A clear and straightforward summary of events. Thanks.

so the lame stream media fed us like sheeple & mushrooms based on rubbery figures from bureaucrooks.

now we are getting some more accurate figures about how deep the hole really is.

i recon that they are still polishing the tarnish on GFC#2.

Another Keynesian urging government to "stimulate" the economy by taking money it doesn't have out of the cash holdings of everyone in the population, and pay it by the billion to corrupt boondoggles like the 'Building the Education Revolution' waste/scam, and the pink batts fiasco.

Keynesianism doesn't work, it is wrong, and it has caused the whole problem that Keynesians are trying to fix with more the same. A little humility would be more becoming, rather than telling everyone else that *not enough* of their money has been confiscated by deception and wasted when its owners would have done better with it for themselves and society at large.

It should be obvious, even to a child, that we can't create wealth by printing pieces of paper and stamping dollar signs on them. Yet stripped of all its jargon and political support, that is all Keynesianism amounts to.

But it is not the *creation* of wealth; only the *confiscation and redistribution* of it.

"But" say the Keynesians "we are not creating wealth out of nothing, but out of resources that would otherwise be "idle" ".

But hang on. All money at any given time is in someone's cash balance. If we lived in a world of perfect certainty, there would be no need to hold cash, because we would already know the occasions for which we would need it in the future, and could withdraw the exact amount we need then. This means that people hold cash only so as to take account of future uncertainty as they see it at the present time. They are not "hoarding" it, they are holding cash balances for the only and proper reason for which cash balances exist.

The money should not be regarded as presumptively available to government to filch and waste on artificial booms which *must and do* eventually collapse into depression oops recessions, which Keynesians then blame on not enough of their infernal interventions!

Thus Keynesianism is ethically and economically bad for the same reasons.

Keynes is just another Fabian Socialist.

You cannot solve a debt problem by creating more of it anymore than stopping a drinking problem by buying more alcohol.

The US Federal Reserve in 2008 had off sheet balance transations of $9 trillion which the Chief Inspector for the Govt Elizabeth Coleman had no knowledge of.Since then this creation of money from nothing has almost doubled to $18 trillion and loaned to institutions/Govts all around the planet.http://www.youtube.com/watch?v=GYNVNhB-m0o You will see here Congressman Alan Grayson ask the delving questions but is dumbfounded by Coleman's reponse.This video reveals that the US Board of Governors on the Fed are both impotent and clueless.This private group of banks run both the share market and the US Govt.

The US Fed is a private group of banks who own and create the US currency.They have a Govt Board of which Coleman is the Chief Inspector.The Fed is creating $ trillions from nothing and causing inflation world wide.Since rates are near zero,the elites are using thsi money to buy up assets for cents on the dollar.They are also further inflating the derivative market which is being used to attack sovereign countries and steal their Govt and private assets.

This is theft on a scale that we've never seen before in our history and many economists still try to spin the lie.

I am not an Economist but isn't the "Australia is safe" idea a bit of a fairyland view? As one Economist said you can't have a safe house when the rest of the neigbourhood is on fire. China is heavily invested in the US and dependent upon sales of its manufactured goods to provide funding for its imports of coal etc.

We're all holding hands so if one falls there is a pull on all the others.

Atman,Australia is not safe since the US Federal Resreve unbeknownst to most,has bailed out our banks for $ billions.This makes our banks beholding and slaves to the Fed.If the Fed calls in loans or ups the rates due their created inflation,then our banks must do likewise.This will mean that many will have to sell up their properties in a very depressed market.We see in the US properties selling for 10 or 20% of their purchase price.This can happen here but unlike the US situation,we cannot walk away from our properties and be free from debt.We can be left with enormous debt even when the banks forclose and possess our property.

To save us,we need to pressure our Govt to make the RBA the lender of first resort so that our banks don't collapse under the financial rape created by the US Federal Reserve.

http://forum.onlineopinion.com.au/thread.asp?article=12490#215892

Arjay, great video, thanks. the Chinese banks have been fairly silly too, having taken advice from Macquarie bank sales men like Keating & Carr on how to do joint private/public infrastructure projects Aussie style, like some of toll roads/tunnells we have here which are no going broke from overpricing.

these deals were done by having banks borrow the money from "industry super funds". what are they going to do for some retirees whose funds were lost in this way? give them a 100 metre section of road so they can set up a toll booth to collect their pension?

as such the Chinese banks are sitting on loans to local governments for all manner of projects like trains that just crashed.

Thanks, Saul, for a very measured and useful analysis. Australia is certainly very much better placed than Europe to weather a stormy future. That said, I do have reservations about using Keynsian stimulus to make the ill effects go away. Again.

It’s popular, of course, because it works. Or would work ... if during the boom times national governments paid down debt, so that the next time stimulus was needed there’d be ample capacity to spend ahead without racking up debilitating debt. I see the problem in the US in very different terms from the EU’s dramas. America’s AAA bond rating was lost not because they’re unable to pay their debts, but because there’s strong political will to reign in debt by cutting spending and improving productivity. That, too, works; look at what GM has achieved since GFC Mk I. The impasse between Obama and Congress may have spooked S&P to re-rate long-term treasury bonds because there’s a real risk that Congress won’t approve budget stimulus based on further borrowing. That may be a good thing: it shows that the world’s largest economy is serious about living within its means, even at a cost. The likely result is near-term pain, but long-term gain. The Tea Party is rubbished for insisting on a serious debt limit and won’t wear paying for stimulus from higher taxes. That isn’t such a radical idea, is it? I think they have a point.

Contrast that approach with the EU, where productivity is poor, investment is feeble, and the only solution on the table involves the few healthy economies subsidising further stimulus by some extraordinarily unhealthy ones. There are no measures on the table which might address the underlying problem: an ageing population expecting AAA rated social services, with no growth or productivity gains to offset increased expenditure. That’s unsustainable, and the odds of a major train wreck are not negligible.

Australia can afford to go Europe’s way ... for the time being. Or we can take the US medicine, which won’t be pleasant near-term, but which might build a better future.

The first stimulus merely postponed the day of reckoning.

What's termed as the 2nd GFC, isn't. It is simply GFC 1 postponed.

Suggesting the stimulus had any advantageous longer term effect is rubbish. It has worsened our position as we face up to the postponed GFC 1.

The Governments that rushed into supporting the stupid stimulus action and especially the socialist big spending borrowers and taxers, with their attendant rorts, in Australia were led up the garden path by economists who guessed wrong and who had simply ran with the Keyensian herd.

They've all made the next few years in Australia a damn sight harder than they could have been. And now watch the b......s bulls..t about the stimulus and try to convince us debt is still the best the answer to the current crisis.

I reckon your analysis is pretty spot on Arjay. And when the full extent of the borrowings of not only Australian Banks but also many of our Public Bodies becomes evident I think we will see a return to much greater financial regulation and a dismantling of the 4 Pillars operation of our current banking system.

Formersnag,the difference between China and the West is that China has many Govt banks which create 80% of its' new money for growth debt free for the tax payer.We borrow nearly all the money from growth from private banks,this is why the West is in so much debt.Our total debt to OS banks etc is now over $800 billion which is over $5000 for every working person and growing.

China has a surplus not a deficit problem.Getting the West to pay their trade debts is the problem from them.This is one of the reasons the US Fed is counterfeiting the US currency.They are devaluing the US $ to lessen their debt but also keep their ponzy schemes going.Much of the money they created did not going into the US economy.The Wall St cronies borrowed more at zero rates to buy up assets and keep the worthless derivative market afloat.Our banks are said to have 20% of their value in worthless derivatives.

We as tax payes have been made guarantors for the big banks.The NAB borrowed $4.5 billion from the US Fed and raised another $3 billion from the share market.Westpac borrowed over $1 billion from the US Fed.Our banks are not all that safe.

imajulianutter, Arjay
While ever governments have or can grant a monopoly license to print money or - what amounts to the same thing - to lower interest rates, it won't matter how much regulation you put in place, the same economic problems that we are witnessing now, and their consequential social injustices, will keep recurring on a grand scale.

http://forum.onlineopinion.com.au/thread.asp?article=12490#215956

Peter Hume, i disagree, are you not old enough to remember how much more stable our economy was with regulation? between 1945 & 1965? When i bought my first house in 1980 the banks would not even talk to you until you had saved a deposit of 1/4 to 1/3. A higher hurdle to get over but made for more a responsible attitude to life, budgeting, saving, etc.

Arjay & imajulianutter are quite correct, remember when Krudd & Swannie "guaranteed the bank's deposits" despite telling us it was not neccessary? Westpac & Commonwealth went straight out, with cheap government money & swallowed up their competitors Bankwest & St George, economic treason in anyones language?

Arjay, i hear what you are saying about the differences between Chinese & Western banks, where they get their funds from, but they have been equally profligate with their lending for cities that stand empty, etc. As long as we & the rest of the world is buying less of their consumer goods, their own ponzi schemes look more UN stable.

The real problem for us still lies with out total relliance on quarrying though. We are heading for a double whammy there, with the probability of a slow down in China & India, plus the start of coal mining in new competitor nations like Mongolia. With commodity prices being so high, new mines are opening up all over the place.

Formersnag,you are right about the Chinese Banking system being equally flamboyant in regards to money creation,but they are not borrowing like us from OS banks to enable growth.They don't have that giant sucking sound of foreign debt starving their real economy of liquidity and thus must have inflation to keep enough money in their economy to make it functional.

Our system must have inflation since the Global Central Banks are milking us dry by expressing our productivity as debt.The more growth we have,the more debt we incur.

Formersnag, unfortunately the reality of the situation is, it doesn't matter whether you disagree or not, any more than if you disagree about the law of gravity. Only if government can create benefits out of thin air by printing paper - which it can't - would it matter if you disagree. It's still causing our economic problems whether or not you understand or agree with it.

""Peter Hume, i disagree, are you not old enough to remember how much more stable our economy was with regulation?"

"Our economy" is "with regulation" now, so I don't see what point you're trying to make. So far as the benefits you enjoyed were at someone else's expense by virtue of government policy, they were not ethically justified.

And a license for government to print money and lower interest rates does NOT make "our economy" more stable, it what's caused the current economic crises.

Arjay
I have already challenged and disproved your claim that there is anything necessary or desirable about increasing the money supply in line with increases in productivity. You have been completely at a loss to defend your reasoning or critique mine. You just went silent. And yet here you pop up again, re-running the same refuted belief system.

Why? Why won't you defend your argument and answer my question that proves you wrong? At here:
http://forum.onlineopinion.com.au/thread.asp?discussion=4643&page=0

You have NOT justified why government should have a power to increase the money supply.

Hi Saul,

Nothing much here to disagree with. The US will become Japan unless they spend some money. Europe will go into recession if they keep tightening. China is struggling with inflation atm and that could go either way for Australia. I don't suspect much damage if any unless it is a by-product of the pursuit of a budget surplus. Just my opinion of course.

On previous discussion http://bit.ly/pNM7cb I'm consistent with my pseudonym everywhere and am absolutely no one of note (probably never will be) and I believe what is said is more important than who says it. If it has merit, it has merit, if it doesn't it doesn't; Also a bit fearful of 'Skeptics' of the world when I change my mind.

My political bias is towards the country Independents, particularly the late Peter Andren. I hope this assuages some of your concerns.

Thank you for your continuing engagement across the Internet and thank you for your time.

Peter Hume if you increase the money supply beyond increases in productivity,then you have inflation or a depreciation of your currency.The true reason for increases in the money supply should only be productivity improvements or population increases.

I don't accept that you have proven otherwise.

Arjay
"I don't accept that you have proven otherwise."

Why not? I have shown why there is no reason for the money supply to be increased in line with productivity, by my example of a farmer who increases his productivity, and sells his increased product on the market: http://forum.onlineopinion.com.au/thread.asp?discussion=4643&page=0

You haven't answered. Would you please join issue, and explain why "The true reason for increases in the money supply should only be productivity improvements or population increases."? So far you have only repeated that belief. You have not given any reason why. And you have agreed that money is medium of exchange, so therefore it's the *relative*, not the *absolute* amount of money that's important, so please don't answer "because there wouldn't be enough money".

This point is important because if there is no justification for an increase in the money supply commensurate with productivity or population growth, there would be no justification government having a monopoly power over the money supply, and no reason for you to support it. This would solve all of the theoretical problems inherent in your policy proposal.

You also have not explained how a government power to print money or lower interest rates could ever be limited from abuse. It's no use saying proper Constitutions would do it. They obviously don't. *How* is the power to be limited to increasing the money supply in line with productivity increases, and not in line with politicians' ego increases please? Okay we put it in the Constitution. What if the government ignores it, which is what has happened in the US. What remedy has the ordinary subject got? Can he sue the central bank for fraud? Which court? The government-supplied court, right?

Thus I have proved your argument wrong thrice over:
a) no justification for money supply to increase in line with productivity or population increase
b) no justification for government monopoly power over money supply
c) no way to limit the power from abuse

I think you should either concede the points or join issue and provide a rational defence of your argument.