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Change from a model of sound finance to one of functional finance

This petition had 211 supporters


"Sound finance" in government is the belief that we have to "live within our means". That spending must be "financed" directly by either taxation or issuing bonds (which we call "government debt").

"Functional finance" instead says we should focus instead on real outcomes we wish to achieve, such as full employment.

Critics of functional finance claim that deviating from sound finance will result in runaway inflation and we'll all end up "paper billionaires" like in Zimbabwe.

Rather than explaining the economics of why this is untrue I want to keep things simple with an analogy.

Imagine a car driving on the highway at 40kmph in 1st gear.

"Its red lining" says the driver, "we can't go any faster!"

"But you could change gears and go faster without red lining" you say.

"Oh I know we could change gears and go faster" says the driver "but a car once drove faster than 40kmph and crashed. You don't want to crash do you?"

Never mind that the car was going 180kmph when it crashed.

Maybe we could go 60, or 80 or 100kmph and get to where we want to go more quickly... but that isn't the conversation we are having.

We are so obsessed with the "dollar in, dollar out" mechanism of sound finance that we are completely ignoring how we really want our society to look; that we could easily be spending more money on social services, innovation, research & development, and most importantly maintaining full employment for all citizens without any inflation risk.

This petition calls for an end to sound finance, and a move to functional finance; and in particular to return to a full employment policy in Australia like we had between 1945 and 1975.



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