“What are we to make of the fact that the facts are so far out of whack with the theory that government borrowing pushes up interest rates?”

It tends to discredit the theory: subject to the influence of all other variables that may affect the supply of, and demand for money. How have you factored them in?

Do you theorise that the effect of government borrowing makes no difference to, or lowers interest rates? If all available funds were to go into government bonds, what effect, if any, do you think this would have on interest rates?

“We question the established dogma, that's what we (should) do.” Good. Do you question the orthodox Keynesian dogma that government can create net real benefits by forcible redistributions and stamping pieces of paper?

So. When did the function of taxation change from revenue raising to currency deflation?

Tristan
How do you know that the expenditure on a given thing, such as broadband, won't cause more unemployment in the field of activity it was taken from, than it creates where it's expended in broadband?

There are a few issues re: stimulus...

The government's stimulus was not meant to support consumption indefinately... It was meant as a 'stop gap' measure to bouy consumer confidence in the short term...

Thereafter - investment in infrastructure builds future capacity - so it is not just 'throwing money around'... It is investment in the future...

Investment here - and in other areas of vital social and economic need - such as social housing - will also provide benefits in the future... Now is the time to make such investments - as it is now that the economy needs support from such expenditure - to counter unemployment and again - to restore confidence...

And when the world economy reverts to stronger growth - then increased revenue - supported by increased capacity - will provide the means of servicing - and ultimately repaying - that debt into the future.,..

”True, and as there are no constant relations between human values, actual observation requires theory in order to have explaining power.”

I’m glad you said that because I can’t actually see any arguments as such in your post. You have simply submitted a series of “what if’s?” A series of rhetorical questions instead of reasoned arguments.

To which I can only respond in kind:

How do you know that the stimulus occasioned more unemployment than it relieved?

What employment would such privately-held funds have otherwise created during a downturn as demand slumped? Who would the private sector be rushing out to employ in such circumstances? Why don’t you tell me?

I would also add that if those opposed are unable to show that stimulus spending during a downturn does more harm than good ie destroys more jobs than it creates etc then they are unable to justify preventing it – especially since those calling for it’s prevention tend to be economically secure.

I don’t know how many people have been put to work digging holes and filling them in again. Perhaps you will tell me? I have however personally seen much needed maintainence work performed on schools. The only holes they have dug were to install upgraded data cabling. Come to think of it, they did fill in the holes again.

“It tends to discredit the theory: subject to the influence of all other variables that may affect the supply of, and demand for money. How have you factored them in?”

I don’t know – how have you factored into your theory why these “variables” which now apparently do exist force interest rates and government debt in opposite directions so frequently and to such an extent that they can move in opposite directions for five years at a stretch or more. Immensely powerful variables wouldn’t you say? Either that or government borrowing does not prevent funds from being loaned.

By the way, do you still want the links to the RBA records and treasury document extracts?

As, I was saying before the computer told me no, speculative questions do not amount to arguments. They merely make it appear as though you have no arguments of your own.

Tristan
That is to re-state the original rationale for the stimulus policies. It appears you might not have understood the question. What I want to know is, if the negative consequences of the policy outweighed the positive consequences, would you know, and if so, how?

If you don’t know, just say so.

The point of investment is to buy assets for purposes of production with a view to making profits and avoiding losses.

By contrast the point of government expenditure on stimulus policies is to employ people to build something, like a broadband network, specifically because in the absence of such government expenditure, private capitalists would not venture to do it, because private capitalists figure that if they did, they would make losses.

Thus the purpose of government expenditure on stimulus policies is to do something specifically loss-making, in the belief that this would be good for the economy.

Moreover the reason why employment is desirable as a social goal, is because it enables the employees to feed their families, participate in the good life etc. But this is a benefit in *consumption*, not in production. The purpose of productive activity, and therefore investments, is to satisfy people’s wants as consumers. To employ producers as some kind of end in itself, regardless of whether it wastes more resources than it gains, is self-defeating. The losses incurred in doing so must, other things being equal, cause greater unemployment elsewhere because the original private owners from whom the money is taken do not have the luxury of running at a loss.

Fozz
I’m not asking rhetorical questions, I’m asking whether those in favour of the stimulus policies know what they would need to know, in order for the policies to be justified in their own terms.

You have the onus of proof back-the-front. It is for those advocating a policy to justify it. Either answer the questions or have the honesty to admit you can’t.

So far all I have had in reply to my reasonable queries are evasions.

BTW, when did the function of taxation change from revenue-raising to currency deflation?

Peter Hume, you seem to have a very narrow view of the purpose and results of the stimulus.

>>...the point of government expenditure on stimulus policies is to employ people to build something, like a broadband network, specifically because in the absence of such government expenditure, private capitalists would not venture to do it, because private capitalists figure that if they did, they would make losses.<<

That might be true. Although an equally likely scenario is that the money simply isn't available to private capitalists - thanks to the tightening of credit, thanks to the GFC - in order for them to finance it.

After all, broadband networks don't come cheap.

But even if it is true, and the entire project "makes a loss", its construction will create jobs that a) pay wages that can be spent on food, cars, holidays etc., that keeps other sectors of the economy humming along, b) keep companies that provide the hardware and services to build the thing in business and c) feed money back into the government's other pocket through taxation on both the companies and the employees.

At the end of the exercise we will have kept quite a few people in gainful employment, and have something (with luck) quite useful at the other end.

Obviously, you don't want to do this too many times, otherwise the future tax burden becomes unsustainable.

But since the discussion has already moved on to how it is wound back, I shouldn't worry too much on that score.

>>The losses incurred in doing so must, other things being equal, cause greater unemployment elsewhere because the original private owners from whom the money is taken do not have the luxury of running at a loss.<<

Given that it taken from "original private owners" through the tax system, which is the same for everyone, how do you arrive at "greater unemployment"?