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The Forum > General Discussion > One Year On, Was A Vote For ‘PUP’ Worth It?

One Year On, Was A Vote For ‘PUP’ Worth It?

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It’s a bit over a year since Australia voted for its 44th Parliament, voting in a new conservative government lead by our 28th Prime Minister Tony Abbott, along with the usual collection of all sorts in the House of Representatives, and the Senate, but mostly Coalition and Labor Party members, nothing unusual in all that.
The real change was that over 700,000 people voted for the first time in a federal election for the Palmer United Party, and at the time they were very much an unknown quantity, not ever having a member in Australia’s Parliament. The consequence of this vote was that the larger than life party leader ‘Big’ Clive Palmer was elected in the seat of Fairfax in Queensland by the narrowest of margins, along with three of what we can assume are the best of the parties members to the Senate, Glen Lazarus, (Party leader in the Senate), Dio Wang (Party whip in the Senate) and Jacquie Lambie (Party deputy everything in the Senate).
Big Clive’s performance over the past year has been well documented in the popular press, along with the general antics of Jacquie Lambie, but little reported about Lazarus and Wang. My questions are, has Australia and those 700,000 voters been sold nothing but a pup, is The Palmer United Party proving to be up to the task of representing a constituency and what is the long term prospects of the party in politics? What is the party’s future in Australia, or is that something only to be determined by the whims of ‘Big’ Clive.
Posted by Paul1405, Wednesday, 12 November 2014 6:44:15 AM
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The PUP has self imploded in Queensland; there's no one left but Glen and Clive.
Posted by ConservativeHippie, Wednesday, 12 November 2014 7:16:11 AM
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It has been a fascinating reflection of the dysfunctional nature of our political system, has it not.

The most obvious characteristic, that Palmer has demonstrated in full colour, is that there are no longer any principles underpinning party politics in Australia. Policies are made and changed on a whim - and I'm not just talking PUP here, please note - while the only goal, of every politician and would-be-politician, is to find a way to be re-elected into the gravy train that we continue to suffer to exist.

PUP itself has shown that money can buy influence in our parliament when applied to the process of becoming elected, in just the same manner that myriad politicians of all flavours have corrupted individual projects with money accepted in brown paper bags.

The votes for PUP have therefore been valuable, in the sense that a vote for Palmer has demonstrated beyond reasonable doubt that we need to introduce some radical changes into our electoral system. Changes that reward honesty, rather than manipulation and deceit, and community service rather than self-enrichment at the taxpayer's expense.

Fat chance though, eh?
Posted by Pericles, Wednesday, 12 November 2014 7:55:16 AM
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A wise old Melbourne lady I knew, declaring her opposition to a change from three-year to four-year terms in Victoria when it was just a gleam in polies' eyes, proclaimed: "What nonsense. A politician who can't feather his nest in three years is incompetent!"
Posted by EmperorJulian, Wednesday, 12 November 2014 11:08:27 AM
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Whether he was worth voting for I couldn't say, because I don't know why the people who voted for him did.

However I can safely conclude that his decision to found the PUP was worth it.
Posted by Aidan, Wednesday, 12 November 2014 11:11:05 AM
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The PUP policies aren't awful, a greater emphasis on federalism, regionalism, de-regulation and de-centralisation, family first etc, I'd call them Libertarian populists but they're also pro union and pro immigration.
There's a lot in their policy statement which is appealing to working class people;
http://palmerunited.com//wp-content/uploads/2013/07/Palmer-United-Party-National-Policy-16MAY2013.pdf
Posted by Jay Of Melbourne, Wednesday, 12 November 2014 1:57:47 PM
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I'm not sure what's going to happen to the Palmer United Party ? The word 'united' seems to be somewhat over stated, given the latest utterances from his most vocal Tasmania senator, Ms Jackie LAMBIE ? Ms LAMBIE seems to be saying and doing anything she wishes, without first seeking her founder's wise counsel, views and opinions ?

I really know nothing of Clive PALMER himself, other than he's got a very litigious penchant, when anyone (outside parliament) annoys him ? That said, he seems either unable or unwilling to exercise any control over his four senators though ? I guess therefore, Party discipline is not that high on their agenda ?
Posted by o sung wu, Wednesday, 12 November 2014 2:14:56 PM
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My youngest daughter voted for him, "because he's a businessman, & we need more of them in parliament" she reckoned. I get the impression she has learned a lesson by his behaviour since.

I'm inclined to think that like Bond, he is more of a gambler, gambling in companies rather than casinos.

I think he will disappear, but at least he did stop us having a senate totally controlled by the left. For that we have to be thankful at least.
Posted by Hasbeen, Wednesday, 12 November 2014 2:26:36 PM
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Its time the whole kit and caboodle of election voting was thrown out and the true democratic 'first past the post' form of voting introduced.
Preference vots only support the idiots and the minorities.
Posted by chrisgaff1000, Wednesday, 12 November 2014 6:27:36 PM
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chrisgaff1000, the FPTP system is EXTREMELY BAD for democracy. It benefits the big parties at the expense of everyone else. It means that standing for election is likely to harm your cause – any independent who stands for election has less chance of winning than of altering the outcome by preventing the votes of his or her supporters from deciding who the winner will be.

Preferential voting is much better for democracy. Everyone can vote according to their honest opinion, secure in the knowledge that their vote will count. And in most cases they stand to lose far more from trying to play the system than they could gain.
Posted by Aidan, Wednesday, 12 November 2014 7:32:05 PM
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I was hoping Palmer would do something for working Australians. It was a waste of time my voting for him.

I've learned that Palmer promised to reimburse candidates financially who ran for PUP in the last election. I know of one who put up $50,000 of his own money and Clive refused to reimburse him. Clive said sue me.

Clive just wants to join the big boys club of multi-billionaires and does not give a stuff about his own country.
Posted by Arjay, Wednesday, 12 November 2014 8:13:45 PM
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ARJAY, I think you're on to something in your summation of Mr PALMER ! Perhaps he's simply trying to demonstrate what can be done when you possess immense wealth. Politics to Mr PALMER is more of a hobby it would seem ? One might pursue numismatics as a hobby, while our Mr PALMER likes to play politics, by dislocating normal conventions by placing carefully chosen individuals/candidates in positions of power, much like a board game ? Trouble is he's playing around with the welfare of ordinary people, people who have a need to live from week to week, payday to payday. A bit of a laugh for him no doubt, but when you're on the end of things, it quickly loses much of it's humour !
Posted by o sung wu, Wednesday, 12 November 2014 8:41:06 PM
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The effect of first past the post voting has been that there is a party in Britain that scored a million votes across the nation in the last election - enough to deliver 30 seats to Labour and Tory candidates - yet that party didn't gain a single seat. A thorough wipeout for a million voters. The party concerned is UKIP - UK Independence Party, which works to reduce the legislative power of the EU to overrule British governments. Like the result or hate it, but oould hardly call it democratic.
Posted by EmperorJulian, Wednesday, 12 November 2014 10:24:09 PM
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Jay said "The PUP policies aren't awful" to appeal to a certain section of the voting public that is the case. I suspect the majority of the 700k would be disaffected conservative Labor voters along with the poorer section of Liberal voters, with a preference split of 54% to the conservatives and 46% to Labor, which is in line with the minor party split in general, except for The Greens which favors Labor 83/17.
It is one thing to have appealing policies, and looking at PUP policies I would think that they are fairly consistent with the general attitude of those they were trying to appeal to, summing it up, their slogan of 'Reunite the Nation' would sit well with their constituency. All this is good but, if you are perceived by your supporters as to not be trying to deliver on those policies, or failing to live up to your perceived principles, those supporters will soon abandon the party and return to their traditional choice.
I think Arjay's comment is now very much the attitude of many PUP voters; " I was hoping Palmer would do something for working Australians. It was a waste of time my voting for him." Only with Big Clive's support can the private party survive long term, and come next election I can not see that support being there. Regardless, with the present perception of the party their vote could only diminish from its 5.5% achieved last election.
Posted by Paul1405, Thursday, 13 November 2014 9:09:20 AM
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You had better hope you are wrong there Pauly.

If you are right, you lot & Labor are going to be back to a small rump, when those voters return to the fold.

How does that song from Pygmalion go?
Posted by Hasbeen, Thursday, 13 November 2014 12:10:30 PM
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I have always been an opponent of compulsory voting. What happens is that boneheads that would not normally vote just see the one line "policies" and don't realise that there is a vast difference between vacuous promises and actual action.

The sooner we see the back of vacuous populist parties such as PUP and the greens the better.
Posted by Shadow Minister, Thursday, 13 November 2014 12:49:45 PM
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Shadow Minister, what good would restricting voters' choice be? After all, the Liberal and Labor parties are just as eager to resort to vacuous populist policies.
Posted by Aidan, Thursday, 13 November 2014 3:14:29 PM
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Hassy wrong as usual! "you lot (Greens) & Labor are going to be back to a small rump, when those voters return to the fold. Very few PUP preferences went to Labor via The Greens. I posted the split of PUP preferences Liberal/Labor.

SM are you calling yourself a "bonehead" ? PUP will not last, but The Greens have shown steady growth over 20 years. Tough luck old chap.

Aidan, I agree

Big Clive is all steamed up with 25% of the parliamentary party, calling on Lambie to challenge him for the leadership. Lambie came back with the quote she wished she never joined the party. Hummm
The beginning of the end me thinks.
Posted by Paul1405, Thursday, 13 November 2014 5:34:22 PM
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So you think an austerity budget is a populist policy?
Posted by Shadow Minister, Thursday, 13 November 2014 6:10:33 PM
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"So you think an austerity budget is a populist policy?"
Not directly, but it's certainly a vacuous policy. And it's largely the result of a populist obsession with surpluses, with most of the public under the illusion that any debt the government runs up now will have to be paid off by future generations.
Posted by Aidan, Thursday, 13 November 2014 6:45:02 PM
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A,

Balancing the budget is neither vacuous nor populist, but there is not an economist in the world that thinks a country can continue spending 10% more than it receives in revenues without severe consequences.

Just the interest bill on Labor's debt is approaching $14b a year which could make a huge difference.
Posted by Shadow Minister, Friday, 14 November 2014 3:31:18 AM
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Shadow, independent analysis have pointed to a new $51 billion black hole in Hockey's budget, something the Treasurer wants to deny. He and the rest of them failed with the fundamentals, incorrect growth forecast, and overestimation of tax receipts. Its clear that Australia has a problem not with expenditure but with revenue. Hockey is now making noises about getting "tough" with his mates from the big end of town over taxation, something they have not been paying for years. Successive governments, both Labor and Conservative have let big and small business avoid tax for far too long. Added to this is some very suspect expenditure items, including the latest cost of military involvement in Iraq, never in the budget.
Lambie wanted to make some puerile gesture the other day about an unfair pay increase for military personnel, she was probably right, but in the end it didn't come off. For how long are you going to keep blaming Labor for this looming disaster which is in fact now becoming clear the handy work of the present government. I admit Labor must take some of the responsibility for the situation, but not all of it, and as time goes on less and less.
Posted by Paul1405, Friday, 14 November 2014 6:46:05 AM
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You know Paul, I almost think you are dumb enough to believe your last post Paul.

Almost, but not quite. No one could be dumb enough to actually believe that crap, or could they?
Posted by Hasbeen, Friday, 14 November 2014 8:13:47 AM
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Pup only came about due to the incompitance of the previous government and it's allience with those independents and the greens. In other words, they gained support by default, a protest vote if you wish.

He was always a loose cannon, always will be and as for his pledge to resign from business activities, yea right, pull the other one.

His voters got scammed by him, and Abbotts paid perennial leave scheme and more fool them I say because literally NOTHING happens without money.

It has been suggested that the life long gravy train for retired polies is coming to an end, interesting times ahead.
Posted by rehctub, Friday, 14 November 2014 9:43:24 AM
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SM,

An austerity budget at a time of high unemployment is vacuous. It damages growth, so revenue falls, so the budget still doesn't balance and meanwhile the people are much worse off.

Balancing the budget for its own sake is populist – it sounds far more sensible than it actually is, and politicians prefer to exploit the public ignorance than explain the truth (though in most cases that's probably because they don't understand the truth themselves).

Running tight fiscal policy to control inflation and/or interest rates is neither vacuous nor populist – this will sometimes involve running surpluses but there's nothing magical or special about the zero point. But right now Australia's inflation is low, and though the economy could do with an interest rate cut, the RBA is scared to provide one because of the likely effects on house prices.

Your statement that "there is not an economist in the world that thinks a country can continue spending 10% more than it receives in revenues without severe consequences" is rather dubious, as the deficit is neither desired nor forecast to stay at 10%. I'd prefer to see a bigger deficit now and a return to surplus sooner. However there are some economists who do advocate continuous deficits. Bill Mitchell is one.

The interest bill you refer to is Australia's not Labor's. And the real problem, which there's been a bipartisan failure to address, is that too much of our money is sourced from overseas instead of the RBA. Commercial banks have borrowed in foreign currencies and bought Aussie dollars, and foreigners have bought Aussie dollars to buy government bonds. If Australia had sourced more of its debt from the RBA, and made it easier for the commercial banks to do so, our dollar wouldn't have risen so unsustainably high, hence our manufacturing industries would be in much better shape and we'd be receiving more interest, balancing out what we pay.
Posted by Aidan, Friday, 14 November 2014 10:16:27 AM
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Aidan, of cause it's labors debt, because unless you were on another planet when Kevin 07 arrived, we had billions in the bank, and zero debt. What's worse, is that this debt was accumulated in boom times, apart from the GFC, which by the way has been suggested to have had minimal impact. So not only did labor waste the spoils of that boom, but they also borrowed on top of that, and wasted the borrowings as well. You can't change history, it's black and white.

As for our manufacturing, a strong dollar hurts out man industries because of exports. It stands to reason that if one American dollar buys less than one Aussie dollars worth of goods, they shop elsewhere, which they are doing right now.
Posted by rehctub, Friday, 14 November 2014 4:23:50 PM
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>>Successive governments, both Labor and Conservative have let big and small business avoid tax for far too long.<< As a small business operator I have been paying 30% tax... please tell me the secret to avoiding this.

On topic, it appears the PUPs are self imploding even more so, since this topic was raised. The Victorian elections will be the windsock for big Clive's future and the rest of the country's expectations for the PUPs.
Posted by ConservativeHippie, Friday, 14 November 2014 4:37:04 PM
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rehctub,

"....apart from the GFC, which by the way has been suggested to have had minimal impact...."

It had a minimal impact in Australia - as opposed to many European countries who smartly implemented austerity measures - and then dived into recession.
Posted by Poirot, Friday, 14 November 2014 4:39:07 PM
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One can fairly confidently expect that if the Abbott mafia had been in office in 2008 it would have adopted the same impoverishment policy (mincingly termed "austerity") as in Europe and the British Isles the moment the Global Financial Heist descended, and we would have gone the way of Spain, Ireland Italy, Portugal and Greece. Rudd's action and later Gillard's, which the Abbott mafia have never ceased whining about, allowed our people to dodge a devastating surrender to the foreign banksters.
Posted by EmperorJulian, Friday, 14 November 2014 5:38:09 PM
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We certainly have some very good posters on this one. Aidan has presented the reality so clearly, even the 'Usual Suspects' appear to be stunned into silence, no counter argument in defense of the Abbott Government what so ever.

ConservativeHippie, if you are paying 30% tax you can't be running a small business, you must be running a microscopic business. What I suggest is you open up 500 new stores, flogging crappy cheap furniture from Scandinavia, move your headquarters to the Cayman Islands, fudge the figures, and pay no more than 1% tax in Australia.

Hassy, when confronted with reality is that all you can come up with. Are you off your medication again? What, the facts are too much for you.

http://www.businessinsider.com.au/a-51-billion-dollar-hole-has-suddenly-appeared-in-joe-hockeys-budget-2014-11
Posted by Paul1405, Friday, 14 November 2014 7:11:57 PM
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What is required for electoral success, and money can't buy, not even Big Clive's money, is party supporters. To win Senate seats, and that's what minor parties like PUP are chasing, is the absolute necessity that the party stands a candidate in as many lower house seats as possible, preferably every seat. Why, it helps build a party profile locally and gives visability to voters, then on polling day and before, fully man pre- polls and all polling places on election day. Minor parties always loose a lot of votes by not being able to stand candidates, and in turn not manning polling stations.
Much of the success of The Greens in the Senate is down to running a candidate in every house of reps seat and in turn manning the polling stations to maximise the Senate vote in the state. PUP was able to achieve the above last election, but will have great difficulty next time around.
Posted by Paul1405, Saturday, 15 November 2014 5:11:41 AM
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Aidan,

I have a degree in economics, so please spare me the 101 lecture especially when you have only the superficial labor amended version.

No one, even in the coalition denies that there needed to be some stimulus to keep the economy ticking, and the way to do this (as suggested by Andrew Robb) was to support businesses to expand to employ people and hopefully to provide lasting infrastructure that would continue reducing costs and generating employment in the long term.

Labor did exactly the opposite and the hamfisted incompetence of the programs they put in place was breathtaking. The $900 cash splash, the school halls, and the pink batts debacle are all prime examples of programs that spent vast amounts, mostly after the crisis, and left little or nothing in the form of income generating infrastructure.

Next labor went on an orgy of entrenched welfare handouts based on taxes that generated less than the handouts or close to nothing. So Labor's legacy is a huge debt, an interest bill of $14 p.a. and ruinous entrenched spending on welfare that left whingers scream merry hell about when the coalition tries to wind it back.
Posted by Shadow Minister, Saturday, 15 November 2014 5:55:02 AM
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I too have a degree in Home Economic, majoring in scone making. LOL Come on Shadow, Labor had to act quickly to head off a rapidly developing financial crisis, triggered by the actions of Liberal Party mates in the US and Europe. What would have the conservatives done in such circumstance, what they have always done when faced with an economic crises, battened down the hatches and tried to ride out the storm, letting the worker carry the can, whilst trying to bail out big business. Ideas of spending on infrastructure would not be part of the equation from the likes of Abbott and Hockey. If it was, it would have taken far too long to implement and, unemployment would gone through the roof.

p/s Did you not once post you had a Degree in Engineering, how many degrees do you have? They will be calling you Professor Thermometer with all those degrees, Some of the 'Usual Suspects' on here are highly suspect of ACADEMICS! Equate them to being Lefties and ABC supporters! Are you "One of Them"!
Posted by Paul1405, Saturday, 15 November 2014 6:43:41 AM
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Lol!, Mr "I have a degree in economics"...

This is what Stiglitz says:

"You were lucky to have, probably, the best designed stimulus package of any of the countries, advanced industrial countries, both in size and in design, timing and how it was spent - and I think it served Australia well," he said."

http://www.abc.net.au/news/2010-08-06/stimulus-served-australia-well-despite-waste/935002

"A report today found there are some valid concerns about the poor value for money on the school spending part of the package.

However, Nobel Prize laureate and Professor at New York's Columbia University Joseph Stiglitz says there will always be some waste with such programs.

He says that is preferable to the waste of human and capital resources that would have resulted if there was no stimulus."

And..

"One of the reasons why the debate about ... Australia's stimulus ... is so important is not because we're historians and we're trying to grade but because we're trying to make a judgment about going forward who is likely to do a better job," Professor Stiglitz told AAP in Sydney today.
Advertisement

"What are the economic theories, advisers, they are likely to draw upon? Labor's done a good job."

Professor Stiglitz said economic advisers who had been praised by "the other side" of politics were the ones who had designed America's "economic mess".

"To praise the people who were the architects of the global financial crisis suggests that your economic ideas might lead this country into difficulty," he added."

http://www.smh.com.au/business/labor-saved-australia-nobel-laureate-stiglitz-20100806-11lkq.html#ixzz3J4y0rUP2
Posted by Poirot, Saturday, 15 November 2014 7:06:45 AM
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Paul,

I have 3 degrees incl BComm (economics and QA) an MBA and a BSc Elec eng.

I have enough to call BS when I see neophytes trying to lecture me on a socialist sanitized version of economics.
Posted by Shadow Minister, Saturday, 15 November 2014 10:25:41 AM
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Poirot,

Stiglitz above being an economist is an avowed socialist and has yet to be heard uttering a negative word about leftist governments, which is why he is wheeled out every time a left whinge government needs to justify its incompetence.
Posted by Shadow Minister, Saturday, 15 November 2014 10:39:20 AM
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Professor Stiglitz, is a former World Bank chief economist and economic adviser to the US government, not to mention a Noble prize winner. According to Professor Thermometer, Stiglitz is a raving red, worse still, he is a fan of the ABC's, and has bad breath to boot!

Come on Shadow the man is a world leader in economics. His opinion has to be respected...just as much as you respect my opinion!

http://en.wikipedia.org/wiki/Joseph_Stiglitz
Posted by Paul1405, Saturday, 15 November 2014 1:38:10 PM
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Paul,

Apparently I was remiss in citing Stiglitz.

It's obvious that his credentials pale in comparison to our own Shadow "I have a degree in economics" Minister.
Posted by Poirot, Saturday, 15 November 2014 1:53:39 PM
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Paul,

I have to say I just enjoyed Obama slapping Abbott's agenda around.

Lol!...talk about a shirtfront!
Posted by Poirot, Saturday, 15 November 2014 2:04:10 PM
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Shadow,

Having economics as part of your degree doesn't count for much – after all, people with PPE degrees are invariably economically illiterate! Indeed my own civil engineering degree included an economics module, but most of what I know about economics I've learned since I graduated.

How well do you understand sectoral balances? It should be 101 level stuff, but your statement that "Balancing the budget is neither vacuous nor populist" suggests you don't.

The Libs' run of budget surpluses had partly been the result of underspending on infrastructure. So while ramping up infrastructure spending was the solution that everyone would have preferred, there weren't the shovel ready projects available.

The "$900 cash splash" (which the Libs subsequently claimed to have supported) made many Australians financially better off and encourages spending, benefitting businesses. And the school halls scheme (which the Libs supported at the time then subsequently claimed to have opposed) was good value in states where the state governments oversaw it directly. It was only where management of it was contracted out to the private sector that colossal waste occurred. Shouldn't the main lesson from this be that we need a capable public sector?

Welfare does not equate to wasting money. Improving the standard of living of those Australians who are disadvantaged by circumstance is worthwhile.

Labor did well in the GFC, but stuffed up afterwards, letting a feral Reserve Bank destroy most of the good work by setting interest rates much higher than the inflation rate justified. The Liberals under Turnbull rightly criticised the government's actions as "driving with one foot on the accelerator and the other on the brake". Unfortunately they were of the opinion that the government needed to take its foot off the accelerator. And with a bipartisan surplus obsession, that's what happened – and by the time the RBA let go of the brake the damage was done.

Deficits only increase net debt if the debt if the borrowing is externally sourced. Australia's relatively high interest, not the deficit, is our biggest debt culprit.
Posted by Aidan, Saturday, 15 November 2014 2:43:39 PM
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Paul1405 I don't understand the hostility and insults directed my way.

I agree with you that big business can exercise the loop holes and pay next to nothing but to suggest small business owners are enjoying the same privilege is incorrect. The revenue generated by over taxing small business and the middle class is what's keeping this country afloat. Neither side of government is content and both will aim to extract more from us.

If you don't think small business owners are paying tax perhaps you need to do some research... ask the local small business owners in your community if they are paying tax. Even buskers are paying tax if they declare their earnings.
Posted by ConservativeHippie, Saturday, 15 November 2014 3:17:09 PM
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Hip, I was just helping you out with that 30% tax crap. " if they declare their earnings." the operative words! "if they declare their earnings". Okay Hip, you can't afford the 500 new stores, or the Cayman Islands. Cash economy that's it, not paying GST, fudging personal expenditure as business, dodgy dodgy dodgy, wives etc on the books when they do not actually work in the business, trust funds. All dodgy! As for the crappy Scandinavian furniture, you can pick that up at your nearest Ikea (we don't pay tax in Australia) Store!

Aidan, you are too learned and factual for our friend. the economically challenged, Professor Thermometer. who is after all a disciple of the Joe Hockey School of Economics.
Shadow I suggest you quit while you are behind, things can only get worse.

Spot on Poirot the Russians are coming! and our Tone was last seen heading for the hills. "shirt fronting' what a load of cods wallop, Tone couldn't go two rounds with a raspberry jelly! Tone needs to fight in the prelims before trying to take on a main event, that's for sure.

Nothing to do with the subject but we're off for some top class reggae tonight just been listening to 'Toots and the Maytals' they know nothing about economics but sure have a terrific sound; On for my partner "T".

http://www.youtube.com/watch?v=gMHY3GEhdsc
Posted by Paul1405, Saturday, 15 November 2014 6:14:30 PM
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Parrot,

I am not claiming that I am better at economics than Piglets, rather that he has allowed his political agenda to override his academic agenda. Having actually read his thesis, it is essentially determining the effect of dole bludgers on the economy and what to do about them.

Similarly Prof Andrew Leigh produced his thesis on the need to introduce a GP co payment yet having taken up politics eschewed his objective analysis.

A,

The coalition did not support the "cash splash" but rather advised against it. What they did was not block the measures that Labor took which compares favorably to Labor's obstruction to the coalitions measures to restore the budget.

Secondly don't put words in my mouth. Welfare is not a waste, but in the case of a huge budget deficit is expenditure that is far from sustainable.

(even Einstein was subject to hubris trying to introduce a gravitation constant to justify his ideological opposition to the expansion of the universe, which he later described as his greatest mistake.)

In short Piglets declaration as to the efficacy of Labor's stimulus was not based on economics rather on ideology.
Posted by Shadow Minister, Saturday, 15 November 2014 8:26:15 PM
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Shadow,

The coalition may not have supported the "cash splash" at the time, but once it was successful they started claiming they'd supported it.

The Liberals did not have the numbers in the Senate to block Labor's budgetary measures. And as many of the budgetary measures the Liberals are now proposing are broken election promises and would be bad for Australia if they were implemented, Labor are right to block them.

Considering how low Australia's welfare spending is by international standards, your claim that it's far from sustainable is far from credible.

Australia's deficit is mainly (probably entirely) cyclical. As the economy improves and company profits rise, tax revenue will go up. Meanwhile as businesses employ more people for longer hours, welfare spending will fall and income tax revenue will rise. So if we try to fix the nation the budget is likely to take care of itself*. Whereas if we try cutting to fix the budget, we just end up damaging the nation (as the USA and UK have done).

Regardless of Stiglitz (or Piglets or Twiglets) your declaration as to the efficacy of Labor's stimulus was not based on economics; rather on ideology.

*Obviously if we run into a problem we must deal with it, and dealing with it may involve cutting government spending. But government spending is not itself a problem, and nor is the deficit.
Posted by Aidan, Sunday, 16 November 2014 1:37:01 AM
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A,

Rubbish, the coalition never supported the cash splash, and subsequent analysis showed that it was almost completely ineffective.

The welfare budget which includes hospitals schooling medicare plus the school kid bonuses, disability etc absorb the bulk of tax revenue and are growing at a rate far outstripping revenue growth. In a decade or so there will be no money for anything else. So yes the socialist utopia where the state provides everything for free will have to end.

As for ideology, why if when the greatest mining boom in history started in late 2009, growth grew to 3% and unemployment dropped, did labor continue spending the majority of the stimulus?

Last year the International Monetary Fund produced a report stating that

Of the 17 top surveyed IMF countries, Australia has the fastest growth in spending of anyone in the world and the third highest growth in debt of anyone in the top 17.
Posted by Shadow Minister, Sunday, 16 November 2014 4:14:34 AM
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.....Labor had to act quickly to head off a rapidly developing financial crisis, triggered by the actions of Liberal Party mates in the US and Europe.

Paul, sorry to be dropping in and out, but I doubt many people out there were opposed to labors idears for stimulating the economy and avoiding a recession, it's just the way they went aout it that was the problem, failure after failure, billions upon billions pissed away and so little achieved.

We now have a situation where voters are beside themselves, because on the one hand they hate the cut backs Abbott is doing, or trying to do, yet on the other hand they realize that labors ways were a disaster. In fact, big Clives votes came in protest of the big two parties.

As I have said many times, you can engage the best designers and draftsmen to draft your house plans, but if you use a dodgy builder it can be a disaster, which is pretty much what labor did, as their plans were not the problem, it was their incompetence in administering them that was their undoing.

Of cause the illegals was just a result of sheer arrogance from Rudd and has stopped many of us of their entitlements, especially our elderly and youth.
Posted by rehctub, Sunday, 16 November 2014 7:37:05 AM
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Stop worrying folks.

Aidan is going to sprinkle some pixie dust around the place, & everything will be fixed.

They get it from the fairies down the bottom of the garden.
Posted by Hasbeen, Sunday, 16 November 2014 11:43:15 AM
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"Stop worrying folks.

Aidan is going to sprinkle some pixie dust around the place, & everything will be fixed.

They get it from the fairies down the bottom of the garden."

What was that you were saying about "sniping", Hasbeen?

Oh yeah, this....

"You do sometimes appear to have the intellect for a serious discussion. Why you content yourself with nasty sniping I can only imagine. Something must have been very traumatic for you, to have reduced you to such a disposition."

Never mind, we're all hypocrites sometimes.
Posted by Poirot, Sunday, 16 November 2014 12:34:07 PM
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Aidan, I'm interested in your version of just where this growth in the economy will come from. With mining heading south and our car industries fast approaching D-day, I dont share your optisim, but I'm willing to hear your thoughts.

Just on government spending V cuts, the QLD gov is about to receive a huge financial boost by way of CSG royalties. What they choose to do with that could well seal our fait. Spend it wisely and create growth and investment, or pay down debt.

I'm for option one, but only because they will have money, unlike Feds.
Posted by rehctub, Sunday, 16 November 2014 12:55:56 PM
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Shadow,
I never said the coalition actually supported it, I said they subsequently claimed to have supported it. And far from being almost completely ineffective, those $900 payments (in combination with the interest rate cut) kept Australia out of recession.

On what basis do you decide what's part of the "welfare budget"? Most people would equate it with social security spending (just over a third of the total) and I could see why you'd want to include health as well (another sixth) but I can't think of any sensible grounds for including "schooling". Is it just because the figures have grown?

"and are growing at a rate far outstripping revenue growth. In a decade or so there will be no money for anything else"
I'm a bit puzzled as to how someone with those three degrees can make a statement so idiotic! It makes me wonder whether you've been inhaling Hasbeen's pixie dust (which it rivals for absurdity)?

Just because something grows doesn't mean it's going to keep growing (let alone sustain the same rate of growth) if nothing is done about it.

"As for ideology, why if when the greatest mining boom in history started in late 2009, growth grew to 3% and unemployment dropped, did labor continue spending the majority of the stimulus?"
To keep growth up and unemployment low. Considering how small a proportion of the economy mining is, it was the most sensible course of action...or at least it would've been if the RBA hadn't literally tried to keep unemployment high. The failure to stop the interest rate hikes was an enormous Labor stuffup, but the Liberals weren't proposing any better alternative.

"Last year the International Monetary Fund produced a report stating that
Of the 17 top surveyed IMF countries, Australia has the fastest growth in spending of anyone in the world and the third highest growth in debt of anyone in the top 17."
I'd rather have a government committed to investing in our future than one that lets an irrational fear of debt wreck our future.
Posted by Aidan, Sunday, 16 November 2014 4:35:18 PM
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rehctub, I'm not presuming any one area will dominate. Australia has the potential to be competitive in any high value activity. Mining does have a bright future despite the current price slump, and thanks to our abundant solar energy I think there's going to be increasing potential for refining metals here rather than just shipping the ore overseas. Though we're losing car manufacturing, that was rapidly becoming a low value activity anyway. There's still great potential in manufacturing, but its value has shifted away from the fabrication stage. Agriculture and food are also likely to grow faster than average, but are very sensitive to the dollar's value. And with sustained low interest rates and strong domestic demand, we can create conditions where nearly every industry can thrive.

I'm not sufficiently familiar with Queensland's requirements to give you a meaningful answer on what they should do with their gas royalties, but I will say that when something's a good investment it's usually a good investment regardless of how much debt you have. So unless there's a danger of not being able to service the debt, government investment should not depend on how much money's coming in.

I should also add that there is absolutely no danger whatsoever of the Federal government not being able to service its debt. The government only borrows in Australian dollars, which are ultimately sourced from the RBA, which it owns. So while it sometimes makes sense to reduce the deficit, the debt itself is never a problem.
Posted by Aidan, Sunday, 16 November 2014 5:25:36 PM
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Where on earth do you get this stuff Aidan?

High government debt forces up the price of everything, including wages, & house prices.

High wages are the reason why we can no longer compete with imports, & the reason our manufacturing is dying, if not already dead.

It, along with high government ta, to try to service its debt, is also one of the main drivers of housing prices, keeping first home buyers out of the market.

You wouldn't actually be our last treasurer would you, he had some stupid ideas too.
Posted by Hasbeen, Sunday, 16 November 2014 6:33:59 PM
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Hasbeen,

Where on earth do you get the idea that high government debt forces up the price of everything, including wages, & house prices? There's neither any empirical evidence of such a phenomonon nor any credible mechanism for how it can occur (though if you think you can explain it, go ahead)!

High wages are PART OF the reason why many of our manufacturers can no longer compete with imports, but there's a lot more to it than that. Another problem is our overvalued dollar, which is the result of too much money being sourced from overseas rather than from the RBA. Part of the reason for that is that our interest rates are too high. Lower interest rates would also make our manufacturers more competitive by enabling more investment in automation (which goes a long way to explaining how Japan's manufacturers managed to remain competitive despite the yen's phenomenal rise over most of the last two decades). A fourth problem for our manufacturers is high energy costs, which is moslty the result of our ripoff network charges, but is exacerbated by the way we fund renewable energy infrastructure, which pushes up the costs before we see the benefits.

"It, along with high government ta, to try to service its debt, is also one of the main drivers of housing prices, keeping first home buyers out of the market."
That makes no sense at all — tax has very little to do with debt servicing, and nor does it increase house prices. If anything, it reduces them, though land value taxation would reduce them far more.

"You wouldn't actually be our last treasurer would you, he had some stupid ideas too."
I agree he had some stupid ideas too... such as that rushing back to surplus would be good for the economy!
Posted by Aidan, Sunday, 16 November 2014 9:57:04 PM
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A,

http://www.theaustralian.com.au/national-affairs/the-stimulus-we-didnt-really-need/story-fn59niix-1226698740758

"What sets the stimulus apart is its sheer scale. The five phases of fiscal stimulus added up to about $95bn, reckoned from the government's own announcements and Treasury papers.

These comprise the $10.4bn in cash payments that were announced in October 2008; $15bn in extra funding for the states (November 2008); a $4.8bn infrastructure plan (December 2008); the $42.5bn package (February 2009); and another $22bn in infrastructure spending (in the May 2009 budget).

Under former leader Malcolm Turnbull, the Coalition voted in favour of the first cash payments but rejected the February 2009 package, including the second round of cash payments, school building program, pink batts scheme and small-business tax break.

Turnbull's argument was that the $42.5bn package should have been about $15bn and should have spent only $3bn on school buildings, rather than $14.7bn or more."

To sum it up, the coalition gave tacit support in the early stages so as not to obstruct the required stimulus, but when Labor started to use the GFC as an excuse to abandon all fiscal discipline, it started to vote against the wildly inappropriate measures.

"But what if the assumptions about the stimulus are wrong? What if the wave of public money flowed into the real economy too slowly? What if the tap kept gushing for too long?

More dangerous for Rudd is a bigger question: what if the stimulus was a small part of the story compared with the other factors at work, not least the revival of China, the fall in the Australian dollar and the Reserve Bank's rapid action to cut interest rates?

Nobody questions the old assumptions as vigorously as Tony Makin, the Griffith University economics professor who has written three academic papers on the subject across the past few years. "I believe it was unsuccessful and shouldn't be repeated," says Makin. "It sets a precedent that I think is a dangerous one.""
Posted by Shadow Minister, Monday, 17 November 2014 9:56:42 AM
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Shadow,

The link is a subscriber only page (and the usual trick of replacing theaustralian.com.au with news.com.au doesn't work). And from the portion of it you posted, it doesn't really say anything much. It was always likely going to be hostile to the Labor government (since it's from the paper that either follows or sets the Liberal Party agenda) but it seems all it can manage is a bit of skepticism and a few "what if" type questions.

In reality there's nothing dangerous about it. Even if the stimulus wasn't the biggest part of the story, it was an essential one. Interest rate cuts alone were insufficient to solve the problem, as overseas experience shows. Maybe a faster response would be better, but what they did was fast enough to keep Australia out of recession. And "if the tap kept gushing for too long" then we'd have seen a rise in inflation. We didn't.

Fiscal discipline should not be seen as an end in itself, but rather as a means of controlling inflation. Economic growth could be a lot higher if everyone accepted this.
Posted by Aidan, Monday, 17 November 2014 11:19:58 AM
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Good onya Shadow, all you can provide to counter Aidan's intelligent economic argument is a link to an ad to subscribe to a bit of Murdoch's gutter press! I take it your economic wisdom is based on what you can get out of the pagers of a couple of trashy fish wrappers. Well done.

To become an "economic guru" like Shadow this all you have to do is;

"Would you like to become a subscriber for 50% less for the first 12 weeks†? Sign up now and access the full breadth of The Australian's content in minutes."

I advise you to cancel your subscription to such rubbish, its not worth it.

So you pay for the thoughts of Chairman Rups, good onya Shadow! None of his so called newspapers are worth two bob.
Posted by Paul1405, Tuesday, 18 November 2014 6:38:30 AM
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Aidan, Paul,

I know that left whingers don't like to think, and need their news predigested by tame economists that will give them suitable sound bites.

Try this from the ABC

http://www.abc.net.au/news/2011-08-08/kates---the-australian-stimulus-and-the-damage-it-caused/2829090

Talking about inflation, when the GFC stuck in late 2008 the inflation rate and the growth rate dropped whilst unemployment increased until mid 2009 when inflation and growth began to rise, reaching "normal" growth and inflation rates by the end of 2009, and unemployment began to drop.

So by your own definition, by the end of 2009, there was no longer any need for stimulus.

However, by this point only 25% of the stimulus had been spent but labor was in its element spending like drunken sailors, and did not turn off the taps until 2012.
Posted by Shadow Minister, Tuesday, 18 November 2014 11:16:17 AM
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SM,

Can you explain to us then why this:

http://www.abc.net.au/news/2014-10-28/koukoulas-why-is-abbott-considering-a-gst-hike/5845256

"The facts show that Treasurer Hockey's budget in May delivered government payments, as a share of GDP, at 25.3 per cent in 2014-15 and it will remain at or above 24.7 per cent throughout the forward estimates. By way of contrast, the last three Labor budgets had government payments to GDP averaging 24.6 per cent.

If Mr Abbott and Treasurer Hockey were in fact fiscally tight and their budget cut government payments to, say, 24.1 per cent of GDP, the level delivered in the last full year of the Labor government in 2012-13, the current tax take without hiking the GST would see the budget deficit of 0.1 per cent of GDP in 2015-16 and a surplus in 2016-17 and beyond, even with the expensive spending plans of Mr Abbott."

?
Posted by Poirot, Tuesday, 18 November 2014 11:30:14 AM
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P,

Steve K, while being a well known economist is also well known for presenting politically motivated half truths.

Fact 1, Changing the GST will not make one cent difference to the federal budget, as the funding goes to the states. This is why no federal gov since Howard has considered the pain of the GST for no gain.

Fact 2, Abbott has made it clear that he will not consider changing the GST unless the states (the beneficiaries of any increase) are prepared to make the case to the electorate.

Next with respect to the budget % of GDP,

Fact 3 Expenditure by Howard was in the region of 22.5% of GDP

Fact 4 Labors last 3 budgets all missed their targets by a wide margin putting their actual expenditure close to the 25.3%.

Fact 5 Government revenues have dropped considerably over the last 4 years.

Fact 6 the Labor locked in most of their expenditure, and has spent the last year blocking every saving measure it can by the government.
Posted by Shadow Minister, Tuesday, 18 November 2014 12:26:30 PM
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Thanks SM,

What explains Hockey bequeathing the RBA nearly $9 billion which it didn't need or ask for?
Posted by Poirot, Tuesday, 18 November 2014 12:34:56 PM
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What you think you know is very different from the truth. It's the right "whingers" who "don't like to think, and need their news predigested by tame economists that will give them suitable sound bites".

Unlike the commercial media, the ABC has an anti bias charter, and carries opinions from all viewpoints including the one you linked to. But arguments like the one you linked to really don't stand up to much scrutiny. It relies on the false premise that the debt incurred will eventually have to be repaid; in reality we're perfectly capable of rolling it over for ever.

Though it didn't meet the criteria for it to be a recession, we did have a downturn and that's why the stimulus was needed.

By my own definition, by the end of 2009, there was no longer the need for AS MUCH stimulus. Your assertion that we didn't need any was false, because the stimulus was playing a lead role in the return to normality of the growth and inflation rates. It would have taken time for the private sector to strengthen enough to retake the lead, but if we'd cut it back gradually while supporting the private sector's growth then we'd probably be back in surplus now.

What wrecked our recovery was the RBA's unnecessary raising of interest rates. That, not the government spending, crowded out the private sector's revival.
Posted by Aidan, Tuesday, 18 November 2014 12:55:09 PM
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P,

You mean the $8.5bn that Whine Swan pillaged from the working capital of the RBA in a vain attempt to present a surplus on paper. This going with attempts to defer payments and and push forward tax collections. All irresponsible actions from an incompetent treasurer.

A,

The ABC has an anti bias charter that it flagrantly ignores.

Finally, considering that by the beginning of 2010 the mining boom had started, growth was nearing 3% (greater than the pre GFC growth of most EU countries) there was clearly no justification for stimulus, and in fact the extent of the original stimulus was questionable. For example the BER debacle was supposedly meant to protect jobs in the construction industry, but placed so much demand that costs in the construction industry inflated by over 20% over the pre GFC levels, by your own measure again proof that the stimulus was too much.
Posted by Shadow Minister, Tuesday, 18 November 2014 5:44:06 PM
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Talking of the ABC, did anyone see Malcolm Turnbull being "loyal" to Abbott on Q&A last night. Grit your teeth and say "I love you Tony".
Posted by Paul1405, Tuesday, 18 November 2014 5:51:31 PM
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Yes, Paul....how many times did Malcolm utter the words "In defence of Tony Abbott"..I counted at least three times, but there might have been more.

"...again, in defence of Tony Abbott" - Lol!

.....

That's a good one, SM...nice spinning.

The RBA wanted to build up its own capital reserves and not have to pay a dividend to the govt. Hockey wants the dividend to prop up his hanky-panky, no doubt.

http://www.smh.com.au/business/the-economy/joe-hockey-blowing-hundreds-of-millions-to-make-himself-look-good-20131029-2wcy3.html

"In the careful phrasing that characterises the Reserve Bank, Stevens today went further than his deputy. Reduce the three concluding paragraphs of his speech to bullet points, this is what you get:

The Australian dollar is going to fall.
The Aussie’s rise shrank the value of the RBA’s foreign reserves and, therefore, the bank’s capital by more than the bank thought prudent. (By implication, a falling Aussie will boost the RBA’s foreign reserves.)
The RBA wanted to rebuild its capital over several years by retaining its profits and not paying the government dividends.
Hockey’s $8.8 billion injection this year means dividends will be paid to the government over the next few years."
Posted by Poirot, Tuesday, 18 November 2014 5:59:52 PM
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SM,

The ABC's anti-bias charter is not ignored, and does ensure lots of different viewpoints get heard (unlike on commercial media). That doesn't mean it's unbiased of course – people, being biased themselves, will always accuse it of bias, though usually in different directions.

Growth in 2010 was nearing 3% because of the impact of the stimulus. So while it can sensibly be argued that they should have started winding it back at that time, there was no justification for stopping it completely.

Where do you get your 20% figure?

Spending on construction enables less to be spent on construction in the future, and people do move into and out of the industry.

And WTF is wrong with the government receiving a dividend from the RBA? Did you oppose it the many times it happened when Costello was treasurer?
Posted by Aidan, Wednesday, 19 November 2014 2:33:07 AM
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Just on the topic is Wacky Jacqui about to do the bolt and leave PUP and set herself up as an "independent" senator, me thinks its just around the corner.
Can anyone see any merit in a independent Senator Lambie what so ever? Unlike Nick Xenophon from SA who, love him or hate him, makes a positive contribution to Australia's political life as an independent.
It should be noted Ms Lambie yesterday tried to speak in parliament on her new favorite hobby horse 'defense pay rates' but unfortunate she was reminded by the Senate President she was speaking on the wrong bill, then she sat down and had a sulk. Get it right Jacquie!
Posted by Paul1405, Wednesday, 19 November 2014 5:12:14 AM
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Paul,

"Just on the topic is Wacky Jacqui about to do the bolt and leave PUP and set herself up as an "independent" senator, me thinks its just around the corner."

Methinks you are correct.

Jacqui has gotten a little carried away with her MSM notoriety. She appears to think she's the star of the show these days, and is apparently totally oblivious to the belly laughs she is engendering in the wider community.

I think Clive will try and hold onto her as it makes his voting block stronger to have her there.

However, Jacqui appears to have begun calling for the leader of her party to fall into line with her bizarre utterances...it's only a matter of time before her ego defies gravity and reaches for the stars.

Should be a hoot!...she makes Pauline Hanson seem reasonable.
Posted by Poirot, Wednesday, 19 November 2014 8:37:46 AM
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Paul,

I should have checked the headlines first.

http://www.abc.net.au/news/2014-11-19/palmer-united-party-demotes-jacqui-lambie/5901950

"The head of the Palmer United Party, Clive Palmer, says Jacqui Lambie has been demoted by the parliamentary party.

Mr Palmer said Senator Lambie has been removed as deputy Senate leader and deputy whip of the party for failing to attend three party meetings this week.

The move follows a deepening animosity between Mr Palmer and Senator Lambie over her comments about party colleagues and political positions.

Mr Palmer said Senator Lambie had not been expelled from the party, but he wants her to sort out her problems.

"We've also suspended her from attending any party room meeting meetings until such time as she gives an undertaking not to attack individual party members and to attend party meetings and to abide by majority decision and normal party procedure," he said.

On Monday Senator Lambie said she would consider her position with the party over the next few days and weeks after revealing she had not spoken to any of her PUP colleagues since last month."
Posted by Poirot, Wednesday, 19 November 2014 8:42:27 AM
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But then again, Lambie is set to put the odd spoke in the govt's wheels...

http://www.afr.com/p/national/coalition_financial_advice_changes_v2ye6UZcNh2JGEIh1Ax1qI

(which, in the case of a cohort of lying scoundrels, is probably a good thing)

"The federal government’s changes to Labor’s future of financial advice laws are set to be unravelled.

Renegade Palmer United Party Senator Jacqui Lambie and Australian Motoring Enthusiasts Party Senator Ricky Muir have broken ranks with Clive Palmer and plan to join Labor, the Greens, and Senators Nick Xenophon and John Madigan to disallow the laws.

The group has labelled itself the Coalition of Common Sense.

The government’s changes were enacted by regulation, not legislation. Regulations can be undone by the passage of a disallowance motion in either house of Parliament."

"Senator Lambie said on Wednesday she was only new to the Senate when she first voted with the government on FoFA. She now realises she had done the wrong thing after hearing about how investors were ruined by the Timbercorp and other scandals.

“I’ve found my way now,’’ she said.

“I have to go in there in make it right.’"
Posted by Poirot, Wednesday, 19 November 2014 8:55:51 AM
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Poirot; Jacqui's got 5 years guaranteed employment, providing there is no DD of parliament, which is highly unlikely, then she is out on her ear. I don't believe Big Clive will contest the next election. The PUP party without Palmer is the UP party, yeah up, up a creek without a paddle, more like it, with no unity, and without the United, it would simply be the P party and it would not be much of a party party for the two boofs and Jacqui left to their own devises. We know Jacqui doesn't have a clue as to what she doing. I don't think the other pair have a clue what they are doing in Canberra either, killing time, warming seats, not much else.

p/s One of my sons said he was definitely going to vote PUP before the election, now he strenuously denies he ever did such a thing, claims he voted Labor, as always, but I don't know.
Posted by Paul1405, Wednesday, 19 November 2014 1:10:24 PM
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P,

I am stunned by the complete ignorance on display. The RBA is a bank, and like all banks borrows money at a low rate and lend it out at a higher rate, the less capital the bank has, the less business it does and the less profit it makes.

Yes the money that Hockey borrowed to replace the capital pillaged by Whine Swan, will cost $300m p.a. but will generate profits well in excess. Compared to the estimated wastage on the BER of nearly $8bn, which yields zero return this is a good investment.

A,

I don't have a problem with the RBA paying dividends, you are confusing me with someone else.

Anyone with a basic understanding of Keynesian economics would know that Keynes was an economic conservative, and whilst demonstrating the benefits of stimulus in a recession strongly advised against stimulus in times of growth. As Australia never technically entered a recession, the stimulus required would have at most been the sufficient to protect threatened jobs for the short time between the GFC and the mining boom. When growth is 3%, inflation is back within the target zone, and unemployment is down to the lower 5% there is no justification for ANY further stimulus.

The BER was a prime example of a poor stimulus plan. The plan had to be made from scratch, and took a long time to get going so much so that the vast majority of the expenditure did not start until 2010. It then delivered vastly over priced structures most of which did not meet the primary needs of the schools.

A far better initiative was proposed by the coalition of subsidizing planned projects via low cost loans that could start immediately, create thousands of jobs and deliver profitable enterprises and income at a fraction of the cost to treasury.
Posted by Shadow Minister, Wednesday, 19 November 2014 1:41:43 PM
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Shadow, further to my previous posting, your 20% figure is wrong. The real data is graphed at http://www.theguardian.com/business/grogonomics/2014/nov/18/slow-wage-rises-show-australias-industrial-relations-system-is-working (which also includes links to its source).
Posted by Aidan, Wednesday, 19 November 2014 1:44:52 PM
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Shadow, you'll be even more stunned when you discover your own ignorance:
The RBA is not a commercial bank, it's a central bank.
Commercial banks borrow money and lend it out at a higher rate.
Central banks CREATE money and lend it out. Most of them (including RBA) also pay interest on money that commercial banks hold with them, to help control the amount of money in circulation.

"I don't have a problem with the RBA paying dividends, you are confusing me with someone else."
Really? Then who said:
"You mean the $8.5bn that Whine Swan pillaged from the working capital of the RBA in a vain attempt to present a surplus on paper. This going with attempts to defer payments and and push forward tax collections. All irresponsible actions from an incompetent treasurer"?
As he vainly chased surpluses and failed to prevent the RBA board from raising interest rates, I'm inclined to agree he was an incompetent treasurer. But there was absolutely nothing irresponsible about receiving dividends from the RBA.

"Anyone with a basic understanding of Keynesian economics would know that Keynes was an economic conservative, and whilst demonstrating the benefits of stimulus in a recession strongly advised against stimulus in times of growth."
Keynes started out as an economic conservative but became less so as his understanding grew. And of course he was not always right (advocating managed currency values when we now know it's much better to leave it to the markets). But I'm pretty sure that he didn't advocate immediate sudden withdrawal of stimulus as soon as it was shown to be working!

Inflation, growth, unemployment etc were indeed at normal levels. But that was because of government intervention. It would have taken a few years for the private sector to return to normal, and during that time the stimulus should be gradually reduced as the private sector expands. Stopping it abruptly will hinder, not help, the private sector's expansion.

As for the BER, it was excellent value in WA and good value in SA. Only in states where management was outsourced was it a failure.
Posted by Aidan, Wednesday, 19 November 2014 3:17:50 PM
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Aidan, someone stop the fight! This is obscene! Aidan please could you show Shadow some mercy, stop the logical argument, stop producing facts. Could you please just agree with the nonsense the lad puts forwards.
Shadow, where are you getting your economics from, your second form commerce book? That is understandable its where Cocky Joe gets his
Posted by Paul1405, Thursday, 20 November 2014 8:07:41 AM
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Pauline (I'm not a racists) Hanson is out to breath life into the ultra right One Nation Party, once again. You may have thought One Nation was well and truly dead and buried, not so it seems. Hanson wants to contest the 2015 Queensland state election. Based on the 2012 Queensland results where the party scored a "microdismal" 0.1% of the popular vote the only way for Hanson is up.
Yesterday Pauline latched onto the burning issues confronting Australia, not the least the eating of "halal", and her favorite of favorites "multiculturalism". I think she see them as related somewhat.
Who knows, Queensland Primer one day, Prime Minister the next. I would like to say good luck Pauline, but I can't.

Thought for the day! Prime Minister Pauline Hanson, Deputy PM Jacquie Lambie, its not a dream, its a nightmare!
Posted by Paul1405, Thursday, 20 November 2014 8:30:35 AM
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Come on Paul, compared to your harpies from the south, Pauline is all sweetness & light. She would certainly be much better for the average Ozzie, than the harpies.

Jacquie Lambie is from the same mould, if a little twisted that your harpies came from. She is certainly no worse than those two. In fact, she probably is less full of hate than either of them.
Posted by Hasbeen, Thursday, 20 November 2014 10:18:16 AM
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What is it with many Queenslanders and their overriding suspicion of anyone south of The Mason Dixon Line. I think they have long suffered from an inferiority complex, never seeing themselves as being able to match their fellow Australians living in the then more prosperous and dynamic states of New South Wales and Victoria. After all Queensland was long known as an economic, social and cultural backwater, famous for nothing more than banana bending and cane toads. Yes, big but inferior they did but see themselves.
On the political stage the Sunshine state has thrown up the oddest of odd-balls, not the least being the likes of Joh Bjelke Petersen, Russ Hinze and lately Clive Palmer and Pauline Hanson. Are these people simply a reflection of the Queensland persona? Sadly it may well be the case.
I will be in Queensland for a week from Saturday, can anyone advise as to precautions I should take before, and upon entering the state.
Posted by Paul1405, Thursday, 20 November 2014 4:22:05 PM
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Paul1405 - you'll have to reset your watch as Queensland operates its own clock. Not just daylight savings, there are a whole lot of things well behind the times here.
Posted by ConservativeHippie, Thursday, 20 November 2014 5:38:43 PM
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Hip, Do they have clocks in Queensland, I thought they were still using sun dials. What year is it up there? 1914.
Posted by Paul1405, Thursday, 20 November 2014 5:50:23 PM
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Banana-benders are indeed a different species, and I should know!
I married one, then went to live there for a couple of years, my second son was born there( luckily I took him south before he was infected) and a previously sane section of my extended family also moved up there, with dire results.
Great place to visit but, please, inoculate your brain at the border! &-)
Posted by G'dayBruce, Thursday, 20 November 2014 8:42:37 PM
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Aidan,

Your ignorance of economics is epic. The RBA is bank that creates money only by the printing of notes and coins. The "creation" of money that you allude to is done in the manner that every other bank does, ie it borrows money and lends it out. For example:

Joe deposits (or lends) $100 to a bank, the bank then lends out $95 to Fred who buys goods, and whose creditors deposit the money into the bank, which then lends out say $91 etc etc. This is exactly why the working capital of the bank needed to be restored, as it enables the RBA to buy the debt of banks and large companies and inject money into the economy to get industry moving and create jobs whilst still making a profit for the government.

Swan's pilfering of the RBA's working capital was pure economic vandalism.
Posted by Shadow Minister, Friday, 21 November 2014 7:10:17 AM
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Shadow,

Your ignorance of economics is epic. Most money creation is now done electronically rather than by literal printing and minting (and it is not the RBA that mints coins).

The RBA doesn't have to borrow Australian dollars before lending them out. It is their ultimate source. Restricting a central bank to loan out only what it borrows would not result in any benefit, but would compromise its ability to control the money supply by setting interest rates and would introduce a stability risk. Such a restriction certainly doesn't exist in Australia, andI don't think it does in any other country either – because hypothetically if it did, the government would have nothing to lose and everything to gain by abolishing that restriction.

"Swan's pilfering of the RBA's working capital" was pure myth.
Posted by Aidan, Friday, 21 November 2014 9:31:32 AM
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Aidan,

In simple terms, you are talking bollocks.

You will find that the RBA is not a great lender, and the reason that interest rates in the banks dropped slower than the RBA lending rate is that the banks had to borrow from overseas at rates higher than the RBA rate. When the US government implemented quantitative easing, it essentially issued $bns in treasury bonds and bought bank and company debt with the proceeds. Reserve banks the world around are considered lenders of last resort, and typically lend amounts "transactional gaps" for as short as a few hours to a day or two.

Perhaps you should actually read a book rather than spouting the first daft idea that comes into your head. While transactions are now done electronically, the RBA cannot lend money it does not have.
Posted by Shadow Minister, Friday, 21 November 2014 12:22:55 PM
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Shadow,

I agree that the RBA is not a great lender, and this IMO is a policy flaw that should be rectified. But the reason that interest rates in the banks dropped slower than the RBA lending rate is that the banks borrowed from overseas at rates LOWER than the RBA rate but then the Australian dollar rose so it worked out more expensive.

Reserve banks around the world could not function effectively as lenders of last resort if they could only lend what they had borrowed.
Posted by Aidan, Friday, 21 November 2014 12:53:59 PM
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Aidan,

You have been wrong so far on every front, so much so that I am beginning to doubt whether you have any education in economics whatsoever, other than conversational discussions with other liberal arts greenies with similar deficiencies.

You clearly have no concept of what a Reserve Bank is and its function. "the RBA is not a great lender, and this IMO is a policy flaw that should be rectified" No, it is not a policy flaw, it is fundamental to what the RBA is.

The cost to banks of borrowing from overseas was considerably more expensive than the money raised from internal deposits, and the reason I know this is that every Bank CEO said it, it was in their general reports, and Whine Swan conceded that it was a problem.

And while as you claim, we can continue rolling over our debt, each year we pay $14bn interest on labor's debt. To give some perspective, the tax revenue to the federal government is about $400bn which makes this 3.5% of federal expenditure. If Labor had not been so incompetent, we could have already paid for the NDIS.
Posted by Shadow Minister, Friday, 21 November 2014 5:11:20 PM
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Shadow,

Rather than doubting my education, I suggest you reexamine your own assumptions. You haven't posted any evidence that contradicts my claims. And not only is it unsupported, the false assumption on which your argument hinges is entirely illogical. If there was no difference between the way commercial banks and central banks of financially sovereign nations can lend money, Greece's current situation wouldn't be any different to in decades past (when it escaped the problem by metaphorically printing money). And hypothetically, if a country's central bank had a restriction that it could only lend what it borrowed, why wouldn't that country abolish the restriction?

I suggest you read http://blog.libertarian.org.au/2011/06/29/printing-money-out-of-thin-air/ if you still doubt it, and http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf to get a better idea of how central banks and commercial banks are completely different.

Australia doesn't pay interest on its cumulative deficits; we pay interest on the money that we borrow from overseas instead of creating ourselves.
Posted by Aidan, Saturday, 22 November 2014 2:00:34 AM
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Aidan,

You will be pleased to know that I no longer have any doubts as to your level of education wrt economics.

Your link to BOE publications does not in any way contradict what I have said, in fact it is an extension of what I posted earlier, and is covered albeit in less detail in first year economics.

Your link to libertarian.org has a single unsupported line essentially claiming that all government debt is unnecessary and by extension the GFC and subsequent debt crisis was an elaborate con job.

I would suggest that you read:
http://www.rba.gov.au/qa/role.html#own
http://www.rba.gov.au/monetary-policy/index.html
http://www.rba.gov.au/fin-services/index.html
http://www.rossgittins.com/2009/03/global-financial-crisis-and-its-effect.html

"debt markets. Developments in US and other debt markets (markets for the borrowing and lending of money) have raised the interest rates our banks must pay to continue borrowing from overseas and made it much harder for non-bank borrowers to raise any more funds from overseas. Remember that almost all of Australia’s considerable net foreign debt has been borrowed by our banks. Our banks have passed their higher borrowing costs on to their business and household customers."
Posted by Shadow Minister, Saturday, 22 November 2014 7:02:33 AM
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The Abbott govt is spending $325 million a year in interest on the $8.8 billion it gave to the RBA unnecessarily.

How's that for fiscal integrity?
Posted by Poirot, Saturday, 22 November 2014 10:24:37 AM
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Here you go, SM

The Australian Editorial re the Abbott govt.

http://www.theaustralian.com.au/opinion/editorials/the-abbott-government-is-doomed-without-narrative/story-e6frg71x-1227131169889

Here's a sample or two..

"While Mr Abbott is just as intelligent as his predecessors, he is languishing and looks flaky..." (my personal fave)

"No successful modern leader can be aloof from the requirements of communications and storytelling. It’s a simple lesson that Mr Abbott has failed to grasp: talking points and three-word slogans can never suffice. “Australia is open for business” does not constitute a narrative or provide inspiration. “Team Australia” has hokey appeal, but it, too, does not work as an explanation for complex national security issues."

"Limply, the Prime Minister is losing the battle to define core issues and to explain to voters what he is doing and why. At stake is his political credibility, no less...."

"...Mr Abbott’s approach to messaging is a shambles of conception, strategy and execution. This deficiency can no longer be masked or ignored."

"The Prime Minister’s Office is too dominated by Peta Credlin, his chief of staff, including on media strategy..."

Well, you get the idea, In a week where the Abbott govt has been broadsided by Bolt and Jones - now the Australian steps up for a biff.

They're worried - with good reason.
Posted by Poirot, Saturday, 22 November 2014 12:34:28 PM
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Shadow,

Firstly, I think I misunderstood one of your claims: when you said...
"and the reason that interest rates in the banks dropped slower than the RBA lending rate is that the banks had to borrow from overseas at rates higher than the RBA rate"
...I thought you were referring to the latest round of domestic rate cuts. But if you meant during the GFC, then I concur.

I'm pleased you accept that BOE document, as it contradicts a lot of the misinformation commonly taught in economics courses. AFAICT the RBA pages you linked to don't, so I'm puzzled as to why you posted those links.

"Your link to libertarian.org has a single unsupported line essentially claiming that all government debt is unnecessary and by extension the GFC and subsequent debt crisis was an elaborate con job."
It does at least reference a book, whereas your claim about central banks needing to borrow money before issuing it is still entirely unsupported.

The GFC was real: a crisis of private sector debt.
The subsequent public debt crisis was real in the Eurozone (where the countries didn't have central banks that could lend what they had not borrowed) but for countries with their own floating currencies, yes, it was a con job.

Although government debt is not without function, it is indeed technically unnecessary.
Posted by Aidan, Saturday, 22 November 2014 4:49:49 PM
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Poirot, I take that to be a clear message to Abbott from Uncle Rupert "Shape up or ship out". Sorry that should read "Shape up or we will ship you out". After reading that me thinks Abbott would have been reaching for a stiff brandy.
Posted by Paul1405, Sunday, 23 November 2014 10:48:05 AM
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25% of the Big Clive Party has done the bolt! Jacquie's gone.
Posted by Paul1405, Sunday, 23 November 2014 11:00:39 AM
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Aidan,

Vivid examples of reserve banks "creating" money out of thin air were in Germany after WW1, Argentina in the 70s and recently in Zimbabwe where the currency collapsed completely. That Greece, whose reputation for fiscal honesty is somewhat tattered, would not simply print money rather than going bankrupt and inflicting incredible misery on its people, wildly contradicts your version.

Considering that the BOE article you linked was about commercial banks not reserve banks, I find nothing to support your argument that orthodox economic theory is incorrect, and would suggest that in order to retain any credibility for your fringe theories that you provide one credible link.
Posted by Shadow Minister, Monday, 24 November 2014 2:47:12 PM
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Shadow,

I did specifically mention on this thread (over a week ago) that I support the use of tight fiscal policy to control inflation. But hyperinflation's never caused by money orinting alone; there's always at least one other factor. For example Germany after WW1 didn't have an effective taxation system. As soon as they imolemented one, the currency stablilized again.

Greece was not averse to printing money when it had its own currency, but now it's in the Eurozone it can not. Only the European Central Bank has unlimited credit in Euros, and it's denying Greece fhe benefit of that. There's no contradiction.

Orthodox economic theory does not claim central banks have to borrow money before they can lend it (or even after they lend it) and you have not supplied any links (credible or otherwise) that even claim they do, let alone have any evidence.

Prof Bill Mitchell's site http://bilbo.economicoutlook.net explains the real situation in a way that's consistent in theory and reality. But since it contradicts a lot of rubbish you think you know, I expect you'll dismiss it as not credible!
Posted by Aidan, Tuesday, 25 November 2014 1:46:35 AM
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Just up here in sunny Queensland, interesting lot these Queenslanders. Watched a bit of TV last night. They are being brainwashed by this Hardboiled Newman bloke. The TV was wall to wall ad's telling the locals what a fantastic job the government is doing. Just stopped short of saying VOTE 1 HARDBOILED. All this propaganda is paid for by the taxpayers. Went out side in the dark ran into my first live cane toad, lucky me.
Posted by Paul1405, Tuesday, 25 November 2014 5:40:35 AM
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Aidan,

I spent some time reading the "billy blog" and read that he considers himself an extreme left liberal. His posts similarly are extremely left whinge opinion pieces with only occasional oblique references to either theory or fact. I also looked for any reference to reserve banks "creating money" without funding this through the issue of bonds, and I could not find this anywhere.

Looking at every major economy, the stimulus is funded by the issuing of bonds incl the US, Japan, Germany, France etc. I cannot find a single example of "printing money" outside the 3 disasters I mentioned previously.

I am still waiting for you to provide a single credible link i.e. from a bank showing what you claim.

Secondly, I can understand that for those like you with no formal education in economics that the subject might appear to be magic and the gods such as Keynes and Friedman make pronouncements that are followed slavishly by lesser mortals. However, economics as taught at universities is not based on opinion, but on careful mathematical analysis of the markets and human interactions, and are not refuted by opinion pieces from fringe dwelling professors.
Posted by Shadow Minister, Tuesday, 25 November 2014 10:54:36 AM
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Shadow,
If you've got the degrees you say you have, surely you have the critical thinking skills to separate out the economic claims Bill makes and his own far left liberal views?

"I also looked for any reference to reserve banks 'creating money' without funding this through... bonds, and I could not find this anywhere."
His posts are categorised. I suggest you try the Debriefing 101 and Economics categories.

"I cannot find a single example of 'printing money' outside the 3 disasters I mentioned previously. "
And that, Bill convincingly argues, is due to a combination of convention (with procedures in place since the Bretton Woods era), bank liquidity considerations, and misplaced concern about its effects.

But the most important thing is that central bank lending to commercial banks is neither funded nor matched by bond issues.

Like yourself, I am still waiting for you to provide a single credible link i.e. from a bank showing what you claim. Misinformation is rife in economics. The myths that printing money is sufficient to cause hyperinflation and that governments shouldn't borrow directly from their own central banks are very widespread – indeed I used to believe them myself. But nowhere, other than from you, have I ever encountered the claim that central banks can't lend their own currency to commercial banks without borrowing the money from somewhere else first.

"Secondly, I can understand that for those like you with no formal education in economics that the subject might appear to be magic and the gods such as Keynes and Friedman make pronouncements that are followed slavishly by lesser mortals."
I'll let those with no formal education in economics speak for themselves, but I've never regarded the subject as magic or any economists as gods. They are not to be slavishly followed, but it is sensible to follow the evidence.

It was never Bill's opinion that attracted me to his blog; rather it was his careful mathematical analysis of the situation and his refutation of the assumptions about the markets and human interaction that many of the widespread economic theories are based on.
Posted by Aidan, Tuesday, 25 November 2014 4:31:13 PM
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Shadow what's wrong with a bit of slavish following. You are a slavish follower of Liberal Party economic nonsense, you hang on the crazy economic word of the Mad Monk and Joe Cocky. How more slavish can you get!
Posted by Paul1405, Tuesday, 25 November 2014 8:04:45 PM
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Aidan,

Despite my shortage of spare time, I did wade through the dross that is bilbo's blog. What I completely failed to find was any claim on his part that the RBA simply creates money, only his opinion stating that it should. I also failed to find any "careful mathematical analysis" unless you version of mathematics does not extend past year 9.

What I did find however, were many posts pointing out the benefits of taking on endless debt to build infrastructure. Which while I disagree with the principle for obvious reasons, it does acknowledge the practice of funding deficits through borrowing and not through "printing" money.

The status so far is that you, with admittedly zero economics background have stated an opinion that is at odds with economics as taught at every reputable university and backed by nobel laureates. Your single link to support your point actually does quite the opposite.

At this point you have the credibility of a homeless man with a "the end is nigh" sign.
Posted by Shadow Minister, Thursday, 4 December 2014 2:27:10 PM
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Shadow,
"Despite my shortage of spare time, I did wade through the dross that is bilbo's blog. What I completely failed to find was any claim on his part that the RBA simply creates money, only his opinion stating that it should."
Did you miss http://bilbo.economicoutlook.net/blog/?p=352 ?

What he's claiming the RBA should do is lend money straight to the government. But the fact remains that the RBA also lends money to commercial banks.

"I also failed to find any "careful mathematical analysis" unless you version of mathematics does not extend past year 9."
What a weird comment! Is a proof any less valid just because it doesn't require differential equations?

"What I did find however, were many posts pointing out the benefits of taking on endless debt to build infrastructure. Which while I disagree with the principle for obvious reasons, it does acknowledge the practice of funding deficits through borrowing and not through 'printing' money."
By convention. But he frequently makes the claim that government spending is unconstrained.

"The status so far is that you, with admittedly zero economics background have stated an opinion that is at odds with economics as taught at every reputable university and backed by nobel laureates. "
Your accusation that I have zero economics background is not admitted, it's false.

Stating opinions contradictory to those of economists is no big deal – other economists do it all the time.

But your claim about central banks being unable to lend other than what they have borrowed is blatantly false, and so easily refuted by any central banker, that I doubt you could name one economist in the world who believes it!
Posted by Aidan, Thursday, 4 December 2014 6:10:03 PM
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Aidan,

You are backflipping more than a gymnast. You said "It was never Bill's opinion that attracted me to his blog; rather it was his careful mathematical analysis of the situation", and then when I challenge you claim " Is a proof any less valid just because it doesn't require differential equations?" A proof without detailed analysis (usually with some level of mathematics) is not a proof only an opinion.

Bilbo's Bloggings contains essentially only opinion which is shared by no reputable economists.

I also note that you link to Bilbo's blog it is not the RBA that simply creates the money. The RBA acts like a bank in that it trades in financial assets such as bonds forex etc. The "creation" in the post you linked is essentially the RBA buying the fantasy bonds that the government issues which is in essence the government creating money. This is possible but generally never done due to the consequences as experienced by Germany, Argentina and Zimbabwe. (I purchased on ebay a $100 000 000 000 000 Zimbabwe note which at the time had real value of about 50c
Posted by Shadow Minister, Friday, 5 December 2014 9:01:42 AM
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Shadow I'm not backflipping at all. A proof that needs university level maths to understand has no intrinsic advantage over one that relies on more basic concepts. NONE of the year 9 level stuff is invalidated by what people learn afterwards.

I admit the stuff he's been posting more recently contains more opinion, but he has already dealt with the proof.

As I said, I too once believed that a government borrowing money directly from its own central bank led to hyperinflation. Bill satisfactorily explained why it didn't. Although it helps control the money supply, it's not actually needed if the central bank pays interest on the deposits the commercial banks make with it. The German hyperinflation was due to the lack of an effective tax system; when the Weimar Republic implemented one, their currency quickly stabilised. Argentina had made the terrible mistake of pegging its currency to the US dollar - see http://bilbo.economicoutlook.net/blog/?p=21418 . Zimbabwe printed money to finance a war, while simultaneously persecuting their main export industry and discouraging foreign investment. It couldn't've done any more to fail if it had tried to!

I'd gained the impression that a government borrowing money directly from its own central bank led to hyperinflation from Jeffrey Sachs's description of the Bolivian hyperinflation (which he'd ended) in his book The End of Poverty. But Bill pointed out one thing that Sachs had neglected to mention: the cause of the hyperinflation was the sudden need for foreign currency for the government to pay back a loan. The advantage of borrowing through the banking system rather than direct is that it enables a country to escape an emergency by defaulting, yet the consequences of defaulting are so bad that going into hyperinflation is regarded as preferable, so there's really no advantage at all. Far better to stick to your own floating currency so you can avoid the problem altogether.
Posted by Aidan, Friday, 5 December 2014 1:18:22 PM
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Aiden, Shadow would like to know if he could switch this debate with you to one about quantum physics? Like economics it is another subject he knows absolutely nothing about, but he was hoping unlike economics you would also know nothing about quantum physics either, and therefore the debate would be on a level playing field! So much for Shadows degree from the Cocky Joe Hockey School of Economics, not worth the paper its written on.
Posted by Paul1405, Saturday, 6 December 2014 3:53:03 PM
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Aiden,

Having spent some time reading bilbo's bloggings I have yet to find any mathematical treatment of economics, and at best contains fuzzy justifications for some of his more outlandish opinions.

Before you seriously try and debate economics you should read at least one first year economics text to give you a rudimentary understanding of the concepts so that you don't sound like a blind person debating the use of colour by Van Gogh.

Paul,

Unfortunately for you some basic quantum mechanics is generally taught in Electrical engineering to understand the behaviour of electrons in conductors and semiconductors.

I now realise that the greens fervent preachings on all topics is based on complete ignorance of anything technical.
Posted by Shadow Minister, Sunday, 7 December 2014 7:05:03 AM
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Top of the morning to you Shadow, I hope a bright and Sunny Sunday morning has greeted you this day, wherever you are.

"I now realise that the greens fervent preachings on all topics is based on complete ignorance of anything technical."
Not so old chum, for example, Dr John Kaye a Greens MP in the NSW Legislative Council is a qualified Electrical Engineer, do you have a doctorate, what has Cocky Joe got? I myself, am a qualified Mechanical Engineer, with additional qualifications in both Production and Structural engineering. Many Greens I know, have tertiary qualifications, not like most in the Labor and Liberal Parties members.

Please do not be miffed that you lose all these arguments on the forum, I am sure one day you will have a win, yes one day, but not today.
Posted by Paul1405, Sunday, 7 December 2014 7:27:49 AM
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Paul,

I'm glad you know one end of a spanner from another. At least it explains your contribution to the economics debate at the level of chimpanzee throwing poo, and your strutting around like the proverbial pigeon.

I suggest you read:

http://www.amazon.co.uk/Economics-Richard-G-Lipsey/dp/0199257841/ref=sr_1_2?ie=UTF8&qid=1292107260&sr=8-2

or something similar and finally you might understand why you belief that you won the argument was based on pigeon logic.
Posted by Shadow Minister, Sunday, 7 December 2014 7:52:07 AM
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Shadow, I like you have only a rudimentary understanding of economics, and freely admit that fact, but unlike you rather than make a fool of myself by trying to debate with someone who is an expert on the subject, in your case Aidan, I sit back and read your mumbo jumbo with glee.
The publishers of those "Dummies" books have just for you 'Economics For Dummies' I suggest you could add it all the other "Dummies" books you have purchased over the years. But be warned, reading them would help.

http://www.officeworks.com.au/shop/officeworks/economics-for-dummies-book-wy70879481?cm_mmc=google-_-inventory+driven+search-_-Small+Business+Books-_-WY70879481&cm_mmca3=conversion&cm_mmca9=columbus&CAPCID=41942850025&cadevice=c&gclid=CjwKEAiA74qkBRCdrM-6or7U73QSJABCDL9pM9C3p2JHcAtdjUZ0L8msz0W_1L0WNeQ7ZZIHI-rU_BoC3lXw_wcB&CA_6C15C=620015440000264271
Posted by Paul1405, Sunday, 7 December 2014 10:05:14 AM
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Paul,

I think you are suffering from dementia as I mentioned previously having a degree in economics and an MBA which covers high level economics financing law etc. I have been the project manager for projects in the hundreds of millions and have drawn up international contracts, forex hedging agreements etc based on my qualifications.

You and Aidan, however, share in having no formal education in economics whatsoever, so please don't refer to him as an expert based on him reading a few fringe blogs.

As for your economics for dummies, perhaps you should try those before tackling Eco 101.
Posted by Shadow Minister, Sunday, 7 December 2014 11:36:52 AM
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Shadow, your accusation that I have no formal education in econmics whatsoever is a lie. As I told you before, I studied one economics course as part of my civil engineering degree.

"Before you seriously try and debate economics you should read at least one first year economics text to give you a rudimentary understanding of the concepts so that you don't sound like a blind person debating the use of colour by Van Gogh."
WTF do you think it is that I don't understand?
Posted by Aidan, Sunday, 7 December 2014 11:46:27 AM
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Aidan,

My engineering course also included a short course in Macroeconomics which essentially gave me a taste for further study. But only an extremely superficial understanding.

In a nutshell, what you clearly don't grasp is monetary policy, finance or any in depth knowledge of macroeconomics.

In spite of repeated requests you have failed to provide any evidence of central banks printing money outside of the handful of failed states we have discussed. Notably there are no cases of hyperinflation without the printing of money.

A little eco 101 for you. Aus gets a large portion of its investment and loans from outside the country. Both of these are dependent on the fiscal stability of the country and currency. The moment the government started to print money, the dollar would plunge and Aus's credit rating would tumble leading to a rapid outflow of capital, interest rates soaring and the fastest economic collapse in History.
Posted by Shadow Minister, Sunday, 7 December 2014 1:48:04 PM
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Shadow, the problem seems to be that you have failed to comprehend that some of the stuff you learned at uni was incorrect.

If you want evidence of central banks printing money, have a look at http://www.tradingeconomics.com/australia/money-supply-m0 and set the chart to go back a few decades. You can even compare it with other countries' M0 (or M1, as the definitions vary between countries) to see that we're not unique in this.

Countries are reluctant to borrow from their own central banks, mainly for historical reasons (because doing so WAS a hyperinflation risk in the Bretton Woods era, even though it isn't any more), partly for bank liquidity reasons, and maybe there is also a fear of spooking the markets as some traders may be under the same false impression as you. However even if a few traders did get spooked, it would only be one of many factors affecting the dollar's value, and the price wouldn't fall very far – it may plunge a US cent or two, but it's no scarier to traders than the QE that other countries have. Our dollar's long term value is driven by imports and exports, and is ultimately self correcting – if it falls, our exports are cheaper and we export more and import less; if it rises we import more and export less.
Posted by Aidan, Sunday, 7 December 2014 6:08:32 PM
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Aidan,

Yes my problem is that I trust the 99.99% of economists and Nobel Laureates that have built up a body of knowledge (of which an undergraduate degree covers the basic building blocks) over your gut feel. I look forward to you pointing out which part of the theory of the economics degree is wrong, as I am sure there are millions of Phds and a handful of Nobel laureates waiting with baited breath.

This skepticism is enhanced when once again you "prove" that central banks are printing money by providing a link that does nothing of the sort. Clearly you have no concept of the M0 money supply. (this includes liquid assets such as cash, bonds, forex etc.) The US Federal reserve is injecting money into the economy without "printing". This is done by borrowing money at low rates by selling treasury bonds, and in turn buying higher interest company bonds of those wanting to invest.
Posted by Shadow Minister, Monday, 8 December 2014 7:20:49 AM
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Shadow, if you think 99.99% of economists concur, it suggests your knowledge of them is very limited. As Keynes himself reputedly said, "if all the economists in the world were laid end to end, they'd still point in different directions"!

The things you think you know that are likely to be wrong are the ones that are based on false assumptions. Not having an economics degree myself, I am not sufficiently familiar with its content to determine which bits of it are wrong, but fortunately Prof Bill Mitchell does, is, and have already done so. It is his evidence and reasoning, not any kind of gut feeling, that I based my opinions on.

This does not mean that I uncritically accept his views. I don't. I disagree with many of his political views, I don't think financial transactions should be as tightly regulated as he does, and I totally reject his assumption that the trend of increasing private sector debt is unsustainable. So if you've got a sensible objection to what he's saying, I'm all ears. But totally unsupported claims about highly illogical restrictions on what the central bank can lend will get the short shrift they deserve, and assumptions that any direct borrowing will send currency traders into a complete panic will be treated with a large amount of skepticism. The fact that the RBA engages in open market operations means that, like QE, it would be a procedural change that wouldn't have a huge effect on the final financial outcome.

And if you think an increase in the base money supply isn't evidence of printing money, where do you think it comes from?
Posted by Aidan, Monday, 8 December 2014 9:56:24 AM
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Aidan,

I wish you would actually read my posts, as I just gave a prime example in the US's QE that creates money in the economy without necessary "printing" an additional cent. The "base" money supply which includes cash but consists mostly of "liquid" assets increases significantly if the liquid asset base (bonds) increases even if the cash component remains static. But you would know this if you had understood even the rudiments of money theory.

As for economists disagreeing, no one will claim that any scientist, or economist is in complete agreement with any other of his profession. However, whilst they may disagree on the finer points and often on interpretation of incomplete data, they all agree on the basic fundamentals which forms the bulk of the undergraduate degree.

If you are prepared to pin your colours to Bilbo's " evidence and reasoning", especially given it turns conventional economics on it head, then it would only be reasonable for you to share it. I have yet to see this in any of the links you have provided.
Posted by Shadow Minister, Tuesday, 9 December 2014 9:30:49 AM
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Shadow,
If you look at M1 instead of M0 you'll still see an upward trend.
Most money creation is done without literally printing money, but the effect is the same: the money supply increases. Accounting convention means that debt also increases so that everything sums to zero, but nobody who understands the system thinks that debt will, should, or even could, be eliminated in the future unless the system is replaced by something different.

I do not agree with your claim that Bill's evidence and reasoning turns conventional economics on its head. You, and indeed he, may like to think it does, but a lot of the apparent difference is due to his political views. Excluding those, there are five important things he understands that many mainstream economists don't:

1) Sectoral balances.
This SHOULD be Economics 101 stuff, but few mainstream economists even mention it and many make predictions that a basic knowledge of sectoral balances would show to be ridiculous, then act surprised (or worse still, refuse to even acknowledge any mistake) when events inevitably prove their predictions wrong.

2) Money creation does not depend on reserves.
Neither for central banks nor commercial banks. The amount of money in circulation depends on how much can be lent profitably at the interest rate the central bank sets (and commercial banks are also restricted by the Basel requirements).

3 Sovereign nations have unlimited credit.
So as long as it sticks to its current policy of only borrowing in Australian dollars, the government can always afford a stimulus when the economy needs it.

4) Countries will never need to reach a zero debt position.
And hence the concept of Ricardian Equivalence (which Ricardo himself never claimed to be true) is false. It also means any money the government borrows now will not have to be paid back by the next generation. Surpluses may sometimes be needed to control inflation, but never just to pay off debt. And hypothetically, if the government did reach a zero debt position, a surplus would be no less desirable for controlling inflation.
Posted by Aidan, Thursday, 11 December 2014 5:24:42 PM
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(continued)

5) What really causes hyperinflation.
Hyperinflation requires the printing of money, but avoiding printing money for fear of hyperinflation is like avoiding having electricity in your house for fear of electrocution!

All other factors being equal, printing money will just result in competitive devaluation. As other things are not equal, sometimes it won't even do that. Whereas hyperinflation requires a sudden large devaluation. In the Bretton Woods era, currency values were fixed, so if a country printed more money the market couldn't devalue it. But the market regarded it as increasingly overvalued and the eventual capitulation to the market was hyperinflation. Nowadays the markets set currency value in real time so that problem can't occur.

Printing money and suddenly selling it off to pay off a large foreign currency loan will cause hyperinflation, as will not having an effective taxation system, and of course as Zimbabwe found out, wrecking your export industries while discouraging foreign investment has that effect too.

There are many times when printing more money is too inflationary. But it's not hyperinflationary except in eel understood circumstances that are easy to avoid.
Posted by Aidan, Thursday, 11 December 2014 5:31:07 PM
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(sorry, "eel" should say "well".)
Posted by Aidan, Thursday, 11 December 2014 5:32:19 PM
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Aidan, I despair!

Every time I point out an error you come back with another.

M1 (cash and deposits) will trend up with the economy and inflation and while the RBA will print extra cash as required by the retail banks to meet transactional requirements.

As for sectoral balances, most of this is covered in Economics 101, it is just not referred to as Sectoral balances. However, I fail to see its relevance to the RBA printing money.

Sovereign nations do not have unlimited credit as Greece found out. Credit needs to be paid with interest. Accumulating debt ramps up the interest until it consumes the budget. For example, Aus's federal tax revenue is about $400bn p.a. while the interest on Labor's debt is about $14bn p.a. or 3.5% of revenue. Instead of paying overseas debtors, it could have been used to pay for the NDIS ad infinitum.

Printing money is like having a hand grenade in the house, as there is no circumstances where using it makes things better. (and you have yet to provide an example where it did)
Posted by Shadow Minister, Saturday, 13 December 2014 6:39:38 AM
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Shadow, no matter what you say Cocky Joe Hockey and The Mad Monk are stuffing up the economy anyway! Unemployment UP, Taxes UP, Prices UP, Profits UP, Wages DOWN, Living Standards DOWN. The CORRUPTION PARTY (formally The Liberal Party) destroyers are at work.
Adian please join the Liberal Party and run for the seat of North Sydney and if by some miracle Abbott wins a second term Australia needs a new Treasurer!
Shadow please join the French Foreign Legion they also need a new Treasurer.
Posted by Paul1405, Saturday, 13 December 2014 7:26:33 AM
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Paul,

It seems whenever your dopamine levels drop you feel the need to rattle off a word salad.

"A Sun-Herald survey of the big four banks, as well as six second-tier banks, including St George and the Bank of Melbourne, asked whether delays over the government's budget measures were harming the economy.
ANZ chief executive Mike Smith said they were certainly not helping.
"They [the government] have a clear mandate to govern and should be allowed to get on with it," he said, in a swipe at the Senate."

It is clearly the Labor Greens coalition of the corrupt whose obstructionist policies are harming the economy.

I guess both Aidan's and your feeble grasp of economics is representative of the complete vacuum of economic knowledge in the Gangreen party.
Posted by Shadow Minister, Sunday, 14 December 2014 4:26:06 AM
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Shadow, stop despairing and start thinking!

"M1 (cash and deposits) will trend up with the economy and inflation and while the RBA will print extra cash as required by the retail banks to meet transactional requirements."
So the RBA prints money as needed. It's an unremarkable occurrence.

"As for sectoral balances, most of this is covered in Economics 101, it is just not referred to as Sectoral balances. "
What is it referred to as?

And why do so many economists make predictions that a basic knowledge of sectoral balances show to be ridiculous? And then act surprised a few years later when their predictions turn out to be wrong? Do you think what they're saying should be taken seriously when it defies Economics 101?

To state, as you did in your reply to Paul, that it is Labor and the Greens who are harming the economy by blocking the government's cuts, shows an ignorance of the basics which appears to be shared by ANZ chief executive Mike Smith! When private spending falls, the government taking more money out of the economy is only going to damage it more.

"However, I fail to see its relevance to the RBA printing money."
There isn't much direct relevance. It's just something that many (seemingly most) economists completely fail to understand. And those who fail to understand it keep on making virtually impossible predictions that the public take seriously.
Posted by Aidan, Tuesday, 16 December 2014 6:20:50 PM
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"Sovereign nations do not have unlimited credit as Greece found out."
GREECE SURRENDERED ITS SOVEREIGNTY TO THE ECB WHEN IT JOINED THE EURO!

Sovereign nations DO have unlimited credit, but Greece didn't value its sovereignty until it was gone.

"Credit needs to be paid with interest. Accumulating debt ramps up the interest until it consumes the budget."
So when was the last time the interest on a financially sovereign nation's debt (in its own currency) consumed its budget? (Clue: the money goes into the economy and most gets recouped through taxes).

"For example, Aus's federal tax revenue is about $400bn p.a. while the interest on Labor's debt is about $14bn p.a. or 3.5% of revenue. Instead of paying overseas debtors, it could have been used to pay for the NDIS ad infinitum."
This is an argument for sourcing more money domestically rather than from overseas. If the RBA had been more willing to lend to commercial banks, the interest payments to the RBA would have counteracted that cost.

Printing money is in no way comparable to a hand grenade, as it's an everyday occurrence. It's just that it's normally done by lending it out to commercial banks. But an inability to print money is extremely harmful (as many Eurozone countries have found) and the inability to increase the monetary base would not only ruin the economy of any country, but would make it overreliant on foreign currency, which introduces a severe economic risks.

BTW I'm not a member of the Greens, and they seem to be as economically ignorant as the major parties. Amazingly enough it seems only the Puppies understand the importance of increasing government spending in the present economic climate.
Posted by Aidan, Tuesday, 16 December 2014 6:21:18 PM
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Aidan,

1) One of the main functions of the RBA is to print money as required this was never in dispute. The requirements never include printing money to pay off debt.

2) Sectoral balances are not that important, and I have never seen economists failed predictions that could be explained by sectoral differences. Perhaps you could enlighten me?

3) If the debt continues to grow out of control, Aus's credit rating will drop, and the interest paid on the debt will increase, leaving less money for essential services as happened in Greece.

4) That sovereign nations have unlimited credit is no more based on fact than claiming that individuals have unlimited credit. Credit is based on an ability to repay debt, and no one can repay infinite debt.

5) "Printing money is in no way comparable to a hand grenade, as it's an everyday occurrence. It's just that it's normally done by lending it out to commercial banks." You really have no clue. Again one example would be sufficient.
Posted by Shadow Minister, Wednesday, 17 December 2014 1:02:16 PM
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Shadow,

1) You made the claim:
"I am stunned by the complete ignorance on display. The RBA is a bank, and like all banks borrows money at a low rate and lend it out at a higher rate, the less capital the bank has, the less business it does and the less profit it makes."
The fact that "One of the main functions of the RBA is to print money as required" contradicts that claim.

I don't advocate printing money to pay off debt; I advocate printing money to stimulate the economy. If the economy's booming then (even if there's no government debt at all) I advocate running surpluses to control inflation. But there's no inflation problem at the moment and the economy needs stimulating, so the government should run bigger deficits.

2) Sectoral balances clearly prove that cutting back government spending when the economy is below capacity will reduce economic growth and result in less tax revenue. Yet governments, and many economists, keep insisting the opposite.

3) Regardless of the size of the debt, sovereign currency issuers have a 100% chance of being able to afford to honour any financial commitments they make in their own currency. And the Australian government sensibly has a policy of not borrowing in foreign currencies. The only real advantage of Australia having a good credit rating is that it increases confidence and makes it slightly easier for state governments and commercial banks to get good credit ratings.

Greece is not financially sovereign, so is totally reliant on its credit rating.
Posted by Aidan, Wednesday, 17 December 2014 11:39:56 PM
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(continued)

4) If an individual invents their own currency and retains the right to print it, that individual would have unlimited credit in that currency. But without the power to tax, it would be difficult to ensure that currency is worth anything at all.

The power to print infinite money would make it possible to pay off infinite debt. That's a statement of fact and does not mean we should print infinite money.

And what of the private sector as a whole? Don't you expect its overall debt to increase even as individual loans are paid off? If so, why should the public sector be any different; if not, where do you expect the money to come from?

5. As you know, one of the main functions of the RBA is to print money as required. More government borrowing generally increases requirements. Why do you assume cutting out the middleman would wreck a currency?
Posted by Aidan, Wednesday, 17 December 2014 11:40:31 PM
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Shadow, forget about that 'Economics for Dummies' I recommended for you, that was a mistake, too many big words like arithmetic and mathematics not all one syllables and no brightly colored pictures, would be of no use to you at all. Cocky Joe could not understand that book, how could you? Now I suggest you get your hands on a copy of 'Where is Boo Boo Bear and Friends' it reminds me of Abbott and Co, should do the same for you. Hockey said its his favorite book on economics, without it he would be lost.
So Cocky Joe's mates from the big end of town agree with him, nothing like agreement from those robbing cheating banks is there.
Posted by Paul1405, Thursday, 18 December 2014 7:41:01 AM
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Paul,

Is the purpose of your post to be a complete dick?

Aidan,

I see no conflict between the RBA managing the mint to provide notes and coins, and its banking functions. Perhaps you can illuminate! While you advocate printing money to stimulate the economy, you still cannot provide any example.

Keynesian economics shows that cutting government spending reduces revenue and hurts the economy. This is why governments stimulate in a recession, and pay back debt otherwise, as unlimited debt is also a massive problem. P.S. Tax takes money out of the economy and also hurts it.

Currency only has the worth if those using it have confidence in it, and as with Bitcoin relies on its limited availability. Oversupply always lowers its value. I don't know of any case where printing of money to stimulate has not resulted in hyperinflation.

Similarly huge debt attracts huge repayments, and with limited ability to tax there is a real limit to government debt.
Posted by Shadow Minister, Friday, 19 December 2014 8:20:01 AM
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Shadow,

There is no conflict. Introducing a requirement for the RBA to borrow money before lending it to commercial banks would create a conflict, but as such a requirement has only ever existed in your imagination, there's no conflict at all.

As I said before, countries are reluctant to borrow from their own central banks, mainly for historical reasons (because doing so WAS a hyperinflation risk in the Bretton Woods era, even though it isn't any more), partly for bank liquidity reasons, and maybe there is also a fear of spooking the markets as some traders may be under the same false impression as you. But the RBA's open market operations mean there's very little difference between borrowing from the private sector and borrowing directly from the RBA.

'Tis only in economic downturns that taking money out of the economy (whether by taxation or government spending cuts) hurts the economy. At other times such action allows interest rates to be kept low (enabling the private sector to borrow more money into the economy) without increasing inflation. There is one caveat though: the strength of the economy varies between different parts of the country.

I notice you didn't answer my question about private sector debt. Are you unaware that our economic system relies on that continually increasing?

Limited availability may enhance a currency's value (due to supply and demand) but it's never the ultimate source. Taxation is usually sufficient to drive demand. Weimar Germany's hyperinflation ended almost instantly when they imposed an effective taxation system.

Do you know of any cases where a country with a floating currency printing money to stimulate the economy HAS resulted in hyperinflation? I can't think of any.
Posted by Aidan, Friday, 19 December 2014 6:04:07 PM
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Aidan,

Can you provide ONE example of a country with a floating currency that has printed money to stimulate the economy! I certainly can't think of one. Without such an example your theories fall in a heap.(even though the zimbabwe currency was not fixed) However, whether the currency is pegged under Bretton Woods, or free floating, the risk of hyperinflation is the same.

Taxation slows demand as it reduces the spending power of the private sector.

The economy is dependent on spending both government and private. If private sector debt is increasing, the economy grows more than if the private sector debt was stable. However, I would not go as far as claiming dependence.
Posted by Shadow Minister, Saturday, 20 December 2014 3:25:24 PM
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Shadow, I too am unable to think of any examples of a country with a floating currency that has directly printed money to stimulate the economy. However there are many examples of countries with floating currencies that have indirectly done so by borrowing money from the private sector while printing money to fulfil the private sector's requirements. Australia certainly has.

The Zimbabwe currency was not fixed, but I think it's fair to say that persecuting the main export industry while discouraging foreign investment is even worse for an economy than pegging the currency. And of course Zimbabwe printed money to finance a foreign war, not to stimulate its economy.

"However, whether the currency is pegged under Bretton Woods, or free floating, the risk of hyperinflation is the same."
No, it's TOTALLY different!

With a free floating currency, when more of a currency's printed there's a slight real time devaluation which tends to be self correcting as it tips the balance of trade to favour exporters.
With a fixed currency, when more of a currency's printed its value declines but is manipulated by the government to stop it falling. Therefore industry is denied the easier exports that a cheaper currency would bring, but with more money, consumers can afford to import more. Unless there's a big productivity increase, the government will eventually be forced to devalue the currency. Speculators hasten the process, getting rich at the government's expense. And the longer the government waits to devalue the currency, the more likely it is to be in the form of a catastrophic collapse (which is what hyperinflation is).

"Taxation slows demand as it reduces the spending power of the private sector."
Absolutely! It counteracts the effect of printing money.

"The economy is dependent on spending both government and private. If private sector debt is increasing, the economy grows more than if the private sector debt was stable. However, I would not go as far as claiming dependence."
It's very difficult for the economy to grow if the money supply doesn't.
Posted by Aidan, Saturday, 20 December 2014 11:43:53 PM
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"Paul, Is the purpose of your post to be a complete dick?"
Shadow, Oh! the slings and arrows, just when I thought we (that's you and me) had reached a state of complete empathy on this subject you throw such a barb in my direction! And it is the time of love and goodwill towards your fellow man.

Anyway its all water off a ducks back.

What about this,

http://www.youtube.com/watch?v=1YNbVaP9d5U

Economics solved!
Posted by Paul1405, Sunday, 21 December 2014 6:15:54 AM
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Aidan,

Here's a news flash: Borrowing money to lend it out is not printing money. Nice try, but your whole hypothesis has just crashed in a hole.

As in every case, if the central bank prints excess money, there is more money chasing goods and prices increase and or the value of the currency drops very quickly. This happens whether the currency is pegged or not. Note that even fixed currencies can have the pegs moved, as did the pound in the 70s.

Private sector debt is not the only source of money supply growth which can grow without public or private sector debt growing.
Posted by Shadow Minister, Monday, 22 December 2014 4:56:52 AM
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Shadow,

The RBA does not borrow money to lend it. It lends the money first (increasing the M1 money supply). Then to limit the inflationary impact of printing money, it sells bonds. And (perhaps more importantly, as it happens passively) it pays banks an overnight interest rate on reserves. IOW there are procedures in place to ensure that printing money does not result in excess money in the economy.

Moving the pegs of fixed currencies is highly inflationary, as it's done in large increments, and the process doesn't happen very quickly.

"Private sector debt is not the only source of money supply growth which can grow without public or private sector debt growing."
Please explain:
• how you think it can do that?
• how else do you think it can happen?
Posted by Aidan, Tuesday, 23 December 2014 9:26:06 AM
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Aidan,

Now I believe you are just making it up as you go along. The RBA does nothing of the sort.

As for money supply growth in the private sector, I suggest you read and try and digest the link that you provided from the bank of England, as I don't have the time nor word space to do the task.
Posted by Shadow Minister, Tuesday, 23 December 2014 12:20:41 PM
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Shadow,

"Now I believe you are just making it up as you go along. The RBA does nothing of the sort."
The RBA claims otherwise:
http://www.rba.gov.au/mkt-operations/dom-mkt-oper.html

"As for money supply growth in the private sector, I suggest you read and try and digest the link that you provided from the bank of England, as I don't have the time nor word space to do the task."
That accounts for M2, M3 snd M4 money supply growth, but doesn't affect M1.
Posted by Aidan, Wednesday, 24 December 2014 1:27:08 AM
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Aidan,

I would strongly suggest that you read the links you post. The last one does not support your position at all.

That the RBA acts as an overnight clearing house for the banks in no way indicates that it is "printing" money to do so.
Posted by Shadow Minister, Wednesday, 24 December 2014 2:00:40 PM
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Shadow,

I told you the RBA sold bonds and paid an overnight interest rate on reserves. You said it did nothing of the sort. I supplied a link to a page where the RBA admits it does that. How can that not support my argument at all?

There is no way the private sector can increase M1 money supply. If you think you can find a counterexample, post it (or a link) and I'll explain why it is incorrect.

You have absolutely no evidence at all to support your claim that the RBA can't lend money without borrowing it first. What will it take for you to admit you're wrong?
Posted by Aidan, Wednesday, 24 December 2014 5:20:02 PM
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Aidan,

That's not what you said:

"The RBA does not borrow money to lend it. It lends the money first (INCREASING THE M1 MONEY SUPPLY). Then to limit the inflationary impact of PRINTING money,"

The words in capitals are what I have issue with and which are not supported by your link.
Posted by Shadow Minister, Wednesday, 24 December 2014 7:33:03 PM
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Shadow, let me again make it clear that when I say "printing money" I don't mean literally printing cash, I mean increasing the base money supply as well or instead.

As the article you said didn't support my position at all says:
During the period of international financial turmoil between 2007 and 2009, there were considerable frictions within the interbank market. As the financial crisis that mainly emerged in the North Atlantic economies unfolded, financial institutions in Australia also became less willing to lend funds to each other, partly due to uncertainty surrounding their own liquidity position, but also due to concerns they held about the creditworthiness of other financial institutions. These trends were most evident in the markets for longer-term debt, but were also felt in the market for overnight funds. To ensure that the cash rate traded at the Board's target throughout this period, the Reserve Bank accommodated the greater demand for ES funds by significantly increasing their supply.

Indeed if you look at http://www.tradingeconomics.com/australia/money-supply-m1 you will see that the M1 money supply was more volatile in that period and was above the long term trend (which seems to be roughly doubling every decade).

Does that answer your question?
Posted by Aidan, Friday, 26 December 2014 12:37:07 PM
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Aidan,

Your definition of "printing" money changes from post to post.

If you had any economic education you would realise that ES financing are "overnight" clearance loans or deposits with a less than 24hr duration and is funded from the RBA's financial reserves, and thus makes almost zero impact on M1.

Looking at the M1 trend, it barely deviates from the long term trend of matching fiscal growth.
Posted by Shadow Minister, Saturday, 27 December 2014 4:23:30 PM
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