I have an opinion piece in today’s edition of The Australian (subscription required) concerning the economics and, indeed, ethics of public sector indebtedness.
A key point I make in the piece is as follows:
“To argue that we are better off because others are sinking in a fiscal sea of red ink faster diverts our focus away from the common underlying cause of government overspending that requires remedial attention, rather than empty promises and intergenerational buck-passing.”
If you run the numbers, Rudd spent about $100 billion in the name of stimulating the economy i nabout three years, not including interest payments. Using a GDP deflator, that is about the same cost of the decade plus long Apollo programme to send 24 men to the moon. In otherwords a lot of money, but unlike Apollo not much to show for it.
adrian
3 Feb 12 at 6:57 pm
The heavy debt burden in Australia is in the private sector.
sdfc
3 Feb 12 at 7:07 pm
Which has a funny way of becoming the nation’s in a crisis.
JC
3 Feb 12 at 7:08 pm
So… we spent a space-program’s worth on pink batts?
Fleeced
3 Feb 12 at 7:14 pm
That it does but when the private sector has ramped up its debt levels and gone through a bust I don’t think they have much choice. The trick is to have your budget in order prior to the crisis.
sdfc
3 Feb 12 at 7:16 pm
They’ve got $260 billion in debt and nothing to fucking show for it. The over-promoted union clerks have actually blown 260 billion plus the surplus of $65 billion Howard left them.
JC
3 Feb 12 at 7:19 pm
Unemployment peaked at 5.8% during the worst global recession since WWII. Who says they’ve got nothing to show for it? The level of debt on issue isn’t a problem.
sdfc
3 Feb 12 at 7:25 pm
Which left us relatively unscathed. Why? Not because of government policy, that’s for sure. No, we weathered the storm swimmingly because our major trading partner, China, didn’t get hit especially hard by the GFC. If Kevin Rudd didn’t soil himself in 2009 and spend tens of billions on “stimulus”, we’d be in the same predicament we find ourselves in now; although we’d owe less money.
The bad news is that China Inc is a clusterfuck of the highest order, and when the wheels come off that sucker, we are going to cop the economic equivalent of both barrels straight to the face. Even if you throw in another stimulus package – with a zero added for good measure – the result will be the same. Our fortunes are inextricably linked to those of China, as they were in 2009. Which doesn’t bode well for us at all.
Oh come on
3 Feb 12 at 7:36 pm
Mate, it affected a couple of middling North Atlantic powers. It wasn’t global.
Infidel Tiger
3 Feb 12 at 7:38 pm
OCO
Export values slumped and didn’t recover until after the global recession ended. The China saved us from the worst of the recession is a myth.
IT
Global GDP fell for the first time since WWII. Australian RGDI fell 3.5% at the depth of the trough. Such slumps have in the past led to sharp increases in unemployment
sdfc
3 Feb 12 at 7:44 pm
sdfc
Australia was the richest country on earth in 1880. For the next century, Australia plummeted, as socialism expanded. By the 1980s, we were a basket-case. After 2 decades of the return to liberalism, we are number 1 again. You do the math.
Peter Patton
3 Feb 12 at 7:53 pm
Rubbish. Yes, export may well have fallen. Commodities prices also fell. We hit some turbulence for a while there. As did China. Both countries recovered fairly rapidly. Again, Australian government policy had absolutely nothing to do with us getting through the GFC relatively unscathed.
But when China goes, so do we. Just you wait and see.
Oh come on
3 Feb 12 at 7:58 pm
Do you even understand how trade with China benefits us OCO? Or is it something you just read in the papers?
sdfc
3 Feb 12 at 8:08 pm
No, of course I don’t understand how trade with China benefits us, sdfc. Or even trade in general. It’s such a complicated concept.
Oh come on
3 Feb 12 at 8:16 pm
It’s not that complicated OCO exports to China raise national income.
sdfc
3 Feb 12 at 8:21 pm
Do you feel better now that you’ve explained something entirely obvious (and not especially relevant to the point I was making)?
Oh come on
3 Feb 12 at 8:24 pm
It is very relevant export values slumped during the crisis dragging income down with it.
sdfc
3 Feb 12 at 8:25 pm
And I didn’t deny that fact. But I said they didn’t fall that precipitously. I also said they recovered quickly.
But what if they had fallen much, much more than they did – and then stayed down? What then for us, dear sdfc?
Oh come on
3 Feb 12 at 8:31 pm
Can’t get away from that debt growth.
blogstrop
3 Feb 12 at 8:32 pm
Australia was saved from the “GFC” by Howard’s surplus (whose creation Labor maniacally opposed), a sound financial system and Chinese cash.
Keynesians are in the exquisitely painful situation of having to accept – if da ‘stimulus’ money sabed us – that they’re thankful to Messrs Howard and Costello.
I blogged at the time on Rudd and Swan effectively acknowledging they’d inherited a cake-walk:
IMF, Government Praise Howardian Economy.
C.L.
3 Feb 12 at 8:35 pm
But export income did fall precipitously, driving real domestic income growth down 3.5% at one point. A decline that in the past has been associated with sharp increases in unemployment. That unemployment peaked at just 5.8% is unprecedented.
sdfc
3 Feb 12 at 8:36 pm
How quickly did it recover and why, sdfc?
Oh come on
3 Feb 12 at 8:44 pm
SDFC
Unemployment didn’t happen because at the time the labor market was still flexible and oversee by Workchoices, which allowed firms to warehouse staff and take the risk it was would short lived.
To even suggest that moronic Lurch Rudd insulation fiasco helped any is no longer just stupid, it’s cravenly stupid. It’s like having a serious attitude problem enveloped by stupidity.
JC
3 Feb 12 at 8:45 pm
sorry .. should have proof read.
JC
3 Feb 12 at 8:47 pm
Onya Robbo, galloping economic illiteracy as usual.
Iceland’s public debt peaked at about 125% of GDP and is now about 85%, with interest on that debt at 17-20% of GDP as of 2012. Australia’s public debt is 14% of GDP and interest barely 1%.
Poor old Robbo, it must be quite depressing to have to go up against Labor on its economic record, which is the envy of the world right now.
m0nty
3 Feb 12 at 8:50 pm
Labor’s ‘economic record’ was inheriting the biggest cakewalk since Robert Ray walked to Belconnen for Lamingtons in the middle of Senate Estimates.
Thank you, Howard and Costello.
Rudd himself admitted this in 2008:
The truth fell out because he wanted to ensure the “GFC” boogie-monster didn’t affect his own government’s stability.
The reward bestowed on Howard by the Queen was well-earned.
C.L.
3 Feb 12 at 8:58 pm
Monster, are you drunk or just plain dense as usual.
He’s talking about the rate of growth you moron and the rate of growth has been parabolic.
Imbecile, they started with $65 billion in the kitty, the union clerks burned through that faster than Jackie Onassis on a Paris shopping spree and then proceeded to spend 26% of GDP with borrowed money.
Stop being an oppositional moron all the time. In fact I thought you were banned from all threads other than open thread for obvious reasons.
JC
3 Feb 12 at 8:58 pm
It’s not. Stop making it up. It’s 26% of GDP, you goose. In fact if you take the damage all Labor states have caused and consolidate it (as there would be no way the Federal Government would let a state fail), it’s fucking higher, much higher.
Also add in the NBN, which the union clerks have been keeping off the budget.
Monster, stop pissing everyone off all the time as you’re getting really annoying. I bet you have no friends for this reason too.
JC
3 Feb 12 at 9:03 pm
And the worst thing is all the information that red-flags Monty’s self-beclowning is right there in his own blockquote.
You really are a bozo, Monty.
C.L.
3 Feb 12 at 9:04 pm
What’s wrong with debt? Just grow the economy and it disappears.
Seriously. What’s wrong with debt?
And if there is something wrong with debt then blame fucking Bush for invading Iraq and being a crony capitalist son of a bitch.
Les Majesty
3 Feb 12 at 9:06 pm
Even at 26% – especially with a surplus coming up, which will put paid to that rate of growth you’re talking about – it’s lowest in the OECD. And with Australia rated as high as AAA, interest repayments are relatively negligible.
m0nty
3 Feb 12 at 9:07 pm
Did he really say that? What an idiot.
Sounds dumber than blockhead Hockey.
Les Majesty
3 Feb 12 at 9:07 pm
Isn’t he. And an annoying one too. I bet he was bullied mercilessly at school because he’s the most irritating little fucker here.
JC
3 Feb 12 at 9:08 pm
Ooh, tag with Les Maj! You deal with these jokers for a while.
m0nty
3 Feb 12 at 9:08 pm
And wasn’t Iceland’s problem private debt, not public debt?
Les Majesty
3 Feb 12 at 9:09 pm
Iceland has many hot sheilas. That’s nothing to sniff at.
Infidel Tiger
3 Feb 12 at 9:13 pm
Well I do agree with that. I think the stimulus worked but mark my words the Red Chinese are going to screw the pooch big time at some point in the next decade and then Gina, the Twigster and Boom Boom Palmer aren’t going to be looking quite so bright, are they.
AUD at let’s say US$0.55? 15-20% unemployment in WA?
Hate to say it but my money is shorting Oz at every opportunity. Just buy USD T-bills and it’s easy money with a guaranteed big return at some point in the foreseeable future.
Les Majesty
3 Feb 12 at 9:14 pm
Okay, that’s what Europe and the US under Bush and now Obama thought. The problem with debt is that you can go broke and the reason you go broke is that the capital markets at some stage, which you can’t predict, cut off the spigot. Finally most of that shit is just wasteful.
Presumably that debt you like is okay as long as it not being used to fund welfare, but for infrastructure, right? I mean you don;t want to be funding welfare spending by borrowing the cash to do so like Europe did. However you should be careful. Debt should be project specific and non-recourse. in other words we should not be saddling future generations with our consumption as debt.
Too late to blame Bush, Les. Odumbo makes Bush look like a fucking piker. Seriously , he makes Bush look like a piker. By the way, it’s not taxes that are the problem in the US, it’s spending.
Dude, the OECD is top heavy with the developed world and they’re fucked, so using the OECD as a bench mark for us is appalling. Compare us to Singapore which is running large surpluses. Ask yourself why we’re not busting out of our seams like Sing when we’re even more leveraged than they are to the developing world through our resources.
They are spending it on shit. For instance the union clerks came up with the bogus reason to pay the (public) human services sector huge increases on the phony reason there is a gender issue. We’re all paying that increase.
lastly, the thing to really be afraid of is that we’re ratcheting up recurrent spending and plugging it up with frothy boom time receipts coming in from the terms of trade spike. If this goes pear shaped as it will, our budget deficit will go to 12% of GDP faster than you can say Homer.
JC
3 Feb 12 at 9:24 pm
OCO
The recovery came with the rebound in export values toward the end of 2009. Government spending added to the recovery in activity. The national accounts tell us that.
The most important part of the fiscal stimulus came with cash hand outs which in conjunction with lower interest rates helped support private sector cash flows during the most dangerous period. The investment tax rebate and the homebuyer grant for construction were about the only policies I would call worthwhile. The BER was too hamfisted.
JC
The labour market performed as it has done in every down turn since at least 1978. Full-time employment growth falls while part-time employment growth rises. It’s nothing new.
sdfc
3 Feb 12 at 9:32 pm
Les, I never knew this side of you. You’re getting all financial on me.
It did nothing of the sort. Our currency fell an unprecedented 40% in two months causing a currency shock that helped dissuade imports. The RBA cut rates like there was no tomorrow and then the Fed saw it’s error, that policy was too tight and quickly righted itself by increasing its balance sheet size through QE.
We saw a terms of trade spike and the rest is history.
The stimulus actually fucked us up in more ways than you can imagine. It also gave the union clerks a chance to spend money whereas before that the morons were on a tight leash.
You can’t predict the fall. You can go broke doing so.
Possible. But excange rates are relative rates, so you have to tell us what the US economy is doing at the time.
Here’s what I reckon. I don’t have risk on it, but I reckon we’re heading to 1.15 before we see 98 cents.
JC
3 Feb 12 at 9:33 pm
JC, you are one of the most astute and prescient commenters on this site. M0nty, you are a poonce, plain and simple. As JC says ‘the most irritating little fucker here’…
Skuter
3 Feb 12 at 9:35 pm
Dunderhead, but you’re the first to say that the fall in NGDP was precipitous and we haven’t seen this rate of fall since the 30′s, which is true actually. It was actually frightening.
Now you’re comparing up to 1978? Seriously, SDFC, get your fucking story straight before posting comments here because you’ll be eaten alive. Not even bones are spared at the Cat.
JC
3 Feb 12 at 9:37 pm
The thing I like most about mOnty is that he is a fucking expert about everything. It’s a rare gift.
Infidel Tiger
3 Feb 12 at 9:38 pm
Oh thanks skuter. The gaggle make it really easy though.
JC
3 Feb 12 at 9:42 pm
I don’t disagree with you; I just wonder why you’re still banging on about Bush 3 years after he left office. Furthermore, on the issues you castigated the long-departed president over, Obama has either carried Bush’s torch or poured petrol on it.
It’s not because you’re a blind ideologue totally incapable of objectivity, is it?
Although it seems we’re in furious agreement on the China issue.
In the medium-long term, the world will need – and buy – Australia’s mineral resources, but there will be some very lean years after China’s crash.
sdfc:
Thanks, China! As I was saying earlier.
Oh come on
3 Feb 12 at 9:43 pm
The Iraq War had no effect whatsoever on the trajectory of deficits.
Source: CBO.
C.L.
3 Feb 12 at 9:50 pm
And OCO… all through the campaign affirmative action kid, President Odumbo repeatedly said, vote for me.. Barry Odumbo.. and I will “heal the economy, lower the world temp, and lower sea levels.
3+ years later sea levels are creeping up ever so slowly and unemployment is higher than when he took office despite spending $1 trillion of making sure the public sector was looked after.
So this fucker owns it. He owns this and more. The GOP candidate needs to make him wear responsibility like a good parent does with a child, because this spoil prick has never been responsible for a thing in his life.
JC
3 Feb 12 at 9:53 pm
Everyone recall how Lefties were going about the Bush deficits from about 2002? Recall? They were actually small compared to the $1.1 trillion Odumbo is averaging.
Take a look at the chart on CL’s link.
However talk about closing down the Odumbo spigot is now considered austerity.
You gotta fucking laugh. You just gotta laugh.
JC
3 Feb 12 at 9:59 pm
OCO
Thanks, China! As I was saying earlier.
I’m not talking about recovery I’m talking about stabilisation.
JC
The government doesn’t have boom time receipts, a large part of the deficit is due to lower tax revenue stop peddling bullshit.
That the labour market has behaved the same in every downturn since 1978 is a matter of history. 1978 was picked beause that is when the ABS monthly series starts. A guru like you should know that.
sdfc
3 Feb 12 at 10:02 pm
That’s great news, cause if we spend another 50 billion, we can get out of this shit. We just need to create our own space programme, the great thing is we already know who to send, and they don’t even need space suits cause they are all from another planet. Let’s face it not even the caucus would miss the Gillard Cabinet, so if the rocket blows up on the launch pad it’s still more successful than most of their other policies probably with less casualties.
Rob
3 Feb 12 at 10:05 pm
That’s a joke, IT, considering that wingnut commenters on here think they’re more knowledgeable on every field of scientific study than the vast majority of scientists in those fields.
m0nty
3 Feb 12 at 10:06 pm
SDFC they are anchoring recurrent spending to frophy receipts.
Doofus, what’s the amount of tax that BHP, RIO and others pay. How about those workers in mining and the add on services that also carry high paid people. They aren’t taxed? Stop being a moron.
Yes, SDFC, you mentioned that, but the drop in NGDP was has big as the 30′s, so it’s not accurate to be comparing. Firms held on because they were flexible and the decline was quick. If they weren’t flexible like now, we’d be fucked.
JC
3 Feb 12 at 10:08 pm
I know those numbers off by heart I’ve seen the chart posted here on many occasions. That’s because monty keeps repeating the same BS each time. Why doesn’t he learn? Does he not understand the chart? Or perhaps he simply doesn’t believe it – or doesn’t want to believe it. Anyway, it’s really really mind-numbing…maybe that’s it. Maybe he thinks the numbers on the chart will one day change.
Gab
3 Feb 12 at 10:08 pm
but the drop in NGDP was has big as the 30′s
That’s not true and says nothing about labour market behaviour.
Tax receipts as a % of GDP are lower than they were pre-GFC.
sdfc
3 Feb 12 at 10:12 pm
Your obsession with me is becoming quite disturbing, Gab.
m0nty
3 Feb 12 at 10:14 pm
JC, beyond the bile and vitriol you dish out beautifully (which a few posters here genuinely deserve), you manage to sneak in some quality nuggets of analysis…I love it. I really do…you have a talent. Kind of like Paul Keating without the Italian clocks and fucked up world view. The Libs could really do with someone like you…
Skuter
3 Feb 12 at 10:15 pm
If fact tax receipts as a % of GDP are at their lowest in almost 40 years.
sdfc
3 Feb 12 at 10:15 pm
Oops the rate of decline, not the absolute trough. I said that earlier, but of course everything needs to be spelled out more than once, as you miss it.
And spending us higher, but anchored by frothy receipts. So it’s an even worse budget position you dodo brain.
JC
3 Feb 12 at 10:16 pm
From a high rate of growth JC. The problem is when the economy enters a period of negative nominal growth, in other words deflation.
sdfc
3 Feb 12 at 10:19 pm
Obsessed with you, monty? In your dreams. I just don’t understand why you keep repeating the same rubbish when clearly you have been refuted each time. You must enjoy stepping on that rake. Is it a form of masochism?
Gab
3 Feb 12 at 10:20 pm
JC receipts are at a near 40 year low. The frothy receipts are in your head.
sdfc
3 Feb 12 at 10:20 pm
Lol.. Skuter… this is as a result of spending years over years on trading desks analyzing macro and trying to figure out how the next dollar was coming, so we could split it with the bank and feed the geedy families. hahahahahhahahaha
Dude, you would not want be within 100 mile of parliament, because if I saw someone like Adam Bandt, Mad dog Bob, the old lezzo, Oakenshitt or any of the other loons it would most likely be very violent and I’d be expelled. For the period I was there those doofuses would be attending press conferences with bruises and black eyes. Knowing those betas they’d be too embarrassed to admit to it and blame it on walking into doors for a while.
JC
3 Feb 12 at 10:24 pm
You’ve got to back your own judgement mOnts. Scientists are mostly fairly dumb kids who needed jobs with little social contact. Use them as a guide if you wish.
Infidel Tiger
3 Feb 12 at 10:26 pm
What do you use? The force?
sdfc
3 Feb 12 at 10:28 pm
Is Monty still claiming that burning houses down sabed Australia?
C.L.
3 Feb 12 at 10:30 pm
NO he’s saying that government spending stimulated economic activity.
sdfc
3 Feb 12 at 10:32 pm
I’ll repeat again.. Both directly and indirectly mining offers a very large share of those receipts and the reason they are trawling for more money by hitting the miners is because recurrent spending is expanding at an unsustainable clip each year. Look at what they just did for public sector personnel in the people services by raising wages between 20 and 40% on the lie that there is gender discrimination.
Figure out what they just saddled the country with as a result of a lie.
Call the average increase 35%, which is between the range increase. Take the average salary of 50K per year.
150,000 people in those services X 35% = $17,500 per year. = $2.6 billion increase per year.
That’s the sort of mindless spending I’m talking about and in a sector where no one was leaving because of better pay elsewhere. And also based on a lie.
JC
3 Feb 12 at 10:52 pm
“The thing I like most about mOnty is that he is a fucking expert about everything. It’s a rare gift.”
Absolutely. Internet guru, fantasy business guru, political strategy guru and macro economic guru. Oh, also meat pie guru. One fucking awesome dude.
DavidJ
3 Feb 12 at 11:04 pm
Then he’s incorrect
as usual.Rabz
3 Feb 12 at 11:09 pm
The over-promoted union clerks have actually blown 260 billion plus the surplus of $65 billion Howard left them.
Meanwhile Canada’s debt is IIRC something like $32bn.
In other words, as a ballpark figure the Australian Labor Party has racked up twice Canada’s entire national debt EVERY YEAR for the past five years.
How anyone can vote for these fucking morons again buggers the imagination.
perturbed
3 Feb 12 at 11:40 pm
It’s un-Australian not to be a meat pie guru.
m0nty
4 Feb 12 at 12:08 am
Bullshit, IT. 100% Colombian grade bullshit. You wouldn’t be smart enough to grasp the stuff they passed with honours.
m0nty
4 Feb 12 at 12:12 am
Erm… no. Public debt in Canada blew past half a trillion during the GFC and is well on its way to $600B (CAD).
m0nty
4 Feb 12 at 12:17 am
Yes, but I have had sex with a female human.
Infidel Tiger
4 Feb 12 at 12:17 am
Rather undergraduate comeback from you, IT. You haven’t really gotten over the fact you didn’t have as much sex at uni as other students, have you?
m0nty
4 Feb 12 at 12:18 am
I didn’t go to uni. I did watch a lot of 80′s movies centered around college frat parties though.
Infidel Tiger
4 Feb 12 at 12:20 am
m0nts – the classic comeback would’ve been:
Lift yourself out of the fog of leftist stupidity, Squire – you know you want to.
Otherwise, you wouldn’t be hanging around here 24/7…
Rabz
4 Feb 12 at 12:21 am
Even worse! You missed out, dude.
m0nty
4 Feb 12 at 12:22 am
I’m here for the hot libertarian chicks, rabbi. I hear they are really into freedom, if you know what I mean.
m0nty
4 Feb 12 at 12:24 am
Rabz
4 Feb 12 at 12:31 am
JC
Receipts were 21.6% of GDP in 2010-11, the lowest in almost 40 years. You’re wrong. Stop whinging its annoying.
sdfc
4 Feb 12 at 12:31 am
Tax as a % of GDP were 20% of GDP the lowest since 1978/9!
Yes if you examine the labour force data you will see a similar experience happening with regard to labour as in the recession we had to have and even the recession in 1982.
Employers hang on by reducing hours and waiting.
Just remember it takes a lot longer to reduce unemployment than it does to increase it.
China helped us out ( due to their stimulus!) by exacerbating our recovery.
The boost to our net exports was mostly imports falling more than exports not exports rising above the pack alah Iceland. This was also quite a short period of time.
It is fanciful to believe that we would not have had a recession without the stimulus.
Whilst I was working in the Funds Management arm of a Large Bank at the time I do know ( from my former colleagues)the bank cut back on lending because we lacked the funding ( A couple of State Managers in this area were told no new lending back as early as late 2007) and also we were VERY risk averse. You only have to look at the difference between FH owners lending and lending for investment in housing to see that. ( There was a reason for that as well!!)
Anyone dealing with lending knew their job was on the line if any of their loans turned out to be pear-shaped.
I have been told it was very similar at the bank where I work now.
It is interesting that only Labour can cut government spending in real terms. The Coalition seems unable to do this.
As an old Bond trader people clearly do not understand the reason for about half our gross debt.
Basel 3! The CGS market has to be maintained at a certain % of GDP.
This means it will rise each year every year.
Oh the figure of $100b for the stimulus is incorrect is incorrect
On your Marx
4 Feb 12 at 11:25 am
Doofus, spending has ratcheted up. Unless you think the coalition of union clerks and Stalinists will cut spending. taxes have to go up which they are once they start bagging the mining tax (if the High Court doesn’t tip it out) and the Carbon tax.
Except this time the dump was huge, in fact the biggest drop in NGDP since the 30′s. You can’t compare.
Whatever.
So Australia never experienced a terms of trade shock which was the biggest in a 150 years. You’re an imbecile Homer.
We would have registered couple of quarters of negative GDP. Big fucking deal.
Yes, we know banks were caught with their pants down as a result of the commercial paper market drying up. So what?
We know Homer.
Thanks for the personalized history lesson.
Homer, you stack shelves at woolies. You’re not working at any bank. Stop the pretense as we know who you are.
When has there ever been a real cut in spending in a current year and not forward estimates, you dishonest reprobate. Point to a year.
God help us if it were true. But it isn’t. You never sat at a desk and traded bonds Homer. You read Treasury bulletins and then put their argument in your own words. Don’t give me this crap you were ever a bond trader.
Whatever. By the way, did you stack the toothpaste section overnight?
JC
4 Feb 12 at 3:28 pm
First of all you do not know me and wouldn’t know if you walked past me in Gladesville!
Spending is 24.7% of GDP which is only slightly more than the average for the previous Government (24.2%).
It will fall below that next financial year.
They already have cut spending in real terms if you examine MYEFO!( 2010/11 if you care to look)
There is no reason why they won’t continue!
This fiscal contraction has happened without any help from strong taxation receipts.
Of course you can compare labour market reaction. Employers always wait to see what happens. as SDFC has said just look at the data.
They did the same thing in the US except there you had the great recession and unemployment rose drastically.
You obviously haven’t looked at when net exports were adding to GDP when the GFC hit us.
The shock you are talking about was AFTER, well after, the GFC hit us and it has yet to really have an impact either looking at the national accounts or at taxation receipts.
A Couple of quarters of negative growth has employers sacking a lot of employees. As I said previously reducing unemployment is a lot harder and takes a lot more time than increasing it. this and other associated things add to a deficit.
That was the point of the stimulus indeed of any stimulus.
The point of bank funding drying up is without funding there is little new lending. When banks a risk averse they are even more wary of lending.
In other words monetary policy was limited, very limited in assisting the ecoonmy to combat the GFC.
You obviously never look at either budget documents or MYEFO. If you did you would see only Labour governments have cut spending in real terms!
I was firstly a bond salesman and then a trader.
(I have also worked in credit, corporate lending and the retail side as well.)
This is why I knew why gross debt will rise this year, every year. No-one here did.
If you did some elementary homework you wouldn’t make so many mistakes!
Pay attention to SDFC as he obviously knows what he talks about
On your Marx
4 Feb 12 at 4:41 pm
Aye, the stupid is strong in this one.
In it proper place, and for the proper reasons, and at the proper scale, nothing. So if it is being used to fund items which will generate wealth over the long term (sufficient wealth to pay back the interest and principle PLUS more so that the nation grows wealthier, fine.
But if it is borrowed for consumption, it’s nothing but bad. So when Krudd the lying blunder-boy borrowed billions to ‘give’ people a $900 consumption boost just before one Christmas, this was 100% bad, stupid and wrong.
Except debt means interest. Hard to grow the economy if debt has been racked up for consumption is soaking up torrents of revenue in interest payments.
Try this yourself, Lez! Borrow $200,000 for a new car, house extension and holidays and see just how hard it is to grow your own economy (ie earn more income) to pay for the debts’s interest.
Poor deluded Lez. You think Bush racked up Krudd and the Juliar’s debts. Been on the New Guinea Gold again?
Mk50 of Brisbane
4 Feb 12 at 5:12 pm
lol. It appears I’m not missing much.
You left out:
1.NBN which is ratcheting higher by the week and
2. we know they are fucking around with timing differences.
I believe Judith here wrote a piece about that and you appear to be wrong. If it wasn’t Judith, it was Julie Novak. Take a looksee and then come back and apologize.
As well as fucking around with timing differences and leaving stuff off balance sheet.
And your point is what exactly, dumbo. Go back and read what i said. I suggested that labor warehousing took place because at that time, the clock hadn’t run out on Workchoices and firms knew they had flexibility so they waited. It wouldn’t happen under this regime with the same events. Raising the issue about what happened in the US actually supports my point, you idiot, as they too had and continue to have flexible labor markets.
And the price of tomatoes were steady this week according to the Coles supermarket update advert. What pointless point are you trying to make with that pointless statement?
The market began to see commodity markets stabilize, the Fed get a grip and unleash QE1. This happened in 4 or so months after the crisis. Are you telling me that markets were not sussing this out? Discounting doesn’t exist?
hahahahahahahahahahhahahahahaha So a carpet laying firm was encouraged by the sheer weight of the Lurch Rudd insulation fiasco, which later became a double stimulus because the fucking morons had to remove most of it from older homes.
Do you have any evidence for your assertion or is that all that’s required to prove your point that the science is settled?
Evidence please.
And? And you actually think the lurch Rudd Insulation Fiasco prevented firms from firing people? Are you retarded? Honest question.
What did the asset markets do here at the time? They continued to fall like it did elsewhere as markets read the intention as negative.
Yes of course it is even if it doesn’t work.
And?
I have to get a news set of tires for my car next week. What’s your point dumphy?
Reary. So a CB is limited to how much money it can create and therefore how many assets it can purchase to stabilize NGDP? Very few people agree with you, Horace.
Are you actually trying to peddle the idea that this bunch of union clerks and unrepentant Stalinists is equal to the Hawke Keating government? You obviously aren’t working anymore as you’re really not that bright.
Oh yea a bond salesmen and then a trader. That seemed to have worked out well looking at the fork in the road in that CV by going to lending.
So you knew Gross Debt would rise because, you’re a failed bond trader who later became a corporate lending jerk. Lol. Don’t make me laugh.
I do make mistakes like most people do. However I’m not a waffling windbag like you trying to peddle a discredited stimulus without proof other than trying to shove a resume in my face and think I’d be impressed. I’m not.
(I presume you worked in Australia as a bond salesmen right? Big market.
Why would I? He’s been getting a beating since he’s been here. You should ask him about his flow of funds theory. It’s a beaut.
JC
4 Feb 12 at 5:17 pm
JC
The employment data suggest employers have been warehousing data during downturns since at least 1978.
The flow of funds theory isn’t mine. That pays me too much credit.
The theory is however correct which is easier to understand when you understand that money creation is a function of the banking system.
sdfc
4 Feb 12 at 8:45 pm
Warehousing labour.
sdfc
4 Feb 12 at 8:46 pm
And the rate fall in NGDP was unprecedented since the 30′s.
SDFC, you keep the same comment and I’ll keep giving you the same response.
You had some cockamamie theory about this didn’t you? I thought you said it was a theory you have developed.
Banking system doesn’t create money and we’ve been through this before.
JC
4 Feb 12 at 10:46 pm
oops…. repeating…
JC
4 Feb 12 at 10:47 pm
Banking system doesn’t create money.
Incredible.
sdfc
4 Feb 12 at 10:54 pm
What’s incredible is that you think the central bank is not the only entity that impacts the money supply though base money.
Frankly I don’t understand how you can be a professional economist and not understand this SDFC.
Let’s go through this again as it seems you never understood money and banking 101.
Monetary contraction and expansion can only occur by permanent additions or subtractions through a central bank’s money market operations.
That’s it. There is no other way for money supply to either rise or fall.
Recall how we went through the example of that single dollar going through the banking system and you had great difficulty understanding it? Want to go through it again?
By the way, you’re on the same page as Bird in believing this.
JC
4 Feb 12 at 11:14 pm
That’d your problem Banking 101 where the money supply is exogenously determined. Outdated rubbish.
I’m surprised someone who has worked on Wall St isn’t aware of how the monetary system works. Money growth is a function of credit.
sdfc
4 Feb 12 at 11:36 pm
Outdated? How? The principles of banking and how banks function hasn’t changed in 100′s of years.
Lol. You shouldn’t be. Lot’s of wall streeters have little to no understanding of banking and money. Some of the most successful fund managers don’t. You’re a professional economist and have no idea.
Money growth is a function of base money, chum. Base money can only created by the central bank. Credit is a function of two things. Deposits and a bank’s capacity to lend within the confines of its leverage ceiling.
SDFC, you really don’t understand this, do you? Money and credit are not the same thing, you imbecile. It’s not a trivial mistake by the way but an enormous one.
This is where you Keynesian fall off the cliff. You are unable to distinguish between money and credit co-mingling both concepts as though they are the same thing. They are not and never have been.
Let this idea sink slowly. A bank cannot create an asset (a loan) unless it has a corresponding liability (deposit). If your “idea” was correct banks would not provide balance sheets because their fucking balance sheets wouldn’t balance, you dipstick. Every loan has to have a deposit at it’s most basic. If you want to prove your case then dispute these points first. Go!
And by the way, leftie tricks of substituting proof with shallow terms like “incredible” and other empty bravado doesn’t work with me as I don’t get intimated.. not even by the devil.
JC
5 Feb 12 at 12:06 am
So you think the monetary system is the same as it was 100 years ago? Explains a lot about your complete ignorance on this subject.
Lets let this idea sink in slowly. Bank loans create deposits. You obviously think we have 100% reserve banking. Like I said, incredible.
sdfc
5 Feb 12 at 12:16 am
Lets take you through it again. In an economy with two banks. Bank A lends money to a business, the business deposits the proceeds with Bank B. Bank A has a system deficit, B has a surplus. Bank A borrows cash from B.
A has an asset in the loan and a cash liablility. B has a cash asset and a deposit liability. The business has a deposit.
sdfc
5 Feb 12 at 12:25 am
No, I don’t really think banks these days move gold around various branches on carts or sail boat with a private militia guarding the hoard. However the principles of banking haven’t really changed much since the Italian principalities, then the Dutch and then the English began to practice modern day fractional banking. It’s still a function of lending money against deposits.
Bank loans create deposits? So you’re saying a bank lends out money even if it has no compensatory deposit? Are you fucking nuts?
There is a process of daylight kiting where a bank’s asset side can be bigger than its liabilities during the day. However that balance sheet has to balance by the end of the day. Assets have to equal liabilities or the bank is broke, you idiot.
What the fuck are you talking about. 100% reserve means nothing like that, you goose. You’re just making up shit as you go along.
JC
5 Feb 12 at 12:27 am
Okay.
This is always where you come a cropper. How can Bank A lend money to a business if it first doesn’t have the funds to lend that money you freaking moron. Bank A has to start with a deposit in order to lend to the business.
Agree with this first before we go any further.
JC
5 Feb 12 at 12:31 am
Banks don’t lend deposits. They are a liablility of the bank. Lending creates deposits. You really need to familiarise yourself with the banking system. If banks only lend to the value of their deposits what do you think the fed funds or ES market does?
sdfc
5 Feb 12 at 12:34 am
Oooh goody. This is like that game. Which came first – the chicken or the egg?
Gab
5 Feb 12 at 12:39 am
Of course banks don’t lend deposits, you ignoramus. Banks lend money but they have to have deposits (a liability) before they can lend money.
I find it incredible that is confusing to you.
Yes.
Yes.
You’re introducing concepts that have nothing to do with the subject at hand.
Do you agree that banks balance sheets must balance? Yea or no? Answer the question.
Look doofus, you started the example and the very first line was wrong, as you assumed the bank would lend without a corresponding liability and didn’t realize it had to exist before there was a loan.
JC
5 Feb 12 at 12:43 am
SDFC
Let me ask you again.. do bank balance sheets balance. Yea or no?
JC
5 Feb 12 at 12:45 am
I’ve already shown you how a bank balance sheet balances when a the banking system creates a deposit. Just a few comments up.
A loan and the resultant deposit is both an asset and a liability to the banking system. I have given the most simple explanation possible what is the problem. Go through my example line by line and tell me where I am wrong for god sake.
sdfc
5 Feb 12 at 12:49 am
No Pierpont Morgan. You did nothing of the sort. You showed Bank B receiving a deposit, but you clearly did not do the same for Bank A or bank a even having a liability to create an asset.
In your example, you numbut, Bank A made a loan without a deposit so it was broke on the first day of trading.
This is clearly not simking in is it. I’m tired and want to go to bed. However rubbing your nose in your stupidity is more fun.
Let’s go though this one more time. In the first point of your example you have Bank A making a loan and you then went through a serious of transactions showing how the money flowed.
However you simply had Bank A making a loan not even realizing Bank A required a deposit to make the loan to the business. Your stupid bank failed on day one, SDFC.
Add up all the debits and credits in your example and you will see the banking system is in deficit of $1000. You nimbus.
I can’t believe I’m having such a conversation!
JC
5 Feb 12 at 1:06 am
You’re not rubbing anyone’s nose in “it” JC. All you are doing is demonstrating you have no idea how the money creation process works.
Banks don’t need a deposit to make a loan. Explain where the banking system in my example is in deficit.
sdfc
5 Feb 12 at 8:06 pm
Oh no!
JC got pwned and he doesn’t even know it
I’m not surprised sdfc just gave up
BofO
13 Feb 12 at 7:15 pm