Morrison woos Gladys to attack ICAC

You can smell the exhaust, the burnt rubber and a thousand cigarettes,…

How do we make an ideal society?

If you were starting from scratch wanting to build an ideal society,…

A Tale Of Two Leaders But Whatever You…

A few days ago, I was tempted to write a scathing piece…

Punishing the Unvaccinated: Europe’s COVID-19 Health Experiment

Forget any notions of juicy carrots; the stick approach of savage punishment…

Undermining trust in institutions is a dangerous game…

The longer the Coalition remain in power, the greater their arrogance and…

The Morrison enigma

By Ad astra It’s becoming alarming. Every day our Prime Minister becomes more…

If Gladys is a “great candidate”, our country…

By TBS Newsbot Gladys Berejiklian managing to resign in disgrace, face the ICAC…

Let’s be clear, Gladys Berejiklian is being investigated…

Over the last few days, there has been a full court press…

«
»
Facebook

Our Government: Traitors to their own people

For the twelve months or so that I have been writing articles advocating the benefits that would come if our government implemented a Modern Monetary Theory (MMT) economic framework, I have been under the mistaken impression that MMT is a regime, or a doctrine that the government needs to adopt as an economic policy initiative.

For most of this time I have viewed MMT as the religion of the progressives in policy direction held back by the right wing neo-liberal conservatives who see MMT as a threat to western capitalism.

But recently, as Professor Bill Mitchell pointed out in one of his daily blogs, we are already living in an MMT monetary system. All the mechanics of a fiat currency system are already there to enable us to interact with MMT every day.

Bill Mitchell says, “The fact is that we are already living in the MMT world. We interact with each other every day in the MMT world. The monetary system, whether it be in the US, Australia, Japan or any of the Eurozone nations, is an MMT-type construct. It is not about moving to some new Shangri-La, which we might call the MMT world – we are already in that world.”

mitch The big plus in realising this is that those who take the time to understand what MMT is all about, can expose the treachery and fallaciously idiotic claims politicians and neo-liberal economists make when they try to convince us that they know better when, in fact, they don’t.

When they say things like, “we can’t afford it, or “where will the money come from,” or even sillier statements like, “if we keep spending like this we’ll go bankrupt,” then you know that one of two things is true. They are either ignorant, or they are lying and are masking a hidden agenda.

Learning about and understanding MMT theory, empowers people to challenge politicians when they hear these ridiculous statements. It provides the knowledge to ask questions and demand honest, truthful answers.

All too often politicians dismiss as out of hand, policy options that are sound and reasonable, e.g. job creating projects that add value, like infrastructure spending. They dismiss calls for creating jobs in periods of mass unemployment citing complex reasons that they don’t really understand, but know won’t be properly examined.

The NDIS, the NBN and the Gonski educational reforms have all been modified or delayed on the basis of their so-called affordability. Through the MMT prism we know that is simply not true.

employ When we hear government members citing reasons why job creation programs won’t work, we realise, when we view such comments through the MMT prism, government politicians have an ideological preference for maintaining a certain level of unemployment as a trade off against inflation.

But we know, through the lens of MMT that is not true. More treachery. We understand that a sovereign currency-issuing nation has options. Having that knowledge immediately exposes the ideological persuasions of politicians who try to convince us that their way is the more economically sound. We can conclude they have a hidden agenda.

MMT tells us that our fiscal capacity is defined in terms of our national resources, what we can produce and sell and the strength of our GDP. Our spending is not constrained to, or dependent on, how much we pay in taxes.

So, to view MMT as a policy direction or some peculiar idea that should be embraced or rejected, or “introduced” overlooks the fact that it is already a part of our economic system. It is already with us. Governments that refuse to acknowledge this basic truth are where the logjam resides.

poor

Photograph by Dorothea Lange (Circa 1930s) courtesy of Google Images

Our government needs to grow up and stop implementing policies that favour the wealthy. They need to open their eyes to the options available that would see greater equality in the distribution of our substantial wealth.

Our government is a traitor to its own people when it allows poverty, poor medical facilities and substandard education to grow while permitting a particular minority subset to continually add to its already obscene wealth.

This sort of treachery needs to be exposed for what it is.

32 comments

Login here Register here
  1. flohri1754

    I have been of the same opinion for quite some time …. didn’t even realize it was MMT. Actually, going back as early as 1934 (at least) in L.C. Jauncey’s work AUSTRALIA’S GOVERNMENT BANK I can see many of the same basics being supported in celebration of the (then) twenty-five year old CBA. Shame that it was privatized. Would be interesting to see where it would be now IF its initial structure and trajectory had been maintained, defended and promoted for a hundred years! (It came into existence in 1911/12).

  2. Wally

    Thanks John, this article clearly answers the main question I had regarding MMT when I read one of your earlier articles on the subject.

  3. mark delmege

    my 2nd was a post in my email last night – I’m not sure how it fits in but its worth a thought

  4. stephentardrew

    I agree John that is why I have consistently called MMT transitional and non-disruptive because it is already in place. It is primarily a change of perspective. The mechanics simply need fine tuning though there will be radical resistance form conventional economists. No great revolutions or dramatic changes simply reconceptualising economics and applying theory to a fiat system that is already operative. It is the best opportunity progressives have ever had to bring about substantial change and a move towards a real democratic society that distributes wealth more equitably and alleviates economic suffering and hardship for the low income and impoverished including pensioners.

    What further excited me about MMT is that it is an early transition towards Jacques Fresco’s (Venus Project) a highly automated cashless society that is truly distributive and cashless relying very much upon self-replicating machines. He has dealt with much of the engineering problems so the foundations for a truly cashless equitable society are already present and will evolve with time. Artificial intelligence and quantum computing will also have very profound contributions. A much more logical and rational society based upon replicable empirical facts.

  5. Anthony Element (@observationpt)

    It’s so simple when put in every day language: We don’t starve sick patients, we starve overweight ones. We feed up the sick patient.
    Similarly applying cost reduction to a sick economy makes no sense at all.
    Back when Howard/ Costello should have been starving the overweight patient of the boom years economy, they instead bribed their way back into government.
    Which leaves us… well, precisely where we are.
    with the more or less same people in charge repeating the same stupid errors, trying to solve a problem they are unable to properly define.

  6. mark delmege

    Stephen you don’t really want a cashless society do you? Transactions dependent upon electricity, wires and cables and then think about the informal economy for a moment !

  7. mars08

    In the title… “Traitors to their own people”

    I suppose it depends on who the ruling class sees as their “own people”

  8. Mercurial

    Why can’t we look at spending on things like the NBN, NDIS and Gonski as investment? Millions of Australians go into debt so they can finance what they consider a useful investment for their or their families’ future. I’m steadily growing tired of the rhetoric coming from government and the media: “How are we going to pay for it?” “What savings will we have to make to spend on this thing?” “Can we afford it?” It’s as if there’s some giant balance sheet, and whenever new spending is proposed, existing spending has to be cut, or new taxes raised, to balance it out.

    The media ask such silly questions. They use the household budget analogy to question government spending, which is utterly ridiculous. Households don’t have exchange rates and bonds. It’s a much simpler set up. But the media and politicians (of both sides, I might add) fall for it every time.

    When will Australians realise it doesn’t work that way? A healthy economy has lots of low income earners with money to spend. They might not spend a lot of money each, but the total spending of the rich is insignificant by comparison with the total spent by the poor. THAT’S what stimulates economies. Austerity only inhibits the poor from spending; it makes the rich think they have more spending power (they do, but only in comparison) but the total degree of stimulus is lower.

    The rich can’t stand the fact that it is poor people who make the economic world go around. They like to think they are the movers and the shakers, but unfortunately there just ain’t enough of them spending enough to make a difference.

    And as for my friend mark delmege, “transactions dependent upon electricity, wires and cables” – what an utterly silly thing to say. Everything else in our lives is dependent upon electricity, mark; why should transactions done that way be any more risky? Would you suggest a return to the ledger and cash under the mattress? A boon for the ‘informal’ economy (if the black economy is what you mean).

  9. JohnB

    The Rudd/Gillard GFC stimulus response fits well into MMT as an example of Overt Monetary Financing (OMF)

    I consider one of the main reasons it was so vehemently vilified/opposed was because the ‘banksters’ didn’t get to lend the stimulus money and thereby set themselves up ‘a nice little earner’.
    The reason it was so successful in warding off the worst impacts of the GFC was because the money was directly spent into the local community, not lent (and thus requiring repayment).
    It was spent where it did the most good with immediate stimulus effect – and at the end of the process Australia gained an asset – refurbished/new social infrastructure and ongoing co2 amelioration (via home insulation – the gift that keeps giving).

    Compare that to the US QE program – all stimulus funds (billions) routed via secured bank loans – repayable with interest by profit making ventures.
    Banks bought up smaller banks and got even larger; much money sent offshore to finance new ‘cheap labour’ factories for transnational corporations -very little local impact or benefit.

    The US missed an opportunity to create local jobs and refurbish/replace chronically rundown national infrastructure like roads, bridges, school, universities – if they had all been directly funded by OMF grants the US citizens would be much better off than they are today.
    Instead, US QE has fed more wealth into the coffers of the 1%, depressing local demand and further increasing domestic wealth inequality.

  10. Chris

    John Trudell – Mining our Minds For The Machine

  11. Wally

    If we don’t adopt MMT and continue to issue bonds to pay for budget deficits Australia will eventually be owned by the owners of the bonds, most likely the Chinese.

  12. JohnB

    Wally,
    Australian bonds are sold/traded almost exclusively in Australian dollars – they have been since about 1986.
    An insignificant $ amount of bonds are held in foreign currency – these are hedged against monetary fluctuations at policy direction of the reserve bank.

  13. Wally

    JohnB

    Excuse my ignorance this is not an area I have a lot of knowledge about so please enlighten me.

    I cannot see how the currency the bonds are issued in has any influence over who owns the bonds. If enough bonds are owned by investors or a bank in another country they effectively own the debt. What influence can they have that can impact on Australia’s economy?

  14. mars08

    aahhh… sighhh… No doubt I will be accused of being negative and weakening Shorten… but… why does Labor keep playing the “debt and deficit” game as fabricated by the Coalition spin doctors?

    You can bet your last dollar that, come the next election campaign, the ALP will be using exactly the same arguments against the Coalition as were used against them. There will be no attempt to restructure the discussion. The ALP with use the same tired, household budget analogy… without a whisper of anything approaching MMT.

    The situation will not change unless somebody in the public eye has the courage to start changing the language.

  15. Matters Not

    Must admit I am surprised at recent ‘admissions’ such as:

    under the mistaken impression that MMT is a regime, or a doctrine that the government needs to adopt as an economic policy initiative. … pointed out in one of his daily blogs, we are already living in an MMT monetary system

    As I have always understood MMT is that first and foremost MMT is and always was about a ‘description’ of how the system actually works. It was an explanation. It was certainly not a prescription for action or response. In much the same way that scientists tell us that global warming is happening without telling us how to respond. At the political level re climate change, some suggest in response a carbon tax while other recommend an emissions trading scheme.

    While ‘descriptions’ are very,very important, in themselves they do not preclude any number of policy responses.

    But I thought MMT advocates already knew that.

  16. Wally

    JohnB

    This is the type of debt issue I was referring to.

    China is the largest holder of U.S. debt. At the end of March, the Treasury Department announced that China owned $1.261 trillion worth of U.S. government securities. That’s more than 20% of the U.S. total foreign debt.

    That means China now holds the power to drastically impact interest rates in the United States.

    BREAKING: U.S. Debt to China Will Destroy the U.S. Dollar

  17. mark

    it’s greed that destroys and the populace hail a man who needs a 50 million dollar house,while I live in my car. mark.

  18. Jexpat

    Calling people traitors because they don’t buy into MMT is a bit of a stretch, don’t you think?

    Sounds…kinda… cultish.

  19. JohnB

    Wally December 14, 2015 at 12:13 am
    Who owns the bonds is irrelevant – it is the currency that the bonds are written in that is critical to the bond issuing nation.

    As Australian bonds are only transacted in AU dollars, the purchaser of those bonds must purchase AU$ to complete the purchase. Interest due and bond redemption is also transacted in AU$.
    Since Australia is the sole sovereign issuer of AU currency, bond payout/interest payments are mostly made electronically or by paper cheque.
    Australia can never run out of its own currency, as it creates and issues it.

    The stability of the AU currency is the main restriction/factor affecting the relative attractiveness of AU bonds – buying AU bonds is an expression of confidence in the currency and the productive capacity of the nation.

  20. John Kelly

    Jexpat, I do not call the Australian government traitors because they don’t buy into MMT. I call them traitors because their policies favour the wealthy 1% over the 99%. They have it within a fiat currency system to make significant inroads into restoring equality and lifting the living standards of the bottom 20% of the population, but instead, choose to target that sub group for substantial budget cuts while enabling the top 20% to further increase their wealth.

  21. John Kelly

    Wally, I find it hard to believe that the Chinese Government would be buying so much of the U.S. bond issuance. Your link does not provide a sub link to the primary source of the Treasury announcement and I can’t find one. In any event it doesn’t matter who buys those bonds so long as they were issued in $US currency. Is there a link to the Treasury announcement?

  22. John Kelly

    Wally, I found this source that says China owns just 7.2% of US debt as at 2014. Again, it really doesn’t matter other than China showing great confidence in US securities.
    http://onforb.es/1tfL0Om

  23. John Kelly

    Wally, the reason why it doesn’t matter who buys the bonds is because they are issued in the currency of the issuer and that means the currency issuer can always meet its commitments.

  24. Wally

    John Kelly and JohnB

    Thanks for the explanation and that was an informative link John Kelly. http://onforb.es/1tfL0Om

    The percentage of debt owned by countries that are less friendly to America is about 10%. This includes China, several oil exporters (Ecuador, Venezuela, Iran, Iraq, Libya, etc.), and a few others. The worst case would materialize if the largest holders decided to sell their Treasury securities at the same time. This could potentially decrease demand which would push yields higher. If yields rose, the federal government would find it more difficult to service the debt, pushing the deficit higher. If the deficit rose, the total debt burden would accelerate and, unless demand for U.S. debt were to increase, it could get ugly.

    Even though more than one third of the debt is owned by foreign nations, as long as there are no safer places to invest, money will find its way here. Therefore, global turmoil would be in the best interest of the federal government. Anything which raises fear will bring money to the Treasury and allay the need for higher taxes. However, one day this unsustainable path we’re on will reach its day of reckoning.

    The difference between the claimed Chinese ownership of US securities on the 2 web sites is another example of how careful we need to be about accepting what we read in the media and on the Internet at face value.

  25. JohnB

    Wally December 14, 2015 at 12:33 am
    China is the largest holder of US debt as a result of 4:1 imbalance in US/China trade.
    China earns so many US$ that it has a problem in how to best utilise them.

    It is a ‘problem’ with many complexities for China.
    The obvious use is to buy US govt. bonds (low interest, but very secure – the 1.2+ trillion you mention); however that has a downside for the Chinese – it serves to strengthen the US$ as a default world ‘reserve currency’.
    The Chinese are trying to breakaway from default linkage of the yuan with the US$ – they have formed their own currency bloc with Europe and are attempting to have their currency included in the IMF’s SDR (special drawing rights) basket of reserve exchange currencies.

    On the other hand, China has exported vast amounts of real ‘goods’, and in return finds itself with accumulated US currency in the form of (many) digits on a computer/spreadsheet. Some exchange – who is really winning out of that?
    Until the accumulated money is spent there is no net gain to a net exporter – hence China is diversifying its spending to acquire solid assets independent of the US (like Australian real estate/Ag. properties??)

    [As an aside, Warren Mosler has advanced the seemingly ludicrous theory that with fiat currencies (on a national accounts basis) imports represent assets and exports become liabilities; see https://youtu.be/Bxt50yigGEM ]

    I don’t agree with the premise of the article you linked to.
    US bonds are denominated in US dollars – the US creates/issues those dollars – they can always pay the redemption value and interest on bonds thus issued.

    If external holders ‘dump that debt’ (as the article describes) who will buy that bond from them? The US will of course – but they will pay only the face value (+interest due) of the bond.
    What other entity can or would want to pay a higher rate for that bond when they can buy similar/same bond direct from the US govt at the current offered rate?
    To send US interest rates up there would have to be buyers willing to pay ‘over the odds’; and if that occurred the US need only offer more bonds for sale at their preferred (lower) rate to satisfy the buyers demands.

    “The foreigners are now dumping Treasuries and if no one buys it, guess what, interest rates go up,” Rickards said
    How do foreigners dump debt? They sell or redeem them – they don’t destroy them, withhold them or take any other action that will make the bonds rarer, more attractive or sought after.

    I think Rickard misunderstands – he means instead that rather than ‘dumping’ bonds he suggests China might refuse to buy more of the offered US treasury bonds, thus forcing the US to raise the interest return on US bonds to make them more attractive to buyers, the rate rise then pushing up US interest rates/stocks.
    If that is his premise he is wrong – he doesn’t understand how a fiat currency system works.

    The US does not need to sell bonds – the economy will function without them – a sovereign fiat currency issuer does not need to borrow in order to spend.
    In the event that a large holder of bonds sell them to some other holder is some other currency it merely represents an accounting adjustment at the federal reserve – the US dollars are owed to some other bank or entity.
    Bonds are only used as a tool to set interbank exchange interest rates/ soak up bank excess reserves.

    See Warren Mosler video from 20 mins on for a discussion on US bonds and China.

  26. Wally

    JohnB

    Thanks for the detailed explanation I realised reading the article John Kelly linked to and the link I posted that the authors were not referring to MMT and as you point out ultimately the US can just print more money to buy back the securities and pay the interest. I assume that if China did have a fire sale on US securities the $US could lose its value and have a negative impact on those selling the securities.

  27. Pingback: Our Government: Traitors to their own people | THE VIEW FROM MY GARDEN

  28. Royce Arriso

    Thanks John. You played a significant role in the Damascene moment which led to my understanding our macroeconomics. And it still remains a source of daily wonderment to this ordinary citizen how often people in highly-paid, responsible positions betray complete ignorance of how fiat currency systems function. Notions of government ‘debt’ alone are extraordinary. Onward and upward, nonetheless!.

  29. Andrea Bimba

    Sorry for seeing this excellent article so late. Neoliberalism and monetarism are political ideologies for transferring wealth to the capital controlling elite, they are not about economic efficiency or providing jobs and growth. The Liberal, National and Labor Parties are all disciples of this ideology and it is their role along with the mass media, including the ABC, to present a more pleasant mask for this poisonous ideology to the electorate who like abused children keep returning to their abusive parents for another dose as they know no better.

    The recent narrow federal election victory of the Coalition confirms this. It must blow up in their faces at some point but I hope that even worse alternatives like One Nation don’t become the new abusive parents? If the Greens remain poisonous to large parts of the electorate due to decades of mass media indoctrination, then maybe the dark haired Senator from South Australia can build his orange revolution? A few green and red flags will help.

  30. Turdbulleatsdicks

    This Government stopped representing the interests of the Australian people along time ago, we the people allowed these traitors to grab our guns and now we have zero ability to physically fight back. Heres example 20567 of why our government has betrayed us.
    Queensland gets a measly 1 million dollars in aid from the federal government for billions worth of damage from Cyclone Debbie. The very same day Turdbull gives the Indonesia Islamic State government 390 million in aid.

Leave a Reply

Your email address will not be published. Required fields are marked *

The maximum upload file size: 2 MB. You can upload: image, audio, video, document, spreadsheet, interactive, text, archive, code, other. Links to YouTube, Facebook, Twitter and other services inserted in the comment text will be automatically embedded. Drop file here

Return to home page
%d bloggers like this: