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?