The ABC is ecstatic: “free market capitalism is facing a challenge”

From the economically-illiterate ABC: Modern monetary theory is gaining traction. But can it knock out free market capitalism? [Sorry if I am repeating from CL.] Socialist grifters that they are, they have zero understanding how wealth is created and therefore think it’s just there to be parcelled out by governments, the same way the ABC is funded. Let’s listen in to their profoundly ignorant discussion:

MMT points an accusing finger at Neoliberalism, blaming it for rising economic inequality and corresponding reductions in the quality and scope of essential services — both public and privatised.

MMT’s proponents argue that the current “surplus obsession” is at best misconceived and at worst ideological — a deception to justify reductions in government spending in order to fund taxation cuts for the wealthy.

They argue that governments shouldn’t be afraid of pushing the economy into deficit if that deficit helps fund further economic growth.

Ah yes, the deficit. Who’s afraid of deficits today? Trillion-dollar deficits as far as the eye can see, and hardly a voice of caution to be heard. E.g.

Democrats have a strong policy basis for their position. Early this year, the two most prominent Democratic economists — former Treasury Secretary Larry Summers and Jason Furman, chairman of the Council of Economic Advisers, both under Barack Obama — wrote an influential article citing structural declines in interest rates. This means that “policymakers should reconsider the traditional fiscal approach that has often wrong-headedly limited worthwhile investments in such areas as education, health care and infrastructure,” they said.

“Politicians and policymakers should focus on urgent social programs, not deficits,” they advised.

Keynesian airheads every one of them. Then this: Corporate debt nears a record $10 trillion, and borrowing binge poses new risks. Did they say “risks”? What sort of risks would these be?

The root cause of the debt boom is the decision by the Federal Reserve and other key central banks to cut interest rates to zero in the wake of the financial crisis and to hold them at historic lows for years.

The low rates were needed to encourage companies to invest and hire as the nation recovered from the worst economic collapse in 70 years.

Cutting interest rates is the standard answer to a troubled economy. But rates have never been this low for this long, and the side effects from too much easy money are becoming clear as central bankers struggle to return interest rates to traditional levels.

Since it’s the Washington Post it is looking for the gloomy side in the story, but for a change I agree with them and not the President.

An artificial environment of near-free money is masking serious underlying ailments and may be storing up problems for a future reckoning. This era of perpetually cheap money has kept alive some debt-ridden “zombie” companies that would have failed if rates were at traditional levels; widened the wealth gap between rich and poor; and distorted financial decisions.

The dangers are immense but between MMT and the traditional Keynesian ignoramuses, there is virtually no one around to turn things around.

But if you want to know what needs to be done, don’t bother with the ABC.

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25 Responses to The ABC is ecstatic: “free market capitalism is facing a challenge”

  1. JC

    There is evidence that MMT works. That’s if you consider South America to be a success for the past 100 years.

    South America has been a incubator for MMT.

  2. Mother Lode

    MMT’s proponents argue that the current “surplus obsession”

    Who has achieved a surplus?

    There is a strong appetite for politicians to talk about surpluses. That is all.

    And if the government gets a surplus and has paid off its debt, then they can reduce taxes.

    People can keep more of their own money.

    This is a disreputable idea, is it?

  3. Mother Lode

    They argue that governments shouldn’t be afraid of pushing the economy into deficit if that deficit helps fund further economic growth.

    Again, who has grown their economy with deficit spending? They can paper over holes by pairing select definitions of recession and government spending. You see politicians crowing about how they avoided recession because a government blowing money is counted in their definition as equivalent to wealth creation (which it is not).

    Even the Soviets eventually realised massive government spending is not the same as producing wealth equal to that spend. Soviet poverty was proverbial.

  4. Mother Lode

    The root cause of the debt boom is the decision by the Federal Reserve and other key central banks to cut interest rates to zero in the wake of the financial crisis and to hold them at historic lows for years.

    This is the state pulling on one of its levers until the damn thing breaks off in their hand.

    And the solution is supposed to be more state meddling?

  5. JC

    They argue that governments shouldn’t be afraid of pushing the economy into deficit if that deficit helps fund further economic growth.

    This is South America at hyper speed. These fucking lunatics believe that markets won’t care about the risk of huge amounts of debt lumbering the market.

    QE works in a sense, because markets have full confidence the monetary authority will curtail QE once the inflation target is reached. This is why bond yields generally behave.

    Remove this caveat and signal the markets that there could be unlimited supply of bonds hitting the markets and you end up with a fractured bond market and hyper -inflation. This is South American economics.

    MMT says not to worry because the government could buy the entire bond issuance and print more money. Who will then have confidence in the currency?

    These lunatics have no understanding of economics. Any MMT proponent should be locked up and never see sunshine again.

  6. Lee

    Who is the ABC adviser on monetary matters?

    Emma “revenue is the same as profit” Alberici?

    LOL

  7. JC

    Emma must have given the Okay for this piece of crap to publish. She is after all the “economics editor” at the ABC.

    The dude who wrote is is

    Antony Funnell

    Antony Funnell is a Walkley award-winning journalist and author who has worked for many of the country’s leading news and current affairs programs.

    Only the ABC could come up with an Antony Funnel to write about MMT. Only they could have someone with that name on staff. He is a Walkley winner too!

  8. Bruce

    And yet, everyday we see and hear a seemingly endless conga-line of sociopaths and ideologues, many taxpayer-funded, declare that THEIR ABCess only deals in facts, NOT opinions.

    Carefully-crafted “opinion-shaping” is NOT reporting on reality.

    The doe-eyed adoration of “guests” from hard-line eco-“saviours” is getting to the point that soon they will need to broadcast “parental advisory” messages or put it on the Sex Before Soccer network.

  9. Ƶĩppʯ (ȊꞪꞨV)

    MMT is communism by another name

  10. Neil

    MMT’s also say MMT only works if you have your own sovereign currency. This appears to bring superhuman powers to a country that has a sovereign currency.

  11. I_am_not_a_robot

    I thought Keynesian economic theory was about using fiscal policy to smooth out economic cycles but I can’t remember Labor or the Left in general ever recommending or practicing budget surpluses.

  12. John Bayley

    MMT is nothing new – it’s a rehash of chartalism, conceived by a crank named Georg Friedrich Knapp in 1905.
    Essentially it’s just another excuse for more government meddling in basically everything and of course it fully subscribes to the Keynesian idiocy of using – more often than not unmeasureable – aggregates to describe economic outcomes.
    Chartalists (MMT cranks) always carry on about accounting identities and similar irrelevancies, but there is no need to get technical about why their ‘theory’ can never work.
    Can anyone thinks of a politician who would A) not love to be able to promise and spend without limits, but at the same time B) be prepared to increase taxes and introduce other such unpopular measures should the ‘economy overheat’ (another meaningless crank term, but alas widely adopted these days).
    The very fact that this BS is ‘gaining traction’ should give us all pause. It can only mean a tacit admission that like all its predecessors, the current system of debt-based, unbacked fiat money is on its last legs.
    Unfortunately when it blows – as is mathematically inevitable – it will cause an enormous amount of pain to a great many people.

  13. Squirrel

    MMT sounds like an absolutely bonzer idea, so in the interests of the cultural diversity, vibrancy and can’t-get-enough-of it-globalism which the ABC never stops spruiking, let’s pay their salaries in Zimbabwean or Venezuelan dollars – they can choose.

  14. JC

    Chartalists (MMT cranks) always carry on about accounting identities and similar irrelevancies,

    LOl This:

    GDP = private consumption + gross investment + government investment + government spending + (exports – imports).

    The ignore the fact that “Government” is the taker and want people to believe it’s part of the production cycle.
    Laughable.

  15. Entropy

    You gotta admit JC, it’s kinda a get out of jail card for rigging economic performance ( see Rudd, K). Things not going too well, borrow and spend, borrow and spend.
    And of course the theory is you will be dead before the long run consequences arrive.

  16. JC

    Ent

    There’s one basket ball sized curve ball in all this.

    In our current system, there is an understood undertaking the government will eventually stop borrowing and begin repaying the debt. There’s also the more explicit undertaking the state will not simply print money to meet its commitments. This is hugely important in terms of the underpinnings of the system. This is what prevents hyperinflation and allows fiat to function in a low inflation environment. The minute these commitments are removed… not the minute, but the second, I would be converting every single dollar I hold in currency into gold or crytpo because I/we know how it ends.

    MMT does away with all this and by pretending that government is more than a suction device in that economic identity. These MMT meatheads can pretend debt doesn’t matter and eternal currency issuance doesn’t either. I suppose it doesn’t matter if you’re trying to re-create Zimbabwe or Venezuelan economics but it does otherwise.

    Antony Funnell doesn’t care obviously. He’s a Wally award winner.

    Sound it out loud.. Antony Funnell is a really funny name.

    Whoops, I meant Walkley mot Wally.

  17. Neil

    I do not understand MMT. They say govt spending is private sector savings or something like that and they talk about sectorial balances. But MMT only works if you have a sovereign currency. So it does not work for Greece because they have the Euro.

    But MMT sounds to good to be true and only something lefties would come up with. Pay off all your debts by money transfer and not need to produce anything

  18. Tel

    MMT sounds like an absolutely bonzer idea, so in the interests of the cultural diversity, vibrancy and can’t-get-enough-of it-globalism which the ABC never stops spruiking, let’s pay their salaries in Zimbabwean or Venezuelan dollars – they can choose.

    We could go one better than that.

    Allow the ABC to print their own dollars … perfectly legal and it says “ABC Dollar” in the top corner of each note. They can choose their own colours, print as many as they like and pay themselves whatever amount they decide is reasonable.

  19. JC

    Allow the ABC to print their own dollars

    Choose a name

    1. ABC Dollars

    2. Funnell Dollars.

    I’d go with Funnell Dollars.
    3 trillion Funnell Dollars = 1 USDollar at the current exchange rate.

  20. John Bayley

    But MMT only works if you have a sovereign currency.

    Argentina has a sovereign currency.
    Venezuela has a sovereign currency.
    Brazil has a sovereign currency.
    Peru has a sovereign currency.
    Russia has a sovereign currency.
    Zimbabwe has/had a sovereign currency.

    Yet every one of these countries has experienced runaway hyperinflation in the past 50 years; some of them more than once.
    If you point this out to the MMT cranks, they always tell you it’s not relevant because…blah, blah.
    They are the same like the socialists/communists: ‘It works fine, it just has not been implemented properly!’
    No wonder, because they (MMT cranks) are in fact socialists/statists themselves.
    As is their ‘theory’.
    They should be laughed at.
    Alas, as the ABC has correctly pointed out, they are in fact ‘gaining traction’ with idiotic politicians like Alexandria Occasional Cortex over in the US Dumbocratic party.
    Not that the Republicans are much better; in that the Dem/Rep parallel our very own Lab/Lib a.k.a Tweedledumb and Tweedledumber.

  21. Old Lefty

    Descending from the realms of theory, the miraculous discovery of MMT gives the ABC another chance, for the trillionth time, to bash the Morrison genocidal fascist racist imperialist capitalist ecocidal etc etc fascist junta.

  22. Old Lefty

    Even the ABC’s so-called language expert is a shrieking culture warrior who thinks grammar and punctuation are reactionary tools of repression. No wonder they got rid of Irene Opinion, who at least talked sense about language.

  23. max

    “Old wine in new bottles” means An existing concept or institution offered as though it were a new one.

    ECONOMIC CRACKPOTS AND MONETARY CRANKS PROMOTE FIAT MONEY

    Greenbackers believe in economic salvation by fiat money monopoly issued by unaccountable bureaucrats operating under the authority of Congress.

    The Greenbackers are big advocates of Abraham Lincoln. Why? Because he allowed the banks to suspend payments in gold in 1861. Then in 1862 and 1863, he signed into law a system of unbacked fiat money called Greenbacks. They see him as the creator — a would-be national savior who was thwarted by the bankers, who had him assassinated.

  24. JC

    The Greenbackers are big advocates of Abraham Lincoln. Why? Because he allowed the banks to suspend payments in gold in 1861. Then in 1862 and 1863, he signed into law a system of unbacked fiat money called Greenbacks. They see him as the creator — a would-be national savior who was thwarted by the bankers, who had him assassinated.

    This isn’t even the half of it , max. Aliens also helped in the assassination. He had to go in case all was revealed.

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