Letter from The Cape Podcast – Episode 12

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Episode 12 of my – Podcast – Letter from The Cape – is now available.

In this episode, we discuss the ‘debt bomb’ narrative, which is used by neoliberals to impose political costs on governments that dare use their spending capacity to improve the conditions of the poor through welfare spending. We learn that governments do not need to issue debt at all and could avoid these political tricks by abandoning the process. We go back in history to a time when the financial markets gave the game away and demonstrated that the debt issuance by government was really just an elaborate form of corporate welfare and has nothing to do with ‘funding’ government spending.

Duration: 7:12

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  1. Hi Bill,

    Please, I want your opinion on Nigeria from an MMT lens as a reply or a full post and recommendation for what is to be done.

    A summary of the country situation below.

    Alot of government income is used to pay debt, which was borrowed to pay for infrastructure and for maintaining the price of naira as well(although recently some crude oil for infrastructure deal with China). There is high inflation(mostly from energy, food because of transportation cost and some insecurity and some border closure as well, currency/imported inflation) without wage increase. Lots of workers in informal sector and unemployment. We also import refined crude although we are a producer. There is a private refinery being built although the owner has stated he’s selling based on international price (the refinery might start operating at full capacity next year or upper).

    Recently, the new president(although from the previous admistrstion’s party) has kinda hinted on focusing on fiscal policies(although I don’t think it’s the MMT type), food sovereignty. He’s let the exchange rate float and removed fuel subsidy which he said mostly benefits the rich( with support from the world bank through a $500m loan for palliative). Removal of subsidy on fuel and education, and the currency float has caused upward rise in prices and threats of strikes. The public education sector is made to run for profit or on market mechanism although publicly owned and other public organisation would follow suite(e.g the national petroleum corporation, which also exits some subsectors for private firms, like the downstream sector )

    Other hints include lowering taxes(already started for telecoms and hinted for companies who hire), attracting foreign investors to natural resource exploitation (gas) although with national ownership stake, to increase income. The refinery would be an exporter as well. Agro-industries. Liberalisation in electricity price(basically another subsidy removal & already done) and attracting investors to invest in the national grid(especially transmission which is the only sector that hasn’t been privatised).

    There has been calls for increase in minimum wage(although lots are in the informal sector plus low skilled private workers earn less than minimum wage) which is actually low and government intervention from the labour union.

    We run a unitary style of govt and his party has a majority in our Congress. Ministers are yet to start working. There is a new CB governor and I don’t know how he works(the former CB gov ran a fixed exchange and even took over the finance ministry at some point and implemented import tax on alot of things for import substitution and also tried to force monetary digitization which caused currency scarcity). Treasury bonds usually at greater or equal to 10%. Things got really bad after a 2015 recession with increasing debt, inflation and devaluation. New president was an accountant in Chicago before becoming a governor in Lagos, a port state in the south and former colonial capital of the nation (also the only working port in the nation and the most smallest – populous state due to economic activity. The same party has been ruling the state since 1998). He once mentioned he’s going to apply the strategy he used as governor: attracting privateinvestors + ownership stake + mechanism of getting future taxes from those private investors for use today + competent team of ministers = fiscal policies.

    I basically don’t know if a JG can be run but he’s talked about using the Agric sector to counter brain drain and youth poverty(even though youths don’t really like that sector because of hard labour and no machinery and low pay). So I understand some of the policies but the abruptness is wild.

    Thank you and sorry for the long post.

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