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The Forum > Article Comments > Debt for development makes sense > Comments

Debt for development makes sense : Comments

By 21 Prominent Australian Economists, published 10/6/2009

Debt can help us build assets now that we couldn’t otherwise afford, and repay the costs when the assets bear fruit.

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Whole heartedly agree.

It's interesting to read Ross Gitten's article about the efficacy of locking up "criminals" who cost so much money to keep in gaol that it impacts the state's ability to provide hospitals and schools. see http://www.smh.com.au/opinion/counting-the-cost-of-wrong-emphasis-in-crime-reduction-20090609-c25y.html
Posted by billie, Wednesday, 10 June 2009 9:13:36 AM
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Thanks OLO for publishing this. I would have missed it otherwise.

I don't have much faith in the projections of macro economists, but nevertheless it is nice to see most of them are on the same page. And possibly more important, that the government was listening to them when it made its decisions.

It is a bit frustrating the powers that be rarely tell us the real reasons they decided to take a particular path. They seem to think we will find sugar coated sound bites much easier to swallow. How nice it would be instead for them to give us the same information they based their decisions on, and tell us their reasons for going the way they did. The gutless wonders seem to prefer to hide behind platitudes.
Posted by rstuart, Wednesday, 10 June 2009 12:07:05 PM
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How long will it be until we join the dots between energy and the economy? Fossil fuels have allowed us to leverage two things; namely work and debt. With it highly likely that the world's primary energy source, oil, is past peak production and numerous warnings from many different organisations for another oil shock around 2012 due to declining investment (around 21% this year according to the IEA) and production declines from existing oil fields - it is very hard to see how our economy is going to grow, at least for any sustained period. With a declining energy supply, resulting in reduced economic activity, how exactly are we going to pay off this debt? In short we won't and even worse our current debt laden stimulus packages are doing essentially nothing to get us out of our liquid fuels predicament, thanks in part to an unrealistic assessment of our liquid fuels situation by our government (see: http://anz.theoildrum.com/node/5469)
Posted by leckos, Wednesday, 10 June 2009 10:20:37 PM
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I have read this letter before. While I strongly argue the fact the federal government is not at all constrained by any need to earn revenue and may spend whatever it sees fit without earning, taxing or borrowing, I nonetheless completely agree with the general cut and thrust of the article. There is a very big difference between going into debt in order to build up something of great long term value (debt is NOT the same thing as federal government deficit) and borrowing for a consumption spending splurge.

leckos, you have just named one of my biggest fears. I think you are likely correct - we are near or at the phenomonen known as "peak oil". Oil is already running at about twice the long term average price.....during a serious downturn (albeit that the $USD has suffered). It looks to me as though the collapse of the spectacular run up in oil prices only began when the economy of the US - easilsy the single biggest petroleum consumer at around 25% of all the world's supply each day - began slumping about a year before the stock market crash.

It is a fact that there is scarcely a financial crisis so severe that it cannot be dealt with by government spending if the political will is there. But physical supply constraints in the energy that powers modern life itself is something else again. We need to get cracking on alternatives because we are just about out of time.
Posted by Fozz, Friday, 12 June 2009 6:06:55 PM
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It would have been most interesting if the 21 economists had given their view(s) on the likelihood that the expenditure will be on projects that will make a return above the borrowing rate over the life of the debt.
Posted by 58, Monday, 15 June 2009 11:26:19 AM
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"21 Prominent Australian Economist Agree?"

That sounds as realistic a probability as the Last Budgets Recovery Projections and the accuracy of Cost estimates provided by any socialist.

IT is an acknowledged fact, most economists change their mind more often than their underwear...

which mean 4 times a month ...

at least that way they produce an "economic" deployment of washing powder.
Posted by Col Rouge, Tuesday, 16 June 2009 4:15:04 PM
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