Posts about monetary policy

The elaborate farce being played out between the Bank of England and the British Treasury

As at September 9, 2026, the Bank of England held £489,026 million in British government gilts (bonds). Since the beginning of February 2022, the Bank has been steadily selling of the stock of gilts it purchased as part of its Asset Purchase Facility (APF) over the period March 11, 2009 to December 15, 2021. These purchases defined its so-called ‘quantitative easing’ (QE) programme that spanned the GFC and the Pandemic as the Bank sought to keep interest rates (and bond yields) at low levels. The so-called Quantitative Tightening (QT) programme that began in November 2022 is now giving the government political problems because it is one of the reasons bond yields are rising. The whole relationship between the Bank of England and the Treasury is an elaborate farce involving transfers back and forth that have no functional purpose other than to disguise the fact that the government is the currency issuer and has no effective financial constraint on its spending. But while the accounting is farcical it does have real world political implications which work against the elected part of government fulfilling a useful public purpose.

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Is opposition to the AI development the new Ludditism?

In the early C19th, skilled English textile workers fearing for their future wage earning capacity launched a campaign against the automated machinery that was fast being introduced into the factory system. The initial protests in Nottingham in 1811 spread quickly to Yorkshire and Lancashire. They became known as the – Luddites – a self-appointed title and for the next 5 years or so, the conflict between the workers and the bosses (aided by government) ensued. The workers’ case was really about who controlled the production process and the new technology they were fearful of was just another part of the sequence where capital sought to exert control on the extraction of surplus value from the workforce. Since then, if one expresses opposition to the introduction of new technology one is labelled with that title. The latest battle front in this struggle might be the rapid introduction of Artificial Intelligence, although that process goes well beyond an aim to control workplaces and reflects a broader desire to control society in general.

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Is Keynesianism dead? Far from it – it provides the life support for a crisis-ridden capitalism

On September 28, 1976, then British PM gave an historic speech at the Annual Labour Party Conference held in Blackpool. The speech was written by his son-in-law, one Peter Jay, who himself was mired in scandals throughout his career. For example, the nepotism allegations after he was appointed British Ambassador to the US, his wife’s extra-marital affair with Carl Bernstein, his own affair with the family nanny at the embassy and the resulting paternity lawsuit that Jay initially denied but was found to be the father, not to mention his demeaning relationship with Robert Maxwell. A good candidate for a speech write. In that speech, Callaghan more or less claimed that the Keynesian consensus up to that point (from the Great Depression) was dead and that the fiscal tools that had delivered prosperity in the post WW2 period were no longer effective and should fiscal deficits should be abandoned. How exactly when the non-government sector as a whole desired to spend less than they earned overall was not specified because the lie that cutting government spending was a growth tool dominated. This narratives that Callaghan introduced have been repeated many times since that time when conservative commentators and economists seek attention. The latest appeared in the Financial Times (September 5, 2026) in the form of an article by former Bank of England board member Andy Haldane – Is Keynesianism dead?. He says yes, I say no!

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Yen starts to appreciate again – as you were!

In recent months, the mainstream media commentators have been issuing increasing lurid predictions of how the ‘out of control’ fiscal situation in Japan is killing the yen and a full-scale currency crisis was imminent, after the yen moved across the ‘fabled’ 160 mark against the US dollar. What is ‘fabled’ about that threshold is anyone’s guess, but mainstream economists and their mouthpieces in the press love to come up with disaster thresholds that generate headlines. There is nothing significant about 160. Last Tuesday (September 1, 2026), the yen reached 160.20. At the time of writing, the yen was sitting on 155.95 to the US dollar. Why is the yen appreciating again? And why have the short-sellers become very wary? Especially, as the Takaichi government is clearly intent on pushing ahead with the rather significant fiscal expansion, which the mainstream think will kill the currency. This post argues that the yen dynamics have little really to do with fiscal policy settings. Other factors are more significant and often reflect the skittishness of the financial markets chasing profit wherever they can find it. The commentators and the financial market spokespersons might claim the dynamics are all about excessive government debt and all that political stuff, but the reality is very different. As you were!

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Latest Australian national accounts data provide no justification for further interest rate rises

I am travelling a lot today and so this is just a brief reflection on the response in the media to yesterday’s National Account release from the Australian Bureau of Statistics. The reaction from the mainstream media has been rather incredulous with most commentators claiming in the most lurid terms that the figures mean that the Reserve Bank of Australia will have no choice but to hike interest rates again at its next meeting to, as one character put it “to close the gap between supply and demand”. Well it should come as no surprise that in my assessment, the data that came out yesterday provides no basis for an interest rate increase. And given the dynamics that the data is depicting, there is no way an interest rate increase would do anything to close such a gap without plunging the economy into a major recession. Any strength in current expenditure is going outside the domestic production system via imports – capital for data centres, EVs. Capacity utilisation rates remain below 80 per cent. Unemployment is rising. Any price pressures are coming from global events that are insensitive to domestic interest rate rises.

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Government debt hysteria relies on acceptance of a totally unnecessary administrative practice

As a followup on Monday’s blog post – Australian government debt approaching $A1 trillion – who cares? Everybody it seems but me (August 24, 2026) – there is an additional aspect of the hysteria around government debt levels that was implicit in that post but bears more detailed discussion. What I am writing today is nothing that I haven’t written before but as the debt hysteria comes in cycles and then becomes more subdued once the more ridiculous predictions fail as time passes, the counter has to be regularly repeated. I am studying the Japanese language at present and as it becomes more complex (for me), repetition is the only way I can ingrain the written language and sounds. The point today is that the mainstream commentary, even from so-called progressive sources, takes as given a major institutional feature of the modern system that is totally unnecessary in a fiat monetary system. Further, that feature just happens to be imposed to advance the ideological interests of the elites, while it masquerades as a non-negotiable and natural requirement of a sustainable system. The implications of abandoning that feature is what I am discussing here today.

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ECB research paper continues to deny that bond buying programmes essentially funded the Eurozone governments

The ECB recently published in their Occasional Paper Series the following report (No. 397) – Prohibition of monetary financing: an economic perspective – which purports to justify the current practice of central banks of not directly buying the debt issued by their governments, despite many central banks at various times since this practice became the norm, buying very large quantities of government debt in the secondary markets. The discussion really avoids the issue and just rehearses the usual guff: central bank independence, maintaining fiscal discipline, and hyperinflation myths – which when one digs more deeply have never stood up to scrutiny. And when one puts the class element into the discussion we see through the fictions. Governments and their central banks will always bail out large corporations with influence when the need arises and never talk about their ‘independence’ being compromised etc. The reality is that the large-scale bond-buying programmes in Europe by the ECB saved several Eurozone governments from insolvency during the GFC and after because they funded the government deficits at times when the private bond markets were pushing for unacceptably high yields on the government debt.

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RBA governor makes another self-serving public presentation ignoring the dismal reality she is helping to create

Earlier this week (July 28, 2026), the Governor of the Reserve Bank of Australia presented to a fundraising event in Sydney on the topic of – Monetary Policy in an Era of Shocks. Later she conducted a Q&A session where she declined to answer key questions about the policy choices the RBA has taken under her leadership, opting instead to treat the assembled as bereft of basic analytical capacity. The speech continued the sequence of self-serving misrepresentations of the true state of the Australian economy. Apparently, the RBA thinks that a broad labour underutilisation rate of 10.9 per cent (that is, resource wastage approaching 11 per cent) and a capacity utilisation at its lowest since June 2020 (when lots of production enterprises were shut!) is still below the slack needed to restore ‘balance’ (full employment). The prominence of central banks and monetary policy as the primary macroeconomic counter-stabilisation policy tool is one of the worst aspects of this neoliberal era. At some point, we will understand that the central banks should be reduced in their role and self-serving appearances of the senior staff at public events terminated.

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Imagine if the British government wrote off its holdings of its own debt

Last week, I considered recent research published by the BIS – Bank of International Settlements pushing the ‘growth friendly austerity’ myth – which was a classic example of how the sense of urgency and crisis is engendered by constructing the narrative in such a restricted manner that real world options are excluded which contradict the mission. If we assume that key features of any system are unable to be activated, then it is easy to speculate that the system will fail. This communication technique abounds in the financial and economic commentariat and leaves listeners and readers with a sense of anxiety and distort the political process. The commentaries that typify this approach all invoke a sense of urgency – ‘act now or else’ – and like to quote large dollar (pound, yen etc) sums because the commentator knows that our eyes glaze over with numbers that are beyond our own experience. Further, when the article parades as an Op Ed, the writer regularly just rehearses some press release or perhaps, less formal statement, that some organisation like the IMF has made. The other part of the scam is that these organisations are elevated into the sphere of sources that are to be believed without question. Two recent examples are the recent articles appearing in the UK Guardian – Burnham’s funding gap: what state are UK finances in for the PM-in-waiting? (published July 3, 2026) – and – Act soon to change ‘unsustainable’ direction of UK debt, OBR warns (published July 7, 2026).

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Bank of International Settlements pushing the ‘growth friendly austerity’ myth

I have been ‘at it’ for decades now but it never ceases to amaze me how mainstream macroeconomic analysis is carried out and the way the public just accepts the conclusions without understanding the basis on which the analysis generates those conclusions. Chapter II in the BIS Annual Economic Report (released June 28, 2026) – High public debt and shifting financial markets: challenges for central banks – exemplifies this point. The conclusions are rather stark but they all flow on some key assumptions that could be varied at any time by the government, which would nullify the conclusions. In other words, the projections of crises and monetary emergencies are all predicated on the assumption that the government would not step in with its unique capacities to prevent the catastrophe. In what world would we think that would happen? Not the real world, and the GFC and pandemic are recent examples where the alleged constraints are jettisoned by government in the blink of an eye.

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