Debunking Economics - the podcast

There’s only one reason a government issues bonds. It’s so their account with the central bank is not overdrawn. It’s only regulation that stops the central bank from saying a rapidly expanding deficit is fine. After all, it’s an indicator of how much government money has gone into supporting the private sector. But economists and finances see that as monetising finanacing, and it’s a no no. Instead, regulations insist bonds are issued to the value of the government’s spending deficit. But what purpose do they serve, other than allowing investors to influence their price and yield, often as a response to government spending. In short, they seem to think their market pricing can influence government policy. So, why do we pay so much attention to an artificial process that only happen because we can’t trust governments to regulate their spending and keep inflation in check.

A listener (Doug) left a comment on YouTube saying I assume Phil intends to play "devil's advocate" when he speaks as though taxes are necessary for money issuance by governments with sovereign currencies. He’s worried that it might confuse new listeners to the podcast. So this week, Phil and Steve get stuck into the more contentious side of MMT – how government spending creates money, and bond issuance has limited impact on that. It depends on who is buying them. They discuss how government spending differs from household spending funded by a bank loan. Consider it a catch-up for new listeners and viewers.

Phil happened upon a book to Australian economist Joshua Gans (and Andrew Leigh) called Innovation & Inequality – how to create a future that is more Star Trek than Terminator. He discusses some of the concepts with Steve, including whether companies responsible for the creative destruction of other industries should be made to pay. As Phil puts it, if I burnt down a shop, I would possibly go to prison. But if I make that shop go out of business -and all the shops around it – because I happen to run Amazon, I face no consequences. It’s progress. But I the next chapter, the progress of AI will see more destruction, as more of us lose jobs. Then the only way we will be kept alive is by a basic income, provided by the state or possibly by people like Elon Musk. If it’s the latter, imagine the political control we would hold. So, how do we balance wealth whilst still providing incentives for innovation. And how much of that innovation is destroyed by the momentum of existing big tech players?

Andy Burnham is now the British Prime Minister but, Phil asks, aside from convening cabinet meetings in the north, will he do anything different to his predecessor. No, he will follow the same neoclassical economics approach as all Prime Ministers, with an obsession for balancing the books, rather than developing creative outcomes to distribute wealth and grow the economy. In short, it’s a slightly more attractive head, stuck on the same ugly body, he says. So what about Count Binface’s contribution to UK politics? Steve’s verdict: well, he might be trapped inside a dustbin, but its better than being trapped in an economics textbook! So, that all said, is there anything positive to from this change is stewardship of the nation?

This week Phil and Steve talk about the staggering accumulation of capital, which has ratcheted up since the pandemic. In the US the top 0.1 percent of companies hold 88 percent of all corporate assets. In 2017, the top 10 S&P companies accounted for 20% of the market cap of all 500 companies, now they account for 37%. And its not because these companies are good. It’s because the nature of products today gives them a stranglehold on their customers, however bad their offering. Steve calls it the ‘shitification’ of business and Phil managed to get Microsoft’s AI to admit just how bad their own products are. ‘Held together with duct tape’ was the gist of it. So bad products, capital accumulation, income and wealth diversity – and governments do nothing but embrace it all, ignorant of what damage it is doing to society.

This week Phil and Steve confront the mathematical and environmental reality of a "zero growth" future, sparked by a debate over the deflationary traps of finite currency systems like Bitcoin. Steve thoroughly dismantles standard neoclassical theories of "decoupling"—the fantasy that global economies can indefinitely expand their wealth while reducing energy consumption—exposing how mainstream economic models trivialise energy as a minor production input. By presenting real-world data showing a linear, lockstep relationship between global energy use and gross world product over the last 50 years, the hosts argue that modern capital is merely a conduit for turning energy into useful work. Ultimately, they outline the profound structural challenges of transitioning to a deliberate zero-growth framework, explaining why managing a massive, debt-leveraged economic downshift is a biophysical necessity for the planet, yet an absolute impossibility under our current credit-driven capitalist architecture.

How much longer can the United States rely on the US dollar to dominate the global financial system, and what happens when the cracks finally start to show? In this week's Debunking Economics podcast, Phil Dobbie and Professor Steve Keen travel back to the 1944 Bretton Woods conference to revisit John Maynard Keynes's ultimate lost argument. Steve details how Keynes's visionary proposal for a global clearing union and an international currency—the Bancor—was explicitly designed to penalise both hoarding surplus nations and debt-ridden deficit nations, spreading wealth to developing countries and preventing destructive "beggar-thy-neighbour" tariff wars. By rejecting Keynes's framework in favour of institutionalised US dollar hegemony, the modern global economy has instead trapped itself in a cycle of systemic trade imbalances and ballooning private debt. Tune in to explore why today's aggressive tariff landscapes are exposing the structural fragility of the greenback, whether Alternative Modern Monetary Theory (MMT) baseline assumptions are entirely wrong about trade, and what a chaotic shift away from the world's primary reserve currency means for global stability.

Phil and Steve confront the global surge in anti-immigration rhetoric and right-wing political momentum, tracing its roots to the structural failures of neoliberalism rather than the actions of migrants themselves. Steve dissects how decades of fiscal paranoia, deregulation, and slashed public spending on health, welfare, and education systematically eroded working-class security, turning migrants into easy scapegoats for falling real wages and housing shortages. They evaluate how corporate-led migration has been historically weaponized by business elites to depress labour costs at the expense of local training, while contrasting the economic benefits of "capital deepening" through technology against raw "capital broadening" through rapid population expansion. Ultimately, it paves the way for Pauline Hanson and Nigel Farage tocapitalise on very real working-class anxieties, but their adherence to the exact same deficit-obsessed economic playbooks will only invite further structural chaos.

Steve and Phil critique our systemic over-reliance on Gross Domestic Product (GDP) as the definitive baseline for comparing global economies and measuring societal well-being. The discussion underscores a fundamental flaw in neoclassical modeling: while GDP measures raw industrial output, it completely fails to reflect actual public welfare due to stark differences in income distribution, unpriced volunteer and domestic labour, and varying national structures of public service delivery. For instance, a per-capita GDP comparison artificially flatters the United States over Europe or China simply because American citizens are forced to spend massive out-of-pocket sums on privatised health care, transport, and education—essential services that are heavily subsidised or provided entirely free by the state elsewhere. Would it be more worthwhile to measure something fundamental, like the relative happiness of a nation. Steve argues that GDP still has a place, but it should never be used on its own. That’s just lazy.