So long as we rely on OS central banks and the private ones here to own our currencies, there will never be enough money for our economy to function.

Money is not wealth. It is just a facilitator of economic activity. When this facilitator is created as debt by private banks, the debt will always be greater than the increases in productivity.

So in other words, why doesn’t the government tax foreign investors less now, in exchange for government taking the whole of their profits after ten or twenty years, and use the proceeds to pay for pensioners and other welfare recipients.

The starting point is nationalist: Australians versus foreigners. And socialist: all private property is to be held subject to a general right of government to dictate any and every condition, and take as much as it wants; in other words, the author is plugging national socialism.

(Government owning and controlling the means of production was at first called communism, but that got a bad name because of the millions of deaths by starvation, so they changed the name to socialist. That got a bad name because of Stalin, so they changed the name to national socialist. That got a bad name because of Hitler and Mussolini, so they changed the name to democratic socialist. That got a bad name because of Scargill (not to mention Pol Pot), so they keep changing the name, to social democracy, to the third way, the green economy, the blue economy, “reforming capitalism”, social responsibility, and so on.

(But let’s get one thing straight. At base there’s only two possibilities. Either you own your life, and the fruits of your labour and voluntary exchanges, and you believe in the individual and economic freedom that have raised the living standards of everyone including the poorest of the poor to the highest levels in the history of the world (to the stage that capitalism’s opponents are now moaning about how rich it makes the proletariat - ‘unsustainable’).

(Or it’s the same old communist sh!t sandwich in a different wrapping with the name changing all the time.)

“However, this approach would require a command economy of some sort that would not be acceptable in Australia.”
And
“A Google search will locate hundreds of his articles on reforming the theory and practice of capitalism.”

Bit of a self-contradiction there, Shann? Command economics are alright when it’s you formulating the commands, I suppose?

The premise of the article is that foreign investment creates open-ended “unlimited, unknown and uncontrollable foreign liabilities”. Shann makes no attempt to justify this statement.

But obviously the liabilities created by foreign investment are not “unlimited”: they’re limited to the property and tort rights incidental to the investment. Similarly they are not unknown or uncontrollable for the same reasons. This means the premise evaporates. The argument is nonsense.

To make sense, the argument would need to show that the social benefits of the proposed intervention would be greater than the social benefits of the investment. To do this he needs to know the discount for futurity of all relevant parties. Otherwise he cannot establish that the proposed intervention would attract foreign investment on “better terms” than it’s being attracted now.

It is *not* acceptable to define foreigners as non-humans, or sub-humans, or not part of human society. If foreigners are to be valued less as human beings than Australians, that needs to be made explicit and the rationale for discounting their values and needs should be explained and justified, which the author fails to do. This means the argument fails again – for the same reason that all national socialism is bad!

Quite apart from that, the argument turns on this paragraph:
“Modern investment analysis discounts at a compounding rate the value of obtaining cash in the future because of the opportunity cost of not earning a return today. At equity discounts rates this reduces the Present Value of all possible profits after ten to twenty years to a small fraction of the initial investment cost. When the value of future cash is discounted again because of operating risks arising from competition, changes in technology and markets the expected future Present Value becomes trivial.

Translation: people prefer the satisfaction of a given want sooner rather than later. When you add up the risks over time of various categories, there’s less and less reason to delay gratification by investing because of the risks in the future.

The fallacies of the argument are numerous. Shann assumes the liabilities of foreign investment are infinite, the present value of future profits is zero, and the benefits of government confiscating future profits automatically outweigh the costs. At no stage does he justify any of these assumptions, all of which are demonstrably false.

“In other words more investment can be attracted on the basis of eliminating all “unlimited, unknown and uncontrollable foreign liabilities” on a voluntary basis.”

But if the property owners don’t “agree” to the proposed intervention they’ll have property taken under compulsion, which is payment under duress, not agreement. Not even the government defines tax as a voluntary payment.

So it’s not voluntary, and the argument fails again.

At no stage does the author attempt to demonstrate that the benefit to society sacrificed because of his proposed intervention would be less than the benefit to society from the intervention: there’s that ole economic illiteracy again, that characterises all communism or whatever you want to call it. “If only we could all live out of the common storehouse, if only everyone could live at everyone else’s expense, then what a Paradise we would have. How much more productive and fairer society would be *sigh*.” It’s just the same old nonsense it’s always been.

“The income generated from formerly foreign owned investments after twenty years could then contribute to creating a universal minimum income for pensioners and welfare recipients.”

Notice how, as to the input side of the equation, capital is treated as morally suspect and presumptively anti-social unless taken over by the State in hopes the State will then receive the profits formerly created by the capitalists?

But the obvious question then arises, once the assets are fully-socialised, where does the author think the profits will come from? Bureaucrats? But if not, then why won’t the original supposed problem of open-ended liabilities attend the ownership of the remaining private capitalists?

“As these beneficiaries consume rather than invest they do not discount the future value of money.”

Nonsense. Consumers, qua consumers, discount the future *more* and desire only instant grat.

And notice how, as to the output side of the equation, the original problem is conceived to be how the government can fund pensioners and welfare recipients? At no stage is the brain of the author turned to what government might have done to cause the problem in the first place.

For example, how has government caused the problem of a dependent aged population by taking the majority of what people earn throughout their lifetime through taxes and inflation, strangling small businesses to death, forcing the poorest people into unemployment by making it illegal to employ them, taxing employers for employing them, subsidising and rewarding poverty, spending zillions on aid for the nations of foreigners whose inflowing wealth is supposedly the problem, and similar self-contradictory absurdities, thus making it difficult or impossible to provide for one’s old age, sending the population broke into retirement?

Notice how there’s no mention of the prime class of beneficiaries, the parasite class of bureaucrats that would be created to administer and enforce the proposed intervention?

Reforming capitalism? How about reforming the communism that's causing the problem!?

Notice how Shann’s economic incoherence merely assumed:
1. government has nothing to do with causing the problem, and
2. government knows better how to economise property than its private owners and producers!

Complete twaddle but of course if it’s true, then why stop at confiscating profits after twenty years?

All the author’s protectionist arguments were completely demolished by Bastiat in these two short humorous articles, as true today as when they were first published in 19th century France:
“A Negative Railway: http://mises.org/daily/5201/
and
“Must Free Trade Be Reciprocal?”:
http://mises.org/daily/6193/Must-Free-Trade-Be-Reciprocal

Read ‘em and weep. Shann might as well propose digging holes in the road where Chinese goods are received into Australia. Beneath all the faux economic jargon, that’s the intellectual and moral level of what he’s suggesting.

Hello Arjay
I agree with your sentiment that money should not be wealth and it is bizarre that we do not control the value of our own currency. This is a point I have suggested to be included in the forthcoming Financial System Inquiry. My submission will published by Treasury when they announce their final Terms of Reference.

But note that only Australians can create Australian currency and there is no limit to how much we could create with or without also creating debt. This has been demonstrated by Central Banks in US, Europe and the UK.

Hello Jardine K.

I am flattered by your attention in writing over 1500 words in response to my more modest 838.

You have forced me to respond because you could mislead other readers into thinking I am socialist or communist by making false imputations.

Other readers should note that my proposals are based on market forces not the dictate of a government as imputed by you.

They should also note that you have mischievously suggested that I am proposing government ownership of foreign investment when I make it clear the beneficiaries are individuals.

As a serial entrepreneur I have walked my talk and raised millions of dollars to finance vineyards, cotton production and films while not providing property rights to investors longer than 15 years.

This proves that if I gave my investors property rights for a longer time they would be paid more than was required to attract their investment. Overpaying investors is inconsistent with the fundamental justification of adopting a market economy!

Limited life investment increases the efficiency and effectiveness of a market economy. As I noted in my article all intellectual property rights have limited life. A basic problem arises from accounting doctrines that do not identify when an investment has been repaid and so the extent that investors obtain profits in excess of the incentive to invest.

You ask me to justify the statement by Professor Edith Penrose that foreign investment provides “unlimited, unknown and uncontrollable foreign liabilities”. The unlimited life of corporate investment arises because our society grants corporations the rights of perpetual succession. The liabilities are unknown because accounting doctrines do not identify when the investment has been paid back or identify profits in excess of the incentive to invest. The liabilities are uncontrollable because unlike all intellectual property we do not introduce a sunset provision on corporate existence.

Most of your words do not require a response as they are based on the false implication identified above.

But thanks for your very extended attention.

Shann, thanks for that.

How can you say your proposal is based on market forces when the terms offered are: “either submit to having all your profits confiscated later, or to us confiscating a larger share of your profits now than we would otherwise, or the whole deal will be prohibited?”

That’s not market forces, that’s the government telling people they have a choice between one or another kind of governmental confiscation or prohibition: the opposite of market forces. The “choice” would only make sense if we assume government has a right to all the property in Australia in the first place: national socialism.

Any social benefits that you allege, are downstream of that original proposed governmental expropriation of private property rights.

Therefore your proposal is communist or socialist, because it consists of government taking ownership or control of the means of production by government expropriation of private property rights, for some alleged higher social purpose represented by the State’s unilateral decision backed up by coercion, which is the very core and mechanism both of
a) your proposal, and
b) socialism or communism by definition;
and any name-changes are merely colourable.

“This proves that if I gave my investors property rights for a longer time they would be paid more than was required to attract their investment.”

It proves it as concerns your real market transaction; and that is all well and good. However it does not and cannot prove the same thing for your proposal for government to take future property rights in other different ventures, whose risk/return relation is almost certainly different. Because if it were true for them, there’d be no need for the policy, would there? The Australian vendors would be able to obtain the same terms, and investors would agree to forego those future property rights voluntarily, without the need for government threatening one compulsory expropriation or another.

Foreign corporations have perpetual succession: so do Australian ones. And liabilities being allegedly “uncontrollable” because of no sunset provision on corporations, is only the same point, and it applies equally to Australian corporations.

“[A]ccounting doctrines do not identify when the investment has been paid back”.

Why not, since that is the whole point of capital accounting? They identify it to the owners, surely? Even if they don’t, which they do, why is that any reason for government to take property and hand it out to pet political favourites?

Thus Penrose’s alleged open-ended liabilities of foreign investment are all equally characteristics of non-foreign investment. So the argument resolves to national socialism any way we look at it. The argument only makes sense if we regard either foreign, or all, investment and productive activity as somehow of suspect and anti-social character, to be remedied by state confiscation of assets and manipulation of markets on a presumption of governments' superior competence and goodness, which of course is socialism through and through.

Notwithstanding the goodness and acuity of your market transactions, still the lead of coercive socialism cannot be transmuted into the gold of freedom and consent - with all its moral and pragmatic superiority - by policy alchemy attempting to get government to play at doing what markets do. If they could, full socialism would have been a) possible, and b) a success, which it ain’t, that’s the whole point. As Mises once said, as soon as policy attempts to mimic the action of the markets, the socialists have lost the argument.

If the purpose of the exercise is to help the poor, there’s heaps of more obvious and simpler things that government could do by reducing its myriad interferences with freedom and capitalism, and gross waste, which are by far the main single cause of Australia's poverty in the first place, rather than launching even more regulations and handouts!

Dear readers
Please do not get mislead by the posting above by Jardine. He imputes that I am suggesting the very opposite to what I state!
Nowhere have I suggested that the government should take over own foreign investment or become owners of foreign investment or even discourage foreign investment. I say the opposite. I suggest we attract more foreign investment but do on a mutually more attractive terms to provide foreigners with bigger, quicker less risky profits.
His comments about socialism, communism and government reducing profits are in his imagination. I would welcome comments that are grounded in my arguments not imputations.

Shann, I'm sorry if I have misrepresented your argument.

But have I?

Why is it not true to say that your proposal amounts to the government saying to foreign investors:
“either submit to having all your profits confiscated later, or to us confiscating a larger share of your profits now than we would otherwise, or the whole deal will be prohibited?”

Shann

Would your proposed scheme be voluntary, in the sense that investors could elect not to comply and be no worse off than they are now?

Would you please acknowledge that all the reasons that you gave why the liabilities of foreign investment are allegedly unlimited, unknowable and uncontrollable, all apply equally to Australian companies?

Should the same policy apply to Australian companies, and if not, why not?

“I suggest we attract more foreign investment …
His comments about socialism, communism and government reducing profits are in his imagination.”

Who’s “we”?

Please confirm whether the scheme would work on the basis that the foreign investor would no longer have the future stream of income he would have in the absence of your scheme, as at the arbitrary cut-off date decided by government, and that government would assign the benefit of it to whoever was to be privileged to receive it?