Under one God,

Apologies, but your style of writing is a little hard for me to follow. It appears you are arguing the RBA is in total control of all of our governments spending decisions and that it dictates what spending commitments the elected sovereign government will make – that the federal government must ask the reserve very courteously how much it can have to spend and what on? Is this what you are suggesting?

The federal government has ZERO need to borrow from anyone and is not told what to do by the reserve.

Taxes levied by the fed DO NOT pay for anything – the act of taxing extinguishes that sum. There is no bank account holding tax money collected by the fed. The taxed money is accounted for but that is all – it does not go anywhere in particular, much less into the reserve. If you were to pay your taxes to the fed in cash, you would get an official receipt saying that your taxes had been paid – and the cash you handed over would be tipped straight into a shredder. In the past, taxes paid in cash were incinerated.

Now let’s be crystal clear about one thing – deficit spending by the federal government does NOT equal any kind of debt that must be repaid by future generations etc etc. They have ZERO need to borrow what they can (and do on a daily basis) create.

Arjay says that Rudd already has us in debt to the tune of $200 billion. That is one-fifth of GDP. So where did that enormous sum come from? We had a surplus (a false concept economically at the federal level) of $22 billion, who loaned us the rest?

The period you refer to Arjay (after WW2), was the Keynsian period – a period of strong govt spending, high govt engagement with the economy and – not coincidentally – very strong growth and very low unemployment.

FOZZ<<The federal government has ZERO need to borrow from anyone and is not told what to do by the reserve.>>so why we pay tax[if govt creates money,..why we need ever more govt taxes?

<<Taxes levied by the fed DO NOT pay for anything..the act of taxing extinguishes that sum.>>what sum[you say there is no sum...loltax PROVES there is a sum[because OUR CASH [tax gst etc paid it]

<<There is no bank account holding tax money collected by the fed.>> so where does my wage DEDUCTION go[where gst go[my tax i PAY on my BOOZE or fags IT GOES TO THE FED

<<The taxed money is accounted for but that is all>>accounted to WHO[THE FED}

<<it does not go anywhere in particular,>>lol..it goes to treasury who sccounts it back to the fed

>>If you were to pay your taxes to the fed in cash, you would get an official receipt saying that your taxes had been paid..and the cash you handed over would be tipped straight into a shredder.>>yeah because the fed issues it UNDER sole licernce GLOBALLY

<<In the past,taxes paid in cash were incinerated.>>allowing the issuer to issue more[every dollar returned to the fed creates 10 more credits it lends out at intrest, globally[because lending CREATES money, that when it returns to its issuer is shedded,..by the cartel who owns the fiat..but its credit remains..[and its intrest in reserve fiat needs..new borrowings..to pay the ursury....ursury payable ONLY IN FIAT CURRENCY..owned and issued and controled by the fed reserve banking CARTEL[globally]

<<They have ZERO need to borrow what they can(and do on a daily basis)create.>> yes they = the fed,govt is not owning the fed..[the BANKERS do]

Fozz’s argument is just more of the confused belief that in government we have discovered a magic pudding; that we can create real wealth by digging holes and filling them in again. For some reason, we only need forced redistributions – taxation or inflation - to work our magic, but the redistributions involve no net cost, only benefit.

The belief that we can create net wealth – real wealth - by forced re-distributions is nothing but confusion. We can’t, no matter how strongly anyone believes it. All that government is doing, by either taxation or inflating the currency, is taking from A and giving to B, that is all.

Nothing can change this fact, because there is no magic available. The money you get from Canberra is the money you sent to Canberra, minus freight both ways.

The stimulus packages will only destroy wealth, because *that’s all they can do*.

Rapscallion
What do you mean by ‘true values in the economy’? How would government be able to know, in advance, for every single transaction, the difference between the market price and the supposed true value? Then how would government be able to ‘protect’ them? If what you are saying were right, total government control of the economy would work.

Money and banking are not ‘unregulated’. The whole purpose and effect of monetary policy, central banks, banking regulations, government monopoly of currency, legal tender laws, deposit guarantees, etc. etc. etc., is to control or influence the price of money. Therefore your assertion is not valid and the argument fails.

Grim
How do you define the difference between ‘capitalism’ and ‘financial capitalism’? Presumably just plain old ‘capitalism’ is of a non-financial kind?

This looks like more confusion about basic economics.

Leigh
Personality is irrelevant. The real issue is whether anyone can show reason or evidence against my argument, rather than more of the personal insults and confused voodoo of the ‘let’s burn down our houses’ school.

Janet, Keith
Thanks; much appreciated.

Pericles
The viable alternative is to stop doing what’s causing the problem in the first place, which is, monetary policy to lower the rate of interest.

“Public opinion is prone to see in interest nothing but a merely institutional obstacle to the expansion of production.

“It does not realize that the discount of future goods as against present goods is a necessary and eternal category of human action and cannot be abolished by bank manipulation.

“In the eyes of cranks and demagogues, interest is a product of the sinister machinations of rugged exploiters.

“The age-old disapprobation of interest has been fully revived by modern interventionism.

“It clings to the dogma that it is one of the foremost duties of good government to lower the rate of interest as far as possible or to abolish it altogether….

“The wavelike movement affecting the economic system, the recurrence of periods of boom which are followed by periods of depression, is the unavoidable outcome of the attempts, repeated again and again, to lower the gross market rate of interest by means of credit expansion.

“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”

Mises, ‘Human Action’, p. 570

I think that was the mistake I made, Jefferson.

>>The viable alternative is to stop doing what’s causing the problem in the first place, which is, monetary policy to lower the rate of interest.<<

I thought that the idea was to address the problem as it exists today. Silly me.

Yours would be a good idea if we hadn't dug this hole in the first place (and I guess that was also what Keith refers to when he says "Justin did give an alternative ... didn't you recognise it? The Greeks once mastered that option."), but I think people are more concerned about cures than prevention right now.

One real alternative would of course have been to "let the market sort it out". Banks would be made to survive or die without government handouts, and we punters would have to get by without our own personal red envelopes. The "problem" would disappear as real asset values reasserted themselves, and bad loans absorbed back into the system..

But I think you would agree that while "effective" in economic theory, it would have caused significantly greater misery to all parties. So we are left with a distictly un-pretty political solution, which we can all pick holes in until the cows come home.

As a solution to the immediate issues, "shrinking government" is a non-starter. Again, it is a nice theory - and one, by the way, that I support wholeheartedly as a longterm goal - but will take literally decades to implement.

Of course, I could be wrong, and the solution might be staring us in the face. In which case, I'd be delighted to hear something less like a political slogan, and closer to a workable action plan.

Jefferson; Capitalism is about making something. Capital.
Finance Capitalism is about making a profit from the exchange of money. Nothing is created, nothing is built, nothing is manufactured.
Except debt.