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Two Questions Scott Morrison Needs to be Asked.

In the next few months, media writers, commentators and interviewers will find politicians breaking down doors in an effort to have themselves heard on radio, written about in print and seen on television.

There’s nothing like an election to remind politicians they are public servants, no better time for them to stick their heads up and say, ‘vote for me, vote for me.’

It’s also the best time for those media personnel who have access, to question politicians on a range of issues, no better time for us to test their knowledge and their sincerity.

At the start of everyday, the Liberal party backroom boys and girls send out the gospel according to the party machine. The parliamentary members are given instruction on the issue of the day, or if there isn’t one, they are given the script for an invented one.

They are told what to say, how to say it, how to fend off questions and generally spruik the party line in a convincing way.

But at election time they are vulnerable. Things happen quickly on a day to day basis. Unexpected issues can spring up from anywhere and catch them on the wrong foot.

Which means they will be nervous and, while confident they have all bases covered, will be fearful of surprises. The one issue where they are all susceptible, is the economy. On this one issue, most of them don’t have a clue.

There is one question a journalist, or anyone else who gains access, can ask; a question that will probably stump them. They should know the answer, given that they make regular decisions that impact on our daily lives, but they probably won’t.

images5T7N9JVY The question journalists, radio commentators and television hosts should ask is: do you understand the principle of the three sectoral balances? The problem is that most media people in a position to ask the question directly, don’t know the answer either.

The three sectoral balances are, government net spending, terms of trade (exports versus imports) and private sector spending. At any given time, the sum total of these three sectors will equal zero.

What chance is there, that a politician will know that? If they do know it, what chance is there that they could answer the next logical follow-up question: if a government is running a surplus (spending less than it withdraws in taxation) and we have a trade deficit (cost of imports exceeds income from exports), what is the impact on the private sector?

The answer to that question is, the private sector will have to borrow to make up the difference to bring the total up to zero.

If a politician doesn’t know the answer to the second question, explaining the answer to them will likely leave them dumbfounded. The answer reveals the flawed nature of government spending reductions during times of low growth.

If a sovereign government cuts spending to reduce its deficit when simultaneously, our trade position is also producing deficits (and large ones as now), the private sector must go further into debt to maintain existing living standards or lower living standards to compensate.

That is because only government spending can increase the assets held in the private sector. Without it, all private sector transactions cancel themselves out.

imagesZYE2J0BK At the moment, however, while the government talks of the need to reduce spending, it is actually increasing spending. It is doing the opposite of what it is preaching. Such is the hypocritical nature of politics.

This increased spending by government means private sector debt which might be increasing in one area (credit card debt) is cancelled out by the asset a commercial bank gains when extending the credit.

But this will only continue while the government continues its deficit spending. As we all know, that is not their intention.

Scott Morrison wants to return to surplus (i.e. take more money out of circulation). He wants private debt to increase at the expense of government debt.

He says we don’t have a revenue problem, only a spending problem, yet while spending is increasing, revenue is in decline. Morrison is clearly confused hence the tendency to waffle. Thus we have a very good reason to ask him, more than anyone else, if he understands the principle of the three sectoral balances.

It remains to be seen if, in having the principle explained to him, he would change his view in favour of increasing the rate of spending and forget about a surplus for now.

If he doesn’t, our economy will not climb out of its current lethargy and might even comatose.

But we need someone to ask him the question. It needs to be asked in public and televised. I suspect his answer will expose his limited understanding of economics.

images If he is able to demonstrate a clear understanding of the three sectoral balances, then he confirms what we all suspect. That this government does not want to improve the lives of its citizens other than those in the top end of town who fund its party.

Someone who has access to Scott Morrison, needs to ask the question.


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  1. Glenn K

    fat chance of that happening. the LNP will be using the household budget comparison and the MSM will play along.

  2. Michael

    Who are you?
    What are you doing?

  3. astra5

    Thank you for a most informative piece.

    From what Morrison says, and doesn’t say, I would be confident he could not answer your question, nor would he understand it.

    The man is ignorant and incompetent. He is out of his depth. More and more are now realising this. He may even be worse than Hockey. Out of the frying pan into the fire…

  4. stephentardrew

    One can only live in hope.

  5. DisablednDesperate

    Great as always. I thought it interesting that they let Dutton talk about the economy but decided he must have been used as cannon fodder while Morrison was hiding.

  6. gee

    the very first question (usually the quickest path to understanding) is: “Where Does Money Come From?”

    Answer: the Government.

    Government “spends” money into existence and “taxes” it out of existence.

    this is done through the RBA by tapping numbers into a keyboard, it has been entirely divorced from real assets since they got rid of the gold standard.

    The banks, as proxy for the RBA, issue currency by issuing debt. In essence, when you go shopping on your credit card, you “spend” money into existence as well, when you pay back that credit card, both the debt and the money ceases to exist.

    Money issued this way are really just IOU’s between banks. the only money that is actual currency is that which is issued by the RBA which the banks use to pay each other the balance of owed/owing between them.

    Governments don’t have to create debt to create money, that is just the Neocon-Job the Financiers have pulled over the last 40 years to ensure they and their mates get their hands on the nations true wealth.

  7. townsvilleblog

    Hillsong Morrison can be asked any questions, the replies will always be ‘supernatural.’

  8. z

    what you expect Morrison to answer, john ? do you really believe he knows a lot economic theory ? overestimated him for sure.

  9. stringybark

    “Where the bloody hell are you Scotty boy…and what do you know????????

  10. Royce Arriso

    Never mind, John. NeilofSydney will be along soon to dismiss all that complicated rubbish about ‘sectoral balances’. In it’s place will come a Titanic’s-worth of statistics based on a dumbed-down notion; the nation’s finances can be compared to those of a household. I bloody give up (almost!).

  11. jim

    AAH Democracy, Democracy was necessary so that the people had a chance to get rid of bad governments without the need for mass rebellions or riots please vote NO to the Qld four year terms this Saturday, 7 news Qld just implied strongly that 4 year terms would be good for us saying all partiess are for it BULLSIIT This referendum will lock in this dilution of voting rights for future generations. A teenager today who lives to 85 will have 5 fewer chances to keep their State leaders honest. ,

  12. Michael Lacey

    I think there are people in the LNP understand it very well!
    “this government does not want to improve the lives of its citizens other than those in the top end of town who fund its party.”
    Why? corporate/capitalist elite depend on keeping the workers “over a barrel”. Their function is to create an obedient, docile, uncritical workforce who will work to support the upper-class’s lifestyle and the economy. Keeping wages low, or debt pressure high, means workers will be less likely to complain or make demands. As workers struggle to provide their families with all the temptations that a capitalist society offers, they become far less likely to risk their employment, and less able to improve their situation. At bottom, conservatives believe in a social hierarchy of “haves” and “have nots” “corporate feudalism”. They have taken this corrosive social vision and dressed it up with a “respectable” sounding ideology which all boils down to the cheap labour they depend on to make their fortunes. Cheap-labour conservatives don’t like social spending or our “safety net”. Why? Because when you’re unemployed and desperate, corporations can pay you whatever they feel like – which is inevitably as little as possible. You see, they want you “over a barrel” and in a position to “work cheap or starve”. Cheap labour conservatives don’t like “bottom up” prosperity, and the reason for it is very simple. “Corporate lords” have a harder time kicking them around. Once you understand this about the cheap-labour conservatives, the real motivation for their policies makes perfect sense. Remember, cheap-labour conservatives believe in social hierarchy and privilege, so the only prosperity they want is limited to them. They want to see absolutely nothing that benefits those who work for an hourly wage.
    They no very well what they are doing , they are creating a healthy climate for their group!

  13. Blase free

    Thank yo

  14. Blase

    Thank you John Kelly

  15. Gangey1959

    1) What planet are you from ?
    2) What does this $ do to one of these 1,2,3 etc ?
    @ Gee. Didn’t money used to grow on trees? Until we went to plastic notes that is. Now it grows in the tip.

  16. my say

    Scott Morrison never answered a question in his life ,he never answered one when he was immigration minister ,he hasn’t a clue he would have to use his fingers to add two and two ,
    He now has a list of 24 questions that he wants Labor to give answer’s to about there negative gearing policy,because he obviously knows nothing about it ,he just can’t come up with a policy of his own ,thats why he stole the tobacco tax policy from Labor,he is hopeless.

  17. Michael

    Democracy consists of choosing your dictators after they have told you what you think it is you want to hear. – Alan Corenk
    Democracy means nothing if people are not able to work the democracy for the greater good – Chandra Bhushan
    If voting made any difference they would not let us do it. – Mark Twain
    One of the penalties for refusing to participate in politics is that you end up being governed by your inferiors. – Plato

  18. totaram

    Great work John.
    Another thing we can do is to write a “balance sheet” for Australia Inc so that we can compare it to the balance sheet for (say) BHP Billiton. You will then find that the “deficit” disappears. In a balance sheet, assets and liabilities always balance. There is a separate “profit and loss account”, where the profitability” of the company is measured. In this, all investments are depreciated to create expenses, and it is very different from lumping all expenditure as such. If we are really comparing the Federal govt. to a company, let us do it properly. Why have just a govt. “budget”, which doesn’t adhere to these kinds of accounting standards at all?
    I am not an accountant, but I am pretty sure I have a point. After all, can we find out when BHP Billiton paid off all its debt and ran a surplus budget? (This is called a “lazy balance sheet”)

  19. Phil

    Always enjoy your writing John. This article in particular. Morrison is incompetent and powerful – a dangerous combination.

  20. Heterodox (@mmt_rod)

    Can’t you get accreditation through AIMN and ask these questions yourself.
    Go and camp for all the post budget pressers and destroy ScoMo’s/LNP credibility.

  21. Geoff Andrews

    Yesterday at 3.00pm, Michael posted the second comment:

    Who are you?
    What are you doing?

    I presume this was directed at John and, being a very reasonable fellow and a great fan of John’s, I thought that the second question was genuine and carried with it no sneering insinuation of John’s competence.

    However, John and a few well credentialed fellow economic philosophers appear to be in the minority so the proposed questions will never be asked. If they did ask and Mr Morrison was familar with the three sectoral balances, wouldn’t he be able to say, “We’re aiming to have a manageable deficit and strong government spending over the next 4 years – not as profligate as Labor’s, of course, so this will increase private savings particularly if we spend more money on negativel gearing.”
    Or similar weasel words.

    Better to continue with the household analogy where they have performed abominably and hoist the bastards on their own petard, which is the inference I took from Michael’s comment.

    Still can’t get my head around the assertion that:
    (government nett spending) + (exports – imports) + (private sector spending) = zero, at any given time, assuming the units are A$.

  22. Michael

    Geoff at 2016_0317 13:03.

    You have highlighted that which was not intended – I was being too cryptic by far – my attempt was to respond to the headline/subject heading – my apologies.

    I admire John Kelly’s writing and he has a nice smiling face.

  23. Florence nee Fedup

    Maybe Morrison should be asked what he believes Labor’s wasteful, bad & excessive spending goes. Does he believe the money Labor spends of providing essential services is wrong, bad?

    Asked how he intends to meet the revenue needs of government to provide services by cutting taxes?

    Asked what level of revenue & taxes will make the business world happy.

    Asked who he believes will pay for providing highly educated and skilled human infrastructure that industry also needs if we are going to see any economic growth.

    Asked who will pay for the physical infrastructure, such as energy, ports roads etc.

    Seems his government has come to the conclusion, all will be paid for by the workers themselves.

    All will be user paid.

    All this is to come from a low paid workforce.

    As for welfare, looking after the vulnerable, not government responsibility.

    In fact I have heard wages described as best form of welfare.

    Why does Morrison and his ilk believe that the only duty of government is to cut taxes.

    Why does he assume this is always a good thing to do.

  24. Geoff Andrews

    Thanks for the links, Hetero.

    At first glance, they are fairly indigestible but then I am unfamiliar with the jargon but I will persevere.
    I suppose what I’m looking for is predigested “MMT for Dummies” with which I can convince my doubting relatives but I have to convince myself first.

    For example, if at any time the equation:
    (government nett spending) + (exports – imports) + (private sector spending) = zero,

    is true as proposed, how does the equation adjust itself to remain zero if just one of the elements suddenly manifests itself?
    How do the other two elements in the equation adjust to give zero?
    For instance, an exporter may have received a 1 billion payment overnight or the government makes its fortnightly aged pension deposits into the old leaning bastards’ bank accounts at midnight.

    Not much to ask, is it? 🙂

  25. Michael

    We can ask all the questions we would like – but is it not a blight on our democracy that there is no venue where those to whom we have surrendered our power to (under the guise of a “mandate”) are put in a position where they have to answer any question – they may give us a response which in most cases is just that and would suffice as a “grunt” and saving all those words.

    All kinds of obfuscating tactics have been refined over the centuries not to answer questions – perhaps shaming is the only tactic left.

    Was the question answered? If not, why not?

  26. Heterodox (@mmt_rod)

    Geoff ,a correction, it’s private sector saving not spending.
    Sectoral Balances is just a balance sheet looking at the aggregates of the stocks and flows of money through the economy.
    Take your pension example, assuming there is no net change in (exports-imports) then the Gov payment of pensions was balanced by the appearance of those pensions in private sector bank accounts.
    The Gov has less + pensioners accounts having more = 0

  27. Pingback: Two Questions Scott Morrison Needs to be Asked. | THE VIEW FROM MY GARDEN

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