With all talk of a deficit economy I have to wonder why we can't just print money to pay for some of the government's infrastructure projects.

Now before you jump on me and start sprouting the inflationary argument blah blah blah..take a moment.

What is the difference between printing $1billion, say for a fast rail project and borrowing the money from an overseas bank where your investment is greatly reduced by long term interest payments.

Both options involve injecting money into the economy that we don't have - so what is the advantage of being in debt to a foreign country (and paying interest) than printing our own in a measured and calculated way for these much needed projects?

Ask Robert Mugabe.
New printed dollars get their value from the dollars that already exist in the economy, so the value of the currency already in circulation goes down, not to mention the value of our dollar on the International Market.

Maybe the Government could issue some far more attractive bonds that could be taken up by the Superannuation industry and use some of those dollars?

IF we start doing that we may as well start calling the AU dollar the rupiah.

I am not talking about the rampant printing of money to match the likes of Mugabe but for special infrastructure projects which will also create jobs.

Borrowing in the form of a loan and printing money inject extra money into the economy - so what is the difference?

I read recently that the UK is going to do just that- print money. Interest rates have nowhere to go (0.5%).
The biggest danger as I see it is negative equity, and the consequent collapse of the price of everything as people simply walk away from debts they cannot repay. Inflation may ease the pressure. Inflation will not be good for those who have been clever enough to liquidate to cash though, timing to buy back in will be important.

Dear Pelican,

In the US they're printing money, "hand over fist,'
to bail out the economy. I don't see why we can't
do it here. What you're suggesting makes perfect
sense. Why pay interest to foreign banks - when
the printed money once the economy balances out
can be withdrawn from circulation by the Government.
In the meantime, the infrastructure projects and
the employment they generate, will benefit the
economy and the nation.

Pelican;
You raise a valid point.
So long as work has to be performed, ie wages, at the point of injection
into the community then the money will have the value of that work.
Anyone who doubts this ask the worker.

Actually it would probably be much more worthy than the pixel money
that has got us into the present mess.
The problem in Zimbabwe was I think too much money chasing unavailable
goods. The printing presses ran faster than trucks bringing goods.

Come to think of it, isn't this what the RBA does when it buys bonds from
a bank ? Isn't this the way they shovel money into the economy ?

I think you are right Bazz. Much of it appears as paper transactions even if there is no 'real' money sitting in the bank vault. It would seem much is loaned on projected earnings through loans - all sounds a bit Enronish.

This link is interesting: http://goldnews.bullionvault.com/banks_fractional_reserve_banking_capital_091220082

pelican
Today we do not use very often printed money but electronic one, may be we can complete a project withouht to print money at all.
Is this OK for you or you prefer your hall full of notes?
If you prefer to become millionair in few moments you can do it(current printing machines are very productive) but then every Australian will become millionair, you can not change your economic or social status because you will be millionair, in realy you will be a poor millionair!
Of cause if you tell some one from overseas that your income is many millions of $AUD yearly he will become crazy or may be he will tell you that this notes are good as toilete paper!
THE MOST IMPORTANT IS NOT HOW MUCH MONEY YOU HAVE BUT WHAT YOU CAN BUY WITH THEM.
OK, I will not fight with you! You full up your track with money!
More money you have more goods you buy, more goods you buy more higher go the prices from the goods.
You have created huge problems to employees, they want better wages to keep their standard, better wages mean higher production cost, you destroyed our exports.
Most manufacturies will close, most employee will lose their job,
Jesus or Baraba asked Pilatus to Australians.
pelican, pelican! she destroyed our country!answered australians with one voice!
Keep the track with the new printed dollars for your dream!
You deserve them!
Antvnios Symeonakis
Adelaide

Printing more money?

As Pelican has noted it was investors playing with "pretend" money (playing Monopoly) that got us into this mess. Simply printing off more money without a foundation for value (such as we used to have when the dollar was attached to gold reserves) is like trying to put out a fire with fire. Or if you prefer an alchemistic approach like trying to create gold out of base metals - can't be done.

I am not claiming to know the answer BTW - I doubt that anyone really does have an answer they are confident with. Which is why Turnbull appears such a clown, because he would probably be doing much the same as Rudd which is the reaction by all the western governments to this mess: Bail out.

I do know that unchecked capitalism caused the problem. Just like we need road rules to keep traffic from winding up in gridlocked chaos, we need controls over our monetary system.

For every company that is being 'bailed out' I sincerely hope there are clear strings attached. We can't stop humans from being greedy, but we can make it difficult via government regulation.

Fractelle, I agree that regulation has to be stronger, relevant and enforced.

I don't know the answer either, it was something that came up in conversation the other day.

Antonious, I am not arguing for money to be printed for my own personal use but for infrastructure projects. I understand the inflationary aspect and your comment about what you are able to buy with a much devalued dollar.

The idea I am toying with is the fact that both an OS loan and printing money introduce 'new' money into the economy so what is the difference between the two options the government has in relation to inflationary considerations?

The key I think is to use this money to pay for labour and materials to build - then to withdraw money from circulation. I am no economist and maybe some more savvy people out there can shed some light on this.

If the US and Britian are doing it there may be a strong argument for us to do the same. I suspect the US is doing it for bailouts and I am not supporting that avenue of attack - only for innovation and infrastructure.

Actually Pelican I think the government is doing just what you suggest.
The $200 billion the government is budgeting for is in fact pixel
money that will be paid for work.
Except of course the give away that is currently in the mail.

An unknown slab of that will be transferred almost immediately to China.
WE get the government we deserve.

Pelican

I am no economist either, but this doesn't mean we are banned from thinking through this near impossible situation.

I understand where you are coming from - by investing in our infrastructure, Australia can prepare for the future. The money is not so much as 'just printed' as virtually borrowed from the future. While a version of this is what got the USA and hence the rest of the world into this mess. The difference is that something would actually be created (homes, schools, rail, hospitals etc) than just dollars which only exist in the imagination of the finance industry.

I found the following report and you might find it interesting too:

http://wotnews.com.au/like/what_can_rudd_do_to_restore_a_healthy_economy/3092536/

I would rather see money poured into something substantial than handouts to families.

Fractelle,
Here, here Good site too.

Pelican and all
Thing went south with the UK company law of 1860's when limited Liability companies were created...while it facilitated investments it also unleashed the dark side of human nature (greed).

Add to that the disconnect with ACTUAL tangible value was removed with the demise of the Gold standard (i.e. $ = gold). From then on it’s all notional value this means the market determines value. To me there in lies the problem I simply don’t trust the morality or the emotional nature of the market.

I see something inherently wrong with facilitating
Corporations to chase exploitation of lesser laws (legal and environmental)
Support corrupt regimes
Exploitation of the vulnerable (both the misery of the 3rd world and ill-equipped poor and under sophisticated [dodgy deals and sub prime loans]. Caveat Emptor is an inditement/excuse not a moral justification.
If in a 3rd world country the business should improve the local circumstance not retard or exploit it.
All in the name in the name of profit and (corrupted/dysfunctional) Capitalism.

More parochially speaking and following the article allowing our country to cease being self sufficient. In this we are surrendering our futures to the vagaries of the market and the Dickensian attitude of the rich get richer and the poor? Who cares the market doesn’t. This has nothing to do with equality but every thing to do with equity and humanity

This is an ideal time for Australia to claw back some of the balance by investing in this nations future not only infrastructure but in small entrepreneurial green solutions and sciences.

Most employment (the back bone) is in small businesses.
There is no one golden bullet solution or will it come from huge Corporations defending (perverting the markets i.e. clean coal [sic]).
Our salvation will come from the entrepreneurial desperation of small business.
Capitalism was never conceived to cope with the contra interests of international and mega corps.

>>Capitalism was never conceived to cope with the contra interests of international and mega corps.<<

Right on Examinator.

Competition is impossible between mega-monopolies. Something of an oxy moronic situation.

What we have now is the opportunity to support small business and the emerging new technologies eg, alternative energy and let the global monopolies go the way of those other overinflated beasts; the dinosaurs.

Of course there are those who blame the arrant greed of low income people who had the temerity to want their own homes - hmmmmm has Col Rouge been black-banned?

For some "funny because its true" watch Jon Stewart:

http://www.thedailyshow.com/video/index.jhtml?videoId=220252&title=CNBC-Gives-Financial-Advice

Money has to come from somewhere, so someone has to print it. It's the details of who controls the amount printed, and the conditions under which it gets printed (or otherwise created for use, i.e. electronically) that count. Those actually wondering about this may find this piece of interest - Global Financial Meltdown: Forces beyond our control, or the greatest scam ever? http://www.rudemacedon.ca/greatest-sting-ever.html - in which the way money is currently created is shown to be the very source of all of our current problems, and then some.