The ABC is ecstatic: “free market capitalism is facing a challenge”

From the economically-illiterate ABC: Modern monetary theory is gaining traction. But can it knock out free market capitalism? Socialist grifters that they are, they have zero understanding how wealth is created and therefore think it’s just there to be parcelled out by governments, the same way the ABC is funded. Let’s listen in to their profoundly ignorant discussion:

MMT points an accusing finger at Neoliberalism, blaming it for rising economic inequality and corresponding reductions in the quality and scope of essential services — both public and privatised.

MMT’s proponents argue that the current “surplus obsession” is at best misconceived and at worst ideological — a deception to justify reductions in government spending in order to fund taxation cuts for the wealthy.

They argue that governments shouldn’t be afraid of pushing the economy into deficit if that deficit helps fund further economic growth.

Ah yes, the deficit. Who’s afraid of deficits today? Trillion-dollar deficits as far as the eye can see, and hardly a voice of caution to be heard. E.g.

Democrats have a strong policy basis for their position. Early this year, the two most prominent Democratic economists — former Treasury Secretary Larry Summers and Jason Furman, chairman of the Council of Economic Advisers, both under Barack Obama — wrote an influential article citing structural declines in interest rates. This means that “policymakers should reconsider the traditional fiscal approach that has often wrong-headedly limited worthwhile investments in such areas as education, health care and infrastructure,” they said.

“Politicians and policymakers should focus on urgent social programs, not deficits,” they advised.

Keynesian airheads every one of them. Then this: Corporate debt nears a record $10 trillion, and borrowing binge poses new risks. Did they say “risks”? What sort of risks would these be?

The root cause of the debt boom is the decision by the Federal Reserve and other key central banks to cut interest rates to zero in the wake of the financial crisis and to hold them at historic lows for years.

The low rates were needed to encourage companies to invest and hire as the nation recovered from the worst economic collapse in 70 years.

Cutting interest rates is the standard answer to a troubled economy. But rates have never been this low for this long, and the side effects from too much easy money are becoming clear as central bankers struggle to return interest rates to traditional levels.

Since it’s the Washington Post it is looking for the gloomy side in the story, but for a change I agree with them and not the President.

An artificial environment of near-free money is masking serious underlying ailments and may be storing up problems for a future reckoning. This era of perpetually cheap money has kept alive some debt-ridden “zombie” companies that would have failed if rates were at traditional levels; widened the wealth gap between rich and poor; and distorted financial decisions.

The dangers are immense but between MMT and the traditional Keynesian ignoramuses, there is virtually no one around to turn things around.

But if you want to know what needs to be done, don’t bother with the ABC.

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