Australia’s $911,000,000,000 Debt

[tech/a]

The government would sell bonds to pay for those fighter jets, but if you believe the government is just printing money and spending it, why wouldn’t they just print money to pay for the fighter jets? Any Australia dollars they print can easily be converted to US dollars.

Because it's a debt to a third party. They would be increasing the debt which could not be written off. Unlike debt to itself.

As I said before, if you believe the government can just print money and doesn’t need to borrow it, why do they sell bonds to the public in the first place? and why do they have taxation?

To cover the debt to third parties, debt to itself it can and does write off.
I'm not suggesting ALL DEBT

I think you are confusing the reserve bank with the government. The government does not decide how much money gets printed the reserve bank does, and if the government wants more money than they receive in taxes they have to sell bonds, which the reserve bank and other investors may or may not want to buy.

No Im not. This can only be done by Sovereign Countries. The likes of the USA, Australia, Japan, China, etc. One very big reason the UK left the European Union. If you're in the union and you want money from it you are in debt to a third party and you have to pay it back ---- supporting COVID spending for instance.

This is not something I have dreamt up.

 

[InsvestoBoy]

The government would sell bonds to pay for those fighter jets, but if you believe the government is just printing money and spending it, why wouldn’t they just print money to pay for the fighter jets? Any australia dollars they print can easily be converted to US dollars.

As I said before, if you believe the government can just print money and doesn’t need to borrow it, why do they sell bonds to the public in the first place? and why do they have taxation?

I think you are confusing the reserve bank with the government. The government does not decide how much money gets printed the reserve bank does, and if the government wants more money than they receive in taxes they have to sell bonds, which the reserve bank and other investors may or may not want to buy.

Sorry, this is backwards. The whole idea of thinking of modern government finances as if they were a household or corporate is just wrong.

The governments Treasury spends first, regardless of "income" from taxes or deficit. They literally spend by fiat, by ordering the Central Bank to create new deposits and then crediting their accounts with those deposits.

No modern sovereign government is constrained by the need to have prior deposits raised from taxation or bond sales before they can spend. Treasuries just spend what's been legally authorised. To suggest otherwise, e.g. "selling bonds to pay for fighter jets" is obviously absurd.

Taxes and debt issuance literally sterilise the deposits spent by the government into the economy. Taxes also provide a mechanism for redistribution.

Suggested reading

1. https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-creation-in-the-modern-economy
2. https://moslereconomics.com/mmt-white-paper/
3. the book that that @tech/a linked

 

[InsvestoBoy]

One very big reason the UK left the European Union. If you're in the union and you want money from it you are in debt to a third party and you have to pay it back ---- supporting COVID spending for instance.

This is not something I have dreamt up.

View attachment 155900

Given the UK never was nor never planned to be part of the EMU, only someone with the intellectual stature of Boris Johnson could believe this was a "very big reason" for Brexit.

 

[tech/a]

Given the UK never was nor never planned to be part of the EMU, only someone with the intellectual stature of Boris Johnson could believe this was a "very big reason" for Brexit.

Lesson learned--always quote the quote ---I read this some time ago and will have to find where Boris quoted it.
Dont, think Boris was that intellectually impaired he did manage to become Priminister of the UK.

 

[divs4ever]

Lesson learned--always quote the quote ---I read this some time ago and will have to find where Boris quoted it.
Dont, think Boris was that intellectually impaired he did manage to become Priminister of the UK.

and so did Liz Truss ( briefly ) and the US installed Joe Biden ( and also elected Fetterman after a medical issue )

it might be time to re-watch those Yes, Prime Mister episodes

 

[Value Collector]

Sorry, this is backwards. The whole idea of thinking of modern government finances as if they were a household or corporate is just wrong.

The governments Treasury spends first, regardless of "income" from taxes or deficit. They literally spend by fiat, by ordering the Central Bank to create new deposits and then crediting their accounts with those deposits.

No modern sovereign government is constrained by the need to have prior deposits raised from taxation or bond sales before they can spend. Treasuries just spend what's been legally authorised. To suggest otherwise, e.g. "selling bonds to pay for fighter jets" is obviously absurd.

Taxes and debt issuance literally sterilise the deposits spent by the government into the economy. Taxes also provide a mechanism for redistribution.

Suggested reading

1. https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-creation-in-the-modern-economy
2. https://moslereconomics.com/mmt-white-paper/
3. the book that that @tech/a linked

Regardless of how it is done, and what order things are carried out, my point holds true, the government can not just print money and spend it and then Warsaw the debt as techa suggest,other wise there would be no need for any bonds or taxes.

If we could just print money or create endless deposits to buy military equipment, why did the governments of England, Australia and the USA put so much effort into selling War Bonds during the big wars of the past.

 

[InsvestoBoy]

Regardless of how it is done, and what order things are carried out, my point holds true, the government can not just print money and spend it, other wise there would be no need for any bonds or taxes.

When you say "can not" it means something specific, sovereign governments with a fiat currency can and do print "money" and spend it, that is literally how it works today.

The order things are carried out obviously matters, for households and corporate sectors to be able to pay taxes or buy bonds they must do so using the very deposits Treasury spent into the economy (or on the back of private credit).

Perhaps you mean to say "if governments conduct deficit spending without sterilising excess deposits through taxation and debt issuance, those excess deposits will begin chasing an unchanged supply of real economic goods/services and thus the value of all deposits relative to those goods/services would decline which I believe is a material constraint".

If we could just print money or create endless deposits to buy military equipment, why did the governments of England, Australia and the USA put so much effort into selling War Bonds during the big wars of the past.

At that time those governments and the governments of their trading partners were constrained under a hard money standard, a self imposed restriction on their own ability to issue spend by fiat. Deficit spending created a real world drain on gold reserves held by Treasury.

But even in those days war bonds were already recognised as a sterilisation mechanism, sending deposits the government had already spent into the economy back into the Treasury instead of competing for scarce real goods.

Today, and for some time, you will note that the US Government did not need to issue War Bonds to finance the Afghan War, or the two Iraq Wars, etc.

 

[Value Collector]

The order things are carried out obviously matters, for households and corporate sectors to be able to pay taxes or buy bonds they must do so using the very deposits Treasury spent into the economy (or on the back of private credit).

Perhaps you mean to say "if governments conduct deficit spending without sterilising excess deposits through taxation and debt issuance, those excess deposits will begin chasing an unchanged supply of real economic goods/services and thus the value of all deposits relative to those goods/services would decline which I believe is a material constraint".



At that time those governments and the governments of their trading partners were constrained under a hard money standard, a self imposed restriction on their own ability to issue spend by fiat. Deficit spending created a real world drain on gold reserves held by Treasury.

But even in those days war bonds were already recognised as a sterilisation mechanism, sending deposits the government had already spent into the economy back into the Treasury instead of competing for scarce real goods.

Today, and for some time, you will note that the US Government did not need to issue War Bonds to finance the Afghan War, or the two Iraq Wars, etc.

Again I think both you and Techa are confusing the “Government” eg the currently lead by the Labor party with the reserve bank.

The “Government” does not print money, the reserve bank does, now the government might have the equivalent of a giant credit card at the reserve bank, but that is still a loan from the bank.

Go back and take a look at Techa’s claims, especially the one where he says the government can just erase its debt.

The government sold war bonds during ww2, long after they had dropped the gold standard.

 

[Value Collector]

Also, Both Ukraine and Canada have been selling bonds to fund the war in Ukraine, doesn’t Canada just use some of the magic money???

 

[tech/a]

Understanding How the Federal Reserve Creates Money

Learn how the Federal Reserve targets and creates new money in the economy, and find out how the savings and loans system magnifies this process.

www.investopedia.com

Same for all sovereign governments.
Doesn't have to be printed just an entry ---click of a mouse.

What Is the Gold Standard? History and Collapse

Learn more about the gold standard, including its complicated global history and its connection to the fiat system and the U.S. dollar today.

www.investopedia.com

Might also be helpful

 

[InsvestoBoy]

Again I think both you and Techa are confusing the “Government” eg the currently lead by the Labor party and the reserve bank.

I confuse nothing, the party in power is irrelevant and I don't know why you bring it into the conversation, Treasury and Central Bank are the relevant entities.

The “Government” does not print money, the reserve bank does, now the government might have the equivalent of a giant credit card at the reserve bank, but that is still a loan from the bank.

It's literally only a loan from the CB in the event that Treasury doesn't sterilise their deficit spending.

About Monetary Policy

www.rba.gov.au

The Relationship Between Monetary Policy and Debt Management

Sound financial policy requires that the Government fully fund any budget deficit by issues of securities to the private sector at market interest rates, and not borrow from the central bank. Many countries have legislation to deliver this outcome, though in Australia it is effectively achieved by agreement between the Treasury and the Reserve Bank. This arrangement means that there is separation between monetary policy and the Government's debt management, with the Treasury directly responsible for the latter and the Reserve Bank responsible for the former.

It is not possible to ensure that the Australian Government's need for funds are exactly matched day-by-day by issues of securities to the market. To overcome this mismatch between daily spending and financing, the Treasury keeps cash balances with the Reserve Bank that act as a buffer. The Reserve Bank also provides an overdraft facility for the Government that is used to cover periods when an unexpectedly large mismatch exhausts cash balances. The agreement between the Treasury and the Reserve Bank places strict controls on access to the overdraft facility. The overdraft is used infrequently, generally to cover unforeseen shortfalls in cash balances.

Go back and take a look at Techa’s claims, especially the one where he says the government can just erase its debt.

I am responding specifically to your claims that governments need to issue bonds to buy bombs.

 

[InsvestoBoy]

Also, Both Ukraine and Canada have been selling bonds to fund the war in Ukraine, doesn’t Canada just use some of the magic money???

View attachment 155916

Ukraine is a great example.

Do you really think in Ukraine some general is listening to a STU official saying "hold up, I just need to issue some bonds before you buy some AK-47s"...it's laughable.

Inflation in Ukraine is 25% for a reason.

Canada is a nothing example, just a mechanism provided by their government for citizens to send money to a war zone (which would otherwise be illegal).

 

[moXJO]

I'm losing track with you lot.
The rba buys govt bonds. It doesn't lend money from reserves.

 

[wayneL]

Understanding How the Federal Reserve Creates Money

Learn how the Federal Reserve targets and creates new money in the economy, and find out how the savings and loans system magnifies this process.

www.investopedia.com

Same for all sovereign governments.
Doesn't have to be printed just an entry ---click of a mouse.

What Is the Gold Standard? History and Collapse

Learn more about the gold standard, including its complicated global history and its connection to the fiat system and the U.S. dollar today.

www.investopedia.com

Might also be helpful

Yes

But instead of being explanatory, it serves to be even more confusing. It raises more questions than answers when you consider how things are.

 

[Value Collector]

Ukraine is a great example.

Do you really think in Ukraine some general is listening to a STU official saying "hold up, I just need to issue some bonds before you buy some AK-47s"...it's laughable.

Inflation in Ukraine is 25% for a reason.

Canada is a nothing example, just a mechanism provided by their government for citizens to send money to a war zone (which would otherwise be illegal).

I don’t know the exact workings of the reserve bank of ukraine, but if it’s like australia any spending they do above what they collect in taxes is generating debt, they aren’t going to just print money.

There is a reason they are asking for gifts rather than just offering to purchase stuff with magic money.

(Again, I think you are missing nuance in my point, I understand the Reserve banks can generate money by either printing it or digitally, but this is separate from the government, and it will need to be paid back via taxation or other government earnings.)

 

[Value Collector]

I'm losing track with you lot.
The rba buys govt bonds. It doesn't lend money from reserves.

Yes, when they purchase a government bond they get a piece of paper and the government gets money, at some stage the government has to give that money back and the rba returns the piece of paper.

 

[Value Collector]

It's literally only a loan from the CB in the event that Treasury doesn't sterilise their deficit spending.

About Monetary Policy

www.rba.gov.au

That my point, it is debt. Real debt not mythical debt.

Now, if they fail to “sterilise” their spending, and debt is created, how do they magically erase it? Which is the claim Techa made.

 

[InsvestoBoy]

That my point, it is debt. Real debt not mythical debt.

Now, if they fail to “sterilise” their spending, and debt is created, how do they magically erase it? Which is the claim Techa made.

I dunno what claims others made and don't have anything to say about them, again, all of my posts have been rebutting the idea that government spending is constrained by taxation or debt issuance.

If the Treasury went out and spent without any sterilisation, there would be more deposits in the economy relative to an unchanged amount of real economic goods/services. One possible outcome is benign: those deposits find something productive or inert to do. The other outcome is inflationary: those deposits bid up good/services.

 

[moXJO]

To clarify around money printing. I heard it costs about 30 cents to make the notes and they profit from the difference
Is that true?

 

[moXJO]

To clarify around money printing. I heard it costs about 30 cents to make the notes and they profit from the difference
Is that true?

seigniorage