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The Forum > Article Comments > This year's G20: getting the fundamentals right > Comments

This year's G20: getting the fundamentals right : Comments

By Tony Abbott, published 28/1/2014

For the leaders of the countries generating 85 per cent of the world’s GDP merely to agree on the principles needed for taxation to be fair in a globalised economy would be a big step forward.

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We don't need anymore Global Governance Tony. We need sovereign States who can create their own new money for growth free of private central banks such as the US Federal Reserve and the Bank of International Settlements.

I'm reading that China has now a $24 trillion debt bubble which could send us into another financial crisis. I suspect your Govt knows we are headed into more troubled times because you Govt has increased the National debt ceiling to $500 billion.

We should never have sold off the Commonwealth Bank and desperately need a Glass Steagall Act to isolate the banking,off balance sheet derivative gambling economy,which is 6 times their assets. Our banks are not safe and last year the Commonwealth for the first time refused to disclose it's exposure to derivatives.
Posted by Arjay, Tuesday, 28 January 2014 7:46:34 AM
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This whole article is the PM's Davos address un rehashed.
RE;
"You can't spend what you haven't got.
No country has ever taxed or subsidised its way to prosperity.
You don't address debt and deficit with yet more debt and deficit."

The PM may be an economics graduate but the Davos address shows that he has learned very little since graduating.

The PM needs to read “A Call To Arms,” by Maury Klein. The book is an historical account of the U.S. mobilization as it prepared for, and engaged in, war with Germany and Japan.

The scale of the task was unprecedented in human history — and the accomplishment of it changed not just the structure of the American economy, but American society as well. What is striking about the story — and the monumental effort to quickly build, virtually from scratch, the largest and most sophisticated war machine ever to exist on the planet — is that there is nary a peep of concern or argument about how this enormous task would be paid for.

All of the anguish and struggle had not to do with finding enough “money” to pay for things, but rather with finding enough things to buy — and enough skilled labor to properly marshal it all together. In the end, virtually every real resource available in the continental U.S.—oil, gas, steel, aluminum, rubber, copper, sugar, tin, and man-hours of labor—was purchased by the Federal government to build the Army, Navy, Air.

The comment above is an extract from an article on the book and subject by J D Alt and the whole article is available at;
http://neweconomicperspectives.org/2013/08/mobilization-and-money.html#more-6200

A sovereign government can always pay to employ the resources available in exchange for its currency. The role of tax and government borrowing is to remove excess purchasing power from the private sector when completion in that sector for resources that are becoming scarce is starting to impose inflation.

If anyone wants to argue with this view please be wise enough to read Alt's article first.
Posted by Foyle, Tuesday, 28 January 2014 8:25:05 AM
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Yes lets get back to the really serious hairy-chested business of trashing both civilization (or whats left of it) and the planet too, as fast as we can. As depicted in this stark image.
http://www.dartmouth.edu/~spanmod/mural/panel21.html
Lets not let any of this hippy inspired environmental and/or sustainability crapp get in our way.
Posted by Daffy Duck, Tuesday, 28 January 2014 9:45:12 AM
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Then of course there is the new essay by Chris Hedges titled The Myth of Human Progress & the Collapse of Complex Societies.
An essay which provides a necessary counterpoint to the let-it-rip-business-as-usual message coming out of Davos.
Posted by Daffy Duck, Tuesday, 28 January 2014 11:00:28 AM
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Excellent direction to be heading, a big ask at the G20. Keep pushing for the development of the north and please, please, DO something about 'our ABC', the Yarts council, the warped school curriculum and the 'Human Rights industry' (Tim Wilson a good start)
Maintain the parental leave scheme at current levels and hold a plebiscite on gay marriage, if for nothing more than to get it out of the news cycle. Thanks, that was a healthy 'venting'
Posted by Prompete, Tuesday, 28 January 2014 11:01:13 AM
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Prompete, love your satire but a word of warning: you need to make it a bit more obvious that you are taking the mickey lest some think you are being serious.
Posted by GlenC, Tuesday, 28 January 2014 11:08:11 AM
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Foyle,

The link you provided is a feeble attempt to show that public spending improves the economy.

It can, but the single biggest difference between this example and the last 6 years is that the wartime spending in the US was on infrastructure, production equipment, training and research, not welfare payouts, public service paper pushers, and useless school halls.

The coalition's focus is to trim the welfare handouts, the unproductive public service, and increase spending on infrastructure, which is similar to what happened in the war time USA.
Posted by Shadow Minister, Tuesday, 28 January 2014 11:13:32 AM
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*As 2014 begins, it's easier to be optimistic.*
Well as you have the foreman's job at last, of course it is. But for the rest of us there is little hope left.

*Markets are the proven answer to the problem of scarcity*
Well that is the answer to all of our problems. We start a market of illegal boat people.
*You can't spend what you haven't got.* So just print some money and hand it out to the top 1%. They will spend it and then we will get some....... eventually.
*No country has ever taxed or subsidised its way to prosperity.* But it has made for prosperity for the big end of town who get the subsidies and they pay no tax.
*And profit is not a dirty word because success in business is something to be proud of.* As long as it is the rich mates who get the profit and not those losers who work for them.

* As always, stronger economic growth is the key to addressing almost every global problem.* Until you find that there is nothing left to grow or anywhere to grow it.

* Stronger growth requires lower, simpler and fairer taxes that don't stifle business creativity.* Because we don't want the 1% to have to pay tax do we?

* We're streamlining environmental approvals * So there won't be any silly regulations to stop polluting the heck out of everything so the 1% can make even more profits.
Posted by Robert LePage, Tuesday, 28 January 2014 11:42:19 AM
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Well there was one other leader at Davos informing the world his country was “Open for business!”

http://www.cbsnews.com/videos/irans-president-tells-davos-his-country-is-open-for-business/

Understandable when his country is coming out from under extensive sanction.

Trite sloganeering if your country isn't.

Can someone tell me when this country was ever closed for business?
Posted by SteeleRedux, Tuesday, 28 January 2014 12:35:13 PM
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Shadow Minister,
Just a few days ago I made the point in one comment on the OLO site that the cash handouts, the school improvements, which by the way were often libraries and science facilities or other valuable add-ons, and the insulation were prompt, short lead time items. They were excellent reactions by the Rudd, Gillard, Swan, and Tanner economics team to the immediate need to avoid the collapse brought on by the operation of many of the world's economies in the unsustainable area of the available fiscal space. Howard and Costello operated the Australian economy in that unsustainable space every year that the held the levers. I have plotted the sector outcomes for those years on Dr Stephanie Kelton' fiscal space diagrams and they show how poor our economic performance was in that era.

I also made the point that from the start of 2010 the government expansionary activities, designed to maintain employment, and through wages, demand, should have been long lead time infrastructure.
Posted by Foyle, Tuesday, 28 January 2014 4:29:26 PM
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Foyle a lot of that Rudd/Gillard stimulus money was wasted. We borrowed $ billions from OS Central Banks and much of the school stimulus money went to Companies like Leightons and back OS again. So we went into debt and OS Companies got the profits.
Posted by Arjay, Tuesday, 28 January 2014 5:47:11 PM
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Dr Paul Craig Roberts was Assistant Secretary to the US Treasury and Associate Editor of the Wall St Journal. He has opposing views to Tony Abbott http://www.boilingfrogspost.com/2014/01/26/how-economists-policymakers-murdered-our-economy/
http://www.boilingfrogspost.com/author/dr-paul-craig-roberts/

All is not rosy as Tony Abbott would have us believe. When Kevin Rudd went to the last G20 meeting, he endorsed the concept of "bail in". This means that if or when our banks get into trouble, they will have to power to convert your deposits into their shares as happened in Cyprus. Does Tony Abbott endorse this Kevin Rudd 'bail in" policy ?

Since the 2008 GFC we have seen unprecedented money creation that has gone into inflating share ,derivative gambling and property values. Unemployment around the planet has risen.This means that real production and consumption has fallen, while the volume of money in the financial sphere has exploded. When the share/derivative bubble bursts, where will all this worthless money go?

We will experience hyper-inflation then more stagflation with rising interest rates compounding the problem.

If "bail in" becomes a reality, it will be total anarchy.http://www.cecaust.com.au/
Posted by Arjay, Tuesday, 28 January 2014 8:45:15 PM
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Foyle,

Stating that 3 particular policies were wonderful in spite of all the evidence shows that you are economically inept and driven by politics. (i.e. the $9bn cash splash that studies showed was only about 1% effective, the school halls debacle where buildings where built at double the cost they should have been, and delivered halls that were a long way from optimal, and finally the pink batts stuff up where people were killed, houses burnt down, and the project was cancelled mid stream leaving thousands unemployed and contractors with materials they could not use.)
Posted by Shadow Minister, Wednesday, 29 January 2014 4:46:50 AM
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Arjay and Shadow Minister
You both show that you do not understand how money flows in economy, or the effect of those flows.

The money used for stimulus handouts and projects progressively flows from the initial recipients to second, third and the umpteenth in the line with small proportions flowing to profits, savings and taxes at each exchange.

Leighton made some profit but paid out most of the money received for each contract as wages and to pay for construction materials used. The wages paid to Leighton employees was re-spent on fuel, food, electricity etc., as was the wages paid by the initial suppliers of building materials.

This process is repeated over time until every last dollars ends up as savings somewhere. If Leighton made an excessive profit most of that profit still went to other people such as shareholders of new capital projects and was thus stimulatory.

Sovereign governmemts pay their bills by creating balances in citizens' and businesses' accounts. They don't need to see if they have the money before they decide to spend. They monitor the economy and tax money out of existence any money that was likely to cause inflation.

You send in a tax return. Your employer has built up a credit balance for you with the Tax Office from the taxes it takes out of your wage. When you submit a return the tax office cancels the amount you are assessed and returns to you any left over. Your account is in effect reset to zero and there is no pile of money left either as notes or in numbers in accounts. If you think there is tell me where it is.

Anyone who knows me knows that I have had a fairly clear understanding of macro-economics for over forty years. And I keep up-to-date.
Posted by Foyle, Wednesday, 29 January 2014 6:11:21 AM
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Foyle eg stimulus. A 9 square m School Tuckshopto refurbished cost $600,000.00 The transport and positioning of a School Portable Cost $800,000.00

Leightons would have got a small contractor to do the work. If a Contractor cannot do either if these for $100,000.00 ,something is wrong. Who pocketed the $1.2 million for doing nothing? Who was signing off on these contracts and probably getting secret commissions?
Posted by Arjay, Wednesday, 29 January 2014 8:11:58 AM
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Arjay,
In addition to commenting here and probably elsewhere did you ever approach the Federal Police or any other anti-corruption authority seeking to have specific incidents investigated?

In the supermarket anti-competitive shopper docket rip off I started campaigning about 12 years ago when I realised that all disabled, and even just the aged, were being disadvantaged by being overcharged for groceries to subsidise the fuel discounts.

I wrote several times to the ACCC and at a meeting addressed by the commissioner asked a question that caused him difficulty. I even had a private conversation with him afterwards.

Yesterday the supermarkets and the ACCC came clean. The whole shopper docket system was a program to deceive customers and destroy other businesses.

When you see something that is wrong, don't winge, do something
Posted by Foyle, Wednesday, 29 January 2014 10:00:45 AM
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Foyle,

Spare me the ideologically twisted high school economics and an equally uninformed article that makes a schoolboy error of using a single example to draw a general conclusion. Having a degree in economics I am fully aware of the multiplication factor and its limitations which you obvious don't. I also doubt you have any qualifications in economics.

KRudd and Juliar were also equally economically incompetent, but made up for it with ideological drivel. It is nice to have an economically astute PM for a change.
Posted by Shadow Minister, Wednesday, 29 January 2014 4:08:28 PM
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No degree here. Just a couple of questions thanks.
Chinas debt is $24 trillion? Who to and why would it be allowed to get so high?
Australian Govt have or may raise the ceiling of their deficit to $500 billion? Is it at $50b now? (if so the proposed $6.00 added to the medicare card transactions fades into insignificance) I hope I misread.
The 'bail in policy'? Oh dear.

Foyle. Good on you for your hard work and persistence with the ACCC and the shopper docket farce. Now that they have finally admitted guilt to major deceit, pretty much of the whole country, Im sure we all look forward to them being punished to the full extent of the law. As any other multi million dollar company who abuses their position surely is.
I will be watching for the news.
Posted by jodelie, Friday, 31 January 2014 5:54:27 AM
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Jodelie,

China's gross debt /GDP ratio is roughly the same as Australia's. The difference is that for this debt accumulated over more than a decade by China is that they have $trillions of roads, power stations, high speed rail etc, all infrastructure geared to improving productivity.

Australia had almost no debt 6 years ago, and after 2 labor terms has a huge debt with nothing to show for it except a few unneeded halls that don't add $1 to the nations productivity, and screeds of regulations and taxes that are strangling business.
Posted by Shadow Minister, Friday, 31 January 2014 8:49:58 AM
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Jodelie, China's debt bubble is the total private + public debt. It has increased by $14 trillion in 5 yrs. Our banks have loaned $230 billion into the Chinese bubble market.

Our present Govt debt is $300 billion or 20% of GDP. Hockey has increased the debt ceiling to $500 billion which will probably be used to bail out banks and pay for the unemployed.

The whole financial system is totally interconnected and we too can go down just like Greece or Spain.
Posted by Arjay, Friday, 31 January 2014 10:21:23 AM
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