<< The lesson for Australia is clear – governments must learn to live within their means and public finances must remain on a sustainable footing at all times. >>

I am very pleased to see you write this, Julie.

So, I wonder how it sits with an Abbott government? Are you mob going to take us towards a sustainable future?

Gillard said that she wants a sustainable Australia, not a big Australia. Then in the three years following that and other similar statements, she has led a government that has gone very strongly towards a big and unsustainable Australia!

And neither you nor your boss have picked her up on it, have you?

Julie, there is simply no indication that the Libs / coalition would take Australia closer to living within our means than Labor has done!

You want public finances to be on a sustainable footing at all times. Well, it is not likely to happen unless we achieve an overall sustainable society and live within our means in terms of all major resources and a stable if not steadily improvement quality of the environment.

If I could see even an inkling of this sustainability ethic within your mob, I’d vote for you. But as it is, you are simply no better at all than Labor. In fact, both of you are terribly bad antisustainability dinosaurs. So I won’t be voting for either of yuz!

Governments like individuals should live within their means. We have a federal government that thinks nothing of putting our nation in debt to bail out international financial basket cases. We could be the lowest taxed nation in the world if we didn't have such a wasteful attitude by the nations governments. With regards to Cyprus. They, like a lot of the EU are paying the price for joining the union and using the Euro. In the passed nations like Cyprus would have devalued the currency to entice investment and tourism to increase GDP.

The lessons are very different than those you've very briefly and very simplistically outlined Julie.
Most of the problems can be sheeted home to seriously dumb irresolute politicians
The problem for Greece, was rampant tax avoidance at all levels!
Italy and others used derivatives, to kick the debt can down the road, to balance/cook the books, and keep the EU on side?
The asinine austerity measures are clearly not working and only adding further contraction outcomes.
95%+ of corporate Australia, has relocated head office offshore, to basically avoid tax.
Other large corporations have created subsidiaries in offshore tax havens, and then paid themselves premium dollars for so called service? Managing in the process, to hide billions from internal revenue.
We do have a problem Julie, and that problem is the structural deficit created by your side of politics, as you gave away the rivers of gold, created by the first mining boom, and followed that absurdity, by selling off very profitable public assets.
The money these entities once earned for the treasury, now has to come from somewhere else!
A far better choice would have been to create a sovereign fund, that would have allowed us to develop our own offshore oil and gas provinces.
The lessons from Cyprus and elsewhere are, you need to collect as least as much tax or income, as you spend!
What we and others need, is quite massive and genuine tax reform and simplification, that would raise significantly more tax; and eliminate costly compliance costs, in a win/win outcome.
Rhrosty.

Verily simply put, we need to raise taxes. This means that every one needs to make a contribution, not just the miners. Then we need to get rid of profligate government spending designed to win votes.

David

Your rather infantile attempt to bracket the Gillard government with the bank crisis in Cyprus shows that you and your party have no idea what it is all about or how to deal with it.
The problem is all caused by the withdrawal of regulation of banks worldwide and allowed them to in affect to gamble with non existent money.
If any blame can be laid, it would have to be at the door of Reagan and Thatcher, who started to remove regulation in their drive to use the "market" to run the economy and by doing so handed over the government to banks.
various governments continued in the same vein from both sides and we now are seeing the results of what has become a giant ponzi scheme.
There is no other way to gain control of the economy than to re- regulate the banks and also to bring in legislation that will provide a safety net for ordinary depositors.
There is bound to be a run on Cypriot banks if they ever do open again and it will be the tipping point then, whether the run continues in other countries.

Australia has a relatively low percentage of government debt to GDP ratio, the country's real debt problem is private debt.

"The burden of paying down Labor debt will once more fall on the shoulders of a future Coalition government." Yes, I'll bet that will be a smoke screen for lower taxes on the rich and massive cuts in education, welfare and health spending.

RobertLePage

"There is no other way to gain control of the economy than to re- regulate the banks and also to bring in legislation that will provide a safety net for ordinary depositors." Yes, indeed.

Europeans and Americans are paying for the neo-liberal fantasies of long defunct economists and politicians.

If you think Australia could protect itself if only the right politicians were running the country you have not understood the magnitude of what is happening in Europe.

Tyler Durden of Zerohedge explains in this short article why he expects the unfolding systemic collapse to be global, and not European.

http://www.zerohedge.com/news/2013-03-20/cyprus-atms-low-cash-credit-card-payments-refused-medvedev-compares-europe-ussr

Rhrosty, Robert Le Page and Mac have expressed it very well. The attempt to link the Cyprus crisis with the ALP government here is beyond pathetic.

The causes of the Cyprus crisis are many, including but not limited to, buying Greek government bonds and other high risk investments. But a particular part of the crisis Julie fails to mention is that Cyprus is the largest washing machine in the region, laundering billions of "hot" euros and other currencies, not least from the Russian mafias.

Not a single Cypriot MP voted for the austerity package. That sounds suspiciously like democracy to me when the elected representatives actually responded to hugh public outrage.

The other factor that you fail to mention Julie, is that the Cypriot banks, like other banks in Europe, the UK and the US have been engaged in large scale criminality for at least the past three decades with not a single prosecution. When institutions and their officers become not only "too big to fail" but too big to prosecute (as the US Attorney General said recently) then we are really in trouble as a democracy.

Just gotta agree with Robert, Mac and James.
There simply no substitute for cleared eyed pragmatism, and factual realism/historical knowledge.
Rhrosty.

yes, not much there, again. I am really gettign worried now.

Govt spending Julie is only half the problem.
http://barnabyisright.com/2011/06/27/our-banks-racing-towards-a-bigger-armageddon/ Your own Barnaby Joyce was sounding the alarm about our banks in 2011.Now our banks exposure to worthless derivatives is over $ 19 Trillion or 16 times our GDP.How can we bail them out?

Our Commonwealth Bank for the first time has refused to publish details of their derivative exposure.

We need a Glass Steagall Act Julie to separate the derivative gambling economy from our real assets.Will your party protect the people from these predatory type of activities?

Extremely disappointing article. It commenced with what appeared to be a reasonable analysis of Europe's challenges but finished with a cheap shot based on embedded falsehoods.

The Australian economy was tracking 6th in the world in 1996 after numerous structural reforms from the mid to late 1980s began to take effect. Australia slipped back during the period of poor economic management of the Howard years to 11th.

Now, after five years of Labor and the worst economic downturn since the Great Depression Australia is first in the world - by a very long margin.

All the evidence shows that the economic settings Australia's Government has chosen - of which borrowings is just one - have been the right ones for the times.

Yes, the levers are now in different positions: taxes are applied differently, overall taxation is lower, borrowings are higher, capital investment is higher, interest rates are lower, deficit is higher, money supply is only slightly altered.

Those are the inputs.

But on almost every indicator of outcomes - unemployment level, job participation, income per person, productivity, etc. etc. etc. - Australia is better placed now than at any time in its history and better than any nation in the world.

The real message, Julie, is very clear indeed: do not risk Australia's economic future by changing back to the team which has proven its incompetence.

Wow Alan, we knew you wrote, but did not realise your talents were in fantasy. When did you join Alice in Wonderland, your bio said France?

I was going to suggest you come back & have a look at Oz, after some of your previous fairyland stuff. I thought you might just be out of touch, but after this post I won't bother. I doubt you could see the truth if it attacked you with 10Lb sledge hammers.

RobertLePage, mac
You don't understand what you're talking about and it's as simple as that.

Governments at all times into and during the GFC (and the Great Depression for that matter) exercised monopoly control of the supply of money and credit. You also don't understand the first thing about derivatives.

The idea that the problem is not enough monopoly government cartels manipulating the money supply so as to hoover up wealth from the productive class and handing it out to the parasite class is simple idiocy. It's precisely your economically ignorant political ideology that has caused the problems you're complaining about in the first place. The only result of the policies you urge would be more of the parasitic corporatocracy that you are trying to oppose.

If you want to understand what you're talking about, you need to start by getting a basic understanding of the theory of money and credit, which you can obtain here:
“What Has Government Done to Our Money?”
http://mises.org/books/whathasgovernmentdone.pdf
“The Mystery of Banking”
http://mises.org/Books/mysteryofbanking.pdf
both by Murray Rothbard

Only *after* you are stopped blurting out garbled ignorant self-contradictions will you be qualified to hold an opinion on the matter and until then, the less said the better eh.

Hello again, Hasbeen.

So how did you go on the quiz?

http://newmatilda.com/2013/03/15/could-you-be-treasurer-take-quiz

Cheers, AA

Hmmm. Try this instead:

http://newmatilda.com/2013/03/15/could-you-be-treasurer-take-our-quiz

Sorry Alan, I stopped reading tripe, when I gave up soothsaying.

Alan Austin,

>Now, after five years of Labor and the worst economic downturn since the Great Depression Australia is first in the world - by a very long margin.<

I'm not sure how you (or whoever) arrived at this first place rating for Aus (or any of the ratings for that matter), given that on GDP we are not quite up there with the U.S., China, UK, Germany, etc? I can only assume that this rating is based on qualitative factors (such as indicated in your following statement) rather than on a quantitative basis? Or else, per capita GDP perhaps?

> on almost every indicator of outcomes - unemployment level, job participation, income per person, productivity, etc. etc. etc. - Australia is better placed now than at any time in its history and better than any nation in the world.<

Regarding your point that Aus was 6th, but moved down to 11th during the Howard years, I have to wonder about the correlation of this time-frame with the rise and rise elsewhere of the 'bubble' culminating in the GFC? Given that Aus was not a significant participant in that bubble, is it not possible that this rating was skewed by anomalies in the comparative base? (Since I doubt that you would be involved in any purposeful imaginative accounting.)

I propose a similar question regarding your attribution to the Rudd/Gillard governments of credit for Aus moving up to first place post the GFC's main shock (given that it is really still ongoing). Is it possible that this assessed elevation in rating was a coincidental resultant of the slippage of our other competitors in the ratings - due to their much greater exposure to the economic and fiscal resultants of their much greater participation in the GFC 'bubble-burst'?

I remain unconvinced that your attribution of credit and blame for the progression of our economic or societal 'rating' on the world stage is soundly based, but I remain open to appropriate argument in this regard. Unexplained ratings remain subject to question, don't you think (and any consequential attribution)?

Hi Saltpetre,

Growth is a tricky one because it bounces around. The USA's current annual growth rate is 1.6% Australia's is 3.1%. But this is volatile.

The other criteria where Australia is clearly ahead of the USA, and most of the rest of the world include:

1. gross national income per capita
2. income disparity
3. employment participation
4. unemployment rate
5. women in the workforce
6. superannuation
7. health care
8. pension levels
9. economic freedom
10. interest rates
11. savings
12. home ownership
13. value of the local currency cf the euro
14. value of the local currency cf the UK pound
15. government 10 year bond rate
16. bankruptcies
17. deficit as a percentage of GDP
18. current account as a percentage of GDP
19. debt as a percentage of GDP
20. balance of trade current
21. balance of trade history
22. foreign exchange reserves
23. international credit ratings
24. overall quality of life

All these are measurable. Comparisons are easy to make - both between countries and between periods of Australia's history.

Sources readily available, if required.

It will be interesting to see what happens to the election campaign in Australia if the serious media starts to look at the economy in some depth, rather than accepting shallow and mendacious nonsense like that offered in this article.

Is it true Julie Bishop is a shadow frontbencher?

Cheers, AA

Alan
Do you assume that the credit for the economy belongs to the government?

Putting aside the fallacy of post hoc ergo propter hoc, what makes you think any positive measure is because of any good the government is doing rather than despite any bad its doing?

Hi Jardine,

It's pretty much accepted by observers outside Australia that you have:
(a) the best-managed economy in the world by a mile,
(b) the best-managed economy in Australia's history, and
(c) the worst media coverage of political and economic issues in the free world.

Hence it's no surprise that most Australian's are surprised at Australia's surprising economy.

It can readily be proven that on all these 26 criteria Australia is now travelling better than in November 2007 when Labor took office:

1. income – GDP per person
2. GNI income per person
3. income disparity
4. interest rates
5. inflation
6. people employed
7. job participation rate
8. personal tax rates
9. company tax rate
10. superannuation
11. health care
12. pension levels
13. personal savings
14. productivity
15. current account deficit
16. current account deficit as a % of GDP
17. international credit ratings
18. economic freedom
19. value of the Aussie dollar cf the US$
20. value of the Aussie dollar cf the euro
21. value of the Aussie dollar cf the UK pound
22. balance of trade
23. industrial production growth
24. foreign exchange reserves
25. overall quality of life

How did this happen?

Most economists credit the extraordinary stimulus packages of 2008 and 2009. Only Australia and Poland in the OECD averted recession.

Before Europe knew what was happening, Australia was tipping cash into households. This was followed by targeted infrastructure expenditure unmatched in the world.

In the early months of the GFC the Government handed out a staggering 3.3% of GDP. Next highest was the USA which allocated just 2.4%. Not enough, it seems. All others were below this, mostly well below. The OECD averaged just 0.7%.

Other governments tried to catch up with more spending later, but too late to avert disaster.

Joseph Stiglitz, the Nobel Prize winner from Columbia University, studied Australia in depth and wrote:

"Rudd’s stimulus worked: Australia had the shortest and shallowest of recessions of the advanced industrial countries."

Stiglitz is not alone. Most economists who have crunched the numbers have reached similar conclusions.

Happy to discuss further, Jardine.

Further to our Banks $19 trillion of Derivative exposure.Not only has the Commonwealth refused to publish their risk this year,the RBA has opened a bail out fund currently of half a $ billion.

Is the RBA preparing to pint money for the banks to help bail them out as in like the US Federal Reserve is doing ? This will depreciate the value of our $ thus our spending power.This if done by us is called counterfeiting or by them the banks, as "quanitative easing."

Please explain.

Hi Alan

“Hence it's no surprise that most Australian's are surprised at Australia's surprising economy.”

LOL.

Still doesn’t get you out of your difficulties, I’m afraid. Adding the fallacy of appeal to absent authority doesn’t fix the problem caused by the fallacy of post hoc ergo propter hoc.

“Most people” and even “most economists” is not a rational argument. Besides, most economists also support central banking, and have you seen what that’s been doing to the world lately? And if you don’t distinguish those with a vested interest in government from the rest, then there’s a conflict of interest right from the outset.

In order to understand the effect of economic causes, there’s a need for sound theory. At the very least, it needs to not be based on demonstrable logical fallacies. Saying someone else somewhere else has crunched the numbers won’t cut it. The reason is because the numbers won’t tell us whether an improvement is *because of*, or *despite* a given policy. There’s a need to demonstrate causality, not mere sequence or correlation.

In fact Keynesian theory intrinsically provides no way of determining whether it’s working or not, because it’s a simple logical fallacy to argue “after that, therefore because of that” which is all Stiglitz et al. have got.

All that you have said pre-supposes the validity of Keynesian theory. However we can’t make society richer by digging holes and filling them in again, and we can’t make society wealthier by printing pieces of paper and stamping official incantations on them, and it’s as simple as that.

Keynes famously said: “Pyramid-building, earthquakes, even wars may serve to increase wealth, if [politicians can't think of] anything better.”

This is the level of nonsense that Stiglitz is defending. According to that theory, the government could have made Australia richer by blowing up a few decent-sized cities. Think of all the “aggregate demand”, think of all the “jobs” we would have created then. Sorry, it’s just sycophantic indefensible rubbish.

Arjay
No argument for central banking is it?

JKJ: so a Nobel prize winning economist has got it all wrong, but you have figured it out. Huh? Can we expect to se you on the Stockholm stage this year?

Hi JK Jardine,

Fair questions.

Re: “appeal to absent authority …”

Pretty sure they are all present, JK. Happy to provide names. They include Juan Jose Daboub, Paul Krugman, John Quiggin, Glenn Stevens, Joseph Stiglitz, Rodney Tiffin, John Edwards, Malcolm Edey, Tim Harcourt, Guy Debelle, Scott Haslem, Nicolas Herault and the economists who work on OECD papers.

Re: “… the fallacy of post hoc ergo propter hoc.”

Yes, this can be a fallacy. But not always. And not necessarily. It is a matter of sound data, careful analysis and clear thinking.

Re: “There’s a need to demonstrate causality, not mere sequence or correlation.”

Yes and no. Washing hands after handling putrid matter was demonstrated to prevent illness centuries before causality was proven. No?

Sometimes where causality cannot be proven absolutely it is safest to go with best fit or most satisfactory explanation.

Re: “All that you have said pre-supposes the validity of Keynesian theory.”

No, not really, JK. Isn’t it the other way around? The experience of Australia validates Keynesian theory after the event. The one and only nation that went in hard, early and well-targeted with a Keynesian intervention turned out to be the one and only nation that averted two negative quarters, wholesale job losses and a blow-out of debt and despair.

You don't need to have presupposed the validity of the theory to acknowledge afterwards - perhaps ruefully - that it does appear to have been validated.

Re: “We can’t make society richer by digging holes and filling them in again …”

Correct. But we can certainly enrich society by insulating buildings, providing infrastructure for schools, housing for the needy, faster internet connections, alternative energy generation, improved roads, rail and ports and so on.

Pretty sure this is the approach Stiglitz is defending. No?

Cheers, AA

JO'N.

Logical fallacy.

Do you affirm that earthquakes make society richer? That destroying whole cities makes us as a society wealthier? That's what you're defending. You need to deal with the actual issues; your personalisation of the argument to me only proves that don't understand the issues of economic theory and have no better argument but fallacy.

Jardine K. Jardine : I think you need to do a crash course on finance.
And I see now that this thread has degenerated into the usual slanging match between party ideologies. Well keep on arranging the deckchairs Titanic crew.

HOW BANKS SECRETLY CREATE MONEY
http://www.webofdebt.com/articles/dollar-deception.php
It has been called “the most astounding piece of sleight of hand ever invented.” The creation of money has been privatised, usurped from Congress by a private banking cartel. Most people think money is issued by fiat by the government, but that is not the case.

JKJ

"You need to deal with the actual issues"---OK what are the actual issues?

RobertLePage,

"The creation of money has been privatised, usurped from Congress by a private banking cartel." That statement is perhaps misleading in the Australian context, banks have always created money. Banks didn't so much 'usurp' the function of creating money, previous governments surrendered an important component of monetary policy by eliminating SRDs.

I'll admit I'm rather nostalgic for the golden days of Keysianism and bank regulation.

our family has been living in the Philippines these past 5 years, but we get the Australian news on Channel 62 and are amazed at how well Australia has been doing. Yes, Australia and Poland have weathered the financial crisis quite well, but from what I've heard, it was Wayne Swan's decision to treble the tax free threshold that helped ordinary taxpayers, but a lot more could be done.

For instance, negative gearing: why continue with this sort of nonsense?
Also, fringe benefits taxation: why not raise it from the pathetically small amount to at least 5%?

And why not create a sovereign wealth fund, as Norway did, where its average income is $48,000 compared to Canada's average of $36,000?

How did Norway get it so right and we just can't seem to get our heads - and hearts - around that?

Amazing how much JKJ sounds like the old Peter Hume? Not a past life perhaps? Equally combative, self-assured, hates anything to do with government, taxation, regulation or welfare, or banking and industry 'oligarchs'; and wriggly as a cut snake.

Alan Austin,

I have to admit your evidence for Aus' rating at No 1 is compelling, and I can find no fault with it. However, you would have to admit that many of these positive factors (healthy economy, welfare, universal healthcare, productive base, private wealth, investment environment, etc), and the gearing to accommodate them - including relevant banking regulation, loan conditions, and a fortuitous mining boom - were already in place prior to the GFC? And there was a healthy surplus to facilitate at least the start of the Rudd stimulus.
Still, the stimulus worked, but who should we credit for this visionary, expeditious action - Kevin Rudd or Wayne Swan?

In spite of your healthy argument, I still have a difficulty attributing our well-being entirely to the Rudd/Gillard governments, or in finding any significant fault with the Howard government. And, since then, with Gillard taking credit for CO2 reduction as being related to the carbon tax - when at least part of any reduction would have to be attributed to the Pink Batts and Solar Energy subsidies included as part of the prior economic stimulus facilities. Cause and effect? Not quite clear cut?
Still, your portrayal of the Aus economy is very heartening.
Question now is what shocks may we yet expect from the continuing troubles elsewhere? As well as some troubling signs in our own industrial resilience - given some recent major closures?
And what of our exposure to interest rate and foreign exchange Derivatives? $19 Trillion? (Many times our gross national product?)
Not quite out of the woods, yet, but at least a reliable compass?
And, with Abbott and Hockey at the helm? Or is your bet on Gillard?

>Is it true Julie Bishop is a shadow frontbencher?<
I suspect this is a rhetorical question, but Julie Bishop is Deputy Opposition Leader and Shadow Minister for Foreign Relations.

Hi Saltpetre,

Re: “many of these positive factors … were in place prior to the GFC”.

Correct. Reforms enabling Australia to survive downturns were implemented in the 1980s. Keating predicted those would fireproof the economy for 40 years.

Re: “There was a healthy surplus to facilitate at least the start of the Rudd stimulus.”

Depends how the surplus was achieved. Selling productive assets – and losing rivers of revenue – were puzzling decisions.

Re: “who should we credit for this visionary, expeditious action - Kevin Rudd or Wayne Swan?”

Senior Treasury officials, Swan, Tanner, Wong, Rudd and Gillard, in that order.

Re: “I still have difficulty … finding any significant fault with the Howard government.”

Failures included selling off assets you should have retained, selling them for too little, selling gold reserves at near rock bottom prices just before the steep price rise, losing $4.5 billion gambling on foreign exchange market, handing out money to the wealthy, allowing infrastructure to run down and failing to invest appropriately the huge mining boom revenues.

The funds Howard/Costello left were a fraction of what they should have. Australia should not have slipped so far back in the global rankings with all your advantages.

Re: “What shocks may we yet expect from the continuing troubles elsewhere?”

God question. And who is better credentialed to manage future upheavals?

Re: “And, with Abbott and Hockey at the helm? Or is your bet on Gillard?”

Gillard will win the election if the focus is on economic performance, ministerial integrity, the environment, social justice and international affairs. If it remains on Kevin Rudd, the fragility of the hung parliament and the opinion polls, Labor will lose.

Australia’s doom is that there is no chance your media will focus on matters of substance.

Re: “I suspect this is a rhetorical question, but Julie Bishop is Deputy Opposition Leader and Shadow Minister for Foreign Relations.”

Yes. Extraordinary from this distance to see how often senior Coalition figures tell such appalling lies – as in this article – and just get away with it. Bizarre!

Cheers, AA

If we in the West do not initiate A Glass Steagall Act that separates derivatives from our real productive economy,then expect to lose most of what you own.Even if their derivative exposure was just $ one trillion,this would mean we have to bail them out at over $ 90,000 for every working person.

$ 19 trillion means a bailout of over $1.7 million for every working person in this country.This is the amount that our RBA will have to create from nothing to bail them out.Since we don't have the money,the RBA will create endless cyber money just like they are doing in the Europe and the USA.It is nothing but a thieving scam.It is called hyper-inflation.

Banks are not too big to fail.Our civilisation is too important to fail.Our Govts can create all the money we need for our economies to function.We don't need private central banks.

Let the banks fail since they created the problem in the first place.

Thanks for that, Alan in France (aka Austin), and cheers to you too. We live in interesting times indeed.

Arjay,

It seems unlikely that our banks (and possibly our government) would lose all they have invested in those derivatives, even in worst scenario, and I expect they have good reason for those investments. All the same, there is cause for caution in these troubled times. I hope they don't get too far ahead of themselves and get caught out in the as yet unfinished hard landing awaiting some in the EU.
Discretion in these times remains the better part of valour.

Robert
You do realise, don’t you, that the Federal Reserve is a creation of the Federal Reserve Act, which is an Act of Congress?

Also if you read the US Constitution, you’ll see that the feds have no more right to print money than they have to set up the Federal Reserve: Article 1, Section 8, and Tenth Amendment. But you can’t send the feds to arrest the crooks: they are the feds!

I think the theory in your link is 80 percent right. The error is to neglect the fact that *government* at all times exercised a monopoly of money and credit, created the Fed and its banking cartel, and legalises and compels the fractional reserve banking fraud which channels trillions from the productive class to the plutocrats. It’s a government control of the money supply phenomenon – you know, what you’re in favour of?

“What Has Government Done to Our Money?” by Murray Rothbard
http://mises.org/books/whathasgovernmentdone.pdf

“The Mystery of Banking” by Murray Rothbard
http://mises.org/Books/mysteryofbanking.pdf

Saltpetre
Me? Combative?

Smatterafact I knew a guy called Hume once. His father was related by marriage to my cousin who was also a Jardine. Nice chap. He defended your freedoms as well as his own so it was a case of unrequited principles I’m afraid. He never tired of hoping people would used reason to see through their superstitious beliefs that government creates net benefits for society by printing money and handing it out to banking cartels of its own creation. By the way, is your real name Saltpetre?

mac
the issue is whether Keynesian stimulus policies really do counter recessions - make society wealthier – or not.

Alan argues by reference to the authority of economists who say it works. They reason that, since Australia spent billions on stimulus policies, and fared relatively well in the GFC, therefore the government spending money on school buildings saved Australia from a worse recession.

The counter-arguments are as follows. As for the authority of those economists, that’s an appeal to authority, which is a logical fallacy. If their theory is wrong, then their authority is wrong.

The question is whether the theory can be logically defended. If it can’t, then all the authority in the world won’t make it true.

Besides, if someone else assembles authorities who disagree, then what? Pistols at dawn? A head-count? What kind of theory of knowledge is this? At best authorities enable only probabilistic knowledge; at least logic enables categorical disproofs.

About the empirical evidence, to argue that stimulus policies worked because after they happened, the economy got better, involves logical fallacies. Just because A happens before B doesn’t mean A causes B. Also, Alan’s approach could only be sound if all other things were equal, or all other variables and contingencies were controlled-for as between the nations compared. They aren’t, so it’s a non sequitur.

Besides, the USA did trillion-dollar Keynesian policies, so why doesn’t that disprove Alan’s theory according to his own empirical methodology?

In a nutshell, the argument is that massive corrupt wastes such as the Building the Education Revolution or TARP don’t make society richer, they makes us poorer, both morally and economically. Australia prospered despite, not because of stimulus policies.

Notice how none of the Keynesian apologists have ventured to defend Keynesian theory itself, but only, in effect, to assert empirical guesswork that it’s correct?

But if it’s correct, we’re back to the idea that we can make society wealthier by destroying whole cities, as Keynes asserted. And why only stimulate during recessions? Why not permanently make society wealthier - make poverty disappear - by permanently digging holes and filling them in again? If the theory's defenders can't answer these questions, I think we should conclude it's nonsense.

The argument is, wealth is always the result of savings and work, never the result of destruction, waste or consumption per se. Alan’s argument would only be valid if the government got the money from a moonbeam. It doesn’t. What it “injects” into the economy it first takes out, in a net loss-making process.

Please see Chapters 1 & 2 of "Economics in One Lesson" by Hazlitt,
http://www.hacer.org/pdf/Hazlitt00.pdf

Hi JKJ,

Re: “The question is whether the theory can be logically defended. If it can’t, then all the authority in the world won’t make it true.”

Correct. It can. The authorities pretty much agree.

Re: “Just because A happens before B doesn’t mean A causes B.”

Correct. So we examine all possible causes. Then go with the evidence.

Re: “Alan’s approach could only be sound if all other things were equal, or all other variables controlled ... They aren’t, so it’s a non sequitur.”

It may be a non sequitur. But not necessarily. Research determines that.

Re: “Besides, the USA did trillion-dollar Keynesian policies, so why doesn’t that disprove Alan’s theory according to his own empirical methodology?”

The US experience does validate the theory. Australia splurged 3.3% of GDP. Next highest was the USA which allocated 2.4%.

Yes, Australia got through the GFC best of all developed nations. The USA also did pretty well. They didn’t recover as quickly as Canada or Switzerland, which may be special cases. But America certainly fared better than European nations whose stimulus spending was lower and slower.

Re: “massive corrupt wastes such as the Building the Education Revolution …”

No. The opposite is true. Australia's BER was not wasteful. Nor were the other stimulus programs. The money went where intended. Almost all within the timeframe required.

Re: “Australia prospered despite, not because of stimulus policies.”

No. Evidence supports because of.

Re: “Notice how none of the Keynesian apologists have ventured to defend Keynesian theory itself, but only ... to assert that it’s correct?”

Yes. It’s a rapidly changing world. Theories are constantly being refined and rejigged. John Maynard would not recognise today’s world. Nor would Henry Hazlitt.

Re: “But if it’s correct, we’re back to the idea that we can make society wealthier by destroying whole cities …”

No, not at all. Destruction and rebuilding provides short term employment, but does not build the nation’s wealth. Well-targeted infrastructure spending does both.

Re: “If the theory's defenders can't answer these questions, I think we should conclude it's nonsense.”

Correct. But they can.

Cheers, AA

JKJ,

No, my name isn't Saltpetre, but my first name is Peter, and my surname, in part, contains 'salt'. (I am also a target rifle shooter, and you may be aware that saltpetre was a component in early gunpowder formulations - hence my choice of pseudonym.)

So, is your name really Jardine K. Jardine? (You don't really have to answer this.)

I think Alan Austin makes some good sense, and, to use your own suggestion, perhaps Keynesian economic theory can be supported by logical evaluation - as I think Alan has suggested. All the same, the many factors involved in evaluating any economic theory are such, as you have suggested, that empirical 'proof' is likely always to be elusive. A bit like evaluating climate change?

As someone once asked "how long is a piece of string?" To which the reply was "a banana of this colour" - stated whilst holding hands aloft and separated. Makes just about as much sense as trying to understand the workings of international banking, or what the perfect formula might be for 'good government'. Nothing is static.

Now listen up, Julie Bishop included.
All these problems in Europe and the US were predicted back in 1995
by Colin Campbell & Kenneth Deffeyes.
In fact as far back as 1956 Hubbard made some warning but not as
detailed as the first two.
Some say that GDP is a very poor measure of economic activity, but
never the less the cost of energy is eating our GDP out of house & home.
WE have been stupid enough to let ourselves get into debt when we were
about to be assaulted by rapidly rising energy prices.

Sure as many Labour supporters will tell you our debt to GDP ratio is
low compared to others.
If you say that then you do not understand what is happening !
You are stoney broke if you owe $1000 just as you are broke if you owe $1,000,000 !
The GDP has been eaten and you have nothing with which to repay your debt !

Goodness me Alan Austin, Saltpetre, Arjay etc etc;
Have none of you woken up to realise it has nothing to do with money ?

Even some of the economists are wondering why neither inflation or austerity work any more.

It is ENERGY stupid ! (to coin a phrase)

Hi Alan
Well I think you’re doing the best you can with what you’ve got!

The issue indeed is which theory best explains the evidence; Whether the stimulus policies create net wealth for society considered as a whole, or merely rob Peter to pay Paul in a process that makes society as a whole worse off.

Now it’s common ground that, logically speaking, the best that can be said of your empirical argument is that it is “not necessarily” a fallacy, while the best that can be said of my critique of it is that your argument may be fallacious but not necessarily.

Therefore the empirical evidence, of itself, is not capable of concluding the issue for that reason, and two reasons more. Firstly to resolve it further on the basis of empirical evidence, we would have to examine all the different statutes, regulations and policies of the countries you compare on all the headings you mention, for example personal tax rates, company tax rate, superannuation and health care and so on; and then analyse the economic effect of all those differences because it is simply invalid to assume that all these other things are equal when we know they’re not.

Secondly we would need to account for the unknown contingent variables that might affect the result, for example the difference in their informal economies, and cultural differences as to time preference on returns and so on.

Obviously many of these data are unknown or unknowable and it is false to pretend otherwise. The fact is, you have not taken them into account, have you? On the other hand, your appeal to empirical evidence cannot be unfalsifiable or it’s not rational. If it turns on mere bare assertion it assumes what is in issue and is therefore fallacious. You need to be able to say what empirical evidence would prove it wrong at the same time as take into account the unknown contingent variables which, correct me if I’m wrong, you can’t do. If percentage of GDP spent is the criterion, why not 100%?

This means that the empirical evidence, of itself, is not enough. We must fall back, as you said, to “sound data, careful analysis and clear thinking”.

Now the data sets aren’t sound for the reasons I have given. This leaves clear thinking. Your conclusion must make sense in its own right as a matter of pure theory, because you’re using theory to interpret the data. To show which theory best explains the evidence, you have to eliminate the obvious logical possibility that the stimulus policy was a mere wealth redistribution, that it was made a net loss not a net benefit, and that any increase in prosperity came from the extent to which government did *not* interfere, rather than from the stimulus policy.

“Destruction and rebuilding provides short term employment, but does not build the nation’s wealth.”

Looks like you’ve abandoned the central tenet of Keynesian theory that aggregate demand is the criterion whether a stimulus policy is justified, and just parted company from all the authorities you mentioned as well as Keynes. But if not, why not?

The obvious question is, by what rational principle do you distinguish stimulus spendings that are destructive and wasteful mere political wealth redistributions, from those that build the nation’s wealth? Please don’t answer by examples. We need to know the defining criterion. It can’t be profit and loss, or you’ve just lost the argument. And it can’t be aggregate demand, or you’ve just lost the argument.

So what is that rational principle please?

Just listen to them, waffle waffle waffle.
They just do not understand what has been happening under their feet.
Stimulation, ie money printing, is not working.
Austerity, cutting back pensions & other similar acts are not working.

Those old time economists from an era of plentiful cheap energy never
had to face the questions that are here now.
The ones both professional and amateur that we see arguing here are as
about as relevant as a pair of retired generals arguing that Napoleon
should have won at Waterloo.

They seem to be unaware that energy prices have been increasing at 7%
a year since about 2000. The rate is only likely to increase.

Our big problem is that the only minister that knew what is going on
is no longer in government.
The only opposition member that knows is Barnaby Joyce and he probably has been told to shut up.

Every day you see on your TV that oil is $95 a barrel, well it is not,
we pay about $118 a barrel and soon we will be importing one million
barrels a day of refined product.
Work that out for the year !

Jardine K. Jardine,

You are fast becoming my favorite poster.

First you banish the Wicked Witch from the West (name withheld to protect the guilty)

And now you're vanquishing Alan the Gaul.

And every post a poem of pure logic.

If you think I am talking through my hat, spend 1/2 an hour and watch
this talk on Energy Return on Energy Invested.

http://www.youtube.com/watch%3Fv%3DM9YRNqewGIY

All this playing with money to try to achieve business as usual is very
clearly a mirage. The mathematics says so.

JKJ,

>by what rational principle do you distinguish stimulus spendings that are destructive and wasteful mere political wealth redistributions, from those that build the nation’s wealth?<

I know your question is addressed to Alan Austin, but I venture that the answer is obvious: constructive development contributes positively to future amenity, prosperity, resilience and growth; whereas reconstruction of purposeful de-construction can only at best restore the former status quo, but only after wasting finite resources, including energy - resources which have to be taken into account in any assessment of overall prosperity and potential - including the waste of human potential which could otherwise have been utilised in more constructive occupation.
Everything has to be paid for, one way or another, whether constructive or not, but only occupation which produces a net gain can be considered constructive.

One factor not considered in your questioning of empirical data is the value of positive motivation to overcome adversity or attain positive reconstruction. The effectiveness of the Marshall Plan was in part due to the development of optimism, and of faith that economies would rebound - leading to investment and risk-taking based on an optimistic outlook on the future.

Hence, constructive investment to avert undue hardship, and to give people hope for a positive future, produces multiple gains, more than compensating for the initial stimulus outlay. The only question may be on the actual 'constructiveness' of the projects which are the subject of that stimulus outlay. In our case, some of the stimulus projects have been imperfectly conceived and/or delivered, but we are nonetheless better off for those efforts.
We are rightly No. 1 on so many bases of comparison, and it is impossible to demonstrate that the stimulus has not contributed positively to this reality.

BTW: Why so down on democratic governance, when it is this which facilitates our stability and the assured future quality of life for the whole of the populace?

Greetings.

@JKJ: Re: “Therefore the empirical evidence, of itself, is not capable of concluding the issue …”

Evidence leads to many important conclusions, if not all.

Re: “we would have to examine all the different statutes, regulations and policies of the countries you compare on all the headings you mention ...”

Correct. Painstaking, but important.

Re: “Secondly we would need to account for the unknown contingent variables that might affect the result ...”

Correct also. They do that too.

Re: “Obviously many of these data are unknown or unknowable and it is false to pretend otherwise.”

No, not many. Some. Most important data is knowable. No-one is pretending it is less tricky than it is.

Re: “You need to be able to say what empirical evidence would prove it wrong at the same time as take into account the unknown contingent variables which, correct me if I’m wrong, you can’t do.”

Yes, we need to say that. We can and we do.

Re: “If percentage of GDP spent is the criterion, why not 100%?”

Because the empirical evidence suggests 3.3% was optimum. This is based on the observed outcomes in Australia of growth, low debt, low taxes, low unemployment, low interest rates, positive savings, adequate welfare and superannuation.

Re: “you’re using theory to interpret the data.”

No. The other way around. We are using data to validate the theory. I think this is where we differ, JK. You have asserted this before. It has been rejected before.

Re: “To show which theory best explains the evidence, you have to eliminate the obvious logical possibility that the stimulus policy was a mere wealth redistribution ...”

Correct. We did.

Re: “Looks like you’ve abandoned the central tenet of Keynesian theory that aggregate demand is the criterion …”

Yes. Abandoned long ago.

Re: “by what rational principle do you distinguish stimulus spendings that are destructive and wasteful mere political wealth redistributions, from those that build the nation’s wealth?”

Simply by measuring the nation’s wealth. The ABS does this routinely. Catalogues 1370, 1383, 6523 and 6554.

Requires some effort. But that’s okay.

Cheers, AA

Alan

You are kidding, right?

Who's "we"?

Your argument has again degenerated into mere appeal to absent authority. You can’t just expect me and everyone else to accept your assertions, for no other reason than that you say that "we" (unspecified) have checked "the data" (unspecified) and validated a "theory" (unspecified) thus knowing, for the subjective evaluations of 23 million people, what they would have preferred the money to be spent on!

Sorry, not good enough. You need to show your workings: both data and reasons. You need to bring them into the debate, not just refer off to them somewhere else on the basis that you already know everything in issue, you’re right without having to prove it, and the unspecified facts speak for themselves.

It's just another fallacy. All I would need to disprove it, is adopt exactly the same standard as you’re using, and allege that “we” too had crunched the numbers and proved you're definitely wrong. You accept that of course?

Saltpetre
Interesting. I regard net nick-names to be irrelevant, only I have often found that when people can’t defend their arguments, they degenerate into trying to make mileage out of my nic.

It’s not me who’s ignoring the importance of subjective values in dealing with the empirical data: it’s Alan and you.

With respect, you don’t appear to understand the issue, and I can't answer your question on democratic governance until you do. The question is whether there’s a net benefit to society as a whole, not just whether there’s a benefit to one group at cost to another.

You have to prove it. You can’t just assume it. Why? Because we already know that the stimulus programs were funded by political takings from A and giving to B.

For example, suppose the state were to build a railway through the middle of the Great Stony Desert. That would satisfy your criterion, because it would be constructive development that contributes to future amenity. But you can see the problem for your position, can’t you?

SPQR
Thanks for your kind remarks.

Hi again JK,

Re: “Who's ‘we’?”

Those of us who subscribe to the view articulated above which started this discussion:

“After five years of Labor and the worst economic downturn since the Great Depression Australia is first in the world - by a long margin. All the evidence shows that the economic settings Australia's Government has chosen have been the right ones for the times.”

Re: “Your argument has again degenerated into mere appeal to absent authority.”

Not at all, JK. Twelve authorities were named. You can’t expect us to present all their findings here in 350 words. Easily googled, however.

Here, for starters is Scott Haslem, Chief Economist at UBS:

"I’m definitely not in the camp that says the government should aggressively wind back the fiscal stimulus. On that basis I’d give the government a big tick in managing the economy through the economic downturn — what’s most important is that they commit immediately to banking all of the gross dividend in the fiscal accounts. It’s not necessarily about radically altering the settings — we’re desperately short of infrastructure — but the government must bank the dividend and return the budget to surplus. It’s tough to calibrate the balance between monetary and fiscal stimulus but the government has done a reasonable job."

Re: “You need to show your workings: both data and reasons.”

Of course. No problem.

This chapter from the OECD’s Economic Outlook Interim Report titled The Effectiveness and Scope of Fiscal Stimulus is a good starting point. Lots of data and reasons:

http://www.oecd.org/economy/outlook/42421337.pdf

More here from the IMF:

http://www.imf.org/external/np/pp/eng/2009/020109.pdf

Re: “The question is whether there’s a net benefit to society as a whole, not just whether there’s a benefit to one group at cost to another.”

Correct. ABS papers 6523 and 6554 deal with income and wealth distribution.

Re: “Because we already know that the stimulus programs were funded by political takings from A and giving to B.”

Correct. That is why being Treasurer is difficult. And why Australia’s current Treasurer has earned immense respect and admiration around the world.

As shown here Thursday:

http://www.guardian.co.uk/commentisfree/2013/mar/21/australians-julia-gillard

Cheers, AA

Far be it for me to wage into this little private war, however, one only has to consider that the big 4 banks all took significant advantage of the US Federal Reserve open book borrowing windows, and we are talking billions not millions, to realise the Australian banking system was on it's knees in 2008/09.

APRA and the Reserve Bank failed to inform investors and the Government about this little borrowing occurrence and as such, investors should be suing APRA and the FED for millions.

The current Labor government was not only lucky to have the funds left by the previous Liberal govt, Australia did not have the negative economic woes fronting most of the EU, Asia and the US.

Energy, that being cheap oil, is the only thing keeping us going, oh that's right cheap oil at $90 per barrel +

what is going to happen when some real growth occurs, energy at $150+ per barrel, economic decline and recession/depression, welcome to the laws of diminishing returns.

With our Fractional Reserve Banking system, we are all going to see 'deflation', global Per Capita Wealth continues to decline and the Cornocopians continue to dance in the street.

Welcome to economics 101, energy verses environment....loss personified.

Get used to it.

Geoff

Ahh, Geoff, they are like the Oracles on the mountain, they are
arguing amongst themselves and when they resolve, if ever, their
differences they may decide to acknowledge the proletariat.

In the meantime, down here in the real world, the diesel shortage in
Asia gets worse, banks in some places are stealing their depositors
money, and we are closing our refineries so we can import 100% of our fuel usage.

Fortunately there are a few economists who have realised that it is
not about money at all, but a more fundamental problem of eroei and net energy.

Until government & treasury economists realise that they are redundant
nothing practical will be done.

People across the world are beginning to realize that their savings are not safe, that they can be raided by Governments and their cabals of institutions who can just take some of their money to help the struggling Oligarchs and Multi-billionaires.

The repercussions of this new reality haven't had time yet to really sink in. When it does we are going to witness a savage reaction and a period of great financial instability world-wide.

You've been warned!

SPQR,

"You are fast becoming my favourite poster."

Your head is easily turned.

JKJ has been around forever - delivering exactly the same spiel ad nauseam.

If the Wicked Witch from the West has taken a bit of time off, it's because she's bored and uninspired with the tripe that gets offered up here regularly.

(P.S....since you're so enamoured of JKJ's dog-eared rhetoric, you should look up Peter Hume's old posts. Let me know if you can spot a difference :)

Let me put another slant on the discussion. If the Labor government had not squandered so much money on allegedly combating the GST then perhaps, and only perhaps, our economy might not be in quite such good shape and our dollar would not be so high. This would then flow on to a much better result for our manufacturing industries and farming sector which are both doing it quite hard at the moment.

David

David, our dollar is high because the US has printing money or rather
sending screen pixels to all in sundry and decreasing the value of the US $.
Anyway, it doesn't really matter we are now entering an entirely new
economic regime and all the old rules are going out the window.
73 Bazz

I don't think the fundamental principle of living within ones means and minimally relying on credit has changed. It just seems to have been forgotten.

David

Alan
I've read your links and just as I suspected, they don’t prove your case at all, they prove mine. Those authors are just doing what you’re doing – assuming that government creates net benefits for society by stimulus spending.

Also the OECD reports contradicts you in that governments clearly are using “aggregate demand” and “boosting demand” as their criterion, so we're back to the idea that burning down houses makes society richer because it increases “aggregate demand” for housing.

The argument so far looks like this:

As to the data:
JKJ: How do you know Keynesian stimulus policies work to create a net benefit to society? How do you know they don’t just loot A to satisfy B, making society as a whole worse off?
AA: Because. The authorities say so.
JKJ: Well how do you know they’re right?
AA: Because. The data prove it.
JKJ: How do you know?
AA: Because. The authorities say so.

As to the theory:
JKJ: How do you know Keynesian stimulus policies create a net benefit for society?
AA: Because. The data prove it.
JKJ: How do you know?
AA: They prove it because they prove it.
JKJ: By what standard?
AA: 3.3 %
JKJ: How do you know? By what theory?
AA: They just prove it.
JKJ: Well Keynes said even spending on pure destruction or waste would create net benefits for society, so according to your theory, blowing up whole cities would also make society richer?
AA: We’re not using that theory any more.
JKJ: Well what theory are you using?
AA: The theory that the data prove it.

And so on. It’s like a joke. The basic argument is only this: “We are right, because we are right.” It’s groupthink.

Let’s get this straight. The data, of themselves, are just a huge heap, and wodge, and pile, of numbers. To reach any conclusion about what they mean, let alone whether policy is indicated, requires analysis, which requires theory.

Alan essentially asserts that the data speak for themselves. (cont.)

To prove this he refers off to other people all sharing the same belief system, but at no stage do any of them actually consider whether it’s true in the first place: they just assume their conclusion in their premises!

Consulting the data is valid only IF the theory you’re using to analyse them is not riddled with fallacies. But if it’s just an amalgam of demonstrable fallacies, like Keynes’s and Alan’s and Stiglitz’s and Krugman’s, this fundamental defect cannot be remedied by dressing it up in mathematical and statistical operations. This is just a fetishism of science.

Just think: what would you have to believe, in order to believe that printing paper creates actual real net wealth for society?

To translate it out of its false scientific, and into its real superstitious cast, it looks like this:

High priest: Throwing virgins into the volcano increases crop fertility.
Rationalist: How do you know it works?
High priest: Because. All the high priests say so.
R: How do they know?
HP: Because the data tell them so.
R: What data?
HP: The increase of crop fertility that happened after we threw virgins in.
R: How do you know that was because of throwing ‘em in?
HP: Because. All the high priests say so.
R: How do you know they’re right?
HP: Because the data tell them so.
R: What data?
HP: Google it – (links to opinions of high priests).

And then we have the Saltpetres of the world, the ordinary punters who can’t follow the chains of reasoning involved, chiming in with “Why are you opposed to increasing crop fertility?”

It’s pathetic. Obviously if you don’t count the cost, anything will seem a benefit!

And notice how all of the authorities that Alan refers to *just happen* to get their income from the river of treasure thus diverted in their direction? "It is difficult to get a man to understand something, when his salary depends upon his not understanding it!".

Bazz, Geoff
Energy prices are rising. So what?

Jardine rhymes with Sardine.

A Sardine is a small fish with limited intellect destined to be forced into a small can. The common man has a similar destiny.

Take your money out of the bank and put it under your mattress.

You've been warned! Ignore at your peril.

Hi again JKJ,

Re: “Those authors are just doing what you’re doing – assuming that government creates net benefits for society by stimulus spending.”

Not at all. No-one has said that. Wealth and income are created by many sectors working together. No-one is “assuming that government creates” anything by itself.

Re: “I've read your links and just as I suspected, they don’t prove your case at all.”

Hmmm. Not sure, JKJ. Have you read the links and posts with a view to understanding what is said? Or just with the intention to refute? There is a difference.

Most of your objections seem to reflect wilful misunderstanding.

Re: “Also the OECD reports contradicts you in that governments clearly are using “aggregate demand” and “boosting demand” as their criterion, so we're back to the idea that burning down houses makes society richer because it increases “aggregate demand” for housing.”

Just nonsense, JKJ. The OECD is not advancing that idea. Neither am I, nor Saltpetre nor anyone else. This is another example of what seems to be deliberate misinterpretation. No?

Re: “JKJ: Well Keynes said even spending on pure destruction or waste would create net benefits for society, so according to your theory, blowing up whole cities would also make society richer?”

Another example of same. Nobody believes this any more, JKJ. No-one ever did. It has been explicitly rejected on this thread x times, where x is a measurable quantity.

By repeating this assertion endlessly you are reinforcing that you are not open to listening.

Re: “The data, of themselves, are just a huge heap, and wodge, and pile, of numbers. To reach any conclusion about what they mean, let alone whether policy is indicated, requires analysis, which requires theory.”

Correct. The analysis and theory are readily understandable by those who wish to understand.

Re: “They [people sharing the same belief system] at no stage actually consider whether it’s true in the first place: they just assume their conclusion in their premises!”

Not true. Conclusions are based on data measured by the ABS and equivalent bodies abroad. Refer above.

Cheers, AA

Alan,

You have the patience of a saint. In this quotes you sum it up:

"By repeating this assertion endlessly you are reinforcing that you are not open to listening."

I learn from what you say and I think some others do as well, even if I do not always agree. But really, you are wasting your time trying to persuade JKJ of anything that he does not already agree with.

How about some insights into how Hollande is miserably failing to grasp the issues in France. How Jean-Luc Melenchon was right all along. And how Sarkozy must have learnt the art of brown paper bag donations from the late unlamented Bjelke Peterson.

Geoff, note;

JKJ said;
Bazz, Geoff
Energy prices are rising. So what?

See, missed the point, has not twigged that it is not about money.

JKJ,

Virgins used to be plentiful and cheap, so, where's the downside?
Priests happy, people happy, and fewer mouths to feed.

Unfortunately, JKJ, you make no cogent argument, just clearly being argumentative for the sake of it, and with nothing constructive to contribute.

Oz has many ripe plums to pick, because the right fertiliser was applied in the right concentration and at the right time. And, no houses or cities were destroyed. Win, win. Who needs theory, when we have a simple evident proof?

Do you not realise Theory is only used to indicate effective choices, and if the choices made provide positive results (as they have in the case of Oz) this tends to confirm the Theory - and vice-versa of course. Can you advise us of a 'perfect' Theory? Of anything? (Note: Theory, not formula.) String Theory, Quantum Theory, Evolution Theory, Theory of Relativity - are these 'perfect' Theories, or may improvement or refinement still be possible?

You purport to hold all the answers, so, what say you?

Time to lick your wounds and walk away; but like the sentry in the forest in Monty Python's Quest for the Holy Grail you will probably carry on, all while challenging "come back here you cowards, I will chew on you and gum you to death"!

Says it all;
By James Howard Kunstler
on March 25, 2013 8:20 AM

Of course, everybody should have been worried a lot sooner than last
week because the basic operating system of global banking is
accounting fraud, and has become that stealthily, insidiously, for
about fifteen years now. Nothing is what it appears to be anymore.
Compound interest has not really been working since 2008 because the
world can't increase its energy production enough to generate the
additional surplus wealth needed to cover the aggregate interest due
all around the world.

Not that old furphy again, Geoff of Perth

>>...the big 4 banks all took significant advantage of the US Federal Reserve open book borrowing windows, and we are talking billions not millions, to realise the Australian banking system was on it's knees in 2008/09. APRA and the Reserve Bank failed to inform investors and the Government about this little borrowing occurrence and as such, investors should be suing APRA and the FED for millions.<<

On what basis were the Banks obliged to make such a declaration? It was business as usual, where they took the opportunity to grab a handful of funds at attractive rates of interest. Neither the Banks themselves, nor our economy, was in any danger whatsoever.

Furthermore, on what grounds should investors be suing APRA, the Fed, or anyone else for that matter, for "millions". On what basis would you calculate the damage caused?

I know this has nothing to do with Cyprus, so my apologies for going off-topic. But it is quite irritating to read the same old rubbish trotted out on every possible occasion, when it has absolutely no significance whatsoever, and serves only to show up the writer's fiscal illiteracy.

Meanwhile, Cyprus' position as a haven for offshore funds has been totally exposed for the disastrous strategy that it is, just as Iceland's was a few years back. When our Banks find themselves with assets that amount to 800% of our GDP, I expect we will receive - and deserve - the same treatment.

But there is one consolation. Instead of facing pain in a single blow, Australian Bank customers receive our "haircut" on a daily basis, thanks to the massive profit margins the Banks extract from us. We would feel justifiably aggrieved if we were asked to support a one-off bank Cyprus-style "bail-in" with $20 billion of our hard-earned cash. But that is in fact what it is costing us every year.

Think about it.

AA. The data collected by the ABS are just that, "BS". For example, if you have worked one hour in the previous fortnight they regard you as employed. Like I said, "BS". There are many other examples.

There are liars, damned liars and statisticians.

David

There is really no way around all these problems.
We, and by that I mean the majority of countries, have been borrowing
as if there was no tomorrow. The crash in Greece bonds meant that there
went Cyprus bank's assets.
We are all linked together in that none of us can any longer generate
the funds to pay the interest on our borrowings.
Australia is a bit better off in that we are digging holes in the
ground and selling the country by the shipload to China.
Sooner rather than later, China will find all their markets have dried
up and they have an unemployment problem.

It will be the mother of all cutbacks.

Alan
It might be helpful to consider some examples.

What about a public works program for the government to build artificial reefs on every beach in Australia? This constructive activity building infrastructure would provide point-break quality surf instead of beach-break quality surf, which is more amenable. Would this justify stimulus policy funding? If not, why not?

How about a railway through the Great Stony Desert? Obviously the data don’t exist because it hasn’t been done yet, so you’ll have to answer by reference to your theory.

But hang on. The data don’t exist for any of the projects before the government funds them, do they, because the whole point of the exercise is that *but for* the funding, they wouldn’t be undertaken?

And since your theory is that the data prove your case, doesn’t that prove your theory wrong even in its own terms? If not, why not?

P.S. The expression “aggregate demand” and “boosting demand” I cited are from the OECD document and are pure Keynesianism. They contradict you in claiming that theory is not used. If you’re not using aggregate demand or boosting demand as the criterion, you still haven’t said how you know whether the policies are justified. An inner voice, or unspecified data, told you so perhaps?

PPS None of those documents addresses itself to *whether* the stimulus policies produce a net benefit to society, rather than merely looting A to satisfy B. They only try to measure *how much* the governments spent, and how much benefit it was. But if this is not so, please refer us to the specific data that you say make your case.

Obviously if your argument takes the form of sending me on an errand to construct your argument for you, it means you’ve lost. If you can’t show evidence and reason, you should have the decency to concede the general issue.

SPQR
Who is the Wicked Witch of the West, by the way?

If you do as Poirot suggests, you will find a series of threads in which ...

(cont.)

... she was brought to a full stop by questions she can’t answer without disproving her own argument. To any person interested in the truth, this would be a sign to *re-think* their demonstrably erroneous belief system. But bitter sneering is all Poirot’s response.

* * *

The exact similarity of the intellectual method of the Keynesians and warmists is remarkable, isn’t it? Both enter with a bluster of supercilious patronising statements to the effect that government has superior knowledge and goodness, necessary for the most beneficial interventions. When questioned they refer off to high officials, replete with reams and thickets of statistics gathered at public expense.

But the law against misleading and deceptive conduct only applies in trade and commerce, not to politicians and bureaucrats, who don’t need their marketing statements to be true. Not even James O’Neill thinks that politics is about the pursuit of truth LOL. Politicians only need a pretext for a stimulus policy, preferably covered in the appearance of science - they don't need it to be true.

The intellectual class themselves, in their comfortable offices, far from any of the hard, heavy, dirty, dangerous or irksome work that actually pays for them, amuse themselves pootling on their computers compiling and collating statistical operations. But, as we have just seen, these statistics do not, and are not capable of proving what the Keynesians or the warmists are arguing. They are multiple complete refutations away from any logical argument.

When they occasionally emerge from the groves of sychophantic orthodoxy, and into the glare of public discussion, it never occurs to them that they might meet people whose freedoms and property have been violated and spoliated by the forced interventions for which they were the main cheer-leaders. Like Alan, James O’N, Poirot, Bazz, Robert LePage, they prove nothing and assume everything. They answer any demand for reason with slovenly contempt by referring off to a whole pile of gizzard-lore and gobbledegook compiled by vested interests who have come to believe their own bullsh!t, which they are incapable of rationally defending – because it’s wrong!

JKJ,

Sorry to interrupt your self-congratulatory reverie (You seem inordinately fond of triumphal posts to yourself)

Anyhooo....I like this bit:

"...she was brought to a full stop by questions she can't answer without disproving her argument. To any person interested in the truth, this would be a sign to *re-think* their demonstrably erroneous belief system. But bitter sneering is all Poirot's response."

Could be...

On the other hand, it may be that she declines engagement with you because she finds you a tiresome windbag, full to the brim with repetitive and turgid rhetoric.

Who knows?

: )

Poirot
We are amazed at your latest proof that government stimulus policies create net benefits for society, that the world faces detrimental anthropogenic global warming that policy can improve, and that minimum wage laws make the working class better off.

It's not the rhetoric that stops you from engaging, it's the logic.

All
Look, let's face it. There is no evidence or reason to think that stimulus policies are anything other than is obvious on the face of it, namely political redistributions of other people's wealth, handed out to political favourites, wasted on a grand scale, and backed up by nothing but political expedience and spurious Keynesian nonsense that is flatly incorrect. And that's only looking at the Keynesian *cure* for recessions: their theory of what causes them is even more mendacious.

Meanwhile down in the valley, us peasants are discovering that 40% of
the gold coins in our pocket have disappeared in a puff of smoke.
Oh well, the village print shop is working double shifts, and the
blacksmith is busy making horse shoes.
The rest of us are eying our backyards and wondering if it could grow
enough veggies to keep us keeping on.
At least we won't be paying tax to keep the economists waffling.

JKJ,

<< "[Poirot] it's not the rhetoric that stops you from engaging, it's the logic>>

Couldn’t agree more--Poirot starts from the premise that if you make enough noise the causal reader will interpret it as a counter argument.

In a recent AGW thread I pointed out the loopy CVs of some of the warmist "experts" and she *“debunked”* it by linking to the site showing/supporting exactly what I had quoted--I would have pointed out how illogical it was, but I had to attend causality having injured my back ROFL.

Poirot
Don’t worry about what the WA govt says. They cannot force you to relocate east--beside seven eastern premiers are wholeheartedly in favour of you staying put.

Really busy “must zip”.

Wow, SPQR,

I see you're presenting your investigative cherry-pick as some kind of game-changer.

The difference, deary, is that Skeptical Science utilizes peer-reviewed material from climate scientists to explain "the science" - as opposed to pal-reviewed junk from "skeptic" sites.

I know you have a preference for the spoutings of weather hacks on the various sites you frequent which you probably consider to be cutting edge stuff....your prerogative of course.

JKJ,

There's been enough material posted and linked to on OLO to debunk the deniers a hundred times over. Why don't you trawl around for the answers to your disingenuous guff.

Here you go boys...

I'll post this here so you can tell me we can't possibly be warming if there are freaky freezing snows in the northern hemisphere.

http://www.abc.net.au/news/2013-03-27/freezing-spring-huts-europe-and-us/4596258

But then again?

http://www.guardian.co.uk/environment/2013/mar/25/frozen-spring-arctic-sea-ice-loss

Poirot, what is your take on the IPCC saying that there has been no
warming for 17 years ?

To get back to the thread, the European banks are adopting the policy
or stance that fixed deposits or cash accounts are investments and can
be lost if the investment manager fails.
This is the same status as other investment managers.
Depositors go onto the list of creditors such as electricity
suppliers, and other trade suppliers.
Creditors are behind employees in the queue.
How long before Australian banks adopt the same policy ?

Accounts here up to $250k I believe are insured by the government.
However it is not realised generally that the government liability
is limited to $20 billion for all banks.
If a major bank went down the gurgler that would not go very far.
Perhaps they would be settled in alphabetical order, in which case
you might want to change your name, hmm ?

If you think this is just an idle contemplation and you are a director
of a company, you had better think again.
ASIC might think differently.

Bazz,

Regarding Graham Lloyd's quoting of Pachauri:

http://skepticalscience.com/australian-pachauri-global-warming.html

(Apologies to SPQR for linking to a reputable climate science blog:)

But then it's not uncommon for that sort of treatment from a certain media stable - as this indicates:

http://www.businessspectator.com.au/article/2013/1/17/science-environment/australian%E2%80%99s-climate-correction

Greetings,

@David, Re: “The data collected by the ABS are just that, "BS" ... if you have worked one hour in the previous fortnight they regard you as employed.”

Criteria for measuring employment are spelt out in the ABS explanatory notes. They follow global agreement through the International Bureau of Labor Statistics. They're not arbitrarily chosen by governments.

Whenever the criteria change, all stats are changed back through history. So we always compare like with like.

@JKJ, Re: “What about a public works program for the government to build artificial reefs on every beach in Australia? This constructive activity would provide point-break quality surf instead of beach-break quality surf. Would this justify stimulus policy funding? If not, why not?”

Simple cost-benefit analysis, JKJ. In this instance benefits to a limited number of surfers would not justify the outlay.

Re: “How about a railway through the Great Stony Desert? Obviously the data don’t exist because it hasn’t been done yet, so you’ll have to answer by reference to your theory.”

Same response. Unless there’s a likely return on the investment, it’s not worth it.

As an example, the pink batts scheme is now assessed as yielding annual savings to householders – and the planet – in the billions of dollars in energy costs avoided. This return will continue for up to 150 years.

Re: “If you’re not using aggregate demand or boosting demand as the criterion, you still haven’t said how you know whether the policies are justified.”

A combination of practical experience, pencil and paper calculations – or computer modeling these days – and inspired guesswork.

Re: “None of those documents addresses itself to *whether* the stimulus policies produce a net benefit to society, rather than merely looting A to satisfy B. They only try to measure *how much* the governments spent, and how much benefit it was.”

Yes. Measurable benefits include:

*wealth
*income per person
*income disparity
*economic growth
*current account
*foreign exchange reserves
*employment
*health care
*pensions
*savings
*productivity
*economic freedom
*home ownership
*exchange rate
*retail sales
*industrial production
*credit ratings
*overall quality of life

Cheers, AA

Well if you're using cost/benefit analysis, why not the cost/benefit analysis of profit and loss? Why not cut out the middle-man of governmental intervention?

But if you're not using profit and loss, what reason is there to think that the cost/benefit analysis of central planning bureaucrats is going to be any better, considering that
a) they have no personal interest in getting it right, and
b) they pay no price for getting it wrong?
If your presumption were valid, it would be valid for all governmental spending whatsoever.

*Economically* speaking, why would the rationale of government's superior competence at resource allocation suddently cut out when it reached the magical 3.3 percent of GDP that you have conjured without giving any data or reason to back it up?

Also, if a bank robber spends his loot on, say, building a school hall, does that mean that bank robbery creates net benefits for society considered as a whole?

I think the stimulus question is now reasonably passe, for Oz at least, and our focus should move to proposed future government expenditure - given that our immediate need would appear to be in bolstering industry to generate the jobs which will be needed as the mining boom slows, whereas Gillard et al appear to be focusing on education and investment in renewable energy.
It's too late to catch-up on our skills shortage, which only skilled immigration may now meet in the short term, and, though education needs a boost it is questionable whether this should be the prime focus at this time. The same can be applied to a focus on renewables, given other priorities and alternatives for boosting our economy in the immediate term.
The MRRT has missed the prime boom years, the carbon tax is working against our competitiveness, albeit marginally, and our high A$ is impacting on exports and on tourism. The high A$ may be an unexpected 'windfall' for Aussies travelling abroad, and a marginal benefit to those with savings, but is a general negative for our economy. Given that the cause for this is external influences, surely it is reasonable to expect our government to boost our competitiveness through industry investment and/or some modest protectionist measures?

Meantime, Cyprus has produced a most unwelcome precedent - that of bank creditors being viewed as 'investors', such that they may lose their 'investments' if the bank fails. This places the role of government 'regulation' of banks in a new light, whereby prospective creditors may expect reasonable assurance of their security?
In this vein, why are bank officials not held responsible and their assets confiscated first - given that they would have to be held directly responsible for any failure? (And, in the U.S.?)
The world is going crazy!

A new development.
The Russians got their money out of Cyprus by using branches of the
Cyprus banks in Russia and the Baltic states.
Probably at night while the Cypriots were asleep. In more ways than one !

The ECU is not amused !

Not good news for the locals.

JKJ, you have reached a new low:

>Also, if a bank robber spends his loot on, say, building a school hall, does that mean that bank robbery creates net benefits for society considered as a whole?<

How about: if a bank fails, who wins?

Profit: Oz avoided recession (per demonstrated resultants - as listed by AA - low unemployment, etc, business as usual, wheels haven't fallen off, still producing approx 80% of historical average GDP - in an overall severely dampened global economy);
Loss: Government Debt/Expenditure (approx 3.3% of GDP in 'stimulus' spending = minute outlay);
Future: Rosy.

We remain 'the lucky country', despite having three tiers of interfering 'government' and relevant bureaucracies. Pray tell where we are getting it so wrong?

My only concern is that Gillard and Co. don't lumber us with any further debt incurred on lavish vote-catching and otherwise fruitless 'schemes' before the 'awakening' in September (or whenever).
Mind you, if AA is right and Gillard and Co. actually do have 'the stuff', I can only hope that she and her cohorts have a miraculous 'vision' of a genuinely better way forward for Oz - starting with a complete makeover of the ludicrous Fair Work Australia debacle, abandonment of the MRRT and the Carbon Tax (and any thoughts of ETS), reining-in of hyper-ambitions for the NBN, introduction of fixed-price electricity across the board, and scaling-back of ambitions to make all childcare facilities 'early learning' extravaganzas for a new generation of 'Einsteins'.

We don't need much - just a 'fair go' (including a guarantee that the latest developments in the EU regarding Cyprus and the potential 'theft' of bank depositor's funds will never be replicated in Oz).

AA. Just because the whole world is cooking the books on employment, doesn't mean it isn't BS.

David

Why is that a low at all? I know there's a legal difference between the forced redistributions of stimulus policies and bank robbery. I want to know whether there's an economic difference.

We keep getting told that Australia is the envy of the rest of the world.
It is true our debts are small in GDP terms and in per capita terms.

The government is not examining the entrails of the goats.
So it does not know what is going on and the PM sacked the only one that knows.

What does not seem to be understood is that the rest of the world is
trying to reduce its debts and we are going the other way increasing
our debts, while at the same time China's growth is reducing and orders
and prices of coal and iron ore are reducing or are expected to reduce.

Prof Garnaut last night warned that we have to transition our economy
from resources to manufacturing.
Now I don't give much credit to Prof Garnaut as he is a business as usual economist.
He has a totally unrealistic view of the future, but I think he is
right as far as resources and manufacture is concerned.
Globalisation will gradually fade away and local manufacture will
return under the crush of energy cost and availability.

Today the banks in Cyprus are supposed to open, but the bank unions
are threatening a strike, oh well as someone said life wasn't meant to be easy !

The whole quote Bazz goes, life wasn't meant to be easy, but delightful.
Yes you are right mate, energy is implicated in growth.
Every western style economy rests on just two support pillars, energy and capital; and basically started going backward, with the first oil shock.
Energy is only dear because our pollies seem to be colluding with the fossil fuel industry, and eco-fascists, who say energy, and all the staples of life that then flow from it, must be dearer!?
Simply put this is BS.
Cheaper energy is possible, by utilising solar thermal heat, to turn endlessly abundant sea water into hydrogen, utilising the older catalytically assisted, water molecule cracking method.
This would produce hydrogen for less than 3 cents a cubic metre, given virtually no moving parts to wear out, wind or wave powered pumps; and the heat source completely free.
The only outlays, by and large, are infrastructure, and start up outlays.
Thorium, is cheaper than coal, and our own biological waste can be powering our cities, via the world most fuel efficient, whisper quiet ceramic solid state fuel cells; and, providing a saleable surplus, if we add in food scraps/wastage.
Lighter than air methane, can be passed through a simple catalytic conversion process, to produce petrol replacing liquid methanol.
Algae can be grown to provide, a ready to use as is unrefined, fuel.
One variety produces ready to use diesel, while another produces ready to use jet fuel.
The ex-crush material, is eminently suitable for net energy gain, ethanol production
Some algae are up to 60% oil, absorb 2.5 times their own bodyweight in carbon emission, and under optimised conditions, quite literally double that bodyweight and absorption capacity, every 24 hours.
Cheers, Rhrosty

Rhosty,
The quote perhaps modified by Malcolm Fraser was just;
"Life wasn't meant to be easy"
in response to a political claim that something the government was
doing was difficult.

Re hydrogen, anything using fuel cells is just not viable as my son's
father in law told me as they cannot even get large ones for buses to
be viable because of short life time.
There are bans on underground parking for hydrogen vehicles.

Oil is now 10 times the 2000 price because it costs more to get out of
the ground. Think of the insurance premiums for deep sea drilling.
That is before considering Arctic drilling.
As much as I am wrapped in electric cars, in the much longer term the
individual's car is doomed.

Hot rocks geothermal and nuclear are the main hopes for electricity
generation.
Solar without some better storage than anything on the horizon will
be expensive to have sufficient storage and just not available for everyone.

Gas might make a transition fuel but it would cost massive dollars.

It really all works like this:

The EU's financial strategies have left Mediterranean members with highly elevated unemployment, rising taxation, huge pension-benefit and services cuts and lastly high debt levels, personal, corporate and sovereign. The 1% is now intent on taking personal savings. The only thing that keeps the nations from going bankrupt is more debt, in the form of ECB loans.

Here is how European democracy works: everybody will do what Berlin wants. Similarly in the US and spreading to a city near you in the future, debt will come home to roost, Europe is just the first in line to show that hubris makes stupid

We now have a situation where no European small saver will ever feel safe again, it’s like breaking an egg; restoring confidence is no longer an option.

Eventually people will realise the truth and bank runs will push banks over the edge, requiring more bailouts, rinse and repeat.
Ironically the 1% doesn’t care. They don't care that the entire southern part of their union is falling over the edge. They don't care what happens to the people in the streets of Nicosia, or Porto, their jobs, their savings, their well-being, their children. They're not accountable to those people.

The only reason for Mediterranean nations to remain in the Eurozone and the EU will be bullying from Brussels and Berlin. This bullying from the core, from those who preach union above all else, which will be the undoing of the entire project, but after more pain of the same kind that now hit the Cypriots will have spread north and eventually globally (the rot won't stop).

Staying in the union offers nothing positive to anyone anymore, except for those presently in power in Brussels and in the capitals of the rich core nations. The dissolution of the union is inevitable. Unfortunately, given the hubris of the general population, so is the inevitable bloodshed that will pave the way there. We in Australia should be wise and watch what will follow and make the decisions now to ensure we don’t suffer the same fate.

I have just spent about 30 minutes listening to a BBC program,
"World Have Your Say", most of the speakers were in Cyprus and they
really are in difficulties, and it has only just started.
Millions of Euros were helicopted into Cyprus from somewhere.
Most of the speakers blamed the Germans, and a couple of Germans said
they have been pumping money into southern Europe although they
thought it wrong to cut depositors funds.

Their problem started when Greece had to cancel government bonds.
The Cypriot banks had invested a large percentage of depositors money
in Greek bonds. Much of it came from Russia.

When the Greek bonds evaporated the Cypriot banks lost most of their assets.
Therefore they had banks but the banks had no money or assets.
That is the crux of the problem, the bank has lost the depositor's money.

cont:
So the problem in Cyprus is different to say, Greece, but they had
let the banks there get too big in that they were handling so much off shore money.
The problem in Cyprus is exactly the same as if the people had invested
in some sort of investment trust, but then it went broke.
In an investment trust, if it goes broke so do you.
As the reasons are the same, that is why the depositors are treated the same.
The banks have no money and have little assets.
Some accounts are said to be insured, but by whom ?
The government ? Was their money in the bank also ?

If they were not in the Euro they could devalue the peoples accounts
and print Million Drachma notes.
The people may not be any better off with their devalued amounts.

What a mess !

more;
I just stumbled across this article linked.
I thought the Cyprus solution was too far out for us until I read this which predates Cyprus;

http://theeconomiccollapseblog.com/archives/cyprus-style-bank-account-confiscation-is-in-the-new-canadian-government-budget

or this;
http://tinyurl.com/cx7bbvf

Is this one of the subjects that got discussed at these G20 etc conferences ?
Just bear in line that Wayne Swan has been attending them for some years.
If Canada can put that on their list of must dos I think there is a
good chance it has been seriously looked at in case it is needed.

Bazz, you might also be interested to know that the Russians and British as well as a few other nations 'big depositors' removed most of their money whilst the Cypriot's home bank branches were closed.

They managed to do this because the main Cypriot bank has branches in Moscow, London and a few other European cities, these branches did not close and the big depositors (mainly Russian Oligarchs and Mafia types) still had access to their accounts and managed to transfer their money to other safe havens.

Unfortunately the Cypriot man and woman in the street did not have this option and have been left holding the can.

The same think happened when Iceland failed.

It's like 'jobs for the boys' if you are in the club you never lose, if you are one of the 99% you will always lose.

Cheers
Geoff

This 'bail-in' idea seems all back-to-front. Of course it all stems from the experience in the U.S., where only Lehman Bros took the big hit (and even there it appears that the assets of those at fault - the directors and senior executives - were not seized, as they should have been, in proportion to those parties' direct responsibility for the losses of ordinary investors), and where the directors, executives and account managers of the likes of Goldman Sachs and AIG, etc, have not been held responsible for their role in the whole GFC disaster - but rather, massive bonuses were paid, virtually out of public funds and the funds of massively losing investors. Where is justice?

It seems clear to me that the first who should pay are those directly responsible for a financial organisation's bad investment decisions, with their private assets frozen, and withholding of salaries and bonuses, until the mess is sorted by appointed administrators. If ordinary investors' funds are to be used in a bail-out, then these investors should become the holders of equity in the institution, in proportion to their 'investment' in the bail-out - they become part-owners, just as the U.S. became a part- or outright-owner of some of their failing investment organisations - and such private investors should have a say in bail-out plans, just as equity investors do in a company's AGM, but regarding what portion, if any, of their holdings may be used in any bail-out, what reciprocal equity they should receive, and on what terms.

If one cent is 'confiscated' from ordinary private bank savings in Cyprus or elsewhere without a reciprocal, and appropriate, conversion to equity, this can only be viewed as government-supported highway robbery, nothing less, and relevant government(s) must be held directly responsible as a co-conspirator and thus subject to legal challenge.

Until the U.S. pursues legal action against the perpetrators of the GFC to seek reparation for ordinary investors it, the U.S., can only be viewed as complicit, not only in that debacle, but also in all the ensuing failures around the world.

"this can only be viewed as government-supported highway robbery, nothing less"

Bravo Saltpetre! At last you've got it!

Now, can you see that there's no way that government-sponsored and -imposed fractional reserve banking can be anything else? How could you have a government-granted monopoly power to manipulate the money supply, exclude competition, and require the banks to buy government debt in exchange for issuing new money, that could be anything other than government-supported highway robbery?

What evidence or reason is there to think that the government and the banks wouldn't use it to defraud the population which is exactly what's been happening on a grand scale?

The very expression 'highway robbery' presupposes that you care to protect private property rights. But when I ask Alan how the economy knows whether the source of the stimulus funding is criminal or governmental violations of property rights - you answer that that I've reached a new low, as if it's wrong to ask how you can distinguish monetary policy from criminal activity?

But that's what you're arguing, remember?

"relevant government(s) must be held directly responsible as a co-conspirator and thus subject to legal challenge."

Hooray Saltpetre! Now you're getting it!

Fractional reserve banking is a crime, sponsored by government, against the people, but you can't sue the perpetrators, because they have control and the backing of the legislature, and simply apply a double standard, declaring that what's a crime for anyone else - printing money - is socially beneficial when they do it.

But that's what you and Alan have just been arguing *in favour of of* remember?

"Until the U.S. pursues legal action against the perpetrators of the GFC to seek reparation for ordinary investors it, the U.S., can only be viewed as complicit, not only in that debacle, but also in all the ensuing failures around the world."

Hooray Saltpetre! Everyone else, listen up please!

Alan
So, how does the economy know whether the source of the stimulus funding is criminal or political activity? What is the economic difference, if any, if they are both spent on the same stimulus project that you approve of?

When you do your cost/benefit analysis, do you count the value received by the owner of the wealth that was taken by government to pay for the stimulus spending, on an equal footing with the value received by someone else? If so, why, and if not, why not?

Geoff, yes I heard about the Russian raid on the Moscow branch.
When the Cyprus President went to Moscow they probably made him an
offer he could not refuse.
I also Heard on the BBC that Estonia was given a wrap over the knuckles
by the EUC for being a naughty boy for being involved, and if they want
to be part of the Euro, they should behave.

Geoff, when it finally starts to crank on the 1% will be in the same
boat as the rest of us, but out of habit they will probably be the
Lord over us tenant farmers.

No one thought the government could consider fiddling with the super
but if they can do that, I guess they would not think twice about the
snatching some of bank deposits.

Talking of deposit insurance, does anyone know if the guarantee
applies to $250K in each bank or to $250k no matter how many banks it is in ?
Also when $20 billion in claims is paid that's it, the end, all the rest can whistle.

Cyprus now, Egypt next ?

http://news.yahoo.com/egypt-calls-favours-credit-crunch-hits-key-imports-084458158--finance.html

http://tinyurl.com/d4obtas

This will make Cyprus look like a picnic where someone forgot the sausages.

Egypt has been hand to mouth for some time. Due to its oil production
peaking in 2000 it has been a significant importer.
This meant that the subsidies on fuel have been a big burden as the
price oil has increased 10 times since 2000.
They also susidise food imports as they cannot supply from the
Nile valley since their population doubled from 40 million to 80 million.

AA & Jardine,
When you were arguing I could not be bothered to wade through all your
posts. However I have just read something by Gail Tveberg that I am
sure will interest you both as it makes both your arguments redundant.
It is about how the economy is winding down and how it is being driven
by the cost of energy.

http://tinyurl.com/bn89p29

Thanks Bazz, for a very interesting post. It looks like the middle east dominoes are getting ready to fall. Egypt of course has a trump card in the Suez Canal, and are looking to use it to blackmail the U.S. and EU to bail them out, plus courting other Arab countries in the region so as to put even greater pressure on their Western Friends to come to the party.

Egypt clearly demonstrates the folly of a state-wide social welfare system subsidizing basic commodities, bread and fuel, while the state lives on borrowings and delayed-payment accommodations. It looks like Hosni Mubarak's government held off reducing fuel subsidies once Egypt's own oil production started to decline, probably to retain power. A fool's paradise. Subsidizing food must also be a prime indicator of a failing state.

Lessons not learned, responsible responsive action forestalled, producing an economic basket case, and resulting in revolution when essential corrective action is proposed. So now, Egypt gravitates towards becoming a sectarian Islamic state (though its government protests otherwise), and a contest looms between the West, trying to stave off such an eventuality, and Arab states which may have an interest in the formation of a major Islamic coalition - potentially to restrict oil flow to the West and to embark on evolutionary, and long-overdue development of Arab nations towards much greater self-reliance and stability. Iraq, Libya, Egypt, Qatar - so far.
May religious differences (Sunni/Shia) be set aside in the interest of an Arab/Islamic conglomerate with power to stick it to the West, at long last?
Egypt has been Western-friendly, attracting aid and military support, probably based on Suez staying open to unhindered trade, but will this stand up against the perceived objectives of a Muslim Brotherhood?

U.S. and EU overstretched financially and militarily, limiting capacity to respond to Egypt's current plight. Troubled sailing ahead.

Yes, I think that Egypt will be the next domino.
If the canal is closed it may well be cheaper to subsidise ships to go
via the Cape than subsidise Egypt.
From China and Australia it might be cheaper via Panama.

The Arabs generally do not understand how precarious is their situation.
At present some Gulf countries are supporting Egypt by selling them
cheap fuel or just giving them money, but that cannot go on forever.
Eventually they have to support themselves and as they cannot grow
enough food in the Nile Valley for their population they must earn it
some other way.
Tourism is finished for now anyway but more troubles seem certain.
They either have to reduce their population or standard of living or both.
This a microcosm of what Ludwig was been warning on OLO.

Bazz
You are contradicting yourself, and obviously don’t understand the arguments.

> JKJ: Bazz, Energy prices are rising. So what?

>>Bazz: See, missed the point, has not twigged that it is not about money.

You then link to an article whose main point is: “In my view, the danger is quite different: The real danger is financial collapse, coming much earlier than a decline in oil supply.”

Therefore even you think it is about the money, and nothing you have said gives any reason for thinking that the government can magically create wealth out of forced redistributions of money substitutes, which is what Alan is claiming, and I have just comprehensively disproved.

Saltpetre
“Lessons not learned, responsible responsive action forestalled…”

And the solution is what? More monopoly government manipulation of the money supply?

All
What is happening in Cyprus is just more of the unravelling of the unsustainable fraud of fractional reserve banking around the world. Bazz and Saltpetre can see it's fraud. But that's not good enough. You have to understand that the pretext for its existence is the Keynesian nonsense that Alan has just demonstrated cannot be defended rationally or ethically. While ever you persist in thinking that government creates benefits by manipulating interest rates, or that the problem is being caused by declining supplies of energy, it means you're confused. It may be that energy supplies are an issue, but that's not what's causing the economic ructions and shenanigans in Cyprus - government control of the money supply is!

No Jardine, you missed the point again.
It is about what happens to the economy as a *result* of the geology.
It forces money into irrelevance.

The money is like a plane that runs out of fuel.
There wasn't anything the pilot could do, printing more planes won't help.
Trying to use less fuel (money) won't help either.

At this stage it does not matter a tinkers damn what you do with the money.
That is why many economists say nothing is working.
They tried wearing out the printing machines and they tried locking
the vaults and that didn't work either.

What Gail was saying is that it is the loss of energy that causes the
economy to fall over and that hides what is happening below the money.
Everyone thinks the money is being applied to the job but it is irrelevant.

JKJ,

>that's not what's causing the economic ructions and shenanigans in Cyprus - government control of the money supply is!<

Or, is it lack of government control/regulation of money and the banking system?

>And the solution is what? More monopoly government manipulation of the money supply?<

No, the dilution or removal of subsidies on fuel - scaled-in as soon as it becomes clear that it is a no-win situation (ie when the cost of the subsidies cannot be sustained, or justified, by related government revenues and returns).

Welfare and unregulated banking run rampant, as seems clear in Greece and Cyprus (and probably also in Italy, Spain, Egypt, and perhaps even Libya), is a recipe for disaster. Scaled welfare, designed to assist people over a temporary hump before getting back into productive employment (or to sustain the frail and disabled) is a fine measure - as long as it is scaled to the capacity of the economy.

With everyone pointing to the affluent and the wealthy, and aspiring to a similar life-style, the world is being led down a one-way track to exponential non-sustainability - with huge brass knobs on!

Government may be a necessary evil, but how can anyone expect things to be other than far worse without government regulation and fiscal management? How else public infrastructure and essential services? Without government, only those with means could afford any reasonable quality of life; a lord/serf system would prevail; the 'work-house', beggars, and the insanely poor would be commonplace; law enforcement would be impossible; dog-eat-dog.
Even with reasonable governance the world is clearly in a mess.
Surely the answer is better governance and more effective regulation, not less, including a complete revamping of global monetary, finance, banking, and fiscal systems/arrangements.
People, left to their own devices, simply cannot be trusted in the main to always be fair, ethical or honest. Hence, law and order needs to be universally balanced and universally applied, without fear or favour - in respect of individuals and governments.
Can it be? Maybe in a future, universally inclusive, and far more humble world.

Continued.

But how to fix it? Truth is it is probably too late. How the hell do you stop a leach sucking, before it's full? Our academia is so bloated, & incompetent it probably not worth saving, but watch out it spits if disturbed. One day a week of effort is too much for most of them.

A point of interest, just watch how many lefty politicians, chucked out come election time, find a home & pay packet, in academia somewhere.

The bureaucracy is probably even worse, if that's possible, some of them would die of fatigue if asked to do a day’s work a week. They spit too, just look at the rabble Newman chucked out, & the noise they make. Probably the first time some of them have woken up in years.

Then the bludgers. The bleeding hearts hate the idea of asking them to sing for their supper, but I love it. Let’s scrap all street sweepers, & roadside slashes. When the bludgers want a quid, show them a broom, or a scythe. Tell them to come back after a couple of miles work. Hell even single mums should be able to do that with a baby on their back, Indian women did.

So again bury your gold, because if our pollies don't cut all three leach classes by at least 50% we are done for.

It is only a matter of time, & the mobs of Rome will trample us in the rush for whatever they can grab. Just like those Tuna, they will wipe us out, & only shed a tear when they get hungry, & we are nowhere to be found.

Will it be the Chinese, or the Muslims? I hate to think of this as the future for my kids, & their kids, but I doubt we will find politicians with the guts to do what’s necessary. Even as we sink they’ll be too dumb, & the leaches too lazy to bail.

You started to get there Saltpetre, then you got lost. The problem is of elites & bludgers.

At the start of civilisation we have a village chief & a few courtiers, the village idiot, & perhaps a cripple.

Add some decades & you have a king, with many courtiers, village chiefs become noblemen with courtiers & bureaucrats, but they do supply defence, & there are still only a few idiots & cripples.

Add a century & you have a President/PM, with thousands of courtiers & bureaucrats, there are mayors everywhere, with more attendant bureaucrats, a standing defence force, & higher education, serving only the elites. Some how the idiots & cripples have multiplied.

Another century & you have a top & bottom heavy country. A huge proliferating self serving bureaucracy & higher education system crushing the productive sector, but now with a huge useless mass of bludgers who can never be sated, no matter how much they are given.

It is stuff all to do with the cost or availability of energy, it is the sheer weight of numbers dragging on the coat tails of an ever shrinking productive sector.

It is like watching a bunch of tuna rip into a school of bait fish. They rip in, grabbing everything they can get right now. Bugger tomorrow, they want it now. Suddenly the bait fish are gone, no more to rip off. The elites & the bludgers have got it all, tomorrow is eaten, & the civilisation collapse. Nothing to do with hydrocarbons.

Continued

Hasbeen, what you say is correct, but the reason we can no longer
support the hangers on is because we no longer have the spare energy.

It was loverly on the ride up the production curve, there was all that
spare cheap energy, but all good things come to an end.
We can no longer support them in the style to which they have become accustomed.

Both China and India are aiming for growth that will double their
economies in less than nine years.
Does anyone believe that can be done and we still maintain our standard of living ?

Something has got to give !

Bazz
"At this stage it does not matter a tinkers damn what you do with the money."

So will you give me all of yours?

Saltpetre
It should be obvious from reading your post that you are involved in a tangle of self-contradictions. For starters, where did you get the idea that banking is "unregulated"? The very fact that government regulates the price of it, is telling you all you need to know. And where did you get the presumption that government represents the wise and fair overseeing of banking or anything else. Not even you agree with this - just look at your past posts in this thread.

Bazz
Also, the fact that energy becomes more scarce doesn't make people magically cease to value money as a medium of exchange; and doesn't mean that money's performance of that function is jeopardised.

Bazz, Saltpetre

"It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a 'dismal science.' But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance."
Murray Rothbard

JKJ,

We seem to be at cross-purposes. Do you really think we are talking about economics here, economics in a vacuum, rather than the blatant manipulation of the world's banking and economic systems by totally unscrupulous ego-maniacal vested interests?
Libor ring a bell, GFC, sub-prime loans, worthless derivatives and synthetic derivatives, synthesized massive real estate bubbles, 'buddy' loans, political donations and lobbying to engineer de-regulation of banking, investment and fiscal management systems and to foster militarisation and exponential growth in defense industries?
There is a poison afoot, and it is entirely the love-child of the minds of pathetic, egotistical and entirely unscrupulous MEN (and some pathetic political ignoramuses).

When we talk economic theory we are talking about how to reverse and get out of this intolerable and unconscionable mess. Oz applied a theory, and got out of the immediate priority mess, but it is by no means end of story. There is much work to be done, and it involves some of the most powerful and most influential people on the planet.

We need a revolutionary change in mind-set, not a bandaid, not a tweek here or there. So, who and how to do this? There are currently no better theories than Democracy, Capitalism and Economic Prudence, but all have been corrupted and diverted away from 'best practice' principles. Is less government intervention a solution, or better government intervention? Please, don't say NO intervention.

We need a change in Democratic and Capitalist endeavour, away from growth for its own sake, and towards inclusive sustainable resilience.
Quarks and iPads, or Bread? Money is a means, how to use it is a choice.
Terrorism - a prime growth opportunity, or a self-inflicted disease? Treatment - war, or constructive amelioration?
A world for all, or only for the 'survivors'?

This looks like where the authorisation to confiscate the deposits in
Cyprus's banks came from.
The G20 meeting in Seoul in 2010 was agreed by members, which included
Australia. Whether Australia has ratified or adopted I do not know.
It would seem to be the basis for Canada's recent legislation and the
justification for Cyprus.

Next, in Seoul 2010, “G20 leaders endorsed this framework and the timelines and processes for its implementation.”

That framework is set out in the FSB’s “Key Attributes of Effective Resolution Regimes for Financial Institutions” (pdf).

On the 11th November 2010 the G20 conference in Seoul agreed to a document that set up
the procedure to seize the funds of depositors amoungst others.

Preamble

The objective of an effective resolution regime is to make feasible the resolution of financial
institutions without severe systemic disruption and without exposing taxpayers to loss, while
protecting vital economic functions through mechanisms that make it possible for
shareholders, secured and unsecured creditors to absorb losses in a manner that respects
the hyrachy of claims in liquidation.

What is of serious concern though, is its power to “transfer or sell assets and liabilities,
legal rights and obligations, including deposit liabilities and ownership in shares,
to a solvent third party,” … without consent -

Under General Resolution Powers

Paragraph 3.2 vi states

Transfer and sell assets and liabilities, legal rights and obligations. including
deposit liabilities and ownership in shares, to a solvent third party,
notwithstanding any requirement for consent or novitation that would otherwise
apply (see key attribute 3.3);

The question is, has Australia agreed to or indeed ratified this G20 agreement.
It would appear that this agreement is the basis for the recent Canadian legislation.

Here is the link where I came across this info.

http://tinyurl.com/d2hzjrn

It seems that what I always understood to be meant by a bank has changed.

"We need a revolutionary change in mind-set, not a bandaid, not a tweek here or there."

Yes we do, but more of the same is not that revolutionary change, is it? And what is your suggested remedy - even more regulation by those presiding over the massive fraud and corruption - but more of the same?

The revolutionary change in mind-set that we need is: freedom. The history of money has been one long history of abuse by governments of their monopoly power, from the days of debasing coins with less precious metals, to every kind of jiggery-pokery imaginable.

The one thing that has never been tried, is to abandon money socialism.

This does not mean "NO regulation". It means that the legitimate function of government is to enforce the law against fraud, and the law of contract, not to “manage” the money supply. The reason is, because such management cannot take any other form, than manipulating the flow of treasure in its own direction, and anyone who can help get their hands on it – the banksters.

So you’re contradicting yourself, because on the one hand you say the system is corrupt and stinks, which is true, but on the other hand you say the solution is more of the same – monopoly government privilege to manipulate the money supply.

The idea that government magically creates benefits for society by printing money is just complete rubbish, and we need to recognise that. It’s why Alan was completely unable to defend it, went round and round in circles when challenged, and just ended up referring me off to the statistical compilations of the western world, as if that proves it! If you can’t recognise basic logical errors and dodgy crawling to those in power, what makes you think you can re-design society?

Just think: if the solution were more regulation, then how could that NOT take the form of granting legal privileges for some people to benefit at other people's expense? What would be an example of government regulation of money that did not answer that description?

Bazz, I think you may be missing the point a little here.

>>This looks like where the authorisation to confiscate the deposits in Cyprus's banks came from.<<

If a Bank is allowed to fail, that money would disappear completely anyway. "Confiscation" would not enter into the discussion; the funds would simply be lost.

What the governments are trying to do is reach a position where the depositors don't lose their savings completely, hence the various levels of government guarantees around the place. The EU standard seems to be 100,000 Euros, the UK 's is Stg 85,000. Above that level, the bets are off. But wouldn't you agree that given the choice of keeping a hundred grand or losing the lot, you probably would opt for the former?

Once again, "confiscation" is entirely the wrong word, since in a failed Bank there are, literally, no funds to confiscate. They don't exist.

In Greece, they helped the Banks survive by giving their bondholders a "haircut" on the money they were owed, reducing the Banks' debt exposure. Cyprus' Banks had few bondholders, but many depositors, so their only recourse is those deposits.

Another option - one that was exercised in the UK early on in the GFC - was where the government nationalized the failing Bank, and takes on its liabilities. This could not be implemented in Cyprus, as the Banks balance sheets represented 800% of the country's GDP.

Banks have failed throughout history. There has not been a time when depositors' interests were so cherished and protected by governments as today.

Fact.

"We need a revolutionary change in mind-set, not a bandaid, not a tweek here or there."

Yes we do, but more of the same is not revolutionary change, is it?

And what is your suggested remedy but more of the same: even more regulation by governments, implicated up to their necks in massive systemic fraud and abuse?

The revolutionary change in mind-set that we need is: freedom. The history of money has been one long history of abuse by governments of their monopoly power, from the days of debasing coins with tin, to every kind of paper and digital fraud imaginable.

The one thing that has never been tried, is to abandon money socialism. What you’re suggesting is MORE socialism, not less.

This does not mean "no regulation". It means that the legitimate function of government is to enforce the law of contract, and the law against fraud, not to “manage” (ha ha) the money supply. Such management cannot take any other form than manipulating the price of money to benefit political favourites at the expense of the productive class.

So you’re contradicting yourself, because on the one hand you say the system is corrupt and stinks, which is true, but on the other hand you say the solution is more of the same – monopoly government privilege to manipulate the money supply.

You are reluctant to abandon the panoply of government controls, with its prestigious mystique, because you IMAGINE that government thereby magically creates benefits for society by printing money. But what if your theory is wrong? What makes you think you would know? Where would you find out? From the government? From compulsory state education? From the mass media, drenched in Keynesianism? Where?

If the theory of government’s necessary and beneficial management of the money supply is wrong, that would have explaining power, wouldn’t it? It would explain the GFC to a ‘t’, wouldn’t it?

And it would explain why when challenged, Alan was completely unable to defend it, went round and round in circles, and just ended up referring me off …

(cont.)

Bazz. With reference to hydrogen, I believe it should be reserved for very large projects, like rail, where the fuel cells and capacitor banks, gas pipes, can be located alongside rail/tram lines.
This would make those transport options, the cheapest ever!
Fuel cells degrade over time, given water cooled polymer converters. The more expensive platinum, is definitely more durable, but inordinately expensive for practicably purposes.
The very cheap polymer films are easily replaced, say every ten years, and the old material recycled.
Electric cars will be virtual hybrids, with the conventional engine replaced with CNG or scrubbed biogas, (methane) converting ceramic fuels.
The fuel cell weighing less than the conventional engine it replaces.
Something around 85% of the energy consumed by the conventional engine is used up spinning the flywheel and the attached alternator, which by the way, weighs nearly as much as its companion conventional engine.
Energy regenerative braking and storage capacitators, will extend the range well beyond that of petrol powered engines!
The ceramic fuel cell has the highest energy coefficient in the world at 60%, and virtually all of the energy produced goes directly to the wheels or inboard amenities.
The exhaust from the process is mostly water vapour.
This option eliminates the need to carry/transport half a ton of extremely expensive batteries.
Green car money stumped up by the Govt, should only ever go to locally manufactured carbon fibre vehicles, powered by the foregoing option.
This would also create a massive export market and economies of scale, we can only dream about!
Also, we have copious NG supplies, but still need to import almost every litre of highly refined petrol or diesel! And all paid for with increasingly limited export dollars!
Local suppliers, are on the public record claiming, even with a fuel excise imposed, they could supply domestic NG for around 40 cents a cubic metre. A cubic metre of NG having the same calorific value as a litre of petrol.
Rhrosty.

… to the statistical compilations of the western world! But correlation doesn’t prove causation! If you can’t recognise basic logical errors, and obvious crawling to the powerful, what makes you think you can re-design the monetary system or society?

Just think: if the solution were more regulation, how could that NOT take the form of granting legal privileges for political favourites to benefit at other people's expense? What would be an example of government regulation of money that does not answer that description?

If you say that the answer is more regulation
a) as Alan has just proved, you can't justify this magic-pudding theory that wealth comes from printing paper and sponsoring wasteful boondoggles, rather than the more obvious explanation,that such policies simply take from A (owner/producer) and give to B (political favourite)
b) you can't justify it ethically
c) you ignore the fact that all the gross abuses and corruption that you correctly identify, have happened and are happening under government regulation, so what makes you think more of the same is going to improve it?

Democracy is only the best theory if it DOESN’T mean massive systemic theft.

But it does under Keynesianism, which is why Alan can’t distinguish the Keynesian rationale for political versus criminal wealth redistributions. Democracy would only be the best theory if it meant respecting the property rights of others, which central banking intrinsically infringes and corrupts.

Every time you infer that government creates benefits by manipulating the money supply, you cement in the mentality that is causing the problem, for which you yourself say the remedy is a revolutionary change in mind-set.

Perhaps you could start with yourself? Merely examining your own beliefs to remove your self-contradictions would be a good start, wouldn't it? At least make an attempt to understand what you’re talking about. I respectfully recommend the following to see through the bullsh!t spun by the Pharisees.

“What Has Government Done to Our Money?” by Murray Rothbard
http://mises.org/books/whathasgovernmentdone.pdf

“The Mystery of Banking” by Murray Rothbard
http://mises.org/Books/mysteryofbanking.pdf

"Economics in One Lesson" by Henry Hazlitt
http://www.hacer.org/pdf/Hazlitt00.pdf

Rhosty,
If I had my druthers and I was treasurer, I would say no more
money for roads, it must all be put into rail.
I would reopen the closed lines in the country where at all possible,
even if they had to be run at a loss for a while.
It would revitalise the freight of harvests.

My son's father in law that I mentioned earlier was on a British
Government committee to look at changing the UK bus fleet to CNG or
hydrogen. He represented the bus building company he was MD of at the time.
Mercedes had some trial buses as they did in Perth and his company
built a number of fuel cell and NG buses, but they never were
financially a success. Getting the fuel tanks purged on the buses
was always a problem, and the hydrogen had numerous other problems.

CNG probably won't be used until there is no alternative but to spend
the big money and make the change, provided we have the money by then.
Someone in the US did the arithmetic to cost the change to CNG and
the figure was more money than the US could ever raise.

I hope that can overcome problems with fuel cells, which are mostly
financial and service problems. However I feel that in the longer run
there will be no place for individually owned cars. Perhaps we will
see ideas like the J-Pods take off. Small automatic pods on route
follower systems.

From the Resiliance web site.

The Next Domino ?
Egypt: The fuel and food situation continues to raise fears that a general uprising could engulf the country.
Egypt’s hard currency reserves have fallen to $13 billion from $36 billion two years ago, but much of this reserve is illiquid and billions are owed to foreign companies that operate Egypt’s oil and gas fields.
The immediate crisis is insufficient diesel fuel needed for irrigation pumps, harvesting this year’s crop, and transportation of nearly everything.
There are long lines at filling stations in many parts of the country. The government is attempting to install a rationing and distribution system for fuel and flour in hopes of curtailing black market sales which are running rampant, but Egyptian papers are saying this may not become effective until January.

An IMF team is due back in Cairo on Wednesday to continue the loan talks, but government insists it does not need an emergency loan at this time and still seems unwilling to impose the harsh austerity measures demanded by the IMF for fear of provoking more rioting.
The Morsi government seems to be taking the position that the country is too big to fail and that the outside world cannot afford to let the Suez Canal close, so somebody will step in and bail the country out.

The only bright spot of the week was the offer of oil from Iraq and Libya which the country can no longer afford to purchase on the open market.
Egyptian diplomats are reported to be making the rounds of the oil-producing states seeking loans or gifts. Whether this aid will be enough to allow Cairo to muddle through the current crisis remains to be seen.
Over the weekend, Egypt’s most popular television satirist was arrested for insulting President Morsi in what could be the beginning of a crackdown on anti-government dissent and another round of troubles.

JKJ,

> the legitimate function of government is to enforce the law against fraud, and the law of contract, not to “manage” the money supply.<

By the time a fraud or breach is identified the horse has usually bolted (Dot-Com, GFC?), or else drawn-out litigation ensues, enriching lawyers and leaving even less for creditors. No, the answer is better control. As to managing money, prudential assurance and guarantee is key. (GFC perpetrators walked away with buckets of money, at expense of ordinary creditors. Regulation and oversight failed or non existent. 'Loose' credit created a spending and construction orgy, with consequent inflationary pricing 'bubble', and together with trading in 'worthless' or exceedingly overvalued commodities conspired to generate an inevitable 'crash'.) Buying bonds (govt or private) is a gamble, like buying shares, so buyer-beware, and prudence and investigation of underlying 'value' is key.

As for: >monopoly government privilege to manipulate the money supply.< This is simplistic - because govt itself can 'manage' only a portion of available supply; the rest it should assure meets reasonable proven prudential assurances. (Who else could do that?)

>The idea that government magically creates benefits for society by printing money ..< No, but money supply is not static - how else did Oz' GDP go from $A300 Billion circa 1980 to over a trillion now (with similar rises all over the world)? As for 'fiat money', this is just different currencies, and there's nothing derogatory in that.

>more regulation ... how could that NOT take the form of granting legal privileges for some people to benefit at other people's expense? What would be an example of government regulation of money that did not answer that description?<

You are blaming govt instead of the actual fraudsters - who are mostly bankers, traders, company CEO's and Financial Comptrollers, and possibly Auditors and Credit Rating Agencies. Govt's have been complicit in some instances by LACK of appropriate Regulation and Oversight (eg. USSR, U.S. of A. and possibly Argentina and others - but NOT Oz). TBC>

Cont'd>
>manipulating the price of money to benefit political favourites at the expense of the productive class.<
Simplistic horse-feathers. Wage Increases + easy credit availability > price increases > inflation > GDP increase;
Productivity Increases + lower material and capital costs > lower prices > stability or deflation + GDP increase.
Balance is key. Money supply has to fluctuate with wages, profits/losses, balance of trade. Money supply should balance with net productivity; and no loans, bonds or Treasuries should be issued without balancing securities (asset and up-to-date balance-sheet values). Has this balance been adhered to? No. Result - GFC, bankruptcies, bail-outs. Where did bail-outs come from? Govt debt (issuing bonds or extending 'warehouse' IOU's) but without reciprocal assets, securities or prudent balance-sheet projections. Result: chaos, industry slowdown, job-losses, lack of credit > downward spiral.

I read enough of Murray Rothbard to realise he is stuck in a time-warp loop. Money IS only useful for its exchange value, BUT, money IS a commodity and subject to fluctuations in intrinsic value like any commodity. Money is not static, for every winner there is a loser, and, if fraudulent manipulation (see causes of the GFC) is widespread, money loses exchange value (see $US and Euro).

Henry Hazlitt (1946) suffers from a flawed belief that all govt expenditure equates to lost (and supposedly more cost-effective and beneficial) productivity in the private sector; and therefore govt expenditure (and therefore taxation) should be limited to the barest essentials. Codswallop. There has, of necessity, to be a mutually beneficial balance.
Destructive-reconstruction, broken glass: Archaic!
Fractional Reserve Banking: Inherently sound if loans are soundly based, and balanced by actual asset/security value (in current terms). Failure occurs when banks/companies attain funds by sale of 'questionable' or valueless bonds or securities/shares (based generally on balance-sheet chicanery), and either the market or govt fails to detect and/or prevent this, or is otherwise collusive.

We may agree to differ, but I believe you need better reference material; and I need a digital-age crystal ball.