Sunday, 3 February 2013

Government borrowing explained: a guide for urine drinkers

Calling all chronic Urine Drinkers and Dung Eaters. I'd like to explain government borrowing for you.

Don't think that applies to you. Think again.

All the water you drank today was sewage in the recent past and very possibly excreted by the person sat next to you right now.

Their output made your coffee possible. That and the stewed cowpats in which the coffee grew.

Still thirsty?

Water operates in a cycle, and therefore starting at any point on that cycle is as valid as any other point. But the emotional impact is vastly different.

The standard water cycle always starts with evaporation. Even the pre-treatment of water to make it drinkable is barely mentioned, and we certainly don't go into the mechanics of what happens after you flush.

But wind that cycle back a stage and you can immediately generate a severe disgust reaction. So much so that even in areas with a severe shortage of water any attempt to use our advanced technological knowhow to short-circuit the evaporation/precipitation part of the cycle gets a label: "toilet to tap".

And that tends to stop any rational debate on the subject stone dead.

Precisely the same trick is used with government spending. Government spending is just like the pre-treatment of water. It is an artificial intervention into the natural system that stops people and businesses dying unnecessarily. It is why we have an advanced economy rather than all of us having to stew our own cowpat juice.

And, like water, any spending in a credit economy creates a form of effluent that has to be dealt with by an active intervention. These are the excess saving desires of the non-government sector. They have to be sorted out or everything starts to go very smelly very quickly.

And it is all a cycle. Government spending generates a taxation flow or an amount of excess saving 'solids' that has to be processed by the government sector to stop it causing paradox of thrift problems.

Opponents of this advanced technology then invoke the 'toilet to tap' line to create a disgust reaction - simply by winding the spending cycle back a step.

They imply that government spending depends upon borrowing and they call the excess savings the Public Sector Borrowing Requirement.

Since in our society borrowing is considered dirty, if not outright sinful, it tends to stop any rational debate on the subject.

Our advanced water treatment mechanisms allow us to augment the natural process. Without it our population would be decimated by our own effluent and our standard of living would be dire. Many in the world are still without it. Unnecessarily.

Similarly advanced fiat money technology augments the natural spending cycle. Without it our economies would be in depression and our standard of living much, much lower.

Never let the philistines win the argument with their emotional trickery - on water or money.