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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

An open letter to members of the Parliamentary Labor Party

To all parliamentary members,

As a member of the Labor party, I am pleading with you, the federal parliamentary members, to stop what you are doing for a moment and ask yourself the following questions:

Do you want to be the next government?

Do you want to win the next election?

Two simple questions, both of which should evoke a resounding, YES response. If they don’t, you should not be there.

One more question :

Are you willing to do what is necessary to achieve an election victory?

If the answer is NOT YES, then for Christ’s sake, get out of the way!

This brings me to the matter of what you need to do to WIN the next election. At the moment you look like a dull grey train crawling along a disused track somewhere, with a driver, who might be a really nice guy, but who gives the impression of having no idea where the train is heading.

You need a new driver!

You need someone who will electrify the party, the media and the public. Not one of your faction ridden hacks, or some compromise candidate who has the charisma of a turtle crawling toward the safety of the sea.

The reality you need to face up to, is that there is not a man among you who can win the next election, be it held this year, or next. There is not a man among you who can electrify the public consciousness to a point where sufficient numbers out there in voter land, will change their minds and vote for you.

There is not a man among you who can win seats in Queensland and hold on to seats in the rest of the country. Face up to it! You are destined for another three years and beyond, on the opposition benches, if you don’t wake up to yourselves and do what is necessary TO WIN!

You may be under the mistaken impression that people vote on policies and promises. They don’t! They vote on what they think will be better for them. There’s a difference. They can be persuaded not to believe you on policies; they can be persuaded by lies to distrust your promises.

And we saw how well that worked against you in 2019. So what do you need to do to WIN?

It is no longer a question of finding the best candidate to lead the party. That ship has sailed. You need to find the candidate who can WIN!

There is only one member of the parliamentary party who can win the next election and send Scott Morrison packing.

That person is Tanya Plibersek. And before you roll your eyes and think, ‘oh god, not a woman,’ or ‘she doesn’t want it, ‘ get up off your comfortable office chairs and face reality.

Tanya Plibersek is not your best choice. She is your ONLY CHOICE.

Apart from electrifying the party, she will light up the imagination of the broader electorate. Remember this: people also vote on who they think will be the better prime minister and it’s not hard to see how much better she would stack up against Scott Morrison in that category.

The people are tired of Scott Morrison. His failures to deliver on a range of promises, are now legendary. They WANT to see him gone. But when they look to the alternative, they are sufficiently unimpressed to bother doing anything about it.

Anthony Albanese is the Bill Hayden of today. He is a nice guy, but he is not prime minister material.

You have an opportunity right now to get your act together and be proactive in the one crucial area that will put you in a winning position. But, if you allow your factional interests to exceed your good judgement, be prepared to spend the foreseeable future on the opposition benches.

Someone needs to tap Albo on the shoulder and tell him the truth. Then, you need to replace him with Tanya as leader, who will become the next prime minister of Australia. No messy contest, either. Just a seamless transition, just as it was done when Bob Hawke replaced Bill Hayden.

There are moments in history when opportunities are grasped with fervor. AND OTHERS, WHEN THEY ARE MISSED ALTOGETHER. You can grasp this moment, or, you could just keep on disappointing your loyal following.

It’s your call.

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Covid exposes the reality of fake debt.

When treasurer Josh Frydenberg abandoned the Tony Abbott mantra that “you can’t fix the economy unless you fix the budget,” it was clear that something within the mindset of the treasurer and the government, had changed. They realised that the reverse was true.

No longer do they believe that debt is a disaster, or that deficits are bad. Not now, under the current Covid climate. Funny how things you do for the sake of expediency and political advantage, finally catch up with you.

Long gone is the soft target of Labor’s predilection for high spending there to exploit. Not even the Murdoch press can play with that one anymore. Covid has blown that one right out of the window.

No longer will the mantra, “how are you going to pay for it,” work either. Funny how both the conservative press and the ABC are now running spending stories without referring to the levels of sustainable debt.

Economic gurus everywhere are now reviewing and revising their reporting strategies to accommodate the changed circumstances that reflect more closely the MMT reality of sovereign debt…that it isn’t debt at all!

The government balances its books by issuing bonds to cover spending that exceeds taxation revenues, but knows all too well, that those bond sales are no more than a smokescreen to hide the fact that the Reserve Bank provides the money for all government spending, regardless of the outcome of any bond sale. It simply creates the money out of thin air.

There is no difference between a $1 trillion debt and a $2 trillion debt. It’s what you spend it on, that matters.

Now, some in the press, have woken up to that reality too. So, what is the government doing now? They are embracing the reality that full employment is the key to a successful economy. Who would have thought?

Up until now, the thought has been that a certain level of unemployment was necessary to combat inflation. Not anymore. Employment is now the key driver.

Get people back to work, manufacturing, producing, distributing, delivering, servicing, and voilà! No longer does one need to worry about balancing a budget. Over time, that will happen automatically. Who would have thought?

For a government who won an election in 2013 on the flimsy fantasy of a “debt and deficit disaster,” this 180-degree turnaround seems to have been achieved without a scintilla of a backlash. What a stroke of good fortune that has been.

‘’How good is that’,” we could imagine the PM, Scott Morrison saying to his cabinet as they engineered the dismantling of the job keeper program.

There is a certain irony here, that journalists are struggling to address because in doing so, they reveal their own shortcomings.

Notwithstanding the insensitivity the government has shown towards the needs of various sectors within the national framework, they are now happily prepared to dole out the dollars to those very sectors they despise, knowing full well that their hypocrisy in a Covid-conscious electorate, will go unnoticed.

How good is that? And it is all because the conservative side in the political arena has adopted the “don’t worry about the debt” mentality. Why have they done this?

Because they now realise that it is not real debt!

The problem for Labor in this otherwise snippet of good news, is that those who would most likely change their vote and punish the government for their dishonesty, are currently so self-obsessed with their larger bank accounts and wondering what to spend it on, that they are blind to this fundamental policy reversal, or couldn’t care about it anyway.

Comment bon est ca?

 

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Trump’s Enigmatic Legacy

Unsurprisingly, there are those here in Australia who are mourning the departure of this enigma of American politics. Why?

Trump was neither a leader or a politician. At best, he was an enigmatic cult figure. All this very weird defense for a president who not only failed in every aspect of his own expectations, he also failed his country in ways that history is yet to chronicle.

His inability to grasp the most basic of protocols, his unbelievable capacity to lie, to believe his own rhetoric concocted from his own narcissistic stupidity, will be his legacy.

He personally had no impact on America’s economic ups and downs of his first two years, despite Fox News’ attempts to convince people otherwise. That was all generated by the residual effects of the GFC. The third year was nothing more than bluff and bluster as he strutted the world stage seemingly unaware that his contemporaries were laughing behind his back.

The final year was governed by the devastating impacts of Covid-19, the importance of which he failed to grasp. He will forever be inextricably linked to his own failures in leadership on that issue. Overall, he did nothing to advance the living standards of average Americans.

Whoever disputes this, has been duped, as have so many by this clown. He, however, was just a pawn in a much broader and darker plan by the religious right, to take control of the US. They are far from finished. I suspect they already have their sights on their next stooge. My tip is Mike Pence.

Perhaps Trump’s most damaging legacy is that he opened the door to a section of America that will now pursue their racist agenda with even greater passion, now that he is gone. They saw him as the second coming of Christ. The religious right will delight in fanning their flames with glee while keeping a safe distance.

Thus, the great American divide will continue until they destroy themselves, as did Rome, Napoleon, the Ottomans, the Third Reich, the USSR. History doesn’t lie. The statistics that can be produced to show gains and losses during Trump’s time in office (and they are many), are trivial in the long term. It is the social, cultural and religious differences to which he has given oxygen, that will determine its future. And they are huge.

They will only get worse.

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A Triumph Of Leadership

For the past 5 months or so, I have been engaged in debates on Facebook on the subject of Victoria’s second COVID-19 wave. Not surprisingly, the debates have been fierce, on several fronts and against some heavy-hitting conservatives who have demonstrated an unwillingness to understand, in any rational way, what happened.

Their intent has only been in favour of campaigning to have the Victorian Premier, Dan Andrews, strung up by a rope in a smokehouse

They have been relentless in their efforts to undermine the premier, spurred on, no doubt, by some appalling daily headlines in the Murdoch owned Herald-Sun.

The reality is, the government did not cause the second wave, anymore than it caused the first. As difficult as it is for some people to accept that, so hell-bent as they are, to bring down a premier, it is a matter of fact.

The second wave was caused by a succession of contracted infections which began with a night manager becoming infected by a returned traveller at the Rydges Hotel in Carlton. It spread like wildfire throughout the northern suburbs and into aged care facilities. That is how it happened, pure and simple.

Sadly, those with ulterior motives have been trying desperately to sheet home the blame to the government and Dan Andrews, in particular, citing failures in the provision of adequate security, provision of proper protective equipment for health care workers and the use of police and ADF personnel in quarantine.

But, thankfully, there have also been those with clearer heads and more convincing arguments who have tried to rationalise with them. Now that the lockdown is over and the rolling average daily cases have fallen to zero, something most conservatives argued was not possible, the antagonists are struggling to find a sustainable argument against the measures the government imposed.

Here is an example of one particularly belligerent conservative when replying to the suggestion that Dan Andrews’ lockdown was successful and that he should be congratulated for doing a great job…

Yes, his plan worked. But why should someone be congratulated for fixing a mistake that should never have happened in the first place ? Scenario : You hire me to do some kind of repair work on your home . Let’s say I botch it and reduce it to rubble .. In the meantime whilst rebuilding said home you are out of pocket and hardship .. Once it is rebuilt with all returned , are you going to congratulate me ?

And here is the reply from one whose focus was more circumspect…..

Yeah except the scenario you are putting forward isn’t what happened. You hire me to do some work. Unknown to you, I breach my contract with you and hire untrained subcontractors, don’t provide them with the training that I agreed to in our contract. They reduce your home to rubble. If we then continue the argument being put forth about Dan Andrews, it’s not their fault, or my fault, it’s your fault for hiring me in the first place and not having a crystal ball and foreseeing that I would breach my contract. If people are going to insist that Dan Andrews was responsible for the second wave and slam him on a daily basis, then he’s also responsible for the position we are now in with 14 consecutive days of no new cases and most importantly, no more deaths, so obviously, (he) should be congratulated.

This is just one example across thousands that have flown to and fro on Facebook during the lockdown. In most cases, the antagonists have been far more acerbic, highly defamatory and more political than they were in addressing the issue at hand.

An inquiry, soon to be released, will not change this. Nor will it be as vitriolic and as savage in its report as those so filled with feigned and false outrage, would hope. But, I have no doubt they will continue.

In the meantime, the success of the state government’s lockdown has been hailed as a game changer by governments and medical experts around the world.

This fact must be utterly galling for those who want Dan Andrew’s head on a spike. But if one thing is certain, it is that this entire episode will go down in history as a triumph of leadership by a premier who simply did his job, no more, no less.

I stand with Dan.

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A letter to Michael Sukkar from a Deakin constituent

Dear Michael

I saw you on the 9 news last Saturday evening telling us the $60 billion overestimate, if used to help people excluded from JobKeeper support, like casuals, people in the Arts and university staff, is money our grandchildren will have to repay.

You are an intelligent man. You can’t be that ignorant of how federal government money is raised. If you are, you need educating. This money has been, or would have been, created out of thin air by the RBA. THAT IS HOW ALL FEDERAL GOVERNMENT SPENDING HAPPENS.

It is not borrowed, nor are taxes used.

To offset spending that exceeds tax receipts, as a guard against inflation, The Australian Office of Financial Management issues a bond tender which, under normal circumstances, is purchased by individuals, banks, super funds, foreign interests and others.

For the buyers of bonds it is no different from buying shares or opening a term deposit. Bonds are issued for a set period, one year, two years, three years and on maturity are retired to the bondholder’s deposit account with the RBA. It is an automatic process and has nothing to do with our grandchildren. The RBA just moves the money from one account to another.

As of today, 23rd May, 2020, the AOFM has $649.2 billion of bonds on issue.

The last $100 billion of these bonds were purchased by the RBA. They had to do that because no one in the private sector could raise the cash to buy them. To suggest that this money has to be repaid is to say the government is borrowing from itself and must repay itself. I’m sure you can see the absurdity of this suggestion.

Federal government bond issues ARE NOT DEBT. A Federal government currency issuer CANNOT owe itself money.

So please, next time you are in front of a camera speaking to your constituency, or to the nation, don’t treat us like fools.

If you are truly perplexed by what you are reading here, I’m happy to meet with you and explain modern macroeconomics in greater detail.

Have a nice day,

John Kelly, a Deakin constituent.

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Aussie Politics in 2022

As one speculates on the deteriorating trajectory of the Australian economy under the stranglehold of COVID-19, it’s not hard to see the gradual demise of the Morrison government as we limp toward 2022, despite the perception that they have managed the whole health crisis reasonably well.

With an election not due until mid-2022, something Labor can count as a blessing, the Coalition will be hard pressed to explain to an impatient electorate as to why things are taking so long to improve.

By 2022, the economy will still be very fragile, with unemployment likely to remain high, perhaps as much as 8% without JobKeeper and a new improved JobSeeker. Combine that with outstanding bond issues close to, or in excess of, $1 trillion dollars and a government ideologically committed to reducing this fake debt and its deficit spending, a prolonged period of low wage growth and rising inflation will persist.

By that time, however, the patience of the Australian voter will have run out. No longer will they believe the rhetoric, the mantras or the likely dire predictions of the Murdoch media that an incoming Labor government would be worse.

It will become apparent to those middle-class swinging voters who view themselves as little capitalists, that a marked decline in living standards has occurred for which the Conservatives have failed to adequately respond to, or appear to be able to remedy.

It’s a scenario similar to 1983 when we saw the Hawke Labor government elected following a period of high unemployment and economic mismanagement under the Fraser government….the one where John Howard was Treasurer.

Labor went on to lead the country for the next 13 years. They introduced several major economic reforms that fundamentally changed and elevated the Australian economy to a point, somewhat ironically, where conditions in a growing world economy enabled the very same, Lazarus performing John Howard to subsequently govern and to be seen to be so successful.

Ironic because, if a conservative Government had remained in power during that time, they would never have had the vision necessary to enact those reforms themselves.

By 2022, with much of the world still struggling under the weight of post-Covid mismanagement and conservative governments under increasing pressure to perform better, time will have run out for Scotty from Marketing, assuming of course, that he is still there.

That does not assume either, that Anthony Albanese will still be there. Bright minds with more charismatic appeal and a flair for theatre are already waiting in the wings establishing their credentials. Just as Labor’s Bill Hayden was convinced to stand aside in 1983, so too might Albanese. If events become such that a quick leadership change may be seen as a pragmatic, if not irresistible opportunity, it could happen.

The Morrison Government, however, will be on a hiding to nothing. They have only ever looked good when the economy was on auto-pilot. Their lack of vision has always been their undoing. Once events transpire to challenge their capacity to be innovative and creative, they collapse in a clumsy heap of confusion and dysfunction.

There will be a lot of challenges for the Coalition over the next 18 months; challenges they will struggle with, ideologically. History tells us that it won’t end well.

Over time, history has a habit of repeating itself politically and such a time, for Australian politics, is less than two years from now. So let the games begin.

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Is Morrison’s Pink-Batts Moment Coming?

Will the federal JobKeeper Allowance become Scott Morrison’s pink-batts/school-halls’ experience? It’s starting to look that way, even at this early stage.

Just to recap, when Kevin Rudd decided to “go early, go hard, go households” in response to the looming threat of a worldwide economic collapse (aka the GFC), he followed it up with a multi-billion dollar job creation program to have every house in the country supplied with roof insulation.

On the face of it, a great idea.

In addition, he introduced the “Building the Education Revolution” (BER) program, a massive schools’ upgrade, involving the construction of school halls, basketball stadiums, libraries and classes, projects that would, over the long term, have been on their radar, anyway.

Another great idea.

However, it wasn’t long before the school halls program began attracting a great deal of political criticism from the conservative Opposition and the Murdoch media who claimed there had been wholesale rorting and cost blow-outs. For the Opposition, it was like a dream come true. They hated the whole idea of a stimulus in the first place.

Feigning concern about excessive spending and budget deficits that were the product of the GFC stimulus initiatives, the leader of the Opposition, Tony Abbott, called for a judicial hearing into the BER and claimed it, and the home insulation initiative, were failed programs and a waste of money.

Despite Primary Schools being provided with new and refurbished halls, libraries and classrooms as well as new and refurbished science laboratories and language learning centres, it was the cost of these programs that became the focal point.

Never mind the provision of new and refurbished covered outdoor learning areas, shade structures, sporting facilities and other environmental programs, all of which represented ongoing benefits to our childrens’ education, the opportunity to gain political points from a perceived rort, was too great a gift for the Opposition to ignore.

The reality was that the insulation program covered 1.2 million homes which had, by 2015, produced savings of approximately 20,000 gigawatt-hours (72,000 TJ) of electricity and 25 petajoules (6.9×109 kWh) of natural gas. But this was of little interest to the Coalition partners.

Their interest focussed on the tragic loss of life of four workers, accidentally electrocuted, while they were installing the batts. It was this tragedy that the Opposition and the media sought to magnify, purely to discredit the government and gain political advantage.

Notwithstanding the benefits to the economy, particularly in the area of employment, the ongoing reduction of greenhouse gas emissions and being able to avoid a recession, the political outcry from the Opposition and the media, over the four deaths and anecdotal evidence of rorting, was unrelenting.

The Rudd government subsequently suffered a drop in popularity and a perceived mis-management of the economy.

Since then, under intense media attack, the Labor party has been cast as responsible for all ongoing budget deficits (aka, the debt and deficit disaster), while the Liberal/National Coalition has enjoyed the confidence of the media and a deceived public, in matters of financial management, despite the reverse being the reality.

As they say in politics, that’s politics.

Now, however, it seems some comeuppance is on the horizon.

In response to the Covid-19 pandemic, the Coalition government, led by Scott Morrison, has unleashed a stimulus spending program that is five times greater than anything the Labor party did between 2007-2013.

To grasp the significance of this 2020 cash splash, one needs to remember that at the point when the Coalition became the government in 2013, the national gross debt was $278 billion. Seven years later, under Coalition management, it has ballooned out to $607 billion.

But that is just the start. Planned stimulus spending over the next two years will see it climb to, $800 billion. A large part of this spending ($130 billion), will be allocated to the JobKeeper program, an ambitious attempt to forestall a massive increase in unemployment, estimated now, to exceed 10% by the end of June.

Treasurer Josh Frydenberg has claimed that without JobKeeper, the unemployment level could be as high as 15%. And he’s probably right. It is, therefore, an alternative unemployment support program.

The JobKeeper program provides businesses who have suffered a 30% loss of turnover caused by the Covid-19 lockdown, a payment of $1500 per fortnight, per employee, so long as those businesses retain those workers in employment.

There are, however, some interesting side issues in play.

The employees are supposed to receive the $1500 even if they weren’t being paid that much in the first place. The government has already been forced to amend the rules to exclude 16 and 17 year old full-time students who were only working part time. Some, in this category have already made a killing and won’t be asked to return any money already received.

So that raises a number of questions, namely: will businesses pass on the full amount if that is more than they were paying employees? And, will businesses make up the difference between what the government gives them and whatever they were paying their staff, if it was more?

Will they continue to pay superannuation and penalty rates as required? Will their workers continue to accrue annual leave if they were stood down?

One should never underestimate the cunning of those who would see an opportunity to rort the system just as they did with the school halls program. In this case, the temptation to manufacture a few phantom staff will be, for some, irresistible. For others, just claiming the money for those who were never likely to be laid off, will be very tempting.

For a government who have grittingly put their ideology to one side, for the better good, the shock of it all might prove too much to manage. They have so far surrendered any future criticism of Labor’s spending record. They are gearing up to post a huge budget deficit for 2019/20, and worse, the biggest budget deficits in history for the fiscal years, 2020/21 and 2021/2022.

Now they face a very real rorting scenario. One senses that budget deficits will be small change compared with what history tells us is a sure bet.

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The Recession we are going to have!

Now we will see them in full bloom. No, not my iceberg roses, although they look spectacular at the moment. No, now we are seeing our brilliant, supposedly better economic managers in action, the ones a majority of the country think are superior to Labor.

Here we are, facing an unexpected hit to the budget bottom line, an economic disaster, never mind that peoples’ health is threatened, a time of unprecedented calamity, a true test of our leaders’ economic credentials and who is in charge?

Imagine briefly, if you will, that Labor won the election last May and were facing the same circumstances today. The economy was already in a slump, however, an increase to Newstart would probably have been introduced. Thus, all else being equal, the December GDP quarterly increase of 0.5% would likely have been marginally higher.

The bushfire crisis, however, would have prompted a Labor government to commit funds to generate economic activity, probably in the tens of billions, money actually spent, smashing the budget bottom line, committing the nation to more borrowing (quelle horreur) and most importantly, saving jobs.

Already, we would have heard the cries of reckless spending and higher debt burdens to come, from the feckless opposition. God save our poor grandchildren from their diminished lifestyle. Deja vu, I hear you cry.

But no, this time we have the rare opportunity to see the oh, so highly regarded, superior economic credentials of the conservative side of politics in action. And what have we seen thus far? Nothing! Zip! Rien!

But this week, an economic package will be unveiled, estimated to be in the order of $10 billion. Wow! How generous is that? This will be the conservatives’ response to a crisis. And who will be the main recipients of this spending?

Pensioners possibly, in the form of a lower deeming rate, likely to put one or two more dollars into their fortnightly pension. Perhaps even an advertising campaign targeting the tourism industry. Small business will get something, likely to be in the form of wage subsidies to encourage them to retain staff.

The problem with that though, is that if there is no work for them to do, a wage subsidy won’t be much of an incentive for a builder, a plumber or an electrical firm to hang on to staff. They would want to see activity, the kind that creates work.

The issue we are facing today is a double whammy. We are facing both a demand and supply shock to our economy. The demand shock is reflected in peoples’ unwillingness to spend. That’s been the case now for nearly a year.

A supply shock is reflected in the unavailability of goods, even if people did want to spend. The coronavirus has restricted the movement of said goods worldwide. That means hundreds of thousands of workers losing their jobs.

But we must remember that our present leaders are the superior economic managers. They will manage this emergency. I mean, how good is Josh Frydenberg? His latest comment, “The Australian economy is very resilient,” should reassure us all.

All of which means, a recession looms large and with it, a serious test of the economic credentials of the conservative side of politics. That’s something we haven’t seen since Malcolm Fraser was Prime Minister and John Howard was treasurer, in the early 1980s.

And I can still remember how well that turned out.

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The Trickle-up Conspiracy

Henry Johnston’s article, NO WE CAN’T (AIMN, 13/02/2020) begins “Try as I might, I cannot pinpoint the exact moment or instance, when the world’s conservative parties shifted from extolling tradition and practising good manners, to embracing corruption and malfeasance.”

It’s more complicated than that, but there is a timeline that accurately reflects how this mess was created.

In Australia, the rot began with the Conservatives plotting the dismissal of the Whitlam government in 1975. It spelt the end of democracy in Australia although it wasn’t considered so at the time. It took a few more years to engineer the right conditions and the right man.

Two years earlier, US President Richard Nixon, took the US off the Gold Standard, freeing up the dollar and increasing its value against foreign currencies. It was effectively a coup by the corporate sector in the US over its government, ending their democracy with the stroke of a pen.

The coup in the US was barely recognised by anyone at the time and importantly, gave the Corporate sector valuable time to plan and position themselves during the Ford/Carter administrations to find the right conditions, the right man, to enter the White House. They found him in Ronald Reagan.

With Reagan appearing to be at the helm, those who were dangling the puppet strings manipulated every corner of the financial services industry, preparing the evolution of a “trickle-up” system that saw a small handful of very wealthy people become mega-rich and incredibly powerful.

But that was just the beginning.

They became so rich and powerful, they were able to control what the government did and didn’t do. They then looked for the right people to spread their ideology across the globe. In Great Britain, they found Margaret Thatcher, in Europe they found people like Germany’s Helmut Kohl and France’s Giscard d’Estaing who embraced this new world order without question.

This rape of the world’s financial system was cleverly shielded under the very attractive banner of, “wealth creation,” a term which resonated well with middle-class America. It ensured its continuation regardless of who was subsequently elected in the US and across most western governments.

In Australia it began, oddly enough, with the election of the Hawke Labor government in 1983. They stayed in power for thirteen years aided by a cosy relationship with the US administration, US corporations and the subsequent support of the captains of industry here.

Hawke and Keating deregulated the financial markets, something the compliant media still tell us was a good thing. Slowly but surely, the one stumbling block that stood in the way of the trickle-up economy, i.e. the trade union movement, was minimised either through government legislation or partnerships; somewhat ironic since the architect of the reforms was its former boss.

Then came the Howard era, with a conservative outlook so far to the right that they redefined the definition of wealth creation and opened the floodgates for the financial industry to exploit a cashed-up, ignorant public, even further.

From the beginning of the Hawke/Keating era through the Howard years to today, many middle-class entrepreneurs have gained great wealth, thanks to greedy bankers, insurance executives and super fund managers, all too ready to put risk ahead of sound management and enjoy the spoils.

It was in the 1980s that the pioneers of wealth creation who forged the pathways we were encouraged to admire and adopt, set off on their reckless pursuits with breathtaking speed. People like Alan Bond, Christopher Skase, Robert Holmes a Court and a host of other mega rich, wealth creators became the darlings of the media.

They showed the way while compliant governments turned a blind eye to corruption on a scale so big and so important to growing national economies, they were judged too important to fail…..until they did, of course.

It was great while it lasted, but anyone with half a brain knew it couldn’t last. But when the crash came in 1989, it was the wealth creators who survived and continued to prosper. The millions of Mum and Dad investors who had climbed aboard the gravy train lost billions. But, in a paternalistic pattern of condescension, they were considered and referred to, as collateral damage, victims of a necessary market correction, so the media reported.

As those shaken, but not destroyed, wealth creators regained their composure, the process restarted, with the corporate giants still able to manipulate markets and national governments worldwide, ensuring it was business as usual. Today, they are so powerful, no political party can be elected without their approval.

What we have now, is a world financial system so interconnected, so interlocked, it resembles a pyramid with its foundation made up of most of us, the little people at the bottom, arranged neatly across a vast expanse of highly controlled, concentrated purchasing platforms, where we exercise our purchasing power with hopeful but hopeless expectations.

We toil long hours with no option but to continue toiling hard, competing with each other for less than 5% of the net wealth, a reward just enticing enough to keep us keen enough to want to work for more. We offer up our services, our labour to those just one rung, one platform, above us.

We are, by necessity, subservient to those above us, who themselves have become slaves to those on the rung above them in a forever upward elevation that gets smaller and smaller the higher it goes. Those on the very top rung can only be removed by governments with the will to uphold the principles of justice and equality.

But justice and equality are not on the minds of such governments, or those at the top who put them there, thus enabling this tiny group the luxury of looking down to watch the world they have orchestrated, behave as it was destined to do.

They watch our world twist and turn as they choose. They watch as things they orchestrate in one part of the world impact upon other interconnected parts thousands of miles away. When something goes wrong in one part of the world, it filters through to the rest. This is their plan, their new world order.

The 2008 Global Financial crisis should have made that reality abundantly clear to us all.

There will be more GFCs, but such events are of minor concern to the rich and powerful. Such events are a necessary part in the execution of their ideology. Their hold on power will never be challenged because those who could challenge, will never gain political power long enough to reset a course that would lead to a more equal society.

This juggernaut is now in total control and most people don’t even know it. Most baby boomers measure their wealth and the improvement in their lives by comparing their standard of living with that of their parents or that of people they see being oppressed in third world countries.

Little do they realise, their wealth came at the expense of those same oppressed people whose national resources were procured either illegally or under duress; an inconvenient truth perhaps, but who is asking.

We have all been conditioned to measure wealth in terms of our personal material assets and the general wealth of the nation in which we live. We don’t give much consideration for those nations who surrendered their resources for us to achieve what we have accumulated.

We look at our lives and think we are so fortunate, so blessed to live in such a wonderful country without ever realising how much of our democratic rights we had to surrender to get here. We compare ourselves to other nations drowning in poverty, torn apart by wars, famine and plague, not for one minute realising our good fortune was at the expense of theirs.

Our exposure to the despair of other nations, other peoples, is also part of the broader plan of the trickle-up conspirators. We are warned not to be complacent for fear that we too could become them if we don’t work hard and aspire to even greater success.

Yes, we can help them, donate to them, send food and other necessities. We can even call for government action to eradicate the atrocities that we have inflicted upon them. Send in troops even. But we must never forget how important it is to continue to prosper. It’s all part of the broader plan.

The irony of this mess is that those in the middle of the pyramid, who have the luxury of looking down one or two rungs, who would criticise those below them for not working hard enough, whose good fortune came at the expense of third world exploitation, these are the greatest supporters of this appallingly unequal system without realising they are as despised as the rest of us by those above them and the architects of this system.

They are the conservatives who only think of today. The governments they so proudly support don’t look too far ahead. They don’t need to. The trickle-up economy is in charge. They just wait until they are told what to do.

We reap what we sow.

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Mother Nature is Pushing Back

If there is a positive to draw from what is happening to us this Australian summer, it is that for climate deniers, this is, thus far, their worst nightmare and that no longer will anyone take their absurd, unqualified ramblings seriously.

If we should realize just one thing in life, it is that we are here, on this earth, as guests of Mother Nature. We are not her master and by continually abusing her good and generous hospitality, we have justifiably aroused her anger.

As one would expect from any landlady who has decided enough is enough, Mother Nature is pushing back. She is reacting, not pro-acting. She is doing so to demonstrate her power over us. We are but children misbehaving in a manner that is no longer tolerable and we are being given a severe warning.

This summer, for those of us in Australia, she has decided to show her hand.

Make no mistake, this is not some divine retribution from an angry deity that some religious nut-cases will surely begin to proclaim. This is not someone’s all powerful male god punishing his people for their sins. This is a real and present response to a real and present abuse of tenancy, by a real and present, angry landlady.

Those fools who argue that it is useless to act unilaterally to mitigate climate change, or that our emissions are but a drop in the ocean when compared with other nations, are now receiving their wake-up call.

Mother Nature doesn’t see it that way.

These fires we are witnessing, have already emitted more than our annual greenhouse gas emissions for the year 2020, not to mention the heartbreak and suffering of those personally affected.

Our prime minister’s pathetic attempts to show empathy for the victims, demonstrates how distant he and his coalition partners are from reality. They are now like those in the lifeboats of the Titanic, who foolishly claimed their ship was unsinkable, watching as it goes down.

Will climate deniers ever again dare to deny the reality of their foolishness? Yes, I suspect they will. But will anyone bother to listen? I doubt it. What can we expect now from our leaders who have thus far resisted upsetting their coal loving masters?

Just watch, as they choose their words very carefully from now on. Just watch the knee-jerk reactions, as ideology gives way to pragmatism and the reality dawns that votes are now seriously at risk. Just watch as the money begins to flow, money that was earmarked to be banked for Josh Frydenberg’s precious surplus.

There’s nothing like a severe warning from one’s mistress, one’s landlady, for a tenant to take stock. I can’t see it lasting, however. Our government will need a bit more than a bush fire, a naval rescue operation, a financial package, or a surplus gone up in smoke, before they surrender their corporate coal-driven ideology.

But Mother Nature isn’t finished. The damage we have already done, damage that cannot be restored, damage that still has to be accounted for, will yet see her angry hand come crashing down somewhere. Did anyone notice that Norway experienced a temperature of 19 degrees Celsius two days ago? In the middle of Winter??

Whether it be here in Australia or some other part of her very finely, ecologically balanced planet, she will need to react again and again, until her guests get the message. Or, if we don’t, we will have more of the same to look forward to, ever more ferocious, ever more destructive.

Mother Nature is pushing back. She will protect her planet above all else, even to the point of eviction, should she consider it necessary. So, take it that we have been warned.

Or don’t and do nothing. Mother Nature is waiting impatiently, it would seem, for some real and positive response.

Make no mistake though, the next disaster is already on its way.

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Is Europe drifting towards another war?

There is a saying in France that the unskilled worker is either on strike or on holidays. It’s not true; it’s an idiom that has gained traction recently as the country tries to work its way through a number of self-inflicted economic issues.

In France currently, there is a major protest movement, which the media have dubbed the ‘gilets jaunes,’ (‘yellow jackets’). The reason they call them the yellow jackets, or yellow vests, is because they wear high visibility yellow vests when they protest.

They are protesting against Emmanuel Macron, the president of France who has proposed some rather savage tax increases that they regard as impacting upon them quite heavily, taxes they feel are not being spread equally across the economy.

They are a gluttonous, selfish lot, already feeding freely on a highly generous, social system, that includes workplace benefits, a comparatively low retirement age, as well as free health and inclusive education opportunities that other EU countries don’t share.

Their anger is directed at Macron, who they regard as having betrayed their initial trust in him. Their protest strategy is to take advantage of secure employment during the week and then spend their weekends disrupting everyone else’s leisure time. The aim is for those, who would like a little bit of free time for social engagements during the weekends, enjoying whatever it is that they do, to also feel the brunt of their anger.

Oddly enough, there is an equal amount of sympathy and scorn for the movement among the broader French population.

Macron knows that if France remains a member of the Eurozone, its social security system is not sustainable without an increase in its revenue stream. Getting this message across to the yellow vests is proving to be very difficult. France does not have a sovereign currency; its membership of the Eurozone reduces it to the level of statehood inside a monetary block where it has no power to create its own currency.

Alarmingly, the yellow jackets have stopped listening to Macron.

This strategy places great demands on the police to work on weekends trying to restore law and order and allow people to go about their normal activities. The yellow vests are quite violent in their protests, smashing shop fronts, lighting fires, hurling rocks and creating as much mayhem as they can. The police respond with batons and tear gas, creating scenes of chaos wherever the protesters gather.

When I arrived in Paris at Gare du Nord one Saturday afternoon in late September via the Eurostar from London, the yellow vests were in full battle order. They had blocked the main streets and the police were everywhere. I went out onto the street to find a taxi only to find a large queue of people doing exactly the same thing. The short supply of taxis was due to the yellow vests blockading the major exits and entrances to the city and movement anywhere had become severely curtailed.

The following Saturday, when I arrived in Toulouse, I found the yellow vests had blocked the roads there, as well. Our bus driver did not know how to get to our hotel. So, she parked the bus in the middle of a bridge and unhitched our luggage. She said, “You have to walk from here,” and pointed in the general direction of the hotel.

So, imagine, if you will, eighteen disillusioned foreign seniors walking down a street dragging all manner of suitcases, backpacks and other paraphernalia towards an intersection where we could see a burning building, tear gas, police fighting against the yellow vests and listening to a noise that resembled that of an AFL grand final crowd. It was mildly intimidating but also somewhat stimulating and exciting.

We walked for fifteen minutes before arriving safely at our hotel. It had been a sober welcome both Paris and Toulouse. A week or so later, again on a Saturday morning, we returned to Paris from Montpellier, this time terminating at Gare de Lyon to experience the whole thing over again.

Reflecting on this, as I did when I returned home mid-October, it occurred to me that the French riots were part of a worldwide trend. Taken in isolation, they seem selfish and self-centred. But connecting the dots and adding other current protest movements like those in Hong Kong, Germany, South America, Italy, Australia and elsewhere, it becomes evident that currently there is a world-wide sense of unrest and rebellion and that its constituent parts have one thing in common: neoliberalism.

Where this is leading to, is anyone’s guess. But it is real and it is unprecedented. We can also include the calamity and hilarity of events we see unfolding in the US relating to Donald Trump’s impeachment hearings and events in the UK relating to Brexit.

One thing strikes me as a no-brainer. If Brexit goes ahead, France will follow. Their inability to fund their social programs within the Eurozone will ultimately lead them to realize their only option is to leave the Eurozone and ultimately, the EU and restore their true sovereignty. If France goes, Italy will follow and gradually, over a period of many years, the EU and the Eurozone will collapse in much the same way the Soviet Union collapsed.

This then exposes Europe to the dangers of war. It’s a chilling scenario. I don’t expect to be around if and when it happens, but my grandchildren will be.

And that really frightens me. My concern is not for my future, but theirs.

 

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Frydenberg and Steel-Plated Boots

The final results are in for the fiscal year 2018/19. The government’s May Budget prediction of a $4 billion deficit has come in officially at a $641 million deficit.

Well, ring the bells, set off the firecrackers, send a telegram to the Queen. We almost made it. It’s as near to a surplus as you could hope for. All our worries are over. God is in his Heaven and all’s well with Australia.

Except it isn’t!

You can lead a horse to water, but you can’t make it drink. How apt is this simple proverb in today’s economic environment where we have a treasurer and his government obsessed with the idea of producing a surplus in the face of a declining economy?

What fools these people are!

These idiot politicians who have presented themselves as the masters of good economic management, who have convinced a majority of Australians that surpluses are good, that deficits are bad, that debt denominated in our own currency is somehow a burden on the nation.

Never mind what that debt has done to improve the wealth of the private sector; never mind the added value reflected in a GDP number that would otherwise have been negative but for deficit spending.

What is it about these people that they can’t understand a simple economic imperative?

Who is advising them and is the advice being accepted?

If one is foolish enough to believe the government is doing a good job in managing the economy, seek counselling. Rather, one should be directing their admiration and heaping thanks and praise on China and in a perverted sense, Brazil, not Canberra.

It is Brazil’s misfortune and China’s continued growth that has made our terms of trade look rosy. But for that, the real state of the domestic economy would be exposed for even the least competent observer to see.

Nero fiddled while Rome burned. Morrison and Frydenberg are doing the same. They are patting themselves on the back while unemployment rises, production levels are being revised downwards, private debt is driving record numbers of bankruptcies.

Soon, very soon, it will be apparent to all that monetary policy (interest rate reductions) have little or no impact on those who are already struggling to put food on the table. The only means by which our economy can improve at this time, is an injection of government spending, sufficiently large enough to kick-start consumer spending.

Striving to produce a budget surplus is counter-productive to that need.

A surplus is contractionary. It reduces the money in circulation. Our economy needs more money in circulation, not less. The Reserve Bank governor, Philip Lowe, has been dropping hints as big as footballs for months. Yet still, Josh Frydenberg doesn’t get it.

He will soon, however. Our iron-ore sales to China are the only reason he hasn’t already. Soon Brazil will be back in the exporting game. Then, we will see the first negative GDP quarter come in and the penny, hopefully, will drop. I hope, when it does, that he will be wearing steel-plated boots.

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Remember Hiroshima

Today, Tuesday, 6th August 2019 is the 74th anniversary of the atomic bombing of Hiroshima. The following is a detailed account of what happened that day.

For the residents of Hiroshima, the 6th August 1945 was the day to end all days; the dawn of a new age of horror, when night came in the morning and the most depraved of all the weapons used in the war, was unleashed upon her unsuspecting people.

As her citizens both military and civilian, went about their early morning activities, busily preparing for their day, travelling to work, riding in buses, travelling on trams, children on their way to elementary school, the temperature rose quickly to twenty-eight degrees centigrade.

What began as a bright, sunny Monday morning, gave no hint to the death and destruction that was shortly to follow. At 7.00 am, fourteen year-old Masako Yamada cheerfully said goodbye to her mother and set out to join her school friends. Her class had been ordered to help with the demolition parties clearing fire breaks across the city in anticipation of American bombing.

As she left the house, she heard the all-too-familiar sound of the air-raid sirens warning people of approaching aircraft. Masako looked up above to see a lone B-29 bomber streaking across the sky; not unusual, she thought; they were often seen running reconnaissance missions; no need to be concerned.

Half a mile away, Dr. Kano had just finished breakfast and settled back on the balcony of his private clinic, beside the Kyo Bridge to read the morning paper. He too, looked up when he heard the sirens and saw the bomber passing over. Like Masako, he was not concerned. B-29’s were passing over Hiroshima every day, on their way to some other city in Japan.

Twenty miles away on the island of Miyajima, Shigeko Suzuki sat with her parents in the kitchen of their home enjoying breakfast. In one way or another, some four hundred thousand people went about their normal routine that morning, most of them steadfast in their belief that Japan was winning the war, and that soon the soldiers would be coming home, victorious.

Above them, at 30,000 feet, Major Claude Eatherly, of the 509th Composite group, piloting Straight Flush, radioed his weather report to the command pilot of Enola Gay several miles to the south… ‘Cloud cover less than three-tenths at all altitudes. Advice: Bomb primary.’ That message sealed the city’s fate and the lives of 130,000 people. Had the weather report been unfavourable, Enola Gay would have proceeded to either Kokura or Nagasaki.

On the ground, it was 7.30 am, Straight Flush could no longer be heard or seen and the all-clear siren sounded, advising people that it was safe to resume normal duties. Few had even bothered to take shelter. Masako Yamada met up with her school friends and arrived at their prearranged location while Dr. Kano continued reading his paper on the balcony overlooking the Ota River.

To the south, and climbing to 31,000 feet, Colonel Paul Tibbets, piloting the aircraft he renamed Enola Gay after his mother, was leading a group of three B-29’s on the most important and by far the most expensive mission the United States had ever mounted. The Manhattan Project, first begun in 1942 and culminating in the production and successful testing of nuclear fission at a cost of two billion dollars, was about to change the world forever.

‘It’s Hiroshima,’ Tibbets announced to the crew through the intercom. The long night’s flight was over. Now, the months of intense training and the realization that this mission was itself historic in nature brought them all to a new level of anticipation. Each man aboard Enola Gay was there for a specific purpose; each a specialist in his field. Thirty-five minutes later and within sight of the city, Colonel Tibbets set his course for the bomb run.

As they approached from the east, Tibbets’ group bombardier, Major Tom Ferebee, took control of the aircraft, piloting from the bomb bay, and manoeuvred the M-9B Norden bombsight, the most advanced of its kind ever constructed, into position. The target was the Aioi Bridge, so chosen because it was so easily recognized from aerial photographs, forming a perfect T-shape with the Ota River. Just minutes before release, Ferebee could see the city’s suburbs appear beneath him as he made a slight adjustment to his delivery angle to compensate for the wind. At 8.15am local time, he flipped the switch that released ‘Little boy’,a 9000lb uranium bomb, the first ever constructed, from the pneumatically operated bomb bay doors of Enola Gay.

Three minutes earlier, in the hills east of Hiroshima, the lookout at the Matsunaga monitoring post reported three high flying aircraft tracking west toward the city. One minute later, the air raid warning centre at Saijo confirmed the sighting and telephoned the communication centre in the bunker underneath Hiroshima Castle. From there a frantic attempt by a schoolgirl in the bunker to relay the sighting to the local radio station, in an attempt to warn people to seek shelter, was too late.

When Ferebee reported that the bomb was on its way, Colonel Tibbets turned off the automatic pilot and immediately banked Enola Gay sharply sixty degrees to the right. At the same time, the second B-29, The Great Artiste dropped three aluminium canisters attached to parachutes, and its pilot Chuck Sweeney hard-banked to the left, both planes attempting to outrun the expected shockwave.

The blast-gauge canisters dropped from The Great Artiste would record vital information and relay details of the impact by radio signal back to the aircraft. The third B-29, Dimples 91, later renamed Necessary Evil, hung back some 18 miles to the south ready to view and photograph the results using a slow-motion camera.

The bomb dropped into the freezing air and began its deadly descent, set to detonate at 1850 feet, the height calculated by the scientists who built it, to inflict the maximum damage on the city of Hiroshima.

At ground level, just seconds after detonation, the impact was appalling. The temperature at the core reached greater than one million degrees centigrade, intensifying outward in a brilliant flash of light followed by a roiling display of electrically charged colours; reds, greens, yellows, purple. On the ground directly below, the temperature peaked at 3000 degrees centigrade, twice the heat required to melt iron. Those immediately exposed to the heat at the burst point were vaporized where they stood or turned into blackened, overcooked lumps of scorched char on the street.

Within a one mile radius of the hypocentre, all manner of life and matter melted in the thermal heat, clothes disappeared from human bodies and skin fell away from flesh like wrapping paper from a parcel. Human organs liquefied, boiled and vanished. Later estimates suggested 50,000 people died in the first few seconds. Cats, dogs, birds, pets and insects of all description, all plant life simply ceased to be.

The shockwave followed; a force of high pressure, initially greater than six tons per square metre travelling in excess of 7000 miles per hour propelled its way across the city, destroying everything in its wake. It demolished Hiroshima’s predominantly wooden structures in seconds, blowing out windows and sending splinters of glass into the seething fiery air, flying indiscriminately, piercing anything and anyone in its path.

The shockwave thundered in all directions, setting fire to everything it struck, but even worse, carrying with it, the deadly neutrons and gamma rays, that would poison the air and ground for years. As the entire city was set alight, the radioactive particles spread their silent, invisible legacy.

Aboard Enola Gay, Tail gunner, Sergeant Bob Caron watched in shock as the mushroom cloud climbed six miles high. As the cloud raced upward, Caron could see the shockwave materialize in the thermal heat and race toward the retreating planes now eleven miles away from the blast. Even at that distance and height, Enola Gay experienced strong turbulence, as the plane shook violently and the approaching shockwave battered against the fuselage now caught up in the expanding force of energy.

The mushroom cloud reached a height of 60,000 feet, a furious, boiling mass of fire radiating all the colours under the sun. On the ground eight miles from the hypocentre, tiles blew from roofs, windows smashed, homes were destroyed, and trees were incinerated. Everywhere fires started, catching residents in the foothills unawares as they came out of their homes to see what had caused the brilliant flash of light and the terrifying, thundering roar.

Then came the firestorm! As the air temperature soared, it rushed upward, sucking the oxygen along with it, leaving behind a vacuum. Cold air rushed in to fill the vacuum, creating a tornado that tore through the city at frightening speed dragging the fire, and the debris, as it hurled itself along, relentlessly and indiscriminately.

Masako Yamada was two miles from the hypocentre, inside a lunch-room shelter at the time of the blast. She was thrown to the ground and lost consciousness for several minutes. When she awoke, she was underneath a pile of rubble, the city was in darkness, covered by a thick pale of black cloud above, and fires were raging all around her. Dr. Kano’s clinic collapsed into the Ota River. He tumbled downward and found himself pinned between two wooden beams that threatened to either crush him or hold him steadfast such that when the tide rose, he would drown. Miraculously, both of them survived.

Across the Inland Sea on the island of Miyajima, Shigeko Suzuki and her parents were suddenly startled by the flash of light and a tremendous roar that rattled windows and shook the front door. She dived for cover underneath the table first thinking an unexpected typhoon had struck the Island. She waited until it passed, then ventured outside only to witness a huge mushroom cloud rise up above Hiroshima, some twenty miles away.

Above the inferno, Enola Gay flew out of the after-shock and made a left turn, Tibbets rewarding the crew with a panoramic view of the results of their months of long, hard training and the isolation experienced in the most top-secret of missions of the entire war. The crew crammed across to the starboard side of the aircraft, momentarily stunned into silence by what they saw.

Ahead of them lay a further six hours flying time before returning to Tinian Island in the Mariana’s. As the radio operator sent a brief message to Tinian, reporting a successful mission, the B-29 and its two companions, tracked south-east away from the devastation they had inflicted.

Ninety minutes later aboard Enola Gay, now nearly 400 miles away, Tail gunner Bob Caron could still see the mushroom cloud. Amid the mixed cries of astonishment and wonder among the crew, Tibbet’s co-pilot Captain Bob Lewis, scribbled in his log, ‘My God! What have we done?’

This is an extract from John Kelly’s book, ‘Hiroshima Sunset.’

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Perhaps it’s the better result in the long run

I hate saying it, but perhaps it was an election Labor should consider themselves fortunate to have lost. And perhaps they should seriously consider not blocking any legislation in the senate. By that, I mean ANY legislation. Let the government hang itself with its own rope.

Far too often the finger has been pointed at Labor as the cause of some failure in outcome resulting from their senate obstruction. It’s a pathetic excuse but given that 51.5% of the electorate (disproportionately represented in Queensland and Western Australia), seems to believe everything the Prime Minister and his cohort of self-indulgent yes-men say, what is there to lose?

There are dark clouds on the horizon, particularly and most notably with regard to the economy. Fifty-one and a half percent of the electorate believe the Coalition are the better economic managers.

Most of this belief stems from the Coalition’s economic performance during the Howard years (2001-2006). On face value, it seemed everything was being managed so well. Net national debt had been eliminated, middle class welfare handouts were rife, all while the Treasurer, Peter Costello was producing surplus budgets.

Could it possibly have gotten any better? Never mind that private debt was soaring as a result. That was the fault of the consumer. The Howard Government were being portrayed as wizards in economic management. How did they do it?

The answer to that is simple. They had truckloads of money to play with, from a mining boom construction phase no one saw coming. No one thought to question the wisdom of spending all that extra cash like drunken sailors. Not until Kevin Rudd came along and said, “this reckless spending must stop.”

Enter Kevin Rudd, the GFC, a sudden downturn in the mining boom windfall and the whole economic outlook took a sharp dive. The only way to save it was to inject billions of dollars into circulation which meant abandoning surplus budgets and going into debt. Wayne Swan did exactly what needed to be done, but politically, he was crucified for it.

The Coalition convinced the electorate that it needed the expertise of those who were at the helm during the Howard years. Enter the Abbott, Turnbull, Morrison era, with one big difference. No mining boom windfall and with it, no bucketload of money, no economic wizardry.

But, after six years and some twisted, bizarre, psychological deception, the Coalition were still able to convince 51.5% of the electorate that, even though public debt had more than doubled and evidence of a tanking economy was already obvious, they were the better choice. It was a replay of 2001, when Kim Beasley was denied the chance of becoming prime minister.

So, here’s the reason Labor should consider itself fortunate it lost. This is the first real test of the Coalition’s economic credentials since the late 1970/early 1980s, when they brought the economy to its knees. Not surprisingly, it was when John Howard was Treasurer.

It happened because the electorate believed they were better on the economic front than Labor, unaware dark clouds were gathering, unaware the coalition was untested, unaware they had no economic expertise. Then, world events took over, particularly with interest rates and John Howard had no idea how to manage them.

Today, the new Morrison government finds itself in exactly the same position as Malcolm Fraser did in 1980. The economy is seriously in decline and our fledgling Treasurer, Josh Frydenberg has no idea how to manage it.

Frydenberg confirmed his incompetence when he told a London seminar recently that he would rather produce a budget surplus than arrest a declining economy. That, more than anything else, was grounds to disqualify him from holding the office of Treasurer.

Thus, the next three years will reveal, as world events take control, the great lie that has captivated 51.5% of the electorate concerning the Coalition’s economic credentials. Frydenberg’s inability to react will consign him to the political scrap heap and Morrison along with him. By 2022, no longer will that outrageous claim be sustainable, even to the most loyal Coalition voter.

So, notwithstanding a likely unemployment rate of 7%, with no capital investment, the mess that an incoming Labor government will have to deal with and an economy they will have to resurrect, it’s perhaps the better result in the long run.

And so, with the 51.5%, who will get far less than they bargained for and the rest of us who will watch it play out as expected, the truth of it will finally be revealed.

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Paying Down Debt

At one stage during the election campaign, either Scott Morrison or Josh Frydenberg hinted at their intention to begin paying down the national debt if they were re-elected.

It is a sad reflection on our media that no one thought to ask how this might happen. If they had, it’s likely they would have exposed a simple, albeit inconvenient truth, firstly about how that debt is created and secondly, how it is retired.

Currency-issuing governments don’t need to acquire debt, but given that the funding of deficit spending is a fact of life in Australia, we should all know just what the procedure is, and how it works.

To fund deficit spending, the government issues bonds in its own currency. Various entities, both here and overseas, buy these bonds because they have money they want to invest and bonds are considered safe investments.

The bonds are issued for a specific length of time (3, 5, 10 or 20 years), the money received for them is held in an account at the Reserve Bank, interest is paid twice yearly and when the term expires, it is returned to the bondholder.

Under current arrangements, when the Australian Office of Financial Management (AOFM), anticipates that the consolidated revenue account is running low, it will issue a bond sale tender to meet the expected shortfall.

There are other considerations such as yields and so on and the bondholders can, if they choose, sell their bonds on the secondary bond market and even make a profit from it. But that’s another story.

So when and how can this process reflect a reduction in government debt accumulation? Well, it can’t. As long as governments spend more than they collect in taxation, this is the process that plays out. It doesn’t have to, but governments choose to do it this way. It’s a political choice.

In some cases, when a bond issue matures, the government will issue a new tender just to cover the amount being repaid to bond holders. New tenders can be issued to cover maturing issues. It sounds stupid, but what can one do.

From this we can see that debt is accumulated to offset deficit spending and old debt is being retired and replaced with new debt. But what happens when government produces surpluses? Does the AOFM stop issuing tenders for bonds? That would seem to be the logical thing to do, wouldn’t it?

The last time this occurred was in the early 2000s when John Howard famously and incorrectly claimed that his government had paid down all debt.

They had, in fact, reach a point where net debt was thought to be zero, but some gross debt (bonds still on issue), was still owing. Gross debt is what interest is paid on. Howard and Costello wanted to shut down future bond sales but, as it happened, they continued to issue bonds even when the government was producing surpluses. Why?

The answer to that question is best explained by Philip Baker’s article written for the Evatt Foundation in November 2002 where he writes…

“Commonwealth bonds, which the government issues when it borrows money, are the safest of all securities. For many individuals who are labouring to pay off credit cards and mortgages, zero government debt may sound like a good thing. But it could also create a dilemma for big and small investors because it would result in a real shortage of risk-free, safe-haven assets for superannuation savings. The remaining government bonds on issue would be scarcer and more expensive for investors. Fund managers would be forced to invest in riskier corporate bonds or send the money offshore – at the very time the government has increased to 9 per cent the amount of an individual’s salary that must be invested in superannuation.”

So the Howard government continued to issue bonds because the bond traders needed them as leverage against a shrinking and less-safe market. This implies that bond sales have nothing to do with government debt.

So where does this leave Scott Morrison and Josh Frydenberg who desperately want to be seen to be paying down debt, a debt which in reality, does not exist? If the government were to cease issuing bonds it would make no difference to the nation’s fiscal balance. But it would incur the wrath of the bond traders and we couldn’t have that, could we?

Of course, none of this needs to be thought about while we continue to have a negative fiscal balance, i.e. deficit spending, and with the economy currently in a downward spiral, that situation will continue for some time yet. Despite Morrison and Frydenberg claiming we are back in the black, we are not. Not this year, or the next, or likely even the one after that.

And, just for the record, here is where the gross debt position stood back when the adults took over*** and where it is today:

May. 2019. $541 billion

September. 2016. $420 billion

September 2013. $257 billion ***

August . 2007. $58 billion

So much for a debt and deficit disaster. And where are those fearless journalists who could take on the Prime Minister and Treasurer when they make deceptive statements about paying down debt?

Perhaps an intimidatory raid on the ABC might keep them quiet for a while.

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