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The Forum > Article Comments > Land of the Tweedles > Comments

Land of the Tweedles : Comments

By Steve Keen, published 10/5/2011

In the land of the Tweedles when it comes to economics Dee is not Dum, just not smarter.

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Unfortunately the three simple policy ideas that neither Dee nor Dum will discuss have been relegated to the end of the article. See the original at http://www.debtdeflation.com/blogs/2011/05/09/land-of-the-tweedles/ .
Posted by grputland, Tuesday, 10 May 2011 7:47:18 AM
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To avoid a lost decade, debts that can’t be repaid must be written off or written down as soon as possible. One way to encourage write-offs and write-downs is to stop taxing interest and start taxing debt, in the hands of creditors, at (say) 2.5% per annum. As the same creditors would be paying roughly the same amounts of tax as before, there would be little effect on revenue or interest rates. But creditors would suddenly have a strong incentive to write off or write down debts on which the actual repayments don’t justify the tax.

How can evasion of the tax be prevented? By making every debt enforceable only up to the amount on which the tax is paid: if no tax is paid, the debt is not enforceable at all. The tax would then be a “stamp duty” in the original sense: a tax on a contract, payable on pain of invalidity, by the party who has an interest in its validity.
Posted by grputland, Tuesday, 10 May 2011 11:24:35 AM
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Yes, well, of course Dee and Dum have got essentially the same style of fiscal and economic management…um….mismanagement!

What would we expect?

They are both totally in the pockets of the big business sector and beholden to economic rationalists. Well, they’re not just their pockets, they ARE them!

Politicians are very largely businessmen and economists who are innately governed by the profit motive for themselves and by a desire to stay in the good books with potential lucrative employers in their post-political lives, and anything done for the good of greater society takes a far distant second, third, tenth or hundredth priority!

This is the critically fundamental flaw with our whole governmental system.

Not only this but they’ve got the system sewn up so that those on the other side of the political divide just don’t get a look-in, or I should say; get to peer in to the land of Tweedledom but not to partake in a meaningful way.

Sure, Steve Keen is right about the Land of the Tweedles, but I think that he is looking at it with far too much of a narrow focus, and is essentially examining a symptom of the problem, without even thinking about why it is so or how we might reform it.
Posted by Ludwig, Tuesday, 10 May 2011 12:14:24 PM
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The Dees were appointed by the Dums
Posted by individual, Tuesday, 10 May 2011 12:35:03 PM
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Some good stuff Steve but I’d like more.

You focus on debts and expenditure and relate this to the US economics. As most of us are aware even at a domestic level, we need to understand gearing. You provide nothing that tells us about the sustainability of debt for either the US or Australia.

How do the two economies compare in their ability to sustain the levels of debt. For all we know it may be possible for the US to sustain their debt more readily than we could or vice versa.

How about addressing the income side of the ledger? Then relate these to both Tweedle Dum and Tweedle Dee policies. You've given us half a story.
Posted by spindoc, Tuesday, 10 May 2011 1:22:54 PM
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Yes Ludwig we could “reform it” by reducing the number of unproductive elements and increasing the number of productive ones in the Community.

Say, if one wants to be an Economist ‘he can’, after work. I mean after a productive work that has supplied the basic necessities of his/her physical existence or, conversely, wait until retirement.

This modality, if applied to all, Politicians, Lawyers, Estate Agents and sundry idlers would make our nation very rich indeed.

Rich: For age, experience and material disinterest does, no doubt, increase the substance of contributions to the community discourse.

Who, in his/her right mind, can believe any one’s opinion when it, the opinion, is linked with personal material interests?

We who peruse On Line Opinion should, by now, Know at least so much.
Posted by skeptic, Tuesday, 10 May 2011 8:30:20 PM
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I think the only thing left out was "Tweedle-Steve".

Drawing spurious comparisons between Oz and US economies can hardly provide us with any basis for determining either where our Oz economy may have been going wrong before or during the GFC, or since, or what in consequence may be the right way forward. Why not compare us with Ireland, or Greece, or China? Equally non-representative, equally of little or no relevance.

Government debt can only drive a part of the economy (unless you want to bring in another red herring, of a dictatorship or communist state), and private debt (and investment) another part. Both mechanisms should optimally be working in concert - to drive industry, jobs, living standards, and wealth. Both levels of debt also need to be constrained within reasonable limits - or there is forever an inevitable procession of boom and bust cycles. Can anyone deny that rampant debt, greed and deception, lead by the US, fueled the GFC? We were lucky because we had a surplus, low and manageable private debt, and a robust economy and banking system.

The author's over-the-top suggestions (brought rather brusquely out of left field I might add), to "revitalise" our continuing relatively healthy economy are:
. Limit the First Home Vendors Grant to new housing only;

. Limit new Negative Gearing to new housing only; and

. Bring the capital gains tax rate back into alignment with the income tax rate.

Point 1: ("Clever" use of Vendor instead of Buyer here). Might induce more new housing, but Would make it more expensive (with bigger debts) for new home buyers. How could this help anything?

Point 2: This would principally act to remove many investors from the housing market, and put this program in the hands of developers - further increasing the mean cost of housing.

Point 3: Taxing a gain made over many years as though gained in the year of realisation of that gain (by sale of the asset) is demonstrably unfair and punitive.

We need vision and honesty in both public and private investment, not band aids for non-existent deficiencies.
Posted by Saltpetre, Tuesday, 10 May 2011 8:32:35 PM
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genuine private enterprise investment,currently outside the square where green labor dwell.
Posted by Dallas, Wednesday, 11 May 2011 2:06:19 AM
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Australia's housing collapse is well underway and property prices are declining fast. The majority of Aussies live in a financial world they neither understand completely nor gain from in any tangible way. The reality is property speculators damned themselves by jacking up the price of low quality fibro housing using record debt and dual wages, a way of life that's ingrained in society now when every sucker out there is convinced home prices can't ever fall. Read the willy commentary and claims from the bulls on discussion sites like Somersoft Property Forum http://australianpropertyforum.com/blog/main/3221465 to comprehend just how engrained the belief is that "property can only go up".

Australians have an abysmal track record in the real estate market. Germans have a better model that operates fairly and equally, and is the envy of most Europe but the politicians there still have to foot the bill for banking bailouts. The moral is nobody wins from crazy home price inflation, and many first home buyers are locked out of the market so something has to give, and soon.

Matt Cooper
http://australianpropertyforum.com/blog/main/3489065
Australian Property Monitors
Posted by MattCooper, Wednesday, 18 May 2011 10:09:20 PM
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