The ASP Monetary Policy is based on a simple principle - the Australian government will "create our money - and spend it into circulation". Many people have asked: Will this not create runaway inflation? Our answer: NO - in fact monetary inflation will be lower and price inflation will be lower. Below is our reasoning.

A core component of our monetary policy is that the amount of dollars in the economy must be held constant relative to the population size. This is explained in our section Money Supply. This means that the government can only increase the money supply as the population grows. Below is a table of the Australian population growth rate:

Now let's impose these population growth rates (which will limit the money growth rate) on the RBA graph of "percentage change in broad money".

Now let's remind ourselves of the relationship between monetary inflation and price inflation - as taken from Wikipedia:

Following this basic logic, the conclusion is that the ASP monetary Policy will result in:

• Lower monetary inflation - since money growth will be limited by population growth.
• Lower price inflation - since monetary inflation drives price inflation.

Academic confirmation

In our section Resources - Debit Free Money we summarize the research report from Professor Yamaguchi of the Doshisha Business School (Doshisha University). His research compares a "money as debt" system (as we have today) with a "debt free money" system (as proposed by the ASP). The highlights of the report are:

Consequently, if you implement the Monetary Policy of the ASP (i.e. an honest money system) you will get:

No government debt, higher GDP and no price inflation.

A practical example

In order to press home our point - let's look at price inflation from another angle. Melbourne is to build a new water desalinization plant that will cost about $15 billion over 30 years (ABC News). It is expected that water prices will double over the next 5 years (Friends of the Earth). Here we look at 2 scenarios:

Current system

The government has to borrow the $15 billion - and over the course of 30 years, it has to pay back the money with interest. This means that water prices will have to increase (as mentioned above) in order to repay the loan with its interest.

ASP Monetary Policy

The government will set aside $15 billion from the money that it is allowed to "create and spend into circulation", and will pay for the whole desalinization plant over the period of construction. Since no money was borrowed and no interest is payable - the price of water to households will be lower.

None of this is "rocket science". It is simple and it has worked before in places like Guernsey. Refer to this 1958 pamphlet or go here. We strongly urge you to do your own research.