Japan – up against the neo-liberal machine

I have been intrigued with Japan for many years. It probably started with the post-war hostility towards them by the soldiers who saw the worst of them. The Anzac tradition was very unkind to Japan and its modern generations. It always puzzled me how we could hate them so much yet rely on them for our Post-World War II boom. I also thought we owed them something for being part of the political axis that dropped the first and only nuclear weapon on defenceless citizens when the war was over anyway. Whatever, I have long studied the nation and its economy. So yesterday’s election outcome certainly exercises the mind. Will it be a paradigm shift or a frustrating period where an ostensibly social democratic government runs up against the neo-liberal machine? I put these thoughts together about while travelling to and from Sydney on the train today.

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How to break out of the commodification of everything

Regular readers will know that I run a bit, like lots. Last week, while I was in Europe, I decided to stay on Australian time, given the brevity of the mission, so I found myself running at midnight or just after awaking at 22:00 or 23:00 (after going to sleep around 14:00). It turned out to be a good strategy because the abnormally (scary) high temperatures during the day last week in Europe gave way to warm nights with just a hint of crispness in the air – perfect running conditions. Yesterday morning, though, I was in Melbourne, Australia and set off on my early run (around 7:00 being Sunday) and I was a bit tired from yesterday’s Parkrun in Newcastle. Yes, I move around a bit. This morning though, I saw more than the usual numbers out and about on the familiar running areas in the park lands of Melbourne and soon came across Run Melbourne, a large event with screaming speakers, ridiculous geeing-up announcers on microphones, and thousands of people blocking the usual serene early morning paths along the Yarra River. I had earlier been re-reading Chapter 13 of Harry Braverman’s colossal book from 1974 (which everyone should read) – Labor and Monopoly Capital: The Degradation of Work in the Twentieth Century – which was published by Monthly Review Press. The words of – Harry Braverman – came back to me as I tried to work out a way around yesterday morning’s mayhem down by the river.

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The Eurozone Member States are not equivalent to currency-issuing governments in fiscal flexibility

I don’t have much time today for writing as I am travelling a lot on my way back from my short working trip to Europe. While I was away I had some excellent conversations with some senior European Commission economists who provided me with the latest Commission thinking on fiscal policy within the Eurozone and the attitude the Commission is taking to the macroeconomic surveillance and enforcement measures. It is a pity that some Modern Monetary Theory (MMT) colleagues didn’t have the same access. If they had they would not keep repeating the myth that for all intents and purposes the 20 Member States are no different to a currency issuing nation. Such a claim lacks an understanding of the institutional realities in Europe and unfortunately serves to give false hope to progressive forces who think that they can reform the dysfunctional architecture and the inbuilt neoliberalism to advance progressive ends. There is nearly zero possibility that such reform will be forthcoming and I despair that so much progressive energy is expended on such a lost cause.

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British Labour Government should ignore irrelevant fiscal ‘black holes’ and worry about the political hole it is digging for itself

The lack of correspondence arises when a government tries to operate within the tight constraints of unjustifiable fiscal rules by proposing legislation that cuts billions in government support for programs that are the difference between abject poverty for millions and a modest standard of living is once again coming to the fore in Britain. The Labour government is obsessed with achieving fiscal rules that are not only arbitrary but cannot be precisely assessed given the deficiencies in the available data and the forecasting techniques. However, the Chancellor tries to convince everybody that there is precision and that major austerity has to be imposed to fit the government fiscal outcomes within the arbitrary constraints they have imposed. Those constraints do not have any context in the things that matter – reducing disadvantage, dealing with inequality, climate change, health care etc. Yet the constant reference to a ‘black hole’ – the difference between the estimated fiscal trajectory and the fiscal rules constraint leads the government to ill-considered policy hacks aimed at keeping the outcomes within the rules. The visceral reaction against the hacks then leads to the situation we have seen in Britain recently, which further undermines the political viability of the government. The only hole that the government should be worried about is the political hole it is digging for itself as a result of its obsession with imprecisely measured and essentially irrelevant ‘black holes’.

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Australia – the inflation spike was transitory but central bankers hiked rates with only partial information

The Australian Bureau of Statistics (ABS) released the latest CPI data yesterday (June 26, 2025) – Monthly Consumer Price Index Indicator – for May 2025, which showed that the annual underlying inflation rate, which excludes volatile items continues to fall – from 2.4 per cent to 2.1 per cent. The trimmed mean rate (which the RBA monitors as part of the monetary policy deliberations) fell from 2.8 per cent to 2.4 per cent. All the measures that the ABS publish (including or excluding volatile items) are now well within the ABS’s inflation targetting range which is currently 2 to 3 per cent. What is now clear is that this inflationary episode was a transitory phenomenon and did not justify the heavy-handed way the central banks responded to it. On June 8, 2021, the UK Guardian published an Op Ed I wrote about inflation – Price rises should be short-lived – so let’s not resurrect inflation as a bogeyman. In that article, and in several other forums since – written, TV, radio, presentations at events – I articulated the narrative that the inflationary pressures were transitory and would abate without the need for interest rate increases or cut backs in net government spending. In the subsequent months, I received a lot of flack from fellow economists and those out in the Twitter-verse etc who sent me quotes from the likes of Larry Summers and other prominent main stream economists who claimed that interest rates would have to rise and government net spending cut to push up unemployment towards some conception they had of the NAIRU, where inflation would stabilise. I was also told that the emergence of the inflationary pressures signalled the death knell for Modern Monetary Theory (MMT) – the critics apparently had some idea that the pressures were caused by excessive government spending and slack monetary settings which demonstrated in their mind that this was proof that MMT policies were dangerous. The evidence is that this episode was nothing like the 1970s inflation.

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The Smith Family MMT Manga is back – Episode 1 for Season 3 is now available

It’s back. Season 3 of the – The Smith Family and their Adventures with Money – produced by MMTed begins today (June 20, 2025) and will run for the next 12 months, with episodes updated every month. The recession has deepened and the government is in chaos, with its chief advisor Professor Raul Noitawl insisting that more austerity is required to bring down the ‘debt mountain’. Ryan has now been unemployed for months and in desperation has reviewed his world view with shocking results. And to make matters worse, a major sovereign ratings agency downgrades the government debt from A to the lowest rating C. A lot of misinformation follows but sharp as a tack journo Mary Winter knows the reality and confronts the Prime Minister with the evidence. More shocking developments will unfold as the season continues.

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Commentary on Moody’s downgrade gives the game away – finally

We sometimes encounter commentary that blows away the smoke that provides cover for important myths in the world of economics and finance. Whether that commentary knows the import of its message is questionable but it certainly has the effect of casting aside a myriad of fictions and redefines the sort of questions that one can ask. Such was the case last week following the decision by the ratings agency Moody’s on May 16, 2025 to ‘downgrade’ US government debt ratings from Aaa to Aa1. While many commentators acted in Pavlovian fashion and crafted the ratings downgrade as signifying that the US government was “more likely to default on their sovereign debt”, one influential opinion from the mainstream came out with the conclusion that “there is next to zero chance the government won’t be able to pay its creditors”. Which really game the game away and exposed these ratings agencies as political attack dogs representing sectional interests that want less government money going to welfare and more to them – among other things.

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Trump Administration appears to be kicking lots of own goals

Soon after the US President announced – Liberation Day tariffs – I wrote this blog post – US government is pinning its tariff hopes on some unlikely to be realised assumptions (April 7, 2025) – to help readers understand what logic there was, if any, in the decision by the American government to impose wide-ranging and seemingly random tariffs on the rest of the world. The only apparent logic was that his advisors thought that while the tariffs would variously increase the US dollar price on final goods and services available to US consumers via imports, the flood of global investment funds into US treasury bonds, as a result of the heightened global uncertainty would push the US dollar up and offset the tariff impacts on import prices, because all foreign goods would now be cheaper. We now have a few weeks of data available to see whether things are turning out as Trump and his advisors thought. The definitive answer to date is that the opposite trends are emerging which will see the burden of the tariffs borne by the US consumers and producers rather than the presumption of the Administration that the burden would be pushed onto the rest of the world, which would precipitate rapid change in the favour of the US. It seems at present that an ‘own goal’ is being kicked – and – probably a lot of them.

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US government is pinning its tariff hopes on some unlikely to be realised assumptions

Last week, the US President honoured his election promise, indeed his long-held commitment, to increase tariffs on imported goods and services to the US. The formula they came up to differentiate between countries was bizarre but I don’t intend commenting on that here, except to say, the imposition of tariffs on the – Heard Island and McDonald Islands – which are an ‘Australian external territory’ that is a ‘a volcanic group of mostly barren Antarctic islands, about two-thirds of the way from Madagascar to Antarctica’ (where penguins live) ranked up there with their Signal chaos. These guys have access to the ‘red button’ after all. That’s the scary thing. Anyway I was sent a document that seemingly is the theoretical rationalisation for the tariff decision (thanks Mahaish, appreciated) and so I thought I would give it some time.

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Episode 12 (S2) of the Smith Family Manga is now available – Mrs Boff is called in!

Today (March 14, 2025), MMTed releases Episode 12 in the Second Season of our Manga series – The Smith Family and their Adventures with Money. This is the final episode in Season 2. There is a lot going on in the community at present with an election approaching and the government in crisis over its deliberate recession. Have a bit of fun with it while learning Modern Monetary Theory (MMT) and circulate it to those who you think will benefit. Season 3 will begin on May 23, 2025 and there will be some shocking developments revealed.

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Tariffs and more – Part 1

This week, Australia learned that old geopolitical relationships and so-called ‘free trade’ treaties mean little when it comes to US policy. The obsequious way our political class fawns after the US has been a constant sickening element of our national identity for as long as I can recall. When I was a child, we were told by our Prime Minister that Australia was “all the way with LBJ”, a foreign policy that took out nation, against all reason, into the Vietnam War. Now, the US President is demonstrating why a reliance on the US as a ‘good citizen’ of the world is a poor strategy for an advanced nation to adopt. The other interesting aspect of what is going on is that the world is once again entering an experiment that will provide knowledge about the impacts of ripping up free trade agreements and increasing barriers to entry. Theorising is one thing but now we have a practical experiment underway. This is Part 1 of a series on the current debate about tariffs.

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Five years into a pandemic and fiscal fictions have left space for nonsense to propagate

Life expectancy has fallen since Covid in almost every country although the policy response has been exactly the opposite to what should be expected. We now have the United States Secretary of Health and Human Services advocating ‘personal choice’ in vaccine take up while he recommended Vitamin A to deal with a spreading measles outbreak in Texas. Decades of science is being disregarded in favour of ideology. We are now five years into the Covid pandemic and the data suggests that the costs of our disregard will accumulate over time as more people die, become permanently disabled and lose their capacity to work. We also know that the ‘costs’ of the pandemic have been (and will be) borne by the more disadvantaged citizens in the community. I was talking to a medical doctor the other day in a social environment and I learned something new – that in Australia, there is a difficult process that one has to go through to get access to the ‘free’ (on the National Health list) anti-viral drugs if one gets Covid. However, if you have $A1,000 handy, you can ring your GP up and get an instant prescription for the same drugs and avoid all the hassle, which has reduced access significantly for lower income households. Another example of how fiscal fiction (governments haven’t enough money) favour the high income cohorts.

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Fiscal policy must be the tool of choice to respond to major climate related calamities – BIS

“Fiscal support can manage the direct economic fallout from extreme weather events.” That quote came from an interesting new research paper published in the 98th edition of the Bank of International Settlements Bulletin (February 10, 2025) – Macroeconomic impact of extreme weather events. The paper seeks to tease out what the economic impacts and policy implications are of the climate changes that are now manifest in various extreme weather events, such as droughts, wildfires, storms, and floods, which are increasing in incidence across the globe. The researchers recognise that such events are increasingly imposing “high economic costs” and “social hardship” on communities around the world. Their conjecture is that the “most extreme weather events have been rising and are likely to increase further” which will challenge policy makers. They discuss the implication of this increased exposure to such events for fiscal and monetary policy but recognise that fiscal policy must be the frontline tool to respond to the damage caused by such events.

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Britain and its fiscal rule death wish

Governments that adhere to the mainstream macroeconomic mantras about fiscal rules and appeasing the amorphous financial markets have a habit of undermining their own political viability. As Australia approaches a federal election (by May 2025), the incumbent Labor government, which slaughtered the Conservative opposition in the last election, is now facing outright loss to a Trump-style Opposition leader if the latest polls are to be believed. That government has shed its political appeal as it pursued fiscal surpluses while the non-government sector, particularly the households, endured cost-of-living pressures, in no small part due to the relentless profit gouging from key corporations (energy, transport, retailing, etc). The government has not been riven with scandals or leadership instability. But its amazingly fast loss of voting support is down to its unwillingness to take on the gouging corporations and also to claim virtue in the fiscal surpluses, while the purchasing power loss among households has been significant. The same sort of death wish is arising now in the UK, although the British Labour government is at the other end of its electoral cycle which gives it some space to learn from its already mounting list of economic mistakes. The British government situation is more restrictive than the case of the Australian Labor government because the former has agreed to voluntarily constrain itself via an arbitrary fiscal rule.

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Germany’s sectoral decline and its obsession with fiscal austerity

I am currently researching statistical and textual material as part of my plan to produce an updated version of my 2015 book – Eurozone Dystopia: Groupthink and Denial on a Grand Scale (published May 2015) – to take into account the pandemic, Brexit and other major changes that impact on Europe’s position in the world economy and the internal shifts within Europe itself that will make it even more difficult for the Member State nations to maintain their material living standards. My publisher (Edward Elgar) is keen to push this project on. As part of this work I have been examining changes since 2015 across various European states. Today, I discuss the decline in Germany’s fortunes that has arisen as a result of a combination of circumstances: an obsession with fiscal austerity; the suppression of domestic spending capacity; the unrelenting promotion of the so-called ‘export-reliant, manufacturing-heavy economic model’; the election of Donald Trump; and the maturing of the Chinese economy. German politicians, particularly, have become so caught up in the ‘Schwarze Null’ ideology that they have failed to anticipate the medium- and longer-term consequences of their actions. These consequences were all laid out in my 2015 book but policy makers have generally ignored any criticisms of the ‘German model’. Now the chickens are coming home to roost. Fast. And it spells bad times for Europe.

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The Case of the Missing Report – Part 1

This blog post is a long time in gestation and I could have written in 2009 which is the relevant year of the events that I will document in this two-part series. My conversations with government officials during my working trip to the Philippines last week highlighted several things, including their sheer terror of IMF intervention and the ratings agency. I will write separately about that in a later post. But the IMF watches these types of nations like a hawk and is ready to pounce to enforce their authority at the slightest departure from the neoliberal macroeconomic policy line. As long as these types of nations concede to the IMF bullying they have very little hope of developing towards being advanced states. And IMF bullying is what this blog post is about. This is Part 1 of a two-part story that might be summarised as the ‘Case of the Missing Report’. I will solve the mystery in Part 2, which will be published on Thursday of this week.

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Field trip to the Philippines – Report

I have been working in Manila this week as part of a ‘knowledge sharing forum’ at the House of Representatives which was termed ‘Pathways to Progress Transforming the Philippine Economy’ that was run by the Congressional Policy and Budget Research Department, attached to the Congress (Government). I am also giving a presentation at De La Salle University on rogue monetary policy. It has been a very interesting week and I came in contact with several senior government officials and learned a lot about the way they think and do their daily jobs. I Hope the interactions (knowledge sharing) shifted their thinking a little and reorient to some extent the way they construct fiscal policy. This blog post reports (as far as I can given confidentiality) what went on at the Congress.

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