My comment
on Michael Keating’s piece on MYFEO
on Pearls and Irritations blog
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.
But note:
- 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’.
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