Daily Archives: October 29, 2013

Warren Moslers 7 Seven Deadly Frauds of Economic Policy #2

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

Collectively, in real terms, there is no such burden possible. Debt or no debt, our children, and us if we are still around,  will get to consume whatever they can produce.

There is no big mystery about this. For a start, it is not possible for any generation to send anything to a previous generation. That would mean travelling backwards in time! The next generation will consume whatever is available at the time just like every previous generation has done

For countries like the US and the UK it  could mean that the next generation will have a more balanced level of trade with countries like China and Japan. Say the Chinese  used some of their $ and £ to buy aircraft or power stations, or whatever they choose to spend their money on,  and place contracts in the UK and the US. That would be hailed as good news. Politicians would claim credit for the  number of jobs  they had created.

If we really are worried about the next generation we’d do whatever it took right now to keep them off the dole queues and give them genuine opportunities in real and meaningful jobs.  The older generation will be helping themselves too. That way the economy will be in better  shape in 10 or 20 years time and better able to cope with the demands of an ageing population.

Future Funds and a Biblical story.

There’s a Biblical story involving Joseph and the Pharoah that many  will be familiar with. Joseph had been sold into slavery in Egypt but  even though he was in prison he managed to acquire a reputation in fortune telling.

The Pharoah asked Joseph to interpret some dreams. Joseph was smart enough to come up  with the reasonable suggestion that they meant seven years of plenty followed by seven years of famine. Maybe Joseph had spotted something in the climate patterns or maybe he just got lucky.  Some will believe he really did have some special powers. Who knows?

In any case,  the decision was made to store extra grain during the first good seven years. If the harvest was 20% above normal for seven years, then 20 % below normal  for the next seven they would of course need to store that 20% to smooth out the supply.
Even if there was no certainty there were lean times coming it would be quite sensible to store any surplus of course.    Of course we think we are smarter than the  ancient Egyptians. If we have a few good years we, here in Australia,  save our money in a future’s fund. Administered by highly paid executives , no doubt.


Australia has A$92 billion in the kitty presumably to be used when we have our seven lean years sometime in the future.

If the ancient Egyptians had done the same, saved money when their harvest was good   and spent money when their harvest was down, they wouldn’t have created any more grain when they needed it.  They would just have pushed the price up even higher.

The money has been sitting there for several years now and the Australian economy has managed reasonably well without it. Its pretty much forgotten as far as the economy is concerned.

If we didn’t have the money we might have to print extra if it was needed. The Australian government can print and spend  as many Australian dollars as it likes and it would have exactly the same inflationary effect as taking money out of the futures fund. So there seems to be no point in having the fund as far as I can see. Or am I missing something here?