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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 – May 15-16, 2021 – 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.

Here are the answers with discussion for yesterday’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

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The Weekend Quiz – May 15-16, 2021

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. A sovereign national government can run a balanced fiscal position over the economic cycle (peak to peak) as long as it accepts that after all the spending adjustments are exhausted that the private domestic balance will only be in surplus if the external balance is in surplus when averaged out over the same cycle.TrueFalse2. An understanding of Modern Monetary Theory (MMT) allows us to understand that mass unemployment can arise if the growth in real wages are excessive.TrueFalse3. Only one of the following statements is definitely true when you

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Central bank writes off government currency transfer

3 days ago

Today, I am treating as Wednesday, given I wrote an extended treatment of the Australian government’s fiscal statement yesterday and I reserve Wednesday’s for other writing commitments. So just a few things today but including a really interesting piece of news. Some music to follow for those who seem to like what I come up with on Wednesdays. But the interesting snippet is from a tiny island in the middle of the Indian Ocean that might just be showing the world how central banks and treasuries should interact.

Central Bank of Mauritius wipes off government currency transfer
On May 16, 2020, the Government Gazette of Mauritius No. 57 notified us of a new piece of legislation that would go before the parliament in that nation.
THE COVID-19 (MISCELLANEOUS PROVISIONS) ACT 2020 – proposed

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Australian government fiscal statement 2021-22 – a largely missed opportunity

4 days ago

Last night, the Federal Treasurer released the annual ‘fiscal statement’ (aka ‘The Budget’) and everyone is jumping up and down at the size of the spending proposed. Yes, the deficit and debt hysteria has been abandoned for the time being – but only because this is an election year (presumably). This is an announcement government (with little action) and the actual bigger spending initiatives are not next year but in the hazy forward years which means we can largely disregard them. Further, what most commentators are ignoring is that the Government is proposing a record fiscal contraction next year (2021-22) and is relying on (unrealistic) growth in household consumption expenditure over a period they project real wages will fall. If their projections are to be believed then household debt

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Australian labour market struggling with significant sectoral disparities

5 days ago

Tonight, the Federal Treasurer releases the annual ‘fiscal statement’ (aka ‘The Budget’) and we already know that the Government is now in a period of fiscal contraction despite all the big expenditure numbers being touted in the press. I will write more about that tomorrow. But it is now 6 weeks since the Government abandoned the JobKeeper wage subsidy program and today’s ABS release of the – Weekly Payroll Jobs and Wages in Australia, Week ending 24 April 2021 – might give us some guidance as to the impact of the fiscal withdrawal in terms of job loss. The problem though is that the period in question was also a school holiday period, which confounds things somewhat. Suffice to say that the labour market is definitely not booming. It has gone backwards since the end of March but how much

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US labour market goes backwards with mixed signals – but significant slack remains

7 days ago

Last Friday (May 7, 2021), the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – April 2021 – which showed that the recovery since the catastrophic labour market collapse in March and April 2020, has substantially slowed after signs in March that the revovery was accelerating. The change in payroll employment fell from 770 thousand in March 2021 to a miserly 266 thousand and unemployment edged up slightly to 6.1 per cent. The broader labour wastage captured by the BLS U6 measure fell by 0.4 points to 10.7 per cent. The US labour market is still 8,215 thousand jobs short from where it was at the end of February 2020 and the unemployment to job openings ratio also suggests significant slack remains.

Overview for April 2021:

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The Weekend Quiz – May 8-9, 2021 – 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:

Assume that a national is continuously running an external deficit of 2 per cent of GDP. In this economy, if the private domestic sector successfully saves overall, we would always find:
(a) A fiscal deficit.
(b) A fiscal surplus.
(c) Cannot determine because we would need to know the scale of the private domestic sector saving as a % of GDP.

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The Weekend Quiz – May 8-9, 2021

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. Assume that a nation is continuously running an external deficit of 2 per cent of GDP. In this economy, if the private domestic sector successfully saves overall, we would findA fiscal deficitA fiscal surplusCannot determine because we would need to know the scale of the private domestic sector saving as a % of GDP2. Government bonds constitute non-government financial wealth. Accordingly, non-government net worth immediately rises if the government issues new bonds to match its deficit spending.TrueFalse3. A government wanting to achieve full

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MMT and Power – Part 1

10 days ago

I often read that Modern Monetary Theory (MMT) is defective because it has no theory of power relations. Some critics link this in their narrative to their claim that MMT also has no theory of inflation. They then proceed to attack concepts such as employment buffers, on the grounds, that MMT cannot propose a solution to inflation if it has no understanding of how power relations cause inflation. These criticisms don’t come from the conservative side of the policy debate but rather from the so-called Left, although I wonder just how ‘left’ some of the commentators who cast these aspersions actually are. The problem with these criticisms is that they have clearly adopted a partial approach to their understanding of what MMT is, presumably through not reading the literature widely enough,

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What exactly is a rout?

11 days ago

Its Wednesday and just a few items today. I have a fair number of commitments today and some writing deadlines. But I thought a brief comment on a Financial Times article last week (April 30, 2021) highlights how paradigm shift creates wedges in those devoted to the degenerative paradigm. Some embrace change more than others. Some hang on to any thread to maintain their credibility. We might write something about Modern Monetary Theory (MMT) and power tomorrow. That should appeal, eh!

What exactly is a rout?
The Oxford Dictionary tells us what a rout is.
A pretty big event really.

This was a rout in cricket.
Sorry England readers.
Pretty amazing batting collapse.

This was a rout in military history.
That will make you Englanders feel better perhaps.

The following graph does not

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The macroeconomic narrative continues to (MMT) evolve but the games not over yet

12 days ago

I think the general population are starting to get the message that my profession and the political class that uses it as an authority has been leading them down the garden path for decades now to cover up policies that have deliberately undermined our socio-economic prospects and allows a massive transfer of national income to the top-end-of-town. I am also watching, on a daily basis, the almost ludicrous way the mainstream economists and the politicians weave and duck as they change their story about fiscal deficits, public debt and unemployment. The paradigm shift that has been in play for a while now has accelerated in recent weeks, from a ‘6 in front of it’, to a ‘5 in front of it’, then last week a ‘4’ with some players urging a 3. That fancy talk the policy class use to talk about

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US and UK fiscal stimulus supporting growth while the delays in the Eurozone lead to a double-dip recession

13 days ago

Last week (April 29, 2021), the US Bureau of Economic Analysis published the latest national accounts data – Gross Domestic Product, First Quarter 2021 (Advance Estimate) – which showed that the US economy grew by 1. The following day (April 30, 2021), saw Eurostat announce that the Eurozone contracted by 0.6 per cent in the first-quarter 2021, which means it is now enduring a double-dip recession. The European Union, now without Britain as a member, contracted by 0.4 per cent. In contrast, with Britain now out of that mess and determining its own future, we saw the British economy return a positive GDP growth rate in February as exports rose and government stimulus sustained domestic activity. Why should we be surprised about this. In this post, I examine the US situation in more detail

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The Weekend Quiz – May 1-2, 2021 – answers and discussion

15 days ago

Here are the answers with discussion for this special May Day Weekend 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:

When there is an external deficit, the private sector can reduce its overall indebtedness as long as the government supports saving by running a deficit.

The answer is False.
This question relies on your understanding of the sectoral balances that are derived from the national accounts and must hold by definition. The statement of

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The Weekend Quiz – May 1-2, 2021

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.

Before taking this week’s May Day quiz, please sing the – Internationale – and recite after me “Workers of the World Unite!”. Thank you. Now proceed.

1. When there is an external deficit, the private sector can reduce its overall indebtedness as long as the government supports saving by running a deficit.TrueFalse2. When a sovereign government issues debt it has no impact on the overall holdings of assets held by the non-government sector.TrueFalse3. When 10-year government bond yields rise you now that bond markets are demanding increased risk

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The Cambridge Controversy – a fundamental refutation of orthodox economic theory – Part 2

18 days ago

This is Part 2 in a two part series that deals with the importance of the = Cambridge capital controversy – which saw economists associated with Cambridge University in England and MIT in Cambridge, Massachusetts argue about the validity of neoclassical distribution theory. Most recently, in response to a New York Times article about Joan Robinson, one of the key protagonists in that controversy, Paul Krugman declared the Controversy “a huge intellectual muddle” which was really unimportant in the scheme of things. That just revealed his ignorance and/or his part in an on-going denial that the basis of the framework he operates in is deeply flawed and has no scientific legitimacy. In this Part, we get down to the complexity (as best I can without becoming too technical) of the debates. The

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No inflationary trends evident in Australia – latest data

18 days ago

I have been seeing a lot of crazy predictions that inflation is about to accelerate because of the elevated levels of government spending, record low interest rates and substantial government bond purchases by the Reserve Bank of Australia. It is almost as if the conservative, deficit-haters want that to happen so they can say “We told you so” as they cling on to their flawed macroeconomic theories. Well sorry to disappoint. Today (April 27, 2021), the Australian Bureau of Statistics released the latest – Consumer Price Index, Australia – for the March-quarter 2020, which hoses down the inflation fears. The Consumer Price Index rose by just 0.6 per cent in the quarter (mostly petrol prices) and over the 12-months to March 2021 it rose 1.1 per cent. The less volatile series, Trimmed Mean

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The Cambridge Controversy – a fundamental refutation of orthodox economic theory – Part 1

19 days ago

Some years ago, I promised to write about the – Cambridge capital controversy – which saw economists associated with Cambridge University in England and MIT in Cambridge, Massachusetts argue about the validity of neoclassical distribution theory. I never wrote the blog posts because I considered the material was a little difficult for a blog audience. Also, while of great interest to me, the topic was not necessarily compulsory reading for those trying to come to terms with Modern Monetary Theory (MMT). But today, I relent. For two reasons. First, I think my readership has reached much higher levels of economic literacy over the last 15 years and can handle a challenge. But, more importantly, there are times when the mainstream characters, who have been claiming that there is nothing new

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The IMF is all at sea, stuck in its ways, and sending conflicting signals

21 days ago

Last week, I wrote about how the IMF is presenting a somewhat nuanced view these days. See – IMF now claiming continued inequality risks opening a “social and political seismic crack” (April 21, 2021). But, there was a warning for those who might think this suggests the institution is leaving its mainstream macroeconomics past behind them though. Rather, I think what is going on is a series of ad hoc responses to the growing anomalies that the institution faces between the observed reality and the sort of predictions it has been making based on its core paradigmatic approach. We are observing a specific form of dissonance in many of the current contributions coming out of mainstream economics. This takes two forms: (a) an incomplete response to the current situation (pandemic, GFC

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The Weekend Quiz – April 24-25, 2021 – answers and discussion

22 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.

These were the Quiz questions for the fourth and final week of my edx MOOC – Modern Monetary Theory: Economics for the 21st Century – that recently concluded.
I promised students that I would provide answers and analysis for them after the course finished. So that is what the ‘Weekend Quiz’ for April 2021 will be occupied with.
Question 1

The MMT

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The Weekend Quiz – April 24-25, 2021

23 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.

These were the Quiz questions for the fourth and final week of my edX MOOC – Modern Monetary Theory: Economics for the 21st Century.
I promised students that I would provide answers and analysis for them after the course finished. So over the course of April 2021 we will be answering the questions posed each week of the MOOC.
Please go to The Weekend Quiz – April 24-25, 2021 to view the quiz

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German Bundesverfassungsgericht decision is no victory for EU federalists

24 days ago

The banner on the home page of the German citizens’ group – Bündnis Bürgerwille e.V. – says “Recht gilt auch in der EU” (Law also applies in the EU) and the sub-header “EU – Verträge müssen eingehalten werden” (EU treaties must be complied with). I have sympathy for that sentiment but not the politics of the so-called ‘Citizens’ Will Alliance’, which recently sought to block German government approval of the much vaunted, much delayed, fairly small recovery plan. The mainstay of the EU is the Eurozone because it comprises 19 of the 27 EU nations and the largest nations. The dynamics of the EU economy are driven by what happens in the largest Member States of the Eurozone. The European Commission has been dithering for more than a year to get a fiscal stimulus plan in place and by the time

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IMF now claiming continued inequality risks opening a “social and political seismic crack”

25 days ago

It is Wednesday and I have had lots of unscheduled commitments (that just come out of the blue) to attend to today. So not much writing. I did have time to read the latest IMF – Fiscal Monitor, April 2021 : A Fair Shot – which was published on April 7, 2021. The schizoid nature of this institution continues to evolve and it will be hard for the austerity mavens to unambiguously use it as a cover for their arguments when they resume their call for public sector spending cuts etc. Music follows.

IMF Update
I don’t have time today for a full review of the Fiscal Monitor publication.
But suffice to say, the tone coming out of the IMF has shifted significantly from when it was leading the charge in destroying nations and increasing income and wealth inequalities.
Don’t think for one minute,

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The Brexit predictions of doom are proving to be wildly inaccurate

26 days ago

When the British Office of National Statistics published the January 2021 trade figures in March, the first after Brexit was finalised, they showed a 42 per cent decline in UK exports to the European Union. Exports fell by £5.6 billion and imports fell by 28.8 per cent or £6.6 billion. it was the worst monthly drop since records were first published on a monthly basis in 1997. The Remain crowd went berserk and the ‘I told you so’ chorus was raucous. I wonder where there voice has gone now the February 2021 trade figures show a 46 per cent rise in UK exports to the UK. Boats and trucks are carrying goods to the EU from Britain still. We shouldn’t take the monthly data too seriously, especially as it has been complicated by the transition arrangements and COVID. There will be costs from the

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The Weekend Quiz – April 17-18, 2021 – 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.

These were the Quiz questions for the third week of my edx MOOC – Modern Monetary Theory: Economics for the 21st Century – that recently concluded.
I promised students that I would provide answers and analysis for them after the course finished. So that is what the ‘Weekend Quiz’ for April 2021 will be occupied with.
Question 1

Which of these situations

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The Weekend Quiz – April 17-18, 2021

April 16, 2021

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.

These were the Quiz questions for the second week of my edx MOOC – Modern Monetary Theory: Economics for the 21st Century.
I promised students that I would provide answers and analysis for them after the course finished. So over the course of April 2021 we will be answering the questions posed each week of the MOOC.

1. Which of these situations represents an inflationary episode in the macroeconomic sense?

(a) On July 1, 2000, the Australian government introduced a Goods and Services Tax of 10 per cent on most goods and services (with some

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Australian labour market – recovery continues but storm clouds on the immediate horizon

April 15, 2021

The latest data from the Australian Bureau of Statistics – Labour Force, Australia, March 2021 – released today (April 15, 2021), shows that the Australian labour market continues to recover – and while the recovery had stalled a bit over the latter part of 2020, the March result builds on the strong February result. Employment increased by 0.5 per cent (70,700) in the month and unemployment fell by 27,100 to 778,100 persons. As a result the unemployment rate fell by 0.2 points to 5.6 per cent, even though participation rose by 0.2 points. Overall, a good outcome. The main uncertainty now is that the recovery to this point has been dependent on government fiscal support, which ended in March 2021. Given the labour market is still quite a margin from where it was in March 2020, the idea

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Either the Eurozone as we know it is dead or Italy goes out – latest research

April 14, 2021

It’s Wednesday and my snippet day, which just means I don’t write as much so that I can write more elsewhere. But today, I summarise some research that has just been released which seeks to assess the sensitivity of the commitment by the Italian population to the euro to tolerating further austerity. The research finds that if the technocrats start forcing Italy into austerity measures via a return to the Excessive Deficit Mechanism (and enforcement of the Stability and Growth Pact fiscal rules) then the majority will prefer to leave the Economic and Monetary Union. The majority are happy to retain the euro but only if there is no austerity and structural reforms imposed on the nation. This is a big swing in public sentiment and will give the neoliberals in Brussels one huge headache.

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The cat is progressively getting out of the bag – Part 2

April 13, 2021

This is the second and final part of my discussion of the – Economic Affairs Commitee (House of Lords) – hearings into – Quantitative Easing: Committee to examine whether inflationary fears justified, the future of QE, and the merits of ‘helicopter money’ approaches. In Part 1 we learned that statements made by notable central bank governors (or equivalent) to the public about what they are doing are highly questionable given the evidence given by two prominent witnesses to the House of Lords enquiry. The evidence doesn’t just refer to matters pertaining to the UK. We learned that it is obvious that large-scale government bond buying programs by central banks are funding fiscal deficits despite the denial from the central bank officials. In this Part, we find more revealing statements by

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The cat is progressively getting out of the bag – Part 1

April 11, 2021

Remember on February 3, 2021, when the RBA governor Philip Lowe spoke at the National Press Club in Australia and told the audience that the Reserve Bank of Australia is not funding the federal government deficit, either in part, or, in full. This was in response to being asked whether the current situation that sees the RBA buying large swathes of government bonds are in any way consistent with Modern Monetary Theory (MMT). Well, since he gave that speech and answered questions from Australia’s journalists, a very interesting session was held by the – Economic Affairs Committee (House of Lords) – in London as part of the Committee’s investigation into the ins-and-outs of Quantitative Easing (QE). And some very revealing statements were made in those hearings which the RBA governor might

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The Weekend Quiz – April 10-11, 2021 – answers and discussion

April 10, 2021

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.

These were the Quiz questions for the second week of my edx MOOC – Modern Monetary Theory: Economics for the 21st Century – that recently concluded.
I promised students that I would provide answers and analysis for them after the course finished. So that is what the ‘Weekend Quiz’ for April 2021 will be occupied with.
Question 1:

The reason that MMT

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