Letter from The Cape Podcast


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Episode 20:

December 8 2023




Transcript

In this episode, I discuss recent media commentary on Japan, which exposes falsehoods about Modern Monetary Theory (MMT) that prevail even among people who have held high-level positions in government policy-making departments.

Duration: 10:06


About this Podcast

My educational venture - MMTed - is now an affiliate of 3CR Melbourne, which is a community radio station in Melbourne.

As part of that relationship, MMTed is assisting a new radio program - RadioMMT - which is hosted by Anne Maxwell and Kevin Gaynor and is presented every second Friday from 17:30 to 18:30.

I now contribute is a regular segment on their program. The topics are general but sometimes there will be specific local context provided, given the location of the radio station. They focus on Modern Monetary Theory concepts applied to contemporary issues in the real world.

I am also making the segment available here as a podcast so that it reaches a wider audience.

A new podcast will be posted here about every fortnight.

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Past Episodes

Listen (7:21)

Transcript

This podcast introduces the purpose and scope of the series.

Listen (6:33)

Transcript

In this podcast, we consider the role of the currency-issuer in achieving and sustaining the goal of full employment.

Listen (7:21)

Transcript

In this podcast, we consider whether a scoreboard at a major sporting venue could ever run out of points and what this means for the currency-issuer in a nation.

Listen (6:27)

Transcript

In this podcast, we discuss the popular misbelief that as 'taxpayers' we provide the government with the necessary funds that allow it to spend. We show that the idea that to enjoy better government services and infrastructure requires offsetting public spending cuts and/or higher taxes is a fiction and prevents the government from taking the necessary action to deal with the major challenges of the day.

Listen (9:28)

Transcript

In this podcast, we play a pencil and paper game where I am the government and the listener represents the non-government or citizens. We see how the imposition of a binding tax liability motivates the citizens to supply their labour to the government in return for its currency. And, in doing so, the citizens solve the problem that the tax liability presents - where do they get the currency from! The corollary that arises is the it is the spending that creates the capacity to pay taxes rather than the fictional view that it is the taxes that fund the government spending.

Listen (8:16)

Transcript

In this podcast, we wonder what all the noise about public debt is about. We extend our pencil and paper game to introduce national debt and we learn something fundamental - that the funds that the non-government sector uses to purchase the public debt comes from the government itself in the form of past fiscal deficits that were not yet taxed away. Those government deficits created financial surpluses in the non-government sector, which allowed citizens to accumulate financial wealth in the currency that the government issues. The debt issuance did not fund the government spending - it was the other way around!

Listen (7:57)

Transcript

In this episode, we discuss the dangers that arise when we are lured into thinking that our experiences as households of our financial constraints and our budget somehow provide us with intelligence to assess the spending opportunities of our national governments. By falling into that trap, we undermine our own future by limiting the scope and size of the public sector. The only way we should assess whether government fiscal policy is serving its purpose is to understand that purpose, which is to advance human and environmental well-being in a functional way. The 'numbers' that are required to achieve that purpose - deficits etc - should be run up on the government scoreboard. But by being sidetracked into thinking that it is the numbers that matter, we lose sight of the functional purpose of government.

Listen (6:43)

Transcript

In this episode we examine the veracity of the progressive call to 'Tax the Rich' which proponents think will provide the government with more spending capacity to improve health and education services. We learn that there is no zero-sum game where we have to sacrifice A if we want more of B, as long as there are idle productive resources which can be brought in use. The currency-issuing government has no financial constraints. We should increase the taxes on the high income recipients but not because the government needs their money. The reason is that if they have less money then it reduces their power to influence the public debate through control of media, through funding of think tanks and lobbying organisations, through funding of political parties and all the rest of the ways that those with lots of cash can splash it around to get what they want at the expense of the many.

Listen (8:14)

Transcript

Qu’ils mangent de la brioche - Let them Eat Cake. The rally cry of the elites when confronted with the reality that the peasants in France did not have any bread to eat. In this episode we examine modern variants of that disdain that the elites have for the workers, the poor, and for those who struggle to make ends meet. We consider how the unelected and largely unaccountable RBA Board is deliberately attempting to push up unemployment in their misguided policy attack on inflation. All manner of excuses are being given to justify this attack on the living standards of the disadvantaged while nothing is being done to modify the outrageous salary increases of the bosses that have been recently publicised in the media. It is Australia's, let them eat cake moment.

Listen (8:06)

Transcript

In this episode we learn why it is pointless for the government to set fiscal targets in terms of size of deficits etc. The purpose of fiscal policy is not to achieve any preconceived financial numbers. Rather, the government should use its spending and taxation tools to advance societal well-being, which includes ensuring there are sufficient jobs for all who want to work; providing first-class public infrastructure and services (including health, education, transport, etc) and ensuring that everyone can participate meaningfully in society. These areas of concern represent the goals that we want government to pursue. We should assess the current fiscal position only with reference to how close the government is to achieving these goals.

Listen (5:34)

Transcript

In this episode we reflect on the recent Royal Commission report in Australia into the Robodebt scandal where conservative government ministers and senior public servants designed and implemented a scheme that was knowingly illegal, and, which imposed untold harm on the most disadvantaged citizens in our society. Some committed suicide as a result of being hounded by government and their hire debt collectors to repay debts that were not even valid and had been assessed by an out of control and flawed computer algorithm. This episode really is the culmination of decades of mistreatment of the unemployed by government.

Listen (7:12)

Transcript

In this episode, we discuss the 'debt bomb' narrative, which is used by neoliberals to impose political costs on governments that dare use their spending capacity to improve the conditions of the poor through welfare spending. We learn that governments do not need to issue debt at all and could avoid these political tricks by abandoning the process. We go back in history to a time when the financial markets gave the game away and demonstrated that the debt issuance by government was really just an elaborate form of corporate welfare and has nothing to do with 'funding' government spending.

Listen (7:12)

Transcript

In this episode, we consider the concept of productivity and discover that the mainstream bias towards a narrow interpretation - where a productive worker is only one that generates profits for a private capitalist - prevents us from fully understanding things we observe. This bias also prevents us from understanding the value of programs and practices that contribute to social connectedness and self-esteem.

Listen (6:55)

Transcript

In this episode, we consider the so-called Intergenerational Report, which the Australian government released this week. These Reports are released every few years and are designed to scare us into believing that unless the government cuts spending and services now it will run out of money and hike taxes in the future as more people retire and require medical care and pension support. The problem with this exercise is that it addresses the wrong problem. An ageing society presents a productivity problem rather than a financial one for government. The future generation has to be more productive than the last and that requires significant investment now in education and training - exactly the opposite to what the government is doing.

Listen (7:48)

Transcript

In this episode, we consider the recently released White Paper on Full Employment by the Australian government, which purports to define its labour market policy agenda for the foreseeable future. We juxtapose it with the 1945 White Paper on Full Employment, which recognised that the federal government had the spending capacity and the obligation to achieve and sustain full employment. By contrast, the 2023 edition is a tawdry document and reinforces the notion that the maximum employment level is dictated by estimates of the Non-Accelerating-Inflation-Rate-of-Unemployment and that macroeconomic policy will only cause inflation if it tries to drive the unemployment rate down below this level. So it rehearses the standard orthodoxy where microeconomic policies that attack the unemployed are required to reduce the unemployment rate. It is a sad cop out by the Australian government.

Listen (9:28)

Transcript

In this episode, we discuss the way that governments shed their responsibilities to provide adequate housing and public infrastructure through the use of the 'de-risking' narrative. This is core neoliberalism and has been used to justify the transfers of billions in public cash to profiteering private corporations as governments tell us they do not have the funds necessary to fulfill those responsibilities. In return, society endures degraded infrastructure and the reduced quality and scope of the services that emanate from the investment. A small segment of society pockets significant wealth.

Listen (7:37)

Transcript

In this episode, I discuss the warped sense of priorities when a nation can see their way to fund and supply massive quantities of military equipment that is being used to murder thousands of people include babies and young children, yet ignore the significant levels of poverty within there own borders. The latter problem is always ignored with justifications that there is not enough fiscal capacity, yet, when it comes to feeding a voracious military-industrial machine, there is no limit to the funds forthcoming.

Listen (8:15)

Transcript

In this episode, I discuss the coincidence of record retail bank profits and the 13 rate hikes from the Reserve Bank of Australia. The two outcomes are directly linked and RBA interest rate increases have increased the capacity of the major banks to record massive profit gains at the expense of the low-income borrowers. The RBA is deliberately transferring wealth from poor to rich in Australia under the pretext of fighting inflation but the major drivers of the current inflationary pressures are not sensitive to interest rate changes anyway, except rents and the rate hikes are, in that case, causing the inflation. I argue that the Bank of Japan has demonstrated the correct path to dealing with the inflation.

Listen (7:30)

Transcript

In this episode, I discuss the mess that privatisation and public-private partnerships have created. I note that these arrangements were all justified by the claim that the governments had run out of money and needed private funds to maintain essential public services and public infrastructure. It was a lie. The upshot has been the consumer is forced to pay higher prices for inferior and less reliable services while the private investors make of with millions in supernormal profits. All of which was totally unnecessary.

Listen (10:06)

Transcript

In this episode, I discuss recent media commentary on Japan, which exposes falsehoods about Modern Monetary Theory (MMT) that prevail even among people who have held high-level positions in government policy-making departments.



Professor William Mitchell

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