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The Forum > Article Comments > Here are some alternative facts - not fake news, but quite bad > Comments

Here are some alternative facts - not fake news, but quite bad : Comments

By Tony Makin, published 15/6/2017

Few economists ever draw the link between Japan’s decades-long economic torpor and its public debt mountain.

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Alan B.,
"Government deficits are not an inexhaustible supply of picked from thin air money!"
For a sovereign currency issuer (such as Australia's Federal Government) that only borrows in its own currency, they literally are.

"If that were so, basket case economies, like Zimbabwe, would be rolling in wealth!"
WRONG!

Firstly, wealth and money are two different things.The Zimbabwean government seemed hell bent on destroying the former.

Secondly, the Zimbabwean dollar was officially fixed against the US dollar. Rather than letting the market determine what it was worth, the Zimbabwean government wasted resources preventing competitive devaluation. Then they ran out of the resources to do so, resulting in a catastrophic devaluation.

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Leslie,
Possible but unlikely. I'll go by Hanlon's razor.

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runner,

Spending more than we earn can be sustained, but there are consequences. Usually it means interest rates are higher than they otherwise would be. But in the current economic climate,

The claim that "our grandchildren are going to pay a huge price" is based entirely on the completely false assumption that they will ever be under any obligation to eliminate the government's debt.

But on the current trajectory, our grandchildren will pay a very high price for the stupidity of people who think the government must meet short term economic targets at the expense of education funding, infrastructure, the environment and indeed the standard of living of families.
Posted by Aidan, Thursday, 15 June 2017 4:09:26 PM
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Adian, given one can be asset rich and cash poor! Money and wealth are two different articles! And I see you read no further than down to Zimbabwe, before jumping to the completely wrong conclusion!

However way you present it, Zimbabwe's economic problems, along with virtually every other basket case economy, are debt related, whether by deficit or quantitative easing or just plucking money from thin air, like derivative money, as you seem to suggest as your preferred model?

Even there you are on the public record as claiming, that would be okay even for recurrent spending!? And economic bankruptcy going somewhere to happen, a la Zimbabwe, if adopted!?

The very successful Celtic tiger, was brought undone by debt laden foreign speculators, forcing themselves, with government assistance? Into Ireland's real estate market!

You seem to argue against the very thing you then go on to propose? Suggest you read further, actually comprehend what is proposed, give credit when due, rather than simply repeating what others have just proposed; then try and claim it as your own original thought? A display of good manners wouldn't hurt either, "einstein" oops, Adian.
Cheers, Alan B.
Posted by Alan B., Thursday, 15 June 2017 4:44:21 PM
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Fixed against the American dollar eh Adian? There you are! And the best possible explanation for a loaf of Zimbabwean bread costing a million Zimbabwean dollars! And inflation going through the roof!

Been flying over St Petersburg again lately? Flap harder, you're not making any headway! The jet stream tail wind is another thousand feet up, "einstein."
Alan B.
Posted by Alan B., Thursday, 15 June 2017 4:55:44 PM
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Alan B.,
You were the one who brought up Zimbabwe, falsely claiming it to be a counterexample to what I was saying.

Mugabe did just about everything wrong regarding Zimbabwe's economy. I doubt anyone in his position could have done worse if they'd tried to. So of course the fixed exchange rate was only a small part of the reason for their dollar's collapse. But it was a crucial one, and had they let the market determine its value, it would still exist today.

Likewise, most of Venezuela's current economic problems stem from their implementation of an anti business form of socialism, but they would not now have hyperinflation if they hadn't kept the official value of the bolivar fixed against the US dollar as the price of their main export (oil) crashed.

I agree money shouldn't be wasted. But the claims you're making about would happen if it is are completely wrong. I stand by my statement; debt funding for recurrent spending would be (relatively) OK. For governments only borrowing in the currency they issue, it never causes bankruptcy nor hyperinflation if they let the market determine the currency's value. That said, I wouldn't support such a policy due to its effects on inflation and/or interest rates.

The main reason Ireland was in so much trouble after the GFC is that it doesn't issue its own currency so has limited credit. Greece is in a similar situation, though from a much worse starting point.

I don't know what it is that you think I'm arguing against and proposing, as I haven't actually proposed anything in this thread. If you're referring to the RBA as a source of funding, ITYF I first mentioned it before you did; at the time didn't you favour self terminating thirty year bonds?
Posted by Aidan, Thursday, 15 June 2017 6:34:46 PM
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