A Saturday soliloquoy on how the new Govt’s laser-like focus on debt reduction and use of blunt instruments and magical thinking is wreaking havoc in hospitals, schools & the economy
Blunt instruments certainly describes this government aptly. I’m cheered by the timeline cleansing video! I’ve softened in my opinion of our now King immensely not just because of the video.
Thankyou for so much valid info Bernard. My own week saw me at A&E getting a blood transfusioand Iron.. the point I want to make here is having experienced this in both Australia and New Zealand A&E departments so evaluated the comparative experience. Australia wins by several hours. Putting more people through A&E in less time by several hours. 14 hours in NZ versus 11 in Australia.
The link you provide is a non-sequitur to your assertion. MMT's basis in accounting and legal identities suggest that opposition is ideological rather than technical.
The wikipedia article doesn’t support your assertion. It records the main tenets of modern monetary theory (with lots of references for you to look up) and records some criticisms from other economists. Nothing unusual.
I know of no government that has successfully implemented MMT.
It seems to me that MMT is awfully risky for a government to undertake because the downsides are so high. If you're wrong about MMT or you fail to implement it correctly you've probably doomed your nation to hyperinflation amd all the terrible consequences of that.
Here's the thing I'd love for MMT to be right or correct or whatever. However I don't know how you can test it. Macroeconomics are so darn complex that you cannot really model it out. The only test is in the real world.
That said, I'm no economist, I've read a bit. Happy to be educated further.
Patrick, there a number of examples of MMT in action: in the 1930's, the NZ Labour government used new money created by the Reserve Bank to finance both state house building & the implementation of the guaranteed minimum price for dairy farmers. At the time, the National party opposition denounced both schemes as economically ruinous & dangerously inflationary,(which they weren't ) but when they came to power in 1949, National was happy to continue both schemes. In the present, Stephanie Kelton, in her MMT book, 'The Deficit Myth' outlines the procedure every time the US Congress votes to pay millions of dollars in military aid to an ally - the Federal Reserve simply creates the funds by a key stroke & electronically transfers the funds to the Pentagon.
Aren't those just examples of deficit spending, which is not unique to MMT? Don't all the current orthodox macro theories advocate for deficit spending, at least deficit spending under certain circumstances? "creates the funds by a key stroke" -- that's how all fiat money is created in the computer age.
I read "The Deficit Myth" a few years ago and IIRC MMT is not about deficit spending per se, but that deficits don't matter.
They're not examples of deficit spending, they're examples of governments creating new money & putting it into circulation to finance various economic activities.
Neoliberalism theory isn't risky with massive downsides? Wasn't neoliberalism theory been proven time and again in the past 40 years to fail? Why continue to use a theory that is failing people and planet instead of using a theory that is simply observations of how the economic world actually works?
There are risks in any theory. To mitigate them just look at reality, tweak as required and stop being so stubbornly ideological about it.
It seems you and I agree that society should move beyond neoliberalism. But it sounds like you're making a false dichotomy (neoliberalism or MMT). There are a myriad of other options beyond neoliberalism and MMT. Neoliberalisms extensive failures do not have any bearing on the quality of MMT.
"a theory that is simply observations of how the economic world actually works" are you claiming that MMT is that? I don't buy that. If it were that simple there wouldn't be all these competing theories.
I would say that... the atomic bomb was theoretical physics until they pulled the switch at the Trinity test-ground. Kaboom! Science has shown us that those things that are predicted by pure physics and mathematics- relativity, black holes, sub-atomic particles etc. do, with the passage of time and more powerful tools of observation, become observable realities. MMT / Post-Keynesian economics is no different- it works forward from mathematics rather than reverse-engineering an economic framework from a set of ideological tropes and the historical non-equivalence of economics under the Gold-Standard. To deny the basic tenets of MMT / Post-Keynesianism it is no different to Hitler believing that nuclear physics was a crock of shit because it was invented by Jews.
There's a significant difference between nuclear physics and macroeconomics. In nuclear physics you can perform rigorous experiments fully following the scientific method. You can control variables, you can repeat experiments, you can relatively easily perform ten or perhaps hundreds of experiments. You can quickly learn & iterate. In macroeconomics you cannot do that. You can't create a control group and a test group for a population. You cannot control other variables like, for example, wars and pandemics. I don't think that's an appropriate comparison.
"To deny the basic tenets of MMT / Post-Keynesianism it is no different to Hitler believing that nuclear physics was a crock of shit because it was invented by Jews." That's a very very strong statement and inflammatory statement with zero evidence. First, I've specifically been requesting evidence that MMT works, not any post-Keynesian theory. Second, from what little I know of WWII history (and a quick wikipedia check https://en.wikipedia.org/wiki/German_nuclear_program_during_World_War_II) indicates your statement about Hitler is false.
My 'Hitler' statement was from memory of many decades ago. Although I believed it to be true, apparently it's not. I would suggest it still has value as an apocryphal story. I confess I thought it created a pretty conclusion to a comment that started on the subject of nuclear physics.
My example of the Trinity test is entirely valid. Straight from theoretical to practical without multiple iterations.
The distance between 'Post Keynesian' and MMT is arguments over minutiae. Mosler's American-centric view of imports as a net benefit to the importer only works if the importer is an issuer of 'a' (not necessarily 'the') desirable reserve currency that can profitably held as bonds by the exporting country.. Likewise MMT's insistence that sovereign governments are 'monopoly' issuers of currency and bank credit is merely a 'second tier' issuance vs other post-Keynesians' emphasis on bank-issued credit as being at least as important as sovereign issued currency. These are minutiae compared to the gulf between Neoliberals' antiquated and ideologically motivated fakery of money as a scarce and finite commodity vs the MMT / post-Keynesian reality of money supply being readily adjustable through the mechanisms of issuance and taxation.
Given that the RB is stuffed to the gills with 'experts' imported from the non-government banking sector, It would be fair to presume that any numbers the RB comes up with, are not based on optimising public good, but rather on optimising the profitability of the non-government banking sector. That is to say, enough public money is created to get the economy moving to a point of confidence where private borrowing takes off again, but not so much as to curtail the demand for private credit because government services gain favour over private provision.
Scrapping code black for EDs has the same logic as banning road cones. It doesn't fix the problem, just slightly changes the aesthetics on the surface.
The fact that unlike the road cones, this was NOT publicly announced makes me think that even they believe this will not improve anything.
As an internet rando I am prepared to assign some degree of intent with decision making.
Ps: I think the birds(in the background) are in agreement with treasury that we need to increase our debt to 50% GDP.
It’s nearly the end of the quarter so the CEO should be revisiting the old KPI’s. I wonder what the scores are? Remarkably, they will all probably be saying it’s going well.
Of course, as he can’t set performance measures for coalition Ministers/MPs so they can just continue on their destructive path.
Extremely good fact-laden interview just now on RNZ with Martin Stiles describing the realities of cuts right now in the wards, the 'brown -white' and north-south differences in medicine in NZ, the role of public hospitals in emergencies etc.
Changing the goal posts to look good, the shocking use of cuts to pay for unfunded tax cuts primarily for the wealthy, not tackling primary issues and not listening to what Dr Stiles and others are clearly stating, et al is what the current govt tries to justify. Noone believes it. The new medical school may have been useful but as Dr Stiles indicates the current ones may be fine for getting new much needed NZ doctors who understand holistically NZ patients.. V much worth a listen.
The health system also needs staff to backfill for staff who go sick and/or go on holiday. Need at least 5% more than the needed number of professionals. Health needs MUCH more money. 😭😭
As expected, we were sold a pup by the Coalition of Chaos. I feel so happy for those who got a tax cut at the cost of my job (private employer) and my wife's (public service). Thanks a bunch.
Who is going to expose the downright lies re the state of the economy spun by the current government prior to the election and afterwards. We obviously can’t rely on the msm.
Bernard, you are shifting the dial! Not only is Treasury advocating government debt of 50% of GDP to release $80B of additional funds, but Chippy is now advocating the same. Your pioneering work is gaining traction! Bernard, you are a NZ treasure - please release today's article.
This is the conundrum we’re in. We can’t see where they are going, we can’t see what they want to achieve and can’t understand their rationale for decisions. Is it truly random? Is it part of a larger plan (David Seymour clearly has one)? What will happen when schools, hospitals, Police, public transport, Councils etc. fail? David Seymour is waiting to privatise schools (Charter Schools) and health (Private health Care). Is National and NZ First in agreement with this? Who will be able to afford this level of user pays? We are a low wage economy. Do they not care about the plane load of people leaving each day? Do they want (cheaper) migrant labour in schools, hospitals, prisons, retail etc? Looks like they’ve spoken to a small group of older people and perhaps well off younger people to develop their modus operandi (was going to say policy but that’s not right). Is it all about self interest - I’m OK so everyone else can achieve what i have? I am truly confused at present and am hoping National voters are as well. I’m hoping younger people will stand up and be heard soon - this will be theirs to inherit. Thank goodness for this community of people on the Kākā trying to make sense of what’s happening and looking ahead to the next election - thanks Bernard. Have a good day everyone! PS it’s dismal, grey and wet in the Waikato right now……
I’m suspicious that the prime driver of the upheaval is the link to key players in the National and ACT parties with particular North American frameworks about ideal national (country) economic systems which enhance private wealth.
Hopefully the three parties of the coalition will separate because of it.
Yes there's a big rain band over the upper North Island right now. But this morning was glorious - warm and signs of spring everywhere, the sun almost shining but not quite banishing the cloud.
Release Bernard please
Patrick Medlicott
Blunt instruments certainly describes this government aptly. I’m cheered by the timeline cleansing video! I’ve softened in my opinion of our now King immensely not just because of the video.
Thankyou for so much valid info Bernard. My own week saw me at A&E getting a blood transfusioand Iron.. the point I want to make here is having experienced this in both Australia and New Zealand A&E departments so evaluated the comparative experience. Australia wins by several hours. Putting more people through A&E in less time by several hours. 14 hours in NZ versus 11 in Australia.
Yikes. Hope you are better now Frances. Stay safe please.
Reading that Treasury paper and discussion on public debt, it is clear that Treasury is not using a modern monetary theory analysis.
MMT is unproven and not all it's cracked up to be.
https://en.wikipedia.org/wiki/Modern_monetary_theory
The link you provide is a non-sequitur to your assertion. MMT's basis in accounting and legal identities suggest that opposition is ideological rather than technical.
The wikipedia article doesn’t support your assertion. It records the main tenets of modern monetary theory (with lots of references for you to look up) and records some criticisms from other economists. Nothing unusual.
I know of no government that has successfully implemented MMT.
It seems to me that MMT is awfully risky for a government to undertake because the downsides are so high. If you're wrong about MMT or you fail to implement it correctly you've probably doomed your nation to hyperinflation amd all the terrible consequences of that.
Here's the thing I'd love for MMT to be right or correct or whatever. However I don't know how you can test it. Macroeconomics are so darn complex that you cannot really model it out. The only test is in the real world.
That said, I'm no economist, I've read a bit. Happy to be educated further.
Bill Mitchell commonly cites Japan over the last 30 years. Articles on his blog site.
Patrick, there a number of examples of MMT in action: in the 1930's, the NZ Labour government used new money created by the Reserve Bank to finance both state house building & the implementation of the guaranteed minimum price for dairy farmers. At the time, the National party opposition denounced both schemes as economically ruinous & dangerously inflationary,(which they weren't ) but when they came to power in 1949, National was happy to continue both schemes. In the present, Stephanie Kelton, in her MMT book, 'The Deficit Myth' outlines the procedure every time the US Congress votes to pay millions of dollars in military aid to an ally - the Federal Reserve simply creates the funds by a key stroke & electronically transfers the funds to the Pentagon.
Aren't those just examples of deficit spending, which is not unique to MMT? Don't all the current orthodox macro theories advocate for deficit spending, at least deficit spending under certain circumstances? "creates the funds by a key stroke" -- that's how all fiat money is created in the computer age.
I read "The Deficit Myth" a few years ago and IIRC MMT is not about deficit spending per se, but that deficits don't matter.
They're not examples of deficit spending, they're examples of governments creating new money & putting it into circulation to finance various economic activities.
Neoliberalism theory isn't risky with massive downsides? Wasn't neoliberalism theory been proven time and again in the past 40 years to fail? Why continue to use a theory that is failing people and planet instead of using a theory that is simply observations of how the economic world actually works?
There are risks in any theory. To mitigate them just look at reality, tweak as required and stop being so stubbornly ideological about it.
It seems you and I agree that society should move beyond neoliberalism. But it sounds like you're making a false dichotomy (neoliberalism or MMT). There are a myriad of other options beyond neoliberalism and MMT. Neoliberalisms extensive failures do not have any bearing on the quality of MMT.
"a theory that is simply observations of how the economic world actually works" are you claiming that MMT is that? I don't buy that. If it were that simple there wouldn't be all these competing theories.
I would say that... the atomic bomb was theoretical physics until they pulled the switch at the Trinity test-ground. Kaboom! Science has shown us that those things that are predicted by pure physics and mathematics- relativity, black holes, sub-atomic particles etc. do, with the passage of time and more powerful tools of observation, become observable realities. MMT / Post-Keynesian economics is no different- it works forward from mathematics rather than reverse-engineering an economic framework from a set of ideological tropes and the historical non-equivalence of economics under the Gold-Standard. To deny the basic tenets of MMT / Post-Keynesianism it is no different to Hitler believing that nuclear physics was a crock of shit because it was invented by Jews.
There's a significant difference between nuclear physics and macroeconomics. In nuclear physics you can perform rigorous experiments fully following the scientific method. You can control variables, you can repeat experiments, you can relatively easily perform ten or perhaps hundreds of experiments. You can quickly learn & iterate. In macroeconomics you cannot do that. You can't create a control group and a test group for a population. You cannot control other variables like, for example, wars and pandemics. I don't think that's an appropriate comparison.
"To deny the basic tenets of MMT / Post-Keynesianism it is no different to Hitler believing that nuclear physics was a crock of shit because it was invented by Jews." That's a very very strong statement and inflammatory statement with zero evidence. First, I've specifically been requesting evidence that MMT works, not any post-Keynesian theory. Second, from what little I know of WWII history (and a quick wikipedia check https://en.wikipedia.org/wiki/German_nuclear_program_during_World_War_II) indicates your statement about Hitler is false.
My 'Hitler' statement was from memory of many decades ago. Although I believed it to be true, apparently it's not. I would suggest it still has value as an apocryphal story. I confess I thought it created a pretty conclusion to a comment that started on the subject of nuclear physics.
My example of the Trinity test is entirely valid. Straight from theoretical to practical without multiple iterations.
The distance between 'Post Keynesian' and MMT is arguments over minutiae. Mosler's American-centric view of imports as a net benefit to the importer only works if the importer is an issuer of 'a' (not necessarily 'the') desirable reserve currency that can profitably held as bonds by the exporting country.. Likewise MMT's insistence that sovereign governments are 'monopoly' issuers of currency and bank credit is merely a 'second tier' issuance vs other post-Keynesians' emphasis on bank-issued credit as being at least as important as sovereign issued currency. These are minutiae compared to the gulf between Neoliberals' antiquated and ideologically motivated fakery of money as a scarce and finite commodity vs the MMT / post-Keynesian reality of money supply being readily adjustable through the mechanisms of issuance and taxation.
Given that the RB is stuffed to the gills with 'experts' imported from the non-government banking sector, It would be fair to presume that any numbers the RB comes up with, are not based on optimising public good, but rather on optimising the profitability of the non-government banking sector. That is to say, enough public money is created to get the economy moving to a point of confidence where private borrowing takes off again, but not so much as to curtail the demand for private credit because government services gain favour over private provision.
Scrapping code black for EDs has the same logic as banning road cones. It doesn't fix the problem, just slightly changes the aesthetics on the surface.
The fact that unlike the road cones, this was NOT publicly announced makes me think that even they believe this will not improve anything.
As an internet rando I am prepared to assign some degree of intent with decision making.
Ps: I think the birds(in the background) are in agreement with treasury that we need to increase our debt to 50% GDP.
Thankyou Bernard - depressing though it all is, please open up to wider read
As Craig Renney says, economics is called the dismal science for a reason.
:-)
It would be a national (small n) service to release this one Bernard. Timeline cleansing video is genuine Kiwi-magic!
It’s nearly the end of the quarter so the CEO should be revisiting the old KPI’s. I wonder what the scores are? Remarkably, they will all probably be saying it’s going well.
Of course, as he can’t set performance measures for coalition Ministers/MPs so they can just continue on their destructive path.
Thank you Bernard.
Extremely good fact-laden interview just now on RNZ with Martin Stiles describing the realities of cuts right now in the wards, the 'brown -white' and north-south differences in medicine in NZ, the role of public hospitals in emergencies etc.
Changing the goal posts to look good, the shocking use of cuts to pay for unfunded tax cuts primarily for the wealthy, not tackling primary issues and not listening to what Dr Stiles and others are clearly stating, et al is what the current govt tries to justify. Noone believes it. The new medical school may have been useful but as Dr Stiles indicates the current ones may be fine for getting new much needed NZ doctors who understand holistically NZ patients.. V much worth a listen.
https://www.rnz.co.nz/national/programmes/saturday/audio/2018955524/dr-martin-stiles-on-health-targets
What a great article. Thank you 🙏.
The health system also needs staff to backfill for staff who go sick and/or go on holiday. Need at least 5% more than the needed number of professionals. Health needs MUCH more money. 😭😭
Keep shining a bright light on all this magical thinking so that everyone can see clearly…
As expected, we were sold a pup by the Coalition of Chaos. I feel so happy for those who got a tax cut at the cost of my job (private employer) and my wife's (public service). Thanks a bunch.
A double-blow is terrible - I've lost my job (private sector) but also lost it under Labour-NZ First during Covid
Who is going to expose the downright lies re the state of the economy spun by the current government prior to the election and afterwards. We obviously can’t rely on the msm.
Bernard, you are shifting the dial! Not only is Treasury advocating government debt of 50% of GDP to release $80B of additional funds, but Chippy is now advocating the same. Your pioneering work is gaining traction! Bernard, you are a NZ treasure - please release today's article.
I think Uncle Chippy is an in the closet Kaka fan boy.
I agree with Dean. YOU ARE MAKING A DIFFERNCE!
If Simon Watts thinks paying billions for overseas carbon credits will result in public pushback, just try reneging on the Paris agreement.
Why to they want to “sink”NZ
This is the conundrum we’re in. We can’t see where they are going, we can’t see what they want to achieve and can’t understand their rationale for decisions. Is it truly random? Is it part of a larger plan (David Seymour clearly has one)? What will happen when schools, hospitals, Police, public transport, Councils etc. fail? David Seymour is waiting to privatise schools (Charter Schools) and health (Private health Care). Is National and NZ First in agreement with this? Who will be able to afford this level of user pays? We are a low wage economy. Do they not care about the plane load of people leaving each day? Do they want (cheaper) migrant labour in schools, hospitals, prisons, retail etc? Looks like they’ve spoken to a small group of older people and perhaps well off younger people to develop their modus operandi (was going to say policy but that’s not right). Is it all about self interest - I’m OK so everyone else can achieve what i have? I am truly confused at present and am hoping National voters are as well. I’m hoping younger people will stand up and be heard soon - this will be theirs to inherit. Thank goodness for this community of people on the Kākā trying to make sense of what’s happening and looking ahead to the next election - thanks Bernard. Have a good day everyone! PS it’s dismal, grey and wet in the Waikato right now……
Maybe dismayed, sad, angry. Maybe not confused.
I’m suspicious that the prime driver of the upheaval is the link to key players in the National and ACT parties with particular North American frameworks about ideal national (country) economic systems which enhance private wealth.
Hopefully the three parties of the coalition will separate because of it.
Yes there's a big rain band over the upper North Island right now. But this morning was glorious - warm and signs of spring everywhere, the sun almost shining but not quite banishing the cloud.