All posts by Senexx

Hamilton Holden Hutley Hound MMT

In April 2020 the Economic Society of Australia (ESA) held a webinar about the Australian Government’s fiscal response to the COVID Crisis. It included economists Steven Hamilton, Richard Holden, and Nicki Hutley facilitated by Shane Wright. Towards the end of the webinar, there was a Q&A, and questions were asked about Modern Monetary Theory.

As you will see we get the usual misinformation that its printing money; that QE is printing money; that it is printing money indefinitely and; there’s a Debt to GDP ratio limit (per Reinhart & Rogoff); as well as worry about the credit rating agencies; and the hyperinflation argument.

Nicki Hutley

Stephen and Richard will answer this question far far more theoretically than I will.
You know I’m following the debate interestingly and I love reading Krugman who’s just so into this and he’s very animated at the moment.

I like to call it magical monetary thinking. There are certain assumptions that you need to have for MMT to hold true; and one of them, obviously, if you look at Japan you could say well 200 percent Debt to GDP you know not not harming them.

There are a few things and there’s the Rogoff and Reinhardt study that sort of says when you get to a certain level of Debt to GDP it has an impact on your long-term growth for a start.

There’s also this assumption that everybody will that there won’t be some confidence effect, that rating agencies won’t come in and increase the price of your debt – that you can just keep wearing down the debt through growth and because growth is higher than the level of the interest rate and that is not always true. It might hold true for a while but it won’t hold true permanently. It’s a bit magical thinking to believe that we could suddenly, suddenly the world is completely different from everything that economic theorists have have held true for a long time.

[I’m] not saying that these theories don’t change over time but I’m certainly not convinced.

Steve Hamilton

Here’s all I’ll say as far as I can tell I had to ask someone what MMT was not that long ago.
to be honest with you as far as I can tell it’s a combination of two things. A set of things that almost every economist agrees with and then a set of things that almost every economist thinks are totally insane.

Right! So if we deal with the first group first it’s not news that there’s a thing called the inflation tax; like yeah of course we can fund anything we want by printing money that’s not news; you could do that but you’ll pay for it in inflation.

I think there is a set of MMT proponents that sort of it’s have it’s essentially an empirical question there’s a set of MMT proponents that think you can do it without an inflationary consequence and I think to me at some point inflation has to bind right otherwise you just print in infinite, infinite amounts of money and and we have to agree that some point inflation is going to bite.

So I kind of think we don’t need to think about MMT so much we can just say yes it makes sense the Reserve Bank uh is is is is doing its darnedest to keep buying bonds through QE right and in the short run we can get away with this printing money to pay for these kinds of assets without sparking inflation and I 100 per cent agree we should do that; but to do that infinitely and forever, I don’t know. I suspect Richard has a similar view.

Richard Holden

Let’s be clear QE is not MMT. And you know Phil (Lowe) was at pains to make that point yesterday that they’re buying on the secondary market they’re not just printing money they’re buying bonds. Right Japan issues bonds okay. The MMT folks say you don’t need to issue bonds you can just print money.

I think the way to think about that is the government’s balance sheets got a balance. What’s on the asset side the present discounted value of all future tax revenue that they can collect. What’s on the liability side? There’s bonds and there’s money. Okay now you can always issue more liabilities to cover liabilities but what happens if people think the market thinks you’re not being able to cover that at some point on the asset side with future tax revenues?

Well, the price of money falls – so what does that mean, it means inflation goes up right!? So that’s what’s sometimes known as the fiscal theory of the price level.

And the empirical evidence none of these MMT folks like it when you say Weimar Germany or Venezuela or Zimbabwe but you know try try France in 1981 under the Mitterand government that try
to put their feet their sort of toe in the water on this and inflation started getting out of control very quickly and had to reverse course or Germany under Gerhard Schroeder in 1998 same sort of thing

so um I think as Steve said the idea that
deficits that we can’t have like you know 80 per cent or 90 to use the Reinhardt Rogoff number Net Debt to GDP and some; there’s some magic number in which case it all falls apart that’s clearly wrong the idea that we can’t have a strong fiscal response is silly.

The idea that we can print money not issue bonds um and get away with it indefinitely that really is silly

Holden improves from his piece at The Conversation called “Printing Money is not the solution to all economic ills” and that is a genuine positive as it shows an evolution in his thought. I say he improves because unlike others he recognises that QE is not MMT. Unfortunately they all seem to be a little obsessed with seigniorage.

Please follow the links throughout this post as they correct the misunderstandings these economists have.

In fact, nothing described by any of these economists even resembles MMT. They would all do well to read the Explainer: What is Modern Monetary Theory?

 5 reasons to keep wearing your mask

COVID mask mandates might be largely gone but here are 5 reasons to keep wearing yours


C Raina MacIntyre, UNSW Sydney

Mask mandates in most indoor settings have been dropped in New South Wales, Victoria and the ACT, with Queensland to follow later this week.

Without a mandate, mask use tends to drop, so we can expect only a minority of people to be masked in public indoor spaces.

With thousands of cases a day and just over half (57%) of Australians having received a third COVID vaccine dose and children still under-vaccinated, we may see a surge in infections.

While masks are a small inconvenience, they remain vital in preventing SARS-CoV-2, because the virus spreads through the air we breathe.

Some people will continue to wear masks to stay safe and achieve a more normal life through the pandemic. Here are five reasons to keep wearing yours.

1. Masks reduce your chance of getting COVID

Many studies have shown masks protect against COVID. While N95 respirators offer the greatest protection, even cloth masks are beneficial. N95s respirators lower the odds of testing positive to COVID by 83%, compared with 66% for surgical masks and 56% for cloth masks.

The protection when everyone wears a mask is much greater, because it reduces the likelihood of well people inhaling the virus and prevents infected people from exhaling the virus into the air. If everyone wears a mask, the viral load in the air is much lower.

When we lose the protection of universal masking, it’s a good idea to wear a high protection N95 or P2 respirator.

2. You might not know you have COVID

Transmission of the virus without symptoms is a major driver of spread, and we cannot know who around us is infected.

Infected people may be asymptomatic or may not know they’re infected. This is especially so for Omicron.

Overall, about one in four infections are asymptomatic. But even people with symptomatic infection are contagious before the symptoms start.

Business woman wears a mask.
You might not know you’re infectious.

3. Wearing a mask protects others, including those at risk of severe COVID

Wearing a mask protects others, including those at greatest risk of severe COVID: people with disability, chronic illnesses and suppressed immune systems.

COVID disproportionately affects migrants and people from lower socioeconomic groups who are more likely to work in customer-service roles. If you wear a mask, you’re protecting workers, commuters and others you interact with.

Rates of vaccination also lag among Aboriginal and Torres Strait Islander people, leaving them more vulnerable to COVID in the absence of masks.

Masks also protect children who are vulnerable to COVID, with only half of five to 11 year olds partially vaccinated and under-fives not yet eligible for vaccination.

Children who wear masks can also protect their peers. In the United States, the risk of outbreaks was nearly four times higher in schools without mask mandates compared to those with mandates.

Omicron is not the flu or a cold, and has accounted for 17% more deaths than Delta in the United States. While Omicron generally causes less severe disease than Delta, it has claimed more lives because of vastly higher case numbers.

There is also growing evidence SARS-COV-2 persists in the body after infection, which may result in long-term heart, lung and brain damage.

4. Masks protect your colleagues

Many workplaces are insisting on people returning to face-to-face work, some without providing safe indoor air – and now without mask mandates.

The risk of COVID transmission is greatest when indoors for prolonged periods without adequate airflow. So sitting in an office for eight hours without a mask is a risk, especially if safe indoor air has not been addressed.

Man in a mask sits at his work desk, next to his female colleagues.
Wearing a mask reduces your risk of contracting COVID from co-workers.

At the same time as dropping many workplace mask mandates, NSW has moved to remove automatic workers’ compensation for people who catch COVID at work.

This is a double disadvantage for workers returning to workplaces with fewer protections and facing greater obstacles to workers’ compensation should they get infected.

5. Others might follow your lead

Being one of the few people wearing a mask when others aren’t, such as in a supermarket, is a daunting prospect for those of us who wish to continue masking. There are reports of masked people being abused and bullied.

However a NSW survey showed the majority of people in that state wanted mask mandates to remain. The more we normalise masks and the more we see them, the better protected the community will be.

As much as we wish it so, the pandemic is not over and new variants will likely emerge.

A layered, multi-pronged strategy which includes vaccines, masks, ventilation, testing and tracing is the best way to protect health, the economy and a resumption of normal activities. The Conversation

C Raina MacIntyre, Professor of Global Biosecurity, NHMRC Principal Research Fellow, Head, Biosecurity Program, Kirby Institute, UNSW Sydney

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Immigrants are People too

This post is written colloquially and comes from a comment I lifted from Bill’s Blog by Phil Lawn. I’ve spaced it out for clarity and left it outside of a massive block quote because it does indeed deserve a post of its own. Over to Phil.

For all those people who like to label anyone who sings the praises of low immigration as racist, immigration is a policy.

Immigrants are people. High immigration of mainly white people (deliberately) would be racist.

Low immigration of people regardless of their colour or religion would not. A low immigration policy favouring refugees (people in need) is not anti-immigrant.

Image from Animated Stats. The UK is #1.

I also dislike the fact that a high immigration intake of skilled people insidiously deprives many countries of the people they so badly need. Since a strong country should be able to produce the quantity and quality of stuff it requires (some international trade needed to alter the mix of goods), every country has as many people as it needs.

After all, every working person is both a producer and a consumer and thus adds nothing in net terms to the people already in a country. It simply comes down to a country appropriately educating/training and utilising the people it already has.

If people think Australia needs more skilled people, that is an admission that Australia’s education/training and employment policy is failing.

It also reflects that the wages on offer for some jobs are not high enough to attract people to take them on. Why do the ‘leave things to market forces’ advocates turn to the government every time they can’t get people to work for them?

A simple solution – offer higher wages. Once upon a time, when workers were better represented (unions and institutional wage setting), employers in this situation were forced to raise wages to obtain labour.

No wonder there is no wage growth anymore and certainly no wage growth while a country is importing hordes of skilled migrants, as Bill has pointed out.

We will let Bill have the last word ostensibly to demonstrate this is neither racist nor anti-immigratory.

The problem is that governments have not been prepared to use their fiscal capacity to ensure everyone has a job and so the labour supply has outstripped labour demand.

Can We Trust Politicians?

We are currently hearing the storyline – MMT is correct (although they don’t express it that way) but god save us if anyone finds out.

An MMT understanding allows us to appreciate that most choices that are couched in terms of ‘budgets’ and ‘financial constraints’ are, in fact, just political choices.

Given there are no intrinsic financial constraints on a currency-issuing government, we understand that mass unemployment is a political choice.

Imagine if citizens understood that!!

An MMT understanding lifts the ideological veil imposed by mainstream economics that relies on the false analogy between an income-constrained household and the currency-issuing government.

Households always have to finance their spending choices, through earned income, savings, asset sales or through borrowing. A currency-issuing government spends by instructing its central bank to type numbers electronically into relevant bank accounts.

All the elaborate accounting structures and institutional processes that are put in place to make it look as though tax revenue and/or debt sales fund spending are voluntary smokescreens, which serve the purpose of imposing political discipline on government spending.

Insiders know this, but actively decline to share that knowledge with the public.

There is also a growing claim that there is nothing new about MMT – that everything we write about is “well-understood” or “widely understood and acknowledged”. Further, apparently “everybody knows” and New Keynesians are “fully aware” that the government is not financially constrained.

It is very strange – if all the major features of MMT were so widely shared and understood – how do we explain statements from politicians, central bankers, private executives, lobbyists, media commentators etc, etc that appear to not accept or understand the basic MMT claims?

    • Where in the vast body of macroeconomic literature – mainstream or otherwise – do we see regular acknowledgement that there is no financial constraint, for example?

    • Why is there mass unemployment if government officials understood all our claims?
    • It would be the ultimate example of venal dysfunctional politics to hold that that everybody knows all this stuff but are deliberately disregarding it – for what?
    • Why do economists still claim that banks lend out their reserves?
    • Why do they think that an asset swap (liquid for near liquid) engineered by the central bank will provide banks with more funds to lend as if banks wait around for deposits before they make loans?
    • Why don’t papers on banking indicate that loans create deposits rather than engage in the fiction that it is the other way around?
    • Why do economists still claim there is a monetary multiplier operating when bank reserves respond to broad monetary movements?

I could pose hundreds of like questions. I am not naive. I couldn’t answer any of these questions if the claim that everything MMT has proposed is passe in the extreme.

These sorts of claims then lead to statements that there is “nothing new” about MMT – is designed to discredit us and to suggest we are just a bunch of misguided, politically naive intellectual minions.

Please note that MMT does not include the word “new” in its descriptor. Also, if some person out there can find any literature written by one of the major MMT academics or authors where there is a claim that the theoretical structure proposed and integrated by the writers is “new” please let me know. (I wouldn’t waste my time by the way.)

The descriptor of import is “Modern” which like all descriptors can be interpreted in a number of ways. The way the MMT literature discusses the economy and integrates components from banking, the national account accounts, a deep understanding of the way bond, currency and labour markets work – is certainly modern.

It is clear that MMT writers borrow, absorb, integrate strands of theory dating back to Marx and before. There has never been a denial of that. But there are truly novel aspects of our approach that the vast majority of economists progressive or otherwise – who are slaves of the textbook framework – still do not understand despite the claims that everything is understood.

As we said at the beginning there is now a line of critics who acknowledge the validity of core MMT principles but think they are too dangerous for people to broadly share in that knowledge.


Because we apparently have reached a point in history where we hate dictators and eulogise the benefits of democracy (à la Churchill in the Commons on November 11, 1947 – “democracy is the worst form of Government except for all those other forms that have been tried from time to time”), but don’t want the politicians we elect to have the flexibility to advance our well-being.

Or in simpler language – “because we don’t trust politicians”.

This has been a long-standing view.

Remember the famous quote from American economist Paul Samuelson in the interview he did for the film – John Maynard Keynes: Life, Ideas, Legacy – where at the 52:50 mark into the film, he said:

I think there is an element of truth in the view that the … the superstition that the budget must be balanced at all times … aah … Once it is debunked … takes away one of the bulwarks that every society must have against expenditure out of control. There must be discipline in the allocation of resources or you will have … aah … anarchistic chaos and inefficiency. And one of the functions of old fashioned religion was to scare people by … aah … sometimes what might be regarded as myths into behaving in a way that long-run civilised life requires. We have taken away a belief in the intrinsic necessity of balancing the budget if not in every year … in every short period of time. If Prime Minister Gladstone came back to life he would say ‘oh, oh what you have done’ and James Buchanan argues in those terms. I have to say that I see merit in that view.

This amounts to a world where the elites can manipulate the fiscal capacity of the state to advance their own interests (procurement contracts at will, bailouts when they mess up, etc) but if we want to do something about unemployment or poverty then the rest of us has to be held in this fictional world that appeals to our instincts of fear and uncertainty.

And, of course, we then are encouraged to distrust politicians and so it goes.

My view is that once we expose these myths, more sensible political discourse can take place.

And if we do not like our government – that is they go crazy with their spending capacity – then we throw them out of office (in Australia, every three years or so).

I also think that if the standard of political dialogue was improved, higher-quality candidates would seek election and push out the time-serving careerists who dominate all political parties.

It is an extraordinary world where we accept a deception because knowing the truth might require us to act differently.

I don’t accept that proposition. I believe that the truth will set us free and we will become more politically engaged and demand quality political behaviour.

So, can we trust politicians?  We can trust ourselves!!

This has been a remix of three of Bill Mitchell’s blogs for the State of Modern Monetary Theory today.

MMT Does Not Advocate (or mean) “Monetisation”

Modern Monetary Theory in no way endorses “monetisation.” To the extent monetization is simply a name for quantitative easing (roughly, RBA purchases of long-term bonds), we either oppose it or find it only mildly effective and sometimes propose alternatives.

Whether it comes from Catallaxy, Rabobank or Saul Eslake, these ideas run rampant amongst the economics community.  Allow me to repeat, Modern Monetary Theory in no way endorses “monetisation.” At best we only find it mildly effective and have proposed other ways of achieving the same goal.

An example of an early MMT work that specifically criticizes even the use of the word monetisation is Warren Mosler’s Soft Currency Economics II, a paperback that is not too expensive at used book sites.

First, we believe that entities other than Canberra choose the form of Australian government liabilities through their investment, saving, financial-trading, and other choices.

Regardless of the public’s choice of assets, our central bank, the RBA, buys and sells assets to get its chosen interest rate(s). Of course, interest rates other than the cash rate are determined by other actors. The action of “the markets” (including huge banks) for bonds and other debt securities most closely approximate an uncoordinated supply-demand process. Unless, of course, market manipulation dominates there.

Critics across the spectrum have been gathering that the unique idea of MMT (perhaps because of its name) involves attempts to “pump money” into the system. This process would then likely generate inflation but would allow higher federal spending without tax increases.

In fact, as former Bernie Sanders aide and MMTer Stephanie Kelton puts it in her terrific new popular book (for example, on p. 36), you might as well think of bonds and money as “yellow dollars” or “green dollars”—more or less the same, except one pays interest.

Another place to find a good critique of the idea that deficits “pump money” into the economy is The Scourge of Monetarism by Nicholas Kaldor. In the writings in that 1980s book, Kaldor sought to dissuade British policymakers from an earlier round of fiscal austerity.

What MMT does is explain how the federal spending process works always. It does not call for a change in a method of financing. Moreover, the always-existing method of increasing spending does not require tax increases unless there is a macroeconomic need for them—say to dampen aggregate spending and cool down the economy. Hence, there is nothing magical about the number zero for the federal deficit or deficit increases. The federal government indeed never “pays for” new spending the way households or Australian States or local councils do. Hence, worries about higher deficits as such should not slow our crises responses ever.

This is a remix of Greg Hannsgen, Ph. D, UMKC graduate, Levy Economics Institute Research Associate post.  The original can be seen here.