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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Australian government debt approaching $A1 trillion – who cares? Everybody it seems but me

The neoliberal era has made humanity progressively crazy when it comes to currency matters. At the moment, this trend seems to have reached new heights of absurdity. I note that the US government is now buying up its own debt with more debt as a cover for the stupidity that its President and his lackeys have launched on the World. By substituting longer-term debt with short-term Treasury bills, the composition of bond demand changes (higher demand for long-term debt – government induced), which lowers the yields. But the debt level overall remains unchanged. This is different to quantitative easing because the Treasury buyback scheme is not facilitated through the central bank creating new bank reserves, but it is equally as absurd. And in Australia, the media is going crazy about the ‘journey to $A1 trillion debt’ as the August bond auctions issued $A4 billion in new issuance in early August. Frothing lines quoting that this means every man, woman, and child (and I presume those who have other gender affiliations) owe $A36,000 up from $A35,700 and that ‘taxpayers’ have to spend about $A30 billion a year now servicing the debt abound. The Australian government responds – buying into the horror story line – that the debt might be a trillion but it is still much lower than that of other English-speaking nations. As if that matters. And, last time I checked, I didn’t owe any money on outstanding federal government bond liabilities and I certainly have never paid any ‘debt servicing’ charges, but I am a taxpayer. The problem is that these fantastical media stories and actions by the crazies in the US government send a signal of impending doom to the public which then complies with all sorts of bad policy moves.

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Australian labour market – unemployment continues to rise as a deliberate policy choice

Last month, I noted that the sharp shift towards part-time work was the first signal that a labour market contraction was coming. The latest data released today confirms that the contraction is now eating into overall employment and pushing the unemployment rate up. The Australian Bureau of Statistics (ABS) released the latest labour force data today (August 20, 2026) – Labour Force, Australia – for July 2026 – which showed that the labour market deteriorated in July. Employment growth was negative although the economy added full-time jobs, which offsets some of the severity of the decline. Overall working hours contracted sharply. Official unemployment increased but the increase would have been larger had the participation rate not decelined by 0.2 points. Had the participation rate not declined in July, the official unemployment rate would be around 4.7 per cent rather than the published rate of 4.5 per cent. There are now 10.8 per cent of available labour not being used (either unemployed or underemployed), which makes a farce of the RBA’s claims that the labour market is tight. There is substantial scope for more job creation given the slack that is present. There is substantial scope for more job creation given the slack that is present.

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Real wages in Australia decline for the third consecutive quarter

Today (August 19, 2026), the Australian Bureau of Statistics released the latest – Wage Price Index, Australia – for the June-quarter 2026, which shows that the aggregate wage index rose by 3.2 per cent over the 12 months down from 3.4 per cent in the March-quarter. With the annual inflation rate for the June-quarter came in at 3.7 per cent, workers once again had to endure real wage cuts, which is not consistent with an economy that is overheating and running short of resources. It also reflects badly on the constant claims from RBA officials including the governor that unemployment is still not low enough and the ‘tight’ labour market is contributing to the slightly elevated inflation rate. Nothing could be further from the truth and this data demonstrates that.

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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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Alt protein is the way forward and China is already well ahead of the rest who are infested with destructive neoliberal ideology

With the Rhine drying up and grass turning brown all over Europe (including the UK), even conservative bodies such as the ECB are starting to take notice and comment. On July 2, 2026, a member of the Executive Board, Frank Elderson gave a speech to the 7th World Congress of Environmental and Resource Economists – The green transition – benefits and barriers. In that speech, he directly tied the mounting climate chaos with inflation volatility and emphasised the need to transition as quickly as possible to a net zero carbon economy. I am continuing to draft material for an upcoming book on degrowth and decolonialisation from a Modern Monetary Theory (MMT) perspective. The current area I am researching concerns the evolution of new uses of fermentation to provide food security and allow humanity to transition away from reliance on animal and fish products. The evidence demonstrates that the Chinese are now using its traditional expertise in fermentation to fast track production of Alt protein. As we know, the production of protein via livestock is highly inefficient (protein per hectare) and environmentally unsustainable. Using biomass and converting lignocellulose into food protein is a way around that situation and the Chinese are already way ahead of the rest of us. As long as we hang on to neoliberal ideologies that prevent wide scale state support of emerging industries and starve researchers of state provided R&D funding, the greater will the gulf between China and the rest of the world on these future technologies and products. We are now seeing this in the production of EVs, for example. Alt protein is the solution for humanity to eliminate livestock dependence. We should be following the processes that China has put in place.

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Be thankful for small mercies – proposed cut in Japan’s sale tax

Most of the economics commentary in the last few weeks about Japan has been about the need for higher interest rates or, relatedly, the ‘desperate’ foreign exchange intervention where the US allegedly bailed out Japan to prevent currency failure. All side issues really. The forex intervention said more about US paranoia than anything about Japan’s challenges. The US clearly doesn’t want Japan to sell off its stock of US Treasury bonds and cause yields to rise (not that that would matter anyway) and it also knows that Japanese manufacturers have become very competitive (and are booming) in the US market. That is what that is all about. But the real news, in my view, is the decision by the Japanese Cabinet to cut the sales tax on food from 8 per cent to 1 per cent, even if the cash registers in the big retail stores would have needed massive upgrades to accommodate the planned zero sales tax. A 1 per cent compromise solved that piece of archaic infrastructure. But the sales tax proposal, which will see the first cut since the tax was introduced in April 1989 is a significant plank in the current government’s desire to shock the economy out of its damaging deflationary mindset. While I support the move, it would have been better for the government to scrap the sales tax completely. But the current proposal is a small but significant step in the context of Japanese politics and the surrounding economic commentariat. So we should be thankful for small mercies.

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Japan’s proposed investment boost will not run out of yen

The prophets of doom (Japan division) are back in town predicting the worst for the country. The UK Guardian even is getting in on the act (July 25, 2026) – Can Japan avoid a Liz Truss-style shock as its PM embarks on a giant spending spree?. It is interesting now that the prophets have a new ‘case study’ to provide them with a reference point for their predictions of chaos. I wrote about that in this blog post – Rinse and repeat – Truss chaos – the new benchmark (March 28, 2024) – and gave some Japanese context sometime later in this post – Those who invoke the ‘Truss Moment’ should look at what is happening in Japan (February 12, 2026). Apparently, the plans by the Japanese government to revitalise public infrastructure and crowd in private investment will see the “International investors” will lead to a “Liz Truss-style economic shock”. I wonder every day what these journalists think of their lives when they reflect on what they write. It can’t be a very fulfilling life when it is based on beat-ups, conspiracy-style fictions, and the rest of it. One of the rules of composition that I was taught in university was that an argument had to be internally consistent. These types of articles cannot even get that rule right.

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A shift to fiscal surplus in Australia would amount to a criminal act by government

The former head of the Australian Treasury claims that: “Everybody knows the budget should be in surplus right now.” Well last time I checked I was still part of the body of humanity and I don’t know that. In fact, the fiscal balance is currently recording a deficit (which should be referred to as a net public injection of financial assets to the non-government sector) which by all indicators is not large enough. The commentators that are blindly repeating the former Treasury head’s assertion really haven’t much idea of how the system works and what the implications of a shift to surplus would have for the overall prosperity of the nation and its people. They blindly rehearse fictions about fiscal deficits pushing up interest rates and leaving future generations worse off. The reality is that if the Federal government could somehow move to surplus, there would be a recession and the number of available workers who were either unemployed or underemployed (currently 10.9 per cent of the available labour force) would rise significantly. That would undermine the well-being of tens of thousands of workers and their families. The call for fiscal surpluses completely ignores the macro linkages that bind the sectors in the economy together. Such a shift would amount to criminal neglect.

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