My comment on Michael Keating’s piece on MYFEO
on Pearls and Irritations blog of 21.12.2016
Whilst I totally agree with Michael’s remarks about the rating agencies (See* below. CC) I find the attention given to budget surpluses, budget repair and ‘living with our means’ saddening. It is as though we are still on the Gold Standard and that no-one has heard of FIAT money.
The purpose of Government should be building the ‘best and fairest' democratic society we can ‘with all the means at our disposal’ and theses include the ability to create as much ‘means of exchange’ as we need to ensure all the other ‘means’ – skilled work force including teachers, academics, natural resources, know-how and enterprise etc – can be fully engaged in the project.
Would you trust car repair to anyone who demonstrated a lack of understanding about how cars work? Recently the PM told State Premiers that the Federal Government was not an ATM.
- an ATM is a machine that dispenses spending money ONLY if some-one has put the money into it beforehand and
- secondly, this is exactly how the Government DOES see itself.
The PM’s comment shows he neither understands how the Federal Government does create money nor how ATMs function.
There is an excellent article by Dr Steven Hail at Economic Reform Australia's blog 'Paying for public services in a monetary sovereign state’ that is definitely worth a read.
*Michael Keating's observations on Rating Agencies
The ratings agencies should have been totally discredited, following their performance in assessing credit worthiness in the lead-up to the GFC. Furthermore, and contrary to popular opinion in Australia, when countries have lost their triple AAA credit rating in the past (Japan,2002 and the US, 2011) it had no detectable impact on financial prices (see posting by Stephen Grenville, former Deputy Governor of the RBA, 18 December). As Grenville argues, ‘Financial markets make their own judgements about risk, without the help of ratings agencies, .. so it’s time to stop genuflecting at the ratings altar’.