The respected economist Michael Hudson has written a disturbing book. Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy.
Hudson says allocating funds through money markets results in unnecessary costs. The cost is interest payments over the course of a loan. At 6% it doubles the cost of a Canberra home and at 4% it triples the cost of the Cotter Dam.
The costs come from the way we create bank debt. When we create bank debt the bank creates some new money. When the debt is repaid the bank destroys the money. The cost turns out to be the cost of interest.
We do not have to take on bank debt. Instead we can borrow from savers and repay with taxes. If we give a return to savers by giving a discount on the taxes we remove the cost of interest but still give a return. This happens because we do not create extra money and destroy it. It will halve the cost of public housing and reduce the cost of the Cotter Dam to one third of our current repayments.
Cost benefit calculations change using this new form of loan. It is much better to build for the future with long lasting assets. For example it is better to duplicate roads when building them than duplicate later. We should rethink how we finance public infrastructure and redo our cost benefit calculations.
We will find we can get at least twice as much infrastructure for the same amount of money. We can remove all public debt and replace with discounts on rates and taxes. We will no longer be dependant on credit rating agencies, the vagaries of the money market, or Commonwealth handouts.
Let us hope that one or more of the political parties will make an election promise to investigate the claims in this letter.