Martin Place?

My nephew and I were chewing the fat about his plans to enter the building development game. This got us onto various building practices that are cost- and labour-saving but have been successfully blocked by the unions.

I suggested that if unemployment is the issue then Australia would be better off if we purposefully depreciated our currency via the usual method of ‘printing’ money (in reality it is just created in a computer somewhere, hopefully with good security).

My nephew asked me what they do with the money they create. I said that as far as I know they can either lend it to the banks, put in their own accounts and use it to pay for major infrastructure programs, or, more likely just pay the government bond dividends with it (i.e repay government debt with fictional money).

The price for devaluing the currency is inflation, although this doesn’t always occur if it is done carefully. But in Australia inflation leads to high interest rates which leads to political pain for the presiding party due to mortgage rates increasing.

Hence we live with a over-inflated currency that makes our exports less competitive and therefore of lower total value and also that cheapens imports, which can be viewed as exporting jobs.

This all got me wondering whether there is a means to devalue a currency without printing money. Of course there is – it’s called government mandated fixed exchange rates. It’s hard to imagine us stuffing the economy back into this little box.

To cut a long story short I am therefore currently reading “The Evil Princes of Martin Place” by Chris Leithner. This guy is very insightful but driven by a sense of injustice that is some sort of motherlode.

The whole thing smells very much of a first world problem…rather than bat on about the injustices and the power and wealth disparities in the first world he would be better placed to worry about how our current systems are going to react to the imminent end of key resources. Do our financial systems have enough flexibility to respond or will we need the whole system completely re-engineered?