Sam,

as near as I can tell, you are still thinking of a federal government budget as functioning in exactly the same basic manner as your or my household budgets. This is a logical enough assumption, but it is not how the federal budget actually functions.

The federal budget functions in way that is unique among all others. The fed is the sovereign, the currency monopolist. It alone is empowered create and destroy money (in $AUSD) at will and it does this every day. As I'm sure you are aware, money is not a real, physical thing - it is an abstract concept, an idea. Because it is abstract, there is no limit to the sum that the currency monopolist can create at will, they can simply imagine any amount they like and instantly bring it into existence.

Unlike you and I and everyone else, they do not have to earn or borrow money before they can spend money - because they themselves are the source of any amount of it they choose.

When the fed (not state) government taxes, the tax dollars do not go anywhere. There is no federal bank account holding a stock of taxed dollars. In debiting a bank account, the fed simply compells that sum of money to "un-exist". No transaction occurs. There is a system that accounts for this and may superficially resemble a bank account but is an accounting structure, that's all.

Why would I have any need to earn, save or borrow what I can simply create in any amount at any time I choose?

Seems I am about to exceed the word limit, will post the rest later, including the need for the fed to run small defecits for sustainability.

While no-one can suggest a clearer way to go than Rudd, there is also no-one that has given a clear explanation of why the world is in the extremely severe financial trouble it is in.

The point is, what should a historian portray concerning such a position?

Maybe the old bush term, - rip sh't or bust - should pretty well describe it.

bushbred, try Steve Keen Debtwatch for a pretty persuasive explanation for the mess we're in. Article "The Roving Cavaliers of Credit" is a detailed description of how debt financing of housing and securities bubbles eventually leads to crashes. Insufficient liquidity to service debt leads to asset deflation leads to a credit squeeze when banks realise they are put on a limb etc.

I'd be interested in your take on this. Thanks.

Well, Palimpset, during the Howard era our farm land prices jumped from 35 dollars per acre to 300 dollars per acre while grain prices stayed the same.

Some say, it was Howard/Costello's heavy borrowing early in the period which luckily merged in with global inflation.

Apparently the same has happened worldwide.

But I'm not an economist, mate, only a mug historian who has also written a fairly popular series on WA, called A Land in Need.

The Need there-of mostly rescued by what so-called mug economists call Quarry Economics or Pitstock Politics.

Cheers, BB, WA.

Hello Bushbred; the proposition of offering alternative, or the correct measures that ought to have been the case; - That is the exact point that has been over looked Bushbred - The classic textbook example of a Narcissistic Psychopath cannot be told anything – and Rudd cannot be told – or be debated – nor compromised with his ego – even if it destroys us; It is likened to a dog peeing on a tree –: marking its territory – That is all that matters to them. And not what is correct or what is right.

I would love to read your historical account of the W a Treasury under the Labour party; and how so much wealth could be distributed outside of Democratic systems.

Well that would be all Labour run States- but you live in WA

Government can only exist by the ability of a Nations people – it is constitutionally charged with the responsibility to Protect and preserve private property rights- Not Private property and National Ability charged with, and deplete to keep Government and its Industrial parasites to exist.

It is not a substitute God who reorders the Metaphysics and rewrites the sciences to suit its own purposes; That is what exists today - You might be right Bushbred – Australian Colloquial expressions we cannot write here; We are drowning in a very deep DOODOO pile- Thanks to the psychopaths.
And most of us realise ; there is no recovery now.

fozz wrote...'Seems I am about to exceed the word limit, will post the rest later, including the need for the fed to run small defecits for sustainability'...

may I request that you read the following, as initial guide, to follow leads to others areas...on history of banking, leading to current system, and current crisis...
http://www.historyworld.net/wrldhis/PlainTextHistories.asp?historyid=ac19 (last and most important page missing...)
http://en.wikipedia.org/wiki/History_of_banking (another swing at it from different perspective)
http://www.investorwords.com/1914/Federal_Reserve_System.html (good definition of federal reserve system...)
http://books.google.com.au/books?id=KZAJTdn6x0IC&pg=PA88&lpg=PA88&dq=currency+regulations+history&source=bl&ots=uvz5Y030Pg&sig=fKeRSZrtar6_mzMERJj5z0TvxJo&hl=en&ei=DCrZSZOWEJDW7AOvoKTZCg&sa=X&oi=book_result&ct=result&resnum=10#PPR21,M1 (happy 88page reading including currency regulation...)
http://en.wikipedia.org/wiki/Official_gold_reserves (gold reserves of countries list_ ie actual reliable comparable worth value of each country and its currency(meaning 'positive' asset only[does not include debt put into asset category as done these days to inflate bottom line...)
and google 'gold reserve economics'...
simple view of 'toxic-debt'...bankers view...http://www.theage.com.au/interactive/2008/world/economics101/index.html
http://www.thebull.com.au/articles_detail.php?id=1372 (biggest debt sector-housing, and warning signs in Australia...)
http://en.wikipedia.org/wiki/Global_financial_system (uselessly brief blab for such major area of public interest, but links to imf, world bank, origin and its failure as evidenced by current crisis(which no one including public leaders want to acknowledge and prosecute...but throw more public money at them) etc...)
...and hopefully enough pieces of common knowledge available...how money(cash) to cash-collections(banking) to cash flow(large to smaller sectors of world where cash flows in and out to...and how it all comes together (and abused(eg futures markets, wall street, and for us the common public the housing sector) so your next post can address the particular point you want to make...

sam