Macrobusiness stumbles upon awful effects of its prescription, mistakes them for ‘paradox of thrift’

Over at Macrobusiness today, the boys discover that

Data released this month suggests Australian households are deleveraging at a furious pace.

and incorrectly conclude that households are caught in a paradox of thrift:

Australian households are caught in their very own paradox of thrift, which means that the federal government will need to intervene directly in the economy to support demand.

Of course, this is a complete misreading of the situation. We’re just seeing the perfectly predictable effects of the sort of fiscal stimulus that MB seems to love so much (UBI/MMT). Indeed, in Jobkeeper/Jobseeker boost we had something like a UBI, funded by government deficits. The results are a predictable outcome of basic accounting – if government borrows to give money to households, then government debt goes up, private debt goes down.

Government – borrowing to pay UBI:

Dr Cash$umpteen billion
Cr Government Debt$umpteen billion
Government gets cash through borrowing

Government – paying UBI/Jobkeeper/Jobseeker:

Dr Fiscal expenditure$umpteen billion
Cr Cash$umpteen billion
Government gives borrowed cash to households

A perfectly predictable thing then happens to households – their indebtedness goes down:

Households – receiving UBI/Jobkeeper/Jobseeker

Dr Debt $umpteen billion
Cr UBI/Jobkeeper/Jobseeker income$umpteen billion
Households received Government’s cash and pay down their debt

Yes, yes, this is the mechanism by which private debt is made EZFKA public debt, to much rejoicing and adulation. This is the mechanism by which the EZFKA is reset for another round of private debt expansion.

The fact that the fiscal policy called for by Macrobusiness would do this was, of course, perfectly predictable:

What’s that they say about being careful what you wish for?