FOZZ<<So once again: we run a modern monetary economy using non-convertable fiat currency with a floating exchange rate.>>>you might run it but govt dont, its run by the imf..run by the currency exchange..run by the market

<<The government does not need to acquire gold or anything else to issue (spend) currency.>>>no it finds the nickle to mint their coins...lol...mate it would be funny if it wernt so missleading

<<The central bank does not need to worry about defending a fixed exchange rate.>>yet it does currency swaps with other central banks to retain parity..[only last year we swapped 10 billion of ours for usa currency]

<<The federal government may issue Australian dollars as it sees fit. It has no prior need to tax or borrow in order to spend, unlike everyone else. It is THEIR currency. They alone issue it.>>.rubbish mate the fed reserve issues money,and the fed reserve is controled by bankers,not govt..the same bankers control most of the worlds feds

<<Do you have a good answer as to why I would need to earn or borrow what I can simply create at will before spending?>>you might contropl it by govts dont[the fed does..and the fed is run by bankers..[who can and do issue..their fiat franchise as THEY chose

<<The proposition is ridiculous.>>>it would be if govts did control their own feds [but i agree its rediculous that they dont]

mate see the treasury dosnt hold cash[it returns it to the fed[all our taxes go directly to the fed]...and the fed sold the gold and silver/copper... long ago..[just like it will sell the cupra/nickle when they remove the last of only real..consatitutionally legal currency

It might help to to quote Ludwig von Mises, of the Austrian school of economics.

JFAus
“The entrepreneurs who approach banks for loans are suffering from shortage of capital; it is never shortage of money in the proper sense of the word.”

“No increase in the welfare of the members of a society can result from the availability of an additional quantity of money.”

Fozz
“If you increase the quantity of money, you bring about the lowering of the purchasing power of the monetary unit.”

“If it were really possible to substitute credit expansion (cheap money) for the accumulation of capital goods by saving, there would not be any poverty in the world.”

“The quantity of money available in the whole economy is always sufficient to secure for everybody all that money does and can do.”

“For two hundred years the governments have interfered with the market’s choice of the money medium. Even the most bigoted statists do not venture to assert that this interference has proved beneficial.”

Fozz, yes it is a fact that we live under a fiat money system. However that is no justification. The question of policy is what the system should be.

It is also a fact that:
- fiat money does not create new wealth
- it only redistributes existing wealth, making society poorer not richer
- it is a fraudulent sneak tax
- it is always inflationary for the same reason that frauds want to get other people’s property without their consent
- it privileges the rich and powerful at the expense of the poor and weak
- it is based on suppression of honest competition which, given the freedom to choose, the people would prefer
- it causes the greedy privileged economic boom, and then the depressing injustice of the economic collapse
- it is used to fund aggressive wars and provoke crises that aggrandize the state (‘war on’ this, that and the other)
- it favours violent over non-violent social co-operation
- the mass of the people don’t understand the above; if it were clearly explained they would abolish dishonest money.

Peter,

Once again you are talking about what IF?, rather than what IS.

So you accept that we live under a fiat money system. This is good but you still seem to be avoiding the key question. Under our fiat money system, why would the sole issuer of the currency actually NEED to earn or borrow the very same currency that only it is empowered to create before it is able to spend that very currency? The answer is – it doesn’t. If it doesn’t create the currency first (spend), no-one else can get it at all.

Ergo, the Australian federal government is NOT revenue constrained. All spending constraints are voluntary. You can argue till the cows come home about why the constraints are voluntarily adhered to but to argue that they simply cannot spend unless they tax or borrow first is an economic fallacy and serves only to confuse.

“If you increase the quantity of money, you bring about a lowering of the purchasing power of the monetary unit”. Why would this be? This statement makes no distinction between an annual increase of 2% and an increase of 200%. Small, steady increases facilitate economic growth.

“The quantity of money available in the whole economy is always sufficient to secure for everybody all that money does and can do” Incorrect. If the money supply becomes too constrained for too long, recession is at hand. You alluded to something like this earlier. Are you arguing that if the supply of the medium of exchange necessary to allow the smooth transaction of the massively complex array of goods and services in the modern economy on any given day were say, halved, no significant effects would result?

The supply of money is critical. The manic preoccupation federal governments have had in running up ever increasing surpluses year after year serves only to drain liquidity from the economy. As if there was any need for the federal government to “save” money in a fiat money system. The only way to finance growth is then to run down private savings

Cont later

Peter, you say,

“The entrepreneurs who approach banks for loans are suffering from shortage of capital; it is never shortage of money in the proper sense of the word.”

“No increase in the welfare of the members of a society can result from the availability of an additional quantity of money.”

What evidence exists to substantiate it is never a shortage of money in the proper sense of the word? In the real world there is a shortage of money and I think at least one actual cause of that shortage in the proper sense of the word has not been seen.

Cause of this present world money crisis remains unseen.

Given that I understand a relevant unseen likely cause of increased demand on money worldwide, I think an additional quantity of money can be made available for members of society, not for "a" society but for the whole of human society worldwide.

The crisis is worldwide and so solutions must extend worldwide. The cause according to evidence on hand is world natural food resource devastation and shortfall in supply causing impact including unseen worldwide inflation.

Being honest, what do you think could be the likely economic impact of unseen world land and ocean natural food resource depletion/devastation? What do other people think such impact could be?

Fozz
If we confine the discussion only to what *is*, not what *if*, then we can neither discuss counter-factuals, as you do, nor policy, which you also do.

Yet the discussion is what happens if the government does this or that, and whether it should. Therefore we have to discuss both what different causes lead to what effects (means), and what values they serve (ends).

From the *fact* that government can print as much fiat money as it wants, *nothing follows* as a matter of policy.

The government is not revenue constrained only in the sense that it can print as much paper money as it wants.

However the government's ability to grant itself a monopoly power to print as much paper money as it wants
a) does not confer a power to escape the inevitable (destructive) economic consequences - (that's the whole point) -, and
b) does not mean that the power is a power to create wealth - it is still only a power to (fraudulently) redistribute wealth.

(“If you increase the quantity of money, you bring about a lowering of the purchasing power of the monetary unit”.) "Why would this be?"

Law of marginal utility?

"This statement makes no distinction between an annual increase of 2% and an increase of 200%."

It doesn't need to: it holds true either way. That's why they do it! The difference between 2 and 200 percent is one of degree, not of kind. The successful parasite tries not to destroy its host.

"Small, steady increases facilitate economic growth."

That is the issue. If it were true that such resulted in the creation of net wealth rather than mere re-distribution, then it would be true that we would have discovered a way to make real wealth by stamping paper. Nothing you have said has established that. I can't understand how you can believe it.

Define "small". Define "steady". How do you know? How do market participants know the difference? Prove it.

"If the money supply becomes too constrained for too long, recession is at hand."

That is the Keynesian/monetarist orthodoxy, but nothing you have said has established that.

What causes recession is that capital and labour have been malinvested in businesses and industries that are unprofitable and unsustainable. The reason for the malinvestment is that both the entrepreneurs in deciding whether to invest, and the consumers in deciding whether to buy, are influenced by the false signals sent out by government's chronic inflation of the money supply. Entrepreneurs become faced with the choice whether to suffer serious losses now or worse losses in the future.

The orthodoxy does not explain: why government? Where do they get this presumed residual economic super-competence? What is it about the power to beat people into submission, or majority opinion, that confers this wondrous acuity?

If it were true, isn't it true that we could abolish private property, and human freedom, and all be better off in a society run by a totalitarian dictator? If not, why not?

The interventionist orthodoxy does not deal with the central problem of economic calculation. In the absence of profit and loss, how does government decide on the relative scarcity of resources? Answer?

Even if government were populated by selfless angels, where would they get the necessary knowledge? How would they know which level of supply or demand of a given commodity at a given place or time is appropriate? Don't tell me, lemme guess: clever (government-funded) academics do complicated mathematical equations?

That is all voodoo, state-worship. It is a re-run of the errors of the socialist myths of governmental omniscience and omnipotence.

In any event, you're a socialist - what credibility do you have in running capitalism? Answer?

JFAus
People want money, not because they want stamped pieces of paper, but because they know other people are keen to exchange them for milk, armchairs, etc.

If we give Jones a licence to print money, he will endlessly print and spend. Government's legal monopoly is merely legal counterfeit. They get other people's valuable goods and services, and give worthless paper.