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Bill Mitchell

Bill Mitchell

Bill Mitchell is a Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at the University of Newcastle, NSW, Australia. He is also a professional musician and plays guitar with the Melbourne Reggae-Dub band – Pressure Drop. The band was popular around the live music scene in Melbourne in the late 1970s and early 1980s. The band reformed in late 2010.

Articles by Bill Mitchell

The Weekend Quiz – March 28-29, 2020 – answers and discussion

1 day ago

Here are the answers with discussion for this Weekend’s Quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of Modern Monetary Theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

Question 1:

Only one of the following propositions is possible (with all balances expressed as a per cent of GDP):
(a) A nation can run an external deficit with a fiscal surplus of equal proportion to GDP, while the private domestic sector is spending less than they are earning.
(b) A nation can run an external deficit with a fiscal surplus of equal

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The Weekend Quiz – March 28-29, 2020

2 days ago

Welcome to The Weekend Quiz. The quiz tests whether you have been paying attention or not to the blog posts that I post. See how you go with the following questions. Your results are only known to you and no records are retained.

1. Only one of the following propositions is possible (with all balances expressed as a per cent of GDP):A nation can run an external deficit with an offsetting fiscal surplus, while the private domestic sector is spending less than they are earning.A nation can run an external deficit with an offsetting fiscal surplus, while the private domestic sector is spending more than they are earning.A nation can run an external deficit with a fiscal surplus that is larger, while the private domestic sector is spending less than they are earning.None of the

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“We need the state to bail out the entire nation”

3 days ago

Major developments across the globe in monetary and fiscal policy keep happening on a daily basis at present. We are now hearing conservatives, who previously made careers out of claims that government deficits would send nations broke and more, appearing in the media now claiming “We need the state to bail out the entire nation”. Not too many economists are pushing the line that the market will deal with this crisis. They all the want the state to be front and centre as their own personal empires (income etc) becomes vulnerable. In a normal downturn there is not much sympathy for the most disadvantaged workers who bear the brunt of the unemployment. Now it is different. This crisis has the potential to wipe out the middle classes and the professional classes. And suddenly, who would have

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Learning about epidemics

4 days ago

Today is Wednesday which means it is my short blog post day. I have been travelling a lot today. By the way, there are still some things which cannot be attended to via the Internet, Zoom or otherwise. As I continue to calculate various things along the way to my 10-point or something plan which I hope to have final by next Monday. But with limited time today as I dodge and weave to avoid the virus, I have been reading a lot of the research literature about modelling epidemics. It is quite interesting and nurtures my penchant for modelling, estimation, numerical forecasting etc. But it has helped me understand the reason governments are now inflicting massive economic damage on our nations in the name of ‘flattening the curve’. I cannot say I know much about all this. But I know more than

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Some lessons from history for the design of a coronavirus fiscal intervention

5 days ago

This post continues my thinking and analysis of the issues relating to the design of a fiscal intervention by the Australian government to ameliorate the damaging consequences of the coronavirus dislocation. Today, I delve a little bit back in history to provide some perspective on the current fiscal considerations. Further, I consider some of the problems already emerging in the policy response. And finally, I consider the lessons of history provide an important guide to the sort of interventions that the Australian government might usefully deploy. While the analysis is focused on Australia at present, the principles developed are portable across national boundaries. And the underlying Modern Monetary Theory (MMT) understanding is applicable everywhere there is a monetary system. This

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It’s Modern Monetary Theory time! No, it always has been!

7 days ago

The world is changing that is for sure. Governments around the world are promising to spend billions to address the coronavirus crisis and no-one (other than a few so-called progressives – see below) are talking about how governments will pay for the interventions. Everybody knows how. They have always known. The shams about governments not having enough money to provide adequate housing, schooling, health care, employment, other services, and a sustainable response to climate change are now exposed for all to see. The game is well and truly up. Everybody can now see that governments just have to announce billions of intervention and it will happen. Forget all the ‘complexity’ about accounting arrangements. Forget all the stuff that we will also drown under massive tax burdens if the

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The Weekend Quiz – March 21-22, 2020 – answers and discussion

8 days ago

Here are the answers with discussion for this Weekend’s Quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of Modern Monetary Theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

Question 1:

Given that most governments are sovereign in their own currencies, there is no limit on the expenditure that these governments can introduce to deal with the coronavirus emergency.

The answer is False.
The question was designed to ensure you are careful in articulating each of the concepts mentioned accurately and not drawing quick but false

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The Weekend Quiz – March 21-22, 2020

9 days ago

Welcome to The Weekend Quiz. The quiz tests whether you have been paying attention or not to the blog posts that I post. See how you go with the following questions. Your results are only known to you and no records are retained.

1. Given that most governments are sovereign in their own currencies, there is no limit on the expenditure that these governments can introduce to deal with the coronavirus emergency.TrueFalse2. A rising government deficit will always allow the household sector to increase its saving in nominal termsTrue False3. A rising government deficit always indicates an expansionary shift in policy.TrueFalse

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Australian labour market – mediocre and worse to come

11 days ago

This is the ‘calm before the storm’ data release, although the calm is already pretty poor. It will get worse in months to come. The Australian Bureau of Statistics released of its latest data today (March 19, 2020) – Labour Force, Australia, February 2020 – which continues to show that the Australian economy is in a weak state with a fairly moderate labour market performance being recorded for the start of 2020. The culprit in the coming months will be the coronavirus. But to date there is one culprit – the Australian government – which has been starving spending by its obsessive pursuit of a fiscal surplus. Employment growth was weak – 0.2 per cent and only outstripped the change in the labour force because participation fell by 0.1 points. As a consequence, unemployment fell by 26,400

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There is absolutely no reason for musicians to lose all income because gigs are cancelled

11 days ago

A fairly short post today (Wednesday oblige!). So just some snippets. Today, the Australian Bureau of Statistics published the latest – Retail Trade, Australia, Preliminary, February 2020 – which was the first release of a “suite of new products for Australian retail turnover”. The new offering is designed to more accurately and immediately pick up the “economic impact of coronavirus”. This release is preliminary and gives us more current data to that which is published in the upcoming April Retail Trade, Australia. The news is not good, as you might expect. Retail trade rose by 0.4 per cent in February 2020, as food purchases rose but all other spending categories fell. So the result is driven by the ridiculous panic hoarding behaviour that is now common. I went to a supermarket last

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You lost! Badly! Humility not hubris is needed in order for British Labour to regenerate

12 days ago

When the Remain vote lost the June 2016 Referendum there was a sense of denial. They had lost but only because of the ingrates that voted the Leave. And sooner, rather than later, those dolts would soon have the so-called Bregrets and another vote would be held and the Remainers would win. That sense of denial persisted past the 2017 General Election, which should have consolidated Jeremy Corbyn’s leadership, but didn’t. The biting sense of privilege that the Remain camp seemed to construct for itself slowly but surely ate into the Labour Party leadership, regularly feeding news stories to the press and social media about the impending doom facing the British economy (Project Fear), and pushing the myth (supported by all sorts of interpretable public polls) that a ‘peoples’ vote’ (I am not

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The coronavirus will redefine what currency-issuing governments can do – finally

14 days ago

Life as we knew it is changing fast, almost by the hour. Most of my speaking engagements, which were heavily booked for the foreseeable future, have been cancelled or deferred. All the gigs that my band was booked for have been cancelled until people start returning to the now, empty venues. And, more significantly, the ideologues are giving way to the pragmatists in the policy space. Almost (see below). The sudden realisation that even Germany will now spend large amounts to protect their economy exposes all the lies that have been used in the past (up until about yesterday) to stop governments doing what they should always do – maintain spending levels in the economy to sustain full employment and ensure no-one falls through the cracks and misses out on the material benefits of growth.

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The Weekend Quiz – March 14-15, 2020 – answers and discussion

15 days ago

Here are the answers with discussion for this Weekend’s Quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of Modern Monetary Theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

Question 1:

Italy is currently in crisis and would have to undergo a period of austerity if it restored its currency and renegotiated all Euro debts into the New Lira (that is, defaulted) because investors would be reluctant to purchase Italian government debt.

The answer is False.
Once the Italian government reinstated its currency sovereignty and allowed

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The Weekend Quiz – March 14-15, 2020

16 days ago

Welcome to The Weekend Quiz. The quiz tests whether you have been paying attention or not to the blog posts that I post. See how you go with the following questions. Your results are only known to you and no records are retained.

1. Italy is currently in crisis but would have to undergo a period of austerity if it restored its currency and renegotiated all Euro debts into the New Lira (that is, defaulted) because investors would be reluctant to purchase Italian government debt.TrueFalse2. If policy makers use NAIRU estimates to compute the decomposition between structural and cyclical fiscal balances and these estimates are above the true full employment unemployment rate, then the estimated impact of the automatic stabilisers will always be biased downwards.TrueFalse3.

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Conversation with William Mitchell and Noel Pearson, Newcastle, December 15, 2019

18 days ago

Today’s blog post is shorter than usual but you do get to access a hour-long video where I talk with Indigenous leader and activist Noel Pearson about Modern Monetary Theory (MMT), how it impacts on his perceptions of options to improve indigenous well-being in Australia, and how it informs a new collaborative venture we are in the process of putting together – JUST2030 – as a response to the socio-ecological crisis that three decades of neoliberalism and the fiscal obsession with surpluses has created.

Conversation with William Mitchell and Noel Pearson, Newcastle, December 15, 2019
For non-Australian readers – Noel Pearson – is the Founder and Director of the – Cape York Institute for Policy and Leadership.
You can learn about his work as a lawyer, activist, indigenous leader, writer

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The coronavirus crisis – a particular type of shock – Part 2

18 days ago

Yesterday in my blog post – The coronavirus crisis – a particular type of shock – Part 1 (March 10, 2020) – I discussed some of the considerations that governments need to take into account when dealing with the economic damage that will result from the coronavirus crisis. I did not consider the health issues because I am unqualified to assess those other than to take into consideration what the health professionals are now saying as they gain more knowledge of the particular disease. In Part 2 today, I extend that discussion and outline some specific issues that bear on the size and design of any fiscal intervention.

A coherent policy plan has to be announced
One of the problems of endemic uncertainty is that rumours abound and fear leads decision-makers to make very irrational choices.

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The coronavirus crisis – a particular type of shock – Part 1

19 days ago

Economists like to think in terms of demand and supply. Often by assuming the independence of the two, they make huge errors, none the least being when in the 1930s they advocated wage cuts to cure the unemployment arising from the Great Depression, on the assumption that the cuts would reduce costs for firms and encourage them to hire more. But they failed to understand that economy-wide wage cuts would undermine aggregate spending, upon which production decisions, and, ultimately, employment decisions depended. The coronavirus outbreak is one of those events that emphasises the interdependence between the demand and supply sides of the economy. It is a supply shock – in that it has reduced the growth in output supply as firms stop producing because their workforces are quarantined. And

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US labour market – stronger in the first two months of 2020 but still scope for expansion

21 days ago

On March 6, 2020, the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – February 2020 – which reveals a mixed picture – payroll employment growth has maintained its momentum since December, adding a further 273 thousand jobs and the unemployment rate fell marginally (although steady at the one-decimal point level). But the employment-population ratio fell by 0.1 points and the Broad labour underutilisation ratio (U-6) rose in January by 0.1 point to 7 per cent because there were more underemployed workers. Further, while real wages grew marginally, they lag behind labour productivity growth, which means there is scope for faster wages growth without triggering inflationary impulses. And the polarisation between high-pay and

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The Weekend Quiz – March 7-8, 2020 – answers and discussion

22 days ago

Here are the answers with discussion for this Weekend’s Special Birthday Quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of modern monetary theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

Question 1:

While the desire by governments to reduce their public debt ratios through fiscal austerity is ill-founded, the strategy will always succeed but at the cost of higher unemployment.

The answer is False.
Again, this question requires a careful reading and a careful association of concepts to make sure they are commensurate. There

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The Weekend Quiz – March 7-8, 2020

23 days ago

Welcome to The Weekend Special Birthday Quiz. The quiz tests whether you have been paying attention or not to the blog posts that I post. See how you go with the following questions. Your results are only known to you and no records are retained.

1. While the desire by governments to reduce their public debt ratios through fiscal austerity is ill-founded, the strategy will always succeed but at the cost of higher unemployment.TrueFalse2. The Confederate government in 1861 could have eased the inflationary impact of its war spending by issuing more bonds than it did.TrueFalse3. When net exports are negative, government deficits will be required if the private domestic sector is to save overall.TrueFalse

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Bundesbank remits record profits to German government while Greek health system fails

25 days ago

I am back into my usual patterns, which means that I plan to write less on a Wednesday for my blog than other days. I have a number of projects underway at present – academic and advocacy – and I need to devote writing time to those. Given that yesterday I wrote about the Australian National Accounts data release and today I have to travel a lot, it is another case of Thursday becomes Wednesday and I offer some snippets. I will write a detailed account of my view on how to deal with the coronavirus from an Modern Monetary Theory (MMT) perspective next week. But today I want to highlight something that just ‘goes through to the keeper’ (cricket reference meaning no-one pays attention to it) but is significant in understanding what is wrong with the Eurozone. I refer to information that is

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Australian National Accounts – continued weakness and highly vulnerable to recession

26 days ago

We have had a long drought. Massive bushfires. Floods. And, now, the coronavirus to deal with. The latest release by the Australian Bureau of Statistics of the – December-quarter 2019 National Accounts data (March 4, 2020) – allows us to see some of the impacts of the bushfires, given it is a rear-vision view of where the economy was at in the last three months of 2019. The next quarter’s data (due early June) will start to tell us about the coronavirus effects. Today’s data confirms what we have been tracing for several quarters – the Australian economy is grinding to a halt with private business investment continuing to decline and only a falling household saving ratio keeping Household Consumption expenditure moving in the face of flat income growth. The data shows that annual GDP

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The EU outdoes itself in the madness stakes

27 days ago

One of the themes I exercised when speaking in Europe recently, particularly when presenting at the French Senate Commission and the Ministry of Finance, was that by pushing European integration into an unworkable currency union and refusing to budge, the European political class was undermining the valid aspects of the ‘European Project’, which the likes of Jean Monnet and Robert Schuman saw as a way of bringing peace to the Continent after several attempts by Germany to usurp the rights of citizens in other European nations through military endeavours. Research released by the The PopuList Project, which is a UK Guardian motivated attempt to bring together academics and journalist to study shifts in European voting sentiment since 1989, is rather alarming for those who hang on to hope

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The central bank independence myth continues

28 days ago

One of the enduring myths that mainstream macroeconomists and the politicians that rely on their lies to depoliticise their own unpopular actions continue to propagate is that of ‘central bank independence’. This is the claim that macroeconomic policy making improved in the ‘neoliberal’ era following the emergence of Monetarism because monetary policy was firmly in the hands of technocratic bankers who were not part of the political cycle. As such, they could make decisions based on fundamentals rather than the requirements of the political cycle. The corollary was that vote-greedy politicians, who operate on short-term political cycles, would be willing to compromise the ‘longer-term’ health of the economy to splurge on populist programs that might increase their chances of re-election.

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The Weekend Quiz – February 29-March 1, 2020 – answers and discussion

29 days ago

Here are the answers with discussion for this Weekend’s Quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of Modern Monetary Theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

Question 1:

Estimates of the structural fiscal balances are typically based on overly pessimistic estimates of potential GDP and thus should be disregarded.

The answer is True.
The correct statement is the implicit estimates of potential GDP that are produced by central banks, treasuries and other bodies are too pessimistic.
The reason is that they

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The Weekend Quiz – February 29-March 1, 2020

February 28, 2020

Welcome to The Weekend Quiz. The quiz tests whether you have been paying attention or not to the blog posts that I post. See how you go with the following questions. Your results are only known to you and no records are retained.

1. Estimates of the structural fiscal balances are typically based on overly pessimistic estimates of potential GDP and thus should be disregarded.TrueFalse2. For a nation with a strong terms of trade (and external surplus), it is wise for the government to run fiscal surpluses and accumulate them in a sovereign fund to create more future space for non-inflationary spending.TrueFalse3. A currency-issuing government, that is, one that issues its own floating currency never faces solvency risk with respect to the debt it issues.TrueFalse

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Our sequel to Reclaiming the State in now in progress

February 26, 2020

As parat of my recent European speaking engagements, I went to Rome on February 5, 2020 to speak at the Italian Senate on Modern Monetary Theory (MMT) and the dysfunctional state of the European Union. The next day I had long discussions with one of my co-authors, Thomas Fazi, who I wrote – Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto Books, September 2017) with. We have been working on the sequel to that book for some time, and, in the process, have had to work through some difficult issues on which there has been some degree of difference in our viewpoints. While I was in Rome, Thomas and I also recorded a video of a conversation where we talk about our sequel. We provide that video here as well as a brief discussion outlining some of the

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Rounding off the Masterclass in London last weekend

February 25, 2020

Last Saturday, I held an MMT Masterclass or Teach-In in London. It was an experimental session because I wanted to see what level of difficulty people would find useful as we work on developing the pedagogy and materials for MMTed, which is intending to provide free teaching resources for those interested to learning Modern Monetary Theory (MMT) from first principles. Given the time constraints, I didn’t quite finish Module 1. So I thought I would provide the slides here with a written explanation of what I would have said so that you get the complete context and application of the concepts that we developed together during the class. So this blog post completes the lecture. Thanks to all those who attended and to those who have sent me the requested feedback. This will help us improve the

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Travelling all day – listening to jazz

February 24, 2020

I am travelling for most of today after a rather (exhausting) speaking tour of Europe and the UK. I met a lot of people, gave an (awful) lot of presentations and I thank all the organisers who helped set up the meetings. Special thanks to Tristan (Paris), the GIMMS team (UK), Kevin (Dublin), and all the other people who helped make the tour work. I will be back in Europe in June-July. On Thursday, I will be provide some information about the new book that Thomas Fazi and I are working on as the sequel to our last book – Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto Books, September 2017). Tomorrow, I will be providing some final remarks to cover the material that we did not get to in last Saturday’s London MMT Masterclass.

Please note that I

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Workers in half Australian industries endure real wage cuts

February 23, 2020

Last Wednesday (November 19, 2020), the Australian Bureau of Statistics (ABS) released the latest- Wage Price Index, Australia – (December-quarter 2019). Both private and public sector wages growth was just 0.5 per cent in the December-quarter – keeping growth at record lows. Over the year to December 2019, overall wages growth was 2.2 per cent. With the annual inflation rate running at 1.8 per cent, workers were able to enjoy some real wages growth. However, over the longer period, real wages growth is still running well behind the growth in GDP per hour (productivity), which has allowed profits to secure a substantially increased share of national income. Further, 9 of the 18 industrial sectors delivered real wage cuts to their workers and the aggregate figure is distorted by the strong

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