//Yes, Jonathan Swift's proposal, mainly in relation to an over-supply of Irish children: as an Irishman, he was concerned to ensure that Ireland was contributing its share to the British bottom line.//

But your proposal does also infer that there could be a market in the live children trade//

Whoosh.

Jo: it's not about the cannibalism.

//How's that for a modest proposal ?//

In a word? Shite.

chrisgaff1000

We are not bankrupt.
Government debt is literally at 0% of our credit limit!
Unlike certain South American countries, we have practically no sovereign debt and we let the market determine the value of our currency. Because we're not holding our dollar above its market value, we have zero risk of a catastrophic collapse as we lose the ability to control its value.

We own the Reserve Bank, and could always borrow from it if necessary. But of course it's not necessary, as there's no shortage of buyers for our government bonds.

With unlimited credit, debt levels don't matter. But deficits still have consequences. Sometimes (regardless of debt) surpluses are desirable to keep interest rates and inflation low. But right now, inflation's below the RBA's target despite interest rates being at record lows. Meanwhile the high unemployment in much of Australia indicates that fiscal stimulus is needed. But instead the politicians are doing the opposite: trying to cut their way to surplus to give the illusion of fiscal responsibility.

We need stimulus, after the ruckus the liberals went into about labor using stimulus to keep an even balance, this mob have dug themself into a hole they can not get out of.
They know what's needed, but the consequences are dire.

So they just cut cut, the voters get more depressed and tighten up even more. That sort of politics is no different than a dog chasing its tail.

Chrisgaff, Aiden is of course right, the RBA can cover any debt.
Just print it and if you cannot buy enough paper issue pixel money.

Does it feel unreal ? Well it is, it is all based on confidence.
If one morning, if enough people in the right places get out of bed
feeling a bit nervous then there is nothing more nervous than a trillion dollars.
There is nothing more contagious than a currency panic.

Hi Tone,

Don't knock it, I should imagine a small child would be quite tender and tasty - all one might need is a bit of mixed herbs, salt and pepper. Roasted slowly, the meat would just fall off the bone. Ideal for meat pies.

Of course, there would have to be an age-limit, say fourteen: no kids over that age, roughly the age from which young girls can start having children of their own for the market. And any sensible government would limit the process to only a fraction of all births, say 60%, so that there would be enough reproduction to make the whole system viable from one generation to the next. So market forces would have to be controlled, perhaps by the imposition of export duties on the live children trade.

If only Jonathan Swift were still here, he could advise governments properly.

Perhaps another innovation could be to require those aged fourteen and over to either study or work, and if they had not found work by, say, 25, then they could be drafted into the trade, like old cattle and sheep are these days, perhaps for dog-food, and blood-and-bone as fertiliser.

What do you reckon ? A child-led economic recovery ?

Joe

No, Bazz, it's not all based on confidence. Confidence plays a big part in setting the short term value, but has little long term effect.

The real bases are fiat and trade. Fiat (the requirement that Australian dollars be used to pay taxes in Australia) creates a demand for the currency. Trade sets its value against other currencies. This is largely self correcting because if our dollar goes up we import more and export less, and if it goes down we import less and export more.

Any increase in the amount of money in circulation (whether from the RBA or commercial banks, and whether the money is spent by the government or the private sector) is inflationary unless it is balanced by an increase in production. But money in savings is effectively not in circulation, as it's not being spent.

Increasing the money supply will cause competitive devaluation (resulting in us exporting more and importing less). But despite the widespread perception it does not cause hyperinflation; that only happens when something prevents competitive devaluation. The "something" is the government either trying to fix the exchange rate or immediately selling the money it prints to fund large foreign currency repayments. Technically it can also happen if the country's being blockaded (but that's rare) or if the country doesn't have an effective tax system (even rarer, but easily fixed).