The new British Labour government will have to abandon its fiscal rule or deliver very little

It’s the Wednesday pot-pourri – British politics, self promotion, events, sport and music. Politicians invariably claim that the situation they inherit when they take office following an election is untenable and that the ‘public finances’ are worse than they had initially thought. Of course, the idea that ‘public finances’ can be good or bad or somewhere in between is a misnomer and just reflects the ignorance of the fiscal capacity that governments have (that is, currency-issuing governments). There is no such thing as a deteriorating public finance situation. So when Rachel Reeves got up after being elected the new Chancellor of the UK she was just posturing and telling the British people that they should not expect much better than what the Tories delivered. What can be good or bad or somewhere in between is the state of public infrastructure and public services. And after 14 years of devastating Tory rule, one can safely conclude that there is a huge deficit in the UK in that context. The question then is what can be done about it. My reading of the situation is that if Labour want to actually improve things significantly in terms of public service provision and the viability of Britain’s infrastructure then it will have to abandon its mindless fiscal rule. And it would be better that they do that quicksmart while they enjoy such a large domination of the Parliament.

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Season 2 of our Manga – The Smith Family and their Adventures with Money – available now

Today (July 12, 2024), MMTed releases Episode 1 in the Second Season of our Manga series – The Smith Family and their Adventures with Money. We have spent the last several months developing the storylines and graphics and Season 2 will run from today to December 6, 2024 with episodes appearing on a fortnightly basis.

Have a bit of fun with it while learning Modern Monetary Theory (MMT) and circulate it to those who you think will benefit …

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Special pleading from Japan’s fossil fuel financing megabanks reaches new heights

In our new book – Modern Monetary Theory: Bill and Warren’s Excellent Adventure – which will be launched in the UK next Wednesday, we devote a chapter to what we refer to as the Japanese irony. This relates to the fact that while the conduct of policy in Japan is justified in mainstream terms, the more extreme policy settings that emerge produce outcomes that expose the deficiencies of the mainstream theories. At present, we are observing more examples of this. The latest matter of interest in Japan (from my watch) is the pressure the three megabanks are putting on the Bank of Japan policy makers to push up bond yields and interest rates. There is no reason based in financial stability concerns or community well-being for the Bank of Japan to agree to their demands. They just amount to special pleading from Japan’s fossil fuel financing megabanks for more corporate welfare to boost their profits.

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ECB estimates suggest meeting current challenges will be impossible within fiscal rule space

In the recent issue of the ECB Economic Bulletin (issue 4/2024) there was an article – Longer-term challenges for fiscal policy in the euro area – which demonstrates why the common currency and its bevy of fiscal rules and restrictions is incapable of meeting the challenges that humanity and the natural world face in the coming years. The ECB article is very interesting because it pretty clearly articulates the important challenges facing the Member States and provides some rough estimates of what the fiscal implications will be if governments are to move quickly to deal with the threats posed. However, it is clear from the analysis and my own calculations that significant austerity will be required in areas of expenditure not related to these challenges. Given the current political environment in Europe, it is hard to see how such austerity can be imposed and maintained in areas that impact the daily lives of families. What is demonstrated is that the architecture of the EMU is ill-equipped to deal with the problems that Member States now face. The common currency and fiscal rules were never a good idea. But as the challenges mount it is obvious that Europe will have to change its monetary system approach in order to survive.

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The yen, podcast, and book announcement – all on International Workers’ Day

It’s Wednesday and today I consider the current yen situation which is causing some hysteria in the financial media even though there is not much to worry about. I also provide access to my latest podcast with the Washington-based Bad Faith, which traverses issues of class, the demise of the Left, Modern Monetary Theory (MMT) and degrowth. And the book announcement – pre-orders are now available. And finally an anthem for International Workers’ Day.

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The Smith Family manga – Episode 12 – the Season 1 finale – is now available

Episode 12 – the finale for Season 1 in our new Manga series – The Smith Family and their Adventures with Money – is now available. We will let everyone calm down from the excitement for a little while to give us time to write and draw Season 2, which will begin on May 24, 2024.

In the meantime, have a bit of fun with it and circulate it to those who you think will benefit …

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