Saturday, 29 October 2016

The Treasurer's XI - a short allegory on deficits

The Bean Counters Score


It was a long week-end and the Treasurer’s Eleven – aka, The Bean Counters - had come up from Canberra to play the Village; they lost the toss, the Villager’s openers took the field – but consternation, for the bowling was underarm! ‘Do these guys know what they’re up to?’ was the general reaction around the ground.

But there was consternation amongst the scorers as well for the Treasurer’s scorer started with a bag full of kidney beans – transferring them methodically into a black box as runs were made.

The runs were coming freely once the Villagers got the hang of slow, low, curly deliveries – wickets were lost mainly through carelessness and hilarity but at 256 for 7 the Treasurer’s captain called a halt; all the beans had been used – there were no more runs to be had!

‘But what about our other three batsmen?’ complained the local skipper; mark them as ‘unemployed’ was the response, ‘there are no more runs for them score’.

Lunch was a slow, somewhat sombre affair - the visitors seemingly uninterested in taking the field. ‘What’s the point’ said the Treasury skipper, ‘Where will the runs come from? You lot have used up all the beans, there are no runs for us to score.

‘Don’t worry where the runs will come from’ assured the Village scorer, ‘we use a computer – so we have just as many runs as you need and more besides. No need for any of your batsmen to be unemployed.’

Free from the dread of the beans running out, the Treasury boys batted happily scoring 221 before the last wicket fell.

Net result, Treasury suffered a 35 run deficit, the Villagers enjoyed a 35 run surplus.

And the point is?

  •         The game of life should not be restricted by how many beans are to hand.
  •         When Treasury loses, others enjoy a win. And vice versa.
  •         Bean counters can learn a thing or two from the SCG scoreboard
  •         No reason for anyone to be marked, ‘unemployed’ if you understand cricket scoring - or Modern Money Creation (Ref Bank of England Q1 2014)

CC Oct 2016

Background brief

The Australia Federal Government is a CICG, a Currency Issuing Central Government.  The currency it issues is the Australian dollar which, since 12 December 1983 has been a FIAT currency; that is, ‘State-issued money which is neither convertible by law to any other thing, nor fixed in value in terms of any objective standard’ (Wikipedia). In short, our dollar is backed by no material substance but is a constitutional project and its value is underwritten by the willingness of the Federal Government to accept it in payment of taxes.#

Our dollars mostly appear as book keeping entries, numbers on computer screens not as ‘real money’; ordinary folk cannot create A$s to add to their own balances or those of their friends, only the CICG can do that. Because a FIAT currency has no material backing, literally no thing limits how much can be produced but the amount of currency that should be created is fixed by the sum total of the national resources – human, material, administrative and constitutional. To issue more FIAT money than that would be inflationary.

·         #  And we all have confidence that this is so; this confidence is important for it is mutually supportive and what makes FIAT currencies work; they are not ‘a trick’ but an essential tool for modern societies.




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