I am Australian but not a proud one. That doesn’t mean anything other than I don’t consider nationalism to be a particularly appealing trait. I would perhaps defend our borders from attack and I prefer Australia winning at sport than the English (but not the West Indies!). But when I read a newspaper headline (March 24, 2011) – Australia tops index ranking for maintaining strong fiscal balance – I feel ashamed that I live in such a nation. Given the methodology that went into construct this index, Australia would be better off being down the bottom of the rankings – by choice rather than inaction. Just when you thought the public debate about fiscal policy couldn’t deteriorate any further … it plunges to new depths. This index is published in a new “study” (I would not actually give it the gravitas of a study) – is actually an exercise in reductio ad absurdum ad infinitum aka total BS.

I am travelling today and have commitments which will take me into the night. So I have limited blog time. But there is always something to say and while I might say the same thing often I figure that there are thousands of commentators to my one who all say the same (different) thing every day. Anyway today you will learn that the Japanese government can call on the central bank to buy its bonds whenever it wants. You will also learn how crazy the British government is and how obsessive compulsive behaviour locks a nation into slow growth and entrenched unemployment. We’re sticking to our strict fiscal rules – no matter what! Simple conclusion for today – the budget madness continues.

A number of readers have written to me asking me to explain why the US government (and any sovereign government) should not learn the lesson of the inflation that was caused by the spending policies of the Confederacy during the 1860s in the US. They have tied this query variously in with the rising budget deficits, the quantitative easing policies of the Bank of England and the US Federal Reserve Bank, and more recently the “injection of liquidity” by the Bank of Japan as a reaction to their devastating crisis. The proposition presented is simple – the Confederacy funded their War effort increasingly by printing paper notes (and ratifying counterfeit notes from the North) and saw runaway inflation as a result. This blog examines that point. What you will learn is that the experience of the Confederate states during the Civil War does not provide an case against the use of fiscal policy or the proposition that sovereign governments should run deficits without issuing debt. The fact is that “printing paper notes” does not cause inflation per se. It might under certain circumstances. Those circumstances were in evidence in the Civil Wars years in America.

I have very little time again today so to the point! Sometimes you are reading an article or column and you nod along saying – yeh, that is correct, this writer understands it … and then crunch … the brick wall appears – one word, one phrase, one sentence, one paragraph and all that bonhomie evaporates and you realise that the writer isn’t as cognisant of the way the macroeconomy works as you first thought. It is a case of so near but so far.

I am travelling today and haven’t much time to write and I have a day of library document searches ahead. But the input from economists over the weekend in relation to the devastating earthquake and tsunami in Japan last week has been nothing short of a total disgrace. Even as the news was unfolding the mainstream neo-liberal ideologues were out in force preaching that the Japanese government was now facing a major fiscal crisis and its capacity to deal with this event was severely limited. Imagine the reactions of the people in shock after the event to hear the news bulletins telling them that their government was crippled and unable to help. The reality is that the claims by the macroeconomists were not ground in any credible theory. It is bad enough they provide this mis-information and lies when unemployment is rising. But when thousands of people are feared dead it is nothing short of being obscene. Earthquake lies – all courtesy of our neo-liberal economist brethren.

Apparently, the US government has just announced that their budget deficit is the largest in absolute terms. Given that the US makes a net gain of one person every 16 seconds, I guess they recorded a record population today as well. Nine records were also set yesterday by junior athletes at the annual sport’s carnival held by the Charlestown Secondary School (Nevis, US). The latter are certainly more interesting and have more relevance for the health of the community. The fact is that the budget outcome is like a score at a sport’s game. Imagine if the cricket authorities decided to place a limit of how many runs a team could score in the current World Cup. You wouldn’t have much of a game. And then they decided to become austere about it and cut the available runs! Just like the runs on the scoreboard, the budget numbers (dollars) can be whatever it takes. The record deficit is not going to stop any game. The fact is that with the extent of idle capacity that you witness in the US, the record needs breaking again very soon!

I read two articles in the last few days which tell me that the bond market traders generally do not understand the intrinsic characteristics of the monetary system and that IMF economists have even less of a clue. The bond traders attribute to themselves an air of importance that it not a reflection of their real role in the monetary system. However, my own profession continues to disgrace itself and is nothing more than a propaganda machine. The mainstream economists are too stupid to realise that their models and frameworks do not explain anything that we are interested in. But such is their position of dominance in the policy space that their neo-liberal grandstanding is given credit. It is embarrassing but worse it is dangerous. Anyway, sometimes a journalist comes to the correct conclusion but for the wrong reasons. While the conclusion is correct, the erroneous reasoning does as much damage by way of misinformation than if the overall conclusion was also wrong. It is a case of being right for wrong reason equals wrong.

I have been travelling the last two days and have disrupted work patterns. But I did manage to read a few things in between other things today which made my hair stand on end and suggest that the austerity debate has moved ground. So desperately lacking is the real evidence which might support the economic claims the conservatives have been using to justify their manic desire to savage public spending when there is 10 per cent unemployment (and worse) – that the deficit terrorists are now appealing to morality – that public deficits and debt are immoral. It makes you wonder why these characters just don’t become stand-up comedians. But given how dangerous they are as a result of their positions in government it is clearly not a laughing matter. I would seek to try these characters for crimes against humanity when it becomes obvious to everyone how wrongful their actions are. It is interesting though – the descent into “moral” arguments means that you can conclude that even the conservatives know that the bevy of economic arguments that they use to justify their damaging policies are nonsense. But there is a new emerging problem. As I write today the entrenched unemployment that the deficit terrorists are now acknowledging they will cause to worsen is giving rise to employers discriminating against the most disadvantaged workers that are seeking work. What this tells us is that the employers have too much power.

As a service to humanity, I decided to rip off the title for today’s blog from an article that was published on Monday (February 7, 2011) in the Washington Times – Destructive economic myths. My blog is highly rated by Google so if some innocent bystanders happen to go searching for that article they might also bring up my blog, get confused, click my link instead of the Washington Times and learn some facts that will help them oppose the political nonsense that both sides of politics in the US is engaged in at present – as the vote to change the debt ceiling approaches (March 1, 2011). I might be too late but it is worth a try*. Anyway, the austerity push is being justified by recourse to the same misinformation and lies that was used to deregulate the world economy (particularly the financial system) which led to the financial and then economic crisis that still endures. Talk about destructive economic myths!

I have been sick today which is rare and have had trouble remaining vertical for very long. So the blog is a little shorter than usual. Just as well the subject matter might have disrupted my recovery. I note the UK economy is being deliberately sabotaged by its elected representatives which seems to conjure up a very weird construction of what we elect governments for. And in that context, the deficit terrorists are ramping up their calls for major fiscal retrenchment in the US. I thought Americans could read English – maybe they missed the British Office of National Statistics National Accounts release – it is pretty obvious – real GDP growth now negative again courtesy of a negative contribution from government in the December quarter. And the terrorists seem to want the same for the US. Its grim on both sides of the Atlantic.