Rehctub, there needs to be a shift in emphasis in discussions, not
just here either. There is too much reliance on past techniques both
financial and technical.
The world economy is undergoing a major shift that is rewriting all the rules.
Economists are not really aware of this and still believe all problems
can be solved with money fiddling.

Most people do not realise what set off the big financial bomb in 2008.
The financial people built a house of cards that was fine until a
card fundamental to the structure was pulled out from under it.
When peak crude oil occurred in 2006 the price started rising slowly
until 2007 when a tightness in the oil market became apparent.
As the price rose during 2007 and early 2008 people started defaulting
on their mortgages until July 2008 when the price reached US$147 a barrel.
The economy could not afford that price and the sub-prime housing
loans fiasco collapsed taking the banks with it.
Joe six-pack as they called him, could not afford to pay his mortgage
and the defaults rose through 2007 & 2008.

This was a lesson that governments, economists and business did not learn.
There almost certainly will be a repeat sometime in the next five years.
The fundamental rule is "No increase in energy, no growth".

Bazz,

(Genuine question) What's your opinion of the stories circulating that Saudi Arabia is set to go bust within two years or so?

http://www.smh.com.au/business/comment-and-analysis/saudi-arabia-may-go-broke-before-the-us-oil-industry-buckles-20150805-gism05.html

"Saudi Arabia is effectively beached. It relies on oil for 90 per cent of its budget revenues. There is no other industry to speak of, a full fifty years after the oil bonanza began.

Citizens pay no tax on income, interest, or stock dividends. Subsidised petrol costs twelve cents a litre at the pump. Electricity is given away for 1.3 US cents a kilowatt-hour. Spending on patronage exploded after the Arab Spring as the kingdom sought to smother dissent."

"The International Monetary Fund estimates that the budget deficit will reach 20 per cent of GDP this year, or roughly $US140 billion. The 'fiscal break-even price' is $US106.

Far from retrenching, King Salman is spraying money around, giving away $US32 billion in a coronation bonus for all workers and pensioners.

He has launched a costly war against the Houthis in Yemen and is engaged in a massive military build-up - entirely reliant on imported weapons - that will propel Saudi Arabia to fifth place in the world defence ranking."

"Money began to leak out of Saudi Arabia after the Arab Spring, with net capital outflows reaching 8 per cent of GDP annually even before the oil price crash. The country has since been burning through its foreign reserves at a vertiginous pace."

(Much more info on the machinations in the article)

Bazz, if Joe Hockey couldn't afford to pay his mortgage, I'm sure Labor would've got maximum political milage out of it. But I find it extremely unlikely, as Joe's rich.

And if you're trying to use it as a metaphor than you're trying to spread a vicious lie. Vicious because the Australian economy, and indeed many other nations' economies, have been damaged by trying to implement policies based on that lie. The truth is that Australia can and does pay all our debts. Furthermore, even if our debts were bigger than those of Greece, we could still pay them easily because (unlike Greece) we have unlimited credit.

"...although economists are now wondering why neither stimulation or austerity no longer work as they used to in bygone times."
Austerity has never worked for this purpose. It works when there's a shortage of real resources, but at the moment there's a glut so it can't do anything other than harm the economy.

Stimulating the economy works and always has done, but if the stimulus is not big enough than it can be counteracted by other factors. Exactly the same as in bygone times.

"For the economy to grow it just must have increased energy deployed."
Not necessarily, as energy expenditure is not proportional to value.

"Now, if you do not have extra energy available you cannot get growth.
This is a basic fundamental."
Except that it's not true. If you do not have SUFFICIENT energy available than it's very difficult to get growth. But Australia's energy use peaked in 2009.

And hypothetically, even if future work did require an increase in work and energy to pay interest and capital, the amount needed could be cut by cutting the interest rate.

The need to reserve fossil fuels for our own use is a red herring. We don't have, and aren't in danger of having, anything like the severe shortage of them that would dent our ability to "build the next energy regime"

The requirements for moving to 100% renewable energy are irrelevant to this thread. We can discuss it some other time.

Aidan,

"Bazz, if Joe Hockey couldn't afford to pay his mortgage, I'm sure Labor would've got maximum political milage out of it. But I find it extremely unlikely, as Joe's rich."

I don't think Bazz was referring to "our" Joe...but since you've brought him up in connection with his mortgage, I have to include this observation, especially in connection to rehctub's comment:

"We must put a stop to the entitlement mentality."

Which brings us to Joe Hockey's "nice little earner" of claiming $271 from the taxpayer for every night he spent in his wife's property in Canberra.

(well her name is on the title at least, but we all know it's his too)

Entirely within "entitlement" of course, his accommodation allowance paid around $46,000 off his wife's mortgage.

Great eh!

And, as you've pointed out, he (and she) are RICH!

Now he's (most likely) off to "double dip" from his parliamentary pension while vacuuming up his wages from his sinecure as Ambassador to the US.

Not bad for the most failed treasurer in Australia's history.

Poirot, Saudi Arabia is worried by the drain on their finances.
In a recent month they drew down $US70 billion. It appears that they
have about $US700 billion tucked away. I cannot guarantee that figure
I just read it in an article somewhere.
The Saudi government has banned the buying of new cars and furniture
by the Princes and government offices.
I am sure that will break their heart.
Nevertheless they are worried. They are hoping that the US tight
shale companies will fold. Some are already declared bankrupt and many
have ceased operations. Operating rigs have fallen from 1600 to about 600.
It will however take another year before most would have to stop.
It all depends on the price. It is down now because the economies
could not afford the $80 plus and wound back demand.
This was predicted in 1994 by Colin Campbell & friends.

As Saudi Arabia is believed to have peaked they cannot turn the screws
any harder and now the US has started selling their strategic reserve
which will turn the screw on Saudi another notch.

Aiden said:
"For the economy to grow it just must have increased energy deployed."
Not necessarily, as energy expenditure is not proportional to value.

Well that is correct and some energy sources are more effective than others.
We use fossil fuels because they produce a lot of energy for the input.

However if there is no increase there will be no growth.
Otherwise what will power the growth ?

Our oil based energy is almost zero and we must buy it from Singapore
Korea and Taiwan. That will disappear if we are outbid.
No one is even suggesting that we build a Topisch-Fischer coal plant
to at least supply some liquid fuel for emergency services.
The decline in crude oil production will overpower any shale or
oilsands production in just a few years time.
Alternatives take years to design & develop and we may not have many years.