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The Forum > Article Comments > Economics and political expediency > Comments

Economics and political expediency : Comments

By John Turner, published 13/9/2010

If, for example, the manufacturing sector screws down the wages of the workforce then the market for the manufacturers’ products collapses.

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I think you should read "The Wealth of Nations" again
Posted by snake, Monday, 13 September 2010 11:19:54 AM
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Oh dear. What a farrago of misunderstandings, Mr Turner.

"Australia only needs foreign currency to pay for goods and services which we import but only when the total value of those imported goods and services exceeds Australia’s exports of goods and services"

Not so. The first part is correct. The part following "but only" is manifestly wrong. Think about it for more than a millisecond, and you'll see.

"Was that earlier borrowing essential or was it borrowing which underwrote the capacity of the banking system to cause asset value inflation...?"

This is not a genuine either/or question, is it. A strong case can be made that it was both. Or equally, that the two are entirely unrelated.

Which makes your next question just a little silly, doesn't it.

"Should the banking system be allowed to continue behaviour that has had that outcome in the past? I, for one, think not."

Then you fall into the simplest trap of all: where does money come from...

"The Coalition hammered the theme that the government was borrowing $100 million a day. The government was not borrowing that money from anybody. The government was creating the money in the same way the banking system creates money every day."

Unfortunately for your argument, the banking system does create money by incurring debt: there is literally no other way to do it, given that we live in a world where double-entry bookkeeping underpins the structure of every P&L and every Balance Sheet.

But you are somewhat right to say that the government "creates" money in the same way: but it does so by also going into debt.

Here's a short primer for you to refer to, next time you decide to pontificate on matters outside your area of expertise.

And please, check your facts occasionally.

>>The system in the UK may recognise this argument as there, once tax is paid, there are no refunds or there weren’t<<


"John Turner has an applied science degree on top of a diploma in metallurgy"

Yep. And it shows.
Posted by Pericles, Monday, 13 September 2010 11:49:26 AM
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the piece centered on examples and definitions, true.

the point being made however, is that systems and forms [of economics] are changeable in their operation which in turn alter delivery of benefit.

Brian Walters SC and Robert Clark MP talked in Melbourne city last week about the Human Rights Charter in Victoria (sponsored by the Castan Centre). it was a political affair but an instructive one.

the overriding feeling that myself and a friend had was: what a waste of time. not because the specifics of the conversation were terribly boring - they weren't, but it was because of the political nature of the event. given that the two political representatives were given a platform to argue for their parties positions on human rights, 'liberty issues' and social justice - they came a mile short of representing anything progressive.

Robert Clark couldn't have been more scripted or fearful of straying off the liberal party hymn sheet - seemingly paranoiac of a journalist (presumably from the age) hiding in the shadows...

Mr Walters was a bit better, but still short of the mark.

Clark and Walters failed to address the fact that Charter's of Rights et al exist in forms many and varied all over the world in a vain attempt to mitigate the worst excesses and deprivations socio/culturally from 'power' and 'markets' and so and son on.

Solutions for greater social and economic inclusiveness sadly won't be born from trinket-like movements of economic levers...

John wrote this article with a degree of allegory, so have i this comment. less absolutist thinking is necessary to promulgate a new discourse for the economics that will be essential for transition to (what Nicolai Kardashev called) a 'type one civilisation'.
Posted by Matt Keyter, Monday, 13 September 2010 2:33:15 PM
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I am of the belief that even our parliamentarians don't have any clear idea what is involved with the exports and imports, as they are exporting our non-renewable non-value-added mining resources, and the goods being imported by Target, K-Mart, Big W, Lowes and a hundred others, are goods we used to manufacture ourselves. I can only contend that the idiots who demand these exports ie both Liberal/Nationl and Labor parties, have no allegance to Australia and its workers. They expect to get a big pat on the head by their supporters, whereas they deserve a big pat on their head with the handle of a pick, AS you can see with our economy, we are just scooting along a hair's breath away from the recession which we have been in 3 times in the last 20 years, we couldn't do much worse if we employed patients from a mental asylum to run the country.
Posted by merv09, Monday, 13 September 2010 3:59:40 PM
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Rarely,have I ever come across an article with such a Manichean comprehension of the Aust Economy or Economics, the profession, in particular. His rantings leaves much to be desired. In retrospect, a career change maybe ?

1. Banks borrowings - in US currency, and why not ?
The only worthwhile currency worth it's salt, is the World's Reserve US Greenback. OPEC, China, Brazil etc despite monumental efforts to unseat the US Dollar at every nook and corner, have conceded defeat - for now. The AUD is artificially pegged by the RBA. Overseas travel means cheaper fares.

2. Coalition claims of $ 100 M a Day borrowings. Reality, the LNP stated Labor was spending that amount daily. The RBA, which prides itself on it's Independence is duty bound ( ref RBA charter ) to facilitate the creation of money ( fait currency ) to meet the exigencies created by the Govt of the Day.

3. Excuses for Rudd's stimulus to diminish the eroding effect of the GFC.
Any decent Corporation that derives a Plan of this magnitude to address the GFC crisis, doesn't go in half-cocked. Until the tees and dots are finally ticked off, the scheme is reined in. Minor hiccups are then resolved. It shows how inexperienced the prime-mover in actual fact was ?

4. Quote: " the employer then passes on the tax component to the consumer..etc ". All legitimate Business's pay many forms of taxes. Payroll, insurance, GST etc Business would be aghast to learn they can derive income from transferring the Tax burden to the hapless consumer ?

5. Quote: " who does the Tax refund belong to..? " Self explanatory. The Tax refund cheque is only a very small, finite portion the taxpayer is grudgingly paid back. For his sweat, toil and labors, he is rewarded with his own earnings, minus ATO's share of the proceeds. They keep the Interest on your hard earned cash. Oz has 11 million taxpayers.

6. Import Duty. GAAT is strenuously committed to remove all Import duty globally. It's the greatest impediment and disincentive to World Trade. It creates

Posted by dalma, Monday, 13 September 2010 4:03:23 PM
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counter-productive barriers which poorer Countries with limited Resources are disfranchised. It diminishes competition, and feather-beds unproductive niche Industries. The US Congress have often called for retaliatory sanctions and import duty, imposed on Chinese imports. This measure would inevitably impinge on the US consumer in the long term. It's Politically unpalatable and destructive ie. our sugar exports.

The New paradigm: " SEIGNIORAGE ". Govts and Banks rely heavily on it's usage. Definition: " the profit that results from the difference in cost of printing money and the face value of that money ". The money a Govt generates when it prints more fait money. The difference between " face value " of money and the value of the bullion backing it.

Originally, minting money was the sole prerogative of the Monarch, and forging or counterfeiting currency is a felony - then and now. The PIIGS debacle in Europe today is a living example of profligacy run amuck. The IMF, World Bank, OECD are monitoring the situation closely, to ensure these Nations with Sovereign debt, do not flood the World with liquidity, which will spoil the end game, and inexorably trigger off another, more catastrophic GFC.

During 2009, the UK Govt, through the Bank of England, created 200 billion pounds Sterling, of new money, under the name of " Quantitative Easing ". The money was used to buy Govt securities ie. Gilts, which were then held in a special account. Interest, amounting to 10 B was paid to itself. The 200 B cost nothing, not even printing, as it was all done electronically. Gilts are scheduled to be sold publicly. Govt debt was effectively reduced. Wallah. This exercise demonstrates the power of seigniorage.

In 2000, the Fed launched: " 50 State Series 25 cents ",through the US Mint. Each set cost $12.50. 200 million people bought the quarters set. It cost the mint 0.5 cents. The windfall - in the billions. The issuance of Treasury Bonds, Gilts etc Canada: $ 93 B.; US; $23 B; Oz; $20 B. Tin pot Dictator Mugabe subscribes to Esigniorage to pay off his Country's insufferable

Posted by dalma, Monday, 13 September 2010 4:32:49 PM
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