Who do you think will be repaying the Government?

Originally posted by nooneimportant: ↑

Modern Monetary theory is poorly named. It isn't a theory, but is instead an observation of how the economy works.

We have seen that the government doesn't need to borrow money in order to spend it - they create the money! In other words, if there's no one who wants to lend to them they simply have the Reserve Bank (i.e. their left hand) create / print lend the money to the Executive branch (the right hand). Similarly, when you pay taxes the money you transfer is simply removed from the economy. In theory this goes to the Reserve Bank. But the Reserve Bank by definition has unlimited money.

The above is a statement of fact. Modern Monetary theory is just observing that fact and making it simple to understand. It doesn't prescribe "what next", although I think it probably leads to a very Keynesian worldview.

So what is the job of the Reserve Bank? Why can't they just print infinite money for everyone? Because too much excess money causes inflation due to excess demand. We know this and we see it in Zimbabwe, Venezuela, etc. The role of the Reserve bank is to provide enough money to drive demand - especially at times like this, when the economy is struggling. The role of the tax system is to temper that demand and take some of the excess money out of the system.

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Fine but the examples of Venezuela and Zimbabwe need to be viewed on their facts. They're used as a bogeyman as if varying from the orthodoxy of balanced budgets will drive us over this cliff.

The facts don't support this contention but people respond well to fear. They elect governments out of fear. But it's not as if those facts are going to be repeated here. Let alone in the US which has enormous productive capacity.

The reality is that the US has long had a trade embargo on Venezuela crippling that economy, which also is very petroleum dependent.

You have a collapse of the petroleum price, well under way before Covid-19 and you have a recipe for disaster. Especially as the wealthy were making themselves scarce for tax raising.

The principle is that governments of fundamentally healthy economies can certainly issue money and trade their way out of trouble.
The absolute need for balanced budgets is a furphy, it's only even a relative need in relation to the productive capacity of that nation, along with the ability to raise taxes. We have a taxation problem here and it needs to be solved. Too many companies are evading taxes and minimising them, and too many people who are high earners minimise tax.

Australia has been captive to the false emergency of balancing the books each budget round. Fear-based campaigns worked. Now we can see them for what they were and ar.

Now that a serious economic emergency exists, they no option but to throw out the rulebook on balanced budgets.
It's fun watching them squirm. The only other way is a complete breakdown of the social fabric. Something that not even the moneyed elite can bear to contemplate.

What we DO need to revise is the policy on energy. It's absurd that Australia is the biggest exporter of LNG in the world and YET manages to have the highest domestic prices for gas, this cripples local industry. Then you have Chevron, which is part owner of the biggest gas operation in Australian controlled locations, basically pulling out.
https://www.copyright link/companies/energy/chevron-seeks-exit-from-34b-nwshelf-venture-20200618-p553xq

Australia has to revise it's energy policy and make cheap gas available so that we can develop industries here. It's axiomatic that a nation wealthy in natural resources should have a cheap domestic supply. That also applies to electricity although the policy elements are far more complex and we need to shift to where we are wealthy: solar energy. Coal is ridiculous. Everyone knows that except hard headed coal producers and workers. The latter are a depleted group.