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The Forum > Article Comments > Recovery calls for bold moves > Comments

Recovery calls for bold moves : Comments

By Nicholas Gruen, published 24/10/2008

It's good policy to fight recession first and worry about the cost later.

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I would agree with those that say that throwing money at those who will spend it on consumption does little for society in the long term. We want to give money to people to spend but make sure that the money is spent on addressing a pressing social issue such as reducing greenhouse gas emissions.

The mechanism of choice of lazy governments to distribute a lot of money quickly is the existing social security system.

We can set up an alternative way to distribute money to people quickly and ensure the money is spent on ways to reduce greenhouse gases.

Give all low consumers of energy a cash Reward because they consume little energy but require them to spend their cash Reward on infrastructure to reduce greenhouse gases. Those that can't think of a way to spend their Rewards can sell them - at a discount - to those who can.

We can use mains electricity per person as a surrogate for low energy consumption and we can ask people to register if they want to participate in Rewards. To register they call a phone number, identify themselves, identify their electricity meter and say they want some Rewards. Our back end systems can easily calculate Rewards. If people cheat they will never get another Reward.

If they want to get cash then they put their Rewards up for auction by giving a bank account where to put the money.

We can make sure that the Rewards are spent on reducing greenhouse gases by requiring them to be spent through an electronic market place where the merchants are those who can prove their products or services reduce greenhouse gases.

If we use this mechanism we need not raid the surplus and we can distribute as many Rewards as needed to stop the recession. We can ensure that Rewards money is invested in ways to give more value than the amount spent. This means Rewards may be inflated (they sell at a bigger discount) but the regular currency will not be inflated.
Posted by Fickle Pickle, Saturday, 25 October 2008 2:31:56 PM
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Not sure if it will work actually. The $10.4 billion is shrapnel compared to the potential liabilities. Flushing the nation with cash may give a brief 'surge'. After that then what? Another $10 billion, then a deficit?

$10 billion is roughly $500 per person. I think Bush spent $600 and look what didn't happen.
Posted by Neutral, Sunday, 26 October 2008 2:27:33 AM
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The great risk in the traditional Labor policy of spending their way out of a downturn is that they risk having our foreign debt called in. If that happens any stimulus will disappear like an icicle on a hot stove, and Labor will be history for a generation. Look at what is happening in eastern europe at the moment, and what has just happened in Iceland, to get a measure of the peril. The rate at which capital is fleeing Austria at present brings to mind the failure of the austrian Credit Anstalt in 1931, the event which is considered by many to have signalled the start of the depression. A more practical plan would be to announce plans to allow the erection of shanties in city parks for the homeless to live in, in the event that this becomes necessary.
Posted by plerdsus, Sunday, 26 October 2008 7:00:04 AM
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"'m only an economist".

Yes, and doesn't it show Nicholas! Your article is so 'fiscal'.

I don't mean to be rude, but there seems to be no thought of anything apart from the immediate financial situation associated with the looming depression.

What an excellent opportunity this recession, or more to the point; slight stalling of rampant growthism, presents!

It is just what we need to get our collective headspace around the notion...and absolute necessity...of developing a sustainable society!

Unfortunately, there are still many people out there...indeed the vast majority of economists and politicians...who just want to restore our system so that we can continue with never-ending population growth, ever-greater resource consumption and the concomitant destruction of our future.

They all need a big bloody boot up the backside.
Posted by Ludwig, Sunday, 26 October 2008 8:48:00 AM
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What is of course forgotten, is that there are also many benefits
to a bit of a recession. Lets face it, money had kind of lost its
value, as people with near unlimited credit, bid up houses, bid up
shares, bid up commodities etc.

As Warren Buffett says "When the tide goes out, we see who is swimming
naked" ie. those who have overborrowed or overlent, those who forgot
the fundamentals, will pay a price for their foolishness.

Mark Faber points out that simply printing money to overcome any
recession, is a bit like applying a coat of whitewash to the building,
it does not solve the problem of it being structurally weak.

Americans and Australians are guilty of not saving enough, spending
more then they earn and borrowing the rest, which is not sustainable.

A recession forces people to address the reality, to stop spending
more then they earn and pay off some debts. Yes its painfull, but
its paying for sins of the past and has to be faced. Just applying
a coat of whitewash, with Govt giveaways, is not going to address the
fundamentals of the problem. Its little more then a feelgood
exercise to solve short term problems and delay reality for a bit
longer.
Posted by Yabby, Sunday, 26 October 2008 12:44:03 PM
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Spot on, Yabby!
Posted by RobertG, Monday, 27 October 2008 6:43:51 PM
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