Australia – inflation still falling while the RBA governor keeps inventing ruses to keep hiking rates
It's Wednesday and there is a lot going on in the data release sense -…
It’s Wednesday, and I have been following the British Labour Party conference and it seems they are conducting business as usual. That is, working out new and old ways to keep themselves unelectable even when the Tories are one of the worst British governments in history I would think. But so it goes. A split is the only way forward I guess. The Blairites can then hold conferences, stack votes to have unelectable leaders and design fiscal rules to their hearts content. At least they will be saving me time this time around. I will just be able to cut and paste my previous critiques of John McDonnells’ neoliberal Fiscal Credibility Rule and apply the analysis to the new Rachel Reeves’ rules. Not much has changed. Who is giving this lot advice? After that, I am sure you will appreciate that the IMF is now considered to be past its use-by date and currently mired in a data-fudging scandal. And then some Rock Steady to calm us down. That’s what today’s blog post offers.
I always find this time of the year entertaining (footy finals, etc) because it is conference time for the British Labour Party and this year’s event is proving to be hilarious.
The grip that identity politics has on the Party was brought to the fore this week when one of the MPs (Duffield) got involved in a Twitter rage over a statement that “only women have a cervix”.
The right-wing press saw the issue as music to its ears and the debate set elements on the progressive side into conniptions about transphobia.
The complexity was lost but then the Labour leader and the Shadow Chancellor were skewered by the media and it is clear their own performances were rather wan to say the least – and at odds with each other.
Then the shadow employment minister resigned because he was told not to advocate a £15-an-hour minimum wage pledge despite the Leader previously seeking plaudits for that policy while seeking the leadership.
The minister claimed Labour was “more divided than ever and the pledges you made to the membership are not being honoured.”
Not a good start to the Conference.
Then the Shadow Chancellor adopted the time-honoured tradition in Labour of walking the plank when she started down the ‘credibility’ route with the announcement of her fiscal rules and new office to save money.
The conservative press called it “oxymoronic” that the Party would propose “a new watchdog aimed at keeping an eye on unnecessary spending of taxpayer money… funded with taxpayer money” (Source).
While one could contest the oxymoronic claim, the claim by the Express journalist was certainly moronic.
The new office will not be ‘funded’ with taxpayer money. It will be resourced with government fiat currency as all spending in the UK is.
The real oxymoronic status is that it is designed to stop ‘wasteful’ spending but its very existence will be superfluous, and by definition, wasteful.
George Osborne created the ‘Office for Budget Responsibility’ and now Labour want to have their toy, the ‘Office for the Value of Money’.
Both are reflections of an erroneous understanding of the fiscal capacities of the British government.
Reeves told the Labour Conference that:
It’s thanks to the OBR that we know the Tories have missed everyone of their debt and deficit targets.
Which tells us the sort of nonsense that Labour is infested with.
Maybe the smart question she could have raised was along the lines of whether the original targets were sensible given the spending and saving decisions of the non-government sector and whether missing the targets was the vehicle to a better outcome in terms of employment and income generation than would have been the case had the targets been met.
Just getting up at a Conference and shouting about debt and deficits as if both are to be avoided is really poor conduct and typifies that the Labour Party hasn’t learned any lessons from its recent failures.
Apparently, this sort of nonsense makes Reeves “credible” with the “financial institutions and large sections of the media” (Source).
We got fiscal rules where a Labour government would enforce the balancing of the recurrent fiscal position (net of capital spending), require ‘tax’ revenue to match daily public spending, and reduce the debt ratio.
The Tories said they would do the same.
So John McDonnell’s ridiculous Fiscal Credibility Rule has been tightened under Starmer and Reeves, but it will be equally unworkable.
The Labour Party cannot get beyond their obsession that somehow amorphous financial market speculators will ruin the currency unless the government appeases them with these stupid (neoliberal) fiscal rules.
Given the Bank of England has bought a fair proportion of all the new debt issued over the last few years without the sky falling in, when will the Labour Party realise that the investors are at the behest of the government not the other way round?
The legislative power is much larger than the ‘market’ power.
Iceland, for example, showed during the GFC just how constrained the big hedge funds are when the government legislates to advance public interest.
The Tories should be very confident going into the next general election.
1. The perennial US debt ceiling fiasco.
2. The calls for a trillion dollar coin in response to the stupid Republican antics about 1.
3. Rachel Reeves proposing an Office for Value of Money to appease the City.
4. Keir Starmer thinking he should be leader of the British Labour Party.
Which implies it was useful at all – and one could argue that under the Bretton Woods scheme it served some utility in helping nations defend their exchange rates when their current account positions created instability.
And that would be before they started to introduce stupic and damaging conditionality to the loans they provided (late 1960s into the 1970s).
But once the fixed exchange rate system ended (after August 1971, although it didn’t really end until a few years later when the Smithsonian Agreement collapsed), the IMF had no further purpose.
It invented one – to be a neoliberal attack dog in tandem with the World Bank and inflict shocking damage to the poorest countries. It also allowed itself to be a pawn for advanced nations to depoliticise austerity attacks – circa Britain in 1976, for example.
Well I have been arguing all this for years now.
And like all things that are outside the box, at some point they become the fashion.
The Financial Times article (September 27, 2021) – Georgieva data scandal heightens IMF identity crisis – confirms that thesis.
The IMF has an identity crisis. Its traditional role as lender of last resort has been usurped by the central banks that have pumped trillions into financial markets …
For most rich and middle-income countries, the IMF had already long lost its importance — thanks, in part, to the quantitative easing programmes in place since the 2008 financial crisis. Why sign up to IMF loans with stiff conditions when investors starved of yield are eager to lend just as much, almost as cheaply, with no strings attached?
The article quotes Carmen Reinhart, yes, she of the spreadsheet scandal, who still thinks she is relevant to anything.
Apparently governments who have borrowed from the IMF will face a “solvency issue”.
She has been banging on about solvency crises for just about ever.
And, the IMF boss has been accused of manipulating (or demanding manipulating) of data that changed China’s rankings in an index, while at the same time seeking funds from China. This is when she was at the World Bank.
There is denial about this but the investigative report documents some pretty weird going-ons.
Here is the Report (September 15, 2021) – Investigation of Data Irregularities in Doing Business 2018 and Doing Buiness 2020 – that has fed the allegations.
There seems to be evidence of bullying, Groupthink, and basic crookedness if the external report provided to the World Bank board is credible.
What would one expect from these institutions that really should have been disbanded and replaced decades ago given the damage they have inflicted on nations around the world.
This is what I have been listening to while working this morning.
The next track – I’m Still Waiting – is one of the first released by the Wailers under its –Studio One -recordings and produced by –Clement Coxsone Dodd
It was on the 1965 release – The Wailing Wailers – accompanied by The Soul Brothers. It was marketed as “Jamaica’s Top-rated Singing Sensations”.
The Wailers were of course:
1. Bunny Livingston.
3. Robert Marley.
The Soul Brothers who were the Studio One house band and featured on many of the 1960s rock steady/ska/reggae recordings were mainly jazz players trying to earn extra cash.
They were originally the Skatalites (Roland Alphonso, Don Drummond, Tommy McCook, Jackie Mittoo, Lester Sterling, and Lloyd Brevett) but became the Sound Dimension in 1965 when trombonist Don Drummond went to prison for murdering his wife. Other musicians also joined the ‘group’.
The tremelo on the guitar is beautiful. A true rock steady classic.
Here is the original album cover, which I picked up at a second-hand shop in Melbourne in the 1970s to my great benefit.
That is enough for today!
(c) Copyright 2021 William Mitchell. All Rights Reserved.
This Post Has 27 Comments
sorry to bother you,
I am trying to purchase a ebook copy of your Macroeconomics (after having bought the hard copy) because i have recently bought an iPad as a study tool, i have tried the Macmillan Int Higher Ed link but it does not load, elsewhere search took to two other websites, Springer and Bloomsbury but could not find your title, Book Depository does still list your book but no ebook, Amazon says kindle version is not available, (Macmillanihe was sold off?)
is there some way you can expose my interest in the ebook version of Macroeconomics for study on the iPad, and if there is some response, i will either pay the reader for the ebook or if she declines payment, i will make a payment to your MMTed effort (if this is acceptable to you).
Please let me know how you fell about this.
“The Tories should be very confident going into the next general election.”
Matthew Goodwin agrees:
“Labour’s conference is disaster zone. … And still 2 days left. Looks like a student union sh*tshow.”
Although he also says: “Global debt now stands at $296 trillion !! How are we going to pay for this? “, so if anybody fancies bringing him up to speed on MMT on Twitter…
It is incredible to think the liberal left just might get away with it.
Move back to what was described in George Monbiots book – Captive State. That lists everything That was done under New Labour That Bill and Thomas Fazi would call depoliticisation.
That lost the Labour party Scotland and large parts of the North of England. Given the Labour Party has just spent more than four years trying to undermine the votes of millions of working-class northerners by trying to reverse the Brexit result. It’s more than a bit rich for Labour members to start bleating about ‘democracy’.
Ken Loach article in the Guardian yesterday was excellent. If you get a chance you should read it.
Why is there a liberal left in the Labour party ? It is a “socialist “democratic party. If you want to vote for the liberal left that is what the Liberal Democrats are for. Vote for them instead. Who will never win and continue to try and hijack the Labour party like they have done to every social democratic party across Europe.
Who want PR voting put in place just like parts of Europe run by Brussels to depoliticise democracy further. Try to force The Lib Dems down people’s throats. Let’s be very clear The Guardian is a liberal paper. Not only do governments in Europe have virtually no say but with PR they can’t organise a fight back against Brussels.
The SNP and the Scottish greens are infested with the same problem. Now following Tony Blair’s roadmap which is the reason Labour lost Scotland and how the SNP kicked them out. It is insane, but we all know why they are now moving right along the political spectrum. EU uber alles.
The Brexiverse really is when the right acts like the left and left have turned into Liberal democrats voting to stay in the middle of the right wing spectrum. Turning true left wing and right wing voters into populists. With nobody to vote for.
Came back yesterday. I went to the fringe meeting on Monday where Reeves was interviewed. I got in 4th question which mostly referred to LVT but ended with a question (which you’re supposed to do) ‘Have you read the Deficit Myth?’. I asked the same question at the Policy Committee I’m on (soon to be abolished apparently) and she’d agreed to meet with me. I have her SpAd’s contact details.
The usual format: take 3 questions so you can ignore what you don’t like. She lumped my question in with another on housing. She gave a very brief entirely irrelevant response to both.
Won’t be bothering to meet her – I was going to take Patricia. But she is very shiny.
The first fringe I went to was on, I think, how to pay for green policies. Clive Lewis was on the panel, who indicated at another policy committee meeting that he understood MMT. I asked a question – or rather gave a little spiel about MMT – can’t remember the answer – but spoke to Clive after and I think he’s sound. He would make a good leader but there’s no chance of that with the rule change.
I also mentioned that taxes do not fund public expenditure in a ticket-only round-table discussion on property tax reform run by IPPR (Institute for Public Policy Reearch) at which John McDonnell and Andy Burnham (Mayor of Greater Manchester – and hopefully future leader) were the main speakers. I’m in touch with Andy’s team and will do my best to get through to at least his advisory team, using the LVT backdoor.
I saw footage from some sort of Labour Youth side-event where the speaker was yelling to the audience that ‘we do have a magic money tree, it’s the rich’ (tax the rich etc. etc.). So, basically reinforcing the lie that the rich are the source of all money and that our society is dependent on them (and for this, they should be financially punished). The crowd went wild of course.
When both sides peddle the same lie you can see why the Tories win out. If it were indeed true that society is dependent on the rich then many would feel they should be treated favourably and more should be encouraged to be like them. So long as Labour support the same core lie then their ‘punish the rich’ argument will always seem counterintuitive (and elections will continue to be preceded by a chorus of rich people claiming they will leave the country and ‘take their taxes with them’ if Labour win).
If you ever get the time to read captive state by George Monbiot or reclaim the state by Bill and Thomas.
They show clearly what the strategies of
a) Well it is better to vote for New Labour than the Tories.
b) Stay in the EU we can change it from within.
Actually means in reality. What happened over many years be living in those strategies.
What is even more frightening than actually believing those strategies will work. Is the people who believe it can’t even change their own political party from within. Never mind the whole EU block of all the different countries. In Scotland those that honestly believe they can move the EU to the left of centre if they are members call it a work in progress. Can’t even move the SNP to where they want them to go.
It is delusional.
They cling onto and seek out people who share that view. They going looking for people like Richard Murphy and Dirk Ehnts who think they can change Europe from within. Cling onto them like a life raft. Rather than stopping it at source, seeing it as a real danger to democracy and stop it from happening in The first place.
The liberal left will do anything but take on the SNP and Labour and call them out on it. Anything that might stop their dream of independence even though it is, and never will be independence that they will have voted for. Clinging to ideologically rats that will NEVER be able to deliver what they promise.
With a PR system already in place in Scotland set up that way by London for obvious reasons. Under Brussels control democracy will be as far away as ever.
It is heart breaking to watch the delusions taking place.
“The Brexiverse really is when the right acts like the left”
Still a bazillion miles away from convincing them that they are overtaxing for the size of government we have.
Who would have thought that the RightLeft (or are they LeftRight?) like paying more taxes than they need to?
Don’t we know it Neil.
The amount of time we spend on Conservative blogs trying to convince them.
I think we have moved some of them a little bit. Or made them think about it more than they ever did.
Bill, when I saw the title I went WTF? but when I came to “working out new and old ways to keep themselves unelectable even when the Tories are one of the worst British governments in history” I laughed my head off. Thanks for the jokey surprise.
I’m glad the ‘mint the coin’ quackery was in the stupid list. I was hammered on Twitter for dismissing it as a silly falling into line with a mistaken and stupid piece of legalese which changes nothing fundamental about the facts. [Bill edited out a personal attack on a colleague].
At least the Labour Party adheres to colour correctness.
The Shadow Secretary of State for Northern Ireland, Louise Haigh has, aptly, bright carrot orange coloured hair.
Perhaps the Shadow Chancellor of the Exchequer should have green hair?
The “Things too stupid to even think about” section made me laugh. But the trillion dollar coin, while it is stupid to think it would be necessary, well you have to take into account just how stupid the positions held by many members of Congress actually are. And then compare those stupidities. And in that light the trillion dollar coin looks a lot less stupid. I mean it does solve the ‘how are you going to pay for it’ question without getting into a whole bunch of money theory. Kind of like we are just going to pay for it with a handful of trillion dollar coins. It isn’t that stupid. It is just stupid that something like that needs to be proposed in the first place.
It would seem that the whole narrative of “back to the mainstream” is being loved by the mainstream corporate media (in Australia at least). The corporate media don’t just believe in neoliberalism, they actively support it because it is in their economic interest as corporations.
This is a problem for the left, we have to bypass this filter to get our story through to the people.
Minting the trillion dollar coin is not a “pay for” it is a spreadsheet operation, since the physical coin itself is trivial to manufacture. I agree with Bill it is a stupid idea, and I *also* 100% agree with *you* that Rohan Grey is right to advocate for it: Grey knows it is pure political theatre, and that is the whole point, to expose monetary operations for what they are, secured accounting records of credits and debits, scorekeeping. Or as Nathan Tankus has put it: the debt ceiling is a stupid accounting gimmick that can be solved with another stupid gimmick — mint the damn coin.
If they could do it, mint the trillion dollar coin, it would be obvious then what the consolidated government is doing, that they never need to “get money” from anywhere to credit bank accounts by due process, and thus for all future time obviate the need for the gimmick. This is why I would press the Biden Admin to do it, so that it becomes a forgotten unnecessary thing of the past. I might be wrong though, it might spark some sort of new Confederate civil war, with the amount of guns those folks own it is a danger that any pragmatist needs to consider when deploying monetary gimmicks.
I know Bijou 🙂 The coin is a gimmick as you say- but it could be used to defeat that other gimmick- the debt ceiling. They are both stupid. But at least it is fun to think of a trillion dollar coin. Be nice to find one of those on the beach somewhere… Or in the couch cushions. Not all that more stupid than the mega-millions lotteries that occasionally approach billion dollar prizes here.
And then you get the whole hysterics about saddling our grandchildren with public debt garbage- and that would all go away with that kind of coin issuance. So there are aspects to it that are not stupid at all as far as commonplace understandings of government being just like a big household. Oh- kind of blows that misunderstanding up also, government minting giant denomination coins. That’s something everyone knows a household cannot do.
In ‘Economics of Employment’, Abba Lerner, in a paragraph entitled ‘Logic does not easily overcome habit’ (p 152), states:
‘The tendency to apply to others and to society at large concepts which are developed in one’s own experience is too strong to be overcome by a simple indication of a logical fallacy. The new theories must become familiar, and until they become familiar the emotional resistance is still able to overcome any intellectual clarification…… Habit is stronger than reason. And so the only way by which reason can prevail is by continual repetition until it has got habit on its side.’
From this perspective of increasing familiarity with a new idea, the following motion was put to the General Committee of H&WoodGreen Constituency Labour Party in London in September.
“Recognizing That to win the next General Election, the Labour Party must clearly demarcate itself from the Conservative Party and
Recognizing That the UK is a currency issuing state and that, therefore, the UK state is not financially constrained but is resource constrained,
This CLP calls on the Labour Party to ignore the size of the fiscal deficit and the national debt in determining economic policies and to make the rates of unemployment and inflation the main determinants of the size of government expenditure.”
Surprisingly, it was passed by 40 votes to 20 with 40 abstentions. One suspects it would have been the first time that many members were exposed to the idea of the irrelevance of national debt.
‘It’s thanks to the OBR that we know the Tories have missed everyone of their debt and deficit targets’. Labour has had over ten years of continuous evidence, in which to get an alternative conversation going. They could have got through the worst of the being ignored and being ridiculed stages. As for the identity politics nonsense, that they are also not content to leave to the Lib Dems and Greens. I guess I could find some amusement from watching this shambles from a distance, but since I am here, I find the best way of keeping calm is to limit my exposure to New Labour, as do most people.
That’s fantastic, MartinD. Of course as a motion from a single CLP it didn’t stand a chance of being selected for debate. I’m CLP Policy Officer and will be giving a talk on MMT soon. I will also offer to speak at neighbouring parties. Let’s co-operate. There were several submissions to the National Policy Forum on MMT but only from individuals and the search facility on the website is useless so it will be difficult to use that for contacts.
@Carol Wilcox, MartinD Agreed, the grassroots of the Labour Party have got to have new ideas and language to consider, then make their choice as to whether to stay or leave, that is if they have not already left in disgust or been excommunicated. Change is clearly not any idea that the PLP will initiate.
Hi Derek, you said “They going looking for people like Richard Murphy and Dirk Ehnts who think they can change Europe from within.”
I think that’s a bit harsh on Dirk Ehnts, who lives in works in Germany. He only has two options – work to change it, or leave.
Re above I don’t see how ‘mint the coin’ helps anyone in the long run because the so-called revealing of the fakery involved in debt ceilings/OMF just ends up stuck on another merry-go-round public debate about a fake sort of currency anchor; likely with people in the media fretting over having to mint yet another ‘coin of debt’. Is it realistic to imagine that people who right now can’t see what is in front of their noses will suddenly be enlightened by the concept of a trillion dollar coin ‘anchor’?
Maybe it’s time to have a quiet word with that ‘colleague’.
George S Gordon
You missed the point I was making entirely. So please allow me to be clear on how I see it.
My point was no reflection on Dirk at all. We’ve known for years what Dirk’s stance is and he never lies about it like Richard Murphy does.. Dirk highlights with precision what is wrong with the EU and is very open about it. Murphy is the complete opposite a circus clown.
The point is some of these people that think MMT can be a success in Scotland and live in Scotland look for people like Dirk to cling onto and sit on the fence and call the EU ” a thorn in our side” , ” a work in progress “, any poor excuse they can come up with. Any fairy tale that pops into their head.
I’ve heard them all with my own ears listening to the MMT podcast. When asked, people from Scotland answer with a fudge. Either afraid to make their true feelings known or think the listeners are completely stupid with the answer they give and can’t see right through them.
Why do they never just come out and say it when asked George ? Why do they NEVER give the standard MMT response ? Why do they cling onto people like Dirk and Murphy and allow them to do their bidding for them ? That’s the question you should be asking.
Another strategy they use is they’ll get somebody else “not them” to make a video about it.
I’ll tell you exactly why George. Why they always fudge the answer when asked rather than laying it out clearly like every other MMT’r on the planet. Laying it out clearly like the MMT economists and Dirk.
They sit on the fence George and fudge it because God help us all George if the SNP do get their way and drag us into the heart of Europe. These people do not want to be held responsible or accountable for what will happen. They are trying to distance themselves from that outcome and be able to lay the blame elsewhere. Secretly hoping somebody else will stop It from happening for them but NEVER challenging the Scottish voters on it. NEVER challenging the Scottish greens on it.
It wasn’e me I said what Dirk said they’ll cry. They are users of people George. They’ll cling to anybody rather than take a stance themselves. They will lay nothing on the line using an evil version of Groupthink.
More importantly if somehow Dirk and MMT economists miraculously can change the Scottish voters views about EU membership by laying out the facts. These people who seek out and hide behind other people’s views will be first in line to try and take all the credit.
Their daily, monthly, yearly fudge making factory try and make it a win, win for themselves. If it goes wrong it is not their fault. If it goes right they expect the credit.
So I hope I have made myself clear George ?
I’m also pleased to say that some of these people have jumped ship and joined the Alba party. Finally decided to made a stance on the issue as the SNP rode roughshod over the top of them.Which I said would happen 4 years ago and was ridiculed and laughed at. Who was right George ?
They have thrown their weight behind EFTA instead of full EU membership. With a motion to a full debate on how Scotland’s future should be tied to Europe if Alba win the election. I don’t agree with it at all, but at least these people have come down off of the fence and been brave enough to accept personal responsibility and accountability of the outcome.
For me it is less of a fudge. Which is always a start in the right direction. Until, hopefully they realise there is no need whatsoever to stand in front of a neoliberal judge in a neoliberal EFTA court just to get permission on how you want to use your OWN skills and real resources.
Some Scots want independence from the UK AND remain part of the EU? Like Catalonia with regard to Spain? (The Catalonians have the wealthiest economy in Spain, independence is driven by self-interest). But you are right, lack of MMT literacy is the problem with either EU – or UK – membership.
Meanwhile Senator Manchin is revealed to own millions of shares in a coal company, earning half a million bucks annually in dividend payments. One man whose vote – a self-interested veto – in a 50-50 Congress……. which might determine the future of the planet since Biden can’t go to Glasgow and point the finger at other nations, with his own GND in tatters….
Apologies, I thought you were also having a go at Dirk.
I understand and agree with your views on the EU. However, most Scottish independence supporters need persuading that the EU is a wholly neoliberal concept (and most have not even heard of MMT).
And, as I’m sure you know, they use the “dragging us out against our will” argument to try to persuade more folk to believe in independence, which makes it even harder to change their views.
I’m not hopeful.
One of the best sessions at Conference was the fringe session at the RESIST event, where Bill debated Carlos García Hernández and Michael Thomas on the MMT framework v a Marxist perspective on money and the economy. The quality of the debate was far superior to anything at the actual pink-and-blue Conference. And yes- I would really like to know who is advising the Labour Party on economic policy, because it seems even more regressive than the Tories.
I’ve emailed Rachel Reeves’ PA to ask for a meeting to discuss MMT accompanied by Patricia Pino. We were supposed to be meeting with Anneliese Dodds before she was sacked. I’m sure that Reeves will try to resist but I shall keep on nagging. I’m claiming my position on Labour’s National Policy Forum.