On July 26, 2018, UK Guardian columnist Phillip Inman published an article – Household debt in UK ‘worse than at any time on record’ – which reported on the latest figures at the time from the Office of National Statistics (ONS). He noted that the data showed that “British households spent around £900 more on average than they received in income during 2017, pushing their finances into deficit for the first time since the credit boom of the 1980s … The figures pose a challenge to the government … Britain’s consumer credit bubble of more than £200bn was unsustainable. A dramatic rise in debt-fuelled spending since 2016” and more. While keen to tell the readers that British households were “living beyond their means”, there was not a single mention of the fiscal austerity drive being pursued by the British government over the same period. Nor was there mention of the fact that the entire British fiscal strategy since the Tories took office was predicated, as I pointed out years ago in this blog post – I don’t wanna know one thing about evil (April 29, 2011), on this debt binge continuing. A year later (July 20, 2019), the same columnist published this article – Labour and Tories both plan to borrow and spend. Is that wise? – which like its predecessor fails to present a comprehensive, linked-up, analysis for his readers and makes basis macroeconomic errors along the way.
The latest article is attacking both the variously announced intentions of the British Labour Party and the Tory government to increase net public spending....Bill Mitchell – billy blog
There are no financial risks involved in increased British government spending
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia
1 comment:
Bill Mitchell ― Wall Street’s hitman keeps an eye on MMT defeatists
Comment on Bill Mitchell on ‘There are no financial risks involved in increased British government spending’
MMT is the academic cover for a straightforward political agenda: to push deficit-spending/money-creation. No matter what, from unemployment to health-care to climate change, MMTers chime in as helpers and saviors. MMTers present themselves as Progressives but macroeconomic analysis shows that MMT policy harms WeThePeople and benefits the Oligarchy.
Needless to emphasize that MMTers argue that deficit-spending/money-creation brings immediate help to WeThePeople and involves no risks, neither in the short run nor in the future.
Why is there no risk whatsoever and why was the British Chancellor always dead wrong? “His concept of ‘fiscal space’ … was erroneous of course. It was a denial of the most basic currency capacity that the UK government possesses ― it can never run out of spending capacity. Which, of course, is not the same thing as saying that it can run out of things to spend on.”
This, as most MMT arguments, is superficially true. Like a counterfeiter, the UK government cannot run out of money, but this does not change the fact that paying with counterfeit money is just a tricky way of stealing. Pushing aggregate demand through deficit-spending/money-creation is the wrong way to bring money into the economy.#1
And that is already the end of MMT. MMT policy has no sound scientific foundations. MMT is a political fraud and, strictly following their script, MMTers never speak about the toxic distributional effect of their policy.
The policy of deficit-spending/money-creation benefits the Oligarchy because it increases macroeconomic profit according to the Profit Law which entails Public Deficit = Private Profit. MMT is a free lunch program for the Oligarchy. Financial wealth and public debt grow in lockstep and the fabulous financial wealth in the USA is roughly equal to humongous public debt ($22 trillion and counting). The Profit Law explains how billionaires are able to accumulate that much money and why they can buy all the bonds the Treasury issues and cash in the ultra-safe interest that is reliably taxed from WeThePeople as long as the debt is rolled over. This can function for a very long time but eventually ― well beyond the time horizon of MMTers and their gullible audience ― the economy breaks down. This is not a risk but a mathematical certainty.#2 MMT policy is a Ponzi scheme that works only as long as public debt grows. But infinite growth is impossible on a finite planet. The risks explode as soon as debt growth slows down or reverses as it eventually must. The so-called free-market economy lives literally on borrowed time.
Phillip Inman, the journalist who dares to take the word risk in his mouth is told that there is no risk because “… basic macroeconomics tells us that one sector’s spending is another sector’s income.” And that there are no other risks of higher public debt. There are some real risks, though, for folks that spoil MMT’s snake-oil sales talk: “Come the day that an Modern Monetary Theory (MMT) understanding is widespread ― we are working on it ― the likes of Philip Inman will have to do something productive to earn a living.”
Egmont Kakarot-Handtke
#1 The right and the wrong way to bring money into the economy
https://axecorg.blogspot.com/2019/07/the-right-and-wrong-way-to-bring-money.html
#2 How to pay for the war and to be bamboozled by economists
https://axecorg.blogspot.com/2019/05/how-to-pay-for-war-and-to-be-bamboozled.html
Post a Comment