Dear Michael
I saw you on the 9 news last Saturday evening telling us the $60 billion overestimate, if used to help people excluded from JobKeeper support, like casuals, people in the Arts and university staff, is money our grandchildren will have to repay.
You are an intelligent man. You can’t be that ignorant of how federal government money is raised. If you are, you need educating. This money has been, or would have been, created out of thin air by the RBA. THAT IS HOW ALL FEDERAL GOVERNMENT SPENDING HAPPENS.
It is not borrowed, nor are taxes used.
To offset spending that exceeds tax receipts, as a guard against inflation, The Australian Office of Financial Management issues a bond tender which, under normal circumstances, is purchased by individuals, banks, super funds, foreign interests and others.
For the buyers of bonds it is no different from buying shares or opening a term deposit. Bonds are issued for a set period, one year, two years, three years and on maturity are retired to the bondholder’s deposit account with the RBA. It is an automatic process and has nothing to do with our grandchildren. The RBA just moves the money from one account to another.
As of today, 23rd May, 2020, the AOFM has $649.2 billion of bonds on issue.
The last $100 billion of these bonds were purchased by the RBA. They had to do that because no one in the private sector could raise the cash to buy them. To suggest that this money has to be repaid is to say the government is borrowing from itself and must repay itself. I’m sure you can see the absurdity of this suggestion.
Federal government bond issues ARE NOT DEBT. A Federal government currency issuer CANNOT owe itself money.
So please, next time you are in front of a camera speaking to your constituency, or to the nation, don’t treat us like fools.
If you are truly perplexed by what you are reading here, I’m happy to meet with you and explain modern macroeconomics in greater detail.
Have a nice day,
John Kelly, a Deakin constituent.
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