Government borrowing / printing money - Please explain - for dummies 101

Those pensioners wont be spending anything over the next 4-6 months , and they certainly wont be going out to any seniors events that usually fill up their weekly calender, it was a silly policy on the run, and I think it hit their accounts last week.
They are frugal by nature , and will be saving even more due to their forced isolation .

 

The Aust Govt doesnt print money to increase money. It buys its own securities and bonds on financial markets first from official dealers. If it repays $100b of bonds it withdraws that and prints 100b of cash. Called a repo. Repurchase. To fund repurchase they likely issue longer dated securities like 20 yr bonds to switch for 2 to 5 years expiring bonds. Maybe short bonds and short term bills entities like Medicare hold too.

It converts those liabilities for immediate cash in the economy. Banks will also issue long dated notes to buy bonds and also inject cash. How does Paying cash impact the economy? The govt pays for things. Like stimulus.

Printing currency is something third world economies do. Like Zimbabwe. Ever seen a 200 trillion note. It buys a can of coke .maybe. I can sell you some. I think I have 20+ left. Make a unique gift.

Paul used to be a financial markets dealer for a major bank

Australia...unlike the USA has a rigid rule about borrowing. Remember Khemlani or what killed whitlam? Yeah since the 70s our reserve bank is far more rigid than the us fed.

One of the world rules may be about to be broken. One of the handful of direct currencies is the USD. In Australia if we printed $$$ our currency will be smashed since it's pegged to the USD. But if the USA print it isn't affected. But if confidence collapses it could be valued like the south pacific peso or Fiji coconut. Affecting almost 90% of currencies. The yuan could become a peg. Or the ruble

Too big to fail? They got guns. What could millions of guns do to democracy and politics?

 

Who said we need to repay any of the Govt debt?

Currently interest rates are sooo low we can just refinance the debt and roll over indefinitely over and over. Issue new bonds to repay maturing bonds. NO need to raise new taxes. The Govt "Deficit" is just a number.

Trivia:

Did you know, Her Majesty's UK Government has been in debt for over 300 years?

They just "Keep Calm and Carry On".

 

Seven Deadly Innocent Frauds of Economic Policy
by Warren Mosler

Fraud #1. The government must raise funds through taxation or borrowing in order to spend. In other words, government spending is limited by its ability to tax or borrow.

Fraud #2. With government deficits, we are leaving our debt burden to our children.

Fraud #3. Government budget deficits take away savings.

Fraud #4. Social Security is broken.

Fraud #5. The trade deficit is an unsustainable imbalance that takes away jobs and output.

Fraud #6. We need savings to provide the funds for investment.

Fraud #7. It’s a bad thing that higher deficits today mean higher taxes tomorrow.

Read more: http://moslereconomics.com/wp-content/powerpoints/7DIF.pdf

 

geee ...

Now I've got a headache .

OK

My simplistic view . We live in the best country in the world . Vast hoards of people would love to live here . If we're stuffed then the whole world's a goner and I don't think that the case .

How this all plays out ? I don't know .

I'm thinking that the world will become a more isolated place for a while and at least for around seven years ( that's around how long it takes for the community to forget how badly we stuffed up ) , with countries wanting to be able to produce their own basic essentials ( issuing they can ) . How does this play out ? Import tariffs , Quota's , Subsidies for local industry , all against current free trade , but that might be one of the things out the window or at least seriously reviewed / Maybe countries will be allowed to introduce enough protection to protect essential supplies...

The initial response is that it could hurt china as they've relied on growth by producing for the rest of the world , but their growing middle class will support ingrowing growth at a lower rate .

Carnival / Royal Carribean lines are stuffed for a while .

cliff

 

I cant see where the over 65 pensioners will spend this money. If they do spend it, what's the point? They spend $750 on clothes (because how much food can a 75 year old eat?) and apparently to keep the economy going and that money goes into a business that is receiving 80% of its wages bill by the Govt and then what happens? It's ridiculous, no-one in their right mind would support this economic trash. Never see Rio or BHP do that type of thing.

 

So, it is better to hold properties and physical assets rather than cash or shares as cash or share will lose the values . Do you agree?

 

I never understood all the noise about the US trade deficit last year...
because USs biggest export is their currency, not any goods,
A currency which only they can print and the rests have to earn

It took china more than 3 decades to accumulate 1.5 trillion in savings,
and took US just over a weekend to get 6 trillion in spending.... all out of thin air.

What one can print.... the rests has to earn,
must be the biggest running Ponzi of our times,
Ponzis are after all trust game, it works till it doesn't,
till then..... "In Ponzi we trust"

 

and more $US they print, the world market loves it even more The Neverending Story

 

SMH just published a good explanation:

https://www.smh.com.au/business/the...rom-to-fund-the-stimulus-20200403-p54goi.html

 

If that happened then yes. Inflation would wipe away our mortgage debt.

 

enjoyed this, neat little explanation!

 

thats why US was hell bend on containing China, all the issues they have pointed about the Chinese government might have merits in looking at pure morality's perspective, but the hidden US agenda is rather sinister, it takes a completely idiot(our pm? ) not to see that. To loose the number 1 spot and subsequently world reserve currency will make their economy completely unsustainable. This is a from a economics prospective, I am not taking sides politically.

 

The outcome is this debate: This millennial reckons baby boomers have had it 'too easy"

There will be selective inflations (my invention). Scarce assets, eg., property, will be more expensive. But salary will become cheaper, in real terms. Also because of effectiveness in manufacturing and processes, it is cheaper to manufacture and produce. Anyway, you need more $$ to acquire scarce/limited resources, eg. property.

 

He is not an idiot, or maybe he is... but his hands are tied.

 

well I suppose he is not, he received a medal of honour from the Trump University haha...

 

Money printer go brrr

 

Sorry, that's proven otherwise. Will I be sued for defamation or Admin will delete my post?

 

I am still a dummy I just dont get any of this

BTW. AUD 77

 

A more in-depth explanation about the modern monetary policy is Ray Dalio's article
Chapter 3: The Changing Value of Money