Degradation of Australia’s fiat paper money

September 22nd, 2007

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In our previous article, Fiat paper money on the way to worthlessness, we mentioned ?we will provide you with the chart on how one of the central bankers is debasing the nation?s currency.? Today, we will pick on Australia’s central bank, the Reserve Bank of Australia (RBA) as an example of fiat money debasement that has occurred over the decades.

Please note that Australia is not the only guilty nation. Every nation in the world is engaging in such practices too. In the US, it had come to the point that they are no longer provider vital statistical data on the money supply figures (the M3 figures to be specific). What has the US Federal Reserve got to hide by suspending the publication of such an important number?

Below is the graph of Australia’s money supply figure from July 1959 to July 2007 (click on the link to see the full size image of the graph):

Money supply in Australia

In the chart we were comparing two measures of money supply?currency in circulation and M3. The former, which is sometimes called money base or M0, is basically the actual physical currency issue plus bank?s deposits in the RBA. M3 is a broader measurement of money, which includes currency held by the non-bank private sector plus non-bank private sector deposits with the bank.

Why is the money base so much smaller than M3? Recall that in our previous article, 363 tons of US dollars to Iraq?how much money will eventually be multiplied into the economy?, we showed you how money can be ?created? through the fractional reserve banking system. As you can see, the M3 figures are growing at an increasing rate relative to the money base. In July 1959, M3 was just over 8 times of the money base. In July 2007, M3 was more than 23 times of the money base.

These figures do not include the data for August 2007, when RBA injected additional liquidity into the financial system to ease the logjam in credit. We wonder what the numbers will be.