Tim: Every time I read your posts I see a fundamental heart informing a genuinely clear-eyed and humanitarian view of what is happening economically and socially in our society - a heightening inequality with protections for the wealthy. Thank-you.
With regards by the ‘serious people’ of the mainstream media, ALP and LNP to claim that the Greens are ‘crazy’, it shows how disconnected they are. The only fools in the room are them who pretend the RBA is a group of all seeing wizards when they really are representatives of the interests of capital and not regular people.
The fetishisation of this group with ‘independent’ central banking is symptomatic of the abdication of elected governments taking any responsibility for the monetary policy. Your mortgage has gone up? Sorry! We have an independent reserve bank and we won’t act even when we have the power to. Chalmers doing a political theatre piece when he literally has the authority to help people but won’t. The technocrats should always be subject to accountability by an elected representative otherwise we may as well give up on the democracy side of things.
The abandoned proposal by ALP to take that power away earlier shows how they really are true believers in the nonsense that is neoliberalism.
You would think the collapse in the primary vote would allow for some rethinking of these things, but so far there doesn't seem much evidence of that. The Glover book I mention is pretty good at tracking Labor's capture: I've been rereading it this morning.
Tim, Jim Kable (thank you both) has identified the rich vein in your commentary - a fundamental heart informing a genuine clear-eyed and humanitarian view of what is happening economically and socially in our society - a heightening inequality with protection for the wealthy." Thank you for the integrity and alignment of your heart and mind that seeks social and economic justice. Thank you for the naming and giving voice to this. Great piece, Tim.
The meaning of "central bank independence' changed radically in the early 1990s with New Zealand taking the lead. Before that, it meant that the Australian Treasurer could not issue orders to the central bank, except through what amounted to a nuclear option of a declaration to Parliament. But it was expected that the government and central bank would discuss and (as far as possible) agree on fiscal and monetary policy (similar rules applied in most places). In the post-1990 version the governmetn and central bank agree on an inflation target (which never changes) and then the central bank does whatever it sees fit to reach that target. This never worked will in NZ, which had a string of recessions induced by monetary policy. But it was highly successful in the US for fifteen years or so, until the GFC.
"Independence allows central banks to resist moves by politicians who may want expansionary monetary policies to boost short-term economic performance, perhaps at the cost of higher inflation in the long run."
Tim, a quick look at the nations economic history will tell you that is just not true. Moderate deficits have been the norm in Australia since 1901, without consistently uncontrolled inflation. The Australian government instructs the reserve bank how much currency to issue, and whom to pay. The RBA is a creature of government.
When governments are preaching the need for austerity, cannot afford to properly fund health, education, and housing in the nation, they never have a problem funding the next forever war, AUKUS, or some other toy for the airforce. Those are choices made by governments.
The Australian government is the sole issuer of the Australian currency. It issues the currency by instructing its bank, the Reserve Bank of Australia.
The actual operations of central banks are well covered by Steven Hail, Bill Mitchell, Steve Keen and many other heterodox economists.
"Put simply, the idea is rooted in the need to maintain price stability and mitigate inflationary pressures that can arise from political pressure."
In fact, Tim, the idea is to allow our representatives to place responsibility for economic decision making into the hands of unelected technocrats, thereby removing themselves from responsibility for the adverse effects of economic decisions, such as increasing unemployment due to interest rate hikes instigated by central banks in the fight against inflation.
These ideas are covered in Clara Mattei's book, "The Capital Order: How economists invented austerity and paved the way to Fascism.
You are correct regarding the drinking of the neocon Kool-aid by "progressive" governments as is evidenced by Albanese and Starmer.
I was really just setting out the theory, but my understanding was that that data shows "independent" central banks have performed better re inflation? I'll dig up the references I was looking at if I get a chance.
Tim, the RBA is a body corporate owned by the Commonwealth. It reports to the parliament. While the government may not advise the RBA regarding interest rates and monetary policy, it may overrule the RBA.
Tim, the only thing independent about central banks is the ability to set interest rates. The concept was established by technocrats who decided that inflation was due to consumption, therefore reduce consumption by increasing unemployment by increasing interest rates.
What happens when inflationary cost increases are related to the failure of extended lines of supply, as occurred during covid, or the increase in freight costs due to the expense of insurance for traversing the Red Sea, or sailing around the Cape of Good Hope, or the 1970s fuel crisis caused by OPEC reducing production in protest at US support for Israel in the 1973 war, or profit taking by corporations?
During covid when supply shocks and energy prices caused inflation, in the USA, that great progressive, Larry Summers, and chairman of the fed, Jerome Powell advocated large increases in unemployment, via interest rate hikes.
Where is the justice in continuosly placing the burden of adjustment on workers?
Society is confronted by the reality of inflation, for whatever reason it arises, why are workers consistently expected to meekly accept responsibilty for inflation, no matter the source.
That is why gutless politicians shift responsibility for unemployment to unelected technocrats, and the governments appointees on the Reserve Bank Board.
We can fight back. The banks charge us twice for interest and any other fees they collect when they debit our loan accounts. I have complained to the AFRA and ACCC with little response but I did receive an offer of $500 to withdraw my complaint from the bank in question. https://medium.com/@kevin-34708/is-your-bank-overcharging-you-9d21b34bbe09 . The sad part about collecting interest twice is that it is "lost money" as they do it by slowing the movement of money which means it is a lost opportunity for investment. Speeding up investment money will give us funds to address societal problems - like climate change and the obscene inequalities in wealth.
It took me years to understand how the financial system had so much "unearned income" until I realised that someone earned the income and financial intermediaries claimed it because they could manipulate the "market" rules. For example, depreciation is paid by customers but they do not get any stake in the replaced assets. Similarly with profits. A seller's profit is paid for by the buyer but the buyer gets no benefit. Many highly profitable businesses find ways to exploit others and are well documented in Corey Doctorow writings. E.g. Subscriptions, flag falls on electricity and phone calls. Look for big profits and you will find someone else has paid for something received by others for no good reason except they are allowed to.
Correcting just a few of these cases will make a huge difference to the productivity of an economy. Change the way depreciation on electricity distribution and transmission will drop electricity prices substantially. After 20 years of the AER means most of the electricity assets have been paid for by consumers but all the profits go to the financial institutions that purchased them.
I have written a new article that seems to make the double payment easier to understand. The trick the banks play is to debit your account and pay themselves and not record you have paid them. They get away with it because as MMT points out it is the depositing of the money in a bank loan account that creates new money. https://kevin-34708.medium.com/hidden-fees-on-bank-loans-a21643829dbe
"Neoliberal (economic) systems are designed to remove decision making from democratic institutions and install them in technocratic ones runs by various elites."
Perhapts it's just the attempt to come between an elite and a bucket of money, but it occurs to me we don't consider this a bad thing when it comes to justice; in fact, we want a system run by elites because it's been determined that populism has no place in the justice system. Is my analogy valid? It would seem to apply to the academic and medical science field also. Are judges technocrats? What is it about economics that makes for this difference?
It's valid up to a point but I think the justice system can be more responsive to community, maybe not always for the best, I admit. And we do have a jury system, which is a structural corrective to elite domination.
My usual take on this is something like: experts for means; citizens for ends. IOW, expert opinion needs to be directed at/in service of democratic outcomes.
Tim: Every time I read your posts I see a fundamental heart informing a genuinely clear-eyed and humanitarian view of what is happening economically and socially in our society - a heightening inequality with protections for the wealthy. Thank-you.
Another great piece Tim.
With regards by the ‘serious people’ of the mainstream media, ALP and LNP to claim that the Greens are ‘crazy’, it shows how disconnected they are. The only fools in the room are them who pretend the RBA is a group of all seeing wizards when they really are representatives of the interests of capital and not regular people.
The fetishisation of this group with ‘independent’ central banking is symptomatic of the abdication of elected governments taking any responsibility for the monetary policy. Your mortgage has gone up? Sorry! We have an independent reserve bank and we won’t act even when we have the power to. Chalmers doing a political theatre piece when he literally has the authority to help people but won’t. The technocrats should always be subject to accountability by an elected representative otherwise we may as well give up on the democracy side of things.
The abandoned proposal by ALP to take that power away earlier shows how they really are true believers in the nonsense that is neoliberalism.
You would think the collapse in the primary vote would allow for some rethinking of these things, but so far there doesn't seem much evidence of that. The Glover book I mention is pretty good at tracking Labor's capture: I've been rereading it this morning.
Tim, Jim Kable (thank you both) has identified the rich vein in your commentary - a fundamental heart informing a genuine clear-eyed and humanitarian view of what is happening economically and socially in our society - a heightening inequality with protection for the wealthy." Thank you for the integrity and alignment of your heart and mind that seeks social and economic justice. Thank you for the naming and giving voice to this. Great piece, Tim.
Thanks to you and Jim for the kind words. Much appreciated.
The meaning of "central bank independence' changed radically in the early 1990s with New Zealand taking the lead. Before that, it meant that the Australian Treasurer could not issue orders to the central bank, except through what amounted to a nuclear option of a declaration to Parliament. But it was expected that the government and central bank would discuss and (as far as possible) agree on fiscal and monetary policy (similar rules applied in most places). In the post-1990 version the governmetn and central bank agree on an inflation target (which never changes) and then the central bank does whatever it sees fit to reach that target. This never worked will in NZ, which had a string of recessions induced by monetary policy. But it was highly successful in the US for fifteen years or so, until the GFC.
Sounds like you would like to shift back to the pre-90's arrangement?
Indeed so
"Independence allows central banks to resist moves by politicians who may want expansionary monetary policies to boost short-term economic performance, perhaps at the cost of higher inflation in the long run."
Tim, a quick look at the nations economic history will tell you that is just not true. Moderate deficits have been the norm in Australia since 1901, without consistently uncontrolled inflation. The Australian government instructs the reserve bank how much currency to issue, and whom to pay. The RBA is a creature of government.
When governments are preaching the need for austerity, cannot afford to properly fund health, education, and housing in the nation, they never have a problem funding the next forever war, AUKUS, or some other toy for the airforce. Those are choices made by governments.
The Australian government is the sole issuer of the Australian currency. It issues the currency by instructing its bank, the Reserve Bank of Australia.
The actual operations of central banks are well covered by Steven Hail, Bill Mitchell, Steve Keen and many other heterodox economists.
"Put simply, the idea is rooted in the need to maintain price stability and mitigate inflationary pressures that can arise from political pressure."
In fact, Tim, the idea is to allow our representatives to place responsibility for economic decision making into the hands of unelected technocrats, thereby removing themselves from responsibility for the adverse effects of economic decisions, such as increasing unemployment due to interest rate hikes instigated by central banks in the fight against inflation.
These ideas are covered in Clara Mattei's book, "The Capital Order: How economists invented austerity and paved the way to Fascism.
You are correct regarding the drinking of the neocon Kool-aid by "progressive" governments as is evidenced by Albanese and Starmer.
I was really just setting out the theory, but my understanding was that that data shows "independent" central banks have performed better re inflation? I'll dig up the references I was looking at if I get a chance.
Tim, the RBA is a body corporate owned by the Commonwealth. It reports to the parliament. While the government may not advise the RBA regarding interest rates and monetary policy, it may overrule the RBA.
Tim, the only thing independent about central banks is the ability to set interest rates. The concept was established by technocrats who decided that inflation was due to consumption, therefore reduce consumption by increasing unemployment by increasing interest rates.
What happens when inflationary cost increases are related to the failure of extended lines of supply, as occurred during covid, or the increase in freight costs due to the expense of insurance for traversing the Red Sea, or sailing around the Cape of Good Hope, or the 1970s fuel crisis caused by OPEC reducing production in protest at US support for Israel in the 1973 war, or profit taking by corporations?
During covid when supply shocks and energy prices caused inflation, in the USA, that great progressive, Larry Summers, and chairman of the fed, Jerome Powell advocated large increases in unemployment, via interest rate hikes.
https://prospect.org/economy/2024-01-04-time-for-victory-lap/#:~:text=Larry%20Summers%20most%20forcefully%20exemplified,year%20of%2010%20percent%20unemployment.%E2%80%9D
Where is the justice in continuosly placing the burden of adjustment on workers?
Society is confronted by the reality of inflation, for whatever reason it arises, why are workers consistently expected to meekly accept responsibilty for inflation, no matter the source.
That is why gutless politicians shift responsibility for unemployment to unelected technocrats, and the governments appointees on the Reserve Bank Board.
society not economy
democracy not duopoly
Neat article TD.
cheers
We can fight back. The banks charge us twice for interest and any other fees they collect when they debit our loan accounts. I have complained to the AFRA and ACCC with little response but I did receive an offer of $500 to withdraw my complaint from the bank in question. https://medium.com/@kevin-34708/is-your-bank-overcharging-you-9d21b34bbe09 . The sad part about collecting interest twice is that it is "lost money" as they do it by slowing the movement of money which means it is a lost opportunity for investment. Speeding up investment money will give us funds to address societal problems - like climate change and the obscene inequalities in wealth.
I'd be curious to hear/read more about the charge twice aspect. People should feel free to chip in. Thanks for the link: will read asap.
It took me years to understand how the financial system had so much "unearned income" until I realised that someone earned the income and financial intermediaries claimed it because they could manipulate the "market" rules. For example, depreciation is paid by customers but they do not get any stake in the replaced assets. Similarly with profits. A seller's profit is paid for by the buyer but the buyer gets no benefit. Many highly profitable businesses find ways to exploit others and are well documented in Corey Doctorow writings. E.g. Subscriptions, flag falls on electricity and phone calls. Look for big profits and you will find someone else has paid for something received by others for no good reason except they are allowed to.
Correcting just a few of these cases will make a huge difference to the productivity of an economy. Change the way depreciation on electricity distribution and transmission will drop electricity prices substantially. After 20 years of the AER means most of the electricity assets have been paid for by consumers but all the profits go to the financial institutions that purchased them.
Here is a recent attempt to show the sort of thing that could happen if we changed the way we create new money by moving it away from loans. https://kevin-34708.medium.com/economic-sustainability-0da7481737a2 .
Thanks, Kevin
I have written a new article that seems to make the double payment easier to understand. The trick the banks play is to debit your account and pay themselves and not record you have paid them. They get away with it because as MMT points out it is the depositing of the money in a bank loan account that creates new money. https://kevin-34708.medium.com/hidden-fees-on-bank-loans-a21643829dbe
New money is best used to build new assets owned by people who do not have the financial resources to get a regular loan. Using this tool will solve many of wealth inequalities we have today and reduce the need for tax income. https://kevin-34708.medium.com/a-better-way-to-introduce-money-into-an-economy-36cda1d01476
"Neoliberal (economic) systems are designed to remove decision making from democratic institutions and install them in technocratic ones runs by various elites."
Perhapts it's just the attempt to come between an elite and a bucket of money, but it occurs to me we don't consider this a bad thing when it comes to justice; in fact, we want a system run by elites because it's been determined that populism has no place in the justice system. Is my analogy valid? It would seem to apply to the academic and medical science field also. Are judges technocrats? What is it about economics that makes for this difference?
It's valid up to a point but I think the justice system can be more responsive to community, maybe not always for the best, I admit. And we do have a jury system, which is a structural corrective to elite domination.
My usual take on this is something like: experts for means; citizens for ends. IOW, expert opinion needs to be directed at/in service of democratic outcomes.