Sovereign Money also known as Positive Money, now forms the basis of Modern Monetary Theory. Simply put it is variant of Quantitative Easing, but without any accruing interest, which by-passes the traditional way of creating money.
Quantitative easing involves the central bank either printing money and giving it to commercial banks with the intention that they lend it out to stimulate the economy, or the central bank buys bank bonds to free up money. This does not work, as the banks rarely lend the money out and the economy remains stagnant. Furthermore, the central bank has to pay interest on the bank bonds, which is ultimately paid by the tax payer. So, the banks win at the expense of the people.
With Sovereign money the central bank creates money; and then the Government can spend that money on what it likes. There are no interest repayments, so there is no accruing debt, but a sudden influx of money into the economy can create both inflation and price inflation. If they print $100B and spend it, it will not be possible for the economy to absorb all that money in one go. There may not be enough products available, which will drive up prices on any existing stocks, or it will require the need to import goods. Also, there may not be enough skilled workers to meet the demand for new building projects or other service for which there is no an increased demand. Thus, there will be pressure for workers’ wages to rise, as demand for workers out strips the available work force and existing workers can auction themselves to the highest paying employer.
The key to making Sovereign money a success, is for the Government to introduce the money into the economy at a rate that does not create unnecessary pressures, nor pushes up prices due to lack of supply. The government can create its own supply industries, to ensure that the demand is met, thus keeping prices stable. This is an opportunity for Business and Government to work together in co-operation to ensure that supply meets demand, which means that businesses will increase to produce the supply. This in turn creates more jobs, which creates more demand and as the whole process is repeated the economy grows, benefiting everyone.
With housing loans, although Australia will require approx. $3T to buy out all the existing mortgages, this process can be achieved in an orderly fashion, starting with the smallest mortgages first. When the homeowner transfers their mortgage to a Sovereign Bank Mortgage, the sovereign money can be created at that time. The money is then paid to the former bank to pay out the original mortgage. In theory, the accepted opinion is, that this will create a huge surplus of money for the banks, which they could then use to swamp the economy by making cheap personal loans readily available, which could push up prices due to the over demand and lack of supply. However, there is one fact that most do not realise, and that fact is, that by repaying a bank loan, the bank will have zero money left over as the repayment wipes out the debt, that it originally created.
The conventional view is, that when a person opens a savings account and deposits $1m into it, they will receive 1% savings interest from the bank. The bank then lends the $1m to another person as a mortgage and charges them a 7% loan interest. The bank’s profit is then the difference between the two interest rates, being 6%. But this is not the legal case. For when a person deposits their money with the bank, they are in fact lending the bank their money, for which the bank gives them an IOU and pays them interest. The bank can spend this money as they see fit, but in order to lend that money to another person, they must first seek the depositor’s permission to do so. The reality of doing this on multiple loans is impracticable. So, to get around this problem, the bank simply creates a debt to itself for $1m and lends that to a borrower. When the borrower repays the loan, the bank repays the debt it created and the bank’s balance is zero. The only money the bank will have, is the interest and fees that they made on the mortgage loan. They will still have the original deposit of $1m in their account.
So, when the Sovereign Bank repays the mortgage loan on behalf of the homeowner to their bank, the bank will use that repayment to simply pay of the debt they created and the bank’s account balance will be zero. Therefore, they will not have a huge supply of sovereign money to lend out, so, they cannot create a cheap loan lending frenzy. The only way they could offer multiple cheap loans is to create more debts, which they could do, but the Government will watch and regulate such a move and put a stop to it, if necessary.
With new home build sovereign loans, we will not flood the market with money as this will create an over demand for labour and building materials, which if the supply cannot be met, with create price inflation. By working to a careful building programme, one that can be matched by the available labour and materials, this should prevent price inflation. Furthermore, as we intend to build, at least the council houses, in a factory production line type system, we should be able to increase production, without any inflationary effect.
Due to Sovereign mortgages, it is hoped that the duration of mortgage repayments will reduce to ten to fifteen years, instead of the normal twenty-five or thirty years. So, in ten to fifteen years, the first sovereign mortgages will be repaid and as each year passes, more loans will be repaid. This means that homeowners will be debt free and have more available money to spend on other things.
If they continue to save the equivalent monthly loan amount into their savings accounts, that will create healthy positive bank balances. Alternatively, they could pay the monthly loan amount into their superannuation, tax free, which if they do, over the next fifteen years, will see their superannuation accounts increase by at least $400K, which is the equivalent amount to the mortgage that they repaid in the previous 15 years. This increase in superannuation contributions, will be a great stimulus to the economy.
But the real magic happens, when the people start to improve their quality of life, such as buying a new car, TV, going on holiday or dining out at restaurants. This positive spare money will stimulate the economy; and because we will have been planned for this, the products will be available to meet the new demand. Holden will hopefully be building Australian cars, that people will want to buy, other Australian made electronic and white goods will be available for purchase. All of which helps maintain and create Australian jobs, which in turn grows the Australian economy, without creating inflation or increasing debt. People will be able to buy shares in those nationalised industries, such as Holden, when the Government sells them to the public to recoup their sovereign money investment. The profits made on top of the Sovereign money investment, can be used to repay the State and Nation debts, with the ultimate aim of making Australia a debt-free economy.
As for Commercial Banks, they will still be able to provide loans to people who wish to purchase a holiday home or a commercial property investment. So, in the long term the banks will benefit from the healthy Australian economy, something that they currently do not; and are in fact chiefly responsible for ruining.
Sovereign Money is interest free loans to the Government, by which the Government can pay for projects, with a total Return on Investment Guarantee built in. This “ROIG” prevents Governments just printing money for all and everything they like without checking the negative consequences. Introduction of additional liquidity into the economy can have an effect upon inflation, so, it must be strictly controlled and monitored and booked as a national debt, that must be repaid.
The problem with printing money is how it will be viewed by other countries. Their concern is that you will devalue your currency by oversupply, making it worthless. Just like the $100 Trillion Zimbabwe Note, it has no monetary value and cannot be traded. One way to get around this problem is to conduct your international trade in US dollars. You buy our commodities in US Dollars and we use those to buy your products. What we chose to do internally is up to us, providing we do not abuse the system and print money willy-nilly.
The biggest issue with having a significant national debt, is the accruing interest, which eats up a considerable amount of our annual budget and places restraints on other spending. So, it is important to remove the interest-bearing accrual from our debt. This will then prevent the debt from organically growing over time; and will enable us to repay and decrease the debt every year. How do we transfer our nation interest bearing debt to a non-interest earning debt. We could just print the amount that we owe and repay every creditor. Provided that they accept our repayment in good faith, then not an issue, but if they have doubts about the worth of the money that we have repaid, then we might as well used monopoly money, for all the good it would do. The alternative method, is to borrow money from a country that has a good international reputation financial speaking and one that has either no interest or very low interest-bearing loans.
The Japanese, were offering negative interest rate loans, although recently they have introduced interest bearing loans. So, subject to Japan’s approval, we borrow from them the exact amount to cover our National and State debts, approx. $2 Trillion and repay all our debts owed, thus ending the need to pay accruing interest. We then print $2 Trillion Sovereign Money and repay back the loan to Japan; this is subject to Japan trusting us. We then book this new debt to ourselves in an open and transparent account ledger. Japan will need to be convinced that we are treating the debt as a debt and not just as a clever way of getting rid of a debt. This way it will not affect the Japanese economy. As we repay this national debt, it will reinforce the true value of the money that we repaid Japan.
To sweeten the deal, we will enter in to business deals, where Japanese car manufacturers and other industries can set up in Australia and benefit from tax breaks on profits. We will also sell coal, iron ore and other commodities at a discounted rate to Japan, which will help their balance of trade and economy. They will benefit from a ten percent discount off the standard market rate. This arrangement will continue until we have cleared our national debt. We will also enter into a military co-operation agreement, where we will look at a joint venture submarine building programme. There will be Tax free concessions for Japanese companies that open here. They will also be able to access cheap power costs, once our new power stations come on line. We will benefit from the employment opportunities for all Australians. This will be a partnership of mutual benefit between Australia and Japan, which will be beneficial to both countries.
As of late 2025, combined interest payments on all Australian federal, state, and territory government debt are projected to reach approximately $48.1 billion annually. This figure is expected to continue rising, potentially reaching $64.5 billion by 2027–28. The AUSJAPAN loan arrangement would see the end of the annual $60B interest charge, that we pay on $1Tn at 4.8%. The $60B interest saved can be used to pay down the Sovereign $1T debt. At this rate the national debt will be repaid within 17 years, without effecting the annual budget.
The original concept of MMT was not political, it was a way of demonstrating that interest bearing debt will be the ruin of any economy as the economy has to keep growing just to pay the interest and when it can’t the Government has to raise taxes and/or cut services. MMT changed the philosophy on how money is created and that usury should play no part in it. The people, through their taxes including future taxes, always guarantee any Government borrowing. So, if the people are borrowing against themselves, then why do they need to pay interest, especially when they do not benefit from that interest. MMT dispels the myth that Governments can’t create money without creating hyper-inflation. MMT if properly implemented can provide all the financial resources that a nation needs, without paying interest and without creating inflation. MMT ends the money milking gravy train that the super-rich rely upon, to grow their ever-increasing fortunes, all at the expense of the ordinary man. With the 1% owing 99% of the worlds wealth, it is time that the 99% of the people started making the system work for and benefit them. Politics has added a new dimension to this theory, but despite this the theory remains sound and should be adopted and implemented by every nation world-wide.
You print money and spend it. To control inflation due to the increase in the supply of money, you tax people and business to take the money out of the economy. If you don’t you will end up with hyper-inflation. Basically, you can print all the money you need to provide all the services that the nation requires. Furthermore, SMMT supports the idea of interest being paid, their argument being that Superannuation, pension and health funds rely upon the interest paid on the bonds that they purchased to grow their wealth. Although this in reality is, robbing Peter to pay Paul. Relying on artificially created money to grow wealth is just like their idea of making the rich pay more tax, which has never happened.
You only print money for specific purposes. The increase in the money supply, must ultimately be repaid in full. If it is not then you run the risk of inflation. So, you print and lend the money for a mortgage, the mortgagee will repay the money over a given period, once repaid the Government ledger is zero, the mortgagee owns their home and has no debt. It is not necessary to raise tax in this case as the loan is fully repaid. MMT cannot be used to pay for things where the money is not repaid, even if taxation is applied, as the surplus money in circulation could create inflation.
To combat inflation when using MMT, you must ensure that the supply meets the demand. If the supply cannot keep up with the demand, then you simply do not print and issue the money. The money is held back until the supply can meet the demand.
The major advantage of MMT is that the money is not borrowed from a bank or financial institution, therefore there is no interest to be applied and paid on the money created. Accruing interest on national debts will completely undermine any economy.
The cost of living is not a problem in its own right, but rather a result of other contributing factors that all add to the cost of living. But, the underlining cause of these other contributing factors to the increase in the cost of living, is, the National and State debts, that have been allowed to accrue unchecked. Therefore, the debt is the single most important issue confronting us today. This ever-increasing debt, with its compound interest, will eventually consume the entire country to the point where our annual tax revenue will not be enough to meet our interest repayments. To ignore the debt or to consider it a secondary issue, is to consign our country to ultimate ruin. Controlling, managing and reducing the debt, should and must be the number one priority of any Government.
The National debt was estimated to be approximately $1.8 Trillion and growing. Recent treasury forecasts place the debt at approximately $800 Billion, but as the treasury appear to a particular way of calculating the debt, it is probably best to ignore the treasury and work on the worst-case scenario.
Reducing the debt or ignoring the debt has similar consequences in the short-term, but completely different consequences long-term. The debt interest accrues at $18 Billion a year. This amount has to be paid from the annual tax revenue. So, every year $18 Billion is simply taken from the people and given to a foreign bank. This only pays the interest and does not pay down any of the debt. It would appear, that we have issued Government Bonds at 1%, so what happens when the interest Bond Rate increases to 10%. Our annual interest repayment will be $180 Billion. This will be one third of the annual Tax revenue raised. Which will mean that Taxes have to be raised higher and or services will have to be cut. With this in mind it is better to take some pain now and cut a certain amount of government spending so that the additional money can be used to pay down the capital debt as well as the interest. It is only by reducing the capital debt that you can ultimately reduce the annual interest paid. In simple terms, if you were to reduce Government spending by $100 Billion a year and pay that money towards the capital debt, it will still take 18 years to pay off the debt.
Reducing government spending by $100 Billion will be a cut in spending of approximately 22.5%. However, with careful management of the finances, combined with a drive for efficient and productivity in government sectors, it is possible that this reducing could be achieved without significant cuts to services. Eliminating waste and ending new government spending could see us achieve an improvement in the government finances as well as actively reducing the national debt.
It is important to pay off the debt, as it has a direct bearing on the cost of living. Imagine if we didn’t have the debt. The $18 Billion saved on interest repayments could be used to lower taxes, improve our health care or education systems. We could build new infrastructure such as coal fired power stations, we could explore for new gas fields or reduce or eliminate stamp duty on homes, all of which would ease the cost-of-living burden. Instead, the cost of living continues to grow. Exorbitant government spending has flooded the economy with easy money, which has contributed to inflation. Reducing government spending would have a greater effect upon inflation, than increasing interest rates. Inflation, which is nothing more than a measurement of price increases, is affected by many factors, the most common of which is supply and demand. The problem facing Australia is the fact that demand is out pacing supply, this is because people have a lot of spare cash, thanks to government covid payments and we simply do not make anything anymore. We therefore need to increase the supply, to outpace demand and then prices will fall.
So, if we lower the cost of energy, electricity and gas, lower taxation, reduce or eliminate costly bureaucracy, boost our manufacturing, improve the efficiency of our healthcare and education systems and fully support our farmers in the production of food, then all these will reduce the cost of living.
With the introduction of sovereign money and the end to home owner mortgage interest, this allow will improve the finances of the average family. Allowing them to keep more of their own money, without the need for pay rises.
The main issue for any debt ladened economy, is the accruing interest. The compound interest will continue to grow until every cent is repaid. As interest accrues, it increases the debt, which places even greater pressure on governments to act. The annual interest must be paid, unless you default, which then creates even more problems. As borrowing increases, accrued interest increases, which means that the government has to find the money just to service the interest debt. This often involves raising taxes and sometimes cutting services. We say sometimes cutting services, for it is the continued spending on services that drives up the borrowing, if the spending was cut then the borrowing could be cut.
Victoria State has a debt of approximately $200B. To which interest accrues.
2024 – $168.8B
2025 – $187.9B
Interest $6.8B rising to $10.6B by 2028-29. This would equate to an annual interest rate of 4%. Interest rates may rise to approx. 5.5% in 2028.
There are approx. 8 million Victorians. If they were prepared to pay an additional debt tax on top of every tax they pay now, then the money raised could be paid directly to the debt. Below are the total additional tax amounts raised, the cost per person and the time it will take to pay off the debt.
Extra Annual Tax Cost Per Person Years to Pay off Debt
$1B $125 200
$10B $1250 20
$100B $12,500 2
$200B $25,000 1
For a family of four, Dad, Mum and two children, they would need to raise $100,000 if you wanted to pay off the debt in one year. With the cost of living biting hard, many people would find raising $125 or $500 for a family of four, very difficult, but even if we could, then it will take two hundred years to pay off this debt.
Repaying the $200B debt over 200 years with an annual rate of interest at 4% would equate to a total of approx. $1.6 Trillion
Interest alone without the principal $1,400,627,512,552.64
With the $200B principal amount $1,600,627,512,552.64
Or $8,003,137,562.7632 per year ($8B a year)
Victoria’s State Revenue
2023-2024 $31.41B
2024-2025 $37.47B
From which we are paying the interest of $6.8B per year.
So, repaying the debt is very important, but more importantly, we need to eliminate the accruing interest, otherwise, we will never pay the debt off, certainly no in one life time. Going forward we will have two types of debt.
First, the traditional standard government debt, money borrowed via bonds, paying a fixed or variable interest rate over a given period of time
Second, Conservative Modern Monetary Theory debt, money created by the government without any accruing interest, to be fully repaid once its purpose for being created is fulfilled, over a given period of time typically 15 years.
We can use CMMT to raise money to repay the debt we owe to creditors, which will eliminate the accruing interest. The new principal debt created, must then be recorded as the State debt, owed by the State and to be repaid as and when money becomes available, but at a minimum of $5b per annum. Even at this minimum rate, it will still take 40 to clear.
Labor will say, “let’s keep adding to the debt and borrow even more money to pay for new infrastructure projects” This philosophy will only lead to ruin, as the debt will grow to a point where the tax raised will not be enough to meet the annual interest repayments. And result in the total collapse of all public services, due to the lack of money, not to forget the exorbitant taxes that would be applied to everyone.
Liberals will say, “lets repair the finances, bring them under control” but this philosophy can only mean either raising taxes, or significantly reducing or cutting public services or both.
The truth of the matter is that the debt is now so great, traditional political methods of dealing with it simply won’t work, unless you massively increase taxation and drastically cut public services; austerity on steroids.
The Labor Party would have you believe that everything is normal, but in reality, they are cutting services, whilst significantly increasing taxes. We know that the Royal Children’s Hospital has had its funding cut and the CFA has had $55m wiped off over five years. This is only what we know about, but just look at the state of our roads, pot holes everywhere, so funds are being cut, all so that they can indulge in their vanity mega projects, which serve little purpose.
The Liberals are pretending that it’s just a case of balancing the books, reigning in spending, all the time stimulating the economy. If they rule out tax increases, then their only option is to significantly cut spending, so which service or services do they intend to cut.
Labor simply does not understand and are leading us to economic ruin. The Liberals are carrying on as normal, but these are not normal times and therefore something new has to be tried, or we are all finished.
