billy blog ... some alternative economic thinking

Treasurer Costello announced yesterday that in net terms the Federal Government is now debt free. He went on to make some statements that do not hold up under scrutiny.

First, he claimed that budget surpluses took pressure off interest rates. Sorry, budget deficits put downward pressure on overnight rates as commercial banks scramble to rid themselves of excess reserves and in doing so find that they are unable as a group to clear away a 'system-wide excess'. That is why debt is issued in the first place under a fiat-currency system - to allow the central bank to maintain   More ...