The public debate is constantly distorted by claims that cannot be substantiated. One such claim is that the current period of budget deficits is building a stock of future claims on the well-being of the future generation – our kids. Accordingly, the neo-liberal deficit terrorists claim that the best thing we can do for the future generation is to avoid running deficits. My view is that we have been imposing a huge future burden on our children but this would be larger if we tried to run surpluses now. In fact, the years of surpluses exacted a huge toll on our children’s prospects that they will have to endure for years to come.

Why doesn’t this article get headlines in the newspapers? Today I read a recent article – Why Are Banks Holding So Many Excess Reserves? – from two researchers at the New York branch of the Federal Reserve Bank. It is obvious that the authors understand much more about the modern monetary system than most of the journalists, economists and politicians who make so-called informed commentary about such matters. Three messages emerge: (a) bank reserves play an important role in the conduct of interest rate policy and budget deficits put downward pressure on interest rates; (b) the money multiplier conception of economics is inapplicable to a modern monetary system; and (c) the current build-up of bank reserves will not be inflationary. I thought that it would be nice for you to read this stuff from someone other than billy blog (and my fellow modern money travellers!).

The Australian Prime Minister released his second essay over the weekend, in which he outlines his vision for a modern Australia steered towards new levels of prosperity and equity by his government. Well my reading of the 6098 words is that far from presenting an acceptable vision for the future, they rather, outline how his Federal Government has chosen to continue the abandonment of full employment and impose huge costs from the cyclical downturn on the most disadvantaged workers and their families in our communities for years to come.

This afternoon I am off to Brisbane to appear in tonight’s SBS TV Insight Program, which is focusing on unemployment. The program airs live from 19:30 tonight on SBS One. The on-site location for tonight’s show is Logan City, which is south of Brisbane on the way to the Gold Coast. In the work I did with Scott Baum at Griffith University earlier this year developing an Employment Vulnerability index, we identified the Logan City area as having a concentration suburbs which we considered to be at high risk of job loss. So SBS decided to conduct a ground level exploration of the sorts of considerations that expose a region to job loss and to develop narratives that inform us of how people in battling areas cope with economic downturn. While the topic is depressing it is excellent that one of our national TV broadcasters is actually elevating it to national importance.

News Limited is still (mis)leading the way on the deficit-debt attacks. In another appalling piece of misrepresentation and erroneous reasoning, The Australian ran a story from its economics chief, Michael Stutchbury today entitled Now comes time to pay the piper. This newspaper has really excelled in recent months in the lengths it has gone to mislead and lie to its readers on matters relating to the macroeconomy and the conduct of fiscal policy. There will be a piper to pay – that I agree – but it will be because the federal budget deficit is not large enough right now rather than because it is too high.

I wrote the following piece this morning for tomorrow’s local Fairfax newspaper. While some of the content is definitely of local interest there might be some things of interest to the broader debate. Also it is written to fit a column so it doesn’t allow for much elaboration.

This weekend I am quite busy presenting modern monetary economics to two Greens events. You can see the details below. If you are interested in coming along I am sure you will be welcome.

The world seems to be going more insane every time I check. I have this naive belief that we bother to elect governments because we understand they can do things (as a collective) that we cannot do very easily (as individuals). I also assume we all think our elected governments will broadly use their fiscal powers to pursue an agenda that will advance public purpose – that is, seek ways to improve our standard of living and ensure all citizens participate in the bounty that the economic system generates (including sharing the losses when it doesn’t so generate). Of-course, I know that our polities basically govern to keep themselves in power. But there is the occasional election. Anyway, recent events suggest that governments seem to be able to construct popularity by taking actions that do us harm.

In an article in yesterday’s WSJ The Fed’s Exit Strategy, federal Reserve Chairman Ben Bernanke provides an account of some of the operations of the monetary system that I write about in billy blog. While he doesn’t say it explicitly, he confirms that debt is issued to support interest rates (not fund net government spending) and that debt is not necessary at all if the central bank pays a “competitive” rate on overnight bank reserves held at the central bank. He also confirms that inflation is not an inevitable aspect of an expansionary package but it could be. All fundamental propositions of a modern monetary view of macroeconomics. So in one week, a Nobel Prize winner and now the Chairman of the Fed are stumbling around logic that confirms the neo-liberal driven deficit-debt-inflation-higher-taxation hysteria is without foundation.