Henry, I have no problem with Kevin Rudd going on the road to disaster but I don’t wish to go with him. I have been patient and tried hard to make some sense of the governments’ attempts to formulate and execute their policies. In business we were exhaustively trained to rigorously apply “filters” to the formulation of policies, in all their forms.

The “quick check” method was to ask the questions, what is it? What does it do? Who uses it? and who benefits?

I have failed to get a single government policy to pass this test. The first point of failure is, as you point out, the absence of, or refusal to provide the projected outcome data, therefore the “benefit” cannot be quantified. Secondly, that the stated beneficiary does not actually benefit. Thirdly, when the question “what does it do?” is applied, there is no “real” link between what it is supposed to do and the predicted outcome.

My conclusion is that not one of these policies would get up in the real world and that such policies are designed only to hold the 4.7% percent swinging voters that changed the government. They are marketing policies rather than real.

As I suggested in another thread, we are “sold” on an ETS policy that removes the threat of an evil legacy being visited upon our children, whilst at the same time we are happy to “buy” a stimulus package that loads a terrible debt onto our children’s’ credit card. Can anyone make sense of why we are supporting such contradictions?

Spindoc

I am not inclined to compare government with business in the way you do. They are a completely different species (IMO), but I understand your point.

I also think you over-simplify the complexities of addressing the issues of climate change - it will cost heaps and it won't happen over night. However, first steps must be taken otherwise the future costs will be much more (whether you believe in AGW or not), don't you think?

I am not really sure what the author is trying to buy into with his own brand of rhetoric, what would he or yourself say about the outcome of the G20?

A last and probably the most important aspect of any new project proposal as spelled out by spindoc (above) would be measurement and feedback. As any or the most junior project managers would know: if you can't measure what you are doing how do you know you are doing the right thing?

In the case of the Dec cash splash the government deliberately timed the splash for the most spendthrift time of the year when people will emotionally spend beyond their means and retailers will encourage them through crafty marketing schemes - and not inconsequently significant price reductions. With all the holiday spirit marketing emotionalism sloshing around it would be impossible to determine the effect of the splash thus obsfucating any potential of determining the effect of the stimulus but not, however reducing the government claims of magnificent success.

This government apparently is not at all interested in doing the right thing to improve the economic situation. Even the Wall Street Journal has jokingly admonished the Rudd government for building lots of new town halls and school libraries where the previously employed can gather to reminisce about how good things were when there were jobs.

Hi Q&A, I once did much business with governments, US, UK, OZ and Asia. These all differ between each other and, as you rightly say, “They are a completely different species” to private enterprise. However, once the key differences are isolated and mitigated, I have mostly applied the same analysis to the beast. I mentioned that this was a “quick check” method, other criteria tools are needed to further test government policy however, in the private sector, if the stated outcomes fail this first test they simply don’t get up.

With government policy development, non-starters can be “sold” based upon non-tangible criteria such as social, political, ideological and so on. If our government “sells” us on tangible benefits we are entitled ask for them. If they are not provided we are equally entitled to assume a non-tangible reason. There is nothing wrong with any government applying non-tangibles as long as it’s not sold as tangible. It is, as Henry points out, a matter of transparency and democracy.

This leaves the governments’ raft of policies very weak to non-existent on tangibles and the case for non-tangibles very strong.

As to AGW, I simply can’t make ends meet on this and sitting on the fence is quite painful. Every claim by a “reputable scientific source” can be refuted by an equal and opposite “reputable scientific source”. Therefore on all the key claims, one cancels the other leaving no undisputed claims. It’s a zero sum game. The government policies relating seem to have only one tangible benefit, cash flow. Heavily sold intangibles covering a very tangible new tax system?

The G20 outcome? Not sure there is one yet. It’s instructive that it highlights the fact that the USA and the UK have the same problems and therefore the same solution. The EU has different problems and sensibly won’t buy into the UK/US solution. As for OZ? We have an EU type problem but much less so, and yet incredibly, we seem to be applying a solution that only applies to someone else’s problems. Could this be another example of the intangibles in play?

In Truth and Reality the disaster has already happened, and nobody has a clue as to what to do---least of all the adolescent Beavis & Buttheads that infest the Oz, and indeed all right-thinking propaganda outfits. All of which are now featuring such articles, masquerading as "informed" opinion.

But then again the disaster also happened a very long time ago too.
This reference communicates in very stark terms the coming of the disaster of the power seeking European white man with his "culture" of death and his tribalistic "god" to the native "americans"

http://www.dartmouth.edu/~library/Orozco/panel13.html

Since then the disaster thus portrayed has engulfed or encircled the entire world. And as in all would be world conquering SCAPE-GOATING memes, everything thus encircled is now being systematically destroyed.

Once a weak politician like Rudd is adored and loved by the crowd it’s almost impossible for him to escape from its warm and loving embrace and is constantly forced and motivated to adopt and implement populist policies so he will not be jilted by the crowd. But the present critical times abhor populist policies which by definition will be prolonging the economic crisis and will be placing a heavy burden on Australians who ultimately will be paying the costs of a weak Prime Minister who cannot detach himself from the embrace of populism.

http://www.viewfromtop1.com

So who do you call a "strong" politician?

Someone who is not going to blink when starting a nuclear holocaust?
It is not only "them" (Iran or the "axis of evil") that are leading us on such a path.

All of our dreadfully sane right-thinking leaders are doing so. Wherever they are geographically and culturally--no exceptions.

Ronald Reagan perhaps, the exemplar of populist pandering--at least in theory.

He who made the ordinary USA every-person feel "good" about themselves with his anodyne Saturday Evening Post,Normal Rockwell cliches.

While all of his corporate friends were plundering the collective common wealth of the USA---starting with the Savings & Loan scandals, ripoffs, plunderings, lootings.

A "tradition" of looting and plunder which, via Bush & Co inevitably created the current disaster.

http://www.psychohistory.com/reagan/rcontent.htm

"Ultimately, all government spending must be paid for from taxes that have a high economic cost"

Henry - could you clearly spell out exactly why the sovereign (federal) government which has currency monopoly and is empowered to create or destroy money and can instantly create any sum in it's own currency it desires, "needs" to tax in order to pay for it's own domestic spending.

It is completely ridiculous to portray a federal budget as being the same thing as a household or business budget. Can you spell out why you believe the currency monopolist to be revenue constrained?

'rudd on road to disaster'...nah...we the common people are...rudd and all world-politicians last to feel the crisis...yeah...we will be feeding them for a while while most of us start to 'starve'...

and 'Only rarely did governments display the intellectual rigour to adapt to the new circumstances'...probably...but these set of circumstances are uniquely different than at any other time in human.civilization...energy sources diminishing/or cannot use as before due to severe environmental imbalance...so leeway for 'mistakes' becoming smaller and smaller...

and I cant even call what 'governments' are doing as 'mistakes'...more like still toeing to corporation leaders demands...eg g20 and 1trillion(public debt) to 'stimulate' world economy...crap...wanna stimulate then reduce or stop taxes...as whole economic system is founded on premise 'people will spend money when they have it'...not removing corporation debt to public...

what this trillion debt is for is to remove the toxic debts from the fatcats and their greed that caused this mess in the first place...while dismantling all systems of accountability to their acts...so same people can shift the worst 'risk' to the public...and get back to business as usual...with a smile...while 'government' money hole on 'no-return expenditure( bulging bureaucracy, free hand outs to the lazy, manipulative, never ending contract work constructions etc) continues and increases...

let banks and companies that cant stand on their own fall...then public collect them...so we own real assets...not just burden of debts...

and reduce government size...lean and mean...cost effective governing...and immediate and full accountability to acts...start lining all these fatcats and publicly expose their acts and full consequence delivered and this standard always maintained and 'untamperable'...and we may...just may survive this...with some future stability and quality of life...(guys read on the origins of the french revolution...)

sam
Ps~9last time government debt crisis happened most of public assets sold by politician long gone and without accountability...now how will the public pay its debts?...sell ourselves into servitude to corporations for regular meals?...

Very interesting article and comments.

Rudd is a clown, no doubt about it. Perhaps we should just throw all the politicians in prison, that'd probably be a better solution than anything any of them have come up with.

But can I ask you all something? If current government is 100%, what percent of current government should government be reduced to?

jardine asked 'If current government is 100%, what percent of current government should government be reduced to?'...good question and answer is one that takes up least burden on society to perform its function effectively...but a practical answer is almost impossible in the current limited information made available for general public access....but...

root to this is general public understanding that 'government'(as separate from judiciary and parliament elected)is a burden on us all and sucks away at common wealth(yep as in 'commonwealth' of Australia)...and in our interest to ensure its an efficient effective body...ie cheaper and expeditive...but its also of interest to the parasites among us for easy work and secure money by corrupting government is possible and happened...with added bonus of power in position...

to what percentage of current 100%...probably 40% as a start, then effective laws as in unraveling current over legislation into simple effective one and criminal law directly linked to standards of expected conduct and practice in all statue and monitoring/activation clauses clearly spelt out(especially anyone using the judicial power of the commonwealth...yeah judges)...consequences and ability to achieve strengthened...but chance of achieving it is currently 0%...unless we become republic and pry the claws of the 'crown' off from managing our government for huge fee...and other vital areas like media...going by their conduct so far...

then with time and effective management...think even 80% and more might be possible...of course by then as a society we need to work smoothly in 'process needed of living' so need for government/judiciary/parliament becomes lessened...but this is now getting close to utopia...and some how dont think we are anywhere near there...

sam
just google 'annual government cost' in budget...and recommend sitting down...

"Shortly after that Senate inquiry, the NBN panel announced it was excluding Telstra [whose present CEO is one of those loud American Republicans a la John McCain]. The big telco might even have been relieved by its exclusion, for earlier this month it dropped a [100/ 2 Mbps HFC upgrade] tiger into the NBN hen house.
Did the Government consider HFC when it drew up its tender? Or, as Telstra has suggested, were bidders restricted to fibre to the node (FTTN), for which access to (Telstra says confiscation of) Telstra's wires from telephone exchanges to nodes and then to premises was essential? Or fibre to the home or premise straight away to avoid a regulatory fight over copper wires. Why limit the use of terrestrial or satellite wireless?
But the tax payer contribution (AUD/$4.7B) over and above the killed Telstra share price to the NBN plan would only bring a minimum of 12 Mbps to 98% of the population, with a further contribution up to apparently $15B needed from the consortium, but that was calculated before the dollar exchange rate ...
Or, to put it more practically: should we not simply start all over, this time using a bit more common sense and recognition of technical, financial, commercial and political reality?"
(http://business.theage.com.au/business/make-a-connection-national-broadband-plan-doomed-to-fail-20090331-9idg.html?page=-1)

Of course, the Comms Minister is one of those Extreme Christian Right types who is all about censorship - fighting iiNet and Telstra so that means the #3 and #1 ISP, one could almost see another China charge coming with SingTel Optus being the #2 ISP - not bringing on the age of Cloud Computing, [from LANs to internet to] medianet and ubiquitous comms. As in, citizens must be spoon fed.
And everything is about faith, and I believe, not facts just like Tony Bliar, who is also from the UK!
The sooner Australia cuts its old ties with the colonial masters of the British Empire further, the better things will get!

Sam said,

You are just repeating neo-liberal trash talk. Government is not a burden on society. It does not "suck away" at the common wealth. Quite the reverse, it is the ultimate source of it. New net wealth cannot be created until the sovereign spends. The private sector cannot create new net wealth, only re-distribute it. Those repeating the commonly heard version of this (goverment cannot create wealth, only re-distribute it) have it exactly backwards!

The annual government cost you speak of represents (at the federal level) the flow of money into the economy. It does NOT represent money taken out.

Public and private sectors are not opposites Sam, they are two sides of the same coin, the federal budget functioning as a mirror-reverse of our household budgets. This is the nature of our modern monetary economy.

The words to explain the Rudd – dunnystan syndrome; well it is Embarrassing, and is a statement of the downfall of democracy; -and the antipathy of Socialism – then the total collapse of our ancestral effort - The band of incompetent Morons become the new religious messiahs and saviours , Nephilim Rudd at the helm is; Ignoble and Ignominious.
Perhaps it is time to call it stumps and let the censer consume it self – Survival of Knowledge and human consciousness is important, and not to submit to falsehoods and perpetual lies of promises of stolen treasures of nonexistent commodities.
The know where man , and no-thing automaton moron. Third world Reich President Rudd-dunnistan and cohorts.
Tell them to get stuffed.
Dont let them stuff us. may well be too late.

All,

do you actually have anything of any value to add to the discussion?

fozz wrote..'

'You are just repeating neo-liberal trash talk. Government is not a burden on society. It does not "suck away" at the common wealth. Quite the reverse, it is the ultimate source of it. New net wealth cannot be created until the sovereign spends.'...

sure, lets examine this...

govt not burden: so we are in a locked room with 8others...each have varying amount of money earned...and one vending machine in room...yep, simple economic cashflow situation...now I call myself government, and make the rest pay 50% of money in pocket to me...sure 'total' room economy still same...but individually less in each pocket...so you unlikely to use vending machine as ofter...hope you get what Im tring to say...

govt ultimate source: Ive got 50% of everybodies money in my pocket...say I use to employ two to keep room clean, and they spend on vending machine too...yep, on the face of it its 'economic growth'...but individually money in shortage...yeah?...so question is are we better off with 'smaller' government and let basic economics rule the economy(keep more money to spend in our own pockets) while parliament(law)/judiciary(enforcement) insure to fair play and prevent im-balancing sequestration of wealth in one sector...usually means excessive profit margin for goods and services(usually result of great demand for limited supply or unfair use of power...)

and on...point is we need better balance of cash sequestration areas...so is more money in government pocket from income-tax or leave more of money in your pocket better... which will 'stimulate'(the new catch phrase) the economy more?...

sam
Ps~situation very different in developing countries where they need to develop industry infrastructure...(more money in govt pocket needed...but the population need to keep a close eye on govt-expenditure...and when taxes need to be reduced so 'spending' can drive those industries...

Fozz, if the junk you supply, and call it an informed opinion, then if that is archetypical of your discussion, then No, I cannot compete with such an Ignorant idealist.
I would have spared you the embarrassment of naming it junk without a premise, Clueless garbage, other than gold pots at the bottom of your garden left by the pixies.
Undoubtedly someone else’s wealth looted.

Save your energy sam.

Spindoc, thanks for a considered response, unlike much of the guff that has followed, don't you think? Unfortunately, unless some middle ground is reached, we will always have the same problems.

<< Every claim by a “reputable scientific source” can be refuted by an equal and opposite “reputable scientific source”.>>

I'm sorry Spindoc, this is simply not true. One only has to do a search of the scientific journals for the published literature. However, I would agree a lot of "noise" is being made in the popular press, media and blogosphere that claim AGW is bunkum.

G20? I can't help but think they are repeating the same problems that got us here in the 1st place. I certainly don't have any answers to this dilemma, but I hope most of the money is spent on tangibles, albeit the returns on them might not be felt until much later.

Sam,

as near as I can tell, you are still thinking of a federal government budget as functioning in exactly the same basic manner as your or my household budgets. This is a logical enough assumption, but it is not how the federal budget actually functions.

The federal budget functions in way that is unique among all others. The fed is the sovereign, the currency monopolist. It alone is empowered create and destroy money (in $AUSD) at will and it does this every day. As I'm sure you are aware, money is not a real, physical thing - it is an abstract concept, an idea. Because it is abstract, there is no limit to the sum that the currency monopolist can create at will, they can simply imagine any amount they like and instantly bring it into existence.

Unlike you and I and everyone else, they do not have to earn or borrow money before they can spend money - because they themselves are the source of any amount of it they choose.

When the fed (not state) government taxes, the tax dollars do not go anywhere. There is no federal bank account holding a stock of taxed dollars. In debiting a bank account, the fed simply compells that sum of money to "un-exist". No transaction occurs. There is a system that accounts for this and may superficially resemble a bank account but is an accounting structure, that's all.

Why would I have any need to earn, save or borrow what I can simply create in any amount at any time I choose?

Seems I am about to exceed the word limit, will post the rest later, including the need for the fed to run small defecits for sustainability.

While no-one can suggest a clearer way to go than Rudd, there is also no-one that has given a clear explanation of why the world is in the extremely severe financial trouble it is in.

The point is, what should a historian portray concerning such a position?

Maybe the old bush term, - rip sh't or bust - should pretty well describe it.

bushbred, try Steve Keen Debtwatch for a pretty persuasive explanation for the mess we're in. Article "The Roving Cavaliers of Credit" is a detailed description of how debt financing of housing and securities bubbles eventually leads to crashes. Insufficient liquidity to service debt leads to asset deflation leads to a credit squeeze when banks realise they are put on a limb etc.

I'd be interested in your take on this. Thanks.

Well, Palimpset, during the Howard era our farm land prices jumped from 35 dollars per acre to 300 dollars per acre while grain prices stayed the same.

Some say, it was Howard/Costello's heavy borrowing early in the period which luckily merged in with global inflation.

Apparently the same has happened worldwide.

But I'm not an economist, mate, only a mug historian who has also written a fairly popular series on WA, called A Land in Need.

The Need there-of mostly rescued by what so-called mug economists call Quarry Economics or Pitstock Politics.

Cheers, BB, WA.

Hello Bushbred; the proposition of offering alternative, or the correct measures that ought to have been the case; - That is the exact point that has been over looked Bushbred - The classic textbook example of a Narcissistic Psychopath cannot be told anything – and Rudd cannot be told – or be debated – nor compromised with his ego – even if it destroys us; It is likened to a dog peeing on a tree –: marking its territory – That is all that matters to them. And not what is correct or what is right.

I would love to read your historical account of the W a Treasury under the Labour party; and how so much wealth could be distributed outside of Democratic systems.

Well that would be all Labour run States- but you live in WA

Government can only exist by the ability of a Nations people – it is constitutionally charged with the responsibility to Protect and preserve private property rights- Not Private property and National Ability charged with, and deplete to keep Government and its Industrial parasites to exist.

It is not a substitute God who reorders the Metaphysics and rewrites the sciences to suit its own purposes; That is what exists today - You might be right Bushbred – Australian Colloquial expressions we cannot write here; We are drowning in a very deep DOODOO pile- Thanks to the psychopaths.
And most of us realise ; there is no recovery now.

fozz wrote...'Seems I am about to exceed the word limit, will post the rest later, including the need for the fed to run small defecits for sustainability'...

may I request that you read the following, as initial guide, to follow leads to others areas...on history of banking, leading to current system, and current crisis...
http://www.historyworld.net/wrldhis/PlainTextHistories.asp?historyid=ac19 (last and most important page missing...)
http://en.wikipedia.org/wiki/History_of_banking (another swing at it from different perspective)
http://www.investorwords.com/1914/Federal_Reserve_System.html (good definition of federal reserve system...)
http://books.google.com.au/books?id=KZAJTdn6x0IC&pg=PA88&lpg=PA88&dq=currency+regulations+history&source=bl&ots=uvz5Y030Pg&sig=fKeRSZrtar6_mzMERJj5z0TvxJo&hl=en&ei=DCrZSZOWEJDW7AOvoKTZCg&sa=X&oi=book_result&ct=result&resnum=10#PPR21,M1 (happy 88page reading including currency regulation...)
http://en.wikipedia.org/wiki/Official_gold_reserves (gold reserves of countries list_ ie actual reliable comparable worth value of each country and its currency(meaning 'positive' asset only[does not include debt put into asset category as done these days to inflate bottom line...)
and google 'gold reserve economics'...
simple view of 'toxic-debt'...bankers view...http://www.theage.com.au/interactive/2008/world/economics101/index.html
http://www.thebull.com.au/articles_detail.php?id=1372 (biggest debt sector-housing, and warning signs in Australia...)
http://en.wikipedia.org/wiki/Global_financial_system (uselessly brief blab for such major area of public interest, but links to imf, world bank, origin and its failure as evidenced by current crisis(which no one including public leaders want to acknowledge and prosecute...but throw more public money at them) etc...)
...and hopefully enough pieces of common knowledge available...how money(cash) to cash-collections(banking) to cash flow(large to smaller sectors of world where cash flows in and out to...and how it all comes together (and abused(eg futures markets, wall street, and for us the common public the housing sector) so your next post can address the particular point you want to make...

sam

Hi sam.

Apparently missing from all your links is the answer to the most important question - what is the origin of money? How is it created? Who or what brings it into being?

It is easy to struggle with this concept due to the abstract nature of money. It exists, but not in a physical sense.

Imagine the world is a village inhabited by you, me and all. The total sum of currency circulating aound this village is $100. 5 years later, things have changed. There are more chickens, pigs, an extra milking cow and a new barn. You, as the blacksmith now have more tools, a second forge and make and sell more usefull items and trinkets to me. I in turn as the farmer, sell you more milk and meat from my expanded heard and flock. In order to accomadate this increased exchange of increased volume of goods and services, the total sum of currency circulating the village is now $200.

We note this fact and then go on our merry way, never giving it a second thought.

So how did this increased numerical amount of money just "appear"? If EVERYONE has to earn or borrow before they can spend, how is it possible for the fixed amount to change (and where did the original sum come from in the first place)? Did the dollar bills sneak off and do something while we weren't watching?

The answer is that all is the sovereign. He alone is empowered to create new currency, to increase what would otherwise be a fixed amount. Through his steadily increasing spending as he buys more of what you and I produce, new net money has entered the economy. He did not need to tax us or borrow from us in order to spend what he can simply create.

The link about tax paying for government spending applies only to state governments, who are not sovereign. It does not apply to the sovereign. Please post an alternative explanation if you have one <word limit>

fozz wrote 'what is the origin of money? How is it created? Who or what brings it into being?'...

actually information in those links, but Ill try my best...

your village example is correct, and theoretically the village 'reserve-bank' will keep track of total value of village assets(chicken, cow, pig and potatoes), and ensure total 'money'(legal tender) it prints be of same 'total' value and keep pace with real increase or decrease...(what I refer to as 'real_assets', ie excludes loans\debts ie 'in-the-air assetss)...

when currency value linked to each country gold reserves, currency was stable(gold_reserve_economics), till 1970's when de-linked(do google on the architects behind this market destabilization that was one of the original errors leading to current crisis...)

since, who know, how know, who does about total country asset in real time(but debt/loan included in this, so can see how large toxic loans mess up the bottom line, in other words there is excess world currency circulating at the moment...meaning, yep and dont ask for details)...on this the total currency in circulation is set by each countries reserve banks and money printed or removed...

the relative currency value between countries(poundVfrancs)set by buy/sell market forces...based on even more hocus pocus...discover huge oil fields off tasmania, wall street sees it dramatic increase in 'total_asset' and Australian currency value takes-off up...

so taking Zimbabwe, inflation exceeding 1000%, loaf of bread zim$100,000(reserve bank printing crazy amounts of paper money)...same loaf in Australia $3.00... when loaf zim$1.00 some 20 years back(yeah, been there), so what happened?...buy/sell forces drops zim$ value...so for Aus$3.00 you can buy 100 loafs of bread($300worth) in zimbabwe(and can export back to Australia for a jackpot profit...see the problem)...so zim reserve banks over-values its total assets(saying bread actually Aus$300)...so can print more, but wall street says 'nah, thats fraud'(de-linking needed total-asset_currency-value co-link for current market to work) so devalues currency futher...and on...Zimbabwe can fix this by delinking export/import from zim$, say use Aus$ value...so local Zimbabwean will pay Zim$1.00, but world buys zimbabwean bread at Aus$3.00...see...

sam
Ps~'sovereign'...time when monarchy ruled, yeah blue-veined-by-birth-right-and-god-caste-system time, they determined 'currency', not now...

The Templars invented the banking system - which opperated on Ethics and Honour. Something not common with Government and departments.

Money hmmmmm; This will answer the question- Solipsism exclude.

http://majorityrights.com/index.php/forums/viewthread/22/

Good. So you understand that the sovereign ( I'll use the term "currency monopolist" if you'd prefer) is the ultimate source of the medium of exchange and it alone is empowered to create or extinguish it.

When it taxes, it does not physically collect any money, it simply extinguishes that sum. The reserve itself is always issuing notes and coins to meet our circulation requirements but this is seperate from the process I am talking about.

You'll understand that talk of deficit spending now creating large future debt might be true if you or I anyone else were doing the borrowing (and the fed are not borrowing), but not when it is the currency monopolist because terms such as "debt" and "savings are largely irrelivent to them, owing to their unique powers.

The only way that the absolute amount of currency can possibly increase is when the currency monopolist spends. But if they feel the ideological need to keep running up ever larger surpluses when there is no need, then they are taxing more than they are spending and witholding currency from circulation. They are reducing the net sum availiable in the economy. The only way for the private sector to then finance economic expansion is to keep borrowing. But this must be repaid plus interest and for each dollar of private debt, there is a corresponding liability. It ultimately cannot supply the net increase needed to facilitate a steadily growing economy. To rely on this alone to fuel growth is unsustainable in the long run.

For this reason, the federal government must run small defecits to ensure stable, long term growth. We are so conditioned to think of the federal budget as functioning exactly like our household budgets that we react in horror at the prospect of this, not realizing that a federal defecit equalls the ability for the private sector to accrue surplus.

OK, so Rudd is far from perfect.
Conroy must go, as must all who support secret censorship.
Cash handouts are too blunt an instrument, and wasteful.
Infrastructure spending is what we need: Rail, road, housing (factory built, not bespoked). We need more R&D...particularly the Development bit which Australia is so bad at.
We cannot continue being a mine, a bank and a tourist resort if we are to remain an independent country...we must make things that count: Energy, medicine, factories, food, housing, clothing, gadgets, and last but not least knowledge. Oh, and a free media.
Finally, if the Right is serious about regaining government (I believe they will wait until the next cycle again. Easy to make silly associations that the press and "informed commenters" can run with), they need to sort themselves out. Get rid of the extremists and you will breeze in the next election. Recessions are hard on governments: the mud sticks. What is most important is that the opposition are competant when the population next does a flip-flop.

fozz, sorry but get out of the comfort of your deep well, climb out to top and look at the world as it really is...warts and all...otherwise yeah for a while youll be comforted by fact your well safe and going per usual...then one day...bang...and you are in extreme survival mode...so better deal with 'stitch in time' or 9billion stitches needed when almighty rip from unceasing relief of building pressure...there are real problems affecting us all here...like...

for example http://www.reuters.com/article/newsOne/idUSTRE53537D20090406?sp=true

exerpts...'Healing the banking system(US), which is "basically insolvent," and housing markets is crucial to recovery, Soros said...'U.S. dollar is under selling pressure and one day could be replaced as a world reserve currency, possibly by the International Monetary Fund's Special Drawing Rights, a currency basket comprising dollars, euros, yen and sterling'(yep, fatcats want the buy\sell money-market-gravy-train going on)...'Being the main issuer of international currency, we have been exempt and we have abused that because we have effectively consumed 6.5 percent more than we have produced. That is now coming to an end.'....

and others say... http://www.theinternationalforecaster.com/International_Forecaster_Weekly/World_Financial_System_In_A_State_Of_Insolvency
http://www.forbes.com/2009/03/04/global-recession-insolvent-opinions-columnists-roubini-economy.html

otherwise I foresee that you will be also named 'froggy' till you climb out into the light...

sam

sam,

would it make it easier to accept how our modern monetary economy functions if I said that it is neither "left" nor "right"? It is simply the way it is - you can be a righty and still accept the truth about the origin of money and the need for deficit spending at the federal level.

I'm not sure where you are leading. First you say my village analogy is right, then you attempt to prove it wrong (I think). Your comments and links appear to have no bearing on the nucleus of the argument. That being that all currency derives originally from the sovereign (currency monopolist) who are not limited in the amount they may choose to create.

To argue otherwise is to argue that there exists a fixed, unchanging and unchangable amount of currency in the world. That the sum in existence today is essentially the same sum that existed at any point in history and that the only way to get more is to earn or borrow it from somewhere else (in which case, where did the original sum come from?)

Or business activities "create" an expanding sum (false)

Or that it simply "creates" itself (also false)

Do not confuse the way the fed appears to budget with how the modern monetary economy actually functions at it's core. The type of economic management embraced by both parties for years now represents an ideoligal position, not the actual fundamental working of the economy.

Now, do you understand and accept that the federal government is empowered to create and extinguish Australian currency at will, and therefore to spend money without any prior need to tax or borrow. If you think that the fed cannot do this, please clearly spell out why.

Excellent post Fozz! But ... off-topic?

And Sam!

Hi Q&A

Are you a moderator?

The reason I went down this road is that underpinning the whole argument made by the author of the article, Henry Thornton, is the notion that we are on a road to disaster because the government's deficit spending equalls a massive debt that must be paid back by the taxpayer.

This is absolutely false! But unless we understand the basic functioning of the modern monetary economy, we will logically assume that Thornton is correct. That because balancing the budget and constantly seeking to run a surplus (savings) is good for our household budgets, it must be good for the federal government as well.

No - a federal budget functions as the mirror-reverse of our own. The voluntary constraints that have been in vogue for several decades are just that - voluntary. Implemented by both sides of politics according to an ideology (neo-liberal) that is now past it's prime and beginning to fade.

Once the largely failed neo-liberal experiment is finally ditched, both major parties will be free to resume the basic responsability of government - nation building.

Hi Fozz

No, most definitely not a moderator. I do however like to give credit where credit is due ... and I liked your arguments (not too sure about the latest) - unlike the guff earlier in this thread (and all threads drift from topic).

I am also impressed with Sam's ripostes - and would like to defer my thoughts until I see his response to your penultimate.

Having said that, I am not at all sure where the author is coming from - he is not Henry Thornton by the way, his name is Henry Ergas (you are probably confusing him with another article?).

Ergas comes across (IMO) as just a plain old rhetorical whinger that would be better off getting an old milk crate and shouting to the passers by in the Domain :-)

Oops, you're right Q&A, it was ERGAS not THORNTON - I wrote that at the end of a very long day. And yes, Ergas is as you describe him.

I don't have the URL but check out "billy blog". It is an Australian website belonging to Professor Bill Mitchell. He is a macroeconomist and the head of an economic research facility. It will explain the workings of our modern economy as they really are. Quite an eye-opener.

cheers

hey guys,

fozz, Ive been trying to understand your arguments from your view point, both, what youve written, and presumptions on other indisputable parts of the whole(cash_economics...)...and must say I still not sure I have grapsed it...

for example, you wrote 'the notion that we are on a road to disaster because the government's deficit spending equalls a massive debt that must be paid back by the taxpayer.' as 'This is absolutely false! But unless we understand the basic functioning of the modern monetary economy, we will logically assume that Thornton is correct.'...and earlier, 'That being that all currency derives originally from the sovereign (currency monopolist) who are not limited in the amount they may choose to create.', and 'To argue otherwise is to argue that there exists a fixed, unchanging and unchangable amount of currency in the world.' and 'Or business activities "create" an expanding sum (false)', and '
Or that it simply "creates" itself (also false)',...and on

if a structured reasoned argument from ground basics(basic facts everybody will agree with) that develops into a direction led by reason and logic, ending with your conclusions as the most likely/reasonable, then I may be able to give a useful comment...

for on face of it if the 'sovereign' does indeed can make/give anyamount of money independently of any thing else, they why need for taxes...or why worry about inflation...or just give common people money to live...and 'depression' can never occur etc...if you see what I mean...

sam

Hi Sam

You ask a perfectly logical question: if the fed does not need to tax in order to be able to spend, why do they tax us? The answer is that taxation creates demand for the currency the fed issues (Aussie dollars) without which it would be relatively worthless. If you think that taxation does not create demand for $AUSD, try to stop paying! It also lends weight to the legitamacy of the sovereign's authority - they make the rules and the rules are that in order to live and work/do business in Australia, we must fulfill our tax obligations to the fed. By imposing such a rule, demand for that currency is automatically created, for we cannot work or do business in Australia unless we accrue enough Aussie dollars to fulfill said obligation to the sovereign.

Strange concept I know but the fed does not need our tax dollars to spend them, for they are extinguished the moment they are deducted.

Consider the stimulus, $42 billion so far. We already had a $22 billion surplus, so where is the additional $20 billlion coming from? If the fed needs to earn or borrow before it can spend, surely we can then find in the fed's accounts, a deposit slip for $20 billion from the IMF, or the bank of the PRC, or the Sultan of Brunei? If that is not there, where could the money be coming from? The fed simply creates it.

cheers

fozz wrote...'Strange concept I know but the fed does not need our tax dollars to spend them, for they are extinguished the moment they are deducted.'...

just to be clear, lets take American federal reserve, empowering legislation http://www.federalreserve.gov/aboutthefed/fract.htm (some 12 banks, semi-private, and their purpose http://www.federalreserve.gov/generalinfo/faq/faqfrbanks.htm all of which forms us 'central banking system'...

now to printing money without basis... http://www.theaustralian.news.com.au/business/story/0,28124,25212624-643,00.html ('IT'S an ominous day when the world's economic superpower starts printing money to buy its own government's debt.')

been done before, eg Zimbabwe example, inflationary mechanism immediately set up(pre-ww2 Germann govt action demonstrated this catastrophe best in history...), and if not eased then soon worthless...so back to age old barter system...(cash economics ie money is essentially worthless paper, but fed bank 'promises to pay the bearer of...'guarantee, read whats written on your 10dollar note...is actually 'liquid' intermediary to facilitate goods and services trade, therefore no goods/services then there is no money...thus link essential for system working...)

so fozz on the face of it what you are saying is plausible and guess fed bank can print money irrelevant of any other consideration, but like taking something out here, restricting there, and dumping here of an interconnected/interdependant closed loop real_time working/dynamic system, like money_economics, its a very dangerous thing to do at the very least, and worse plunge us all into economic stagnation and end current 'mutual_benefit_international trading' for a long time...

and since 'workbook guidelines' details of inner working of feds is not available...guess all possible, but certainly hope feds not filled with such megalomaniacs whom disconnected to real market forces, while complete power on the money-printing-press at their disposal...to print anything they like to cease any debt at any time to get the problem off their table...is not the case...if so world economics been made to be very fragile indeed...and I for one would like to know exactly who the architects and current real enforcers of it are...

sam

I am hoping that this is a 5th Generation Post Modern Crypto Marxsoid- Harvard antithesis of Reductio ad absurdum ; and mystagogia - out of context and very bad - bad humour; it must be a G-up - Fairdinkum.

Hi Sam

The "very dangerous thing to do" is done every single day as part of the normal functioning of the economy. Fed spending is a flow of an intangible (yet for all intents and purposes, real) medium of exchange. It flows into the economy with each $ they spend and flows out as it is drained out through taxation etc. It does not issue from any stock as no such stockpiling is necessary.

The danger now is not from overall inflation. Aggregate demand is slumping. The price of goods, services and labour is not going to be driven upward if no one is currently wanting them. The fed is attempting to prevent or at least slow the opposite effect by re-introducing some liquidity back into the economy. This will have some positive effect, even if it is largely only to increase household savings which for years have been basically non-existent but I think that a better way to spend the money they are spending would be for them to directly create jobs. Public sector employment as a total share of the labour market has fallen hugely over the past 30 or so years, and the private sector was never able to use all the labour available. Unemployment has long averaged around 7% or so, only falling below 5% at the peak of the boom, while during the preceeeding era of government "intervention" it averaged around 2% in this country.

All,

are you going to forward an explanation of how money is created? Insults do not amount to arguments.

fozz wrote...'flows into the economy with each $ they spend and flows out as it is drained out through taxation etc'...

firstly, your conscious ignoring/rejection of factors that do not fit into your hypothesis leads to rejection of what you are saying...

From my understanding, your saying cash_economy is fed bank pouring money into economy...which flows through system via various avenues...till it returns back to fed bank completing cycle...

so if fed print more money...dump it into economy...there is more to spend...fixing the stagnation...

ok...lets look at history...after all why re-invent the wheel all over again...http://ingrimayne.com/econ/EconomicCatastrophe/HyperInflation.html ...reasonably good with examples of german hyperinflation(like by over printing money)...and note 'Inflation hurts some people but helps others by redistributing wealth and income'(so all savings/super lost but all cash-debts eg loans wiped out by devaluation)...'The segment of society that was hit the hardest seems to have been the middle class'(most with home-loan, income mostly 'fixed' and soon mostly spent on essentials like rapidly escalating food, mortgage defaults back to bank...so poor(nothing to loose but starve like us all), rich(money shifted to assets like gold that relatively increases in value with hyperinflation-good accounting management)...and on...

sure printing money to induce hyperinflation wipes out all the effects of greed/toxic-risk(relative value of $1billion bank toxic debt today in 1000% hyperinflation becomes 1000% less...see)...and start off again...with rich stillwith money, poor per usual...but middle class screw**...back to zero...16hour/days long hours of hard work to start again etc...

so bottomo line...no thanks...this time let the rich/greedy/unbalanced-self-interested face full consequences to their collective acts...which added cumulatively causing this crisis...

sam

Not meaning to be offensive here Sam, but your style of writing makes it sometimes difficult for me to follow what you are saying so perhaps I have missed a point you are trying to make.

There is no hypothosis here - this IS the way it functions. I take it that you accept that the sovereign/currency monopolist (Milton Friedman would have referred to them as "monetary authority") is empowered to create and extuinguish it's own currency of issue. If nobody was, global economic growth as we know it would be impossible. If the money supply were not to steadily (and the keyword is "steadily") expand, how could an ever increasing amount of goods and services be utilized by and exchanged between a growing population? Or even simply an increasingly materialy wealthy population? Everything would have to be bartered.

No matter how you look at it, you must conclude that money is coming from somewhere and that it is not a fixed, unchanging sum. Someone must continuously create it or it CANNOT exist. I take it you accept this?

We are in no danger of Weimar-style hyperinflation. We run a modern monetary economy with a free floating currency. 1920's Germany had much less control over the value of it's currency at home. There existed a gold standard and Germany was being forced to meet massive war repatriations to the allies. The money that backed this boom just gone bust can't come flooding back - it isn't there! All that is there is private debt. Aust govt has for years been witholding money from circulation by running up huge surpluses.

I would have thought there was sufficient information for you Fozz- it would have given you enough information to produce a PhD doctorate in economics- but you clearly state that you cannot comprehend- It sounds like a Rudd excuse when He does not want to comprehend.
I did provide you a link earlier to explain the Origins of money and its exchange, and its value.

Anyway Fozz, it will all mean very little in about 18 months – Incompetence and Inability rule now – so many of us are willing to, and have prepared to, - Exceed from the Psychiatric “STATE”, the honour and integrity of your money is meaningless junk, and your new Creators of Incompetent idiocy care little for what they publically claim , and are actively , and , continually propagandise and exploit the idiots spherical designed parameters to suit their own depravity, to feed their own mental sickness ,all by worthless fools.

The impending collapse of the Western World is inevitable; - Whilst Rome burns, There are No other havens to escape too Fozz.
Socialism in all of its toxic and cancerous forms has turned our world Malignant
Good luck.

Why don't you spell it out for me All?

I couldn't really see anywhere in the rather poetic opinion piece you linked to anything that clearly stated "the origin of money is <xyz>"

I am not asking who first dreamed up the concept of an intangable medium of exchange - I am asking you HOW IS IT CREATED? Who creates it? Or does it create itself? Who or what is behind the steady expansion of supply?

You appear not to have attempted to answer this question.

Then you appear to blame the collapse of loosely regulated financial capitalism on..............socialism.

Nonetheless, I am not convinced that you are a hopeless case. You just need to think.

Capitalism died a long time ago Fozz – it is a bureaucratic industry now and it has been for a long time.
Liken it to when you write a cheque Fozz , It is a bit of paper with numbers written on it , and an amount that is described as to your honour of payment ; If I was to write a cheque for an amount of money I know that does not exist – it is dishonoured .

That is the nature of money Fozz , it is a substitute for real gold and Honour amongst men and women-
Short supply these day , do you agree?

I take your attempted insult as a complement Fozz – and I do hope I am very wrong about the future , but it is not an opinion Fozz .