David Bidstrup guest post. Everlasting debt

The other day I watched Martin North and John Adams on their YouTube video called “In the interest of the people”, in which they gave some insight into the scale of the debt catastrophe the country faces after chucking money willy-nilly at “eradicating the virus”.

Large amounts always seem a bit unreal to me, imagining a Trillion dollars of debt is a bit mind boggling so I thought I would do a rough, simplistic analysis of repayment times and total cost. Just remember that I am an engineer and not too good at nuance, so the economic purists of Catallaxy, (of which there are many), might smile a bit at my naivety but the object is to try and see how big the paddock is.

I looked at 4 options for repayment of the debt and used the insanely optimistic assumption that interest rates would stay at around 2% forever. (PS, I know they won’t).

Here is my summary:

John Adams made the point that the recent budget made no mention of any scheme to repay this money. The focus was on generating enough cash flow to service the debt, so in essence Australia is in the situation of having an “interest only loan”, the sort that the government and regulators frowned upon a year or so ago.

This mornings “Australian” carried a front page story where the head of Treasury said “government spending will need to be reined in” and that “budget repair would be considered at an appropriate time”. I would suggest that the appropriate time to look at how we might ever get out of this mess is now.

If we re-paid a modest $10 Billion off the principal every year then the total would be repaid in 100 years, (2121), and the total cost, (in today’s money), around $2.01 Trillion. Mind you, when interest rates rise all bets are off.

The clowns who let this happen do not deserve to govern. They do not have the financial acumen to return a profit from a pub chook raffle and have sold future generations down the river with their incompetence. The scary thing is those waiting in the wings for Act 2 are worse.

Maybe it is time to make some hard decisions. First up, we might do better without the states. One mob of fools is one too many but we have another 8 mobs each pursuing their own brands of idiocy. It’s a noncuple cluster f*ck. Next we need to stop the quest for “nett zero emissions” and recognise that our coal reserves are a national asset, that thermal power stations are the best technology, that renewables are a confidence trick that enriches the carpetbaggers and ruins the grid reliability.

We might look at the submarines, (again), and perhaps recognise that if anyone wants to invade us the only thing we can do is KYAG. Perhaps the Swiss model of governance might suit us better than the abomination we have now with two groups of incompetent no-hopers vying for our vote.

We should also have a think about whether our “democracy” is serving us well. The theory is that governments govern with the consent of the people but history shows that we can get stuffed until it is election time. Maybe we need to recognise that the political process has been hijacked by 2 organisations who think that it is their right to “govern us”.

I find it infuriating that future generations will carry this debt burden.  In the “Covid crisis” in Australia we had around 30,000 “confirmed cases”, (diagnosed with a test that could get a result from a bit of dog poo), and just under 1,000 people died. Let’s consider that all this debt can be justified as “saving people from the virus”. If that were so, and we considered that the 29,000 cases that lived were saved by the debt then each life cost the country $69,310,345.00.

And they still want to tell us what to do.

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40 Responses to David Bidstrup guest post. Everlasting debt

  1. bespoke says:

    First up, we might do better without the states. One mob of fools is one too many

    Hell no! At the moment we can compare different a approaches (as little as they seem at times).

  2. Strayan Drongo says:

    We need more power at the state level, allow them to compete against each other and strip almost all power from the feds. We need politics to be local and about the people it really effects. The states get away with everything right now because there is hardly any political coverage at the state level, it’s all nonsense personality reporting on the feds. Also taxes need to be at a state level, nonse of this states have their hand out to the feds and are not accountable to their budget. I’m over the COAG as it stands, it’s set up to fail.

  3. egg_ says:

    The other day I watched Martin North and John Adams on their YouTube video called “In the interest of the people”, in which they gave some insight into the scale of the debt catastrophe the country faces after chucking money willy-nilly at “eradicating the virus”.

    Yours truly frequently posts their YouTube videos on the OTs.

    Adams in particular has been scathing of the Couf from the get go.

  4. John Bayley says:

    Don’t be naive David.

    That debt will never be paid back.

    Remember also that as bad as Australia is, we are still in a much, much better position than most of the EU or the USA; let alone Japan.

    They will try to inflate it away, or in some cases there will be hard defaults, same as what happened numerous times in Argentina.

    Lots of people will be robbed, although most already are experiencing the slow version of that robbery via zero interest rates and real, as opposed to the BS ‘CPI’ rate of inflation.

    In the meantime, the politicians will cover their behinds with the fig leaf of ‘MMT’ and carry on as before.

    Because all of this will work until it does not. This is a certainty; the timing of just when it all blows up, however, is anyone’s guess.

  5. egg_ says:

    The clowns who let this happen do not deserve to govern. They do not have the financial acumen to return a profit from a pub chook raffle and have sold future generations down the river with their incompetence. The scary thing is those waiting in the wings for Act 2 are worse.

    Locking down the Economy for two months and paying people NOT to work for twelve months – what could possibly go wrong?

    All because a political activist* Sydney Doctor was “terrified” of a new flu bug?

    ‘Terrified’ doctors warn young and middle-aged Australians are vulnerable to COVID-19

    *Sydney neurologist Kate Ahmad said Australian hospitals are expecting 15 to 20 per cent of patients infected with coronavirus to be severe enough to be hospitalised, with up to a third of those needing intensive care.

    /Bullsh1t on stilts

  6. Terry says:

    ‘We need more power at the state level…’ Yes

    …almost all power from the feds. Defence, Borders (Immigration/Quarantine), Foreign Affairs, Trade, Electoral Commission, Disputes between the states (High Court), and nothing else. No power to tax citizens; revenue received from States for hypothecated tasks only.

    ‘We need politics to be local…’ Yes. More direct democracy though, rather than local councils.

    ‘…and about the people it really effects.’ Limited decisions ceded to the [State] government. They administrate at the will of the people. When they propose legislation [they believe is] required to administrate, they draft and propose before letting the people directly vote (not unlike the Swiss Cantons).

    With more control and decision-making you will necessarily get a more engaged populace, which in turn helps weed out all of these unsuitable “career politicians” that currently infest the joint.

    ‘taxes need to be at a state level…’ Yes, and they have to be flat (the same rate for all – individuals and companies)… no more playing off one group against another. The “someone else will pay” mentality is why we have a Trillion Dollar Debt (TDD).

  7. Richard says:

    Strayan Drongo says:
    May 20, 2021 at 2:57 pm
    We need more power at the state level, allow them to compete against each other and strip almost all power from the feds. We need politics to be local and about the people it really effects. The states get away with everything right now because there is hardly any political coverage at the state level, it’s all nonsense personality reporting on the feds. Also taxes need to be at a state level, nonse of this states have their hand out to the feds and are not accountable to their budget. I’m over the COAG as it stands, it’s set up to fail.

    This!

  8. Mark M says:

    Re: nett zero emissions …

    Asia snubs IEA’s call to stop new fossil fuel investments
    https://uk.investing.com/news/commodities-news/asia-snubs-ieas-call-to-stop-new-fossil-fuel-investments-2376934

    Yet again shutting down coal in Australia and zero emission goals is utterly pointless.

  9. Eyrie says:

    Have a look at your local council. Do you really want politics to be local?

  10. egg_ says:

    No power to tax citizens; revenue received from States for hypothecated tasks only.

    That’s how to nobble the Scummos of this world.

  11. Peter says:

    Yes, all of this unnecessary debt is an absolute crime. I can think of no Australian government that has done more harm to this countries future prospects than this one, and that is really something, worse the Whitlam, Rudd, Gillard combined.

    They better have their election pretty damn quick, because this wanton economic vandalism is not going to travel well for very long, or very far.

  12. Lee says:

    Have a look at your local council. Do you really want politics to be local?

    No thank you!
    Although my council isn’t too bad, some Melbourne councils are left wing cesspits.

  13. duncanm says:

    Sydney neurologist Kate Ahmad

    who?

    Oh

    Neurologist. Feminist. Advocate for humans, animals and the environment. She/her. Living on Darug land

    Its all climate action, debbil debbil liberals and #israelareevilandshouldalldiebutimnotanantisemitereally

  14. Mak Siccar says:

    Sort of related to this thread. A letter in today’s Oz which which I concur 100%.

    Mad as hell

    Hi. My name is Jim and I too am politically homeless. (“Politically homeless in the hermit kingdom”, 19/5) I’ve been a conservative voter all my life but have arrived at a point where I can no longer support a party that will not take on the most basic issues. It’s all well and good to campaign on economic management and things like superannuation and the usual bread and butter issues but I’m in the market for a conservative party with a backbone. Time and again fundamental issues upon which we expect the government to act are simply ignored or left hanging. Whether it be the education curriculum or the latest case of outrageous partisan bias by the ABC, feckless conservative politicians go to jelly every time. At the next election, in a safe Liberal seat, I intend to get my name crossed off and then discard my ballot. I’m sick of them and “the alternative is worse routine” just doesn’t cut it anymore.

    Jim Ball, Narrabeen, NSW

  15. Mak Siccar says:

    with which

  16. duncanm says:

    $10B sounds like a lot (FMD, it *is* a lot), but the budget is $500B.

    So they only need to cut back 2%

    If they cut back 5%, you could pay off $25B/yr.

    It is quite clear to me that balancing the budget is never a consideration – rather, its ‘how much debt can the voting public tolerate while we throw cash about’

  17. Roger says:

    $10B sounds like a lot (FMD, it *is* a lot), but the budget is $500B.

    So they only need to cut back 2%

    Close the ABC and they’d repay it in c. 10 years (plus interest).

  18. Fair Shake says:

    Diamonds are forever. And the deficit will go close.

  19. Davo the spy says:

    One faulty assumption in the article trumps any other…that is incompetence. That may even be true…but they simply do not care. Whatever gets them voted back in is all that counts, under the self delusion that they as the government can help. So deluded are they that they think it’s really about Australia not themselves. Long looks in the mirror are needed

  20. Professor Fred Lenin says:

    Freydenberg said about the almost one trillion det is not as big as some other countries ,what a tosser ! “We owe a lot of money but tey owe more”? What the hell does that do for our debt? Absolutely SFA .
    Now the child molestors gang of criminals and fraudsters are adding trillions to Americas $28 trillion debt , third world debt for a third world country the USA .
    If a gang of criminals can steal an election and go unpunished ,its a third world country . One per cent of Americans own 40 per cent of all wealth and they own the politicians including the child molestor .

  21. Neil says:

    As everybody knows i am a Howard/Costello supporter. Since 1972 there is only one govt that has reduced govt debt- Howard/Costello. No only did they reduce debt they took it from 18% of GDP in 1996 to zero by 2007.

    Plus for extra good measure saved an extra $80B and put it in the Future Fund.

    Fact is both sides of politics cannot say no to govt spending and we are faced with ever increasing govt debt

  22. egg_ says:

    If a gang of criminals can steal an election and go unpunished

    Facilitated by a jellybacked Conservative SCOTUS – the swamp coup.

  23. Shy Ted says:

    I’m over the COAG as it stands
    Oh, it’s been replaced with something much more secretive, the National Cabinet. No minutes for you to access, just collusion. Methinks the WEF is invited.
    And the young ‘uns I know aren’t aware of the debt or it’ implications.

  24. Mango Man says:

    Public debt is certainly way up. But the one I worry about is the household debt fed by what is effectively an international syndication funnel. At the scale we play at, the risk profile is not unlike that of the offshore loans offered back in the 1980s before people discovered currency risk. In this case, the numbers are huge with a delayed effect in the syndication term.
    Rates are clearly on the way up and with the whopping spends under way here and in Australia don’t be surprised if they don’t come sooner than later.

  25. Anonandon says:

    Buy bitcoin

  26. RobK says:

    DB,
    I concur with the general thrust of the article and arguments right to the last bit:

    Let’s consider that all this debt can be justified as “saving people from the virus”. If that were so, and we considered that the 29,000 cases that lived were saved by the debt then each life cost the country $69,310,345.00.

    I can’t see that logic following to the conclusion because an unknown amount of people may have avoided exposure to the bug. That aside, the process hasn’t followed the protocols set out before the event, as described by Sanj in other posts. The lack of discipline displayed by the administrative medicos and other UN and government operatives is showing them to be not fit for purpose.

  27. Dot says:

    Eyrie says:
    May 20, 2021 at 3:30 pm
    Have a look at your local council. Do you really want politics to be local?

    Yes. No more amalgamations.

    I don’t want a General Manager. I want a mayor I can vote out. I want recall elections, town meetings, sortition and to be able to elect the chief dog catcher.

  28. Forester says:

    Nothing will change until more people are active members of political parties. Doesn’t matter which one, get all your acquaintance to join too. In your grandparents day it wax 40% of the population, it’s about 0.04% today.

    Especially residents in the electorate of Hornsby.

  29. Judge Dredd says:

    Soon, a future generation will burn it down and hang the traitors from the trees. It’s unfortunate that this is the way it will go as history repeats itself

  30. mundi says:

    Almost all Australian debt is held by super annuation funds.

    So the ‘problem’ can be ‘solved’ by simply taxing super annuation.

    You all know it will happen one day. It will just be the old “Why should a doctor retire on more than a janitor? Everyone should get an amount equal to the pension from their super fund. All excess money returned to pay the system which made them what they are.” etc. etc.

  31. Rabbi Putin says:

    Not a good justification by any means but:

    Everyone else is doing it.

    The nations of the world are all sloshing on unserviceable debt. The least-worst are from what I can tell, some former Warsaw-Pact nations that had the opportunity to clean the slate in the 90s, and micro principalities like Lichtenstein etc. But everyone is in the red, and has put it on the future to pay it back.

  32. Mater says:

    You all know it will happen one day. It will just be the old “Why should a doctor retire on more than a janitor? Everyone should get an amount equal to the pension from their super fund. All excess money returned to pay the system which made them what they are.” etc. etc.

    Yep. When it all gets too much, and starts spiralling out of control, it’ll be that and Death Duties.

  33. Zulu Kilo Two Alpha says:

    Yep. When it all gets too much, and starts spiralling out of control, it’ll be that and Death Duties.

    Death duties were part of the Greens electoral platform until a few years ago.

  34. Squirrel says:

    It wasn’t in his speech earlier this week (may have come up in a subsequent Q&A session) but Steven Kennedy was also reported as saying that recurrent spending would need to be cut by $40bn. p.a. to get the federal budget back in to some sort of balance – even after virus-related spending stops.

    With so much of the federal budget effectively off-limits (because touching it would be the political equivalent of starting WW3), the only hope to get anywhere near the $40bn p.a. figure (which is probably an optimistic estimate) would be through a truly radical reduction in the costs of governing the nation – cut the federal government back to its core functions and keep the states, but with much more co-operation between states on policy and program development, so that “back office” costs are kept to a minimum. Competitive federalism is fine, but we don’t need to have eight governments constantly re-inventing the wheel – at taxpayers’ expense – in every area of policy.

    In the longer term, there would still be serious questions about the fiscal viability of the smaller jurisdictions (i.e. both territories, Tasmania and SA), even with scaled back administration costs, because of their limited revenue bases and somewhat less scope, in future, for the larger states to continue cross-subsidising them.

    Geographical realities mean that they would need to be kept going as the least worst option for service delivery – there probably wouldn’t be too much to be saved from trying to run the NT from Adelaide (or Tasmania from Melbourne…..).

    The exception to this would be the ACT, the need for which would be much reduced with a scaled back federal government. In a more rationally and efficiently governed Australia, Canberra could have a council, like other regional cities, with state services provided by NSW and the Parliamentary precincts etc. controlled by the Feds. Aside from saving money, this might also help to break down the Bubble mentality which seems to infect so much of what emerges from that town.

  35. Rafe Champion says:

    Good call Squirrel!

  36. Petros says:

    The federal department of agriculture, water and the environment could easily go.

  37. Ellen of Tasmania says:

    Have a look at your local council. Do you really want politics
    to be local?

    Most of them are signed up to Agenda 21/30. It’s the UNs way of bypassing national governments. Makes local council-people feel special.

  38. old bloke says:

    Petros says:
    May 21, 2021 at 7:50 am

    The federal department of agriculture, water and the environment could easily go.

    Also, Education & Health.

  39. Neil says:

    Amazing how quickly things can change. Since Howard/Costello were running surplus budgets there was a protest because they stopped issuing govt bonds. Several large organisation like Super Funds were banging on the Govts/Treasury door because they govt stopped issuing bonds. After a Treasury review the govt decided to issue at least $50B in bonds and then reinvest that borrowed $50B

    https://www.aofm.gov.au/publications/speeches/changing-issuance-and-debt-management-landscape-what-matters-most-next-sydney

    Fifteen years ago the decision was taken to maintain the Australian sovereign bond market at around $50 billion, despite a run of budget surpluses that would have eventually enabled gross debt to be fully repaid. The cash arising from these cumulative surpluses ultimately formed part of the Future Fund seed capital – in itself a major debt management policy decision. This was a period of reducing net debt (which soon thereafter became negative) while maintaining a discretionary level of gross debt.

  40. FlyingPigs says:

    David B.

    They ‘have’ to keep borrowing money because they have destroyed the natural income base and then ‘swirl’ those borrowings through the ‘economy’ in a Sovereign Ponzi Scheme to make it ‘look’ like a GDP.

    We need more States, unshackled from Ponzi cities that produce stuff all, and given a clean slate to write their own laws funded by the “Crown” royalty on the management and exploitation of natural resources.

    Stop the bastards from taxing us.

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