The Folly of Neo-Liberals
It is utterly appalling that the deteriorating state of the Australian economy is being swept under the carpet while Malcolm Turnbull and Scott Morrison continually tell the country that they can be trusted to steer us through this so-called transition.
Scott Morrison is using their default language, i.e. spin, to make it sound like we are entering some kind of initiation or rite of passage. It is nothing of the sort.
The talk of transition is nothing more than a piece of double-speak dreamt up by some strategy analyst inside the Liberal party “war room”.
That same strategy analyst was probably the one who came up with the idea that Labor were declaring a war on everything. We know that because everyone on the conservative side is saying it.
We have the war on business, war on workers, the economy and on pensioners. This is the sort of rhetoric we use to get from Tony Abbott.
The government is trying to conceal the fact that the situation has deteriorated since Tony Abbott and Joe Hockey took over in 2013 when we supposedly had a budget emergency; when a compliant media sucked up every word, too lazy to be objective or make valid comparisons.
How is it that the economy is in decline now and those same people who told us it was so bad in 2013, are now compounding their dishonesty telling us a completely different story today?
Just look at the indicators, all of which came from the Australian Bureau of Statistics (ABS).
Workers in full time jobs fell for the third month in a row in April, fewer hours are being worked compared with 2013, the percentage of people in the workforce is lower than in 2013, gross debt has increased by $150 billion, interest rates have fallen a full 1% in a failed effort to stimulate activity, our trade deficit is now in excess of $2 trillion dollars, we are experiencing a wages recession and our GDP growth is totally reliant on our exports.
They spend more and they tax more. This is not a transition, this is a failure of policy.
The current major economic indicators are appalling, yet there is barely a whisper from the media who appear, once more, all too happy not to make waves, too lazy to question, too apathetic to bother calling them to account. Does anyone smell a conspiracy?
You can be certain the Coalition won’t quote any of the trend indicators. But they are clearly worried. Every time Scott Morrison and Malcolm Turnbull stick their heads up they look increasingly desperate.
Morrison is speaking faster and louder. Turnbull is warning of the “chaos of a hung parliament”.
On Insiders last Sunday, Greens Leader Richard di Natale argued for the first time the absurdity of trying to budget for a surplus at some defined period in the future. There hasn’t been a time in our history when money was so cheap.
He said he had been speaking to economists around the country who had been saying this very thing. They had been saying that we suffer from an infrastructure deficit.
If we continue to wait for business to show the way, it will only get worse before it gets better all because we have a government controlled by neo-liberals who govern for the banks, industrial corporations and the stock market.
In his latest blog, Bill Mitchell, Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at the University of Newcastle, NSW, Australia, lays the blame with the IMF:
“In the last month or so, we have seen the IMF publish material that is critical of what they call neo-liberalism. They now claim that the sort of policies that the IMF and the OECD have championed for several decades have damaged the well-being of people and societies. They now advocate policy positions that are diametrically opposite their past recommendations (for example, in relation to capital controls). In the most recent OECD Economic Outlook we now read that there is an “urgent need” for fiscal expansion – for large-scale expenditure on public infrastructure and education – despite this organisation advocating the opposite policies at the height of the crisis. It is too early to say whether these ‘swallows’ constitute a break-down of the neo-liberal Groupthink that has dominated these institutions over the last several decades. But for now, we should welcome the change of position, albeit from elements within these institutions. They are now advocating policies that Modern Monetary Theory (MMT) proponents have consistently proposed throughout the crisis. If only! The damage caused by the interventions of the IMF and the OECD in advancing austerity would have been avoided had these new positions been taken early on in the crisis. The other question is who within these organisations is going to pay for their previous incompetence?”
That pretty much says it all.
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Good to see the IMF and the OECD starting to see the error of their economic rationalist ways.
In a perverse way, it is good that these two leading global organisations are only now making their positions known because dumbarse regimes like the LNP won’t benefit from the enlightenment whereas the incoming Alliance Government of Labor, the Greens, Progressive Parties and Independents in Australia on 2 July can benefit from this new found wisdom of alternative and progressive socio-economic theory in tune with Modern Monetary Theory thinking.
Australia is in a good position to weather the storm, but the price of land will increase dramatically. So what should we do, buy Gold or buy Land???
Deflationary forces affect half of the global economy which is now languishing in negative interest rates a result in the collapse of the social contract in the 20th century. The world after 2008 is not the same world as before 2008, just as the world after 1929 could not be made sense of before 1929. This is the first wedge because the working class can no longer insure itself; stagnant wages. Where is Australia in this context we are going to get the brunt of it as they are only listening to neoconservative dogma. The redistribution between capital and labour is becoming increasingly impossible because the politics are toxic, political governance which is required is not there. Added to this is the end of a 30 year period of replacement of manufacturing jobs in the developing world with low wage repetitive work. Employment rates are quite high in Britain and the United States but the bulk of those jobs are low wage, intermittent, repetitive jobs that can be culled immediately by technology when it becomes available. I see a recession waiting in the wings no matter who takes office!
Great article.Of course ALL these Libs LIES being promoted by their MSM,and sadly swallowed by too many of the gullible ignorant public.
Without the MSM and the gullible.These Libs would correctly be gone for sure…
If you want to understand the true insanity of neoliberalism and extremist neolibertarianism, you need look no further than this edifying video from the soon to be dumped senator David Leyonhjelm, modeled on Rudd’s apology for the Stolen Generations – this appalling effort is both deeply offensive and utterly deluded.
The rhetoric coming from Turnbull and Morrison and others in the Coalition, is now being repeated over and over. No facts, no honesty. I have come to the conclusion they are seeing how Trump is convincing his followers ( sheez sounding like a messiah, he sure is not),and are trying some of his factless repetitive crap. Morrison particularly adds the loud, bombastic, bullying to his speeches and responses.
Thank God for Bills mature, respectful, orderly campaigning.
Incidentally I have not heard one word of the failure of the Royal Commission into Trade Unions to have one of the Govt promised over 1000 bad bastards in Unions prosecuted. So far 100 charged, 100 dismissed through lack of evidence. That’s another nearly 70 million down the gurgler, that along with the 55 million to have 4 Asylum Seekers dumped in Phnom Penh Cambodia, 3 having left.
They are in no position to preach about being superior economic managers. The figures are the facts and the facts say they are liars.
David you say we are in a good position to weather the storm. I presume you mean under this incompetent mob masquerading as a Govt?
How? Buy Gold or Land…is that it?
They are not “transitioning” us so much as skewing us.
It’s actually a little like a death camp, where they offer you some sort of suspicious looking “shower block” because you are feeling so grotty and louse infested that you go unquestioning, to your doom. Ok, that’s a crass reduction, hyperbolic, but my beleif is they are selling us a pup and it’s to do with the agenda of Financialised Capitalism, which means we don’t count and are viewed by them as no better than obstacles to be removed on the path to their own anticpated self-gratification.
We are non-people on the way to becoming asylum seekers in our own country.
That is a powerful final statement, paul and I think you sum up the mindset of this current band of maleficents very well.
All true. And look at the history.
1983, Fraser handed over an economy rated 20th in the world.
Hawke and Keating passed Howard the rating of 6th.
Howard, despite the rivers of gold from the mining boom, let our place slip to 10th. And left us with a tax structure that guaranteed future deficits for many years.
Rudd and Gillard, despite the GFC, by eschewing austerity and giving cash to the BOTTOM end of town, and investing heavily in infrastructure projects that kept people in work, left the economy BEST in the world.
And in less than 3 years of neocon slash and burn, the Coalition have brought us to the BOTTOM of the OECD league. That puts us 38th.
Trust them to manage the economy?
I Don’t think so.
Good lord that video was bad, but the comments! Holy cow!! He actually tries to make the claim that abolishing alcohol and tobacco taxes with increase our quality of life because booze and ciggies cost less.
Good article, by the way.
Watching the David Leyonhjelm video reminded me again why I won’t be voting for him or any of his rabid Liberal Democrat numpties. I’m surprised he didn’t rave about the ‘virtues’ of guns also.
I watch part of David Leyonhjelm video and was close to punch the monitor! The sooner that people like this are out of our parliament the better for the country.
David Leyonhjelm has recently lost his best staffer. You know The Hand that Signed the Paper .
Helen has much talent. Unfortunately, she has difficulty with ‘truth’ telling.
Turnbull did not do very well handling HIH very close to going to jail with Ronnie Adler, and Goldman Sachs, his old firm,have just been fined $5 billion for doing naughty things in the GFC, and he asks we trust him with the economy.
Look at the picture at the top of the article.
The pm, talcolm turdbott is looking like “What do you mean unemployed with no internet and what am I going to do about your kids school? Don’t you all know that I’m talcolm, and i’m shiny and what I say is not bullshit at all, just trust me because you all know I’m rich. Besides, now I’m a feminist too. I’ll have boobs to replace the testicals that the religious nutjobs took from me when they let me drive by July 2 to prove it.”
On the other hand, scooter moronscum is just thinking “who am I?, what am I doing here? why do these creatures keep asking me about a thing called a budget when all I have to say is ‘jobs and growth’ and ‘labor caused it’. I’m tired. Where’s jojo? Can I be mayor of somewhere in candyland like him too?”
I just want labor and the rest to start throwing some reality and the truth at the lnp wankers, hard and often. Put them on the back foot, and let the world see them all for what they really are, clueless, lying self serving dickheads.
Q&A in Tamworth Monday night. The big concerns: fracking and mining and the effects on prime agricultural land; NBN and communications; health; education, employment, infrastructure…
The Coalition is so from away from it they are completely out of touch, lost in the Cloud Cuckoo Land of trickle-down economics.
JMS, you are aware if the shit Leyjonhelm is in at the moment over a five hundred thousand dollar funding deal that has blown up in his face, this curiously coinciding with the resignation of his press apparatchik Helen Dale, another somewhat ambiguous figure, something I’ve just this second observed that others have noted also, but will still contribute this to thank JMS for her kind words earlier, like a balm on a burn.
Also curious, a podcast at the Guardian from David Marr, who accuses Shorten of having the capacity to be Premier of Victoria. No, I havent listened to it and maybe won’t because the headline comes across as offensive, both of Shorten and the likeable and capable Daniel Andrews, whilst allowing miscreants like Morrison and Turnbull, who are so useless they couldnt boil water, off the hook.
fn.. just noted guest’s comment and confirm that Barnaby Joyce looked like shredded chicken flesh after being “bitten” by the audience and Windsor over gas fracking, esp the fertile Liverpoool Plains.
Can anyone tell me what Julia actually was implying when she referred to Turnbull in federal parliament, “And there’s Malcolm, riding a horse called ‘the future of global conspiracy’ but is struggling because the back half of the horse appers to be going in a different direction…?”
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“So tell me, how does it feel to know your vote for Bill went to Malcolm?”
“How do you know my vote went to Malcolm?”
“You voted didn’t you?”
Really good article again John.
The last few decades of neo-liberalism are such a massive and appalling conspiracy. All this lost opportunity and suffering of the unemployed and those rejected by the system.
The first decade of neo-liberalism under Hawke and Keating introduced many worthy reforms but all successive governments kept turning to the right when it was time to turn to the left, both LNP and ALP. Even Hawke and Keating should have adopted MMT so they in the final analysis are also failures.
The MMT economists had the answers all along and no one in government would listen and still no large party adopts the message of MMT as policy.
Time to bring out the guillotine.
Well said, Andreas.
I may not support the guillotine but I certainly would support strict and harsh pecuniary punishments on all the political agitators both within and without parliament over the last 4 decades so that any of their ill-gotten gains are withdrawn and penalised with incarceration and fines, or maybe just one (if I’m in a good mood!)
Seriously, those beasts need to be brought to account no matter how long ago because it is fraud whatever way one looks at it.
Julia’s reference to Malcolm is at 5:40 in the following clip….
Bloody idiots,… You think this is LNP policy? Ignore the rhetoric and have a close look without the blinkers at what has happened to countries like Greece and the latest victim, Venezuela. Now that Australia no longer has coal to cushion the impact of no-liberal objectives and with the TPP imminent… but there’s no point is there… I’ve already seen how eager punters on this site are to shoot the messenger.
To save my writing reams, please advise on why the economies of Greece and Venezuela resemble that of Australia?
Royce Arriso because we are not that far behind them and before you freak out and enter a state of denial as expected, here a just two links from MSN but I’m sure if you bothered to look you’d find many more….
instead of being arrogant and abusive at the rest of us mere mortals, who may not have an Economics degree, explain patiently why you think Aussies (or at least us AIMN people) have it wrong.
Also, when you explain, I want you to analyse MMT as an alternative Economic theory to the neoliberalist shit that’s been going on for 4 decades.
We need Progressive change to the way we do business on macro and micro scales that meets the needs of every Aussie and our ethical international commitments.
Yes, you are correct. Yes, I have no idea what I am talking about. Yes, Everything is fine and anyone who tries to show anything different should be hung, drawn and quartered and no, under no circumstances should anyone do any research before they condemn someone with an opinion even slightly confronting….
Johnathan123 your attitude do not help to have a rational debate.
and I don’t think AIMM people have it wrong. For a start they are smart enough to be reading a website like this one. I do however, think that most Australians are caught up so much in the smaller picture, they can’t see the forest for the trees….
Arthur I apologise but I have seen what happens when someone has a different opinon on this sitre before.
and if anyone can help me figure out what Julia meant I would be most grateful….
just say what you think. Explain it in simple language and don’t abuse. You might find we treat you with respect especially if you look at the bigger picture beyond neoliberalism.
Jennifer I would love nothing more than have a friendly, curtious and intelligent debate. I am passionate about the state of the world but have no time for imbeciles who attack without logic. That said, I’m not sure there is a bigger picture beyond neoliberalism but to understand even partially one needs to examine it on the global scale.
For example, I would love to hear someone’s opinion on…
and then there’s….
My interpretation of Gillard’s comment is that she saw Abbott as ‘the CatDog’, like on the ABC children’s PrimeTime tv of several years ago when one wanted to go in one direction and the other, the other. The image is enhanced when one can imagine one biting the other on the bum, if they were conflicting.
Through my eyes, Abbott was never a CatDog which can be interpreted as a complicated, multi-dimensional character.
Abbott is detestable because he was always base and remains base. It especially irks me when the dickhead gets everybody in family, society and his regressive party falling over themselves and he was still too stupid to make a go of it.
I expect much, much, much better of our politicians and I won’t tolerate spoilt brats, who have had the easy way whatever route it may have been.
Even though you won’t engage Johanathan123,
thanks at least for showing some response.
When you feel comfortable, I would welcome you back so that we can consider an alternative, progressive and sustainable socio-economic society from the current neoliberalist debacle.
Jennifer reply coming
For those who could not read one of the links Johnathon123 posted because of a paywall, it is here: http://www.telegraph.co.uk/finance/newsbysector/industry/mining/11749706/Commodities-crash-could-turn-Australia-into-a-new-Greece.html
Both links suggest Australia could become another Greece. Both fail to note that Australia is its own currency issuer. It can never run out of money. It can always pay its bills. If it were to adopt an MMT approach to debt, it would never need to borrow.
However, if we look at Greece prior to its entry into the Eurozone we find horrendous debt levels. It happened because it was poorly managed and drowning in corrupt practices, not because the Greeks are happy go lucky, or lazy.
All nations can learn from Greece, but the lessons are about corruption, not about debt. The situation here in Australia could only resemble Greece if our Executive, Judicial and Government oversight collapsed and even then, only if we surrendered our sovereign currency issuing powers.
If you can mount a case for how that might happen, I’d like to hear it.
Jennifer interesting analogy but it had nothing to do with Abbott. Let me explain why I ask (and please, research before you condemn me) As it was primarily Goldman Sachs who caused the GFC and Turnbull is ex-Goldman Sachs and Turnbull is a publicly acknowledged Zionist who’s mother is Jewish (no, this is not anti-semantic) and with the Rothschild families financial domination of the world established fact (Rothschild’s created Israel)… no, perhaps AIMM readers are correct, perhaps this is way too hard…
So in response to your specific request of the hyperlink, it appears there are wheels within wheels but at NO particular stage does there appear to be a Woman in control.
What do YOU have to say about women being used as pawns while men control the reins?
Work towards leveling the playing field in every aspect and then you and I can have an intelligent and respectful conversation.
Thank you John for your intelligent contribution. May I point out tho that Greece did not voluntarily surrender sovereignty, it was taken from them by the IMF.
Johnathon123, Greece surrendered its currency issuing powers when it signed on to join the Eurozone.
Jennifer I love and respect women. My most intelligent friends happen to be women. Please be aware tho that extreme anything is not acceptable including mysandry. I could be wrong (I’d love a dollar for every time I was) but I see a connection with Julia’s comment and the state of our nation and am trying to discover if it’s my paranoia or if there is something more. Her comment is quite exceptional when you think about it.
John correct but the IMF bled them dry, just like where Australia is heading with debt and without coal, we can’t pay.
John, I guess that each of us have different opinions about Neoliberalism and neoliberal economic theories.
IMHO, they are a failure and we keep going in circles (2008 crisis was a weak up signal) until 95% of the world population will live in poverty and the other 5% rich but isolated of the rest, all living in a world with a nature ecosystem destroyed.
We have to have a complete turn in which metrics we will use to measure progress or growth/developpment.
I have said in other posts that the use of GDP to measure the state of the economy is wrong, we have to go beyond GDP and start using another metrics, indicators like GPI. GDP does not measure the sustainability as an example it does not give data on quantity and quality of growth, between costs and returns.
Growth eventually with stop or slow down and development become the most important part and that it is whet have to be measure and target in combination with sustainability.
It is a complex subject but there are lots of information on line about this and it has been look in many countries including Canada and Finland.
I guess that almost we can have a blog dedicated for this subject.
PS: excuse my English, it is my second language.
I have grown under my own 59 years of self-esteem to not feel obliged to condemn jewish people.
However, I am increasingly aware that my sense of respect is not reciprocated by forces within my community or globally.
I find it immensely interesting that you’ve revealed Mal’s family background considering I have some knowledge of how that impacts on the young person’s upbringing.
Malcolm can address that aspect of his personality to retain any self-respect he might be entitled to. I actually don’t necessarily blame his mum for going but I don’t like it if it meant ordinary Aussies had to wear the consequences of an embittered young man.
Johnathan, was only able to access the first of the two links–not an AFR subscriber, so it shut me out.
Hence of Venezuala, I can’t say anything.
But re Greece…based on a year’s auto-didacting, in which John Kelly’s articles have played an important part, I understand that the Australian economy bears little relation to that of Greece. There is a fundamental, critical difference. Greece uses someone else’s currency, the Euro. We use our own, ‘fiat’ currency. (As does most of the non-EU world)..
We have to pause at this point, to deal with some familiar misconceptions, undoubtedly looming.
1. I am NOT.urging the endless printing of money.
2. Commonwealth ‘debt’ is a paper tiger. Of folk anxious about (Commonwealth) govt debt, this simple question is offered. How can a govt in control of its own currency (again, unlike Greece) be said to have any sort of ‘debt’ in that same currency? Answer; it doesn’t. . 3. Ergo sum, any ‘debt’ denominated in AUD, can always be paid. As it is, regularly. Without any of the drama that adherents of orthodox economics repeatedly predict–plunging exchange rate, inflation, even hyperinflation, FFS! Greece, bound to another’s currency, is thus the dependency Australia is not.
The reason JK’s articles resonate is that he, like similar authors–and posters, here and elsewhere–are able to authoritatively identify the Achilles heel of orthodox economics. Which is, the entirely erroneous notion that public spending is comparable to that of a household, business or individual.
This ‘household analogy’ as it is called, is not merely wrong. It was thoroughly discredited during the Depression years, 80-plus years ago! So why has it been artificially resurrected? Why does it now form the basis of macroeconomic policies, here and overseas? Because it has been given new life by elites with most to gain from it.
Yet when a business, household or individual spends in one area, logically, it has less to spend in another. When a govt in charge of its own currency spends in the economy, it can never run out. And the economy picks up. Unemployment dips. Greece is unable to do this. Burdened by debt in somebody else’s currency, she faces a long, hard road.
Is it any surprise that Neoliberal dogma regards the actions of a govt spending on its citizens as the gravest economic sin? Which is precisely why you will never hear any LNP pollie talk of the Rudd Stimulus. It has been airbrushed, Politburo-like, from history.
Finally, trust I won’t have strips torn off me for what is no more than the stating of simple macroeconomic realities. None of it is opinion, theory, or ideology. It is how things are.
Took me best part of last winter to grasp the gist of it. As somebody else wrote, to understand such realities, “you have to sit down for a while and clear your brain”, of the very naturally-accrued ‘household analogy’.
Most of us have never known any other model!
Give it the heave-ho and understanding commences.
I had no idea his mum went anywhere (or where she went). I apologise if I have offended.
Johnathan123, could you please make your point. To date you haven’t done that.
Royce, first of all, I welcome your opinion. That said, I am under the impression (perhaps foolishly) that as Keeting floated the Aussie dollar on the global market we are subject to global scenarios. I don’t know or understand how we can simply print more money to pay the IMF without causing chronic inflation. Please explain as I genuinely am interested.
omg it’s the pussy police…. Guess that’s the end of polite conversation.
My apologies, my post was directed to Johnathan in reply to his question about beyond neoliberalism and not to John
Arthur I agree with you, now we need to find the solution.
I see that Royce wants your opinion or preferably, your expert analysis of current Macro Economics.
I want your presumably expert opinion of Micro Economics.
I really want to see you address our Australian circumstances in both Macro and Micro models while totally dissolving the Neoliberalist default position.
Jennifer would it surprise you if I said I think the Gillard government was probably the best thing that ever happened to Australia? Would it surprise you if I said that if Jesuit Abbott had have behaved more like an intelligent human being and not like a chiwawia constantly biting at Julia’s heals with his me, me, me attitude we just might be far better situation than we are now? Well it’s true.
Johnathon123, what did you mean, “pay the IMF.”? Floating our currency simply means it is valued on what we produce, rather than being pegged to another nation’s (USA) currency. Since 1983 it has worked to our benefit.
I really want to see ME address our Australian circumstances in both Macro and Micro models while totally dissolving the Neoliberalist default position and I would too if I had the vaguest idea of how to do it but every post I made was a question, not an answer.
John that’s who we are in debt to is is not?
I suspect you don’t know much more than I do about macro and micro economics. However, that’s ok we all have our strengths.
Gillard was good but not great. Surprise that? It all boils down to how the handlers play the strings behind.
Gillard was knifed by Rudd#2 with Shorten pulling the strings and …
surprise who is the current alternative PM?
Don’t ask me to like Shorten but understand if I expect Shorten to move dramatically left from his current cumfy right position.
Shorten is expected to build bridges between Labor and the Greens – immediately.
Jennifer I’m not convinced Shorten isn’t a member of the NLP. His policies are so similar I can’t tell the difference.
Sorry LNP (dyslexic keyboard)
No, Johnathon123, we are not in debt to the IMF. When we borrow, we issue bonds. Anyone can buy them. They are always issued in Australian dollars which means we can always repay them. The IMF does not buy them.
you and I can ask those questions together.
We are all learning and that is the true beauty of these discussions because we all always come out with more than we start with.
John then why does each government sell off our assets to pay debt and to whome does it sell them?
Jennifer so true my friend but only if we listen.
perhaps you should answer our particular questions posed to Johnathan123 –
and simplify MMT for all of us so we all understand and spread the message with confidence.
Johnathan I was tending towards a little sympathy for you but you blew it… to suggest Bill is in anyway associated with the LNP is just plain and simply bloody absurd. Suggest you return to whatever school for failed comedians you escaped from, idiot.
David thank you for condemning me for something I was unsure of. It makes me proud to know our country has so many knowledgeable people.
and what the bloody hell is MMT?
MMT means Modern Monetary Theory.
We need it in Australia without doubt and yes in Britain and the US too.
thanks, I couldn’t figure it out lol
So I guess my question ‘why does each government sell off our assets to pay debt and to whome does it sell them’ goes unanswered.
but whatever the answer, without coal we cannot pay it.
check this out….
coal is not the default position for building the economic framework around any socio-economic progress that does not negatively impact on the environment.
Obviously, we need answers now but we also need immediate backup.
Tnink smart, think quick.
I agree totally but up until recently, coal is how Australia has been paying it’s bills. Now that market has dies someone better think of something to replace it real quick otherwise, well otherwise is something I really don’t want to think about this time of night….
but Jennifer I did learn tonight that I am an idiot because I questioned the integrity of a politician pmsl
Johnathon123, no coal is not how we pay our bills. Coal does give us access to foreign currency, particularly the Yuan, but that is for spending in that currency’s country of origin. You ask why do we sell our assets. Our governments sell off assets because they think our national economy is run the same as a household. But that isn’t true. A national economyy is nothing like a household, the principal difference being that a household cannot create money.
Government spending is a means of introducing money into the economy. Taxes then destroy that money. Spending and taxation are thus not fiscal, but rather monetary policy. The government doesn’t first raise taxes in order to obtain money to spend, rather, it creates the money first by spending it into existence and then removes it from the economy via taxation.
Both major parties don’t understand this. When the government sells an asset it puts that money into consolidated revenue as a saving to spend on something at some future date. But it doesn’t need to do this. It can always pay for its spending simply by creating the money out of thin air.
This doesn’t mean it can spend as much as it likes, but it can always buy goods that are available for sale in $A. Our exports provide us with foreign currency reserves that we spend on imports. Coal won’t die for a long time yet and even when it does, we will have other sources of wealth that the world will want to buy.
The Australian debt clock you have posted is not real. It’s there to frighten people into thinking we are drowning in our own debt. We are not, and never will. As a currency issuer, we can never run out of money and we can always pay our bills in $A currency.
The value of that currency depends on what we produce both for domestic and export consumption. I hope this answers some of your questions.
I’m going to anticipate your next question which I think will relate to inflation. Inflation can only occur when too much money is chasing too few goods. Creating money doesn’t cause inflation. Lack of supply causes inflation. When goods are in short supply, prices rise. Prices don’t rise because money is being created and spent into the community. But the amount of money in circulation has to be controlled to avoid a shortage of goods. That’s where taxation comes into the equation. Taxation takes money out of circulation.
John first of all, coal is as good as dead. Check it out. Yes, we will still be selling it but no where near the quantity and for nowhere near as much. As for printing whatever we want, the more in circulation, the less it’s worth. It’s called inflation and the very reason gold should be 100 times it’s present value due to QE but isn’t because of manipulation. If we could simply print our way out of debt we would all live in utopia but we don’t. As for the counter I took it for granted it would be seen for what it is, I didn’t expect for one minute anyone would take it seriously, perhaps I overestimated.
‘why does each government sell off our assets to pay debt and to whome does it sell them
Thanks John. You are absolutely right, the increasingly shrill Morrison, and the increasingly hyperbolic Turnbull (adjectives used can be readily switched between the two), simply shows to everyone that they are very worried. I don’t think the ever increasing attacks on Labor will have the desired effect. Turnbull is looking increasingly like a broken man (plus stooping to dragging out dear dead dad to try and humanise himself) and Morrison is his usual idiot self, just louder and with ridiculous, fact-free charts. Cormann is running so much on scripted auto pilot that he substitutes the name of the leader of his opposition twice in a statement and doesn’t even realise till the journalists alert him (he’s just a wally anyway so no point spending too much time analysing Cormann).
And regarding the coalitions proposed company tax cuts – the lie to their line about Labor being anti business, anti growth, and anti-bloody-everything, is shown in the fact that Labor are actually supporting a SMALL business tax cut – just not all bloody big business, as the coalition are proposing. Jennifer Westacott was especially shrill when she picked up this ‘Labor anti business’ line and ran with it. It simply showed who the BCA represent, and it sure ain’t ‘mum and dad small business’.
Jonathan123, John answered your question about inflation but I’ll try putting it another way,the way it has been explained to me.
Government spending/creating currency/Quantitative easing, results in upward pressure on inflation when it exceeds the productive capacity of the economy. At present we have a large number of underemployed and a sizeable unemployed population. Government spending (using new money) can take advantage of this resource and build infrastructure of value to the economy. These people then consume more, and stimulate economic activity. It’s why there wasn’t an inflation blow out when Labor implemented stimulus spending during the GFC and similarly why the US didn’t lose control of inflation during their long QE program.
Neo lib types don’t like this approach (or any political party for that matter) but the neolibs don’t like it because having excess labour in the economy (ie unemployment) keeps downward pressure on wages and conditions. They just can’t seem to see that demand drives growth and the more inequality grows, the less demand to drive their profits. To me this is obvious but not to them, go figure.
BTW, the reason they sell government assets is 1)for a short term way of trying to show a balanced/surplus budget (it’s one of the ways Howard /Costello cooked the books) and, 2) it’s simply another way to further move capital from the many to the few (this could be validly debated however I have no doubt it’s a way for governments to reward their backers).
@ Royce Arisso at June 7 9:31 PM
I’m in total agreement with your excellent comment.
I came to realise neo-liberalism was a crock of shyt about half way through the Reagan, Thatcher and Hawke/Keating years but erroneously continued to think Keynesian stimulus was the best macroeconomic approach till just a few years ago when someone on the AIMN site provided a link to Steven Hail’s YouTube video on MMT.
Even then it was months before I watched it as it was over an hour long and I was busy pushing the Greens cause and the cause of manufacturing.
I have a great deal of gratitude and respect for Michael Taylor for providing the AIMN news site and for the many worthy contributors like John Kelly.
Thanks Garth for your excellent comment at 5.22 am – especially the first paragraph where your explanation provides solutions for our unemployment and under-employment situation in Australia.
Our sovereign currency could immediately employ everybody in meaningful employment that matches each person’s skills, experience, qualifications and talents. There is no excuse for the LNP to allow people to flounder in poverty.
I want the Labor/Greens Alliance to address this very issue now so that people can see what they will gain upon the New Government’s birth on 2 July. Full employment is a golden prize and the makings of a flourishing socio-economic system.
Thanks also Royce like Andreas said.
Jennifer, no one is perfect but I’m impressed with Di Natale; why is Labor so hostile towards him.
Who knows? Maybe they’re embarrassed that Di Natale and the Greens have social consciences whereas Labor has been happily skipping along the path to neoliberalism for so long, it’s forgotten about vulnerable people on Newstart and in detention, as well as our precious environment.
Jennifer Meyer-Smith. Microeconomics looks at individual markets; The Automobile Market, The Steel Market. Macroeconomics looks at the entire economy. A good informative starting point could be Phillip Holden’s video; Circular Flow of Income – Macroeconomics.
Phil. Holden: Economics Teacher and Headmaster of St. Lawrence College, Athens.
He has been called the God of Economics and his videos have been viewed thousands of times around the world.
I shall do so.
Jennifer…Referring to Phil’s video “Circular Flow of Income”
where (G) = Govt. Spending
(X) = Exports
(I) = Investments
where (T) = Taxes
(S) = Savings
(M) = Imports
Then the National Accounts Equation.
(G-T)+(X-M)+(I-S) = ZERO…..and must apply at all times.
(G-T) can be called ‘The Government Sector’.
((X-M)+(I-S)) can be called the ‘Non Government Sector’.
Government policies have very little effect on the Non Government Sector.
The LNP continue to condemn the Rudd / Gillard / Rudd governments by saying “the people don’t want to return to those years” and they talk about budget repair like the Global Financial Crisis didn’t exist. Imagine if you can how we would have fared if Turnbull / Abbott / Turnbull controlled our finances during those critical years. Much of what Turnbull and Morrison spruik would apply if we were living back in the 1950’s when our currency was convertible into gold, what was known as the “Gold Standard” and was abandoned in 1971. The Australia government has been the monopoly issuer its own flexible fiat currency since 1971. Turnbull and Morrison’s comments, which is Neoliberal groupthink and has permeated into the public debate, does not apply to the modern monetary system. The analogy neoliberals draw between household budgets and government budgets is false. Households use the currency and must finance their spending. The government issues the currency and must first spend before it can tax. They also talk about bringing the budget to surplus. All this does is expose those that are responsible for controlling the National finances to their collective lack of understanding of the National Accounts Income–Expenditure model in Macroeconomics. Richard Di Natale and now Bill Shorten is speaking the same language regarding budget surplus. Budget Surplus can only be achieved by forcing households further into debt.
This can best be explained by using a couple of possible scenarios: (a) If households and firms spend less than they earn (tend to save), and Imports are slightly greater than exports, then the Government budget will always be in deficit. (b) If the Nation is running a Current Account deficit, ie. Imports are greater than Exports, which is accompanied by a Government budget surplus of equal size, then households and firms will be spending more than they earn, ie. credit card spending (borrowing). This is unsustainable since Australian households are already experiencing massive debt problems.
Neoliberalism was invented by ex-trotski folk who wished to rule the world. Someday the poor will rise up and eat the rich.
@Jennifer Meyer-Smith. May I be so bold as to ask, when are you going to be a member of parliament and even better a minister in government? You have all the needed qualities of being a consensus builder, knowing the issues, having the contacts, community following, being untainted by the old parties, compassion and a hatred of what the Liberal Party has become and hatred of greed, corruption and neo-liberalism. Maybe you could make it happen this election! Please for all of us, start organising and speaking at some rallies if that’s your thing as I’m feeling the Bern! Jennifer! Jennifer! Jennifer! Jennifer! …….. and the crowd breaks into applause.
OK I need to calm down a bit and return to some Greens solitude …….……………
@Johnathan123. Your line of thinking and questions are hard to pin down as your hopping around like a frog in a billy. Much better to ask one or two questions at a time and wait a bit for the answers. Some of your questions are highly relevant.
On the macro economic and indeed any economic questions, what John Kelly says is as always spot on. Please take the time to understand what he says as the MMT approach does use different terminology and concepts to what nearly all of us are used to based on our daily lives and the distorted nonsense we mostly get from our national media and the decrepit duopoly of the LNP and the ALP.
As John said the Greek situation, or the even earlier Argentinian financial crisis, are not applicable to Australia as they accumulated massive debt in someone else’s currency not their own. A very dangerous and stupid thing to do as they can easily get into a situation when they can no longer meet the interest payments.
I will elaborate a lot more in an article I’m writing for the AIMN site.
Below are links to three good YouTube videos on MMT. They show MMT economists Bill Mitchell, Steven Hail and Warren Mosler. The last link is to a fairly short 116 page book on MMT by Warren Mosler called “The 7 Deadly Innocent Frauds of Economic Policy” in a free pdf download.
In regard to coal. Yes it’s time is over and will probably need to be phased out within 10 years globally. The issue is the available carbon budget to stay under the TOO HIGH 2 deg C global warming above pre industrial limit. This budget is so small that gas should be prioritised as the final fossil over coal and even oil, as it is the cleanest and most energy efficient of the three. The major gas companies are already pleading for coal fired power stations to be closed down.
Professor James Hansen the global warming scientist that I agree with the most, says a 2 deg C limit as recommended by the IPCC is too high and anything above 1 deg C is dangerous and risks catastrophic climate change consequences over the next few centuries. James Hansen recommends a carbon tax with all proceeds returned to citizens on a per capita basis as the main driver for a transformation to sustainability. He and his associates have concluded the world must cut its current CO2 emissions by 6% p.a. and he includes in this reforestation and improved agricultural practices.
Here’s a link to James Hansen. There is a more recent article but I’m in a hurry so this will do.
oops wrong link for James Hansen’s article, try these two.
the thought has occurred to me and I never say never.
Don A Kelly you speak with forked tongue regarding Australian Greens Leader Richard Di Natale’s alleged preference for federal government surpluses. This recent announcement by Adam Bandt clearly reveals the Australian Greens are in the Keynesian camp with urgent federal government deficit funding (as well as increased tax revenue and less wasteful concessions for the wealthiest) being used for urgent infrastructure and the transition to a sustainable economy.
Andreas…If that’s the case then Richard has changed his tune because he was talking about the need to return the budget to surplus only last month. That is the neo-liberal speak, inferring that the Federal budget is similar to the household budget. Which it is not. Actually the Feds don’t have a budget, they have a fiscal deficit. Remember households must earn, borrow or run down savings in order to spend. The Feds can purchase whatever they want, whenever they want, they are the issuers of the currency.
Last Friday Richard said, quote:
“We need to recognise that having debt work for us in the form of productive infrastructure is a good investment,” he said.
“This nonsense that we need to cut spending on essential services, that we need to grow the infrastructure deficit that’s already a significant one in this country simply in an effort to reach a surplus by an artificial timetable is bad economic policy.”
Arthur…..That’s a different tune than he sang last month, but hey we can all change our mind. What is an artificial timetable, just some made up date that we reach a surplus? There’s that word again. I understand Good and Bad deficits, it must be viewed in the context of what the government is trying to achieve and by targeting infrastructure and as a result of this, improved employment figures, then that is a good result.
Bandt’s media release was May 25 which was about Keynesian deficit spending.
Adam Bandt’s official campaign launch will be at 6:30 PM to 8:00 PM, Friday 10 June at the Rose Street Markets, Rose Street, Fitzroy. All non hostile people and pets welcome.
I will be there and will report on anything macroeconomic. Fingers crossed for an adoption of MMT????
Good one, Andreas.