When treasurer Josh Frydenberg abandoned the Tony Abbott mantra that “you can’t fix the economy unless you fix the budget,” it was clear that something within the mindset of the treasurer and the government, had changed. They realised that the reverse was true.

No longer do they believe that debt is a disaster, or that deficits are bad. Not now, under the current Covid climate. Funny how things you do for the sake of expediency and political advantage, finally catch up with you.

Long gone is the soft target of Labor’s predilection for high spending there to exploit. Not even the Murdoch press can play with that one anymore. Covid has blown that one right out of the window.

No longer will the mantra, “how are you going to pay for it,” work either. Funny how both the conservative press and the ABC are now running spending stories without referring to the levels of sustainable debt.

Economic gurus everywhere are now reviewing and revising their reporting strategies to accommodate the changed circumstances that reflect more closely the MMT reality of sovereign debt…that it isn’t debt at all!

The government balances its books by issuing bonds to cover spending that exceeds taxation revenues, but knows all too well, that those bond sales are no more than a smokescreen to hide the fact that the Reserve Bank provides the money for all government spending, regardless of the outcome of any bond sale. It simply creates the money out of thin air.

There is no difference between a $1 trillion debt and a $2 trillion debt. It’s what you spend it on, that matters.

Now, some in the press, have woken up to that reality too. So, what is the government doing now? They are embracing the reality that full employment is the key to a successful economy. Who would have thought?

Up until now, the thought has been that a certain level of unemployment was necessary to combat inflation. Not anymore. Employment is now the key driver.

Get people back to work, manufacturing, producing, distributing, delivering, servicing, and voilà! No longer does one need to worry about balancing a budget. Over time, that will happen automatically. Who would have thought?

For a government who won an election in 2013 on the flimsy fantasy of a “debt and deficit disaster,” this 180-degree turnaround seems to have been achieved without a scintilla of a backlash. What a stroke of good fortune that has been.

‘’How good is that’,” we could imagine the PM, Scott Morrison saying to his cabinet as they engineered the dismantling of the job keeper program.

There is a certain irony here, that journalists are struggling to address because in doing so, they reveal their own shortcomings.

Notwithstanding the insensitivity the government has shown towards the needs of various sectors within the national framework, they are now happily prepared to dole out the dollars to those very sectors they despise, knowing full well that their hypocrisy in a Covid-conscious electorate, will go unnoticed.

How good is that? And it is all because the conservative side in the political arena has adopted the “don’t worry about the debt” mentality. Why have they done this?

Because they now realise that it is not real debt!

The problem for Labor in this otherwise snippet of good news, is that those who would most likely change their vote and punish the government for their dishonesty, are currently so self-obsessed with their larger bank accounts and wondering what to spend it on, that they are blind to this fundamental policy reversal, or couldn’t care about it anyway.

Comment bon est ca?

Unsurprisingly, there are those here in Australia who are mourning the departure of this enigma of American politics. Why?

Trump was neither a leader or a politician. At best, he was an enigmatic cult figure. All this very weird defense for a president who not only failed in every aspect of his own expectations, he also failed his country in ways that history is yet to chronicle.

His inability to grasp the most basic of protocols, his unbelievable capacity to lie, to believe his own rhetoric concocted from his own narcissistic stupidity, will be his legacy.

He personally had no impact on America’s economic ups and downs of his first two years, despite Fox News’ attempts to convince people otherwise. That was all generated by the residual effects of the GFC. The third year was nothing more than bluff and bluster as he strutted the world stage seemingly unaware that his contemporaries were laughing behind his back.

The final year was governed by the devastating impacts of Covid-19, the importance of which he failed to grasp. He will forever be inextricably linked to his own failures in leadership on that issue. Overall, he did nothing to advance the living standards of average Americans.

Whoever disputes this, has been duped, as have so many by this clown. He, however, was just a pawn in a much broader and darker plan by the religious right, to take control of the US. They are far from finished. I suspect they already have their sights on their next stooge. My tip is Mike Pence.

Perhaps Trump’s most damaging legacy is that he opened the door to a section of America that will now pursue their racist agenda with even greater passion, now that he is gone. They saw him as the second coming of Christ. The religious right will delight in fanning their flames with glee while keeping a safe distance.

Thus, the great American divide will continue until they destroy themselves, as did Rome, Napoleon, the Ottomans, the Third Reich, the USSR. History doesn’t lie. The statistics that can be produced to show gains and losses during Trump’s time in office (and they are many), are trivial in the long term. It is the social, cultural and religious differences to which he has given oxygen, that will determine its future. And they are huge.

They will only get worse.

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.

Will the federal JobKeeper Allowance become Scott Morrison’s pink-batts/school-halls’ experience? It’s starting to look that way, even at this early stage.

Just to recap, when Kevin Rudd decided to “go early, go hard, go households” in response to the looming threat of a worldwide economic collapse (aka the GFC), he followed it up with a multi-billion dollar job creation program to have every house in the country supplied with roof insulation.

On the face of it, a great idea.

In addition, he introduced the “Building the Education Revolution” (BER) program, a massive schools’ upgrade, involving the construction of school halls, basketball stadiums, libraries and classes, projects that would, over the long term, have been on their radar, anyway.

Another great idea.

However, it wasn’t long before the school halls program began attracting a great deal of political criticism from the conservative Opposition and the Murdoch media who claimed there had been wholesale rorting and cost blow-outs. For the Opposition, it was like a dream come true. They hated the whole idea of a stimulus in the first place.

Feigning concern about excessive spending and budget deficits that were the product of the GFC stimulus initiatives, the leader of the Opposition, Tony Abbott, called for a judicial hearing into the BER and claimed it, and the home insulation initiative, were failed programs and a waste of money.

Despite Primary Schools being provided with new and refurbished halls, libraries and classrooms as well as new and refurbished science laboratories and language learning centres, it was the cost of these programs that became the focal point.

Never mind the provision of new and refurbished covered outdoor learning areas, shade structures, sporting facilities and other environmental programs, all of which represented ongoing benefits to our childrens’ education, the opportunity to gain political points from a perceived rort, was too great a gift for the Opposition to ignore.

The reality was that the insulation program covered 1.2 million homes which had, by 2015, produced savings of approximately 20,000 gigawatt-hours (72,000 TJ) of electricity and 25 petajoules (6.9×109 kWh) of natural gas. But this was of little interest to the Coalition partners.

Their interest focussed on the tragic loss of life of four workers, accidentally electrocuted, while they were installing the batts. It was this tragedy that the Opposition and the media sought to magnify, purely to discredit the government and gain political advantage.

Notwithstanding the benefits to the economy, particularly in the area of employment, the ongoing reduction of greenhouse gas emissions and being able to avoid a recession, the political outcry from the Opposition and the media, over the four deaths and anecdotal evidence of rorting, was unrelenting.

The Rudd government subsequently suffered a drop in popularity and a perceived mis-management of the economy.

Since then, under intense media attack, the Labor party has been cast as responsible for all ongoing budget deficits (aka, the debt and deficit disaster), while the Liberal/National Coalition has enjoyed the confidence of the media and a deceived public, in matters of financial management, despite the reverse being the reality.

As they say in politics, that’s politics.

Now, however, it seems some comeuppance is on the horizon.

In response to the Covid-19 pandemic, the Coalition government, led by Scott Morrison, has unleashed a stimulus spending program that is five times greater than anything the Labor party did between 2007-2013.

To grasp the significance of this 2020 cash splash, one needs to remember that at the point when the Coalition became the government in 2013, the national gross debt was $278 billion. Seven years later, under Coalition management, it has ballooned out to $607 billion.

But that is just the start. Planned stimulus spending over the next two years will see it climb to, $800 billion. A large part of this spending ($130 billion), will be allocated to the JobKeeper program, an ambitious attempt to forestall a massive increase in unemployment, estimated now, to exceed 10% by the end of June.

Treasurer Josh Frydenberg has claimed that without JobKeeper, the unemployment level could be as high as 15%. And he’s probably right. It is, therefore, an alternative unemployment support program.

The JobKeeper program provides businesses who have suffered a 30% loss of turnover caused by the Covid-19 lockdown, a payment of $1500 per fortnight, per employee, so long as those businesses retain those workers in employment.

There are, however, some interesting side issues in play.

The employees are supposed to receive the $1500 even if they weren’t being paid that much in the first place. The government has already been forced to amend the rules to exclude 16 and 17 year old full-time students who were only working part time. Some, in this category have already made a killing and won’t be asked to return any money already received.

So that raises a number of questions, namely: will businesses pass on the full amount if that is more than they were paying employees? And, will businesses make up the difference between what the government gives them and whatever they were paying their staff, if it was more?

Will they continue to pay superannuation and penalty rates as required? Will their workers continue to accrue annual leave if they were stood down?

One should never underestimate the cunning of those who would see an opportunity to rort the system just as they did with the school halls program. In this case, the temptation to manufacture a few phantom staff will be, for some, irresistible. For others, just claiming the money for those who were never likely to be laid off, will be very tempting.

For a government who have grittingly put their ideology to one side, for the better good, the shock of it all might prove too much to manage. They have so far surrendered any future criticism of Labor’s spending record. They are gearing up to post a huge budget deficit for 2019/20, and worse, the biggest budget deficits in history for the fiscal years, 2020/21 and 2021/2022.

Now they face a very real rorting scenario. One senses that budget deficits will be small change compared with what history tells us is a sure bet.

Now we will see them in full bloom. No, not my iceberg roses, although they look spectacular at the moment. No, now we are seeing our brilliant, supposedly better economic managers in action, the ones a majority of the country think are superior to Labor.

Here we are, facing an unexpected hit to the budget bottom line, an economic disaster, never mind that peoples’ health is threatened, a time of unprecedented calamity, a true test of our leaders’ economic credentials and who is in charge?

Imagine briefly, if you will, that Labor won the election last May and were facing the same circumstances today. The economy was already in a slump, however, an increase to Newstart would probably have been introduced. Thus, all else being equal, the December GDP quarterly increase of 0.5% would likely have been marginally higher.

The bushfire crisis, however, would have prompted a Labor government to commit funds to generate economic activity, probably in the tens of billions, money actually spent, smashing the budget bottom line, committing the nation to more borrowing (quelle horreur) and most importantly, saving jobs.

Already, we would have heard the cries of reckless spending and higher debt burdens to come, from the feckless opposition. God save our poor grandchildren from their diminished lifestyle. Deja vu, I hear you cry.

But no, this time we have the rare opportunity to see the oh, so highly regarded, superior economic credentials of the conservative side of politics in action. And what have we seen thus far? Nothing! Zip! Rien!

But this week, an economic package will be unveiled, estimated to be in the order of $10 billion. Wow! How generous is that? This will be the conservatives’ response to a crisis. And who will be the main recipients of this spending?

Pensioners possibly, in the form of a lower deeming rate, likely to put one or two more dollars into their fortnightly pension. Perhaps even an advertising campaign targeting the tourism industry. Small business will get something, likely to be in the form of wage subsidies to encourage them to retain staff.

The problem with that though, is that if there is no work for them to do, a wage subsidy won’t be much of an incentive for a builder, a plumber or an electrical firm to hang on to staff. They would want to see activity, the kind that creates work.

The issue we are facing today is a double whammy. We are facing both a demand and supply shock to our economy. The demand shock is reflected in peoples’ unwillingness to spend. That’s been the case now for nearly a year.

A supply shock is reflected in the unavailability of goods, even if people did want to spend. The coronavirus has restricted the movement of said goods worldwide. That means hundreds of thousands of workers losing their jobs.

But we must remember that our present leaders are the superior economic managers. They will manage this emergency. I mean, how good is Josh Frydenberg? His latest comment, “The Australian economy is very resilient,” should reassure us all.

All of which means, a recession looms large and with it, a serious test of the economic credentials of the conservative side of politics. That’s something we haven’t seen since Malcolm Fraser was Prime Minister and John Howard was treasurer, in the early 1980s.

And I can still remember how well that turned out.

Henry Johnston’s article, NO WE CAN’T (AIMN, 13/02/2020) begins “Try as I might, I cannot pinpoint the exact moment or instance, when the world’s conservative parties shifted from extolling tradition and practising good manners, to embracing corruption and malfeasance.”

It’s more complicated than that, but there is a timeline that accurately reflects how this mess was created.

In Australia, the rot began with the Conservatives plotting the dismissal of the Whitlam government in 1975. It spelt the end of democracy in Australia although it wasn’t considered so at the time. It took a few more years to engineer the right conditions and the right man.

Two years earlier, US President Richard Nixon, took the US off the Gold Standard, freeing up the dollar and increasing its value against foreign currencies. It was effectively a coup by the corporate sector in the US over its government, ending their democracy with the stroke of a pen.

The coup in the US was barely recognised by anyone at the time and importantly, gave the Corporate sector valuable time to plan and position themselves during the Ford/Carter administrations to find the right conditions, the right man, to enter the White House. They found him in Ronald Reagan.

With Reagan appearing to be at the helm, those who were dangling the puppet strings manipulated every corner of the financial services industry, preparing the evolution of a “trickle-up” system that saw a small handful of very wealthy people become mega-rich and incredibly powerful.

But that was just the beginning.

They became so rich and powerful, they were able to control what the government did and didn’t do. They then looked for the right people to spread their ideology across the globe. In Great Britain, they found Margaret Thatcher, in Europe they found people like Germany’s Helmut Kohl and France’s Giscard d’Estaing who embraced this new world order without question.

This rape of the world’s financial system was cleverly shielded under the very attractive banner of, “wealth creation,” a term which resonated well with middle-class America. It ensured its continuation regardless of who was subsequently elected in the US and across most western governments.

In Australia it began, oddly enough, with the election of the Hawke Labor government in 1983. They stayed in power for thirteen years aided by a cosy relationship with the US administration, US corporations and the subsequent support of the captains of industry here.

Hawke and Keating deregulated the financial markets, something the compliant media still tell us was a good thing. Slowly but surely, the one stumbling block that stood in the way of the trickle-up economy, i.e. the trade union movement, was minimised either through government legislation or partnerships; somewhat ironic since the architect of the reforms was its former boss.

Then came the Howard era, with a conservative outlook so far to the right that they redefined the definition of wealth creation and opened the floodgates for the financial industry to exploit a cashed-up, ignorant public, even further.

From the beginning of the Hawke/Keating era through the Howard years to today, many middle-class entrepreneurs have gained great wealth, thanks to greedy bankers, insurance executives and super fund managers, all too ready to put risk ahead of sound management and enjoy the spoils.

It was in the 1980s that the pioneers of wealth creation who forged the pathways we were encouraged to admire and adopt, set off on their reckless pursuits with breathtaking speed. People like Alan Bond, Christopher Skase, Robert Holmes a Court and a host of other mega rich, wealth creators became the darlings of the media.

They showed the way while compliant governments turned a blind eye to corruption on a scale so big and so important to growing national economies, they were judged too important to fail…..until they did, of course.

It was great while it lasted, but anyone with half a brain knew it couldn’t last. But when the crash came in 1989, it was the wealth creators who survived and continued to prosper. The millions of Mum and Dad investors who had climbed aboard the gravy train lost billions. But, in a paternalistic pattern of condescension, they were considered and referred to, as collateral damage, victims of a necessary market correction, so the media reported.

As those shaken, but not destroyed, wealth creators regained their composure, the process restarted, with the corporate giants still able to manipulate markets and national governments worldwide, ensuring it was business as usual. Today, they are so powerful, no political party can be elected without their approval.

What we have now, is a world financial system so interconnected, so interlocked, it resembles a pyramid with its foundation made up of most of us, the little people at the bottom, arranged neatly across a vast expanse of highly controlled, concentrated purchasing platforms, where we exercise our purchasing power with hopeful but hopeless expectations.

We toil long hours with no option but to continue toiling hard, competing with each other for less than 5% of the net wealth, a reward just enticing enough to keep us keen enough to want to work for more. We offer up our services, our labour to those just one rung, one platform, above us.

We are, by necessity, subservient to those above us, who themselves have become slaves to those on the rung above them in a forever upward elevation that gets smaller and smaller the higher it goes. Those on the very top rung can only be removed by governments with the will to uphold the principles of justice and equality.

But justice and equality are not on the minds of such governments, or those at the top who put them there, thus enabling this tiny group the luxury of looking down to watch the world they have orchestrated, behave as it was destined to do.

They watch our world twist and turn as they choose. They watch as things they orchestrate in one part of the world impact upon other interconnected parts thousands of miles away. When something goes wrong in one part of the world, it filters through to the rest. This is their plan, their new world order.

The 2008 Global Financial crisis should have made that reality abundantly clear to us all.

There will be more GFCs, but such events are of minor concern to the rich and powerful. Such events are a necessary part in the execution of their ideology. Their hold on power will never be challenged because those who could challenge, will never gain political power long enough to reset a course that would lead to a more equal society.

This juggernaut is now in total control and most people don’t even know it. Most baby boomers measure their wealth and the improvement in their lives by comparing their standard of living with that of their parents or that of people they see being oppressed in third world countries.

Little do they realise, their wealth came at the expense of those same oppressed people whose national resources were procured either illegally or under duress; an inconvenient truth perhaps, but who is asking.

We have all been conditioned to measure wealth in terms of our personal material assets and the general wealth of the nation in which we live. We don’t give much consideration for those nations who surrendered their resources for us to achieve what we have accumulated.

We look at our lives and think we are so fortunate, so blessed to live in such a wonderful country without ever realising how much of our democratic rights we had to surrender to get here. We compare ourselves to other nations drowning in poverty, torn apart by wars, famine and plague, not for one minute realising our good fortune was at the expense of theirs.

Our exposure to the despair of other nations, other peoples, is also part of the broader plan of the trickle-up conspirators. We are warned not to be complacent for fear that we too could become them if we don’t work hard and aspire to even greater success.

Yes, we can help them, donate to them, send food and other necessities. We can even call for government action to eradicate the atrocities that we have inflicted upon them. Send in troops even. But we must never forget how important it is to continue to prosper. It’s all part of the broader plan.

The irony of this mess is that those in the middle of the pyramid, who have the luxury of looking down one or two rungs, who would criticise those below them for not working hard enough, whose good fortune came at the expense of third world exploitation, these are the greatest supporters of this appallingly unequal system without realising they are as despised as the rest of us by those above them and the architects of this system.

They are the conservatives who only think of today. The governments they so proudly support don’t look too far ahead. They don’t need to. The trickle-up economy is in charge. They just wait until they are told what to do.

We reap what we sow.

If there is a positive to draw from what is happening to us this Australian summer, it is that for climate deniers, this is, thus far, their worst nightmare and that no longer will anyone take their absurd, unqualified ramblings seriously.

If we should realize just one thing in life, it is that we are here, on this earth, as guests of Mother Nature. We are not her master and by continually abusing her good and generous hospitality, we have justifiably aroused her anger.

As one would expect from any landlady who has decided enough is enough, Mother Nature is pushing back. She is reacting, not pro-acting. She is doing so to demonstrate her power over us. We are but children misbehaving in a manner that is no longer tolerable and we are being given a severe warning.

This summer, for those of us in Australia, she has decided to show her hand.

Make no mistake, this is not some divine retribution from an angry deity that some religious nut-cases will surely begin to proclaim. This is not someone’s all powerful male god punishing his people for their sins. This is a real and present response to a real and present abuse of tenancy, by a real and present, angry landlady.

Those fools who argue that it is useless to act unilaterally to mitigate climate change, or that our emissions are but a drop in the ocean when compared with other nations, are now receiving their wake-up call.

Mother Nature doesn’t see it that way.

These fires we are witnessing, have already emitted more than our annual greenhouse gas emissions for the year 2020, not to mention the heartbreak and suffering of those personally affected.

Our prime minister’s pathetic attempts to show empathy for the victims, demonstrates how distant he and his coalition partners are from reality. They are now like those in the lifeboats of the Titanic, who foolishly claimed their ship was unsinkable, watching as it goes down.

Will climate deniers ever again dare to deny the reality of their foolishness? Yes, I suspect they will. But will anyone bother to listen? I doubt it. What can we expect now from our leaders who have thus far resisted upsetting their coal loving masters?

Just watch, as they choose their words very carefully from now on. Just watch the knee-jerk reactions, as ideology gives way to pragmatism and the reality dawns that votes are now seriously at risk. Just watch as the money begins to flow, money that was earmarked to be banked for Josh Frydenberg’s precious surplus.

There’s nothing like a severe warning from one’s mistress, one’s landlady, for a tenant to take stock. I can’t see it lasting, however. Our government will need a bit more than a bush fire, a naval rescue operation, a financial package, or a surplus gone up in smoke, before they surrender their corporate coal-driven ideology.

But Mother Nature isn’t finished. The damage we have already done, damage that cannot be restored, damage that still has to be accounted for, will yet see her angry hand come crashing down somewhere. Did anyone notice that Norway experienced a temperature of 19 degrees Celsius two days ago? In the middle of Winter??

Whether it be here in Australia or some other part of her very finely, ecologically balanced planet, she will need to react again and again, until her guests get the message. Or, if we don’t, we will have more of the same to look forward to, ever more ferocious, ever more destructive.

Mother Nature is pushing back. She will protect her planet above all else, even to the point of eviction, should she consider it necessary. So, take it that we have been warned.

Or don’t and do nothing. Mother Nature is waiting impatiently, it would seem, for some real and positive response.

Make no mistake though, the next disaster is already on its way.

I hate saying it, but perhaps it was an election Labor should consider themselves fortunate to have lost. And perhaps they should seriously consider not blocking any legislation in the senate. By that, I mean ANY legislation. Let the government hang itself with its own rope.

Far too often the finger has been pointed at Labor as the cause of some failure in outcome resulting from their senate obstruction. It’s a pathetic excuse but given that 51.5% of the electorate (disproportionately represented in Queensland and Western Australia), seems to believe everything the Prime Minister and his cohort of self-indulgent yes-men say, what is there to lose?

There are dark clouds on the horizon, particularly and most notably with regard to the economy. Fifty-one and a half percent of the electorate believe the Coalition are the better economic managers.

Most of this belief stems from the Coalition’s economic performance during the Howard years (2001-2006). On face value, it seemed everything was being managed so well. Net national debt had been eliminated, middle class welfare handouts were rife, all while the Treasurer, Peter Costello was producing surplus budgets.

Could it possibly have gotten any better? Never mind that private debt was soaring as a result. That was the fault of the consumer. The Howard Government were being portrayed as wizards in economic management. How did they do it?

The answer to that is simple. They had truckloads of money to play with, from a mining boom construction phase no one saw coming. No one thought to question the wisdom of spending all that extra cash like drunken sailors. Not until Kevin Rudd came along and said, “this reckless spending must stop.”

Enter Kevin Rudd, the GFC, a sudden downturn in the mining boom windfall and the whole economic outlook took a sharp dive. The only way to save it was to inject billions of dollars into circulation which meant abandoning surplus budgets and going into debt. Wayne Swan did exactly what needed to be done, but politically, he was crucified for it.

The Coalition convinced the electorate that it needed the expertise of those who were at the helm during the Howard years. Enter the Abbott, Turnbull, Morrison era, with one big difference. No mining boom windfall and with it, no bucketload of money, no economic wizardry.

But, after six years and some twisted, bizarre, psychological deception, the Coalition were still able to convince 51.5% of the electorate that, even though public debt had more than doubled and evidence of a tanking economy was already obvious, they were the better choice. It was a replay of 2001, when Kim Beasley was denied the chance of becoming prime minister.

So, here’s the reason Labor should consider itself fortunate it lost. This is the first real test of the Coalition’s economic credentials since the late 1970/early 1980s, when they brought the economy to its knees. Not surprisingly, it was when John Howard was Treasurer.

It happened because the electorate believed they were better on the economic front than Labor, unaware dark clouds were gathering, unaware the coalition was untested, unaware they had no economic expertise. Then, world events took over, particularly with interest rates and John Howard had no idea how to manage them.

Today, the new Morrison government finds itself in exactly the same position as Malcolm Fraser did in 1980. The economy is seriously in decline and our fledgling Treasurer, Josh Frydenberg has no idea how to manage it.

Frydenberg confirmed his incompetence when he told a London seminar recently that he would rather produce a budget surplus than arrest a declining economy. That, more than anything else, was grounds to disqualify him from holding the office of Treasurer.

Thus, the next three years will reveal, as world events take control, the great lie that has captivated 51.5% of the electorate concerning the Coalition’s economic credentials. Frydenberg’s inability to react will consign him to the political scrap heap and Morrison along with him. By 2022, no longer will that outrageous claim be sustainable, even to the most loyal Coalition voter.

So, notwithstanding a likely unemployment rate of 7%, with no capital investment, the mess that an incoming Labor government will have to deal with and an economy they will have to resurrect, it’s perhaps the better result in the long run.

And so, with the 51.5%, who will get far less than they bargained for and the rest of us who will watch it play out as expected, the truth of it will finally be revealed.

At one stage during the election campaign, either Scott Morrison or Josh Frydenberg hinted at their intention to begin paying down the national debt if they were re-elected.

It is a sad reflection on our media that no one thought to ask how this might happen. If they had, it’s likely they would have exposed a simple, albeit inconvenient truth, firstly about how that debt is created and secondly, how it is retired.

Currency-issuing governments don’t need to acquire debt, but given that the funding of deficit spending is a fact of life in Australia, we should all know just what the procedure is, and how it works.

To fund deficit spending, the government issues bonds in its own currency. Various entities, both here and overseas, buy these bonds because they have money they want to invest and bonds are considered safe investments.

The bonds are issued for a specific length of time (3, 5, 10 or 20 years), the money received for them is held in an account at the Reserve Bank, interest is paid twice yearly and when the term expires, it is returned to the bondholder.

Under current arrangements, when the Australian Office of Financial Management (AOFM), anticipates that the consolidated revenue account is running low, it will issue a bond sale tender to meet the expected shortfall.

There are other considerations such as yields and so on and the bondholders can, if they choose, sell their bonds on the secondary bond market and even make a profit from it. But that’s another story.

So when and how can this process reflect a reduction in government debt accumulation? Well, it can’t. As long as governments spend more than they collect in taxation, this is the process that plays out. It doesn’t have to, but governments choose to do it this way. It’s a political choice.

In some cases, when a bond issue matures, the government will issue a new tender just to cover the amount being repaid to bond holders. New tenders can be issued to cover maturing issues. It sounds stupid, but what can one do.

From this we can see that debt is accumulated to offset deficit spending and old debt is being retired and replaced with new debt. But what happens when government produces surpluses? Does the AOFM stop issuing tenders for bonds? That would seem to be the logical thing to do, wouldn’t it?

The last time this occurred was in the early 2000s when John Howard famously and incorrectly claimed that his government had paid down all debt.

They had, in fact, reach a point where net debt was thought to be zero, but some gross debt (bonds still on issue), was still owing. Gross debt is what interest is paid on. Howard and Costello wanted to shut down future bond sales but, as it happened, they continued to issue bonds even when the government was producing surpluses. Why?

The answer to that question is best explained by Philip Baker’s article written for the Evatt Foundation in November 2002 where he writes:

“Commonwealth bonds, which the government issues when it borrows money, are the safest of all securities. For many individuals who are labouring to pay off credit cards and mortgages, zero government debt may sound like a good thing. But it could also create a dilemma for big and small investors because it would result in a real shortage of risk-free, safe-haven assets for superannuation savings. The remaining government bonds on issue would be scarcer and more expensive for investors. Fund managers would be forced to invest in riskier corporate bonds or send the money offshore – at the very time the government has increased to 9 per cent the amount of an individual’s salary that must be invested in superannuation.”

So the Howard government continued to issue bonds because the bond traders needed them as leverage against a shrinking and less-safe market. This implies that bond sales have nothing to do with government debt.

So where does this leave Scott Morrison and Josh Frydenberg who desperately want to be seen to be paying down debt, a debt which in reality, does not exist? If the government were to cease issuing bonds it would make no difference to the nation’s fiscal balance. But it would incur the wrath of the bond traders and we couldn’t have that, could we?

Of course, none of this needs to be thought about while we continue to have a negative fiscal balance, i.e. deficit spending, and with the economy currently in a downward spiral, that situation will continue for some time yet. Despite Morrison and Frydenberg claiming we are back in the black, we are not. Not this year, or the next, or likely even the one after that.

And, just for the record, here is where the gross debt position stood back when the adults took over*** and where it is today:

May. 2019. $541 billion

September. 2016. $420 billion

September 2013. $257 billion ***

August . 2007. $58 billion

So much for a debt and deficit disaster. And where are those fearless journalists who could take on the Prime Minister and Treasurer when they make deceptive statements about paying down debt?

Perhaps an intimidatory raid on the ABC might keep them quiet for a while.