Shadow, stop despairing and start thinking!

"M1 (cash and deposits) will trend up with the economy and inflation and while the RBA will print extra cash as required by the retail banks to meet transactional requirements."
So the RBA prints money as needed. It's an unremarkable occurrence.

"As for sectoral balances, most of this is covered in Economics 101, it is just not referred to as Sectoral balances. "
What is it referred to as?

And why do so many economists make predictions that a basic knowledge of sectoral balances show to be ridiculous? And then act surprised a few years later when their predictions turn out to be wrong? Do you think what they're saying should be taken seriously when it defies Economics 101?

To state, as you did in your reply to Paul, that it is Labor and the Greens who are harming the economy by blocking the government's cuts, shows an ignorance of the basics which appears to be shared by ANZ chief executive Mike Smith! When private spending falls, the government taking more money out of the economy is only going to damage it more.

"However, I fail to see its relevance to the RBA printing money."
There isn't much direct relevance. It's just something that many (seemingly most) economists completely fail to understand. And those who fail to understand it keep on making virtually impossible predictions that the public take seriously.

"Sovereign nations do not have unlimited credit as Greece found out."
GREECE SURRENDERED ITS SOVEREIGNTY TO THE ECB WHEN IT JOINED THE EURO!

Sovereign nations DO have unlimited credit, but Greece didn't value its sovereignty until it was gone.

"Credit needs to be paid with interest. Accumulating debt ramps up the interest until it consumes the budget."
So when was the last time the interest on a financially sovereign nation's debt (in its own currency) consumed its budget? (Clue: the money goes into the economy and most gets recouped through taxes).

"For example, Aus's federal tax revenue is about $400bn p.a. while the interest on Labor's debt is about $14bn p.a. or 3.5% of revenue. Instead of paying overseas debtors, it could have been used to pay for the NDIS ad infinitum."
This is an argument for sourcing more money domestically rather than from overseas. If the RBA had been more willing to lend to commercial banks, the interest payments to the RBA would have counteracted that cost.

Printing money is in no way comparable to a hand grenade, as it's an everyday occurrence. It's just that it's normally done by lending it out to commercial banks. But an inability to print money is extremely harmful (as many Eurozone countries have found) and the inability to increase the monetary base would not only ruin the economy of any country, but would make it overreliant on foreign currency, which introduces a severe economic risks.

BTW I'm not a member of the Greens, and they seem to be as economically ignorant as the major parties. Amazingly enough it seems only the Puppies understand the importance of increasing government spending in the present economic climate.

Aidan,

1) One of the main functions of the RBA is to print money as required this was never in dispute. The requirements never include printing money to pay off debt.

2) Sectoral balances are not that important, and I have never seen economists failed predictions that could be explained by sectoral differences. Perhaps you could enlighten me?

3) If the debt continues to grow out of control, Aus's credit rating will drop, and the interest paid on the debt will increase, leaving less money for essential services as happened in Greece.

4) That sovereign nations have unlimited credit is no more based on fact than claiming that individuals have unlimited credit. Credit is based on an ability to repay debt, and no one can repay infinite debt.

5) "Printing money is in no way comparable to a hand grenade, as it's an everyday occurrence. It's just that it's normally done by lending it out to commercial banks." You really have no clue. Again one example would be sufficient.

Shadow,

1) You made the claim:
"I am stunned by the complete ignorance on display. The RBA is a bank, and like all banks borrows money at a low rate and lend it out at a higher rate, the less capital the bank has, the less business it does and the less profit it makes."
The fact that "One of the main functions of the RBA is to print money as required" contradicts that claim.

I don't advocate printing money to pay off debt; I advocate printing money to stimulate the economy. If the economy's booming then (even if there's no government debt at all) I advocate running surpluses to control inflation. But there's no inflation problem at the moment and the economy needs stimulating, so the government should run bigger deficits.

2) Sectoral balances clearly prove that cutting back government spending when the economy is below capacity will reduce economic growth and result in less tax revenue. Yet governments, and many economists, keep insisting the opposite.

3) Regardless of the size of the debt, sovereign currency issuers have a 100% chance of being able to afford to honour any financial commitments they make in their own currency. And the Australian government sensibly has a policy of not borrowing in foreign currencies. The only real advantage of Australia having a good credit rating is that it increases confidence and makes it slightly easier for state governments and commercial banks to get good credit ratings.

Greece is not financially sovereign, so is totally reliant on its credit rating.

(continued)

4) If an individual invents their own currency and retains the right to print it, that individual would have unlimited credit in that currency. But without the power to tax, it would be difficult to ensure that currency is worth anything at all.

The power to print infinite money would make it possible to pay off infinite debt. That's a statement of fact and does not mean we should print infinite money.

And what of the private sector as a whole? Don't you expect its overall debt to increase even as individual loans are paid off? If so, why should the public sector be any different; if not, where do you expect the money to come from?

5. As you know, one of the main functions of the RBA is to print money as required. More government borrowing generally increases requirements. Why do you assume cutting out the middleman would wreck a currency?

Shadow, forget about that 'Economics for Dummies' I recommended for you, that was a mistake, too many big words like arithmetic and mathematics not all one syllables and no brightly colored pictures, would be of no use to you at all. Cocky Joe could not understand that book, how could you? Now I suggest you get your hands on a copy of 'Where is Boo Boo Bear and Friends' it reminds me of Abbott and Co, should do the same for you. Hockey said its his favorite book on economics, without it he would be lost.
So Cocky Joe's mates from the big end of town agree with him, nothing like agreement from those robbing cheating banks is there.