Prior to 450 BC, the life of the average Roman was governed by unwritten customary laws. These laws were made and interpreted by a patrician (wealthy) class. Understandably, those who were without this knowledge, the plebeian class (commoners), figured themselves at a disadvantage when courts applied rules they didn’t know or understand. Public outcry demanded that these rules be presented in a code that could be inspected.
By 449 BC, 12 Tables, made of bronze, were ready for inspection. Unsurprisingly, shortly after a riot ensued. There were probably a few of these rules that riled the plebeians but one in the 11th table was notable. They were not to marry out of their class. This meant that plebeians were condemned to continue as servants ad infinitum. No plebeian could attain real power.
Eventually, the commoners won some concessions such as the right to elect someone to represent them on legal matters; the power to veto new laws from the Senate and the right to marry patricians. These were not easily won. These concessions required the novel affront to power of walking out of town. The people vacated the city en masse and said “We’re not coming back until we get what we want”. I suggest Manly. We can visit Zali, have a nice ferry ride and discuss our options from there.
What would make you walk out? We don’t limit marriage between the wealthy and the poor any more. That work is done by exclusive schools, clubs and suburbs. How about if I told you our money system is built on a lie. This is a 13th Table that you can’t see. This is the one that tells you that Government spending must be framed as debt. What sort of debt is written in your own currency? You shouldn’t have much trouble paying it back.
What Sort of Debt is in Your Own Currency?
Federal Government debt is associated with the sale of Treasury Bonds (this is overwhelmingly the greater part). This is when a company, using a bank as an intermediary, buys these bonds with Australian dollars they have acquired. Why would they want them? These bonds are a promise, on behalf of the issuing government like Australia’s, to repay this money at a future date with a predetermined top up of interest. There is nothing safer than a Treasury Bond denominated in the sovereign currency of a country like Australia. As long as the government is there you will get your money back and the interest. The interest isn’t high but it is safe. That is our debt.
I once tried to find out who owned this supposed debt. I rang a government agency called the Australian Office of Financial Management (AOFM). A pleasant gentleman told me I couldn’t know. He pointed me to a spreadsheet that inferred the creditors were organisations with labels like ANZ Nominees but who was that. In trying to unpick this, I rang a senior heterodox (more progressive) Australian economist who told me I was wasting my time. He explained the whole framework of debt, deficit and surpluses is an elaborate front built to conceal what is actually going on.
Why does the government raise money this way? The current system of bond sales has only existed since 1982. Prior to that time, the government still sold bonds but if it needed more money than it obtained through bond sales it would issue a Public Treasury Bill to fund any shortfall. That was a call on the Reserve Bank to “give me the money”. This option was closed off at that time to tie the sale of bonds to government revenue. This gives the impression that the government is funded by the private sector. This also places the market, superficially, at the centre of money creation (see discussion of Barter in Age of Plenty). It is a false picture. It is more than that. It is a massive deception. You can read about the introduction of this post-1982 system here. When your eyes start to roll, come back.
Surplus and Deficit Fetishism
This explains why the fetishism surrounding deficits and surpluses is a relatively recent malady. Prior to this time, it was not a central topic of daily discussion in our morning and afternoon papers. It was not central to nightly news programs. It has come with the financialisation of our society, the neutering of government and with it the discarding of social responsibility. The market is everything.
Yet, answer me this. How can a Federal Government that issues its own currency run out of money? How can it be so financially constrained? It is all in the rules. These rules mean that government’s capacity to fund public services and infrastructure are artificially constrained. This explains the rise of the Public / Private partnership. If the government can’t afford to do these things, we have to invite private sector opportunists in to help us out. They are paid to carry out work, provide a service or both and increasingly walk away with very attractive guaranteed revenue streams (see toll roads and freeway construction). Meanwhile, state governments and local councils, who rely on the Federal Government, starve from lack of money for a range of services. This forces them to introduce medieval style systems of fees and fines to make up the difference.
Households Are Now the Centre of Finance
Be assured, we have been financialised. The book, “Risking Together – how finance is dominating everyday life in Australia”, explains this expertly. One of the reasons it gives for the frenetic pace of privatisation in recent years is the fact you can’t securitise publicly owned services. The privatisation of telecommunications (sale of Telstra), energy and roads now provide an income stream for investors. Our households are now central to the investment strategies of financial management firms. The Reserve Bank carries out twice annual stability checks to ensure that our households are secure for finance. So much of this structure is built on the false notion our governments can’t afford the services we need and the private sector does them better. We know the private sector is better at charging.
So where are our politicians in this? Do they understand this interconnection between bonds, budgets, debts, deficits, surpluses and securities? I am sure they do. It requires a special hubris to believe you know more than these smart people. So why did our politicians allow this to happen? Why don’t they represent our interests? Why don’t they help us to understand how this system works? Why do we hear so often that “governments have to manage their budgets just like a household” when they are so obviously different?
The Age of Agnotology
Do you have the capacity to create money through the keyboard of your laptop or phone? No, then I think we have found a major difference. You or business are not the original source of money no matter how many times the false notion of “taxpayers’ money” spouts by some media or business mouthpiece. We simply extract money from the system according to a set of rules. These rules can take away penalty rates from young people or guarantee tax credits on franked dividends for retirees with millions in assets. In short, why aren’t the rules explained to us? These are very good questions that we’ll hold over to another time.
Here is a simple explanation for the time being. We live in an Age of Agnotology: the study of culturally induced ignorance or doubt.
Here is an excellent article by John B Kelly on the same subject