Fiscal sustainability and ratio fever

I have returned from the US after participating at the Fiscal Sustainability Teach-In and Counter Conference held in Washington D.C. last week. It was a good event and has stimulated a host of follow-up blogs from the activists who promoted the event. On the way home, I read the most recent report from Citi Group (who were saved from bankruptcy by public funds – they were among the first to have their hands out) which is predicting major sovereign defaults. It was clear that Citi Group was advocating very harsh fiscal austerity measures. How often have you heard the statement that the current economic crisis is evidence that “we are living beyond our means” and that the policy austerity that has to be introduced to “pay back the debt” is an inevitable consequence of our proliflacy – both individual and national?

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The Fiscal Sustainability Teach-In and Counter-Conference

In Washington D.C. next Wednesday (April 28, 2010) there will be two separate events where the focus will be on fiscal sustainability. The first event sponsored by a billionaire former Wall Street mogul under the aegis of the Peter G. Peterson Foundation (PGPF) promises to bring the Top leaders to Washington. It will feature a big cast well-known US entities (former central bank bosses; former treasury officials and more). It will be well-publicised and a glossy affair – full of self-importance. It will categorically fail to address any meaningful notion of fiscal sustainability. Instead it will be rehearse a mish-mash of neo-liberal and religious-moral constructions dressed up as economic reasoning. It will provide a disservice to the citizens of the US and beyond. The other event will be smaller and run on a shoe-string. The grass roots The Fiscal Sustainability Teach-In and Counter-Conference is open to all and will actually involve researchers who understand how the monetary system operates. Like all grass roots movements it requires support. I hope you can provide support commensurate with your circumstances.

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How fiscal policy saved the world

Today I read an interview with Richard Koo from the Nomura Research Institute in Japan who is the touring the world promoting his views of why the fiscal stimulus packages are so important. His views are drawn from his extensive experience of the Japanese malaise that began in the 1990s. The interview was published in the September 11 edition of welling@weeden which is a private bi-weekly emanating from the US. I cannot link to it because you have to pay to read. Anyway, much of what he says reinforces the fundamental principles of modern monetary (MMT) and is quite antagonistic to mainstream economic thinking. It is the latter which is now mounting political pressure to cut the stimulus packages. Koo thinks this would be madness, a view I concur with.

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Fiscal sustainability 101 – Part 2

This is Part 2 of my little mini-series on what we might conceive fiscal sustainability to be. In Part 1 we considered a current debate on the National Journal, which is a US discussion site where experts are invited to debate a topic over a period of days. By breaking the different perspectives that have been presented to the discussion, we can easily see where the public gets its misconceived ideas from about the workings of public deficits and the dynamics of the monetary system – its leaders. My aim in this 3-part series is to further advance an understanding of how a fiat monetary system operates so that readers of this blog (growing in numbers) can then become leaders in their own right and provide some re-education on these crucial concepts. So read on for Part 2.

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Imagine if the British government wrote off its holdings of its own debt

Last week, I considered recent research published by the BIS – Bank of International Settlements pushing the ‘growth friendly austerity’ myth – which was a classic example of how the sense of urgency and crisis is engendered by constructing the narrative in such a restricted manner that real world options are excluded which contradict the mission. If we assume that key features of any system are unable to be activated, then it is easy to speculate that the system will fail. This communication technique abounds in the financial and economic commentariat and leaves listeners and readers with a sense of anxiety and distort the political process. The commentaries that typify this approach all invoke a sense of urgency – ‘act now or else’ – and like to quote large dollar (pound, yen etc) sums because the commentator knows that our eyes glaze over with numbers that are beyond our own experience. Further, when the article parades as an Op Ed, the writer regularly just rehearses some press release or perhaps, less formal statement, that some organisation like the IMF has made. The other part of the scam is that these organisations are elevated into the sphere of sources that are to be believed without question. Two recent examples are the recent articles appearing in the UK Guardian – Burnham’s funding gap: what state are UK finances in for the PM-in-waiting? (published July 3, 2026) – and – Act soon to change ‘unsustainable’ direction of UK debt, OBR warns (published July 7, 2026).

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What the new British government needs to do to get the unions on side with climate action

The recent extreme weather in the northern hemisphere, the twin monster tropical storms in Japan, the impending shutdown of the – Atlantic meridional overturning circulation (Amoc) – among other happenings is telling us that things are changing for the worse. Clearly long-term weather trends are open to interpretation because the available data is sketchy the further one goes back. And, narratives from historians tell us that there have been rather extreme weather events in the past, which have led to many lost lives. The National Museum of Australia has an interesting information page – Heatwaves – which helps us understand the historical experience in Australia. There are other credible sites that deal with global events. However, the serial nature of the recent weather trends and the interlinked changes in the oceanic conditions, the cryosphere, rain and storms, and temperature allows us to counter the arguments that are presented to refute climate change science, which rely on claims that the current period is just part of a recurring cycle. These events are also relevant to the current political machinations in the UK, where Starmer is going (yay!) and the new probably PM is under fire from both business and unions for wanting to do something about climate change. In this post, I discuss what can be done.

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Replacing Starmer/Reeves with another captive of the finance sector will change nothing

Successive governments in the UK – Labour and Tory – have pushed the nation to the brink where there is little capacity left for progressive policy. And I am not referring to Brexit. Rather, the elevation of the financial sector as a primary force in the economy, dating back really to the Callaghan Labour government and then fast tracked by Thatcher and Blair, has resulted in almost every important part of the economy being devoured by the greed machine. This is relevant to the leadership struggle in the UK Labour government, which should see the lamentable Starmer replaced by the (to be assessed) Andy Burnham. The latter would be the first Prime Minister to hail from Lancashire since David Lloyd George (1916-22) although Harold Wilson came from nearby Yorkshire. The problem the new leader will face apart from his own misguided notions about fiscal capacity and the need for ‘strict’ fiscal rules is that the financialisation of the British economy (like most economies in this neoliberal age) is so pervasive that the spheres of resistance to change are everywhere.

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Apparently the UK government is about to do the impossible – run out of sterling

Go back to the headlines in 2010 – – “Countries with debt over 90 percent of GDP enter a danger zone”. The 90 per cent threshold entered the media coverage as a result of a paper released by Harvard economists Ken Rogoff and Carmen Reinhart – Growth in a Time of Debt. That paper talked about “debt intolerance limits” arising from “sharply rising interest rates” – and then “painful fiscal adjustments” and “outright default”. It also talked about the “obvious connection” between inflation and high public debt ratios – which had me laughing at the time because no-one has really shown that to be a robust relationship at all. Everyone started quoting the paper, even though at the time it had obvious flaws. The predictions failed to materialise as did all the previous predictions that economists like them had failed. But the press keeps giving their views a public platform because the lurid predictions attract audiences. It is a pity because lame politicians seem to regard the predictions as being based in fact and change policies for the worse. Anyway, Rogoff is back in town predicting that the British government will run out of sterling and be forced to bring in the IMF to address the fiscal crisis. That is what the headlines say. But if you delve more deeply, his position is a little different and exposes the chicanery of mainstream economics which holds itself out as a consistent body of theory but regularly uses that pretence to bully governments into political shifts that help the elites and damage the rest of us.

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A structured approach for progressive political ambitions – Part 7

This is Part 7 of the short series of briefing notes that arose out of discussions I recently had in London about how a progressive political party might want to break out of the shackles that the British Labour Party has bound itself in with its obsession with fiscal rules and an adherence to the fiscal fictions of mainstream macroeconomics. The thoughts, in my view, are relevant for all aspiring progressive political parties that might have fallen prey to the fictional world of mainstream economics and cannot find a way back. In the first part, I suggested a way forward was to shift the focus of what can be done with fiscal policy away from financial matters towards an emphasis on real resource constraints – that is, what productive resources are available for public use. In this sense, the discussion becomes focused on how much nominal spending growth is possible without sparking inflationary pressures as a result of nominal spending growth outstripping the productive capacity of the economy. In Part 2, I focused on aspects of the institutional structure that should be considered to support that shift in focus, including a planning network and a return to a public employment service. In Part 3, I began an examination of the long debate about economic planning, In Part 4, I continued that discussion. In Part 5, I discussed how the age of rapid, networked communication systems eliminate the basis of the pro-market, anti-planning critics. In Part 6, I provided a detailed case study of the role that the Ministry of International Trade and Industry (MITI) in Japan played after WW2 to ensure rapid development could occur within the available real resource envelope. Today, I reflect on industry policy and the way the arch neoliberals are silently conceding defeat.

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A structured approach for progressive political ambitions – Part 6

This is Part 6 of the short series of briefing notes that arose out of discussions I recently had in London about how a progressive political party might want to break out of the shackles that the British Labour Party has bound itself in with its obsession with fiscal rules and an adherence to the fiscal fictions of mainstream macroeconomics. The thoughts, in my view, are relevant for all aspiring progressive political parties that might have fallen prey to the fictional world of mainstream economics and cannot find a way back. In the first part, I suggested a way forward was to shift the focus of what can be done with fiscal policy away from financial matters towards an emphasis on real resource constraints – that is, what productive resources are available for public use. In this sense, the discussion becomes focused on how much nominal spending growth is possible without sparking inflationary pressures as a result of nominal spending growth outstripping the productive capacity of the economy. In Part 2, I focused on aspects of the institutional structure that should be considered to support that shift in focus, including a planning network and a return to a public employment service. In Part 3, I began an examination of the long debate about economic planning, In Part 4, I continued that discussion. In Part 5, I discussed how the age of rapid, networked communication systems eliminate the basis of the pro-market, anti-planning critics. Today’s discussion focuses on the importance of institutional structure in government with a special case study of the Ministry of International Trade and Industry (MITI) in Japan and the role that it played in that nation’s spectacular rise out of the ravages of World War 2 and US Occupation.

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A structured approach for progressive political ambitions – Part 5

This is Part 5 of the short series of briefing notes that arose out of discussions I recently had in London about how a progressive political party might want to break out of the shackles that the British Labour Party has bound itself in with its obsession with fiscal rules and an adherence to the fiscal fictions of mainstream macroeconomics. The thoughts, in my view, are relevant for all aspiring progressive political parties that might have fallen prey to the fictional world of mainstream economics and cannot find a way back. In the first part, I suggested a way forward was to shift the focus of what can be done with fiscal policy away from financial matters towards an emphasis on real resource constraints – that is, what productive resources are available for public use. In this sense, the discussion becomes focused on how much nominal spending growth is possible without sparking inflationary pressures as a result of nominal spending growth outstripping the productive capacity of the economy. In Part 2, I focused on aspects of the institutional structure that should be considered to support that shift in focus, including a planning network and a return to a public employment service. In Part 3, I began an examination of the long debate about economic planning, In Part 4, I continued that discussion. In Part 5, I am discussing how the age of rapid, networked communication systems eliminate the basis of the pro-market, anti-planning critics. Today’s discussion is a practical description of how cybernetics can help deal with resource constraints in a planning system.

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New Green-linked report in Britain avoids the critical issue

I read a new Report this morning – Waste Not – that was published by a new unit in Britain called Verdant, which seems to have links to the England and Wales Green Party. The work is interesting and raises several issues that bear on how government fiscal policy should be assessed. The issues I have with the Report were not canvassed by the author to its detriment. It relates to the impact of government spending and the employment effects of cutting expenditure, regardless of whether we classify that expenditure as ‘waste’ or not.

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A structured approach for progressive political ambitions – Part 4

This is Part 4 of the short series of briefing notes that arose out of discussions I recently had in London about how a progressive political party might want to break out of the shackles that the British Labour Party has bound itself in with its obsession with fiscal rules and an adherence to the fiscal fictions of mainstream macroeconomics. The thoughts, in my view, are relevant for all aspiring progressive political parties that might have fallen prey to the fictional world of mainstream economics and cannot find a way back. In the first part, I suggested a way forward was to shift the focus of what can be done with fiscal policy away from financial matters towards an emphasis on real resource constraints – that is, what productive resources are available for public use. In this sense, the discussion becomes focused on how much nominal spending growth is possible without sparking inflationary pressures as a result of nominal spending growth outstripping the productive capacity of the economy. In Part 2, I focused on aspects of the institutional structure that should be considered to support that shift in focus, including a planning network and a return to a public employment service. In Part 3, I began an examination of the long debate about economic planning, In Part 4, I will continue that discussion and demonstrate that most of the criticisms of it from free market advocates are no longer applicable in an age of rapid, networked communication systems.

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A structured approach for progressive political ambitions – Part 3

This is Part 3 of the short series of briefing notes that arose out of discussions I recently had in London about how a progressive political party might want to break out of the shackles that the Labour Party has bound itself in with its obsession with fiscal rules and an adherence to the fiscal fictions of mainstream macroeconomics. In the first part, I suggested a way forward was to shift the focus of what can be done with fiscal policy away from financial matters towards an emphasis on real resource constraints – that is, what productive resources are available for public use. In this sense, the discussion becomes focused on how much nominal spending growth is possible without sparking inflationary pressures as a result of nominal spending growth outstripping the productive capacity of the economy. In Part 2, I focused on aspects of the institutional structure that should be considered to support that shift in focus, including a planning network and a return to a public employment service. In Part 3, I examine the long debate about economic planning and demonstrate that most of the criticisms of it from free market advocates are no longer applicable in an age of rapid, networked communication systems.

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A structured approach for progressive political ambitions – Part 2

This is the second part of a short series of briefing notes that arose out of discussions I had in London the week before last about how a progressive political party might want to break out of the shackles that the Labour Party has bound itself in with its obsession with fiscal rules and an adherence to the fiscal fictions of mainstream macroeconomics. In the first part, I suggested a way forward was to shift the focus of what can be done with fiscal policy away from financial matters towards an emphasis on real resource constraints – that is, what productive resources are available for public use. In this sense, the discussion becomes focused on how much nominal spending growth is possible without sparking inflationary pressures as a result of nominal spending growth outstripping the productive capacity of the economy. In Part 2, I will focus on aspects of the institutional structure that should be considered to support that shift in focus.

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A structured approach for progressive political ambitions – Part 1

I am stuck in London courtesy of the terrorist policies of Donald Trump and his Israeli gang mates. I arrived at Heathrow on Saturday expecting to be home by last evening only to learn that all flights via Doha were indefinitely suspended. Big problem. I was lucky to find a hotel room at the airport where I am bunkered down for a few days before a rebooked flight on another airline is possible. Luckily, I have been able to find a flight with another airline and will leave London on Tuesday (fingers crossed). Anyway, that was a bad end to a good week’s work in London. Apart from the public launch of the new policy research group, MMTUK, which was a good evening, catching up with MMT activists in the UK, I had several meetings with various people. Those discussions must remain confidential here. However, I decided to write up some ideas that are relevant to how I think a progressive ambition can be politicised in an acceptable manner. The challenge for such an ambition is to shift the population’s focus from an obsession with financial constraints to a recognition that it is the availability of resources that matters. There are several related aspects to this challenge. This is Part 1 of a two-part series on that topic.

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The US attack on Europe misses the point entirely

The other day I was asked whether I was happy that the US President was finally saying things that I have been noting for years. The reference to Trump was, on interrogation, based on the US government analysis of Europe that appeared in the so-called – National Security Strategy of the United States of America – November 2025 (hereafter NSS) – which was released to the public on December 4, 2025. When I finally got around to reading the document, it was clear that the person who put that proposition to me didn’t understood Trump’s position and certainly didn’t understand my position. While the Trump Administration is critical of the European Union, as I am, the respective bases for those criticisms couldn’t be farther apart.

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The arms race again – Part 2

This is the second part of my thoughts on the current acceleration in military spending around the world. The first part – The arms race again – Part 1 (June 11, 2025) – focused on background and discussed the concept of ‘military Keynesianism’. In this Part 2, I am focusing more specifically on the recent proposals by the European Commission to increase military spending and compromise its social spending. The motivation came from an invitation I received from the Chair of the Finance Committee in the Irish Parliament to make a submission to inform a – Scrutiny process of EU legislative proposals – specifically to discuss proposals put forward by the European Council to increase spending on defence. The two-part blog post series will form the basis of my submission which will go to the Joint Committee on Finance, Public Expenditure, Public Service Reform and Digitalisation on Friday. In this Part, I focus specifically on the European dilemma.

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The arms race again – Part 1

The Chair of the Finance Committee in the Irish Parliament invited me to make a submission to inform a – Scrutiny process of EU legislative proposals – specifically to discuss proposals put forward by the European Council to increase spending on defence. This blog post and the next (tomorrow) will form the basis of my submission which will go to the Joint Committee on Finance, Public Expenditure, Public Service Reform and Digitalisation on Friday. The matter has relevance for all countries at the moment, given the increased appetite for ramping up military spending. Some have termed this a shift back to what has been called – Military Keynesianism – where governments respond to various perceived and perhaps imaginary new security threats by increasing defence spending. However, I caution against using that term in this context. During the immediate Post World War 2 period with the almost immediate onset of the – Cold War – nations used military spending as a growth strategy and the term military Keynesianism might have been apposite. These nation-building times also saw an expansion of the public sector, which supported expanding welfare states and an array of protections for workers (occupational safety, holiday and sick pay, etc). However, in the current neoliberal era, the increased appetite for extra military spending is being cast as a trade-off, where cuts to social and environmental protection spending and overseas aid are seen as the way to create fiscal space to allow the defence plans to be fulfilled. That trade-off is even more apparent in the context of the European Union, given that the vast majority of Member States no longer have their own currency and the funds available at the EU-level are limited. We will discuss that issue and more in this two-part series.

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The Far Right opposition to the euro in Germany has nothing to do with MMT

Edward Elgar, my sometime publisher, is interested in me updating my 2015 book – Eurozone Dystopia: Groupthink and Denial on a Grand Scale (published May 2015). I have held them off for a few years because there have been notable developments such as Brexit, COVID-19, and more since I finished that work, which are still playing out and difficult to disentangle in such a way that definitive analysis can be made. One of the striking things about Europe, from my perspective, is that voters appear to have separated the growing economic stagnation and the insecurity it brings from their view of the euro as a currency. The most recent – Standard Eurobarometer Survey 102 (conducted in November 2024) – conducted by the EU itself, “has registered the highest support ever for the common currency, both in the EU as a whole (74%) and in the euro area (81%)”. (85 per cent support in Germany and 76 per cent in France). Given the circumstances that is a pretty stunning result. And more respondents thought the EU economy was ‘good’ than those who thought it was ‘bad’, although in Germany and France, the outlook in that regard is highly pessimistic (40 per cent good Germany, 29 per cent France). Yet, the Far Right party in Germany – Alternative für Deutschland (AfD) – which as a result of the national election on February 25, 2025 gained the second highest number of votes (20.8 per cent of total) and improved its voting outcome by a staggering 10.4 per cent. Interestingly, from my perspective, AfD is now the leading voice in Europe against the euro, while other Far Rights voices are no longer (Rassemblement National) or never have (Fratelli) advocated abandoning the euro in favour of a return to national currency sovereignty. So while most Germans like the euro, more are voting for AfD who want it scrapped. That tension is what I am researching at the moment among other things.

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