The Australian Government is Sailing the Neoliberal Waters of Recession

For laypersons unfamiliar with monetary policy, or for those who believe in its “healing powers”, allow me to set the record straight. Today, the RBA is busy trying to stimulate growth in the Australian economy by shifting around dollars that already exist. Monetary policy is a blunt instrument that does not add needed dollars to the economy, but merely shifts around what was previously added by fiscal policy. Monetary policy will change a portfolio composition from all liquid dollars to some liquid and some bonds and vice versa, but will not “add” dollars to the system. Why is this?

Federal Deficit Spending is Money Creation

In addition to closing on a new house and moving over the next two weeks, plus dealing with allergies, I am pre-occupied with writing a series on the Gold Standard and why it was and always will be, a monumental failure. Therefore, I’ll keep today’s discussion brief with another look at how federal spending works. Before I begin, I wish to point out that for the sake of the layperson’s familiarity and understanding, I am going to use the word “money” in reference to federal spending rather than “currency”. We will also skip discussions of private debt and the sectoral balances.