Good article.

On the one hand governments hold themselves out as the saviour of the economy, and the promoter of "jobs" and economic growth; on the other hand they waste trillions of dollars on programs intended to stop economic growth and deliberately make energy more expensive.

How appropriate that the doomsday cult of the Church of Climatology should be behind the modern politically-driven book burnings: http://www.cnbc.com/id/34703166

Governments' disastrous monopoly on the supply of money and credit, driven by its addiction to inflationary finance, are what caused the GFC, not "unregulated capitalism"; and in any event, obviously anyone supporting the current fashionable fad (hysteria) for policies to fine-tune the weather in 500 years time should be rejoicing at economic depressions and the bigger the better. Let their jobs and homes be the first to go!

The missing concept is freedom.

Underlying all interventionism is the assumption that government knows how to allocate scarce resources to their most valued social ends. They don't, because people in government have all the same ignorance and greed, faults and follies, as capitalists and other human beings, but
a) have the additional vice that they are backed by a legal monopoly of aggressive force and fraud; and
b) governments officials lack the incentive, and the ability to calculate economically without relying on the market data they are constantly destroying and corrupting.

A world as much better than ours is today, as ours is than the world of 200 years ago, awaits us but the "progressive" (totalitarian fascists) have to realise that the coerced labour of taxation is no more able to take us forward to it, either ethically or pragmatically, than the coerced labour of slavery was then.

Paul Collits apparently needs to catch up with modern economic theory.

Dr Stephanie Kelton, Cahir of the Economics Department at UMKC, recently presented an excellent power-point supported article at a meeting of the Field Institute, Toronto, Canada. Slide 48 showed the sustainable operating space for a sovereign currency area.

From 1997 to 2007 the Howard Government's policies resulted in the Australian economy operating each year at least marginally within the unsustainable area of Kelton's chart. Some years the economy was substantially within that area. The period in the unsustainable area was the cause of the turn down in the Australian economy in 2008.

The increase in private debt in the Howard era far outweighed the Federal Budget balance gains.

We are still suffering massive underemployment because of the foolish belief that budget deficits always cause inflation. Sovereign government spending to utilize available resources does not cause inflation.

Shortage of available resources causes inflation. At the moment Australia has about 12% total underemployment and plenty of spare manufacturing capacity. We could be employing both without causing inflationary pressure.

The sovereign, currency issuing government can afford a deficit if that deficit puts available resources to work to provide things that will benefit the community.

Somebody sit on this bloke quick.

He can't be allowed to get away with talking so much sense.

Note to Foyle: Keynesianism is a throw-back to dark ages economic theory.

The ideas that we can make society wealthier by
a) engaging in superstitious activities such as stamping special squiggles on pieces of paper, or
b) looting A to satisfy B,
are flatly incorrect, and it doesn't matter how much appeal to absent authority you make in an attempt to assert they are correct.

Jardine Jardine
Before making such a comment you need to become aware of, and read, some of the blogs at,
www.neweconomicperspectives.org

That is the blog site of the Chair of the Economics Department, University of Missouri, Kansas City, Dr Stephanie Kelton.

A good introduction would to be read J D Alt's item about the USA mobilisation for WW2 at, http://neweconomicperspectives.org/2013/08/mobilization-and-money.html

You could then follow that reading up with some of Alt's earlier articles and the article and slides by Dr Kelton at the Field Institute as mentioned in my earlier comment. The most pertinent slides are Nos.10 to 30 and 48 to 54 from memory

Economist James Galbraith, son of the Author of "The Affluent Society" is satisfied that the best economic comments in the world presently come from UMKC.

Even Paul Krugman's articles are getting close to the UMKC views. Do some study of up to date alternative views before placing your foot clearly in your mouth.

Good heavens, Paul, I would have been happy to have written that myself. Delighted to find someone in Queensland with such understanding. Thanks to JKJ and Hasbeen too.

Foyle
You are ignoring the fact that I have totally demolished your economic theory many times over. If you want, I'll do it again just so everyone can see that you can't defend it without relying on one of the following logical fallacies:
- appeal to absent authority
- assuming what is in issue
- misrepresentation
- ad hominem
in fact, the standard arsenal of all left-wing and statist thinking, without which the entire edifice crumbles into mere excuses for parasitic behaviour.

You can start by telling us by what rational criterion you know whether governmental provision of any given service is too much, too little, or just the right amount?

The whole premise of modern economics need change else we'll see more GFC's that will be far worse. The world can not grow exponentially for ever. Everything has it's limits. There is only so much ore in the ground. This mixed with a throw away society is a disaster waiting to happen.
The new paradigm must be based on sustainability. Instead of throw away products start to make products that can be repaired. This will start a whole new industry of spare parts plus skilled people to repair them. The initial product will cost more but you will have a product that will last. This will start to bring down costs in other areas. For example a roofer would not have quote with replacement drills in each job. Mechanics would have more work so you will eventually see companies that will specialize in pure maintenance work and others purely specializing in full on repair. Then specialize further with say gearbox repair. As the sciences become more and more complex we have to start to specialize more and more. Communicating with one another in groups, not relying on individuals. Creating more jobs for the people and more revenue for Governments and much less landfill. As an aside, did you know at the moment there is more base plastic (plastic is naturally produced as a small sphere and will return to it) is some oceans then krill. The first step in ocean's food chain. We also need to put a muzzle on unfettered greed. Which should be looked at as an undesirable human trait. It served a purpose while we where in caves. It stifles modern economies and technologies. Those that posses technology thus power try to keep the opposing technologies stifled so they can keep there power. Look at the patent war's in electronics. Pythagoras didn't study mathematics based on greed. He made nothing from his theorem. He did it simply because he though he could thus should, a desire for knowledge. A desirable human trait, we are supposed to be civilized now. Perhaps we need to act like it!

We certainly face an “uncertain future” but not for any of the reasons you are spruiking.
Energy and other finite resources are what is limiting “ever increasing living standards”
Australia and the rest of the world have far too many people and it will be increasingly difficult to supply even the most basic living standards.
Australia should lead the way and can all immigration from any source, stop building road tunnels, desalination plants and second airports.
An ageing population can still be productive, people can easily work until they are seventy in most occupations. All the currently employed construction workers can migrate to other activities as we would not need all the additional infrastructure, new housing etc.
I presume somebody has paid you to write all that stuff?

If you put a pair of rats in a twenty foot shipping container, filled as much food as you can, shut the door and left it for a period of time, what do you think the result would be when you eventually opened it?
I don't think that any of the corporations, economists, bank managers and politicians would understand why their was nothing but bones left.
Think bigger like the size of the world and even the doomsday cult of the Church of Climatology, could not be blamed for the result.
The doomsday cult of overpopulation would kick in and that will be the end of everything that we hold to be "not negotiable".

Add to the age problem the tens of thousands of economic invaders who taxpayers have to support and the blowout NDIS scheme which will require over 200,000 unproductive workers to keep it going, it will be an interesting future for Australia. I pity the Taxpayers of the future.

Foyle
Are you now telling us that Kevvy did not save us from the GFC but from Howard and Costello's economic mismanagement?

I thought only the warmist alarmists and the fellow who lives in france and tells us how good things are in Aust, under the magnificant labor economic managers, were the only comedians on olo.

Foyle, I think you might want to re-examine the article you linked us to.

>>A good introduction would to be read J D Alt's item about the USA mobilisation for WW2 at, http://neweconomicperspectives.org/2013/08/mobilization-and-money.html<<

Trying to create a linkage between events of seventy years ago with our current world would always be a major challenge. But your reference squibs out pretty early, with this gem:

"...even more important, how did we travel from that VJ day of economic triumph to our sorry state of today, where we think we are so “broke” we can’t even afford to hire enough fire-fighters and equipment to put out the forest-fires raging in our western states?"

What possible connection can be manufactured for that juxtaposition? What relationship exists between a heavily industrialized society forged from government money, that was able to develop new markets across the world for its products at a time when the whole of Europe was both impoverished and without viable industry of its own, and forest fires in 2013?

It might help if you were to explain at the same time, where the money to "put out" these fires would come from, given that merely containing them required a billion dollar expenditure...

http://www.foxnews.com/weather/2013/08/21/wildfire-spending-tops-1-billion-as-over-40-uncontained-blazes-rage-across-west/

There is very little that is more capable of reducing an argument to zero, than this kind of threadbare, irrelevant rubbish being recruited as evidence.

It's strange how carelessly our world keeps edging towards the scenario painted in 1984.

In fact, it's rather like a self-fulfilling prophecy.

What is certain of course is that small group of humans are forever trying to find ways to completely control other humans in case they become difficult or begin to question.

Fear is a great controller. Drugs are as well. Genetic tinkering could achieve a great deal too.

The world will implode if billions of individuals seek their own destiny.

Control is the name of the new game!

Foyle
Obviously if you have no way of knowing whether government is providing too little, too much, or just enough - the quintessence of economising - then you are in no position to advise how big the deficit should be, or indeed whether it should be a surplus.

It should not be embarrassingly easy to totally demolish the theory you keep publicly and persistently pushing.

For someone *honestly* interested in *rational* theory, our discussion would look like this:
Jardine: "Do you have any rational way of knowing whether government is economising, or wasting zillions?"
Foyle: "No."
Jardine: "So that must mean your economic theory is wrong, and worthless?"
Foyle: "Yes. I'd better look for one that's true, not false."
Jardine: "Good idea."

Yet even after you have repeatedly come face-to-face with unanswerable disproofs of your entire theory (and I could provide a lot more), you don't do the intellectually honest thing, and face the fact that it's wrong. Instead you just go quiet, slink off, and pop up somewhere else re-running all the same confused nonsense that you take on authority.

Economic theory requires explanation of cause and effect, but if it's not rationally defensible, that's not theory, it's just arbitrary moralising. Yours is even worse than that, because it *just happens* to favour systematic looting of the productive class by the coercive class by channelling billions to big banks and corporations, and then you have the gall to blame unregulated capitalism for the resulting recessions.

If you want to learn *real* economic theory about *real* human beings in the *real* world, that doesn't just crumble to dust on cursory examination, read:
"Human Action" by Mises
http://mises.org/Books/humanaction.pdf

JustGiveMeAllTheFacts
Your post presupposes that economic principles are just an arbitrary series of assertions with no necessary connection to the truth, that can be changed at will. What if you're wrong?

RobertLePage
The world's population is not just so many rats in a shipping container owned by you.

<<Paul Collits is an Associate Professor at the University of Southern Queensland...>>

Australia needs more university professors like Paul.

Jardine K Jardine
You wrote,
"You can start by telling us by what rational criterion you know whether governmental provision of any given service is too much, too little, or just the right amount?"

Some government expenditures may add little to total well-being but it is the total effect of sovereign (money issuing) government expenditure which matters.

This morning a post at New Economic Perspectives made the point that when approaching close to full employment government expenditure can cause shortages and price rises in in specific items the government wishes to purchase. Such constraints require some micro management, such as slowing down specific government projects, but at any time the sovereign government (SG) has the job of managing the economy to provide the maximum feasible benefits to the people in the sovereign area. The SG is spending too much when shortages of resources, both, or either, labour or products, causes unacceptable levels of inflation.

It is simple accounting that shows that until a sovereign government spends money into the economy the private sector cannot accumulate financial savings.

As for where Howard and Costello positioned the economy for ten or eleven years, plotting the Current Account and Government Sector balances on the chart in Slide 48 of Professor Stephanie Kelton's Field Institute presentation shows that the Australian Private Sector accumulated more total debt each year, an unsustainable situation. Eventually the financial institutions run out of viable borrowers and the economy stalls.

As for pointing to experts in a particular field who do you rely on for your health requirements - the best experts or quacks?

Pericles,
You fail to see Alt's points.

During WW2, money was not a constraint in producing the goods to fight the war. Nor was it a constraint in rebuilding Europe through the Marshall Plan after the destruction of that war. After the war, the transition to the peace was poorly managed in the USA as consumers wanted to spend the savings accumulated as war bonds faster than, for example, the Ford plants' automotive manufacture could be ramped up after being used to produce one Liberator bomber per hour and thousands of trucks and tanks.

Alt simply makes the point that money should never be the constraint when the well-being of the community needs some particular facility such as fire-fighters. The constraints are what resources are needed and can they be made available. That requires governments to pick winners and they tend to do that better that many companies. Look at the mistakes of BHP and Tio in past years.

One point that the neweconomicperspectives blog is always stressing is that a Sovereign Govt. spends first then decides how much of its IOUs should be left in the system, i.e. what the tax level should be. All tax money collected is destroyed.

Please read the theories that have been developed in economics in the last 15 years. Randall Wray, Stephanie Kelton and Bill Mitchell are leaders in the field.

JKJ: RobertLePage
The world's population is not just so many rats in a shipping container owned by you.

Please try to read more carefully. At no time did I write that the container was owned by me.
The intent of the massage obviously passed you by. Not to worry it will dawn on you one day that the earth is not flat and infinite.

It's no secret that I find the arguments in those documents weak and unconvincing, Foyle. But that's just a matter of trivial detail when it comes to statements like this one:

>>That requires governments to pick winners and they tend to do that better that many companies<<

Does the experience of the Soviet Union not impinge upon your consciousness when you make statements like that? Can you point to any one business decision that the Soviets made that was in any way successful, either for the economy or for the people?

One of the most fascinating aspects of post-wall Germany was the massive disparity between East and West that became starkly apparent when the two economies were required to become one.

And you still failed to answer the question on firefighters:

>>...money should never be the constraint when the well-being of the community needs some particular facility such as fire-fighters. The constraints are what resources are needed and can they be made available.<<

That is plainly arrant nonsense. If you geared up a firefighting force to the size needed to "put out the forest-fires raging in our western states", they would quickly become a massive drain on the economy through being 99% inactive.

These naive, idealistic theories never survive the scrutiny of practical, everyday reality.

Foyle

“As for pointing to experts in a particular field who do you rely on for your health requirements - the best experts or quacks?”

We’re not talking about my health requirements, you don’t own other people, and the government is not some wise physician nor the economy a recalcitrant patient.

“Some government expenditures may add little to total well-being but it is the total effect of sovereign (money issuing) government expenditure which matters.”

That’s not the question, and stop trying to squirm out of it.

By what rational criterion do you know whether government provision of any given service is too little, too much, or just enough?

"Such constraints require some micro management"

That assumes you know whether the supply of any given thing is too much or too little. Prove it.

"at any time the sovereign government (SG) has the job of managing the economy to provide the maximum feasible benefits to the people in the sovereign area.

Circular drivel. Whether the government has the job of managing the economy is precisely what you’re failing to prove, because obviously if it doesn’t know what to do, it can’t manage it.

“The SG is spending too much when shortages of resources, both, or either, labour or products, causes unacceptable levels of inflation.”

So by what rational criterion do you know what that is?

Why don’t you just admit that you don’t know, instead of trying to evade the question?

“Alt simply makes the point that money should never be the constraint when the well-being of the community needs some particular facility such as fire-fighters. “

Then why not print so much money that everyone in the world is rich and no-one has to work?

Anti-economic, anti-rational, drivel.

“Please read the theories that have been developed in economics in the last 15 years.”

Please answer the question that totally disprove this parasitic garbage.

Robert
So who owns them?

How do you know that any policy you advocate isn’t going to make the situation even more unsustainable

Jardine K Jardine
I never squirm out of any argument. Yesterday I was away from my laptop from 1pm until late evening.

Sovereign Governments don't print money to any great extent. Money is a SG's promise to pay and those IOUs are created by key strokes every time the SG pays an account or makes a social security payment etc. The public accept those IOU's because the SG will only accept its own IOUs to cancel out each citizen's tax liability or some other charge or fine and because they know other people also accept them as a means of exchange.

The individual Australian states are subservient entities, just as the PIIGS are under the Euro. Australians would be well served by a return to having a Loans Council.

re your comment on; "The SG is spending too much when shortages of resources, both, or either, labour or products, causes unacceptable levels of inflation".
Monitoring the economy is what the Treasury and Reserve Banks analysts do.

I am well aware of the problems of Russia and Eastern Europe after WW2. They did not get help to rehabilitate after the war front crossed almost all that territory. The most efficient production facilities ever, in a country that suffered almost no war damage, the USA, bailed out Western Europe and Japan.

I do not advocate anything but a mixed economy but do know that neo-liberalism tries to hide the extent of the dependence on competent government in developed economies. In that regard you need to read such books as Mariana Mazzucato's "The Entrepreneurial State" or watch her address to the London School of Economics. Most pharmaceuticals and the underpinnings of electronic gizmos such as Apple's "i" products have been developed in USA government or government funded research facilities.

Did you look at or attempt to understand the arguments and slides of Stephanie Kelton's presentation? Modern theory is supported by strong empirical evidence.

Foyle

Imagine if I said “The invisible pink unicorn cured Fred’s disease”, and you said “How do you know?”, and I said “The empirical evidence proves it.”

What would you think of that process of reasoning? You’d think it’s irrational, wouldn’t you?

What about if I said “Becuase the high priests of the invisible pink unicorn cult said so.”?
Still irrational, right?

What would you think if the conversation went like this:
You: How do you know the invisible pink unicorn didn’t give Fred too much medicine thus wasting money unnecesssarily?
I. Because. That would be “inappropriate”.
You: Inappropriate meaning…?
I: Too much.
You: It would be too much because it would be too much?
I: Yes
You: Too much according to…?
I: The invisible pink unicorn.

It’s just complete garble-brained gibberish.

Stop asking me to go on an errand to construct your argument for you. I have followed your links before and they’re just people using the same methodology as you. You don't seem to understand that you need to be able to show *reason* for your beliefs, not just blind credulity and circularity. If you want, get one of your authors to come here and I'll offer to demolish their theory for you.

Being as confused about the basic requirements of logical thought, as I have shown, we would expect you to be confused about the basic concepts of economic theory, which is what we do in fact see.

The idea that the community’s well-being should never be constrained by the want of “money”, meaning physical capital, because government can make more “money”, meaning paper, is just more of the dark-ages magic-pudding superstitious nonsense which is the quintessence of Keynesianism.

Gawd ! All that argument about economic theories !

Anyone who thinks exponential growth can continue in a finite world
is either a madman or an economist !

Look economists and their theories only think that growth is dependant
on all the manipulations of money that they argue about.

AGAIN !

It has nothing to do with money !
Growth and even the status quoe depends on energy !
If you have excess cheap energy you can expand your economy.
If you do not have an excess of cheap energy you cannot expand the
economy and even maintaining existing systems because of inefficiency
and losses becomes very difficult.
The cheap energy is being used up and is replaced by hard to get
energy.
The loss of surplus easy energy is what is giving the governments a hard time.
This is what is meant by "The End of Growth".
Politicians, economists, financiers, CEOs etc find it impossible to
accept this reality and interestingly psychologists have made a study of it.
Both our parties are quite unconcerned about our energy security even
to suppressing reports by the Bureau of Infrastructure, Transport and
Regional Economics (BITRE) which prepared a valuable 400 page report in 2009.

If you have any doubts just watch food prices escalate and track oil prices.

Bazz
The fact that infinite growth on a finite base is impossible, may sound compelling at first, until you realise it’s meaningless for practical purposes unless you specify a time-frame for when the crunch comes. (If it’s in 10 million years time, so what?)

But as soon as you specify a time-frame, you immediately immerse yourself in all the problems of economic theory that you so superciliously pretended to be above. The fact that resources are scarce does not signify the end of economic theory: it’s the major premise of all economic theory.

The original economic problem, which gives rise to all human action, all economic activity, and all economic theory, is that there are not enough resources to satisfy all the human wants that they could go to satisfy. Therefore there is a need to economise, that is, to decide how to allocate scarce resources to satisfying the most highly valued ends.

To say that oil is becoming scarce, far from being a fundamental challenge to economic theory per se, only signifies that the price is likely to go up: Economics 101.

Your brainpower unassisted may find it impossible to work out a solution to the problem. But the combined brainpower of 7 billion people, co-operating through specialisation and division of labour, with the best ideas most rewarded, is a different matter.

In any event, the matter is off-topic unless you are going to assert that government can overcome the problems of oil shortages *economically*, in other words, without greater sacrifice of human values than would otherwise have been the case, however one defines the ultimate human welfare criterion.

Government intrinsically cannot do it, Foyle is flatly incorrect, and it’s as simple as that. To understand why, instead of confusing trite truisms with profundity, everyone should read “Economic Calculation in the Socialist Commonwealth” by Mises: http://mises.org/pdf/econcalc.pdf. In this short essay the arguments of all the Foyles, Keynesians, Marxists, communists, fascists and statists in the world have been irrefutably and conclusively proved to be so much nonsense.

Jardine,
I am surprised that with a bit of thought that you have not
realised that all the economic theory and manipulations can do is shift
emphasis inside what is possible given the availability of energy at any particular time.

Regarding a time line, well there are varying opinions.
Some expect a decrease in tight oil to occur between now and 2017.
If so, the price will rise and reduce demand.
Then a little later conventional supply decline will be visible as
tight oil declines and around 2020 and the price will rise again.

However that is not important, what is important is the economy will
have less energy available because of reduced demand.
The economy must then operate at a lower level.

Some believe the above timelines are 5 to 10 years too early.
I don't have access to the information that those people have but it
is available if I wanted to spend the time necessary to reinvent the wheel.

Bazz
"I am surprised that with a bit of thought that you have not
realised that all the economic theory and manipulations can do is shift
emphasis inside what is possible given the availability of energy at any particular time."

I have realised that.

And what are you contributing to the discussion that is any more than that? Nature imposes limits on human action that cannot be made to go away; man must adjust his action to such limits if he is to have any hope of success in aiming to get what he wants.

You’re not proving economic theory is wrong, you’re proving it’s right.

“However that is not important, what is important is the economy will
have less energy available because of reduced demand.”

Don’t you mean reduced supply?

How is what you’re saying any more than that you expect supplies of fuel to diminish and the price to go up?

So what? Why does that mean that
a) you are not engaged in economic theory?
b) you know how to fix the problem better than everyone else?
c) Governments are capable of fixing it without sacrificing more important values?

The truth is economic theories are very rarely proved and in the vast majority of cases simply do not accord with reality. It has been shown time and again that the forecasts of any group of economists is likely to be worst than just a plain guess.
One reason economists get it wrong it so frequently is by confusing political ideology with the real world. A case in point is the present government believes they are going to create lots of jobs over their first term in office. Why because they think their understanding of how the economy works is superior to labours though it should be obvious that if the government cuts back on spending and sacks lots of people the result is almost certainly not going to be a jump in employment.

Jardine I think you simply gloss over the fact that money has to be created from nothing at some point and then has to be passed on from the creators to the rest of the community.

Bazz
I do not think that energy availability is any way going to constrain the economy. While at present we use vast quantiles of fossil fuels we know of numerous other ways of generating power which if push comes to shove we will roll out.

The article makes s very serious mistake in thinking that the only benefit of the NBN will entertainment. It will become the backbone of every modern successful economy , and in fact the internet is already is already vital to just about every aspect of modern life. The view that NBN is pointless is on a par with saying who needs electricity when candles do the job just fine.
The silliness of bringing climate change denial into a discussion on the economy leaves me dumbfounded. In fact it makes me question whether the author is in any way credible.

Warmair, well you are right if you factor in unknown/unproven sources of energy.
The only known & proven source is nuclear and if things get desperate
enough will it be too late to start a crash course in nuclear building ?
Geothermal, if it can be made to work, would solve many problems.
Also energy storage for solar and wind would also be a life saver.
So far there seems to be fundamental chemical and physical barriers.

There seems to be lots of "How about these technologies ?" but there
still seems to be nothing coming over the hill.

My argument is that no one,especially govt, is advocating a mitigation study.
It is one of those things that led to the collapse of civilisations.
As I have said here previously global warming is the wrong problem
to worry about.

"My argument is that no one,especially govt, is advocating a mitigation study.

How could they do it without using any of the economic theory that you keep saying is misguided?

What makes you think government has the capacity to know what all the relevant factors are? Do you? What are they?

Bazz
Their are many know and reliable sources of energy
Hydro for example is in general cheaper than coal and is more reliable than nuclear.
Wind is close to the same price as coal despite the silly claims of the anti environmentalists.
Solar is currently more expensive than coal but is likely to overtake it within a few years.
Traditional Geothermal is cheaper than coal where it is available.
Nuclear is still in the mix despite its very high costs. (A good example why economics is not rational)

On top of all this efficiency is rapidly increasing take LED lights for example which use less than 10% of the power of the old incandescent, or tablet computers which use less than 1% of the power that the old desk tops. Better Power storage, and power use matched to availability, are all helping.
These just a couple of examples of the incredible amount of innovation which is happening now.

Conclusion we don’t need no stinking fossil fuels.

Warmair
If you are right, then obviously there's no need for any policy on the matter.

Have you stopped using fossil fuels yet? Perhaps if you were to start and tell us how it is, the rest of us might follow if we wanted to?