The journalist also wrote that it is the “big money managers who fund our government debt” and has long as our debt is lower than the rest of the world “making us look relatively prudent”:<\/p>\n
\n… the markets will keep financing us.\n<\/p><\/blockquote>\n
Such poor prose.<\/p>\n
Who is us?<\/p>\n
The taxpayers, the nation?<\/p>\n
There is no economic sense in any of this.<\/p>\n
Government debt is risk free for those who use it within their wealth portfolio as long as the government that is issuing the debt also issues its own currency.<\/p>\n
There is no such thing as “relatively prudent”.<\/p>\n
When the economy is strong and confidence is high, the investors will take more risks with the wealth they manage and we then observe the demand for government debt decline and yields rise.<\/p>\n
The mainstream commentators see that happening and start to scream about the investors being about to stop funding the government.<\/p>\n
But it is exactly the opposite – things are going well.<\/p>\n
When risk in the private financial markets rise, the money flows into the risk free bonds and yields fall.<\/p>\n
All it tells us is that the appetite for risk in wealth management is shifting.<\/p>\n
These shifts tell us nothing about the attitude of the private investors to government fiscal policy choices.<\/p>\n
Moreover, the inference that these investors are funding the government is also highly misleading.<\/p>\n
The government – for the nth time – is not a household.<\/p>\n
I have to fund my expenditure – in various ways – through income, through prior saving out of income, through sales of assets bought with prior income, and\/or from borrowing from banks etc.<\/p>\n
Why?<\/p>\n
Because I am, like you, financially constrained, like all households that use<\/strong> the currency.<\/p>\nBut the Australian government issues the currency and can never be intrinsically financially constrained.<\/p>\n
Which means it does not ‘fund’ its spending from debt.<\/p>\n
It might have an accounting system that moves numbers around to give the impression that it is using the $s from the investors for its spending.<\/p>\n
But the intrinsic reality is that would be nonsensical, given that the $A funds that the investors have in surplus have come from previous government deficits, which would logically lead to the conclusion that the government is funding itself, with a lag.<\/p>\n
The article also becomes fictional when it says that is that we should be worried about the rising public debt in Australia because it “racks up interest” and:<\/p>\n
\n… we shouldn\u2019t ignore the fact that interest payments are becoming a growing demand on the government, leaving less capacity to spend on other things.\n<\/p><\/blockquote>\n
But there is no mention of whether the economy is at full capacity or not.<\/p>\n
The “less capacity” is implicitly defined in terms of the government only having so much money and that finite sum is limited by the investors.<\/p>\n
Which, of course, doesn’t make sense, when we know the government spends by crediting bank accounts – adding numbers to ledgers.<\/p>\n
That is not a finite process.<\/p>\n
The point is that the only meaningful capacity constraint is the availability of productive resources that the government can bring into productive use.<\/p>\n
Sure enough, if the nation is operating at maximum productive capacity then an increase in nominal public spending, whether it be from rising nominal interest payments on outstanding debt or a contract to build a hospital will probably generate inflationary pressures.<\/p>\n
That is a different issue from the government having “less capacity to spend on other things”.<\/p>\n
And if the nation was at full employment, for example, and it really needed to build a new hospital, then the central bank could just buy up some outstanding debt, drive the yields down to zero, and that would solve that problem.<\/p>\n
Remember the RBA purchased about 94 per cent of the public debt issued in the early days of the pandemic – no questions asked.<\/p>\n
And if the interest payments were really a game changer, the government could instruct the RBA to type a zero against the debt it held and that would definitely solve the ‘problem’.<\/p>\n
Further, like all these articles, the journalist has a checklist of scare topics that must be covered.<\/p>\n
The last one entertained is that:<\/p>\n
\n… the people who end up paying more of that interest will be future taxpayers \u2013 including younger generations\n<\/p><\/blockquote>\n
And a quote from a baby boomer economist who the press love to quote (ex Treasury official):<\/p>\n
\nMy generation has seen stunning increases in Australian living standards and wealth, and yet we\u2019re passing on rather more in debt than we should, and that\u2019s a bit of an embarrassing fail.\n<\/p><\/blockquote>\n
Yes, I am part of his generation.<\/p>\n
Our access to public infrastructure and services increased dramatically when we were young and the opportunities that a strong public sector gave us in terms of education, health, etc made even poor kids wealthier.<\/p>\n
Yet I don’t have to pay higher taxes than the generation that came before me.<\/p>\n
And I don’t expect the younger generations will pay higher taxes either.<\/p>\n
Whether they enjoy better public services etc is moot given the neoliberal austerity mindsets that have reigned supreme in recent decades – they probably will not have enduring access.<\/p>\n
The point is that each generation, via the political process, gets to choose its own tax burden, that is unrelated to what went before them by way of public spending.<\/p>\n
I have never been sent a bill to pay taxes to pay back the debt that was incurred by my parent’s generation.<\/p>\n
Finally, the last item on the checklist:<\/p>\n
\n… having more debt gives governments less room to respond with fiscal spending during an economic crisis\n<\/p><\/blockquote>\n
Totally wrong.<\/p>\n
The government has as much fiscal spending capacity as it desires whenever it desires regardless of what went before.<\/p>\n
That capacity is limited when the economy is hot because too much nominal spending will cause inflation.<\/p>\n
But during a crisis, the ‘fiscal space’ expands dramatically and the government can fill any private spending gap – without question.<\/p>\n
Conclusion<\/h2>\n
I suppose after all these years I should just ignore these articles.<\/p>\n
But I know people read them because they write to me regularly either confused and asking for clarification, or, abusive telling me that I know nothing and the ‘following article’ proves it.<\/p>\n
I dislike Donald Trump significantly, but by coining the term ‘fake news’ he was onto something, except his target was astray.<\/p>\n
The ‘fake news’ is the mainstream macroeconomic commentary that goes under the guise of informed (expert) opinion.<\/p>\n
This article is representative of that swill and systematically misleads the readership.<\/p>\n
It is a major disservice in the quest for an enlightened society.<\/p>\n
That is enough for today!<\/p>\n
(c) Copyright 2026 William Mitchell. All Rights Reserved. <\/p>\n","protected":false},"excerpt":{"rendered":"
I read two articles at the airport early this morning, while I was waiting for a flight, that I wish I hadn’t read. The first was bemoaning the approaching “$A1 trillion problem” that apparently the Australian government and all of us are about to face. It was written by a journalist who is schooled in…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[9,14,22],"tags":[],"class_list":["post-63192","post","type-post","status-publish","format-standard","hentry","category-central-banking","category-debriefing-101","category-fiscal-policy","entry","no-media"],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/billmitchell.org\/blog\/index.php?rest_route=\/wp\/v2\/posts\/63192","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/billmitchell.org\/blog\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/billmitchell.org\/blog\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/billmitchell.org\/blog\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/billmitchell.org\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=63192"}],"version-history":[{"count":0,"href":"https:\/\/billmitchell.org\/blog\/index.php?rest_route=\/wp\/v2\/posts\/63192\/revisions"}],"wp:attachment":[{"href":"https:\/\/billmitchell.org\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=63192"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/billmitchell.org\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=63192"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/billmitchell.org\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=63192"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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<\/a><\/p>\n