Dear Aidan,

«While it's true we're not currently in a position to eliminate the debt, that's not important.»

Perhaps that's not important for you because you have no savings.
Debt creates inflation and inflation eats up people's savings.

If it were your own money, surely you would have done everything in your power to return the debt as soon as possible so you can stop bleeding interest over it.

(P.S. I do agree with you on the topic of multiculturalism and immigration)

Dear Yuyutsu,

Without debt there would be no savings. Even the creation of cash involves the government spending more cash than it's earning (IOW running a deficit) even though they don't actually include physical cash issuance in the debt figures.

The relationship between debt and inflation is less straightforward than you might imagine. Debt does increase the money supply, which has an inflationary effect. But technological progress has a deflationary effect, so some money supply increase is needed to balance that. Also, when the extra money is spent employing people who would otherwise be idle, the increased production will (to some extend if not completely) counteract the inflation.

Now, if it were my own money you might have a point. But governments are not individuals.
• Individuals will eventually retire; governments never will.
• Individuals have limited credit; governments that create their own currency have unlimited credit.
• Individuals don't recoup the money they spend through taxation.
• Individuals don't have a responsibility to keep the economy productive and the population employed.

Dear Aidan,

Have you seen the old series "Survivors"? http://en.wikipedia.org/wiki/Survivors_%281975_TV_series%29

After nearly all the population died, that group of survivors found a deserted military air-base with a few barrels of oil. They claimed however to have millions of barrels in their hangar and on that basis they printed money, promising that anyone presenting it could receive a barrel of oil (not that anyone actually had the means to transport those barrels...). When visitors came, they used to show them the same 2-3 barrels over and over again.

One could get away with such lies for a while, but not forever. Money should have a real backing, whether it be natural resources, real-estate, or sadly the power to rob others of theirs.

The purpose of money should be to create confidence that the results of one's labour would not go wasted, thus one doesn't need to consume it all at once but can produce for others first, then enjoy it later.

As much as I would have liked to keep my savings in real commodities, it is not practically possible:
Food would be eaten by rodents and other creepy-crawlers.
Clothes and shoes may no longer fit.
Building materials would probably not match the parts of my house that require repair.
Machinery rusts.
Petrol/oil can easily catch fire.
Medications are not likely to fit whatever conditions I might have in old age.
And so on.
And obviously it all takes much space too.
Thus money.

As it stands, inflation forces one to run fast just to stay in one place. Rather than keeping one's savings in the safe, one is now forced to waste the later part of their life studying financial/investment products which otherwise have no relevance to how they planned and hoped to enjoy their post-retirement days.

You mentioned the deflationary effect of technological progress, but that only artificially brings down the CPI with new products that were not previously needed, usually also products with a very short life-span that need to be replaced again and again. While you cannot eat this silicon, food prices keep increasing!

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Regarding the employment of more people that would otherwise be idle, it would be better for perhaps around half of the people who are employed today to be idle. So many jobs create nothing, so many jobs only complicate people's lives and waste their time - see for example all the superannuation industry with armies of lawyers and accountants being paid to comply with government regulations and try to save a few bucks from taxation. Had there been no superannuation, all those people could be home, so many office air-conditioners be turned off and so much less rush-hour traffic jams, to name a few of the benefits.

Getting people to actually produce more products and services that are truly needed is not as easy as throwing money in their direction because not much more is actually needed in this already-affluent society, perhaps with the exception of aged-care which Australians don't like to do even if they get paid for it.

«• Individuals will eventually retire; governments never will.»

Sadly so, I still hope they will!

«• Individuals have limited credit; governments that create their own currency have unlimited credit.»

Yes, they have a license to rob us, including through inflation-tax.

«• Individuals don't recoup the money they spend through taxation.»

Even governments don't recoup the interest they pay to foreign creditors. Well, if it's in Australian dollars then they recoup it from ordinary Australians through inflation. Eventually, foreigners will learn that Australian money is no good and will stop lending.

«• Individuals don't have a responsibility to keep the economy productive and the population employed.»

If government has this responsibility then it had failed badly and created a non-productive economy where half the employed do nothing useful while the few remaining genuine producers (cars, farmers) lose their jobs.

Race and culture are not the same. We would not ban Germans today. We do ban Nazis because they believe in an unacceptable belief system.
We should not ban the Arab race. We should ban believers in the unacceptable belief system many Arabs ( and Indonesians) adhere to.
Muslims are people we used to call Mohammedans because they follow the teaching of Mohammed.
Mohammed "married" a girl when she was 6 and "consummated" the "marriage" when she was 9. He conquered a tribe of Jews sold all women and children into slavery and beheaded all adult males.

If alive today in Australia he would be in gaol as a war criminal and a paedophile. To follow his teachings is to have moral parameters set by a paedophile war criminal. Such a person is not a fit and proper person to have a vote in a liberal democracy or to control a school receiving the tax monies of a government of such a democracy.

We would not allow Nazis to come here and set up Nazi schools. Why do we do it for people who follow the teachings of a man whose killing was only not of the scale of Hitler's for lack of modern technology?

No, Yuyutsu, I haven't seen that old series. But from your description, it seems to highlight the foolishness of commodity based currency: eventually the government will run out of the commodity and it will collapse.

So rather than fixing the currency value relative to anything else, it's best to have fiat money (where the money's value is based on the need to use it to pay taxes. The market then decides how much the money is worth, and the government adjusts taxation/spending/interest rates to control inflation.

ONE purpose of money should be to create confidence that the results of one's labour would not go wasted. But another purpose, no less important, is to ensure there's a demand for the labour.

As it stands, inflation DOESN'T force you to run fast just to stay in one place. Walking slowly is likely to be sufficient to meet that objective.

The deflationary effect of technological progress DOESN'T only artificially bring down the CPI with new products that were not previously needed. It also enables the old things to be done more efficiently.

Food prices generally rise a bit faster than the CPI, but improving technology slows the rate of increase. And in my part of the country, food prices are still below what they were before Aldi opened.

Regarding your claim that "otherwise be idle, it would be better for perhaps around half of the people who are employed today to be idle", I don't think you've thought this through. Would you really rather about half the workforce ceased contributing through taxes, instead requiring everyone else to pay more to support them?

Jobs that you dismiss as contributing nothing do fulfil a need. Were it not so, nobody would bother paying them. While removing the need could credibly be a better response, that does not mean the workers should be idle. We're very far from perfect, and there's no shortage of worthwhile things that could be done but aren't being done because nobody's willing to pay people to do them.

(tbc)