sam,

would it make it easier to accept how our modern monetary economy functions if I said that it is neither "left" nor "right"? It is simply the way it is - you can be a righty and still accept the truth about the origin of money and the need for deficit spending at the federal level.

I'm not sure where you are leading. First you say my village analogy is right, then you attempt to prove it wrong (I think). Your comments and links appear to have no bearing on the nucleus of the argument. That being that all currency derives originally from the sovereign (currency monopolist) who are not limited in the amount they may choose to create.

To argue otherwise is to argue that there exists a fixed, unchanging and unchangable amount of currency in the world. That the sum in existence today is essentially the same sum that existed at any point in history and that the only way to get more is to earn or borrow it from somewhere else (in which case, where did the original sum come from?)

Or business activities "create" an expanding sum (false)

Or that it simply "creates" itself (also false)

Do not confuse the way the fed appears to budget with how the modern monetary economy actually functions at it's core. The type of economic management embraced by both parties for years now represents an ideoligal position, not the actual fundamental working of the economy.

Now, do you understand and accept that the federal government is empowered to create and extinguish Australian currency at will, and therefore to spend money without any prior need to tax or borrow. If you think that the fed cannot do this, please clearly spell out why.

Excellent post Fozz! But ... off-topic?

And Sam!

Hi Q&A

Are you a moderator?

The reason I went down this road is that underpinning the whole argument made by the author of the article, Henry Thornton, is the notion that we are on a road to disaster because the government's deficit spending equalls a massive debt that must be paid back by the taxpayer.

This is absolutely false! But unless we understand the basic functioning of the modern monetary economy, we will logically assume that Thornton is correct. That because balancing the budget and constantly seeking to run a surplus (savings) is good for our household budgets, it must be good for the federal government as well.

No - a federal budget functions as the mirror-reverse of our own. The voluntary constraints that have been in vogue for several decades are just that - voluntary. Implemented by both sides of politics according to an ideology (neo-liberal) that is now past it's prime and beginning to fade.

Once the largely failed neo-liberal experiment is finally ditched, both major parties will be free to resume the basic responsability of government - nation building.

Hi Fozz

No, most definitely not a moderator. I do however like to give credit where credit is due ... and I liked your arguments (not too sure about the latest) - unlike the guff earlier in this thread (and all threads drift from topic).

I am also impressed with Sam's ripostes - and would like to defer my thoughts until I see his response to your penultimate.

Having said that, I am not at all sure where the author is coming from - he is not Henry Thornton by the way, his name is Henry Ergas (you are probably confusing him with another article?).

Ergas comes across (IMO) as just a plain old rhetorical whinger that would be better off getting an old milk crate and shouting to the passers by in the Domain :-)

Oops, you're right Q&A, it was ERGAS not THORNTON - I wrote that at the end of a very long day. And yes, Ergas is as you describe him.

I don't have the URL but check out "billy blog". It is an Australian website belonging to Professor Bill Mitchell. He is a macroeconomist and the head of an economic research facility. It will explain the workings of our modern economy as they really are. Quite an eye-opener.

cheers