What the good author doesnt tell us is that ALL national economies are at the mercy of the 24 hour a day international (money-market)casino PREDATORS looking for the next KILLING. And that can quite literally destroy otherwise prosperous countries over-night and quite literally kill lots of people as a consequence---either then and there or slowly, via starvation and despair/suicide---witness the suicide of dispossessed farmers in India.

And that the mega-trillions of money involved in such totally non-productive activities far exceeds by huge amounts the actual monies being invested in productive entereprises and activities that produce real long-term wealth.

Naomi Klein told us how the system works in The Shock Doctrine---the applied gospel of Hayek/Friedman who are the patron saints of the IPA.

The IPA makes me sick to the stomach.

Nothing is straightforward simple and easy and economics is probably near the top of the list. We live in a materialistic, free and capitalistic society in which obviously government has a part to play, but the more controls imposed always seem to have a down-side with often an opposite and equal reaction. What is needed is a bit more education on economics in school so that kids can grow up aware of some of the consequences, and investment pit falls regarding money and finance, together with the benefits that investment and saving may bring.

Where is the economic morality in removing fish the consumer price index? Fish used to be a low cost staple food but no longer due to collapse of abundant supply. How can honest economists assess needs of people at the bottom of the economy when the CPI has been tampered with to hide real trends? How can the Reserve Bank know what is causing inflation when the past and probably present price of fish has been rising five times faster than the price of red meat and poultry? Is it morally correct to report thriving mineral-boom figures at the top of the economy while hiding the plight of people at the bottom of the economy? When the Reserve Bank increases interest rates and borrowers pay the extra, who receives the money?

Dear SNAKE....

I agree..that nothing is so elusively confusing as economics.

But there are some basic principles which we should always consider.

i.e... the theological aspect.

A free market is a good thing.
A FM without conscience is as bad as it gets.

People who know in their heart of hearts that "If its 'legal' then its ok" and have no hint of the divine spark in their mental outlook, will stop at nothing, not just to 'become pre-eminent' in their chosen field of commerce, but also to destroy any and all opposition to them.

When the Sassoon family was happily selling death and destruction to the Chinese in the form of opium.... they whined and whinged about Chinese opposition to the British Crown (who was also reaping huge profits from the Sassoon activity), who promptly sent gunboats to squash the Chinese mandarins to realized the havoc opium was causing to the national social fabric.

The Sassoons went further..they demanded compensation for all the opium lost by the actions of the Chinese. "Treaty of Nanking" was the result.

We have the same 'Sassoon' attitude in perhaps most high powered corporate board rooms.

People can only think and act in such inconscienable ways, when they:

a) Are disconnected from the ethics of the Almighty.
b) Have the power to do as they wish.

On such occasions.. Gore Vidals famous quotation is absolutely true.

"They invented a god in their own image"

Had the Sassoons...who built synagogues for their community in China and India.. who were lauded as 'great humanitarians and benevolent citizens' read any of the Prophets...Isaiah, Jeremiah..Amos...Haggai.. they would have humbled themselves in sackcloth and ashes.

Jesus said "Woe to you, Korazin! Woe to you, Bethsaida! For if the miracles that were performed in you had been performed in Tyre and Sidon, they would have repented long ago, sitting in sackcloth and ashes."

I have a feeling Jesus also says "Woe to you Sassoons..woe to you in the corporate boardrooms"

Adam Smith was right when he wrote the Wealth of Nations. Free Trade is the reason why as a species we have been able to increase our wealth. Problems arise when free trade transactions no longer work as they should. Problems also arise when the information we use to evaluate trades do not include all the information we need to conduct the trade. When these instruments break down then people characterise the activities of people who take advantage of the distortions to be acting in an immoral way.

The trick is to make sure that when people who are aware of the distortions in the market and do not take steps to correct them but rather take advantage of the distortions are excluded from further participation in the market.

For example the punishment for price fixing should be that the directors and major shareholders of such companies are excluded from further participation in the market. Major shareholders have to sell their shares and all board members are excluded from participating as board members of this or any other company in the same market.

For example if a company such as Telstra deliberately and knowingly restricts access to its infrastructure for purely restricted trade practices then the punishment is the same.

If the government abuses is control of a water authority by using it as a taxing agent then the government is forced to give ownership back to the community and give all existing customers shares in the water authority.

If banks refuse to allow instantaneous transfers of authorised funds transfers then the same punishments apply.

It may not be easy to define and prove distortions of fair markets but the threat of draconian punishments for those who do will be enough to stop most unfair practices that some call "immoral actions"

We are NOW in a world economic climate that urgently needs us to get real about what Hayek might have meant about the “Abuse and Decline of Reason”. His noted concepts need to be put back in their original context as written and was received during Hayeks own lifetime. I claim “liberty” too, against the world’s unreasonable desk of problems. To me it appears opposite to the version of “Liberal” dynamic, the treadmill we are being held unfairly at ransomed to and grooved by.

Within the global stock market there is an ugly political satire going on. It sits on old and new financial definitions of finance not economics.

I claim that my own forefathers are being taken unjustly out of context and quoted on a grubby granulated spreadsheet that has nothing to do “market freedoms” but deviled by dog eat dog. There is no dignity in delusive multifaceted share grafting inflation making.

Why?

The language in economics must be up-dated in a manner fitting with the modern situation. I.e.: what is meant by a planned economy is as it says. Citizens expect this from government. This is not as some infer; permission for a Stalin approach, (get over it Australia) to demand a ‘command economy’ but rather something that ought to become more willfully balanced, meaningful as “free trade”. Bluntly it is about ensuring ‘liberty’ and ‘freedom’ for people, and those not yet born.

For anyone who doubts the need for strong measured leadership to curb pressure in ‘day to day’ economics’ I advise you read Paul Wolleys transcript “Global finance: big, bloated and dangerous”.

http://www.abc.net.au/rn/bigideas/stories/2008/2149972.htm

It is not hard to imagine the fall of markets and how nasty this will look if no swift action is taken to counter-act the obvious.

In terms of “snobbery” there is no argument in Australia. The way the banks treat individuals is giving “humanity” itself a bad name.

Does the Political Will exist? We are on notice. Is it not the everyday economic spreadsheet that could save us, if only we were that interested?

http://www.miacat.com/
.

That's right-blame government for greedy b5ggers lending shonky loans to people who quite clearly couldn't pay them back once the higher interest rates kicked in , and then selling the debt around the world to reduce risk to the lender. Classic greed at work, working a scam at the expense of the rest of us. Hayek was a tom-fool Austrian theoretical economist running on false logic. And good old Adam Smith gets a note-did he not also warn us against the greedy b$ggers of this world and suggest the need for their control? It was deregulation that gave us the 1929 crash. There is no such thing as morality in modern economics-it's devil take the hindmost and dump the cost of the risk on the superannuant and the small folk who get their life savings wiped out.

The CPI is not a direct measure of inflation, which is an increase in the money supply. The CPI is a very poor indicator as most people would agree after looking at their escalating household bills.

To Henry VII:
The 1929 depression was caused by the same problem as besets us now - a huge inflow of money from the FED in the USA, not deregulation. The US economy is much larger now but the results are likely to be similar, if not as extensive (I hope)

It is just as unreasonable to blame governments for everything as it is to blame markets for everything.

All those financial institutions who found too-clever-by-half ways of packaging up dubious mortgages into sophisticated and opaque new instruments have to bear some of the blame.

One of the key functions of markets is to put the appropriate price on risk. From time to time they fall down on this, and a financial crisis is the end result.

Robert G and Michael T,

I agree with you both. The current inflationary problems are fundamentally caused by too much money being created and the money being created being "isolated" from the risk associated with its creation.

Tell me what is wrong with the following idea and why it will not work

Money is created when we give a loan and do not loan with existing money. Money is destroyed when the loan is paid off.

We do not attach the reason why the loan was created to the money. That is one lot of money is exactly the same as another lot. What if we kept the reason why the money was created with the money. With electronic money this is easy to do.

When someone now uses the money with the reason for its creation attached to it then its value is better estimated because sooner or later it is going to have to be paid off. We now keep the risk associated with the money and when I go to use some money that was created as a loan to ABC Learning I might well discount it.

If we do this then perhaps we get rid of inflation as we know it because inflation is really punishing us all for the bad risk judgements of a few.

Technically this would be simple to do and the risk associated with each bit of money could be recalculated each evening

"Government actions have unintended consequences" And private sector decision do not? Is that the inference we are supposed to draw? It should be of some concern that we have a professor of economics who clearly has limited understanding of the mathematics that drives the rush to free market thinking. The USA had its most sustained and successful growth period when it had an interventionist government.(British) Laissez Faire economics of the 19th century very quickly collapsed as there was a clear need for government intervention to protect social cohesion. The free market would, in theory, work if all market participants had the capacity to fully evaluate all the factors inpacting on their decision. Tp argue that the failure of the sub prime market was due to a housing policy that limited new housing development is half right. Housing policy is a factor but so was the war in Iraq. As Stiglitz argues in his 3 trillion war - the Bush administration's choices about where to place public expenditure is also a significant factor - that 3 trillion could have been used to provide welfare housing (amongst many other things.) If this extract is supposed to be representative of the burden of Sinclair's argument then I hope that it is not representative of the quality of his reasoning when he teaches.

Oh, please!

Market worshipers, like climate change deniers and creationists, seem to require their own 'facts'.

There has been substantial evidence of fraud in the sub-prime affair.

Government inaction by market worshipers is also to blame. Regulation was called for and didn't happen. In addition it is true that the Greenspan Put (Greenspan another market worshiper) and the resultant low interest rates fueled a bubble in the housing market which made things worse. However, if market participants behaved like they do in textbooks then housing prices would never have reached the pre-collapse heights that they did. If borrowers were as smart as they are in the textbooks they wouldn't have borrowed loans they couldn't possibly pay, for properties that were grossly over-valued. If those buying bundles of sub-prime loans were as smart as they are in the textbooks they wouldn't have brought those loans. The fraudsters wouldn't have managed to perpetrate the fraud.