Yabby
You are thinking purely in terms of the source of money rather than what happens with it at the end of the cycle. If you put money into an economy you have to remove it again (repayments) to control inflationary pressure.

Whether you get the money from borrowings (foreign) or not, the effects are still inflationary in the long term if there is no withdrawal of money from the economy. There is also interest rate manipulation to control inflation, particularly in the housing market which is what is happening at the moment.

Why do you think borrowed money will be less inflationary?

Please edumacate me.:)

Pelican, you have to understand the reasons why we seperate central
banks from politically controlled treasuries. The role of central
banks is to make decisions which keep the economy on an even keel,
avoiding recessions as well as avoiding too much growth, or inflation
sets in.

If Govt paid nothing for money, they could spend at will, slosh it
all around, to buy the next elections etc. If they have to pay a
price for it, it makes them think twice, for it will start to cost
them. So it helps with fiscal discipline.

Central banks can in fact print money in times of emergency, as they
did in the US and Britain, during the GFC.

Where the Govt borrows, does not really matter. It could borrow from
the Reserve Bank. It could borrow from people in the street, it
could borrow from overseas. In the end it all pans out, for of
course our Reserve Bank has to have the money to pay other countries
our huge current account deficit each month. In the past that
has been solved by our commercial banks borrowing ever more, to
lend to people, businesses, State Govts or whatever. If they did
not bring in the foreign currency through loans, the Reserve Bank
would have to do it. For at the end of the day, Australia as
a whole, has to pay its debts to the rest of the world. We ignore
it at our peril. And we can't print dollars to do it, they won't
accept it

Yabby I understand your thinking. I always try and look at things from outside the square even if sometimes I jump back into it.

We would not have to print money per se. It is all electronic transactions, would China care if the money was 'printed' metaphorically speaking.

If money is printed in times of financial distress such as the GFC why not to support infrastructure with those protective mechanisms to protect against inflation I mentioned earlier

While governments may or may not be trusted to slosh money around this could easily be avoided via regulatory or legislative controls to prevent rogue government spending particularly for ill-perceived political gain.

It just seems insane to use Arjay's description, to borrow and then pay back huge interest payments which adds a burden to the cost of infrastructure projects.

There's a hole in my bucket, dear Liza, dear Liza....

>>We need an increase in production,not an increase in money supply.We are too busy paying off debt to build the infrastructure needed to make our economy more efficient.<<

Ahem. "increase in production" of what, Arjay?

Digging stuff out of the ground? We seem to be fairly proficient at that already. Indeed, if the miners increase their production further, Kevin will only ping them for more tax. Why would they bother?

Growing food and stuff? You can't open a newspaper without hearing how tough it is out there to make a quid. Drought one minute, floods the next. How do you suggest they "increase production"?

Manufacturing stuff? Our manufacturing industry needs to be able to compete with the rest of the world, so is continually being forced into a corner, away from the volume and the big bucks. Not much opportunity to increase production there.

The great thing about an open market, as Yabby keeps trying to point out to you, is that it quickly puts a price on everything. Including money - or, more specifically, the cost of borrowing money. If it is too expensive to borrow, people don't do it. If it is too cheap, no-one is going to bother to lend it.

As for the stimulus, its real significance was the fact that it kept some people in work, who otherwise would not have a job. Not particularly beneficial in the long term, in that it distorted the market forces that say "this job has stand-alone value to the economy as a whole". But politically, it meant that a whole lot of people don't get to vote at the next election from the dole queue.

And in the meantime, "working families" can still put bread on the table.

And a 3-D TV in their lounge room.

http://www.panasonic.com/3d/

Whether it offends your sense of justice or not, the world survives on credit. I know you would prefer we all saved before we spent, Arjay, but those days, both for consumers and for governments, have gone forever.

How can people save pericles when we are too busy paying taxes to pay off debt? Having better infrastructure does improve production,since people do not spend hours getting to and from work.Many people are stressed/exhausted before they get to work because of the lack of infrastructure.Are you saying emotional/physical well being has no influence on productivity?

There is production happening here whether it be digging ore/coal out of the ground,building houses,roads bridges etc. As you have noted previously the balance of trade is fairly good but we borrow money from OS banks puts us in unnecessary debt.Much of the money we need can be generated here so long as the money supply does not outstrip real productivity.Money only represents human potential.It is not necessy to borrow from the big counterfeiters like the IMF and Bank of International Settlements.They are a fraud.

Fair comment Arjay.

>>How can people save pericles when we are too busy paying taxes to pay off debt?<<

Trouble is, we are already in debt, having used the money to buy stuff. Now it is time to pay it back, or at least keep up with the interest payments.

>> Having better infrastructure does improve production,since people do not spend hours getting to and from work.<<

No question. Unfortunately, building better infrastructure requires money. Governments get money by taxing us - so before we can have more infrastructure, we have to pay more taxes. Or if you want private enterprise to do the job, guess what? They will need to borrow money.

>>Many people are stressed/exhausted before they get to work because of the lack of infrastructure.Are you saying emotional/physical well being has no influence on productivity?<<

Not at all. It has a considerable influence. But you cannot simply wish it away. You have to have money to pay the builder to build your infrastructure.

>>As you have noted previously the balance of trade is fairly good but we borrow money from OS banks puts us in unnecessary debt.<<

But ask yourself, where does this money go, Arjay? Into whose pockets? And then, what do they do with it, once they have it?

It's a cliché, but a useful one: follow the money.

But you still misunderstand the reality of money:

>>Money only represents human potential<<

No it doesn't. Look up the word "potential" and ask yourself how that relates to people and money - you'll find that it doesn't fit anywhere. Money is a form of measurement of human activity, most useful when that activity needs to be exchanged for value.