3AW’s Tom Elliott has been speaking to ex-premier, Jeff Kennett, about Victoria’s debt this morning.

Yes, Victoria’s borrowings are a problem. So are the federal government’s.

If the federal government funded the states and territories better for their necessary services and infrastructure, they wouldn’t need to borrow: right? Yes, that’s right.

But then the federal government would get into debt and have to borrow much more: right?

No; that’s not right.

The federal government issues the national currency, so it doesn’t need to borrow it – from anyone. It can fund its so-called ‘deficit budgets’ – without necessarily raising additional taxation.

In fact, it is ‘surplus‘ federal budgets that forebode problems. They denote inadequate spending and usually portend of national financial distress.

Neoliberal ‘austerity’ economists and politicians, such as Jeff Kennett and Paul Keating (“The recession we had to have“) don’t understand that no governments need to issue bonds to ‘borrow’.

But it’s a very difficult point to make that when the federal government spends, it does not spend from taxation. Nor does it need to ‘borrow’ back. Why would it?

It’s the impossible private mortgage debt that’s about to bring Australia to its knees.

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Click on the above to see Stephen Zarlenga’s full account of Henry George on ‘money’.