ABC reports that former Australian Prime Minister and Treasurer Paul Keating has written that the Reserve Bank of Australia is not doing what is needed to stop the COVID recession worsening -- direct monetary financing of government deficits. He says that the RBA should do "what is sensibly required", which is funding the "mountainous sums" of government spending required to support the corona-ravaged economy.
The RBA's governor Philip Lowe has repeatedly dismissed calls for the bank to purchase government bonds directly from Treasury to finance the deficit spending. Keating, on the other hand, explains "there was no reason why the RBA should not adopt monetary financing of deficit spending."
"In arguing this, Mr Keating appears to be siding with proponents of a school of economic thought called Modern Monetary Theory who have been arguing there is no need for the RBA to buy bonds from the secondary market to fund government spending measures.
"They argue the RBA has the power to create money itself to finance the Federal Government's stimulus spending by purchasing the bonds directly from Treasury."
Lachlan McCall tweeted that this and other shifts in Australia are "the political side of what Steven Hail called "The Second Keynesian Revolution" 18 months ago. Like I said earlier this year, the future is left-MMT versus right-MMT."