FOZZ<<Notes and coins are REPRESENTATIONS of money.>>money IS notes and coins[coins USEd to be REALLY gold and really silver thus not abstract nor a concept[but a limited REAL commodity rare enough to hold a constant value[now coin is cupra nickle, ITS REAL VALUE[in nickle]is less than face value, so NOW it has become a legal tender[having only value because it is 'lawfull currency''..but its not constitutional[rule 115 a state shall not make anything but gold or silver COIN a legal tender in payment of debts]fed constitution]

<<I’m not sure what you mean by“The fed got privatised”>>
http://forum.onlineopinion.com.au/thread.asp?discussion=2441
http://www.galwayindependent.com/letters/letters/who-owns-and-runs-the-central-bank?-/

<<the role of taxation at the STATE government level is indeed to finance the government’s spending. They are not sovereign.>>neither is the federal govt,yet the federal reserve is

<<the role of taxation by the FEDERAL government is to create demand for the currency issued by the fed so that they can spend their otherwise worthless currency>> WERE IT STILL SILVER AND GOLD it wouldnt be worthless[as it is now]

[but the fact its 'legal tender makes it have legally[not constitutionally ;real worth,..despite only being printed paper[and nickle coin]..

funny how the nickle almost is about parity with the price of nickle[but the silver coin [the shilling]contains about 3 dollars in silver..

thats how much value the federal reserve has stolen from each of us[our parents bought their house for 300 pounds [of silver]ITS STILL WORTH ARROUND 300-POUNDS OF SILVER[its the value the bankers stole, giving us fake silver coins while stealing the real silver

Fozz, your arguments hold true if fiat money leads the money creation cycle. Steve Keen has demonstrated that private banks lead the cycle and force the Reserve to relax reserve limits or to create new reserves after banks have created credit. Currently the ratio of debt to GDP is running at 3-6 times historically safe levels.

If the govt is really in charge of money creation or the RBA, then they have been abject failures in allowing credit/debt levels to blow out as they have.

In the '30's we had the non-Keynesian Premiers Plan which brought us out of the depression much quicker than the USA which enacted big government spending programs.

Jefferson is right in saying recovery won't come from an engorged public sector but from the private sector investing again. Rudd would have been better off saving money to take up the slack in employment when it happens. With a lazy $200B deficit in the next few years, and our endless current account deficits we are going to need all the production we can muster to pay our way.

Instead we'll get an estimated 5% increase in total tax take and a load of international pressure to cut government spending. And a Mexico style rape of our resources to pay for Rudds premature ejaculation of more borrowed money into an economy crushed by debt already.

If Rudd really knows best then why wasn't he pushing this barrow 2 years ago? If the Treasury or the RBA really knows what's best why didn't they do something before the crash?

And why are Ratings Agencies still listened to?

Pericles
The cure and prevention are the same: a return to sound money.

Everyone is agreed that there should be political action, so the fact that there would need to be political action is not an argument against a return to sound money.

Fozz
Money is not an abstract concept if we understand its origin. It is merely the most marketable commodity that comes to be valued as a medium of exchange. My mother-in-law remembers depositing a gold sovereign, and when she went to withdraw it, getting back a piece of paper. She doesn't think of money as an abstract concept, and clearly understands the theft that monetary policy involves.

But the effect, and indeed the purpose, of government-monopoly money, is to forcibly replace society's preferred and freely chosen forms of money - usually precious metals - with tokens of nothing but the authority of the state, the same people who stand to benefit most by defrauding the population with fiat money. The effect is to make money *seem* to be an abstract concept - nothing but the fiat (L 'make it thus') of the political class.

Money substitutes are substitutes for money proper, which used to be gold. But since that itself has been changed to mere worthless paper, people confusedly think that money is not 'real'. But that is merely to fail to understand the nature of the fraud, which is two layers deep:
1. money proper replaced with government paper and called money, and
2. money substitutes issued out of all proportion to money on deposit.

If we returned to sound money, people would better understand once again
a) that money is real, and valuable
b) the difference between money and money substitutes
c) the fraud that is monetary policy, and
d) the fact that the fake money is itself used to promote privilege in society and self-aggrandisement in government and its political favourites

Grim
Mises and you are in agreement that banks should be prohibited from lending out money substitutes unless they are 100% backed by money truly so-called. But Mises is consistent: he says no-one, private or public, right wing or left, should have the privilege of defrauding the population with fake money; whereas you, correct me if I'm wrong, think the banks should not be able to do it, but the state should. The effect economically and ethically is no different: it's counterfeiting, it's fraud, not matter whether the party who does it is public or private.

Palimpsest
Steve Keen has not demonstrated that the 'roving cavaliers of credit' would be able to profit from printing money substitutes in excess of money proper, in the absence of the entire panoply of monetary policy instruments and institutions, all of which promote inflation and the privilege to inflate. He assumes the existence of them all as the backdrop to his analysis, and confines his policy conclusions to twiddling with this dial here and that dial there, but leaving the entire framework of legal fraud in place. Certainly government is implicated up to its neck, and it is all too easy for academic economists to claim that *their* particular form of (government-funded) meddling is the one that would be our salvation. Keen disposes of the neo-classicals: he has never refuted the Austrians.

All
The way out of this mess is explained in this article, especially at the end: http://mises.org/story/3386

I would be interested in your comments on it.

Simply stunning, Jefferson.

>>The way out of this mess is explained in this article, especially at the end: http://mises.org/story/3386 I would be interested in your comments on it.<<

"...if we want to return to sound money, and if, by doing so, we want to prevent the total destruction of the exchange value of existing fiat monies, the only option available is a re-anchoring of the stock of fiat money to [gold]"

That was a twist I didn't see coming. The return of the gold standard.

Draw me a picture, if you can, of how this will prevent massive misery around the world. And why gold? Why not oil? Or pork bellies? Or copper? They are all tradeable commodities, after all.

The only possible opportunity to achieve this magic trick would be during a prolonged period of worldwide total political and monetary stability.

Doesn't sound like 2009 to me.

Like many classic academic economists, von Mises had little or no connection with the real world. As The Economist observed in 1957:

"Professor von Mises has a splendid analytical mind and an admirable passion for liberty; but as a student of human nature he is worse than null and as a debater he is of Hyde Park standard"

Jefferson, this is fairyland stuff..

>>Pericles The cure and prevention are the same: a return to sound money. Everyone is agreed that there should be political action, so the fact that there would need to be political action is not an argument against a return to sound money.<<

Cure and prevention are most definitely not one and the same.

As an objective, rebuilding real value into the system, and sticking to policies that recognize the dangers of falsifying market signals, is highly relevant and very necessary.

But it is the journey that is the problem.

It is not a switch, that you can simply turn on at will. Think for a moment what would happen to the price of gold on day 1 of your policies swinging into action.

Then look ahead to day 100, and day 1,000.

Nasty, isn't it?

Jefferson, on this matter I agree with Mises. I do, however think the banks are the more vile of the two. Governments have been accomplices. You'll find this link interesting:
http://www.brasschecktv.com/page/604.html
But I also agree with Pericles:
"...but as a student of human nature he is worse than null and as a debater he is of Hyde Park standard".
A far more interesting and on the ball economist was, I think, Thorstein Bunde Veblen.
Pericles, I stand by an earlier quote; every crisis is an opportunity. Particularly in politics, we must strike while the iron is hot, because voters have very short memories.
Now is the time to at least make a start. Even more than the introduction of the GST, this requires a paradigm shift in thinking, and remember how long it took to get the public to rethink that one?