Good news on economic front

[Leftofcentresalterego]

Frogen, it is you who are confused to the extent that you do not understand that federal borrowing while running a deficit in order to drain excess reserves that would otherwise interfere with the RBA's setting of interest rates IS monetary policy.

While I correctly understand that economic growth cannot continue indefinately without a (preferably) slow, steady expansion in the supply of liquidity (the only alternative source being to run down private savings and run up private debt which cannot go on forever), you appear to mistakenly believe that growth somehow creates the money to finance itself.

Back to the same old questions we go - if the government witholds the money supply by seeking to run up ever-increasing, never-ending surpluses, what finances economic growth? Spell it out for me Frogen. How is it that growth preceeds the increase in the medium of exchange necessary to facilitate that growth? How is it done? Where is the money for growth coming from? What is the process whereby growth by itself stimulates an increase in the medium of exchange without which gowth itself cannot occur?

[JW Frogen]

Money is only a promise to exchange real value, real goods and services that have been produced by economic productivity, money in and of itself does not create that real productivity, if it did Zimbabwe would be a global economic superpower.

Indeed, the current global financial crises is largely caused by your theory that money, or rather credit expansion creates economic value on it's own, it does not if it exceeds what is really being produced.

Sooner or latter, those holding such bonds-paper assets (promises to provide future economic benefit) or in and inflationary economy money (promises that the note will buy a certain amount of economic goods or services) will dump those pieces of paper or electronic promises if they believe they are no longer reflective of the value of real, tangible goods and services.

What the Fed is doing in the US is injecting more money supply into the banking system hoping in the short term this will increase credit lending, but even they know in the long term there will have to be a contraction and pain to maintain any viable dollar. They are just trying to put out a fire, not investing long term in the future of the economy.

As for the amount Obama is spending, that DOES have to be payed back (or at least the debt serviced at increasing cost) at future cost taxpayers. Government debt is real, that is why they issue bonds to finance it. If it were not real they would not even report it as debt.

You have no clue but you are actually doing damage to the very real argument that such debt or money expansion may be justified in this emergency with your Pollyanna arguments it comes at no future cost.

This is exactly why many people do not trust the Left on economics, because they make theological promises concerning economics.

[Leftofcentresalterego]

”As for the amount Obama is spending, that DOES have to be payed back (or at least the debt serviced at increasing cost) at future cost taxpayers. Government debt is real, that is why they issue bonds to finance it. If it were not real they would not even report it as debt.”

Frogen, do you feel some pressing need to continually misrepresent what I have said? Yes government debt is real, as I have always said. No, they do not need to issue bonds to finance it. During deficit spending, $ for $ borrowing serves monetary policy purpose as I have said a hundred or so times. In order to spend, they do not need to borrow what did not previously exist until they spent it into existence.

And again and again with Zimbabwe. Again and again the outright refusal to compare apples with apples. Again and again the insinuation that a deficit worth a few percent of GDP is no different in effect to one worth hundreds or thousands of percent. Horseshit.

One thing I find interesting is that you appear to think that expanding the money supply in the economy comes from borrowing money from within the economy. This would be an accounting impossibility. And that the interest paid on this to taxpayers will have come from more heavily taxing taxpayers. You cannot expand the money supply by borrowing and spending money that already exists. The government is increasing the supply in existence by spending it into existence first and then borrowing money that is already there for monetary policy purposes previously outlined.

Again, where does Australian currency come from? How does it get here? These are questions you seem particularly loathe to answer. I think this is because you have no answer. If you do not understand where the medium of exchange comes from and how it enters the economy, your understanding of the system is skewed right from the start and you start believing strange concepts such as the money supply being irrelivent to growth.