while interest rates are low (or presently, at historic lows).

    This is something the general public understands- as it relates to their own common experience.

    The latter is persuasive; the former, not so much.

  23. Garth

    @jimhaz… the fact is though that government ‘debt’ isn’t debt at all. Government bonds (what is generally referred to as debt) is a tool used by government to control the money in the economy. Just as taxation doesn’t directly fund spending, again it’s a tool to control liquidity in the general economy. The interest that is paid on government bonds is built into the equation so isn’t ‘dead’ money, not in the sense of us paying interest on a credit card. Sovereign currency issuers (like Australia) are nothing like a household or business in terms of budget management.

    I am stunned we have a new head of treasury that thinks austerity is the way to go… How much evidence is needed that it doesn’t work??

    PS. Thanks Kay

  24. Jexpat

    “I am stunned we have a new head of treasury that thinks austerity is the way to go… How much evidence is needed that it doesn’t work?”

    Mr. Fraser is a right wing ideologue, who, like a religious fundamentalist, will never be swayed by evidence.

    In his mind, to borrow a quote from digby: “conservatism can never fail; it can only be failed.”

  25. Kyran

    Well said, Ms Rollison. I think the divergence is over two opposing approaches, as opposed to their language.

    “But who and what you tax, and who and what you spend on are political, not economic decisions.”

    That was where I fell out with the premise. It is economic (social as well as fiscal) policy that must be dictated by fact. An ideologue has to use their narrative, because there are few facts to support them. MMT is largely logical, and evidence based. Another distortion of reality is the notion that a government is a business. One exists to make a profit, the other exists to set a standard. Whilst they must coexist, they should never forget their reason for being.
    I think the only achievement of this government will be that, other than MSM, questions are being asked all the time. They might even wake up to the fact we are voters, not consumers or clients! Take care

  26. totaram

    As an aside, the legislation setting up the RBA requires the RBA policies to serve to “maintain full employment in Australia” among other things. However, that aim seems to have been given up with the entry of neoliberal economics.

    The Act can be found here:


    and clause 10 states the policy.

  27. Jexpat


    Economic and budget priorities are always driven by politics (i.e. political choices or values), just as politics is always driven by either persuasive or coercive processes.

    That ideologues rely on narrative- as opposed to verified theory or fact or historical results, and yet have been so successful in pressing their agenda(s) should clue us in to the power of language and cognitive science.

    To illustrate using my example above about the best time “to borrow and invest,” what that does, in Dr. Lakoff’s terminology is to ignite a familiar frame in people’s minds. A bargain. Everyone likes a bargain, and in most western countries, people have been conditioned from a young age, to not only look for bargains, but buy (and buy into) bargains as advertised.

    Similarly, when MMT proponents say “debt doesn’t matter,” or “debt isn’t debt” or when they attempt to school (scold?) others into how money is created and so forth, they as are more likely than not to ignite frames in ordinary folks minds that fuels the opposite from that was intended in the context of the discussion.

    I’ll leave to AIMN readers in their own experiences in conversation and review of media material to consider what those frames might be.

  28. Kyran

    Well said, Jexpat. Clearly, we need more oversight on all counts. Surely, we need independent statutory authorities to watch over us. What I’ve seen over the past decade, diatribe over fact, vitriol over substance, supports your suggestion. We have become a ‘bargain basement’ in every sense. Take care

  29. paul walter

    In the end though, I am still left wondering why the ALP reinforces the memes of the right, from asylum seekers to “security” and wars, to neolib economics, rather than challenging these as Prof Triggs has done, say.

    Has Labor been infiltrated THAT effectively, by the conservative machine?

  30. jimhaz


    [This is what the Rudd government actually did with impressive specifics- and it accomplished what it was designed and predicted to do]

    To be honest I am certain the ALP did badly overspending by about 20 billion. Too much too soon (mainly in that BER needed to be done over double the time). If this had of been “just a recession” and not a worldwide GFC, personally I would not want governments to spend very much to smooth the recession out, unless it came from surpluses. The GFC was a special case as many countries around the world had to spend big to prevent a financial collapse.

    I don’t believe governments should be in the business of shoring up existing problems by not letting the bloodletting that recessions bring. This bloodletting is required to channel funds to the best value adding enterprises. I see the GFC as caused by gov intervention in the preceding 20 years. Greenspan was a joke, a plant for the 1%.

    [We can also say in general that debt is “better” when interest rates (maintenance costs) are low. Hence, the “best” time to borrow and invest (i.e. where there’s the highest chance of positive rates of return over time) is while interest rates are low (or presently, at historic lows).]

    Yes, good point. But it still must be invested in productive assets, they just don’t have to be as productive as when interest rates are high.

  31. Richard Leggatt

    Jimhaz, I know I’m late in here, but jexpat might answer, in response to your comment about Rudds’ “overspending”, surely, in MMT the simple test of whether a Government has overspent is an increase in inflation? Of which we have none, in fact we might welcome it. I’m new to MMT and trying to get a handle on it, so sensible comments would be appreciated.

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