http://www.yourstrawman.com/

Many people think that there are hundreds of other laws which they have to keep (and new ones every other day), but that is not so. Those other things are called "statutes" and keeping them is optional for you, the human, BUT they are not optional for your fictitious strawman, and that is why the people who benefit from those things want to persuade you to represent your strawman and so become subject to all of their invented restrictions and charges.

If you knew that they were optional, would you agree to:

* Give most of your earnings away in taxes and similar charges?

* Pay to own a vehicle?

* Pay to own a television set?

* Pay to drive on roads which were built with your money?

* Be forced to join armed services if you are told to?

* Send an army which is supposed to represent you, into another country to murder innocent people there?

Were you ever told that these things are optional? If you agree to represent your strawman, then these things become binding on you. These are some of the "statutes" which 'politicians' keep inventing in order to make you poor, make them and their friends rich, and keep you in a position where you have to do everything they say, no matter how much that harms you and does away with your natural rights and freedom.

Since 1980 we sold off 4 state Govt banks and the Commonwealth. Through the fractional reserve system of banking they can create from nothing $10 worth of loans with $1 worth of deposits. Now our Govt borrows from private OS banks for money for growth and inflation. In our $1.5 trillion economy this is $90 billion pa which is created as debt by the private banking system.

Should the private banking system own our increases in productivity by virtue of creating from nothing the money to equal it?

So we now have to sell off resources cheaply just to get enough money for our country to function. Private investors want and profit and eventually take out more money than they give. We have to go back to creating our own credit or become just another poor country in the South Pacific.

@ Cohenite
Re; "a domestic budget deficit outcome increases private financial wealth"

That statement of mine is easy to prove.

The article you quoted by Anthony Cox only considered the first round of the expenditure of the $21 billion cash hand out. The $21b first round was spent into businesses and thus became the source of the incomes spent in the next round and so on almost ad infinitum.

In each round some more of the residual is bled off into savings and profits but even profits become someone else's income and are re-spent. Eventually after enough spending rounds all the $21 billion ends up as financial savings. That is simply double entry accounting.

The $21b was created by key strokes, to increase demand for goods and services in an economy that was flagging, and it ended up as increased savings in the private sector.

You need to read the MMT Primer I mentioned. It is free.

@ Rehctub and others

In a sovereign (money issuing) country a major principle is that the sovereign government can always pay the debts it incurs that are denominated in the currency it issues. It just key strokes the credits to the account of its creditors and owes the payment to the Reserve Bank which it owns on our behalf. Should or does it worry you if you owe money to yourself? No!

In Australia the government tends to borrow the money by selling bonds to the financial institutes but that is simply upper class welfare that increases the profitability of banks.

As I wrote earlier the government spends first and only taxes later to remove any excess demand. During a boom the tax may need to be at a level that produces a government surplus but in ANY situation a sovereign government surplus will reduce demand and reduce employment in the economy.

Too many people follow the foolish or deceitful views of Abbott and Hockey that sovereign government debt is no different to private debt. There are no real similarities.

Again please improve your understanding.

Hi Alan,

It would appear that you have passed the peak of your capabilities on OLO. You have been challenged and found wanting. Like a pebble doing a “Barnes Wallace” across the pond, you temporarily cause few ripples before sinking to the bottom of the pond.

When it comes to anything of substance you are more at home with the sediment at the bottom of the pond rather than demonstrating any capacity to sustain your position on the surface. Superficial, shallow, embedded in detail rather than substance and reluctant to engage in any debate that challenges you confected position.

We are indeed fortunate that you live in France, the home of those who resist all attempts to visit reality.

The questions remain, are you going to answer them?

Debt should only be attached to money that already exists. If inflation money + growth money gets created as debt,this means the more growth we have the more debt we incur.

The debt money will always exceed the growth money, since our inflation money is nearly the same our growth rate of 3%.Even if we sell off all our resources and public assets, in the long term, the debt can never be repaid.

This is why there is so much money in the gambling derivative market. Our banks have a gambling derivative exposure of $21.5 trillion which is 6 times their assets,which are our mortgages. They cannot be bailed out.

Our true Govt debt of State and Federal is more like $ 500 billion.
http://www.barnabyisright.com/

Spindoc and Arjay,
Alan's article made quite a lot of sense to anyone who has knowledge of Modern Money Theory (MMT), a theory that only started to be thoroughly understood about 15 years ago, 25 years after the conservative, Nixon, forced the world off the gold standard (MMT is basically updated Keynesian Theory and although I first read the General Theory 35 years ago it is only now that I am close to understanding most of it).

All money is now an IOU, a promise that can be exchanged for some goods or some service at a later date.

The $A currency and key stoke entries by the sovereign government have value because the sovereign and state governments will only accept payment of taxes, fines and other charges in the $A whether the moneyowed be paid by cheque, cash, or direct debit. Businesses follow the government's practice.

Bank money is all loan money which matures (goes out of existence) as the borrower repays the bank. Sure new bank IOUs are created for each new loan.

State government are like the countries of Europe which gave up using their own currencies. They have to raise or borrow what they want to spend and they have to repay what they borrow or roll the loans over.

Any currency issuing government does not have to borrow to spend. They spend first and tax to the extent necessary as dictated by the economic performance of the currency area. If the currency area is in a slump the best quick move is to provide money to people who will spend it, preferably on local products. For the longer term, the schools building program was a first class move.

For the third time in these comments, if you want to make sensible comment please read the MMT Primer at New Economic Perspectives and some of the blogs by professors Wray, Black, Hudson or the wealthy hedge fund proprietor Warren Mosler. All the contributors (bloggers) are listed on the RHS of the home page and the easy starters are the items by J D Alt.