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A circular system of nonsense – conventional media reporting on the monetary system

There were two headlines on Australia’s national broadcaster, the ABC’s news site this morning that tell us that there has been little progress made in helping people better understand the way the monetary system operates and the capacities of the currency-issuing government within it. Both articles merely rehearsed the standard mainstream fictions, which makes them dangerous, in that they perpetuate the system that has held the world back from addressing its major challenges. By creating false ‘challenges’ and false ‘probabilities of crisis’, these stories delay action that is necessary to deal with the real problems of climate change, inequality, degradation of public infrastructure and services, the health crisis, etc
The other problem is that these ‘analysis’ columns pretend to be balanced with is a ruse to bestow legitimacy or authority on themselves. ‘Experts’, who are wheeled out to ratify the fiction, are just part of the Groupthink. It is a circular system of nonsense. Very disappointing.

Media focus

I did an interview with the New York Times last week, which was part of a story – Why Japan Stands Virtually Alone in Keeping Interest Rates Ultralow – which came out on October 22, 2022.

Unlike most articles at present, this story at least tries to pursue some balance.

There is a lot of interest from the world press at the moment on why Japan is not falling into lockstep with the US Federal Reserve.

I have done a lot of interviews on the topic since I have been working in Kyoto.

I sense the press are getting a lot of commentary from mainstream economists which the journalists cannot square with reality – predictions of collapse of the Japanese monetary system and all the rest of it – the sort of nonsense that has been recycled repetitively since the 1990s.

And some journalists are reaching out to Modern Monetary Theory (MMT) to get a better, reality-based assessment of the situation which stacks up with the evidence rather than just repeating ideology.

More on that another day.

But, sadly, the Australian media is way behind.

Headline One:

Headline Two

One of the problems with this, and I have mentioned it before, is that the ABC commands massive influence in the information space in Australia.

Their platform is the only truly national platform and their ‘analysts’ are held out as balanced experts – delivering the state of the art to the population.

They claim to have no inherent ideological or political bias and are therefore to be seen as a ‘trusted’ voice in economic and political debate.

Who gets the platform significantly influences how the people view the political choices being made.

Unfortunately, in Australia right now, the narrative set by the fictions perpetuated by those with ‘platform privilege’ is disastrous for those who want to be able to assess the policy landscape.

The narrative pushed is all in one direction – austerity is necessary because the government might go broke and needs more ‘fiscal space’ if it is to invest in priorities.

In this article (October 24, 2022) – The government is sitting on (nearly) a trillion dollars of debt. How big a problem is it? – all the usual fictions are trotted out.

There is little knowledge being presented to the readership.

The journalist notes that the new Treasurer’s consistent claim that the government inherited a “trillion dollar debt” has given the government cover:

It has helped build a case for restrained spending and budget repair, offered as a key reason why the government cannot take up all sorts of ideas.

That is after all the purpose of creating the fiction in the first place – to constrain governments from pursuing agendas that might not serve the powers that be.

The journalist falls into line – claiming it “is undoubtedly a very large amount of money” – thereby giving credence to the notion that the public debt is a probem.

The logic suggests that if the debt was a small ‘amount of money’, then it would be less of a problem.

Of course, that would mean that the net financial assets held by the non-government sector in the form of risk-free government bonds – part of private wealth holdings – would be less.

That connection is not made.

We all pursue ‘wealth creation’, yet fall into compliance with government policies that destroy our wealth.

And, we don’t even know that is happening because journalists like this just propagate the fictions that mainstream economists have introduced.

If the government came into our streets and started pulling our houses down without compensation, there would be an uproar – wealth confiscation and all of that.

But they confiscate our wealth when they run government surpluses and reduce public debt and squeeze our liquidity options.

No-one knows what it going on – because they read articles like this one.

The journalist thinks he is adding balance to the story by qualifying the ‘very large amount of money’ using the gross-net debt distinction.

The reader learns that this technically is endorsed by “many economists” because the government has “cash it holds, deposits and loans it is owed”, which reduces the gross debt ‘burden’.

But it is still a ‘burden’ just a smaller one – that is what the reader deduces.

He then qualifies it further by scaling the ‘very large amount of money’ by the size of the economy to come up with the debt to GDP ratio.

Which leads to his conclusion:

It’s a big debt, but it’s not the biggest.

Okay, the next part of these types of stories, presents some table or graph comparing different debt to GDP ratios across the world.

Here things go really downhill.

The reader is confronted with a chart entitled “Global gross debt-to-GDP (% per cent)”.

And the chart reads in order:


So, my regular readers will then invoke the ‘this guy doesn’t know what he is talking about’ rule and stop reading the article.


Well the journalist wants the reader to think that Australia is not as ‘bad’ as many other nations because its debt-to-GDP ratio is much lower.

But everyone has heard of fallacies involved in comparing oranges with apples.

Nine of the 18 nations lists use a foreign currency and their debt, as a consequence, carries credit risk.

The nations are dependent on bond markets if they wish to run a deficit, unless the ECB buys the debt, which it has been doing.

One nation pegs to the euro (Denmark) and thus inherits the rigidities on government spending as a result.

The remaining countries issue their own currency and can always meet any liabilities that are denominated in that currency.

Comparing the two classes of nations in the same table demonstrates incompetence.

And that is a separate issue to the criticism that a table like this with just currency issuers included would be meaningless anyway.

And then the article wheels out the usual select group that gets the platform as the ‘expert’ – usually an investment banker or management consultant type.

This ‘expert’ ratifies the graphic:

When I look internationally, if you drill down and compare across developed economies who are similar to Australia, then that’s very much the case.

Apply my rule!

Then we get the rising debt issue given Covid:

Debt rose very fast with the cost of fighting the war against COVID …

But the article fails to mention that the central bank, a division of government, purchased almost all of the debt issued to ‘fight’ Covid.

So really the government just ‘loaned’ itself the funds, will repay itself, and then the interest payments in the meantime, will be paid to itself.

The old right pocket-left pocket trick.

What would the reader think if they knew all that?

Certainly, not what they think in the absence of that knowledge.

And finally, the article can’t help itself and invokes the household budget analogy:

As households face rising interest costs on mortgages, so too does the government face rising interest bills on its borrowings.

The ‘expert’ is quoted again as saying this means that we need to “think about whether or not it’s going to remain sustainable”.

When would it not be sustainable?

Meaning when would the government be forced to default?

Answer: Never.

So the whole tenet is implausible.

To which the article then wheels out a so-called progressive economist who reiterates the debt is “low by international standards” and just perpetuates the fiction.

It would not matter if the debt was humungous in the context of assessing whether it is sustainable.

There is no debt level that is problematic for the Australian government.

If interest payments, for example, started to add to much nominal spending to the economy relative to other things the government should be doing then the RBA can simply set bond yields to zero and eliminate the problem.

More effectively, the government could (and should) stop issuing the debt altogether and eliminate the corporate welfare system that feeds on the debt.

The other ABC article (headlined above) – Liz Truss could teach Jim Chalmers some lessons when it comes to tax cuts and structural deficit (October 24, 2022) – builds the related narrative that has returned to haunt progressive politics – that the ‘markets are in charge’ – as demonstrated apparently by the recent chaos in the UK.

This will haunt us for years and is akin to the ‘UK had to borrow from the IMF in 1976’ lie and the ‘Mitterand had no choice but to turn to austerity in 1983’ lie.

The journalist here thinks that readers will benefit from knowing that it is a problem:

… where the nation’s finances are permanently locked into ongoing deficits.

He claims that:

1. “We don’t generate enough revenue to cover our projected spending”.

2. “we will continue to spend more than we earn for at least another decade”.


1. Taxes have to rise.

2. Spending has to be cut.

3. Or continue to run deficits – which the journalist thinks is bad.

The UK ‘lesson’ is apparently that:

Denying the coffers that kind of revenue would blow out the deficit and would have to be funded by issuing extra debt.

What does “blow out” mean?


Fact: deficits are not funded by issuing extra debt.

The issuance is a political choice not a financial necessity.

The government could continue to run deficits for ever without issuing a cent of debt.

So the framing matters – the reader thinks the government is like a household as a result of this journalist’s output.

The reality is the output is a fiction and distorts political judgement, and, in turn, compromises the quality of our democracy.

I gave my version of the UK ‘lesson’ in this blog post – British currency gyrations are about weak government not fiscal deficits (October 17, 2022).

The ‘lesson’ is that:

1. The Bank of England dominates and can always control yields at whatever level it chooses.

2. The bond markets only have space if the government allows it so.

3. A divided government with incompetent leaders will also create uncertainty and chaos in monetary affairs.


It is sad that we have made no significant progress over the years, despite several intervening crises that have demonstrated why mainstream economic thinking is deeply flawed and inapplicable.

Paradigms shift slowly.

We just need to keep at it.

That is enough for today!

(c) Copyright 2022 William Mitchell. All Rights Reserved.

This Post Has 27 Comments

  1. The one shining light on the ABC News site is Gareth Hutchens, who writes excellent economic articles (without actually using the term MMT though).

  2. In the UK they are rolling out a certain Lord King of Lothbury to warn against the tide of tax rises we’re going to have to suffer. He says

    Time to front up, to have a narrative that explains to people … the need to help future generations cope with the increased national debt we are leaving to them.

    Quite why anybody would listen to a failure like Mervyn King is beyond me. Half the reason we’re in the mess we are in is because he was asleep at the wheel.

  3. I’m very worried Bill.

    Having all our eggs in Japan is a dangerous situation for us. I’ve watched GEOPOLITICS in action all my life.

    What if the BOJ capitulated ?

    The pressure these psychopaths can put on countries knows no bounds. All it takes is one phone call from the guy who can hardly string a sentence together. Then we look like the emperor with no clothes.

    The BOE have already played their role beautifully allowing yield fluctuations to influence democratic debate. If Japan folds because of political pressure that puts us in a corner.

    The way these psychopaths operate the NYT article could easily be the serving dish for revenge being best served cold. To hang you out to dry, as they have never approached you before.

    They’ve attacked us for years with their BS. This would merely be the icing on the cake.

  4. Funny how in times of crisis, the neoliberals are so keen on pushing for communist-like policies, like nationalizations or price controls.
    Absolutely no problem when private debt turns into public debt, but public debt is a problem, at least until the next bail out.

  5. Hi Bill,

    You might be pleased to hear that Alan Kohler was suggesting the Treasurer drop the constant whingeing about the debt and the interest on it, and whilst it wasn’t a popular view, explained: “I’m a bit of a Modern Monetary Theory person”.

    He was talking to David Speers on the ABC Insiders podcast by the way.

  6. If patience is a virtue you must surely be the most virtuous person alive! I used to think I’d see progress in my lifetime, but I’m now doubting that. Paradigms do indeed shift slowly and I’m at a loss as to how this can be speeded up. What sort of ‘tipping point’ needs to be reached before the MMT message starts break through?

  7. Re: ‘There is a lot of interest from the world press at the moment on why Japan is not falling into lockstep with the US Federal Reserve.’ Speaking from my backward little state, the UK, I can’t say I’ve noticed any journalism considering Japan. But then they are too busy with the £40b black hole in public finances, and as Neil says, consulting such discredited figures as Lord King (given unchallenged space in the progressive Guardian today).

  8. Neil Wilson
    Monday, October 24, 2022 at 17:30

    Lord King was on the Keunsberg show yesterday claiming that the present inflation has been caused by Central Banks printing too much money. It is inconceivable that he could have run the Bank of England for 10 years without knowing how the monetary system operates, so he clearly has a reason to spread such misinformation. Could it be anything to do with the fact that he is now a member of the aristocracy who stand to gain from the transfer of wealth to them from everyone else instead of to the public purpose as was intended on the creation of the Bank in 1694? Sadly, Keunsberg et al just go along with it for reasons of senstionalism and audience figures.

  9. The mainstream in economics have created a cult following for their crazy belief system, which is much like a religion, the psychology of which is probably useful as an analytical tool.
    The faithful uphold the “government is like a household” derived narratives in spite of all the evidence against any of it being true in the case of a currency issuing state.

    Pushing against those beliefs does not result in rational debate, rather an emotion based response, usually including anger, but it’s clear that there is a great deal more there to be unpacked if you can get under that, usually only in a later therapy session, I mean discussion.

    It’s kind of a surreal experience confronting those beliefs especially when it’s a well educated friend or family member. Feels like a full on encounter with Invasion of the mind snatchers type stuff when you realize your government funded media is at work propagating them!

    The anger stems from the frustration deriving of the conflict invoked when a rational attack on any one of those mainstream beliefs occurs, and the mainstream proponent you’re trying to discuss the stuff with realizes that neither their executive mba education or the mainstream media inputs etc.. can be drawn upon in order to articulate a cogent reply.
    All they can do is recite the same tired old narratives; not the stroke of conversational genius they would have hoped would emerge.
    Many politicians nowadays have at least learned enough to just bite their tongue and say nothing!

  10. Education, as practiced in the West, still pursues the Enlightenment dream—that “rational” humans will make decisions based on “reason” and “evidence.” But Freud laid the Enlightenment dream low, and WWI put the final nail in its coffin.

  11. Stephen Terrey—
    Kuhn characterizes scientific revolution as a sort of intellectual dissatisfaction with a paradigm developing too many special cases. To use the heliocentrism example, more precise measurement of planetary positions made for wiggly epicycles, and increasingly elaborate explanations for the wiggles. Copernicus, Kepler, and Newton offered a much simpler formulation that accounted for, in particular, Brahe’s observations.
    Economic theory isn’t about intellectual satisfaction, it’s about material gain. Or if you like, it’s about class war. In this sense, if you want to understand revolution in academic economics, you’re probably better off looking at Marx than at Kuhn.

  12. Seems to me your analysis is right and your evident frustration is quite justified. But to those managing other people’s money in anything under the very long term, what matters most is behaviour and what drives it, whether rational or not.

  13. “mainstream economic thinking is deeply flawed and inapplicable.”

    Yes but it’s been very very good to people like Rishi Sunak…

  14. When I opened up my (print edition of) The New York Times on Saturday my eye was caught by the article entitled “As Yen Falls, Japan Keeps Rate Low.” I thought to myself, “Oh, Bill’s been talking about this.” And apparently the Times’ Japan business correspondent has been reading what you’re saying.

    However, for the most part the Times still doesn’t get it. In the very same section of the paper on the very same day there was an article entitled, “Federal Budget Deficit Is Cut Roughly in Half, Which Biden Attributes to ‘Responsible’ Policies.” One of the two co-authors of this article, Alan Rappeport, had an October 5 article moaning about the U.S. national debt’s crossing of the US$31 trillion barrier. That had deficit hawk moaning from Jason Furman and the Committee for a Responsible Federal Budget. In Saturday’s article, He and co-author Zolan Kano-Youngs continued this line of argument writing — as reporting, *not* as opinion — “The national debt in the United Statees continues to be unsustainable in the long term.”

    We’ve been sustaining the national debt since 1789 — but I guess that’s not “long term” enough for the Times business writers.

  15. @Leftwinghillbillyprospector

    Thanks for the link Prospector.

    Perhaps understandably, Kohler’s still carrying a lot of mainstream baggage (he still talks of bond issuance as a fiscal operation and smaller deficits as “improvements to the bottom line”) but when he tells his readers that neither “the debt” nor the interest on it is an issue, he’s sowing the seeds of doubt, and that’s got to be a good thing.

    I mean, Kohler does draw a lot of water in the daily discourse of matters financial.

  16. Letter in Vancouver Sun, Canada (editor provided with billy blog footnotes)

    The conflict of interest between elites and general public

    Re: Mark Carney says fiscal discipline ‘imperative’ to combat global inflation, instability

    When agents of the private financial sector talk about “fiscal discipline”, what they really mean is additional government deficits to pay higher interest payments on government bonds held by the investment fund companies, asset managers and financial institutions for which they work.

    When interest rates go up, commercial banks profit by increasing their loan rates on outstanding credit card, car, and payday loans. Financial entities also speculate in the markets and make big profits when rates soar after their propaganda campaigns convince the public and the central bank to push rates higher.

    The media must do a better job in highlighting the conflict of interest between representatives of business and financial elites who are rewarded handsomely when their advice is taken, and the general public who bear the brunt of higher payments on debt, stagnation of wages during an induced recession, and in the case of hundreds of thousands of Canadians and their families, the loss of their jobs, income and self-esteem.

  17. Very much agree with Jane Christensen’s comment above. It is so depressing that the mainstream fairytale is still being foisted on the public. In today’s Guardian – Owen Jones does exactly that:

    “That gives Labour space to offer far more ambitious proposals. There is already a ready-made blueprint, developed by tax experts in 2020: a one-off wealth tax on millionaire couples paid at 1% a year for five years, they found, would raise more than £260bn. One of the architects was a tax expert whose job was to help wealthy clients navigate around tax law; their entire plan was developed by trying to prevent the rich seeking out loopholes. Should Labour, in two years, finally bring Tory turmoil to an end, it will face a choice: impose real terms cuts, and provoke further chaos; increase public spending without proper costing, and suffer market retribution; or address the country’s multiple social disasters with game-changing policies funded by tax hikes on those who have profited from these 14 bleak years. To coin a phrase, there really is no alternative.”

    It seems denial and stupidity are irrevocably terminal conditions.

  18. “There is already a ready-made blueprint, developed by tax experts in 2020: a one-off wealth tax on millionaire couples paid at 1% a year for five years, they found, would raise more than £260bn.”

    Raise it from who though?

    Wealth taxes aren’t paid by confiscating wealth. They are paid from income. The rich have pricing power. That’s why they are rich. So they will simply pass on the cost to whoever is paying their salaries or their income

    Especially in an economy where prices are going up. The firm engaging them will simply pass on the cost in price rises. That’s what a shortage of supply implies. Competition isn’t working.

    It is those without pricing power that pay the confiscatory cost of taxation via a reduction in their income. Everybody else passes it on. The end result is a reduction in the number of jobs on offer and unemployment.

    The further a tax is away from causing a direct reduction in the number of jobs on offer, the more inflationary risk there is from it as people reprice their transactions.

    The rich won’t be paying any of the tax. You will be via inflation and job losses.

  19. @Neil Wilson While it is evident that wealthy people have more market power, either by being in jobs where they can demand compensating wages for any loss through higher tax, or by being the employer who squeezes the worker to maintain profit share, increased bargaining power of workers through trade unions and high upper end tax, say 99%, (and yes there are always loopholes) would mitigate to an extent. A wealthy employer who isn’t able to turn his hand to a different enterprise, and who actually wants to run a business, as a lifestyle choice, rather than simply being an investor, will accept a personal cut rather than winding up the business altogether, with resultant employee job losses. America and the UK had high tax rates and economic growth for a considerable period post ww2.

  20. Bill, you write:
    “If the government came into our streets and started pulling our houses down without compensation, there would be an uproar – wealth confiscation and all of that.
    But they confiscate our wealth when they run government surpluses and reduce public debt and squeeze our liquidity options.”
    I think this example is carried to extreme. Public debt reduction is not tantamount to wealth confiscation but to changing financial asset allocation for private investors. Squeezing liquidity options by eliminating a risk free asset is a more important outcome.
    Best wishes,

  21. Dear Demetrios Gizelis (at 2022/10/26 at 3:09 am)

    Thanks for your input.

    You wrote:

    Public debt reduction is not tantamount to wealth confiscation but to changing financial asset allocation for private investors.

    At the macro level, a fiscal surplus has to be a liquidity squeeze on the non-government sector in the currency of issue.

    That squeeze can only be reconciled without insolvency by wealth liquidation in one form or another.

    It is not just a portfolio reallocation matter as you assert. Net liquidity (cash) has to be transferred to the government sector because a fiscal surplus means the government is adding less than it is taking out and forcing the non-government sector overall (yen for yen, $ for $) into deficit. That deficit can only be managed through financial wealth reductions.

    best wishes

  22. Let’s agree currency-issuing governments should not borrow from private-sector money lenders who demand interest on loans.

    However (since that’s not the convention), Chalmers is telling us the interest payments on the govt’s $1 trillion debt’ will soon be a large budget item.

    Bill says much of the debt is owed to the government itself, and therefore (presumably) is not a problem for the govt. budget.

    Who is correct?

  23. Dear Neil Halliday (at 2022/10/26 at 10:53 am).

    You wrote:

    Chalmers is telling us the interest payments on the govt’s $1 trillion debt’ will soon be a large budget item.

    Who is correct? Certainly not him.

    First, the current outstanding debt was issued at lower yields and interest rate movements or shifts in traded yields in the secondary bond market in response to interest rate movements have not impact on the fixed yield that is attached to the already issued debt.

    So the (less than) trillion dollar debt is not to be factored into the calculation. The servicing payments are known and invariant to the shifts in RBA policy.

    It is only new debt that will be issued that will reflect the slight rise in yields in the primary bond market.

    And taken together will not be a “large budget item”.

    best wishes

  24. Dear Bill, as always you’re absolutely correct that government budget surpluses destroy private wealth. However, what I had in mind is that this isn’t the only way outstanding public debt can be reduced or even completely eliminated. A monetary sovereign country’s CB could absorb the outstanding public debt and gradually retire it at maturity. In this way the effect on private wealth is nil. The resulting negative worth of CB is inconsequential because it can never go broke. Is this correct?
    Best wishes,

  25. Don’t suppose anyone’s going to read this… 25th comment on a 3 day-old post but…
    “Bond markets only have space if the Gov’t allows it so” All good inside a country but bond markets are international. It’s the international “market” that is the “corporate welfare system that feeds on debt”.
    And as any half-decent financier would know, the only real way to make money is from debt.

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