Why Australia Will Never Run Out of Money

43 Comments

1. I find it interesting that people use Japan as an example of the outcome of MMT, although this is far less common now than it was a few years ago.
   Using Japan’s public debt as a case study is hardly one that inspires confidence, its economy struggles more than Australia’s and most other developed nations.
   That Japan has not defaulted on debt is hardly the standard we should apply to the question.
   As I posed earlier, the question for MMT proponents to deal with is- what could possibly go wrong?
   Is this a coincidence? In Japan, huge debt has accompanied poor/flat line economic growth, a falling population, an aging population (with a third of the population aged over 65)
   These facts are indicators of economic and societal failure rather than success.
   It indicates low public confidence in the future, poor investment, with burden of caring for an aging population falling on an ever decreasing base.
   It is dangerous and disingenuous to suggest this is a path Australia should deliberately choose to follow.
   What could possibly go wrong?

2. Thanks for sharing your perspective. I understand your concerns about Japan, but the article isn’t suggesting we copy Japan’s model, it’s pointing out that despite having debt over 250% of GDP, Japan has never defaulted. That fact challenges the common claim that “a government can run out of money.”

   Australia’s situation is different: we issue our own currency and have strong capacity to invest in housing, healthcare, education, and climate action. The problem is not that we lack money, it’s that public money is too often directed to corporate subsidies and tax concessions rather than public good.

   The real question isn’t what could go wrong if Australia spends more, but what goes wrong when governments fail to spend on citizens’ needs? Rising housing stress, overburdened hospitals, and student debt are already showing us the cost of not using our dollar sovereignty responsibly.

3. I agree, what is the point of government having a financial surplus, while having a social deficit? Try telling a person sleeping on a park bench, don’t worry, we’ve got a triple “A” rating.

4. I think it is fair to say Japan is in malaise. There are few economic, demographic or societal indicators that suggest it is succeeding. 
   So the fact that it has managed not to default is hardly a reason to celebrate its success. 
   On just about every measure, society lacks confidence in the future, and the debt burden is a contributor.
   Japan is a society that is struggling on a range of fronts, and I’m not aware of any suggestions that debt should simply continue to mount.
   At what level does public debt become of concern? At 300% of GDP? 500%? 1000%?
   Proposing endless and mounting public debt as any form of panacea for funding public expenditure is short sighted and irresponsible.
   Hands up all those countries with high public debt that would be unconcerned with more…
   Anyone?
   And the question remains- why do those that accept the findings of the majority of experts, who devote their careers to the study of climate, reject the findings of the majority of experts who devote their careers to the study of economics?

5. A Commentator,
   Thanks for your comment. I don’t think anyone is celebrating Japan’s broader economic struggles, the point is simply that even with debt well over 250% of GDP, Japan has never “run out of money” or defaulted. That challenges the claim that governments are like households.

   The real issue is not the number itself, whether it’s 100%, 300% or more, but whether a government is using its money to mobilise the real resources available in the economy. If there are idle workers, underused skills, or unmet needs in housing, health and education, then public spending can put those resources to work without creating a problem.

   Personal debt is very different because households are currency users. They can go broke if income falls short. A currency-issuing government like Australia’s cannot.

   So the question isn’t “what level of debt is too much,” it’s “are we investing in people and services in a way that makes Australia stronger?” Right now, too much public money props up corporations while ordinary Australians are left with rising costs and growing personal debt. That’s the real danger.

6. Firstly I’ve never suggested that government expenditure is “like a household”*
   Who here has? It’s a red herring.
   Secondly, the critical point is that onus is on those proposing to walk away from the economic recommendations of the overwhelming majority of those that make a career out of economic research, to guarantee that there will be no unanticipated or unexpected economic or societal consequences with the adoption of MMT. Will you guarantee this?
   What could possibly go wrong?
   Simply saying “Japan hasn’t defaulted” doesn’t cut it, and it particularly doesn’t cut it given the economic and social malaise of the country

7. A Commentator,
   Thanks for clarifying. I take your point that you personally are not saying government finances are like a household. I only raised it because that comparison is made so often in public debate, including by politicians and media, and it is one of the biggest misconceptions I try to challenge.

   On your second point, no economic framework can offer absolute guarantees, mainstream or otherwise. Conventional economics has also produced unanticipated and damaging outcomes: financial crises, austerity policies, and decades of rising inequality. So the onus cannot fall only on those who argue for alternatives.

   It is also worth noting that many respected economists, both in Australia and internationally, support the principles of Modern Monetary Theory. Scholars such as Stephanie Kelton, Bill Mitchell, Randall Wray, and Pavlina Tcherneva, among others, have built strong academic foundations for MMT. They argue that it provides a clearer understanding of how currency-issuing governments actually operate and what opportunities this creates for serving the public purpose.

   The real issue is not about finding a system that promises perfection, but about choosing a framework that best explains reality and enables us to address pressing needs, such as housing, healthcare, education, and climate action. That’s why I believe it is important to include MMT in the public discussion.

8. Denis, you are correct to point out the serious deficiencies within economic theory.
   This article from the Bill Mitchell you mentioned has a few “WOW” moments.
   https://billmitchell.org/blog/?p=62349

   Here’s an extract — A large body of research in social sciences (around the world) has demonstrated that standard economics programs at our universities breed people with sociopathological tendencies who elevate greed above empathy… One 2005 study that was published in the journal Human Relations found that:
   1. Economics students exhibited less altruism and more self-interest in their “first week of their freshman year”.
   2. That is, “differences between students of economics and students from other disciplines were already apparent before students were exposed to training in economics”.
   3. After one year of study these differences were maintained and stable.
   4. By the final year of study, the emphasis on “achievement, power, hedonism” were sustained and economic students valuation of “benevolence”, which we might think of as being empathy towards others, had declined significantly.

   In their 1993 article – Does Studying Economics Inhibit Cooperation? – economist Robert Frank and psychologists Thomas Gilovich and Dennis Regan summarised the extant literature and conducted a series of their own experiments to explore whether there are significant differences between “economists and noneconomists” in relation to whether they exhibit sociopathological tendencies.
   They conclude that:
   1. “that economists are more likely than others to free-ride”.
   2. “economics training may inhibit cooperation …”
   3. And, interestingly, that “the ultimate victims of noncooperative behavior may be the very people who practice it”.
   4. And students in economics classes are more likely to lie when confronted with experiments about generosity – that is, claiming to be more generous than they were.

   Further, an LSE Centre for Economic Performance Discussion Paper (No. 1938, July 2023) – Are the upwardly mobile more left-wing? – found that:
   1. “that higher own status and higher-status parents independently produce Conservative voters.”
   2. Higher own status leads to “opposition to redistribution”.
   3. “individuals with the most Right-wing attitudes (and votes) are then those with high social status whose parents were also of high social status.”
   The problem then is that not only are the number of economists emerging from universities declining but there is also a growing concentration among males from privileged backgrounds that are liable to exhibit the sorts of tendencies noted above.

   Think about that in the context of designing progressive government policy.
   It is not an attractive future.

9. Denis, clearly I’m not concerned about MMT being part of the public debate, because I’m participating in it.
   When people cite a small number of economists that support an economic theory, as justification, I’m always reminded of the fact decades ago many used to cite Milton Friedman as the economic oracle. He was awarded the Nobel Prize for economics. Margaret Thatcher and Ronald Reagan were adherents.
   That didn’t turn out well.
   People should exercise great care in choosing to adopt a largely untested economic theory because a few proponents are articulate and plausible.
   This downside risk is just too great
   The Friedman outcome is a case study in this risk.
   And what we know is that the country that may practice MMT is in long term (and possibly irreversible) decline.
   Given that there are no countries with high debt that would prefer to have more, we should be extremely cautious with MMT.
   I’m not willing to load up the next generation with the possible downside.
   ▪︎▪︎▪︎▪︎▪︎▪︎▪︎▪︎▪︎▪︎▪︎▪︎▪︎▪︎▪︎▪︎▪︎▪︎▪︎▪︎▪︎
   I’m glad Steve has chosen to enter a debate on a thread about economics and MMT.
   It provides me with the opportunity to remind him of his previous claim that the low level of public/government debt in Russia was a indicator of its economic success.
   I said at the time, it suggested he was opposed to MMT.
   He made this statement while claiming the economic data I identified about Russia’s official interest rates, mortgage rates, chronic labour shortage, currency devaluation, poor share market and business confidence, the proportion of GDP devoted to military expenditure, its high inflation were “meaningless” in a discussion about Russia’s economy.
   This says it all about Steve’s economic credentials.

10. AC thinks it’s appropriate to use this thread to mount an attack on me?
    If I was fixated on someone to the extent that we are seeing here, I would seek professional help.

    AC has posted four comments about MMT and is yet to say anything of consequence.
    His argument boils down to this — “People should exercise great care in choosing to adopt a largely untested economic theory because a few proponents are articulate and plausible. This downside risk is just too great.”

    We might ask — The downside risk is too great for whom?
    It’s not too great for those victims of the current system who receive unemployment benefits that do not cover living costs, let alone the costs of training, of transport to interviews and all the other costs associated with gaining employment and complying with mutual obligation requirements.

    Even in a wealthy country like Australia, people are suffering because of the economic policies that AC wants to preserve.
    We have a Reserve Bank that through adjustments to interest rates, uses unemployment to control inflation.
    In short, we have an economy in which economic data is seen as more important, more worthy of consideration, than the lives of ordinary folk.
    The economy does not serve us — we serve the economy.
    And all to stabilise the economy to protect the assets of the wealthy.

    This, from the Bill Mitchell quote above, explains why ordinary folk do not matter, and sheds light on AC’s regard for isolated economic data.
    A large body of research in social sciences (around the world) has demonstrated that standard economics programs at our universities breed people with sociopathological tendencies who elevate greed above empathy…

    The history of economic policy is a history of untested economic theories.
    My guess is that those on struggle street would welcome any untested theory that offers some hope of relief.

11. Steve is you opinion anchored in any knowledge or informed view?
    Because just about the only actual economic indicator you previously used to demonstrate Russia’s economic success was low public debt.
    Do you stand by your claim that low public debt is a sign of economic success?
    And can.ypu explain how factually pointing out your past positions is an “atrack”?

12. The anti-social aspects of the prevailing economic system come from a long and distinguished line of economic sociopathy.
    As the economist Michael Hudson explained in an interview — Modern Monetary Theory explains how to finance the domestic budget deficit. One thing Modern Monetary Theory theory cannot do is create foreign currency. The United States can create dollars to spend into the economy. Then you don’t have to borrow these dollars from wealthy bondholders and investors. You can simply print the money. You don’t have to levy taxes, because that’s the essence of paper money.

    So Modern Monetary Theory refers to a domestic economy, not to foreign money. It’s a theory of domestic money.

    Gold is a constraint on money creation. It all goes back to the awful, awful theories of David Ricardo, the bank lobbyist, in Britain in 1809 and 1810, when he was testifying before the Bullion Committee and saying, “We need to keep wages down. We need to keep the economy poor, so that the wealthy creditors can get enough money to control the world, and reduce everybody else to abject dependency. So we’re against paper money. Paper money is inflationary. If you only use gold and silver, which the rich people have, then we can manage the whole world”.
    Well, he didn’t say it just in those words, as you can imagine, but his arguments were against creating paper money. This was the antithesis of Modern Monetary Theory.

    Ricardo spelled out in great detail exactly what the principles of the International Monetary Fund are have been since 1944 and ‘45, that, if you don’t let countries create their own paper money, and force them to have hard currency, gold, or US dollars, then those countries can’t afford to hire more labor; they can’t afford to invest. They’ll be completely dependent on countries that can act as creditors.

    I’m writing a book now — I’m on the last two chapters — on the political alliances of bankers from the Crusades up to World War One, where you have the whole attempt at hard money.
    This is what caused a rupture in American politics in the 1870s, ‘80s, and early ‘90s.

    It all goes back to Ricardo saying, if you take away the government’s ability to run deficits and spend money into the economy, then you’ll be dependent on the rich people to supply the money. So when President Clinton finally ran a budget surplus in 1998, what happened? That meant that the government was not spending money into the economy. People had to go to the banks and borrow, and pay interest to the banks.

    That’s what the financial sector wants. It wants to get interest, wants to force the economy at large to pay interest, to get the money that the economy needs to conduct business, and employ labor, instead of having the government simply provide, printing the money, without interest. The inflationary effect is identical. It’s no more inflationary to print money than to borrow from a billionaire, who isn’t going to spend money on buying [more] eggs, in any case, and “printing” the money that way.

    So there’s a whole fight over, what is the source and the use of money in an economy today?

    Political elites have always sought to control the economy. When the liberal bourgeoisie deposed the aristocracy through revolution, they did not do away with class distinctions, they simply made themselves the ruling elite. And that is what the fight over MMT is all about.
    The elite class is determined to retain control of the creation of money because that is where their power lies.

13. And?
    You previously used low public debt as an indicator of economic success.
    Have you changed your mind?

14. These discourses seem good. a bit wry some of it?

15. Crikey.

    This does not look good.

    AC is having a conversation with himself. Again.

16. Hardly Steve
    I’m pointing out yet another example of your lack of economic capacity, your routine inconsistency, your lack of credibility.
    So…do you continue to hold that a low level of government debt is an indicator of economic success?

17. It’s a sad fact of life that those who need specialist help the most are those least likely to seek it.

    AC is having a conversation with himself.
    Do not be surprised if he introduces his “little green men” again.

18. Steve, I’m not sure whether you’ve noticed, but I’m entirely comfortable with continuing to point out your serious inconsistency, your cherry picking, your lack of credibility on a range of subjects.
    And thank you for providing so much material.
    Now…you’ve previously said low public debt is an indicator of economic success.
    Do.you still have that position? Or have you changed your mind?

19. Thanks Denis, the fact that inequality is growing means our economic model is not working for all, it’s important that we understand how the economy truly works and how it might work better.

    To A Commentator: “In Japan, huge debt has accompanied poor/flat line economic growth, a falling population, an aging population (with a third of the population aged over 65)
    These facts are indicators of economic and societal failure rather than success.”
    Firstly, perpetual economic growth on a finite Earth is madness,so if a poor/flat line economic growth is associated with sustained wellbeing in a population, that is not economic or social failure, it would be a success that ought to be repeated in other countries.
    Secondly, the world is overpopulated, a falling population associated with sustained wellbeing in a population would likewise be a success rather than a failure.
    Thirdly, an aging population may well be an indication of a good health system, hardly an indicator of failure, if that’s the case, but rather a social success.

    To reduce the situation in Japan to a bland statement of this indicates economic and social failure without taking into account the miriad of nuances involved is, sorry to say, ideological piffle.

    To then make the gigantic leap to “It indicates low public confidence in the future, poor investment, with burden of caring for an aging population falling on an ever decreasing base.” without a shred of evidence, not one iota, not a jot of evidence, no figures, no quotes, no analysis, no logic, just bluster is …well, dangerous and disingenuous. It doesn’t cut it.

20. Gonggongche
    If a country chooses a to adopt a policy of declining economic growth (or contraction) and accepting an ever aging population as a strategy to deal with limiting emissions, lowering consumption, environmental sustainability, I’m entirely supportive of this.
    Adopting the strategy would mean that they would also plan on how to deal with the possible downside (population/demographics, narrowing tax base, ever diminishing  working cohort to support the non working)
    But the country in question (Japan) didn’t choose that path, it just stumbled into it.
    Would Japan prefer less debt? Or more?
    Japan is a case study – on what can go wrong.

21. AC,
    There are more than a few economists who support MMT. Here are several.

    List of Australian and international Modern Monetary Theory (MMT) academics and their qualifications, including institutional affiliations and contributions. These individuals have been instrumental in developing and disseminating MMT as a framework for understanding sovereign currency economics.

    Professor Bill Mitchell
     Qualifications: BCom (Hons), PhD (Economics), LLB, Dip. Crim
     Affiliation: University of Newcastle, NSW (Director, Centre of Full Employment and Equity – CofFEE)
     Contribution: Co-founder of MMT; prolific author and international speaker
     Website: https://billmitchell.org
    Dr Martin Watts
     Qualifications: BSc (Econ), MSc (Econ), PhD
     Affiliation: University of Newcastle (Emeritus Professor of Economics)
     Contribution: Co-author of several MMT papers and textbooks with Mitchell: https://www.newcastle.edu.au/profile/martin-watts
    Dr Steven Hail
     Qualifications: BSc, MSc, PhD (Economics)
     Affiliation: Torrens University, Adelaide (previously University of Adelaide): https://modernmoneylab.org.au/
     Contribution: Advocate of MMT in Australia, author of Economics for Sustainable Prosperity
     Website: https://stevenhail.substack.com
    Steve Keen: Economists: https://www.ineteconomics.org/research/experts/skeen
    More about MMT: https://en.wikipedia.org/wiki/Modern_Monetary_Theory
    Modern Money Australia: https://modernmoneyaustralia.org/

    🌍 International MMT Academics
    1. Professor Stephanie Kelton (USA)
     Qualifications: BA, MPhil, PhD (Economics)
     Affiliation: Stony Brook University, New York (Professor of Economics)
     Contribution: Former Chief Economist for the U.S. Senate Budget Committee; author of The Deficit Myth
     Website: https://stephaniekelton.com
    2. Professor Randall Wray (USA)
     Qualifications: BA, MA, PhD (Economics)
     Affiliation: Levy Economics Institute, Bard College
     Contribution: Founding MMT theorist; author of Modern Money Theory
     Website: https://www.levyinstitute.org
    3. Dr Pavlina R. Tcherneva (USA)
     Qualifications: BA, MA, PhD (Economics)
     Affiliation: Bard College; Levy Economics Institute
     Contribution: Job Guarantee expert; author of The Case for a Job Guarantee
     Website: https://pavlina-tcherneva.net/about/
    4. Professor Fadhel Kaboub (Tunisia/USA)
     Qualifications: BA, MA, PhD (Economics)
     Affiliation: Denison University, Global Institute for Sustainable Prosperity
     Contribution: Specialises in development economics and ecological sustainability
     Website: https://denison.edu/people/fadhel-kaboub
    5. Dr Scott Fullwiler (USA)
     Qualifications: BA, PhD (Economics)
     Affiliation: University of Missouri–Kansas City
     Contribution: Expert in monetary operations and macroeconomic modelling
     Website: https://modernmoneynetwork.org/team/scott-fullwiler/
    6. Warren Mosler: MMT economists. https://moslereconomics.com/warren-mosler-bio/

    More about MMT: https://en.wikipedia.org/wiki/Modern_Monetary_Theory
    Modern Money Australia: https://modernmoneyaustralia.org/

22. AC,
    I appreciate that you bring strong views to these discussions, but I think it is important to recognise that economics is not a settled science. There are many schools of thought, and no single perspective has a monopoly on credibility.

    Low public debt, high public debt, neither on its own is a reliable indicator of economic success. What matters is how a government uses its currency to mobilise real resources and improve people’s lives. On that, even mainstream economists disagree sharply.

    For me, the key point is this: Australia will never run out of money. The real debate should be whether public money is being directed towards citizens’ needs, housing, healthcare, education, climate adaptation, or into corporate subsidies and tax concessions.

    I don’t claim to have all the answers, but I believe it’s fair for Australians to question orthodox views when the results we see around us are rising inequality, unaffordable housing, and overstretched public services. That’s why voices outside the mainstream deserve to be heard alongside it.

23. Hi, Denis.

    One of your comments was stuck in moderation. We apologise for that.

    The security software does that if there are a more than 10 links in the comment.

    I’ll go into the settings and increase it to 15.

24. No problems, Roswell.

25. A Commentator
    “Japan is a case study – on what can go wrong.” Doesn’t that contradict what you said beforehand? With one breath Japan has stumbled into a desirable situation, and with the next breath that is a case study of what can go wrong – sounds like a contradiction.

    For the record,my personal perspective is that Japan and Australia are monetarily wealthy nations, yet both have significant poverty and homelessness. There is nothing nuanced about that, that is an economic and social failure.But poverty and homelessness are political choices. If the people elect a bad government they will get bad results irrespective of whether the government employs MMT or barters seashells.

    Japan is apparently the 2nd largest creditor nation in the world,it is investing money in other countries yet has a poverty problem at home. Labor is giving Japan gas for free and knowingly allows its storage tanks in NT to leak like a sieve. Japan resells gas to third parties making billions. It would seem that money isn’t then used to eliminate homelessness in Japan.

    Poverty and homelessness are political choices, not an inherent character of MMT.

    Australia’s Labor government is running a deficit, spending billions on submarines everyone knows we won’t get, but says it doesn’t have the money for public housing.

    Poverty is a political choice.

    Instead of re-introducing the Carbon Pricing Mechanism that worked in 2013,that had polluters paying for emissions reductions, Labor has chosen to incentive renewable energy initiatives with grants and/or underwrites.That has taxpayers paying for emission reductions and picks favourites for the handouts.Is it something like $600 million Gina Rinehart got in a grant? All while approaching 1 million Australians remain in poverty.

    Poverty is a political choice, it is a product of bad governance so I don’t see it supporting your assertion that “Japan is a case study – on what can go wrong.”in relation to employing MMT.

    As for “I think it is fair to say Japan is in malaise.” I don’t agree, but it would depend on how each of us sees malaise. Again, a claim without a shred of evidence, not one iota, not a jot of evidence, no figures, no quotes, no analysis, no logic, just bluster. It doesn’t cut it, does it.

26. Denis, to add to your list —
    Michael Hudson, President of The Institute for the Study of Long-Term Economic Trends (ISLET), a Wall Street Financial Analyst, Distinguished Research Professor of Economics at the University of Missouri, Kansas City.
    Author of Super-Imperialism: The Economic Strategy of American Empire (Editions 1968, 2003, 2021), ‘and forgive them their debts’ (2018), J is for Junk Economics (2017), Killing the Host (2015), The Bubble and Beyond (2012), Trade, Development and Foreign Debt (1992 & 2009) and of The Myth of Aid (1971), amongst many others.
    Michael has acted as an economic advisor to governments worldwide including US, Canada, Mexico, China, Iceland and Latvia.

    It’s an impressive list.
    About 12 months ago I was neutral on the MMT issue or a little in favour, but Arnd swung me against it on purely theoretical grounds IIRC.
    But the current system causes so much harm in so many ways, including provoking warfare and entrenching poverty, that it seems rather obvious that any option that might bring relief to those who are struggling is well worth a try.

27. Thanks for the reply Denis
    I’m not necessarily orthodox in my economic views, I simply think MMT is a very risky approach to economic management.
    It is likely to be a treadmill that is difficult to get off. It significantly relies in governments quickly reacting to inflation and changing economic conditions.
    We can see that governments don’t react quickly in implementing a contractionary monetary policy, and there is far too much reliance on the blunt instrument of interest rates.
    My view is that there is plenty of risk and downside associated with MMT.
    The most prudent approach is to maintain Keynesian policy.
    Increase government intervention and debt during severe downturn and squeeze it down during economic expansion.
    This way future generations have the option of also reacting to the economic conditions without being saddled with the debt legacy of ours.
    This is the responsible approach to our children and grandchildren.
    As for the range of economists that support MMT, there was a similar view of the Chicago School a generation ago. That didn’t turn out well.
    As I said having articulate, intelligent advocates doesn’t make an untested economic theory a success
    Unless anyone can outline why a public debt to GDP ratio of 500% is manageable and responsible, it is a risk not worth taking.
    ••••••••••••••••
    Gonggongche, I think your most recent point is about political choices relating to expenditure rather than about economics. That’s fine with me.
    ••••••••••••••••
    Thanks Steve , the clarification of your position is interesting.
    When I posted information about the performance of the Russian economy (official interest rates, mortgage rates, inflation rate, share market performance, currency devaluation, chronic labour shortage, percentage of GDP devoted to military expenditure, population demographics)…you said this was “meaningless”
    The information you posted to contradict this point was the low level of public debt in Russia.
    It’s great that you’ve now walked away from even this as an indicator of economic success.

28. From the the fantasyland that is ACWorld — When I posted information about the performance of the Russian economy (official interest rates, mortgage rates, inflation rate, share market performance, currency devaluation, chronic labour shortage, percentage of GDP devoted to military expenditure, population demographics)…you said this was “meaningless”. The information you posted to contradict this point was the low level of public debt in Russia.

    It must be a great comfort to live in a world of selective memory.

    AC was in a tizz about the Russian economy because his favourite superpower bit off more than it could chew in Ukraine.
    As a salve to ease the pain of Russia not crumbling from the economic warfare the Western bloc threw at it, he tried to put a rosy glow on the embarrassment by listing every Russian economy stat he could lay his hands on.
    And it was all meaningless as I said at the time, because the West lost the economic war. Russia did not crumble. Statistics only have meaning from context. In a losing argument they mean nothing.

    Here is what I actually said at the time — Please pay attention, because this has already been explained once. They created the false perception that Russia had a weak economy that would crumble under the weight of sanctions. They acted on that false perception. They started an economic war against Russia. And they lost.
    As you have worked out by now, AC was not paying attention.

    AC will have to find a far more effective salve now, because not only did the West lose the economic war, they are now pleading for a ceasefire in the ground war.
    Winners do not plead for a ceasefire.

    While he’s at it, he needs to tweak his selective memory algorithm. At the moment it’s attracting some rather awkward attention.

29. Great Steve. Please post the link , because I’d like to trawl through all your comments and replies, and mine.
    Nonetheless, it’s great that you’ve walked away from.the single economic indicator you used

30. Please post the link , because I’d like to trawl through all your comments and replies, and mine.

    Did readers pick up on what happened there?

    AC posted no link to back his false assertions, but expects me to provide his faulty selective memory with a helping boost.
    What was that line from The Castle?
    Tell ‘im he’s dreamin’

    He introduced a trivial issue from the past that has no connection to the article, and is unable to deal with the consequences of his silliness.

    The attempted diversion is now under way

31. Hilarious Steve.
    Tell me, is it a false assertion to say that you used Russia’s relatively low level of public debt to justify your claim about Russia’s economic performance? No.
    Is it a false assertion to say that (in response to the economic information and data I posted about Russia’s economic performance), you said it was “meaningless”? No
    I’ve always observed that you make provocative comments, then modify, qualify and amend under challenge.
    It can be entertaining to watch your contortions

32. So I asked Grok — What is it with people who want to re-live old losses?

    The answer came back — Oh no, not that clown with the “Russia’s going broke” data again? Tell him to stop worrying. When NATO exits Ukraine with a whimper, they can drop a few bombs on some Galapagos Islands turtles. That’ll fix it for ‘im.

33. AC,
    Thanks for laying out your view clearly. I think there are a couple of points worth addressing.

    First, governments that issue their own currency, like Australia, are already operating on the principles that Modern Monetary Theory explains. Every time the Commonwealth spends, it creates dollars. The question isn’t whether we use this capacity, but for whom. At the moment, much of it goes into corporate subsidies, tax concessions, and support packages like JobKeeper that delivered billions to profitable companies, not into housing, health, or climate action.

    Second, the idea that today’s government debt is a “burden on future generations” is misleading. When the Australian Government issues bonds, it is essentially providing a safe interest-bearing asset to the private sector. Who does the government have to pay it back to? Australian bond holders, banks, and super funds. There is no foreign creditor holding us to ransom, and repayment simply means creating new dollars. What we leave to our children is not “debt,” but the quality of public infrastructure, education, health systems, and environment we choose to fund.

    Third, inflation is the real constraint, not the size of the debt. MMT doesn’t deny risks. It says governments must watch the use of real resources and adjust fiscal policy when demand outpaces capacity. Relying mostly on interest rates, as we do now, is indeed a blunt instrument, but that’s an argument for expanding fiscal tools, not against them.

    Finally, you referenced the Chicago School. That school of thought drove deregulation, austerity, and privatisation worldwide, and the results have been widening inequality, fragile economies, and environmental harm. In contrast, MMT’s emphasis is on using public money for public purpose. That is not “untested theory”, it’s a description of how currency systems already function, coupled with a proposal to use that understanding responsibly.

    So I would turn your question around: rather than asking if 500% debt-to-GDP is manageable, the real question for Australians is. why are we tolerating rising poverty, insecure jobs, and unaffordable housing when Australia will never run out of money to address them?

34. Chicago School of Economics: https://www.britannica.com/money/Chicago-school-of-economics

35. Denis, I agree that the government should use more financial instruments.
    But they don’t, they have outsourced inflationary control to the Reserve Bank, and we observe that interest rates cause the burden of control of inflation to fall disproportionately in younger home buyers.
    And one of the behaviours we observe in government is that they regularly maintain economic stimulation while the RB is taking a contrary approach by increasing interest rates.
    I have little confidence in governments improving their economic discipline in restraining spending during inflationary periods.
    Which is a key requirement of MMT.
    A significant proportion of Australian public debt is held by foreign entities, I can’t see that increasing public debt, owed overseas, increases the independence of decision making in Australia.
    If we allowed public debt to increase without any intention of reducing it, will future generations have the range of policy options we have or will they be constrained by the debt we leave them,
    ••••••••••••
    Steve once again proves his expertise in changing and avoiding the subject.

36. AC,
    Thank you for this. I think we agree on some important points. Like you, I believe that relying almost entirely on the Reserve Bank and interest rates is unfair, especially when the costs fall heavily on younger homebuyers. That’s why I argue we need governments to take far greater responsibility for inflation control, rather than outsourcing it.

    Where we may differ is in how public debt is understood. Overseas investors indeed purchase a significant share of Commonwealth bonds, but that doesn’t reduce Australia’s capacity to issue its own currency. Those bonds are still denominated in Australian dollars, which only the Commonwealth can create. Our independence comes from that monetary sovereignty.

    Regarding future generations, I’d put it this way: what constrains their choices is not the level of “debt” they inherit, but the state of the nation’s real resources, housing stock, health systems, education, infrastructure, and a safe climate. Leaving them crumbling services and unaffordable housing in the name of “fiscal discipline” is more damaging than leaving them government bonds.

    So while I share your view that governments need to be more disciplined in targeting spending, the measure of that discipline shouldn’t be reducing deficits for their own sake. It should ensure public money is used for the public good.

37. I am enjoying the discussion here.

38. Roswell,
    Yes, it’s incredible. I’m unsure why this article has generated so many comments.

39. Denis, I admire your persistence in pushing this, but I think that realistically we will not see progress toward a more inclusive system until the failures of the current system become increasingly painful for the general population.
    But there is a glimmer of hope on the horizon.

    The BRICS group is now larger in economic terms and population, than the G7.
    If their aim of mutual prosperity and inclusion bears fruit, it will be seen as a significant contrast to the islands of prosperity in a sea of poverty that are produced by liberal economic theory.

    China’s internal economics of inclusion has already produced staggering results that are without parallel in human history.

    If we ever reach a point where the Western masses look over the fence and see their BRICS neighbours doing increasingly well, the outcome will be revolutionary.

40. Thank you, Steve; I sincerely appreciate your encouraging words. You’re right, often change only comes when the failures of the current system become impossible to ignore. That’s why it’s so important to keep raising awareness now, so people can see there are alternatives.

    The rise of the BRICS is a significant milestone. Suppose these countries succeed in building models based on mutual prosperity and inclusion. In that case, it will shine a light on just how much ordinary people in Western nations are missing out under neoliberal policies. And you’re right about China, lifting hundreds of millions out of poverty in such a short time is a result that can’t be dismissed.

    If Australians begin to look beyond the “there is no money” narrative and see how other nations are using their economic sovereignty, it could inspire the same kind of change here. That’s the future I keep writing towards, one where public money is used for the public good, not corporate profit.

41. Denis, yes, it is all about economic sovereignty.

    As the great Eduardo Galeano put it when describing the brutal, militarized neo-liberalism that was introduced in Latin America:

    “People were jailed so that prices could be free.”

42. Yes, it is an interesting discussion (thanks for your forbearance Denis)
    I think there are a range of economic/taxation equity and efficacy issues to deal with before we plung into a policy that is not formally adopted by any country, and which carries risks that remain uncertain and largely undefined.
    And rather than rehash/restart points I have already made to Denis** I’d like his view on one of my personal pet economic suggestions.
    The purpose of having an independent Reserve Bank is to set official interest rates – to suppress or stimulate inflation/aggregate demand/economic activity
    It is a blunt instrument that falls unfairly and disproportionately, particularly on the young.
    The pain of the policy is accute for some, while others are unaffected or may prosper via investment returns.
    I’d like to provide the Reserve Bank with more economic tools/levers.
    That is provide a fiscal well as monetary option.
    For example, if interest rates are used to take the edge of economic activity, a variable GST can serve a similar purpose.
    Adding a temporary couple of percent to the GST would have a similar effect to an interest rate increase, but but the GST increase would spread the pain more equitably.
    The benefit is that the GST increase would also pay down public debt, and while Denis may not see this as a particular benefit, I remain interested.
    So…I would have the government set a legislated
    base GST and the Reserve Bank establishment a flexible margin above, determined by the need to stimulate or contract economic activity.
    Options welcome.
    •••••••••••••••••••••••
    **on the other hand, Steve (being a know it all who makes provocative comments that he then modifies, qualifies and crab walks away from) deserves to be reminded regularly of his embarrassing history.

43. AC,
    Thanks for putting this idea forward. I think we actually agree on some of your concerns, the Reserve Bank’s reliance on interest rates is a blunt tool, and its use of concepts like NAIRU/NARU has been strongly criticised, because it effectively accepts unemployment as a policy lever. That burden does indeed fall most heavily on young mortgage holders and low-income families.

    Where I’d differ is in seeing a variable GST as the answer. A GST rise still lands hardest on those who can least afford it, because it takes a bigger share of income from ordinary households than from wealthier ones. So it risks repeating the same equity problems we already see with interest rate rises.

    And I’d also question whether “paying down public debt” is the right goal. As I’ve argued, Australia will never run out of money, the issue isn’t reducing debt, but ensuring public money is used for public good rather than for corporate subsidies and donors. We already operate on MMT principles, but we don’t use them to strengthen health, housing, or education.

    For me, giving the government itself more fiscal tools, targeted directly at resources and services, would be fairer than shifting the job to the RBA through GST changes.