17 thoughts on “Paying for the Pandemic

  1. JQ. Any other alternatives? What happened to Ali in the future?

    Why do we have to pay for the pandemic on ‘The Court of Capitalism’? Because it’s the only game in town! But the bond market to me is all iceburg and 4% interst tip. 96% is ‘underwater’ which ‘we’ have little control of.

    Over to you Ikonoclast!

    JQ said ” The final option, and the most desirable from a progressive viewpoint, is acceptance of a higher rate of inflation, say 4 per cent, in place of the current target range of 2 per cent to 3 per cent. That would erode the real value of bonds, and thereby place the burden primarily on the wealthy. A higher rate of inflation is also necessary to allow for effective monetary policy.”


  2. In an article such as the Arena article, there is no criticism by J.Q. of the rules of the game. He takes the rules of the game (standard mixed economy government / capitalist financing) as given. There are two ways to look at that:

    (1) It’s realistic. That’s the game. And it looks like being the game for some time to come.
    (2) It’s stultifying and suffocating both intellectually and socioeconomically. It forecloses radical possibilities.

    The masters of capitalism enforce a certain kind of game. While we accept their rules only a certain set of outcomes are possible. Of course, economics is not economics. It is political economy. Applied conventional economics, so-called, takes place in a rigged game on a tilted field. The game is about power, not (economic) value. The article below exposes the financial and monetary control the US increasingly exerts over countries in its orbit.


    The realistic approach is to accept the rules of the game and look for wriggle room within the rules. A puny, tributary ally like Australia has no choice. [1] J.Q. writes about government deficits and government debt. They are two different things of course. It’s a puzzle to me (economically) why government debt needs to be used at all. Surely Federal deficit spending can do all the lifting, including using the Federal deficit to fund the bulk of state deficits? Would take some negotiating of course. Why is debt funding necessary? Is it necessary to “crowd out” private spending or at least “elsewhere spending” of these funds? Does this readmit the crowding out thesis?

    Or does the US ultimately tell us which macro-economic operations we are permitted to exercise and not permitted to exercise? Perhaps it would be more honest to admit that openly. Are our monetary and fiscal policies dictated to us by the USA except for a little wriggle-room? A captive can always wriggle and a captor won’t respond to little wriggles. The effort is disproportionate and a slightly wriggling captor is dealing with itches and stiffness, a process which if permitted can actually work to keep the captor passive and compliant. Larger struggles, accidental impacts from these struggles and the threat of escape from the securing bonds usually elicit force from the captor when a compliant captive is what the captor wants. We are a compliant captive with little choice in the big stuff unless we want to be treated much worse.

    Note 1.

    Given the enormous, though declining, economic, financial and military power of the USA. there is little else that a puny, tributary ally like Australia can do. I use the term “tributary” advisedly. Is the eventual payment of $100 billion, or much more, to the US and UK via AUKUS, better termed USUKA and pronounced “you sucker”, anything other than a tributary payment? The US/UK have future-moved $100 billion at least from French and “Naval Group” coffers to their own corporate and defense industry coffers; to US/UK coffers and probably mainly US coffers. This fits Trump’s model of making allies pay for their defense with no guarantee that the US will ever stay the course in defense. The US has specialized in stalemating, losing or running away from tough and admittedly very ill-advised wars ever since WW2. The US inspires no confidence any more in anyone analysing the real trends. Their incompetence these days seems to know no bounds from regime change strategies to drone target selections. We are a captive, tributary ally tied to a collapsing Anglo-American empire. I admit that realistically it seems we have no large realistic choices. However. but we need a government much cleverer than our current set of buffoons. With a better government we might be able to wriggle to slightly better outcomes and maybe escape complete annihilation.

  3. I don’t understand this paragraph:

    “The capacity of governments to take on large volumes of debt has meant that, in the short run, most households appear to be no worse off as a result of the pandemic. This does not mean, however, that we have discovered a magic pudding from which everyone can take as many slices as they like. Rather, the income support provided to those the pandemic prevented from working, and to those already unemployed, has been financed by the issue of government debt, which has, directly and indirectly, increased the wealth of already wealthy households.”

    The idea that debt carries low interest rates does not imply that it need never be repaid. Ignoring Ponzi schemes the debt must be repaid by taxes which mainly fall on the wealthy. I don’t see how debt that provides initial benefits mainly to the non-wealthy (ignore the JobKeeper excesses as you do) but which must be paid in the future mainly by the wealthy changes the distribution of income in favour of the wealthy. Of course the non-wealthy will also be slugged in the future as well by higher taxes so their initial gains are offset by costs to their children.

    One of the consequences of massively increased debt is fewer schools, hospitals and lower levels of future environmental care. Unless, again, we entertain a Ponzi scheme that will destroy our economy. These lost services impact on everyone.

    I think we should be careful about endorsing snake oil economic elixirs based on the idea that we can borrow indefinitely at low rates. That means we should wind down the fiscal profligacy of the past two years and get debt levels back into the range where we can safely insure against the next crisis whatever it may be.

    Finally, I don’t believe we can assume interest rates will remain low indefinitely. Indeed there are inflationary pressures in the US and elsewhere already. The inflationary impacts seen in property and asset markets globally will have wealth effects that motivate resurgent spending generally. Again prudence suggests moderating our reliance on public debt based on snake oil economics.

  4. I don’t agree that accepting a higher rate of inflation (which I do favour), thereby eroding the real value of bonds, would thereby place any great burden on the wealthy. A wealthy person would merely adjust her asset holdings in favour of ones which rise with inflation. Just as, recently, the smart rats have been getting out of fixed interest because it has been effectively negative.

  5. Harry, it’s certainly true that, if the taxes required to pay debt fell mainly on the wealthy the policies would be progressive. In reality, though (and confirmed by Labor after the article went to press) they are line for massive Stage 3 tax cuts.
    John Street: that’s true for new bonds, not for existing ones. Also, the current rates on inflation-protected bonds are negative.

  6. Why can’t money creation (government deficits) do all the lifting? Why do sovereign governments need to borrow at all? Where money creation needs to be countered why cannot it be taxation of the rich and upper middle class?

    The “governments-must-borrow” ideology surely just equates to “the capitalist rentiers must get their income.” Why must this be so? Surely, the answer is that the capitalist rentiers say so through their captured governments, especially the US government which is simply the oligarchs’ gofer and enforcer. Why can’t we honestly refer to the power in the system instead of pretending this has anything to do with economics?

  7. Ikonoclast – “Are our monetary and fiscal policies dictated to us by the USA except for a little wriggle-room?”

    The RBA like so many other central banks are captives of private banks. Just a year or so ago an overwhelming preponderance of shares in Australian banks were foreign owned. Of those the overwhelming preponderance were US owned. The governing liblab duopoly party is captured by the overwhelming amounts of “donations” it collects from private banks.

  8. Ikon, you should forget about money. As you are well aware, what matters is real resources, including labour capacity, and these are constrained by the productive capacity of the economy. If the government uses the same resources, and allows the wealthy to consume or invest their wealth, the non-wealthy must have less resources available.

  9. J.Q.,

    Of course, I agree only real resources count. But what also counts is how we muster, direct and allocate real resources. The money system and how it is employed plays a role in this. Money and finance are not neutral. They too are real, albeit as information used for allocation decisions for real resources and real productions. The construction of private property and the construction of money/finance are not neutral in economic efficiency and allocation outcomes. Your writings on John Locke clearly show your stance that the construction of private property is not neutral to economic outcomes. I am sure you don’t think the construction of money and finance are neutral either.

    The above points to the need to keep hammering on about the requirement to reconstruct property and finance in our system. The issue, I guess, is how to make that argument with finesse and not lose three quarters of the very conservative Australian public on the way. But to rephrase the advice of the apocryphal Irishman, “We can’t get there is this system.”

  10. Oops,

    A form of the original saying is: “You can’t get there from here.”

    I meant to write: “You can’t get there in this system.” Meaning this system is the wrong vehicle for the journey to sustainability.

  11. John, On your response. The tax cuts are a side issue and have little bearing on your claim that the bonds sold to fund lockdowns advantage the rich. The immediate impact of issuing the bonds will be to fund things like JobKeeper which mainly benefit the less wealthy. The issuing of these bonds seems to have had negligible impact on interest rates. Long-term with a progressive overall tax system still operating it will be mainly the wealthy whose taxes repay these bonds although the children of the less wealthy will also have an impact – lees available for education, hospitals and public works. My query remains: How do you justify the claim that increasing indebtedness benefits the wealthy?

  12. Funny, just at Michael West, thought I’d read it later. Then something flashed up on FB, then I came here to find KT2’s post.

    Frydenberg, Cash, Hanson…

    What a disreputable crew. Has me in recall of the Banks Inquiry. Grubs. And Morrison conveniently out of the country.

  13. In answer to my “any alternatives” questionat #1 above:

    “Debts that can’t be paid, won’t be paid

    “Given all that, a discussion between Piketty and Hudson, convened in Graeber’s memory, is bound to be fascinating, and they don’t disappoint (if you prefer text to video, check out Naked Capitalism’s transcript):


    “Here’s my highlight reel of the discussion, with commentary. Hudson opens with a skeptical take on Piketty’s conclusion to Capital XXI, in which he proposes a global wealth tax. Such a tax is nearly impossible to enforce, says Hudson – unlike a jubilee.

    “Hudson says the source of today’s global vast fortunes is not earnings or income – rather, it’s central banks’ subsidy of the value of stocks and bonds, through rock-bottom interest rates, bond guarantees, etc. These fuel speculative bear markets that run up asset prices.

    “These state-subsidized fortunes are pumped into the financial markets, becoming the loans that everyone else has to pay debt on, just to survive. As in ancient times, the finance sector eventually swallows the productive economy whole. Without jubilee, you get collapse.

    “This is true within rich economies, but it’s even more pronounced in the relations between poor debtor countries who were coerced into taking on massive debts by the IMF, who are going to pay an ever-larger share of their GDP to offshore creditors as the economy slows.

    “The only way for poor countries to service those debts is by imposing crushing austerity, which means starving domestic producers of investment, education and health services, reducing productivity, requiring more austerity – until the whole thing collapses.

    “Remember: debts that can’t be paid, won’t be paid. It’s an iron law, and cannot be repealed – not by austerity, not by “better management,” not by “living within your means.” Can’t be paid = won’t be paid.”


  14. That pluralistic site by Cory Doctorow is brilliant, thanks KT2. That’s the second time I have had that blog recommend it to me and the first time I actually went to it. All articles I have read so far are brilliant but the Wells Fargo article in it is particularly brilliant with multiple links to back up its claims. Well worth reading. Late stage capitalism is gangster capitalism without a doubt. It’s crooked beyond belief now, especially in the US. Where will this end? I will answer my own question. It will end in complete and catastrophic collapse unless there is a revolutionary change of such an extent as to radically and completely abolish capitalism itself. Nothing less can save us and the abolition process (standardly called revolution) will of course be risky too.

    The later the revolution is left, the more risky and difficult it becomes for both technological and environmental reasons. It appears Cory Doctorow has quite a bit to say on how revolution or even reform become more difficult as technology progresses. Of course, we would expect no less than this sort of brilliant predicting from a science fiction writer. Would you believe I have read none of his science fiction yet? I think I need to remedy that.

  15. Thanks Ikon…. if I were to be a writer I’d aspire to write like Cory Doctorow with JQ’s knowledge & Asimov’s imagination. Cory Doctorow appeared in Gresham Law… see below as the links are just discursive readings to understand Utopia.

    So to answer my question a second time:

    “If you’re a socialist you need the Real Utopias Project
    by Harry
    October 1, 2021

    “One of my favorite, and most intense, writing projects this year has been preparing a contribution to an in-progress volume celebrating the work and life of my late friend Erik Olin Wright. The essay, provisionally called “If you’re a socialist you need the Real Utopias Project whether you like it or not”, was prompted by reading and hearing numerous criticisms of either Erik’s book Envisioning Real Utopias, or the Real Utopias Project more generally.”…

    The essay,
    provisionally called “If you’re a socialist you need the Real Utopias Project whether you like it or not”

    Erik Olin Wright


    I am skeptical of utopia. Real or imagined.

    I’d take Engel’s advice for any perceived future… “But in so doing we neglected the formal side—the ways and means by which these notions, etc., come about—for the sake of the content. This has given our adversaries a welcome opportunity for misunderstandings,”. Link below.

    Thomas More’s “Utopia” 

    “Libellus vere aureus, nec minus salutaris quam festivus, de optimo rei publicae statu deque nova insula Utopia

    “A truly golden little book, no less wholesome than festive, about the best state of affairs and the new island of Utopia

    “That life’s a game that can be played well, or badly, is a very old idea and, at least in the last few centuries in the history of Western civilization, a commonplace one. The people in Thomas More’s “Utopia” (1516) play a game of life, “not unlike our chess,” consisting of “a battle between the virtues and the vices.” How to win, and whether you’re playing against yourself or against God or Satan, are matters of considerable philosophical speculation. “Man’s life’s a game at tables,” read a seventeenth-century epitaph, “and he may / Mend his bad fortune, by his wiser play.” The young Milton Bradley [ Games person], too, believed that “the journey of life is governed by a combination of chance and judgment.” 

    “More seems to contemplate the duty of philosophers to work around and in real situations and, for the sake of political expediency, work within flawed systems to make them better, rather than hoping to start again from first principles.

    … for in courts they will not bear with a man’s holding his peace or conniving at what others do: a man must barefacedly approve of the worst counsels and consent to the blackest designs, so that he would pass for a spy, or, possibly, for a traitor, that did but coldly approve of such wicked practices

    “Nobel Prize winner Robert Mundell believes that Gresham’s Law could be more accurately rendered, taking care of the reverse, if it were expressed as “Bad money drives out good if they exchange for the same price.”[24]

    “Gregory Bateson postulated an analogue to Gresham’s Law operating in cultural evolution, in which “the oversimplified ideas will always displace the sophisticated and the vulgar and hateful will always displace the beautiful. And yet the beautiful persists.”[29]

    “Cory Doctorow wrote that a similar effect to Gresham’s Law occurred in carbon offsettrading. The alleged information asymmetry is that people find it difficult to distinguish just how effective credits purchased are, but can easily tell the price. As a result, cheap credits that are ineffective can displace expensive but worthwhile carbon credits.[30] The example given was The Nature Conservancyoffering cheap, yet “meaningless”, carbon credits by purchasing cheap land unlikely to be logged anyway, rather than expensive and valuable land at risk of logging.[31]

    “Gresham can be applied to ethical, psychological, social, political and educational conditions. 

    “Finally, in a letter to Franz Mehring dated 14 July 1893, Engels stated:
           “[T]here is only one other point lacking, which, however, Marx and I always failed to stress enough in our writings and in regard to which we are all equally guilty. That is to say, we all laid, and were bound to lay, the main emphasis, in the first place, on the derivation of political, juridical and other ideological notions, and of actions arising through the medium of these notions, from basic economic facts. But in so doing we neglected the formal side—the ways and means by which these notions, etc., come about—for the sake of the content. This has given our adversaries a welcome opportunity for misunderstandings, of which Paul Barth is a striking example.[57]”…

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s