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John Kelly is 69, retired and lives in Melbourne. He holds a Bachelor of Communications degree majoring in Journalism and Media Relations. He is the author of four novels and one autobiography. He writes regularly for The Australian Independent Media Network and on his own blog site at: The View from my Garden covering a variety of social, religious and political issues.

Website: http://johnbkelly.wordpress.com

Catholicism and the Liberal Party

So Cory Bernardi has finally made his move and put his career where his mouth is. A brave move whatever one might think of his politics, but one where at least his job won’t be at risk for another five and a half years.

He leaves the Liberal Party no worse off really. He’ll still support them. But it’s not a good look, electorally. At the moment it’s easy to watch the Liberal Party imploding. But it shouldn’t come as a surprise to those of us who have witnessed the party’s evolution over the past 50-60 years.

The decay has come from within. It has come because the ultra-conservative wing of the party, Cory’s wing, feels the party is losing its grip on values it believes are central to its raison d’être.

The irony though, is that those values, now under threat, were never part of the party’s original platform, not Menzies’ party. They came in by stealth and quite recently at that. They are essentially Catholic Church values. They are Opus Dei values.

Around 30 years ago, the Liberal party began a covert transformation, so covert in fact, that few inside the party even noticed it was happening.

It began with a disproportionate influx of Catholic members that traditionally, would have been more comfortable in the Labor Party.

This new membership came primarily as a result of encouragement from within the Church, which saw its traditional influence in the Labor Party falling away. It was coming from within Opus Dei.

Traditionally, the Liberal Party was a bastion of Protestantism. At one point when Sir Robert Menzies was Prime Minister there was only one Catholic Liberal member in the House of Representatives.

By the time Tony Abbott became the first Catholic Liberal Party Prime Minister, nearly 50% of his cabinet was Catholic; all this added influence, when only 25% of Australians claimed to be Catholic.

The disproportionate nature of this representation is even starker when one realises that only 15% of Australian Catholics are actually practicing Catholics, i.e. those who attend church regularly.

Church teaching opposing communism, divorce, abortion, gay marriage and euthanasia has been progressively under threat since the 1970s and as local parish congregations continued to dwindle, the need for the Church to have strong parliamentary influence became paramount.

To the Catholic Church, power is everything.

The current disproportionate representation is by no means accidental or coincidental. But lately, things have not been going well for it. The elevation of Malcolm Turnbull to the leadership has upset the cosmic order of things and the conservatives (aka, hard-right Catholics), see themselves on a collision course with irrelevance.

The defection of Cory Bernardi from the Liberal Party is a symptom of this malaise. This image of him as Australia’s Donald Trump is misplaced. Bernardi is nothing like Trump. If anything he is the opposite of Trump.

But he can see where the populist shift is going. And that is what concerns him.

Bernardi is not a populist, he is a committed Christian conservative concerned that a populist movement in Australia, as might be witnessed with the rise of Hansonism, is gaining momentum.

Primarily, Bernardi is concerned with the threat Australia’s secular lifestyle and the influence of Islam, means to traditional Christian values. His defection won’t weaken Catholic influence within the Liberal party but he did not think it was doing enough.

What he thinks he can achieve out on his own is not known, possibly even to him. But clearly his idea of where Australia should be heading is at odds with Liberal party agenda.

What we do know, is that the Catholic agenda within the party comes at the expense of rational policy decisions, something that will do the party no good at all.

Therefore, we can expect that the crumbling of the party will continue.

A Race to the Bottom

Firstly, Donald Trump and the future of the world……

Here’s my take…….Donald is possibly the most narcissistic person I have encountered in public life. From history I have concluded that John Paul II, Nixon, Hitler, Bismarck, Lincoln, Napoleon, Henry VIII, Pope Innocent III, all the way back to Augustine and Alexander were narcissists. They all caused, to some degree greater or lesser, serious upheaval within their sphere of influence. Trump will do the same. How serious this upheaval will be is hard to say, but I do not rule out some military conflict and certainly some global economic consequences. He might pal up with Putin but if China is the target, make no mistake, Russia will side with China when the spaghetti hits the fan.

What has that got to do with Australia? Ask Malcolm Turnbull. He has first-hand knowledge.

Who would have thought 2017 would be the year of the narcissist and the amateur? But here we are. Donald Trump is President of the USA, Malcolm Turnbull is our Prime Minister and Pauline Hanson’s One Nation Party might poll better than the LNP in the upcoming Queensland and Western Australian state elections.

If that wasn’t enough, Cory Bernardi is tipped to form a breakaway Conservative party that will be further to the right of the Liberal Party. Mind you, it’s not altogether clear if Cory’s party will be further to the right of One Nation.

If you thought that was depressing, take note that “fake news” is the latest genie out of the bottle. The chances have never been higher that a flood of unbelievable rubbish oozing out of Canberra, Washington, the right wing MSM and certainly social media will be forthcoming in spades.

One can barely imagine the level of mis-reporting, fake news, lies and deception that is about to be unleashed upon the poor unsuspecting citizens of the world this year.

It will be unprecedented. Little wonder some are feeling like Alice through the looking glass. It is humorous enough watching Senator-no-longer, Rod Cullerton refusing to accept the decision of the Federal Court and vowing he won’t vacate his office, but that is small chips.

On more serious matters, as much as the Coalition partners here will try to hide it, or limit themselves talking about it, our government is between a rock and a hard place with The Donald in the Maison Blanche.

Beware though. This Liberal/National Coalition are a bunch of opportunists and rednecks without a vision beyond perpetuating their own existence.

Trump is a Republican president; their kind of people. He’s a Reagan man, again, their kind of people. But he’s a loose cannon and they are going to be bullied in ways they have never experienced before.

How on earth did it all come to this? That’s an easy question to answer. What we are experiencing as we observe these unexpected outcomes is a worldwide revolution against inequality.

The Americans who voted for Trump, however, have shot themselves in the foot. If they were looking for someone to restore equality to America, they should have chosen Bernie Sanders.

Instead, they have put a filthy rich guy in control because they were sick of filthy rich guys hoarding all the money.

But let’s not concern ourselves with them. What is likely to happen here? As Trump begins to legitimise crassness, political incorrectness and post truth, you can be sure our government will be paying close attention and attempt to capitalise on what he gets away with, by doing something similar here.

If the Queensland and Western Australian state election outcomes show strong support for Pauline Hanson’s One Nation, it will be at the expense of the conservative side of politics.

Coalition members will feign displeasure, of course, but quietly use this lurch to the far right to push for the repeal of Section 18C, call for harsher adjustments to their border protection policy and their immigration intake.

And perhaps, as the doors of the conservative media fly open, ready to embrace public mood swings, they will begin attacks on any minority group that One Nation targets. Trade Unions will also come in for some special attention. Anything to reverse the current disastrous polling figures.

So, get ready to witness the race to the bottom as lobby groups and spin doctors are brought in to soften us up and proclaim closet racists and rednecks as the new normal.

The Coalition will do whatever it takes to recover from their current poor polling in readiness for an election in 2018, a year earlier than required, but necessary to bring the senate timeline back into sync.

 

Unlike Turnbull, Trump Holds No Fear of Debt

Whatever one thinks of Donald Trump, there was something he said in his inaugural address today, that Malcolm Turnbull should note well.

Trump said, “We will build new roads and highways and bridges and airports and tunnels and railways all across our wonderful nation. We will get our people off welfare and back to work, rebuilding our country with American hands and American labour.”

This could be a blueprint for Australia as well. Does anyone think The Donald would be concerned about where the money comes from? Not likely. One suspects he is already ahead of the game.

Speaking a week ago to CNN’s Chris Cuomo, he said, “First of all, you never have to default because you print the money, I hate to tell you, OK?” He was answering a question on the $20 trillion of US bond issuance and added, “I understand debt better than probably anybody. I know how to deal with debt very well. I love debt.”

Compare that boldness with the Australian government’s obsession with debt and bringing the budget back to surplus. Whatever one thinks of The Donald, he is right. He certainly has no fear of private debt and realising, as he clearly does, that sovereign debt is altogether different from private debt, one can surmise he will use it to, “make America great again.”

Furthermore, Trump has no fear of the American media.

How we yearn for someone like that here in Australia. Take the latest labour force figures released by the ABS. They paint a dismal picture.

As Professor Bill Mitchell repeatedly warns us, “we always have to be careful interpreting month to month movements given the way the Labour Force Survey is constructed and implemented.”

What Prof. Mitchell tells us though, is that the latest employment figures for December suggest, “the Australian labour market remains in a weak state and confirms that the September-quarter GDP figures, which showed real GDP growth being negative were probably part of a downwards trend.”

Unemployment increased in December to 5.8% making a mockery of the Turnbull government’s “jobs and growth” mantra. Furthermore, the underutilisation rate (underemployed and unemployed) is at 14.7% unadjusted.

Over the last 12 months, Australia has produced only 91,500 (net) jobs with 125,500 of them being part-time jobs. In other words, full-time employment has fallen by a disturbing 34,000 (net) jobs over the same period.

The disturbing trend toward part time work continues at an alarming rate where today, one in three Australian workers are part time, compared with one in five in 1988. This has serious ramifications for demand, for tax receipts and overall growth.

If ever our mainstream media had the ammunition they needed to press for a Trump like approach to drag our economy out of the doldrums, they have it now. Will they use it? Not likely.

Will our government cast aside their obsession with deficit spending? Not likely. Unlike Trump, our government fears the media. Every thought-bubble they have is followed by the question, “how will the media react?”

It may well turn out that while the world looks the other way, waiting in fear for how Trump might manage China or ISIS or immigration or any other of his more outrageous claims, the man himself might just reconstruct American infrastructure and in the process, restore its flagging economy.

And it probably won’t cost a sovereign cent.

The Economy an Impending Train Wreck

If you were on a fast moving train and someone came through the carriage and told you that the train had no brakes and only a brick wall would stop it, how would you feel? What would you do?

Right now, Australians are heading at full speed into an economic brick wall and the government won’t do what’s needed to stop it.

We boarded the train in the late 90s and early 2000s when mining was the buzz word and Peter Costello started producing surplus budgets. Everyone gave him a big pat on the back and told him what a great job he was doing.

Peter probably felt justifiably proud and continued doing what he thought was the right thing, i.e. producing more surplus budgets. Mind you, he was receiving shiploads of money from the mining sector, so it wasn’t all that difficult.

Unfortunately, only a select few at the time realised that Peter’s surpluses were sucking money out of the economy. He thought he was deploying it to pay down the Hawke/Keating government debt, which had grown to 18.1% of GDP by 1996.

But in doing that actually, he was forcing the private sector (you, me and the corporates), to replace that debt reduction with debt of our own using the credit card, the mortgage and corporate loans. The train had pulled out of the station.

Nobody played much attention to that though. Everyone thought Peter was a genius and by 2007, he had paid down all net debt although, in gross terms, $58 billion of government debt remained.

All the while he was doing that, Newton’s Third Law of Motion was kicking in and private debt was on the rise.

Then, those nasty Labor people were elected once more. Just 12 months later the greatest economic upheaval since the 1930s depression exploded in our faces.

Banks collapsed along with the stock market and property values. Demand fell sharply as unemployment soared into the tens of millions across the OECD world.

A brief period of stimulus in Australia proved to be a masterstroke. Labor’s economic management was hailed worldwide. Yet internal bickering became its undoing despite maintaining the nation’s unique record of continuous economic growth.

By this stage, however, private debt had reached record levels as Australians continued leveraging up on inflated housing prices, buying up anything and everything they could get on their credit cards.

By September 2013, Government gross debt was a miserable $278 billion, just 25% of GDP. The new conservative Coalition government won office through a compliant media who convinced people that Labor’s debt would send us broke. Austerity was the new buzz word.

The new government promised a return to surplus budgets. Despite a fall in demand, rising unemployment and low wage growth, the government assured us they were on the right path.

More than six years later, none of their promises have produced the slightest indication of improvement. Unemployment, low wage growth crippled by a continued fall in demand is sending our fast moving train closer and closer to that brick wall.

The national government debt has skyrocketed to $465 billion, something the Coalition once thought would send us broke and our debt to GDP ratio has risen to above 36%.

The first negative quarter of growth (September -0.5%) was unexpected. The next quarter (December 2016) won’t be known until March 2017 and all the economists are saying it will bounce back to positive territory. That is Bollocks!

The train won’t slow down just because they say so. By March it will already be obvious to the private sector that demand has not improved. They will begin laying off people in February and Australia will be in recession.

Even if the March quarter produced a small albeit unlikely amount of growth (say, 0.2%), the 12 month figure will still show growth at a miserable 1.7% for the year 2016.

This follows 2015’s result of 2.6% and 2014’s of 2.3% and 2013’s of 2.8%. This is the reason unemployment won’t come down, why underutilisation of the work force is close to 2 million people.

None of this needs to happen. The economy is tanking. It is being starved of money that should be coming from the government, that doesn’t need to be borrowed, that should be spent on nation building infrastructure projects, on interim stimulus injections and a job guarantee.

Yet what do we hear and read about daily via the media? The Health Minister, Sussan Ley tells us she didn’t plan on spending nearly $800,000 on a Gold Coast apartment while on an official trip paid by the government, Senator David Leyonhjelm scolds pensioners for being pensioners and now Centrelink, using a suspect algorithm, is advising people traumatised by demands for the reimbursement of welfare payments, to call Lifeline.

That train crash is getting closer and closer. What will the media say when it happens?

Our Government’s Misguided Ignorance About Debt

On October 11, 2009, during the post GFC  wash-up, American economist Paul Krugman wrote in the New York Times under the heading, “Misguided Monetary Mentalities”:

“One lesson from the Great Depression is that you should never underestimate the destructive power of bad ideas. And some of the bad ideas that helped cause the Depression have, alas, proved all too durable: in modified form, they continue to influence economic debate today. What ideas am I talking about? The economic historian Peter Temin has argued that a key cause of the Depression was what he calls the “gold-standard mentality.” By this he means not just belief in the sacred importance of maintaining the gold value of one’s currency, but a set of associated attitudes: obsessive fear of inflation even in the face of deflation; opposition to easy credit, even when the economy desperately needs it, on the grounds that it would be somehow corrupting; assertions that even if the government can create jobs it shouldn’t, because this would only be an “artificial” recovery. In the early 1930s this mentality led governments to raise interest rates and slash spending, despite mass unemployment, in an attempt to defend their gold reserves. And even when countries went off gold, the prevailing mentality made them reluctant to cut rates and create jobs.”

Today, our Australian government is doing exactly what Krugman argued against, with the exception of raising interest rates. This time, however, it is not to protect our gold reserves. We have none. Peter Costello sold them off years ago at bargain basement prices.

This time, it is to protect us from the myth of public debt. And just what is this debt? The Australian Office of Financial Management displays this debt as a permanent fixture on its website for all to see. As at 31st December 2016, the total issuance of treasury bonds and notes is $464,791,000,000.

This is gross debt. This is the figure upon which interest is paid. These days it is more common to hear government members quote net debt because it enables them to subtract the value of the Future Fund (currently around $125 billion) and so doesn’t sound quite as frightening.

But gross debt is the big ticket item, the one those same government members were all too willing to quote when Labor was in power, the one that supposedly costs us $1 billion in interest per month.

This debt comes about because Treasury runs our economy as if it were a household. If the incoming flow of tax receipts does not cover the outflow of government spending, it directs the AOFM to tender for the sale of government bonds to cover the expected shortfall.

But this is no more than an academic exercise. The government is not a household. It is the currency issuer of Australian dollars and can never run out of money. It never needs to borrow any more than it needs to collect taxes.

The bond issues are purchased by a variety of institutions both here and offshore. But they are only ever issued in Australian currency and are therefore never at risk of default. They can always be repaid independently and regardless of the state of our economy.

Furthermore, they do not fund government spending. All government spending is new money issued by the Reserve Bank of Australia (RBA). If you doubt this, ask anyone who has bought these bonds to show you their certificate. The money they have given the government in exchange for that certificate sits in an account in their name at the RBA.

So, the Treasury documents that are issued as part its accounting responsibilities and which reflect an accounting sheet balance of income and expenditure plus debt issuance, are no more than a mythological construct to give the appearance of good housekeeping.

There is no debt. Furthermore, the interest paid on the bonds is also newly created money. It is shown in the budget papers as an expense but it should, more accurately, be an RBA transaction like any other bank and not a part of the national budget.

If the government were really looking for savings, they need look no further than the $12 billion per year the RBA pays its bondholders.  That money could be removed from the budget expenditure side, immediately. So why don’t they? The answer to that question takes us back to Paul Krugman’s article.

The government, like all western economies, still maintains a ‘gold standard’ mentality. It’s a reflection of its collective macroeconomic ignorance. And in maintaining this ignorance, it is overlooking the real threat to our economic well-being: that of private debt.

In acting this way, they are playing right into the hands of the super-rich who want a permanent pool of unemployed workers, a low paid workforce and less government interference in corporate oversight.

It’s high time we brought an end to this deception and the fantasy of government debt.

MYEFO, a tale of incompetence

What a tale the 2016/17 December MYEFO tells. And it’s not what the Treasurer is saying. Firstly, Scott Morrison is projecting a return to surplus in 2020/21 which is unchanged from the pre-election update.

What he isn’t saying though, is that the likelihood of this actually happening is next to zero. Thankfully, that’s not an issue because a surplus budget is the last thing the Australian economy needs right now, or indeed in four years’ time.

Next, the budget deficit is projected to fall by a paltry $600 million this year to $36.5 billion. That saving comes at the expense of pensioners, the disabled, the Green Army and the unemployed. But again, it probably won’t be realised.

That $600 million saving would otherwise have been spent by the recipients buying food, household items, travel, transport and other demand driven needs. That saving does even more harm to the economy.

Next, net debt is projected to peak at 19% of GDP by 2018/19. Who cares? Our debt is issued in Australian dollars and can always be repaid. We can continue to issue bonds till the cows come home and never run out of money.

We can, however, run out of resources. That’s where growth comes from. That’s what we should be looking at, not the debt. Our unemployed are an unutilised resource who create additional demand and a boost to our productive output. The fewer people working the less demand for goods and services.

Meanwhile real economic growth estimates have been revised down. There’s a contradiction here that seems lost on the Treasurer. Tax receipts are down $3.7 billion since the June pre-election budget. That’s because wages growth is virtually non-existent and with the increase in part-time work, people are working fewer hours.

The contradiction?  The government has fought tooth and nail to prevent wage increases for the lowest paid and is now suffering the consequences of revenue write-downs in tax receipts from low wage growth. Talk about scoring an own goal.

What is of no concern is this constant talk about what the ratings agencies might do. Who cares? The ratings agencies are irrelevant to the success or otherwise of the Australian economy.

The interest rate for our bond issuance is determined by the government, not the ratings agencies. Regardless of any determination by the ratings agencies, our bonds will always attract both local and international support, whatever rate the government sets.

Not that we need to issue bonds in the first place, but that’s another story.

What this MYEFO tells us is that the government and Scott Morrison are incapable of managing our economy in a way that will bring an improvement to the living standards of most Australians.

They are collecting less and spending more but not where it actually leads to anything. Where is the investment in the future? How often have these pretenders been falsely warning us that today’s debt is a burden on future generations?

The reality is the reverse. Today’s lack of infrastructure spending is the burden we leave future generations. It is our grandchildren who will suffer the burden of ageing infrastructure, insufficient hospitals, poor public transport and communications.

With this kind of thinking, our economy is destined to decline further, with or without any international events impacting.

The world is changing…and not in a good way

It seems unnecessary even to say it, but that’s the truth of the matter. The world is changing and not in a good way. It’s the story of the frog in the saucepan.

The water heats up but it’s so comfortable that the poor frog doesn’t realise, until it’s too late, that the ever increasing temperature of the water is slowly boiling him alive.

We are like the poor frogs and the changes in our lives have been, and are, so subtle we don’t catch on until it’s too late. What we have failed to notice is that our so-called democracy has been ripped out from underneath us and replaced with an obscene form of plutocracy.

The truth is, democracy in Australia began to die some thirty years ago. We didn’t cause it. That honour goes to the United States. Richard Nixon set the virus loose when he took America off the gold standard in 1971.

It was Ronald Reagan who lay the groundwork for the virus to spread and spread it did. Western economies followed suit adopting fiat currencies and suddenly the greedy race to the bottom was on.

Fiat currencies are not evil in themselves. They can and should be employed for great good. They can provide full employment, raise living standards; they can eliminate hunger and poverty.

But in Ronald Reagan’s world there was a different agenda. The result is that we now live in a world dominated and controlled by corporate greed.

We don’t know if Nixon or Reagan intended the virus to spread across the globe the way it has, but neither introduced any regulatory barriers to stop what actually happened.

So, those two presidents were at best incredibly naïve or at worst, criminal.

The introduction of fiat currencies opened the way for a paradigm change in the distribution of wealth and power. Then, when Bill Clinton repealed the Glass-Steagall Act he made it so much easier for the crooks to flourish. It has resulted in a measure of inequality not previously experienced by any former civilisation.

Today, democratically elected governments are no more than agents, one might even call them servants, of the super-rich. They do the bidding of those that pay them to keep the masses in check.

In Australia, we only need to look at the list of political donors from the 2013 election to see where the big money came from and where the control lies. And this is only what was declared. How much more and from whom, that went undeclared, we may never know.

And why do they donate? Just take a look at the economic policies of the two major parties, both of whom skew their preferences toward their funding base.

There was a time when economic policies were built within a framework that put people first, that cared for the social consequences. Not anymore. Today, it’s all about serving the interests of the financiers and industrialists to the detriment of communities, of social cohesion.

Today, more than ever, factories are shutting down, car manufacturing plants are closing, engineering plants, that once employed successive generations of the same family are sitting idle, while governments across the country call for even more labour reform.

There are devastating signs all around us of Ronald Reagan’s neo-liberal train wreck and yet, while we feel the water in the saucepan getting a little warmer, the comfort levels are still reading ‘cosy’, blinding us to what is coming.

Three major events this year, Brexit, Trump and Renzi’s failed referendum would have us believe the people are finally saying they have had enough. We might even include Hansonism in that revolt but that would be foolish.

That right-wing conservative shift is little more than a bump in the road. Conservative rebels will soon see how wrong they were, how their protest voice will in fact empower the forces of neo-liberalism even further.

Have we learned anything from the GFC? Watch and listen to these pathetic, opportunistic, mongrel, neo-liberal apologists as they scramble their way out of the ditch they have built.

In the long term, nothing will change except the rhetoric and everything will go back to the way it was beforehand.

The world has changed and not for the better. The inequality gap grows wider and wider. Control of our future is contracting to fewer and fewer.

While we listen to politicians telling us about the debt burden we will hoist upon our grandchildren, little do we realise that the super-rich are already planning our grandchildrens’ future.

The trend is toward longer working hours and lower wages.

The sweat-shops of Asia, the child labour in India and the meagre trickle-down offerings western society has been blinded by today, will pale in comparison to a late 21st century world of total subservience.

Unless those duped by neo-liberalism’s trickle-down fraud, can rise from their present artificially constructed comfort zone and claim their rights beyond a simple Brexit or Trump, western living standards, for other than the super-rich, will continue to decline. The frogs will have left it too late to escape.

Do we now have a budget emergency?

The adults have been back in charge for over three years now. Our economy has been saved from the debt and deficit decimation and everything is back to normal. Scott Morrison take a bow. You have achieved something Joe Hockey couldn’t.

Oops! Hang on. Something’s not quite right here.

The September Quarter national accounts have thrown up something that can’t be right, can it? A negative growth factor of 0.5% could only occur under a Labor government, surely. An annual growth rate of just 1.8%? Doubtless there are people out there who will still blame Labor for it.

And it appears Scott Morrison is trying to. He is demanding that Labor must now support the government’s $48bn tax cut plan because the economy needs it. It’s the same old ‘trickle-down’ rubbish conservative governments have been preaching for years.

“This is the ticket to the next 25 years of growth,” he said on Wednesday. “But we cannot achieve that if we cannot get the partners in this parliament that will engage with us in the national interest, that won’t be engaging in party political games, that won’t engage in negative politics and wrecking and destroying, but will engage to lift the burden on business so they can invest and employ more people.”

Can you believe the economic fantasies this man entertains? He actually believes that a $48 billion tax cut for businesses is in the national interest. The cut is over a 10 year spread, let out in dribs and drabs that business will hardly notice. The savings in most cases will probably pay for a Christmas break-up party, but little else.

The modelling shows the corporate tax cuts will deliver an increase in the GDP of 1% in 20 years’ time. Compare that to a GDP loss of 0.5% in the last three months. Morrison thinks that this is going to save the Australian economy from disaster and set up the next 25 years of prosperity. Talk about delusions of grandeur!

And this is what he is banking on to save his economic record. To those of us who have been warning a recession is immanent, that increased government spending, not tax cuts for business, is what is needed, we say, “we told you so.” But Morrison is not listening.

“To regain our competitiveness, and therefore create and sustain jobs, we must encourage our businesses, which employ most Australian workers, to invest and grow,” Morrison said at a press conference on Wednesday.

For the record, the nine Australian governments are collectively the country’s largest employers to the tune of 2 million workers and it is the government who should be leading from the front. Business is waiting for government to show the way.

1467195256008They will thank Morrison for the tax cuts but won’t invest the proceeds. To think otherwise is sheer fantasy. If Morrison wants to encourage business to invest, then he should lead by example.

Let’s start by constructing the world’s biggest solar plant in South Australia, let’s build a fast train service between Sydney and Melbourne, let’s restore the NBN to its original design (FTTH) and get it finished by the end of 2017. Let’s upgrade our urban transport systems.

There’s plenty of other projects just begging for attention. But no, this government is determined to bring the budget to balance. That’s code for surplus. They won’t spend because they think that deficit spending creates debt and debt is bad.

All of which is sheer bollocks!

How do we get it through their thick heads that the only way out of the mess they have created, is to spend? Even the IMF has changed its mind. After being a major contributor to the economic disaster that is the Eurozone by preaching austerity, they have now decided that infrastructure spending is the new austerity.

maxresdefaultProfessor Bill Mitchell was quick to react. He writes, “The Australian economy has been marching inexorably towards recession for the best part of this year and government refuses to budge from its attempts to impose fiscal austerity. Madness is a euphemism for their policy conduct. Incompetent also comes to mind.”

Hello! Is anyone in Canberra listening?

 

Morrison is not up to the job

It is extraordinary how the mainstream media is protecting the Coalition government by not exposing the true state of the economy.

Right now, the government is between a rock and a hard place and has no idea which way to turn. The latest ABS figures for the Wage Price Index show a further deteriorating trend in the most important category of taxation revenue, wages growth.

The flat wages drift continues and growth is being driven by private sector credit.

In reality, wages growth is important in terms of tax revenue but irrelevant in terms of getting Australians back to work. But our Treasurer can’t see that. His answer for low wages growth is to give corporations a tax cut.

On the ABC’s 7.30 last night, Scott Morrison was asked how the low wages growth issue could be fixed. He replied by saying, “Australians need to earn more AND companies need to earn more.” He then went on to say that the government’s corporate tax plan was necessary to give companies more “headroom” to give their workers more hours.

What utter nonsense! By “headroom” I presume he meant more after-tax profit. But businesses must first make a profit before they pay any tax, so how would a lower tax rate help it earn more? It is a ridiculous suggestion, all the more vindicated when one compares how many of our major corporations pay no tax at all.

3c70f5c030283bb617c5726f4316b763Leigh Sales put it to Morrison that Australian companies were already fairly profitable, therefore why shouldn’t they pay their workers more. Another ridiculous suggestion. What she should have asked is, “why doesn’t the government find jobs for the 1 million plus who are underemployed and the 700,000 who want work but can’t find it?”

There were 1,011,100 workers underemployed in August 2016.

More jobs would create more hours as well as exponential revenue by helping drive greater demand. The depth of questions asked of our government ministers is pathetic.

If Morrison was a Labor treasurer, he would be vilified by both the Murdoch, and Fairfax media outlets and the ABC, mercilessly.

Morrison is not up to the job. He waffles on about corporate tax rates in the U.K. and Donald Trump’s plans to cut the US corporate tax rate to 15% believing this is what drives an economy. He needs to speak to business more forcefully.

Professor Bill Mitchell says, “The suppression of real wages growth has been a deliberate strategy of business firms, exploiting the entrenched unemployment and rising underemployment over the last two or three decades.”

That strategy continues today with the government trying to pass its anti-union legislation through the senate. Productivity growth used to be shared with the workforce, creating higher rates of spending which then created more jobs.

Today, the gap between productivity growth and wages growth is widening. Morrison could lower the corporate tax rate to zero and it won’t do anything for wages growth.

o-greed-900The workforce will not increase their spending on the credit card forever. And companies will not employ new labour if they cannot sell more of the goods and services they currently produce. It’s not rocket science.

Morrison doesn’t have a clue.

Not even Malcolm can help them now

Each and every week it seems, a minister in the Coalition government will shoot his/her mouth off, desperately trying to defend their ever more obvious incompetence.

It’s hard to believe but Christian Porter, our Minister for Social Services, thinks we don’t have a job shortage problem. Like most of his conservative colleagues, it seems he would rather take a cheap shot at the unemployed than face up to the reality of a failed approach to reducing unemployment.

Just for the record, the facts are that we have over 700,000 people looking for work but only 150,000 or so job vacancies at any given time. But let’s not allow a statistical fact to get in the way of a good slap-down.

Porter is concerned that too many people are refusing job opportunities, particularly our youth, citing as an example, vacancies in the care sector that cannot be filled. It’s a convenient truth.

Apparently our youth are failing to accept jobs available in the care, retail and tourism industries and Porter thinks their reasons for so doing, amount to them wanting something better.

He says people on unemployment benefits think that some jobs are better than others. “There is a sense in Australia that one job is superior to another job, or that one job is a better fit than another job,” he said during an address to ACOSS (Australian Council of Social Service).

Really? So is there no difference between Porter’s job and that of a taxi driver? They both get to serve the public. They both travel in tax deductible vehicles. They are both grossly overpaid and enjoy extraordinary benefits. Oops! No, that’s not right.

7529308-3x2-940x627Porter’s job provides all the benefits, including being grossly overpaid, without producing anything. A taxi driver provides a vital service to the public, gets paid around $10 an hour when actually working, but receives no benefits, not even sick leave or holiday pay.

One would have to conclude that Porter’s job is a much better fit. So is it unreasonable for a University graduate to look for something better than being a carer?

The unemployed are well within their rights to think that some jobs are better than others. They have every right to look for work where they can contribute to something in their chosen field.

What has been Porter’s contribution to the ‘jobs and growth’ mantra beyond head-kicking the unemployed? Or does he feel that being Social Services Minister absolves him from helping find appropriate work for those on Newstart?

What is it about conservative politicians who would blame the victims of bad policy decisions rather than face up to the job of providing meaningful employment? If we take a hard look at factual outcomes we can see why politicians like Porter like creating distractions to hide their failures?

At the time of the 2013 election, 69.8% of all jobs were full-time. Last week’s job figures from the ABS showed the percentage was 68.1%, up very slightly from last month’s all-time low of 67.8%. There are now over 1.8 million Australians unemployed or underemployed.

The facts tell us that the Coalition has achieved nothing of value in the past three years. They are charlatans. They will search for and cling to the tiniest shred of positive news they can, ignoring the trend, ignoring the reality.

The economy today is in worse shape than any period under the previous Labor government. Yet they still intend to give big business a $50 billion tax cut pretending this will create jobs. In reality, it will do nothing for jobs or the economy, but it will put more money into the hands of the 1%.

safe-schools-620x400The Coalition barely won the last election; it was only because Malcolm Turnbull was leading them. But not even Malcolm can help them now. He has shown us he is no more than a puppet leader, answerable to the hard right faction of his party.

Why do we think we elect people to govern for the good of the country when the truth is, they govern for their own good and the big money that put them there?

They are charlatans. They thoroughly deserve our scorn.

What Australia should fear most?

While most people in the world are scratching their heads in confusion and expressing their disgust at the election of Donald Trump as the next US president, there was one important issue raised during the campaign that received little attention and which has thus far been ignored.

Macroeconomics is not very sexy and not something one would associate with Donald Trump, but in an article in the Financial Times on 28th September 2016, the author, Judy Shelton, put the case that Trump had, “broken a cardinal rule in US presidential campaigning by openly questioning the effectiveness of the Federal Reserve.” 

Shelton reports that during one of the presidential debates, Trump suggested that the US Federal Reserve had been engaging in politics by suppressing US interest rates. The Fed had been “doing political things” with their interest rate policy and “creating a false economy.”

Trump’s comments were seen by right wing conservative economists as supportive of their claims that the Fed was conspiring against them, forcing them to take on riskier positions which, if rates were to rise, would cause their investments to fail.

It’s easy to see why such an issue would not gain traction with a media soaking up all the juicy titbits that were flying high during the campaign. But if true, the ramifications would have important consequences for the US economy and certainly go beyond the media’s interest in Trump’s more exciting personal life.

Trump’s comment is important because it raises the issue of future central bank independence. At the moment, sovereign currency issuing Governments impose, under political pressure, a series of voluntary restraints on their behaviour that mimic the actual restraints they faced when we had a convertible currency, i.e. before we abandoned the gold standard and floated our currency.

In short, it continues to issue debt to cover net spending. It’s all about fiscal discipline. They just don’t like thought of the central bank monetising the net spending. But in reality the so-called national debt, about which so much deceit is practiced, is no more than a voluntary restraint.

untitledBut if ‘The Donald’ feels that ‘The Fed’ is deliberately suppressing interest rates against the interests of Wall Street, i.e. the US Fed is not being independent of the politics of running the economy, he might move to limit its power by assuming greater control over monetary policy.

If Trump is able to grasp the power of a fiat currency, he could well envisage his popularity soaring if he were to bring an end to the escalating debt by firstly, instructing the Fed to stop issuing bonds and monetise deficit spending.

He could then go one step further and instruct the Fed to gradually absorb the $20 trillion-odd on issue (America’s national debt) and present himself as America’s “debt saviour.”

It would amount to no more than juggling a few accounts at the central bank and it would give him sufficient goodwill to appease Wall Street with a lift in interest rates.

He could then have the US Treasury assume much greater responsibility for monetary policy which, in a democracy, it should have anyway. It is high time our politicians faced up to their electors and called the shots, rather than appointing an unelected body to do their dirty work for them.

But, in the area of debt, they would face a new obstacle. The debt issuance (bond sales) is not used to fund deficit spending. It is a place for Wall Street to take out some insurance by buying government bonds. The bonds enable their money to be safely parked in a risk free environment, albeit low return investment portfolio.

So, the final act would then be to instruct the Fed to create a term deposit facility for the banks and bond buyers to park their reserves and be paid interest at a rate that would lessen the pressure on Wall Street to look at riskier investments; a win-win, so to speak.

interest-ratesBut here’s the kicker. If the US Treasury were to assume greater monetary control and the new US administration was more willing to offer Wall Street a higher return in a term deposit thus enabling investors to avoid meddling in riskier products, it’s not hard to see what an increase in interest rates would do to a mortgage belt still recovering from the GFC. This would have far more serious consequences for the Australian economy than it would for America.

An increase in rates in the US would see international bond buyers’ desert Australian bonds in favour of term deposits available in the US. Australian bonds have always been an attractive investment and this should not mean a rise in rates here, but our Treasury Department, fearing the worst, would feel obliged to react and raise its bond rates anyway.

A rise in the bond rate would give commercial banks an excuse to raise mortgage rates.

And here is the ticking time-bomb. A rate rise here that impacts on a mortgage belt that is already seriously over committed, would be disastrous for our economy. We already have a government hell bent on limiting spending, forcing the private sector to make up the difference by taking on more debt.

debtAdding yet more pressure with a rate rise would be, for many mortgagees, the straw that breaks the Camel’s back. With private debt currently at 180% of GDP, the pressure could be explosive.

Such are the possibilities of a Trump presidency. Doubtless, there will be many more. If he can see a way to broaden his popularity with the masses by eliminating the debt while at the same time appeasing Wall Street, it may be an opportunity too good to resist.

If you are a subscriber to the Financial Times, here is another recent article on the same subject entitled, “The end of the era of central bank independence”

Trump may be just what Australia Needs

Notwithstanding the shock-horror first reaction to Donald Trump’s stunning victory, when the dust settles, the next president of the USA has already shown some good signs for both the US and Australia.

Firstly, the aged old idea that we will always have a friend in the White House was never true. More accurately, we always had a friend in the White House as long as we did what we were told. Those days are now over. We have no real friends, just associates and partners.

The reality is, we can continue to suck up to Washington till the cows come home, but we will still only get what they want to give us. And that will depend on what they want from us and what we are willing to give them.

That truth is now more relevant than ever. Trump’s unhinged rhetoric and absence of diplomacy should be seen as a breath of fresh air. At least we know what he’s really thinking.

Listening to Trump’s victory speech on election night and putting aside all the rubbish about bringing the nation together and governing for everyone, the future still looks good; Trump’s references to rebuilding America’s infrastructure particularly so.

America’s roads, rail, bridges, not to mention airports, seaports and communications  have all been allowed to deteriorate over the past 50 years. Rebuilding them will create full employment. There is a good chance he will choose to pay for it using functional finance, i.e. money creation, not bond issues.

The main reason the several trillion dollars of QE (Quantitative Easing) money did not revive the US economy was that the banks who received it chose to use it to recapitalise after the shock of the GFC. That money never made it onto Main Street.

130319112944-us-roads-infrastructure-1024x576If Trump plans to re-invest in US infrastructure in a big way and finance it with money created out of thin air (no bond issues) the money will find its way onto Main Street, it will revitalise lagging industries, create employment, improve tax revenues and bring them that long sought after growth that has thus far eluded them since the GFC.

A recovery from the ground up will be vastly superior to any recovery that Wall Street could engender. Wall Street (the markets) have, in fact, been the stumbling block to growing the US economy of late. Too much money has been invested in companies whose balance sheets have not improved.

That is wasted money. It might suit those who are heavily invested in the stock market and have been the driver of a seriously overvalued index, but it hasn’t helped the average American. That was the reason Trump won. Trump’s victory represented a “fuck you” to Wall Street. And to some extent, the rest of the world.

Beyond America’s borders, there will be new rules to observe. Old alliances will be tested. Trump will be less inclined to be the world’s Sheriff. Nation’s reliant on American generosity in grants, military support and strategic planning might have to rethink their positions.

America is going to be more exclusive, less inclusive. Dis-engagement in the Western Pacific will mean Australia will have to be more mature in our dealings with Asia. Our trade relations with China might well supersede military ties with the US. As scary as that might sound, it shouldn’t be.

But it does mean that we will have to beef up our military strength to something akin to a real middle world power. At the moment we could not defend ourselves without US support. That will have to change.

middle-america-girds-for-chinese-invasionIf we are so petrified of a few unauthorised boat people arriving, the prospect of 250,000 well-armed soldiers landing at half a dozen entry points simultaneously, should be a wakeup call. That scenario however, is far less likely than an economic invasion.

China’s huge holdings of Australian dollars at the RBA should be seen as a great source of future foreign investment. Our economic future is in Asia. We had better start getting used to that.

Donald Trump’s election victory will likely be a watershed for Australia’s long term future. It’s time we grew up and stopped cowering under America’s protective wing. The much coveted ANZUS treaty won’t be worth much from here on in.

For Australia, being the clever country has just taken on a whole new meaning.

Money is a Scary Subject

The devaluation of peoples’ hard-earned money is what Australians fear most. People fear inflation. Never mind the crime rate, political corruption, nuclear wars, family violence, pestilence and the like, inflation is the king of fear factors.

So, when you tell them that a currency-issuing government is not constrained in its spending capacity, they immediately imagine this nightmare scenario where a government will just spend and spend and spend.

This is just one of the reasons why people struggle to accept Modern Monetary Theory. Fuelled by ignorance and being fed the wrong information by others who don’t know any better, they cling to old standards such as the myth that running a country is the same as running a household.

They foresee inflation going through the roof, causing all manner of pain and suffering to families, their savings and their future well-being. The word hyperinflation often sneaks into the conversation as well.

It’s an entirely false scenario, there is no reason to think that way but, that is the way of people when they are opposed to something or are gripped by the fear of the unknown.

The other great difficulty is that most economists don’t accept it either because it goes against everything they have been taught.

The problem is that few of them have been taught macro-economics as opposed to micro-economics. Most of them, while acknowledging that we live in a fiat currency world, still maintain a gold standard mindset. That is the sum of their training.

gold-standardThat is why it is easier for people who have not studied economics, to accept it. Their minds have not been polluted with gold standard thinking. Common sense takes over.

People in the financial markets, for example, seem to understand it quite easily. Tell them that bond sales drain reserves and they get it, they understand it.

But within the world of the economist, it takes a heterodox-economist to lead the charge, someone trained and qualified in the old ways but who has broken through that glass ceiling. Sadly, there aren’t too many of them.

Very few, if any, policy makers understand it. Senior central bankers do, of course, after all they are the ones who juggle the numbers in their computers. But will they dare explain it to the politicians? The very thought of it makes them shudder.

They too fear that once a politician realises the possibilities associated with a fiat currency, the politician will wreak havoc upon a nation’s economy, spending recklessly. It’s a sad indictment of the perceived maturity of our leaders.

Perhaps the biggest problem in explaining MMT is the language used. Trying to explain to someone that their entire thinking processes need to be turned upside down if they want to grasp it, isn’t easy.

When you hear someone say, “The federal government spends by issuing currency and can never run out,” they don’t respond by saying, “great, let’s have full employment.” They say, “For goodness sake, don’t tell our politicians, they’ll just spend like crazy. We’ll become another Zimbabwe.”

Somehow, the language has to change. We have to develop a new way of explaining MMT such that the irrational behaviour of those who should know better, can be ignored.

banner-languageEngaging in a carefully considered language with simplistic clarity, a language that has factored in all the elements of disbelief and fear is a huge challenge.

It’s hard explaining that when a fiat currency is misused, inflation is a possible outcome, but that full utilisation of a nation’s resources (its people), improving our health, our education, lowering our crime rate, is a far better outcome.

It’s hard explaining that a nation is constrained only by its available resources and not by one or two percentage points of inflation. Under our present management, we can’t even achieve that.

It’s hard explaining that a currency issuing nation can always meet its commitments in its own currency, that it doesn’t need to borrow to fund its spending and can always pay for goods available in its own currency.

Why is it that the prospect of providing full employment, having a world’s best education and health system, a state of the art communications network, a respect for our natural resources and equality of opportunity for all, is restrained by ignorance?

This is the 21st century. Those medieval superstitions that so dogged the efforts of people like Galileo and Copernicus should be behind us now. Modern Monetary Theory, like all theories, needs proper implementation to be accepted as fact.

85After all, who can seriously say that the present theory of classical economics has proved itself worthy?

Money is indeed a scary subject. But it doesn’t have to be.

Get off your arse and do something!

For a government that won office on the back of a “jobs and growth” mantra, how did she get away with this? Okay, it was Q&A and Cup eve and people were distracted. But for the Health Minister Sussan Ley to go on the public record and say, “Governments don’t create jobs, governments don’t make it happen,” is a symptom of the delinquency of this government. (2m. 30s).

Where is the accountability when a senior minister can say this and still keep her job?

The Anglicare Australia report, released on Monday: Positions Vacant? When The Jobs Aren’t There, shows a total of 732,000 Australians registered as unemployed with an estimated 875,200 underemployed as at June 2016.

The report shows an average 168,896 jobs advertised each month.

It also shows just 13% of jobs advertised in May were at entry level, i.e. Year 12 or equivalent while 37% of jobs advertised required a bachelor degree or higher qualification.

With figures like this, it’s high time these leaners got off their arse and delivered on their jobs and growth mantra. If the government wants the private sector to create the jobs, then it need to recognise that firms will only employ labour if they can sell the production that is created from that extra employment.

But this present and utterly pathetic bunch of neo-liberal conservatives continue to believe the myth that unemployment is a result of supply-side difficulties that have to be eliminated by deregulating the labour market, imposing tougher work conditions and denying benefits to people.

untitledProfessor Bill Mitchell says, “The main reason that the supply-side approach is flawed is because it fails to recognise that unemployment arises when there are not enough jobs created to match the preferences of the willing labour supply. The research evidence is clear – churning people through training programs divorced from the context of the paid-work environment is a waste of time and resources and demoralises the victims of the process – the unemployed.”

Yet these employees of the state, (our politicians), who lavish themselves with work benefits far beyond anything enjoyed by the average employee in the marketplace, will argue the opposite.

Never mind the very generous workplace conditions we provide them. These are the real “leaners” Joe Hockey referred to, in his infamous 2014 budget speech; the ones who constantly mouth off how successful they have been, quoting various official figures that fail to address the real issues. These are the people who have become the problem.

These are the people we employ to ensure everyone else is employed. How can they be allowed to say they don’t create jobs? When it came to light that 300,000 jobs were created last year they were all too ready to falsely claim the credit.

Even when they thought they were creating jobs, they weren’t. How could they create jobs when the very formula they use, is flawed? They are not even looking in the right direction. The reality is that unemployment occurs when the demand for goods and services falls.

Unemployment is the product of a failure to create enough jobs to drive that demand through spending. This results in total spending being below the level necessary to generate sales that will provide jobs for all those who desire work.

Only increased government spending will correct this anomaly. Our government’s entire approach toward reducing unemployment is to blame the unemployed despite even the official figures showing that there is only one job vacancy for every four people looking for work.

The situation is much worse than that, of course, because it doesn’t include those who have simply given up looking. It doesn’t include those who work as little as one hour per week.

3a580d9So where is the outcry? Why is the media not doing its job as the fourth estate? How is it Sussan Ley can say, “Governments don’t create jobs, governments don’t make it happen,” and not be challenged?

This pathetic lack of concern is an open invitation from the people to allow our politicians to sit on their fat arses and do nothing.

The False Debt-Scare ‘Own Goal’

So, inflation has gone down further to 1.3% for the year to September 2016 from 1.7% in the first quarter of 2016. This is against the RBA’s target rate of 2-3% and all the economic boffins are turning their eyes toward the Reserve Bank guessing as to whether Governor Philip Lowe will reduce interest rates further to 1.25% on Cup Day.

Why do they bother? None of the past half dozen or so rate reductions have stimulated spending. Neither will another rate cut. RBA governor, Philip Lowe has already suggested that reducing rates has run its course and some form of fiscal stimulus is necessary.

What rate reductions have done is inflate housing prices. That is not what they were intended to do. So, now we have the usual suspects (the wealthy) being the beneficiaries of a housing boom while those who most need to buy a house lose out, or place themselves at financial risk by borrowing beyond their capacity to repay.

So, why is inflation so low? The short answer is people are not spending enough to generate increased sales growth that will convince businesses to invest and thus stimulate employment. Sales are the lifeblood of an economy. The 3% GDP growth experienced over the past year has come, not from increased sales, but on the back of government spending.

So who is responsible for scaring people enough to stop them spending? Firstly, it was Joe Hockey and Tony Abbott. Now it is Scott Morrison and Malcolm Turnbull.

People will not spend when they are convinced, as they have been by this government, that the economy is tanking, that we must live within our means, that we have a spending problem, that we must reduce the debt or go broke. That false debt-scare has frightened everyone to such a degree that they have resorted to paying down debt and/or saving.

art-hilzinger-420x0But here’s the thing about our national debt. We know the government recovers an equivalent amount of currency in circulation (a pre-existing government liability) in exchange for the issuance of Commonwealth Government Securities, i.e. security ‘paper’ – but the transaction is recorded on national fiscal balance sheets as an increase in government liabilities.

When that same transaction is recorded on the private investor’s balance sheet with the RBA, the purchase of that ‘security’ is recorded as:

1) A reduction in available ‘Current assets’ equal to the amount of money withdrawn to pay the purchase cost of the purchased bonds;

2)    An increased in the value of long term ‘Investments’ held – of an equal amount to the reduction recorded in ‘current assets’.

In other words, the transaction, at the time of purchase, represents a transfer of money from a readily convertible ‘liquid’ form (cash) to an (interest earning) not so readily convertible investment form (security contract).

At that instant in time, there has been no increase in the net wealth of the investor, though ‘interest’ dividends will be received per agreed investment terms. The interest paid on the bonds is a Reserve Bank transaction, not a fiscal one. That interest should not be a budgetary consideration.

This is what we call our national debt. Yet this government won office in 2013 on the back of a giant scare tactic, saying that our economy was going down the toilet; that we had to balance the budget and pay down debt. In fact they are still doing it.

da9aa5c89393e149e30ff3c04d9e2991So now, through their own ignorance, they are reaping what they have sown. They have frightened the community so well that any growth recorded is the product of the very thing they are trying to reduce….their own spending. In soccer parlance, I think that’s called an ‘own goal’.

If you doubt that our national debt is a myth, that all government spending is new money, that taxes withdraw money from circulation AFTER it has been spent into existence by the government, consider the contradiction of the fiscal balance sheet liability when juxtaposed upon the RBA transactions that simply swap one account across to another and credit interest as agreed.

When one views the transaction this way, it is easier to see how our national debt (so-called) is a myth; one can see that bond sales do not fund government spending. The money received in exchange for the bonds remains in an account at the RBA on behalf of the investor.

The commercial accounting condition that every asset has a corresponding liability is not being applied to federal government accounts. One can see that the entry of the bond sale revenue onto the fiscal balance sheet as a liability only, is false accounting.

This has been written in collaboration with John Bloomfield.