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The Forum > Article Comments > We need tighter fiscal, monetary policies > Comments

We need tighter fiscal, monetary policies : Comments

By Henry Thornton, published 5/10/2010

Time's a wasting, and we actually need tighter monetary and fiscal policies now.

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No Henry.We need a new Bank owned by the Govt to create our new currency.The reason why rates are going up is that the US Fed is printing $ trillion in phoney money and it comes here looking for a safe haven.The stimulus money Rudd borrowed from China,ie $40 billion put pressure of interest rates.We got the debt and the big end of town got most of the $40 billion.It is a scam.
Posted by Arjay, Tuesday, 5 October 2010 10:49:57 AM
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Arjay, has got to be something different. A one track mind suites all situation.
How about saying something constructive. A country with money in the bank, is a country without infastructure.
Posted by 579, Tuesday, 5 October 2010 12:27:25 PM
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The interest rate is supposed to be the price of money.
Like most prices, it is better to let the market set the price for if it is imposed artificially then other distortions are felt: Someone ends up paying.
When folks want to spend, but there is not enough saving then rates should go up. When folks are saving more than is needed in investment then rates should go down. It should be a no-brainer that you cannot spend money that hasn't been saved yet. (Well, someone has to create currency, but that shouldn't be a bunch of wealthy selfish bankers! Like it or not, there is a role for governments in capitalism.)
By keeping rates too low for too long we have created speculative bubbles. Some have "cashed in" on this bubble, no more so than the Banking "industry" and the folks old enough to already own property. There has also been public asset sales, corporatism and other "selling the farm" short term profiteering. Unemployment has been redefined to exclude under-employment so whilst a truly massive wealth shift has occurred in the economy, the statistics have hidden the impact.
Clearly market manipulation is harmful, so why to the "free market" folks not worry about this particular distortion? Answer: profits, lots of them! And all at the expense of the worker, not through any gains in wealth production.
What we *need* is for folks not to reap $M from doing *nothing at all*. We need science, engineering and real infrastructure. We do NOT need several banks and taxpayer insurance companies making $Billion dollar profits whilst contributing *nothing* to the wealth of the nation. We do NOT gain from wealthy people getting *much* richer at the expense of workers!
Forget dodgy economic faux-theory and get back to basics. If only half the boat is rowing then we need to throw the parasites overboard, or make them row!
Posted by Ozandy, Tuesday, 5 October 2010 2:54:54 PM
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http://forum.onlineopinion.com.au/thread.asp?article=11064#185131

Correct as usual Arjay.

But wait, there's more, the mining revenues have allowed the Bligh government to spend like drunken sailors, The BER ripoffs took tradesmen out of the regular building industries, causing a property bubble that is about to burst.

http://forum.onlineopinion.com.au/thread.asp?article=11064#185139

579, 100% wrong, a country without money in the bank after a mining boom has no reserves to establish a safety net or relieve, high unemployment with some infrastructure spending during a recession, after it starts.

Haven't you ever seen "Wall Street" or Micheal Moore's films post GFC?

I strongly suggest you go to see "Wall Street 2".

The "Raving Right, Extreme Capitalists" will not be able to get the next Boom/Bust cycle going, if they are not, "Aided & Abetted" by "Great Big New Taxes" & more, profligate spending from the Red/green/getup/labour Communist coalition.

http://forum.onlineopinion.com.au/thread.asp?article=11064#185157

Ozandy, correct as well, our greatest export product is empty containers.

I can remember discussing in "1984" with Don Chip, the worsening "current account deficit" & predicting the crash in 1987 together with the 1989/90, recession, we had to have.

Things don't seem to be improving, getting worse if anything, they exported almost all industry other than mining, "financial services" or "do you want fries with that".
Posted by Formersnag, Tuesday, 5 October 2010 5:21:58 PM
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The mining boom is still in action if you haven't noticed. You have a funny idea of a comunist coalition.
Posted by 579, Tuesday, 5 October 2010 6:13:09 PM
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579 Mining boom for whom?
You'd better start to understand some basic economics.Our Govt Banks should never have been sold off.$91 billion of new money is added to our economy pa.This is GDP + inflation. It is $8500 per working person.Our Govt banks such as the commonwealth used to create much of this money debt free.They could create it through infrastructure or as loans to the private banks.We now borrow 30% of our mortage money from Global Reserve banks who just create it in their computers anyway.

We have no infrastructure,are selling of all our Govt income earning assets and are drowning in foreign debt.

Under this thieving system,eventually the amount of money in our economy will be equal to the debt.We will all then be insolvent.This is modern day economic serdom!
Posted by Arjay, Tuesday, 5 October 2010 8:53:16 PM
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@Ozandy, “it is better to let the market set the price…”.

I disagree. Let me tell you about my brother-in-law that managed one of the very first video outlets in Sydney. At that time, a new release video would cost around the $45-$50 mark. He was at the warehouse and bought a shitload for around $5 and thought that he would move them quickly, and so put them in a stand at the front of the store and advertised them for $20. None sold for 2 weeks. So he put them up to $35 and displayed a sign stating “Slashed from $50”, and they sold in a few days.

The point being, is that the marketplace is conditioned into believing what the “value” of a product is. A new Holden is NOT worth $38,000 but the marketplace is conditioned into believing that it is. It’s the same for everything.

The concept of competition within business, doesn’t work in the simplistic form that we are lead to, or choose, to believe. Fuel is the classic example, where there are a myriad of oil companies providing fuel, but their prices go up and down together on the same days of the week. They do not compete with each other to see how cheaply they can sell it, but they compete with each other to see how much they can sell it for. This is the competition within big business.

TBC...
Posted by MindlessCruelty, Wednesday, 6 October 2010 9:32:45 AM
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Products are priced upon “what the market will bear”….this means optimizing prices, not competing for “cheaper prices”. In big business, the exceptions to this rule is when a new and usually foreign business wants to gain market share in a new marketplace to them, but an established one for its competitors…such as when Nashua came into Australia and were much cheaper than IBM for the next 5 years to gain market share, and then when established, its prices went a little higher than IBM or around the same mark. Woolworths puts small green-grocers out of business everywhere it opens a new store, by under-cutting the local market with much cheaper prices, and when the small competitors are out of business, they then bring their prices back up to above what the local small business was charging. They maximise profits… they don’t compete to be cheap, but compete to be expensive. And they do it unfairly.

Canada resolved this problem with Woolworths by making a law that if they (a national or multi-national company) reduced prices for an item or items in one store, then they had to do it across the nation as well, and that stopped them from putting small businesses out of business unfairly. But of course, that’s too much to ask of the Australian government.
Posted by MindlessCruelty, Wednesday, 6 October 2010 9:32:52 AM
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Arjay,

You can be forgiven for forgetting the GFC, as here in Australia we hardly felt a ripple from it.

Your arguments are laughable when you compare our position with the rest of the world.

Our government debt is negligble compared to the rest of the OECD (as %GDP), and lower than Howard took us to when we did the same to avoid the Asian Economic Crisis in the mid 90s.

We are hardly "drowing in foreign debt" @ 92%. Most OECD nations are well over 100%. (e.g. UK >400%, Netherlands >400%)

Of course, we also survived the GFC thanks to our strong, independent banks.
Posted by TrashcanMan, Wednesday, 6 October 2010 10:53:09 AM
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Arjay Govt run banks isn't that socialism.
Make up your mind which system you favor.
Posted by 579, Wednesday, 6 October 2010 11:56:08 AM
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the mining boom and hot money flowing out of $USD is driving our dollar, and reducing demand for all export industries. This is doing the RBA's job for them.

Unfortunately, like monetary policy the " automatic stabilizer" effects of a floating exchange rate are brutal on some industries.

Higher RBA rates will of course lead to an even higher exchange rate. The flow of hot money betting on our currency is so large, that even if govt wanted to intervene it could not.

we do not have any fiscal policy problems at all, an some sectors of the economy are doing very tough indeed.

regional and sectoral specific expansionary fiscal policy may yet be needed
Posted by Grant Musgrove, Monday, 11 October 2010 8:17:43 AM
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