@jwwr I think I’m struggling because you aren’t saying what you think should happen based on your analysis.

I can read three possible conclusions:
1. The government should raise taxes instead of having the RBA raise interest rates (MMT approach)
2. The government/RBA should *not* raise taxes or interest rates, and instead accept high inflation
3. The government/RBA should *not* raise taxes or interest rates, because inflation is not real

I reckon #1 has merit. But from reading your analysis it sounds like you would advocate for #2 or #3… but you don’t actually say.

@jwwr I have to say, I find your critique a bit too jumbled.

You say supply is imaginary but then refer to the “underlying economic potential of a market [to produce goods and services]”, which is almost the textbook definition of aggregate supply. (So you agree this is a useful concept, even if “imaginary”?)

MMT is interesting, but on inflation, it has the exact same supply/demand/price dynamics as orthodox macro. It differs by saying that the best way to reduce inflation is fiscal policies (raise taxes) rather than monetary policy (raise interest rates).

Its important to question the goals of RBA. But you don’t need a grand theory that claims the idea of inflation is bogus!

@jwwr but inflation *is* bad, that’s more of an empirical fact rather than a religious belief. (Unless you believe there is little value in stability of prices and markets that allow households and businesses to plan long term).

And I don’t think it’s true that the RBA board are making decisions to achieve zero-sum transfer from poor to wealthy. Rather they are trying to control inflation by reducing total demand across the whole economy (the only tool they have). Certainly you could argue there should be better tools.

A good showing today!

I solved today's #Redactle (#322) in 22 guesses with an accuracy of 59.09%. Played at https://www.redactle.com/