aquascoot wrote on Aug 24^th, 2024 at 4:59pm:


Yes, because frequent market failure, cost of living crises, and periodic recessions badly affect less well-off citizens.   

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Keynes of course developed his economic policies largely in reaction to the Great Depression, which was largely a faiure of finance systems.

The important take from Keynes today is his famous remark: "if the (currency-issuing) nation can build it, the nation can afford it".

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A correct analysis, except for "planners couldn't keep pace with increasing population" - which is nonsense, planners can always plan for increasing population.   

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Wrong on a number of counts; the apparent 'failure' of  the Keynesian welfare state in the West happened quickly in the 70's, (not decades)  due to the Arab oil embargo which caused inflation in the West, and a simultaneous   loss of industry to low wage Asia, cuasing an increase in unemployment (in the West) 

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Wrong again: the "prosperity" wasn't evenly shared as many communities sank into '1st world rust belt' status. 

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Yet taxes on the rich have been reduced since the introduction of the post-Thatcher neoliberal era, which is why inequality is now soaring, and the West (and the entire globe)  is suffering a cost of living crisis courtesy of your "capitalist" free market dogma.

As for taxes, I'm here to tell you currency-issuing governments don't need your taxes, when the goods and services the government needs are available for purchase by the government.

See the next post re Starmer's lies - he's turning out to be as useless as an ashtray on a motor bike.

The real culprits behind the democratic dysfunction afflicting the entire world: mainstream economists (in this case, Saul Estlake):

AAP 

Labor warns of budget chaos as premier seeks new deal

The chaos of Tasmania's government will lead to "economic destruction" if a new deal cannot be reached with two newly independent MPs before the state budget, Labor has warned.

Braddon MP Miriam Beswick and Bass MP Rebekah Pentland declared on Sunday they will sign a new agreement guaranteeing supply and confidence to the government after they were expelled from the network founded by Tasmanian senator Jacqui Lambie.

The pair are among the crossbenchers Jeremy Rockliff's minority Liberal government relies on to stay in power after the March election.

"We are committed to providing the certainty and stability Tasmania deserves," they said.

But Labor Opposition Leader Dean Winter said the premier needs to get the new agreement sorted as quickly as possible, ahead of the state budget.


"The Liberal-Lambie coalition is already in tatters four months after it was formed and instability like this is very bad for the economy," he told reporters on Sunday.

"Minority governments are bad for the economy...This is what it looks like; it looks like chaos, it looks like economic destruction."

A condition of the Jacqui Lambie Network agreeing to work with the Liberal government, in power since 2014, was a deal for an independent report into the state's finances.

Economist Saul Eslake's analysis painted a bleak picture of the state's budget and found the Liberal government was "entirely to blame" for Tasmania's economic deterioration.

He estimated net debt would rise to more than $16 billion in 2034/35, more than 25 per cent of gross state product, unless tax reform is implemented.

There you have it: a dumb, blind economist urging "tax reform", when everyone knows taxes are anathema to politicians who want to get elected  - which is why the decade-old Henry tax reform proposals have been ignored by successive governments.  Winter of course has no proposals of his own, other than urging the disillusioned electorate to put him into power...

The government is due to respond when the budget is delivered on September 12.

Mr Winter, who replaced Rebecca White as state Labor leader in April, also criticised the broader political instability under Mr Rockliff's government, saying "no one wants an early election".

"Jeremy is a nice guy, but this is getting ridiculous," he said.

"Tasmania is not even due for the (next) election yet and the Premier's Liberal-Lambie coalition has already imploded."

And we still don't know how Winter will fix flat-earth-economist Eslake's $16 billion hole....which the Oz Treasury can eliminate with the stroke of a pen....

So, since politicians don't like raising taxes (because we are all self-interested, and those who can look after themselves don't like paying increased taxes),  how can government adequately fund public education, public hospitals and public housing (to deal with unaffordable private sector housing)?

[Note: the current controversy about caps on overseas students for Oz universities has arisen because the federal government abandoned funding unis 5 decades ago, and allowed the fake education "export industry " to fill the gap. Oz should be educating its own students, not fee-paying overseas students who increase demand on rent and infrastructure in Oz, causing inflation]. 

One method:

The government funds unis with money issued by the Oz Treasury, the legal currency-issuer in Oz.

Then limit uni intake to students who have the ability to succeed at the tertiary level, no fees required; overseas students limited by available places in Oz.

Control housing and rent prices, and other prices of essential utilities to control inflation, obviating  the need for CB interest rate rises (the blunt tool weilded by CBs  aka "monetary policy").   

Fund sufficient schools and hospitals (and teachers and medical staff) via attractive fixed price contracts (aka wages), thereby eliminating inflation relating to public sector activity.

Another method:

The Greens propose raising taxes, despite it being anathema to politicians who have to win government (as noted above).

ie, sufficiently tax big companies and the wealthy; - but both scream the economy will collapse if they have to pay more tax; and being powerful influencers and donators to governments, they win the day.

[Would the population elect enough  Greens in the Senate to force a minority Labor government  to raise sufficient taxes, which is the Greens strategy? 

Or would Labor side with the Coalition's low tax regime in the Senate....]

Method three: the status quo.

Bumble along with widespread community dissatisfaction and disillusionment with politics, caused by  inadequate public housing, public education and public hospitals.

A classic case of politicians' ignorance of economics aided and abetted by mainstream flat-earth neoclassical economists (plus Trump's 'inimitable' style):

(microsoft news)

Donald Trump shares bizarre reason why people don’t want to eat bacon anymore


Donald Trump shared his bizarre reason why people don’t want to eat bacon anymore.

The former US president said wind power is stopping people from eating bacon after he delivered a campaign speech in Wisconsin on Thursday (29 August).

Trump gave his comments to a young rally-goer asking what his plan is, "to make life more affordable and bring down inflation for someone like me."

Trump launched into what one critic denounced as a "word salad” and said: “You take a look at bacon and some of these products, and some people don’t eat bacon anymore.”
.......

I suppose Donald was trying to say renewables raise the cost of energy - and bacon; so a return to fossils is the way to bring down inflation....stuff the legally-binding international Paris Agreement.

https://www.thenewdaily.com.au/finance/2024/04/01/alan-kohler-monetary-theory

Alan Kohler: Modern Monetary Theory has become modern fiscal practice

Apr 01, 2024, updated Mar 31, 2024

A few years ago everybody was talking about Modern Monetary Theory, both ardently for and scornfully against, but nobody was doing it.

Now everybody is doing it but hardly anybody is talking about it, apart from American economist Stephanie Kelton, promoting a film on the subject.

Doing what, exactly? Governments are showing by their deeds that deficits and debt don’t matter.

Global government debt has hit a record high of $US82 trillion, more than double what it was before the GFC, and no sign of slowing since the end of the pandemic.

The world’s governments, in aggregate, haven’t managed a surplus for 20 years, and even then, it was small and brief.

MMT is not mentioned by name, but its prime heresy – that deficits don’t matter – has become gospel.

Australian Treasurer Jim Chalmers will soon announce his second surplus, but the government’s long-term forecasts show a return to deficits that last at least 10 years. If they thought it mattered, politically or economically, they wouldn’t.

In the United States the Congressional Budget Office is also projecting deficits forever, with endlessly rising government debt.

There is no serious objection to this, but there hasn’t been a mass public conversion to MMT, so what’s changed?

The reasons against

Three things: First, the pandemic revealed (again) the power of fiscal policy along with the fact that those particular deficits, at least, not only didn’t matter they were essential; second, Japan has shown that you can go for decades, and counting, with deficits and rising debt, and third, the baby boomer retirement bulge is forcing governments to confront the idea that balanced budgets are impossible, so they have given up trying.

The last of those is the most important. As BlackRock CEO Larry Fink wrote in his annual letter to shareholders last week: “It’s not just that more people are retiring … it’s also that their retirements are increasing in length. Today, if you’re married and both you and your spouse are over the age of 65, there’s a 50-50 chance at least one of you will be receiving a social security cheque until you’re 90.”

On top of that the cost of climate change – trying to prevent it and dealing with its effects – will be enormous and governments know it.

And Australia has added its own extra degree of difficulty with a National Disability Insurance Scheme based on diagnosis rather than need. There’s an attempt now to recover that mistake but it may be too late – disability is being properly supported.

The sort of tax increases required to balance the budget in these circumstances would be somewhat inconsistent with staying in power.

The combination of increased retirement support and health care spending with a shrinking working age population paying taxes means that balanced budgets are now politically too hard – the only way a government can hope to get re-elected is to kick the can down the road and just not talk about it.

Oppositions, especially conservative ones, would love to talk about it, but as soon as they are pressed for actual solutions, they must clam up.

So understandably, the political classes are giving up on it – a balanced budget over the course of the economic cycle, which has long been the Australian refrain, is too hard. It’s not even possible, really.

The solution? **, nobody’s getting voted out because of it, and even the conservatives are only half-hearted in their complaints, because they don’t want to be challenged to nominate which spending to cut, and who to tax.

** the ignorant mainstream press are complaining, of course.

‘Just not true’

But what about the growing burden of interest payments, crowding out other spending?

In her book, The Deficit Myth, Stephanie Kelton lets everyone off that hook; she says it’s a mistake to see interest as a burden.

“Paying interest on government bonds is no more difficult than processing any other payment.”

She wrote that it’s “just not true” that rising interest payments shrink the amount of money left over for other priorities – “there is no fixed pot of money”.

But as Kelton then went on to say, there is a limit – it’s inflation. “There is only so much room in the economy to absorb higher spending. That’s the constraint …”

Rising interest payments act as a form of fiscal stimulus – the more there is, the more stimulus.

The massive fiscal stimulus of the pandemic did produce inflation in 2022, but it was transitory and easily controlled.

Interest on debt is only inflationary to the extent that it’s paid to locals. A lot of the government debt is held offshore; the interest payments on that do not fuel domestic inflation.

Modern Monetary Theory does not represent permission to print money to fund government spending as a lot of people think, it’s just a description of the way government finances work, which is that government spending takes place before tax revenue is collected (from that spending to begin with, and the only constraint on the spending is inflation.

And that, it turns out, is the way things are working.

Well…. I’m at Tulla airport waiting for my flight… I see these machines don’t like loose change anymore.
Totally cashless and to scan.

The Aggregate Problem
Economic models are built on aggregates of key variables. Those aggregates hide distribution impacts. That makes it easier for central banks to pursue monetary policy without worrying about the cons

by Steve Keen.

The UK’s unemployment rate is 4.1%, the inflation rate is growing at 3.1% and the economy is growing at 0.6% quarter on quarter. That’s how the economy is doing, what more do we need to know?

Well, it would be useful to know whether the unemployed are predominantly in certain income groups, or that income growth was greater in particular parts of the economy Like, more for capitalists and less for workers?

As Steve and Phil discuss this week, economists are building business models built on aggregates.  Breaking down aggregate data into functions in society, or income, will add a lot of extra complexity to models, but they would do a much better job of showing us what’s going on. For example, central bank policy right now aims to restrict spending and wage growth to tame inflation. But, even if that was the cause of inflation, what if those creating inflation by spending more on services, are distinct from those facing the consequences of central bank policy, losing jobs and paying higher mortgages?

Steve points out that as the economy slows – and it has to because of climate change -   knowing the distribution of income and consumption becomes vitally important. Unless we are prepared to see the rich grow richer at the expense of everyone else.