My Op Ed in the mainstream Japanese business media

It’s Wednesday and my blog-light day. Today, I provide the English-text for an article that came out in the leading Japanese business daily, The Nikkei yesterday on Modern Monetary Theory (MMT) and its application to the pandemic. Relevant links are provided in the body of the post. The interesting point I think is that ‘The Nikkei’ is the “the world’s largest business daily in terms of circulation” and has clear centre-right leanings. The fact that they are interested in disseminating ideas that run counter to the mainstream narrative that the centre-right politicians have relied on indicates both a curiosity that is missing in the conservative media elsewhere, and, the extent to which MMT ideas is becoming more open to serious thinkers. I have respect for media outlets that come to the source when they want to motivate a discussion on MMT rather than hire some hack to write a critique, which really gets no further than accusing MMT of being just about money printing.

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The Weekend Quiz – November 14-15, 2020 – answers and discussion

Here are the answers with discussion for this Weekend’s Quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of Modern Monetary Theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

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Memo: Right pocket to left pocket – don’t let anyone know what it going on in these trousers.

On Tuesday (November 3, 2020), the Reserve Bank of Australia made its monthly announcement with respect to the conduct of monetary policy. The governor Philip Lowe released this – Speech – to announce the decision. There were four elements to the decision, which I will explain. But the most significant aspects of the decision was to set the support rate on excess reserve balances to zero and increase their government bond buying program by 200 per cent. And the most significant aspect of that last decision was how much dodging and weaving went on to deny what they are actually doing. And, within the decision is a point that I would have expected State Premiers to be up and arms about but, instead, there was silence. All in a day of paradigm shift in economics.

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The Weekend Quiz – October 31-November 1, 2020 – answers and discussion

Here are the answers with discussion for this Weekend’s Quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of Modern Monetary Theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

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The Weekend Quiz – October 3-4, 2020 – answers and discussion

Here are the answers with discussion for yesterday’s quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of modern monetary theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

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The Weekend Quiz – September 19-20, 2020 – answers and discussion

Here are the answers with discussion for this Weekend’s Quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of Modern Monetary Theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

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There is no limit to government debt issuance – if you have your own currency

Japan has a new leader of the ruling Liberal Democratic Party, who, given the majority of the LDP in the Diet will become prime minister in the coming days. He was interviewed over the weekend about the current crisis and the role that the Japanese government can play to attenuate the costs. He stated clearly that there was no limit to government debt issuance. The meaning of this statement is clear. The Japanese government should ignore claims that its public debt ratio is too high or is facing impending insolvency or bond-market revolts or any of the other manic predictions that economists who do not know better keep making. Instead, as Yoshihide Suga noted, the challenge is jobs and incomes. The only limits are real resource constraints and when there is a pandemic and rising unemployment, those constraints ease and the fiscal space for more net spending increases. At least one world leader understands that.

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RBA governor adopts a political role to his discredit

Last week, the Reserve Bank of Australia governor, Philip Lowe, confirmed that the claim that the central bank is independent of the political process is a pretense. The Governor was adopting a political role and made several statements that cannot be analytically supported nor supported by the evidence available over many decades. He is insistent on disabusing the public debate of any positive discussion about Modern Monetary Theory (MMT), which, of course, I find interesting in itself. More and more people are starting to understanding the basics of MMT and are realising that that understanding opens up a whole new policy debate, that is largely shut down by the mainstream fictions about the capacities of the currency-issuing government and the consequences of different policy choices. People are realising that with more than 2.4 million Australian workers currently without enough work (more than a million officially unemployed) that the Australian government is lagging behind in its fiscal response. They are further realising that the government is behaving conservatively because it still thinks it can get back to surplus before long and so doesn’t want to ‘borrow’ too much (whatever that means). An MMT understanding tells us that the government can create as many jobs as are necessary to achieve full employment and the central bank can just facilitate the fiscal spending without the need for government to borrow at all. They are asking questions daily now: why isn’t the RBA helping in this way. The denial from the RBA politicians (the Governor, for example) are pathetic to say the least.

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Governments are now in an ideological bind

Today’s blog post is a draft for another deadline I have this week, this time writing for a European publication on the state of affairs in the Eurozone. I have four major pieces of work to finalise this week so, as in yesterday, I am using this time to progress those goals. For many regular readers it will be nothing new. But, putting the arguments together in this way might just provide some different angles for people who haven’t thought about things in this way before. Regular transmission will resume on Thursday (probably).

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Making better investment decisions using MMT as a knowledge base (long)

This is a draft I am working on for a leading US publication. For many regular readers it will be nothing new. But while there are several things I am probing at the moment which I would normally use my blog space to tease out, time is short this week (really) and so I have to combine things. In other words, the blog space and time today is being used to fulfill commitments with very tight deadlines. But, putting the arguments together in this way might just provide some different angles for people who haven’t thought about things in this way before.

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Apparently the government has no money but then has plenty

Things are obviously getting desperate out there in financial media commentary land. If one could express written text in graphical terms then there are a number of financial journalists out there that look – like a rabbit caught in the headlights – that is in a state “of paralyzing surprise, fear, or bewilderment.” A good example of this increasingly observed syndrome is an article in The Australian newspaper today (June 30, 2020) by Adam Creighton – Never forget that governments have no money – it is always ours (subscription required). This sort of journalism is becoming an almost daily occurrence as it becomes obvious that capitalism is now on state life support systems and the extremities of government intervention are demonstrating very clearly what Modern Monetary Theory (MMT) economists have been saying – and the only ones that have been saying it – for 25 years or so. I often note that Japan has already pushed the fiscal and monetary policy parameters beyond the limits most countries have explored in peacetime and mainstream economists have systematically predicted various scales of disaster and have always been wrong. Now all countries are at extremes and still no fiscal disaster. But the mainstream mouthpieces – these financial journalists who seem to think the stuff they read in first-year text books from mainstream economics programs are in same way the basis for expertise and knowledge – are in advanced states of dissonance. Drivel follows.

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The Weekend Quiz – June 6-7, 2020 – answers and discussion

Here are the answers with discussion for this Weekend’s Quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of modern monetary theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

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Britain confounding the macroeconomic textbooks – except one!

Remember back just a few months ago. We are in Britain. All the Remainers are jumping up and down about Brexit. We hardly see anything about it now as the UK moves towards a no deal with the EU. Times have overtaken all that non-event stuff. Now the developments are confounding the mainstream economists – again. There will be all sorts of reinventing history and ad hoc reasoning going on, but the latest data demonstrates quite clearly that what students are taught in mainstream macroeconomics provides no basis for an understanding of how the monetary system operates. All the predictions that a mainstream program would generate about the likely effects of current treasury and central bank behaviour would be wrong. Only MMT provides the body of knowledge that is requisite for understanding these trends.

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The Weekend Quiz – May 9-10, 2020 – answers and discussion

Here are the answers with discussion for this Weekend’s Quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of modern monetary theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

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The Weekend Quiz – May 2-3, 2020 – answers and discussion

Here are the answers with discussion for this Weekend’s Quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of Modern Monetary Theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

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Bank of England official blows the cover on mainstream macroeconomics

It is quite amusing really watching the way orthodox economists who know the game is up work like gymnasts to avoid actually spelling out directly what the facts are but spill the beans anyway. Last week (April 23, 2020), an ‘external member’ of the Bank of England’s Monetary Policy Committee, one – Gertjan Vlieghe – gave a speech – Monetary policy and the Bank of England’s balance sheet. If the message was taken seriously, then the way monetary economics and macroeconomics is taught in our universities should change dramatically. At present, there is only one textbook that seriously caters for the message that is inherent in the speech – Macroeconomics (Mitchell, Wray and Watts). The speech leaves out important insights but essentially allows the reader to appreciate what Modern Monetary Theory (MMT) has been on about, in part, for 25 years.

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The Weekend Quiz – April 4-5, 2020 – answers and discussion

Here are the answers with discussion for this Weekend’s Quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of Modern Monetary Theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

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Some lessons from history for the design of a coronavirus fiscal intervention

This post continues my thinking and analysis of the issues relating to the design of a fiscal intervention by the Australian government to ameliorate the damaging consequences of the coronavirus dislocation. Today, I delve a little bit back in history to provide some perspective on the current fiscal considerations. Further, I consider some of the problems already emerging in the policy response. And finally, I consider the lessons of history provide an important guide to the sort of interventions that the Australian government might usefully deploy. While the analysis is focused on Australia at present, the principles developed are portable across national boundaries. And the underlying Modern Monetary Theory (MMT) understanding is applicable everywhere there is a monetary system. This series of blog posts are building up to the production of my 10-point or something plan to address the crisis.

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Japan national accounts – sales tax rise, growth collapses – as night follows day

In my blog post – Japan about to walk the plank – again (September 30, 2019) – I predicted that the decision by the Japanese government to increase the sales tax from 8 per cent to 10 per cent on October 1, 2010 would undermine non-government spending and growth and was totally unnecessary anyway. The government had fallen prey to the deficit terrorists who have been consistently bullying them into believing that their fiscal position is about to collapse and the bond markets would desert them. Funny that! The Bank of Japan has been buying the bulk of the public debt issued over the last several years anyway. The reality is that, given the instability of world conditions (US-China trade, European slowdown, Brexit, and, more recently, the Corona virus impacts), the Japanese government should have been increasing its fiscal deficit. Yesterday (February 17, 2020), the latest national accounts data from Japan tells us the damage that this policy folly has inflicted. Every time the Japanese government has hiked the sales tax (1997, 2014, 2019) real GDP growth has plummetted and pushed the economy into recession. In the final quarter of 2019, Japan’s growth rate slumped by an annualised 6.3 per cent, driven by a massive 11.1 per cent decline in consumption spending and capital investment decline of 14.1 per cent. Sure enough, Typhoon Hagibis was also a factor but it is undeniable that the sales tax hike was instrumental. The Spanish philosopher George Santayana had it in one when in his first volume (1905) of his book – The Life of Reason: The Phases of Human Progress – said: “Those who cannot remember the past are condemned to repeat it”.

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The Weekend Quiz – February 15-16, 2020 – answers and discussion

Here are the answers with discussion for this Weekend’s Quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of modern monetary theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

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