JoNova

A science presenter, writer, speaker & former TV host; author of The Skeptic's Handbook (over 200,000 copies distributed & available in 15 languages).


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Keynes versus Hayek: Big government versus individual rights

Check these out. There’s been an ongoing war of ideas, Hayek vs Keynes, for eight decades and counting — and these videos sum it up consummately. This ongoing academic fight has shaped lives and countries for decades: booms, busts, unemployment, and possibly even wars.

Indeed it’s an ominous sign of the times that there is a resurgence of this debate. (The masses take no interest in monetary policy when times are booming.)

(If you are in a tearing hurry, skip the first minute).

I’m not a rap fan, but this is so good that, for the first time, I have to admit rap has its role.

There’s a second in the series and it’s even better.

* * *

There are parallels between climate and economics. Using global markets against “man made global warming” is a Keynesian solution to the weather.

The big left-right divide is not about conservative versus progressive. The “progressives” want us slow down, and give  up cars, flights and air conditioners, and the “conservatives” fight to keep development rolling. Ultimately the left right dichotomy boils down to the individual versus the collective. Thus Keynes (the big government solution) is the collective end, and Hayek (let the free market decide) makes the most of individual intelligence and choice.

On these YouTube videos, the Keynsian econs students wield jargon with flair in the comments, but ultimately, they miss the point. Could Keynesian “stimulus” packages be good at some point in the economic cycle? Sure. But do we have to have a cycle? If there were no low interest rate fueled booms, there would be no need for stimulus bailouts when it busts.

Fame and rewards go hand in hand with being a champion of collective action. It suits those who hold the largest purse strings in the land. Those who oppose pumping that purse, always push against the tide.

The Hayek team stands up for individual rights, and has few big backers, not government agencies, not bankers, not big business. The skeptics stand up for individual rights — for the right not to have liberties and finances confiscated for no good reason. If the skeptics win, millions benefit. But if alarmism wins then, like when Keynesianism reigns, big government and some financial institutions grow larger — government power and patronage increase. Paradoxically skeptics work to benefit all the people equally, yet have few collective backers. Even the large fossil fuel companies have put more money into renewables, or carbon trading, than skepticism.

This review of a book on Keynes is worth reading. My favourite snippets from a fascinating struggle:

The Addled Theories of John Maynard Keynes
by George C. Leef, Reviews Hunter Lewis‘s book

Where Keynes Went Wrong: And Why World Governments Keep Creating Inflation, Bubbles, and Busts
by Hunter Lewis (Axios Press, 2010); 384 pages.

Instead of being laughed at and ignored, Keynes became a giant, however. That seeming oddity is explained by the fact that his ideas were enormously appealing to statist politicians and academics. They gave intellectual respectability to a vast increase in government power. Ordinary people are harmed by that because expanding government inevitably means decreasing freedom and decreasing economic efficiency, but scarcely any of them understands how they are hurt by Keynesian voodoo. After reading Lewis, it’s impossible to disagree with Murray Rothbard’s judgment that Keynes was “a charming but power-driven statist Machiavelli, who embodied some of the most malevolent trends of the 20th century.”

At the outset, Lewis observes that Keynes wasn’t really an economist at all, but was “the first of a breed that we have come to know well: the government policy entrepreneur. He lived and breathed policy, loved being consulted, pursued and even lionized by the political and business elite.” The policy that Keynes pushed was the antithesis of laissez faire. Rather than leaving the economy to the “invisible hand” — which is to say, to millions of individual decisions and transactions — Keynes wanted experts such as himself to control “the commanding heights” and make the choices that would shape the general contours of the economy.

The Austrian theory stood in direct opposition to his own explanation, but Keynes never engaged it. As Lewis shows, Keynes was good at using satire and misrepresentation to make himself seem far smarter than “old fashioned” economists, but he never bothered trying to refute the Mises/Hayek explanation for the business cycle.


* * *

Keynes may not have had it right on economics, but he was a smart man:

“The ideas of economists and political philosophers, both when they are right and when they are wrong are more powerful than is commonly understood. Indeed, the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually slaves of some defunct economist.”
* * *

By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.

John Maynard Keynes

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174 comments to Keynes versus Hayek: Big government versus individual rights

  • #
    MattB

    I never thought I;d see the day you backed an ETS Jo! Indeed let the markets decide…

    [Ha Ha. Good one Mattb. Its only Keynsians who think an ETS has got anything to do with a free market, but then you knew that didn't you. ;-) . We all know that in a real free market, the price of carbon is $0.]

    [The fickle nature of a fake free market]

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  • #
    presto

    The global warming scam and CO2 tax should have (could have) been the catalyst for a lot of people to wake up these issues.
    The role of money, the government, the central banks, the intranational corporation are all HUGE monolithic topics that most people have no clue about.
    Funny how all roads lead back to the money trail.
    It’s all tied together.

    Goldman Sachs, Wall St, IMF, World Bank, the UN ..
    Government is now hand in hand with these unelected, unaccountable, bloated organisations and is effectively corporatised.
    Governments main function is as a buffer between the banksters and the tax payers.
    We need a major overhaul in the role and function of governance by the so called ‘political elite.
    Our two party political duopoly just keeps the game afloat.
    Left versus right is irrelevant and is ultimately just a distraction, a big side show.

    As an Australian, I enjoy listening to Ron Paul a US politician who talks about sound money and the role of government in protecting our civil liberties. While he may not have all the issues covered to everyone’s satisfaction, he is the most humble, articulate and responsible politician I have ever heard. He has been warning Americans for decades about bailouts, BIG govt and giving them the sort of solutions I wish could be enacted here in Australia. The government (at all levels) should be out of our lives and out of our pockets. The CO2 tax will make that harder to achieve and obviously that is the intention.

    “I believe that banking institutions are more dangerous to our liberties than standing armies.
    Already they have raised up a moneyed aristocracy that has set the government at defiance.
    The issuing power of money should be taken away from the banks and restored to the people to whom it properly belongs.”
    - Thomas Jefferson.

    “The issue which has swept down the centuries and which will have to be fought sooner or later is the People vs. The Banks.”
    -Lord Acton, Lord Chief Justice of England, 1875

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  • #
    Roy Hogue

    By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.

    And so they are doing! Debauch is exactly the right word. It’s the lowest of the lowlife kind of act against a people.

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  • #
    Roy Hogue

    Hi Matt,

    Where exactly did Jo mention an ETS? I must have missed it.

    Have a great day!

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  • #
    FijiDave

    Former New Zealand Prime Minister, Robert Muldoon said it:

    “If these economists knew what they were talking about, you’d only need one!”

    His remark is quite useful for eliciting some pithy comment from an economist friend of mine. :)

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  • #
    David, UK

    On a related note (economic ignorance and stupidity) check out this post over at Ray Harvey. It features a clip of Obama blaming unemployment and poverty on technological progress and the greater efficiency that goes with it. Yes you read that right: greater efficiency is a problem! He gives the example of the ATM machine doing a job that was previously done by bank tellers – like that kind of progress and efficiency are problems that needs fixing. See it to believe it, and weep.

    http://rayharvey.org/index.php/2011/06/obama-versus-technology-atms-responsible-for-unemployment/

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  • #
    Damian Allen

    A new low for Fielding First, Labor and Greens

    http://blogs.news.com.au/dailytelegraph/piersakerman/index.php/dailytelegraph/comments/a_new_low_for_fielding_first_labor_and_greens/

    Steve Fielding will always be remembered by Australians as a TRAITOR to his country and his fellow Australians !

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  • #

    MattB: What has an ETS brought into being by government edict and maintained by the threat of force (any government policy) got to do with letting markets decide?

    You really are an idiot troll.

    [Mike. Please. Be polite, Matt is not a troll. --JN]

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  • #
    Damian Allen

    “MattB”,
    Not the sharpest TOOL in the shed………..

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    RJ

    There is no right answer though

    I like the Govt as the ref with private enterprise producing the goods and services but even this does not always work. Especially if either become too powerful.

    And I would not leave the money supply entirely to the free market as we tried in recent years. It was a disaster. It almost guaranteed boom and bust.

    And this comment is no longer entirely correct. But few know why (and Govts are taxpayers so its really was just a transfer of wealth)

    By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.

    It banks now. We have now moved almost entirely from a 50/50 debt free money system (notes and coins) and debt based commercial bank credit to almost 100% commercial bank credit

    So Govts no longer confiscate wealth by decreasing the value of money. It never was entirely the Govt anyway. Banks benefit now but the Govt allowed them to by mostly removing the fractional banking restrictions.

    [RJ - The price of money is fixed by decree of an unelected committee. There is no free market in money. There has not been one in living memory. The booms are created artificially by easy money. -- JN]

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  • #

    Damien Allen, your blood pressure will benefit when you start assuming that all politicians are criminal psychopaths. Now and again one may do something which shows that he or she isn’t. This will be a pleasant surprise instead of the endless series of disappointments which results by assuming that they aren’t.

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  • #
    Llew Jones

    I dropped a little hint on a previous thread that Monckton may not have got into as much trouble had he compared Garnaut with Mussolini rather than the “Aryan Race” obsessed Hitler:

    “FASCISM—KEYNESISM—SOCIALISM”

    An amazing development of Keynesian theories is the fact that fascist governments found it easy to borrow them. This fact has been publicly acknowledged by Fascist forces.

    Mussolini personally set his approval and signature over a book which proclaims:

    Fascism entirely agrees with Mr. Maynard Keynes, despite the latter’s prominent position as a Liberal. In fact, Mr. Keynes’ excellent little book, The End of Laissez-Faire (l926) might, so far as it goes, serve as a useful introduction to fascist economics. There is scarcely anything to object to in it and there is much to applaud.(1)

    Keynes’ book, End of Laissez-Faire, was his most pronounced and clearcut advocacy of socialism. This Keynes work was not only enthusiastically embraced by Fascism but was listed as required reading by the League for Industrial Democracy and the Rand School of Social Science in the United States (both Fabian socialist). Harvard economic and sociological courses have repeatedly used the End of Laissez-Faire as required reading for undergraduates.

    The above quoted fascist protagonist further writes that in so far as Keynes’ teachings are concerned:

    All this is pure fascist premises and I cordially recommend Mr. Keynes to proceed to Italy and there to study Fascism with an open mind and with the same scrupulous care as he has studied Bolshevism. An essay from his pen on Fascism would doubtless prove a most valuable piece on constructive criticism.(2)

    Harvard’s socialist theoretician Schumpeter in writing of fascist economists under Mussolini, said:

    It is important to emphasize that even in treatises that took a professedly sympathetic attitude to the citta corporativa (corporative state –ed). the analytic parts did not differ from generally accepted economic doctrine and could have been written just as well by enemies of Fascism.(3)

    The same collectivist formula fits both fascism and socialism. In his brilliant work, The Road Ahead, John T. Flynn states:

    . . . the line between fascism and Fabian socialism is very thin. Fabian socialism is the dream. Fascism is Fabian socialism plus the inevitable dictator.(4)…….”

    http://www.keynesatharvard.org/book/KeynesatHarvard-ch07.html

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  • #
    MadJak

    I liked the vids there Jo. I really don’t think a stimulus does anything but buy time from an economic perspective. It’s pointless unless the systemic issues are sorted out, of which there really is no evidence of.

    Just like with AGW – reducing Co2 before we have a real proven understanding of the climate, is folly for exactly the same reasons.

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  • #
    V

    KEYNESIAN = Tell a big lie so the dumb masses will blindly go along with it because they trust you!.
    And if they don’t we will try coercion, payoff’s and the distortion of facts.
    And if that doesn’t work We will try vilification of opposing views because after all we know what’s better for YOU.
    When we have exhausted all We will appeal to mother nature she has many friends, No one can deny her.
    God forbid our treachery be found, for WE have nowhere to hide, And if we tell you its only ABOUT OIL AND MONEY that we
    don’t want you to HAVE, AHH there’s the rub.

    HAYAKSIAN = Think for yourself, question everything and if there’s money involved you can bet there’s plenty to be made behind every lie!. GOD made us equal on that NO one can deny! So to think that the KEYNESIAN has the right to deny others of the benefits of a MODERN life is surely the greatest lie!.
    The KEYNESIAN science will not accept any other reasons for the BAD GAS, Gee the SUN spots still come and go, Lest we forget our own simple past of experiences of floods and Heat waves the same ones our grandfathers had, Gee isn’t the world going made over a Gas that forms our very life, AHH maybe that’s why the KEYNESIAN want us all dead.

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  • #
    Winston

    Madman at #14
    It is even greater folly to react to the alleged threat of CO2 by reducing the cost effectiveness and availability of fuel before there are any viable alternatives on the table that could realistically take there place. But in true Keynesian fashion, why worry about such details?

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  • #
    Winston

    Madjak, my apologies for the auto correct of your name! Bad eyes.

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  • #
    RexAlan

    Hi David,

    “It features a clip of Obama blaming unemployment and poverty on technological progress and the greater efficiency that goes with it”.

    I always suspected Obama was “Luddite”.

    http://en.wikipedia.org/wiki/Luddite

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  • #
    Winston

    On a related note, the Great Depression served it’s purpose for the elites ( exemplified but not limited to Morgan,Rockefeller and their ilk), as a massive wealth concentration scheme which is the real purpose of boom bust cycles with the Keynesian method. Those that believe that the Depression was an accident of fate are seriously deluded. Many dry runs were attempted before WW1 before the post war boom made stock prices rise well above their true value on a wave of post war euphoria. The elites saw a correction coming but in true Keynsian fashion encouraged the boom upwards, before pulling the economic rug out from under their nouveau rich pretenders living on credit. The bust was a controlled explosion on Wall Street at a predetermined time when all the elite players had maneuvered their money into safe areas. Then, boom! A massive economic explosion with massive collateral damage which effectively reduced their APPARENT wealth slightly but increased their REAL buying power exponentially overnight while simultaneously reducing the wealth to a small group of insiders while others went to the wall. Joe Kennedy was one of the few who caught wind of it and jumped ship at the opportune time, saving himself from ruin. A lot of what’s happened since economically has been as a direct result of this massive scam and the similarities today’s credit crunch environment is tool uncomfortable for my liking.

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  • #
    Rereke Whakaaro

    Llew Jones: #13

    Excellently put Llew.

    But your juxtaposition of Fascism-Keynesism-Socialism implies that they are on a spectrum. And I am not sure that is a good way of representation.

    Conceptually, I have always considered both Fascism and Socialism to be a the same end of a spectrum (with laissez faire Capitalism at the other).

    The only material difference between Fascism and Socialism, as far as I can see, is the question of who owns the means of production: Private ownership in Fascism, collective state ownership in Socialism. Both use the Keynesian principle of the State having overall control of what can be produced, and how it will be distributed.

    Disclaimer: My first introduction to political economics was to read “The Virtue of Selfishness”, by Ayn Rand, and I have come to the conclusion over the years, that economics is one of those fields where your world views are determined by the first text you read.

    It is interesting to note that China, with its “communist” political system is actually less Keynesian than the United States.

    The Chinese do not trust banks, so they put profit into physical assets – primarily precious metals. This reduces money to being just the means of conversion between one item of material wealth to another item of material wealth. Asians (in general) therefore make a clear distinction between money (temporary) and wealth (material).

    In the “west”, money and financial assets have become the end goal, and that is what provides the banks, and ultimately the Government, with their source of power. In the west, we confuse money with wealth, and we do so at our peril.

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  • #
    MadJak

    Winston@15,

    No worries, as you can probably tell by the name, I don’t take myself too seriously…

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  • #
    lmwd

    Thanks Jo. Loved those videos. Brilliant stuff!

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  • #
    Tel

    The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.

    Maybe that was true back in Keynes’ day but in modern times everyone “gets it” about inflation. That’s why people in Western nations simply don’t keep savings in the bank anymore.

    What’s more, when faced with debt deflation, you know that governments will be reduced to money printing to fill in the hole. Even the German government, with an absolute constitutional safeguard against inflationary money printing (and a powerful constitutional court), and the now infamous no-bail-out clause (Article 125 of the Treaty on the Functioning of the European Union) have not been able to stop the process of throwing new money into the holes left behind by past mistakes.

    Money is a vehicle for trade and exchange, it is not a vehicle for saving, and no one considers it to be such anymore.

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  • #
    Tel

    The only material difference between Fascism and Socialism, as far as I can see, is the question of who owns the means of production: Private ownership in Fascism, collective state ownership in Socialism.

    Except that fascist governments are highly likely to forcibly transfer ownership of assets from an uncooperative private owner to another who is better favoured by the state. They also enforce quotas on commodities, labour and foreign exchange, to the point where “ownership” is largely a pointless token.

    Also, under Communist systems generally party officials get to build their own fiefdoms within the so-called people’s property. Thus the collective ownership is also a pointless token.

    The difference is the way they view themselves and the lies they tell to hide what they do. Nothing more than that.

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  • #
    Harry The Hacker

    Way too simplistic. Keynes was an analyser – and was consulted by governments for prescriptions for problems at the time. To say that he advocated any one single solution for ever and all time is I think a bit of a stretch too far.

    Similarly, allowing markets to decide everything will not eliminate the boom and bust cycle. Human greed will see to that. You only have to look at the recent GFC which had its roots in a huge removal of regulation of US financial businesses.

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  • #
    Harry The Hacker

    Just to follow up on my comment @24 – I’d suggest reading “Doctor Strangeloves Game”, its a great read about economic history.

    Coming away from that leads to only one conclusion: everything is more complicated that it seems, and anybody who has a prescription for fixing all the ills is either a con-man or a liar (or both).

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  • #
    JMD

    By a continuing process of inflation….. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency

    Why don’t you get to the real root of the problem Jo? You seem to have some understanding of the nature of money.

    Money and debt are as opposite in nature as fire and water; money extinguishes debt as water extinguishes fire. Charles Holt Carroll

    There would be no carbon ‘credit’ if it wasn’t for the government monopoly on the issuance of the currency. Monetary (read credit or debt) inflation and the power it gives those who control the levers of credit is the problem.

    There are a thousand hacking at the branches of evil to one who is striking at the root. Henry D. Thoreau

    [Thanks JMD. I believe I did get to it two years ago when I wrote, carbon is just another Fiat Currency.]

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  • #
    MadJak

    Harry,

    If I remember correctly Keynes advocated paying down debts during the boom times and using stimuli to get through the rough patches.

    Unfortunately very few politicians wanted to pay down debt when the going was good.

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  • #
    Winston

    Except Howard/Costello, to their eternal credit, whatever other faults they may have had. Were it not for them, the mess we are in now would have been far, far worse. The labour government has increased government size and waste to monumental levels, but fortunately off a sound base. If a government throws around money like confetti, everybody is going to want to have a wedding! Nevertheless, a return to fiscal responsibility is absolutely urgent to limit the damage already done.

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  • #
    J.Hansford

    MATTB!!!…. LOL… You completely missed the point. An ETS is not a Market. It’s a regulation forced on a free market.

    Say two hail mary’s and watch video’s one and two again…. Please. :-)

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  • #
    RoyFOMR

    I picked up the relevance of rap just a wee bit before you Jo.
    Only just though!
    These two videos and, particularly the last one, were gob-smackingly superb. The similarity ‘twixt economics and climate science were displayed for all, who would look, to see.
    Guess it’s all about differentiating between top-down versus bottom-up control.
    Explains a lot. If you think you’re a top-of-the-tree dweller you

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    J.Hansford

    Madjak…. Towards the end of his life, Keynes started to doubt the wisdom of his theory apparently. But he died before he could properly discuss it…. Though it probably wouldn’t have mattered. Big Government was in love with it and well partnered with their Corporate Cronies.

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    incoherent rambler

    Motivations for ones actions in economics and science are less important than the measurable results.
    Because you are motivated to save humanity and/or the environment or make the poor richer has no bearing on whether the actions you prescribe actually work.
    Test the economics by asking when have economists(of any persuasion) been proven correct?
    Equally, when have “climate scientists” been proven correct?

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  • #
    Rick Bradford

    > Ultimately the left/right dichotomy boils down to the individual versus the collective.

    You could equally say it boils down to the optimistic versus the pessimistic.

    Are you so pessimistic about humanity that you think its every action must be controlled by a self-appointed elite (collectivism), or optimistic enough to believe that for all its faults, humanity will always find a way to muddle through?

    Example: the most pessimistic regime in history was undoubtedly the Soviet Communists.

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  • #
    J.Hansford

    Rereke Whakaaro:
    June 26th, 2011 at 9:22 am
    It is interesting to note that China, with its “communist” political system is actually less Keynesian than the United States.

    That’s because the Chinese are not Communist…. The Communists are Communist.

    The Chinese individual, is a merchant at heart…. Their diaspora can always be found selling things in small shops….. anywhere in the world. ;-)

    …and it is why, that in the long run, the Chinese Communists are going to be in big trouble…. and thus a return to violence. It’s going to be interesting to see what happens.

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  • #
    ROM

    Regardless of any supposed system of finance or the way it is implemented, the entire global financial system is based on continuous growth in both material goods and in the monetary supply. We see this almost pathological adherence to growth at all costs in the constant political and business demands for an ever increasing population as we are told, this will increase the size of our economy and ensure further [ business ] growth. To what ends are never revealed or I suspect thought about much by those demanding the increased population base.
    Just that they will make more money and increase their wealth one way or another with more people to sell to.
    Demographers are reasonably certain that the global population will stabilise at around the 9 billion figure by about 2040 / 2050,
    There is ample evidence already of the slow down of the population increase in almost every developed country. A similar slow down in population increase is now becoming evident in the less developed countries as well to the extent that even China with it’s past one child policy is now starting to look at a situation where within another decade or so they will actually be starting to run short of new workers for their industries.

    So by about 2050 the global population may well have stabilised and will then continue to fall at an increasing rate into the future.
    As that future population ages it’s material needs will also decline and consequently the growth factors inherent in and an absolute necessity to keep our present type of global financial system operating will also start to decline.
    Every time such a decline in economic activity in our present system has occurred it has led to a serious recession or even a depression.
    So if our particular global financial system is still operating after say 2050 it is quite likely that the entire global economy will increasingly just stagnate as the required growth that is needed to keep it going drops off with the declining global population base,
    The canary in the mine in this instance is Japan with it’s aging and now declining population and a basically stagnant economy since the early 1990s. And despite a strong xenophobic attitude towards foreigners it is now importing a lot of it’s labor needs as it’s industries run short of new young native born japanese workers.
    Every time such a financial and economic stagnation has occurred over past centuries it is followed by a collapse in the economic and social systems and a massive rise in civil discord, wars and general strife.
    If our civilisation is to survive and it will somehow, then it will need the creation of a new financial system by 2050 if the demographers are right, that can deal with a declining and aging population and declining economic and industrial activity.
    If mankind doesn’t manage that change through democratic means then the future is really up for grabs most likely by a totalitarian regime that will as usual with such regimes, have no scruples or empathy with those under it’s control.

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    [...] Keynes versus Hayek: Big government versus individual rights [...]

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  • #

    MattB: June 26th, 2011 at 1:46 am

    I never thought I’d see the day you backed an ETS Jo! Indeed let the markets decide…

    Alarmists are always economically illiterate. ETS has nothing to do with the free-market regardless of them falsely calling it a “market based approach”. Government fiat has nothing to do with real free-markets,

    Cap & Trade Is Not A Market Solution (Robert P. Murphy, Ph.D. Economics)

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    Harry The Hacker: June 26th, 2011 at 11:36 am

    Similarly, allowing markets to decide everything will not eliminate the boom and bust cycle. Human greed will see to that. You only have to look at the recent GFC which had its roots in a huge removal of regulation of US financial businesses.

    Wrong, you need to study this subject better,

    Understanding the financial crisis (Video) (8min)

    I suggest reading,

    Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse (Thomas E. Woods Jr., Ph.D. History, 2009)
    Financial Fiasco: How America’s Infatuation with Homeownership and Easy Money Created the Economic Crisis (Johan Norberg, M.A. History, 2009)
    Gambling with Other People’s Money (PDF) (Russ Roberts, Ph.D. Professor of Economics, 2009)
    The Housing Boom and Bust (Thomas Sowell, Ph.D. Professor Emeritus of Economics, 2009)

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    Llew Jones

    Rereke Whakaaro@20

    R,

    I must fess up I’m an engineer and all I know about economics can be summarised in “Have you heard this one …. . I’ve got a few jokes about economists.

    In what seems a past life now I used to have fun on the left wing The Nation blog stirring up the American lefties aka liberals. The liberals of course thought Bush and big business were fascist cronies of the corporate State known as USA. When I did a bit of googling I discovered that Keynes, their hero, was a bit more sus than Bush etc. So just trying to be helpful and advance their understanding I advised the lefties on The Nation of that truth. That’s when expletives were added to “You Aussie Smart Ass” Which I’ve always assumed we spell differently.

    So when I noticed Keynes being mentioned here it brought back those fond memories.

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    The U.S. Housing bubble which was the root cause of the recent GFC was cause by government intervention in the housing market. The bubble is clearly illustrated here.

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    bananabender

    Economies and climates are very similar – they are both chaotic and non-linear. Trying to control either is an exercise in futility.

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    Oblong

    By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.

    And more evidence of inflation now as there are moves to scrap the 5 cent piece (although that was being suggested back in 2009, too: http://www.watoday.com.au/national/5cent-piece-not-worth-a-cracker-20090523-bimh.html)

    Of course it’s not “high metal prices” as such that are the problem, but a devaluation of the currency by a continual increase of the money supply (of which high metal prices are a symptom, not a cause).

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    You could equally say it boils down to the optimistic versus the pessimistic.

    Are you so pessimistic about humanity that you think its every action must be controlled by a self-appointed elite (collectivism), or optimistic enough to believe that for all its faults, humanity will always find a way to muddle through?

    Not quite. If you are optimistic about humanity – that all people are really good or confused and can be talked into doing the right thing, then you might think a collective approach where we just ask everyone to work hard and reward them all equally might stand a chance of working. If you are pessimistic about humanity, and you know that all of us are flawed, and some of us are also crazy psychopathic dictators you know that no ruler can be trusted, and there’s no way collective action ought be allowed to dominate individual choices.

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    gytr

    I don’t know if it’s been mentioned on this site before, however today I watched a movie called “Inside Job”, narrated by Matt Damon, a documantary about the lack of action taken by the various Governments in the US, before and after the GFC meltdown.

    I drew some rather alarming comparisons with regards the CAGW (or whatever they are calling it these days) and corruption of politics/policy makers. Substitute Greenpeace for Goldman – Sachs and you’ll see what I mean…

    Seriously I strongly recommend watching it and applying the current situation to it.

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    gytr

    By the way, I should add that I studied Economics (Econometrics major) and then discovered my only real career choice was to join a bank or ABARE… Which is why I’ve worked in IT for the last 18 years…

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    Bulldust

    It’s pretty simple really. Markets work best unless there is a demonstrated fault in the market with respect to competitiveness. That is why governments tend to step in when markets result in a monopoloy, for example, if the monopoly company starts to exert its non-competitive power. But first, and always foremost, it must be demonstrated that the monopoly is exerting such power.

    In this way it is identical to the CAGW debate. Until such time that the CAGW hypothesis is proven beyond reasonable doubt, there is absolutely no reason to take “action against climate change” (as the politicians are so fond of saying, laughable as it is) and only IF the cost of said action is more economic than doing nothing (or adapting to said climate change). The CAGW side has not proven anything close to “beyond reasonable doubt” that there is anything to worry about, let alone that action is justified economically, Stern’s laughable efforts notwithstanding.

    The whole CAGW debate, as I have said so many times:

    A) FAILS on scientific grounds (as shown amply to those sceptical enough to accept anything other than pure IPCC dogma);
    B) FAILS (for Australia) on economic grounds (see my paper published a couple weeks ago); and
    C) FAILS politically because there is no popular support for it.

    Three strikes and it should be out, but somehow this Fabian zombie dogma will not die. Even if it did the UN would be along with Agenda 21, telling all us non-socialists how we should live and die.

    Politically I am centrist, by Australian standards, but based on this policy alone I could never vote Labor again as long as they keep spewing outright lies to push this agenda. I just about wanted to kick the TV in this morning hearing Joooolya spew lie after lie on Meet the Press this morning. She is delusional if she thinks the population is believing her nonsense.

    Game over Joooolya.

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    Bulldust

    Good move gtyr… ABARE has been pared to the bone over the last decade or so… their analysis is incredibly lightweight anymore. I say that as someone who has used many of their publications and stats over the years. Shame because it used to be a very good agency.

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    Ross

    A little bit of supply and demand economics 101 appears to be happening in the EU carbon market.
    From WUWT http://wattsupwiththat.com/2011/06/25/eu-carbon-credit-trading-takes-a-dive-in-greece-they-cant-hardly-give-eu-carbon-credits-away/

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    Oblong:
    June 26th, 2011 at 2:40 pm

    “By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.

    And more evidence of inflation now as there are moves to scrap the 5 cent piece (although that was being suggested back in 2009, too: http://www.watoday.com.au/national/5cent-piece-not-worth-a-cracker-20090523-bimh.html)”

    This actually makes sense. The currency has been devalued by a factor of ten since decimal currency was introduced on 14th Feb 1966. We didn’t have a half cent coin then but that is what 5c is worth now.
    I think the inflation policy is run to stop people putting their savings under the mattress. It also keeps the cash economy circulating the cash instead of stashing it away. Bastards.

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    Graeme Bird

    “Could Keynesian “stimulus” packages be good at some point in the economic cycle? Sure. ”

    They are never good. They can pump up the metric of GDP yes. But GDP isn’t the entirety of spending. In fact GDP misses out the main area of spending that can repair a damaged economy. That is to say “Gross Investment”

    GDP= C+ (net)I+ G + X – M

    But GDP misses out GROSS I. Which turns out to be business-to-business spending. So fiscal(un)stimulus diverts spending from Gross investment to government spending and consumption. So long as extra consumer price inflation doesn’t manifest itself right away fiscal spending can therefore pump up GDP. But GDP is only a metric.

    When the economy is damaged you need as much resources in Gross investment as possible. Since you have all these negative cash-flow investments (malinvestments)that need to be sold and brought up to speed as reasonable functioning investments or businesses.

    You need resources to be able to take these bad projects and salvage something worthwhile out of them. And this cannot be done if resources are being diverted to government spending and consumer splurging just to pump up the GDP metric.

    Hayek knew this and he advocated saving ones way out of recession. Which is the right thing to do.

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    Graeme Bird

    The above is not to say that it may not be necessary to boost spending so as to increase business revenues to or above their post-recession highs. But with a fiat currency you can hit any level of business revenues you choose by combining new cash release with increases in the reserve asset ratios for banks. So fiscal stimulus not only doesn’t work. It can never be justified from the point of view of arranging for a targeted total spending level in the economy.

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    RJ

    Reply at 11

    [RJ - The price of money is fixed by decree of an unelected committee. There is no free market in money. There has not been one in living memory. The booms are created artificially by easy money. -- JN]

    This comments shows your lack of knowledge regarding the money system. But it is not just you. There is today more misinformation and misunderstanding about money than global warming / climate change.

    Do you know anything at all about fractional banking? Or what base money is compared to commercial bank credit for example. And how many Governments removed the fractional banking rules in the last 30 or so years that allowed commercial banks (not central banks) and the market to create an unlimited amount of money (commercial bank credit) only restricted by the demand for credit. Let the market decide. Which they did by the commercial banks pouring huge credit into housing and dud investments (to increase short term bank profit). That taxpayers are now picking up the loses from this silliness that was always going to collapse at some point.

    Read web of debt (or Ellen’s brilliant web site http://www.webofdebt.com/) if you want easily understood accurate information in a sea of misinformation that easily revels climate change.

    So today it is NOT easy Government money (it was in the past at times but not always due to fractional banking). It is easy commercial bank credit that has caused the recent expansion in the money supply, and helpful Governments that let the banks and markets do this.

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    Dave

    CO2 Tax

    Questions?
    For the non-economist (me) this Tax is a Keynes style to benefit the collective (us) in Australia for a better future? Why then do they critise me for demanding how this will work with replies of the “Science is settled”, “You are an idiot if you don’t believe”, “support the Yes Campaign” etc.

    No wonder this government has lost it way. I, as an average Australian have the right to demand the answers to this CO2 Tax – and if not – they will never get my vote again for the lies and the insinuation of my lack of rights to question – with their calls of labelling me stupid!!!!

    The majority of Australians have seen through this government for what it is! “Liars and Greedy Little Grubs”

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    RJ

    Harry The Hacker: @ 26

    Similarly, allowing markets to decide everything will not eliminate the boom and bust cycle. Human greed will see to that. You only have to look at the recent GFC which had its roots in a huge removal of regulation of US financial businesses.

    Exactly. As the recent boom and bust clearly shows.

    I like 100% backed money (not the Ron Paul market based system) but at present we have the worst of both worlds. Taxpayers supporting the value of money but commercial banks getting the full benefit from new money.

    Anyone who thinks the markets will stop boom and bust is living in a dream world. Money is different to anything else as it can effectively be created from thin air. Today it is no more than a JE on a computer screen. A Government body (IMO) should determine the amount of credit and the market the allocation of this credit. As explained in this document

    http://www.monetary.org/amacolorpamphlet.pdf

    Niall Ferguson thinks education is the only answer (or this is what he said at one talk I attended). I tend to agree. Until the public understand how it all fits together and what money is no Government will move forward for the majorities benefit. It will require an effort (fight) comparable to climate change though.

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    Kevin Moore

    Australia used to have a government owned and run bank – The Commonwealth Bank.

    To see how a bank should operate for the benefit of the nation see:-

    http://www.alor.org/Library/Commonwealthbank.htm

    And find out who the treacherous politicans were who had its functions debased and finally had it sold off to private enterprise.

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    Kevin Moore

    Actually it is banks that cause booms and busts, not governments.

    Any how while we are distracted into argueing about Julia’s science,the Fabian Socialists are getting on with their agenda. It is obvious that they have us all argueing about something that is patently crap. Maybe it is time to start focusing on the real issue,their agenda.

    http://www.australiamatters.com/fabian.html

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    RJ:

    So today it is NOT easy Government money (it was in the past at times but not always due to fractional banking). It is easy commercial bank credit that has caused the recent expansion in the money supply, and helpful Governments that let the banks and markets do this.

    RJ. I didn’t say it was government loans. I’m aware of what base money is (I’ve posted graphs from St Louis Fed Reserve before). There are many ways to create money: change the banking regulations, Clinton era changes to the bond market, drop interest rates, redefine “collateral” accepted for loans, post everyone a cheque as a tax refund using borrowed money — even sending refunds to people who don’t pay tax. There is no end to the creativity of those who want to extend the bubble.

    The people who get to spend the newly created money first are the winners in this race. The people who save, unwittingly give up their purchasing power.

    It’s another way the ruling class can take money from the masses.

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    brc

    Most people who barf on about Keynesian stimulus don’t really know what they are talking about. They are just pork-barrelling, favor-doling and vote-buying and wrapping it in economic talk. I’m sure Keynes must be spinning in his grave if he knew the things that are being said and done in his name.

    The thing is, all politicians are keynesians now. Even John Howard, for all his rhetoric, couldn’t resist a little pump-priming now and then. Tony Abbot probably would be little better (though I doubt he’d waste it like Swan) and Hockey makes me nervous. Similarly, Campbell Newman in QlD makes me nervous as he looks like the sort that will crack open the treasury at the first inkling of a decent excuse.

    The chances of a politician coming along who truly believes in a Hayek/Friedman model of the world, and is able to sell it to the people are extremely slim. Even those who talk the talk usually fail to walk the walk.

    Those who are arguing for ‘booms and busts will still happen’ and ‘banks cause the booms and busts’ need to study more. These outcomes are the result on a tightly regulated market for credit. The Credit Market has price fixing and centralised control. Of course it’s all for our own good – but it wouldn’t work for, say, lamb chops, so why would anyone expect it to work for capital? Until you get rid of central banks as a tool for manipulating the price of money, you’re always going to end in boom or bust. As much as they delude themselves, central bankers are like a drunk driving along by watching in the rear-vision mirror. Occasionally they’ll negotiate a turn, but for the most part it’s a series of overcorrections, crashes, and unsafe spurts of speed.

    Homework for anyone : really read Hayek’s book ‘the road to serfdom’ Read and understand. It will be hard for most people as their education and upbringing will have pointed you in an opposite direction.

    Me? I just want to live in post WW2 west germany. From rubble to world leading in one generation. Now that’s free markets at work. Think of the good in the world if that same model could be repeated in countries everywhere. Instead, we get some format of what they tried in East Germany, from rubble to collapse in one generation, with a heap of brutality and loss of human rights along the way.

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    Similarly, allowing markets to decide everything will not eliminate the boom and bust cycle. Human greed will see to that. You only have to look at the recent GFC which had its roots in a huge removal of regulation of US financial businesses.

    Human Greed is something that prevents wild booms and busts. Why? There is money to be made in shorting or selling stocks that are overpriced. Greed on it’s own can’t make a big bubble without easy money to fuel it.And If we reward people well enough for catching cheats, and we punish the cheats severely, human greed will make sure that market prices don’t over run the real world too far.

    We haven’t punished the cheats at all. The government bailed them out. The execs and the shareholders weren’t wiped out. The government made that money from thin air (see the base money graph I posted in my Helicopter Ben article). The TARP simply couldn’t possibly have happened if the government had to raise taxes.

    The problem under it all is that easy money is easy to spend. People make dumb decisions because in a sense, it’s not their hard-won money they are betting. Indeed in a climate where inflation is running strong, people need to make speculative bets just to keep up with the race. Easy money boom cycles mean that every man and his dog has to get into the markets.

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    RJ

    & 58

    Actually it is banks that cause booms and busts, not governments.

    It’s actually both. The commercial banks generate and benefit from the additional credit. But Governments let them do this. In part by removing or not enforcing the fractional banking restrictions.

    In recent years commercial banks were not restricted by base money (notes and coins plus central bank credit). As a result they could lend credit without restriction (if they could find a willing borrower). And understandable they did this. To various degrees. Some like Northern Rock (and RBS and HBOS) were grossly irresponsibly. Some less so (the ones that did not collapse when the short term money market dried up to fund their long term loans).

    But agree that it is today the commercial banks that increase or decrease the money supply not the Government (as many still believe)

    http://www.positivemoney.org.uk/what-we-want/the-licence-to-print-money/

    Various attempts are now being made to restrict banks such as tighter capital requirements but these will not succeed with a disinterested (or misinformed) public.

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    Louis Hissink

    Jo,

    It’s also a cunning way for government to pay their bills as well.

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    RJ

    @ 63

    Jo,

    It’s also a cunning way for government to pay their bills as well.

    Today it’s by increasing Government debt. Because that is how Govt deficits are financed today. It use to be in part by printing additional cash. But today the Govt deficit is financed almost entirely by Government bonds.

    The cunning bit is QE where Govt bonds are replaced by central bank credit (to reduce Govt debt). This is being wisely done in the UK and US but not I think in NZ or Australia.

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    Andreas

    Rap’s only role is to make every other form of music seem infinitely more civilised and agreeable.

    I like the Austrians and generally agree with them, but the idea that a free market is the panacea for all ills is not supportable, some government interference is necessary and inevitable, it’s a simple (ahaha if only) matter of setting the optimal level and being extremely cautious of any extension of their powers. But people and markets can be irrational without the help of governments – in the famous words of Keynes “the market can remain irrational longer than you can remain solvent”. Yes such irrational exuberances may be exacerbated by the price of money being artificially set too low as Hayek and the Austrians claim, but they would still occur irrespective. The focus of speculative manias is on capital gains – house prices only ever go up! – hence so long as the perceived windfall is sufficient the cost of money is not so important.

    On the climate side of things: if we were emitting a gas that was unequivocally proven to cause oceans to rise 10 metres by 2100 then I might consider supporting a government push to control said gas emissions but as we aren’t and it isn’t then I ain’t.

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    RJ

    @60

    Those who are arguing for ‘booms and busts will still happen’ and ‘banks cause the booms and busts’ need to study more. These outcomes are the result on a tightly regulated market for credit. The Credit Market has price fixing and centralised control. Of course it’s all for our own good – but it wouldn’t work for, say, lamb chops, so why would anyone expect it to work for capital? Until you get rid of central banks as a tool for manipulating the price of money, you’re always going to end in boom or bust.

    This is not correct

    The central bank today is no more than the bankers bank. The commercial banks and markets today determine the size of the money supply. The central bank operate bank accounts for these commercial banks. And provide credit for these commercial banks when required or necessary (like commercial banks provide credit when required for Govts, companies or individuals). The interest rate of this central bank credit has an impact on the market but how much?

    But both commercial banks and central banks create this credit (money) from thin air. This credit only has value because it is backed by the wealth and future production of a country or countries. So who should control (and benefit from) the size and new issue of this critical asset. Private banks or the Govt /taxpayer. I think the Government (or Govt body) is the better option but even this option can lead to problems if the public are not interested or knowledgeable and vote in a stupid Govt.

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    RJ

    RJ. I didn’t say it was government loans. I’m aware of what base money is (I’ve posted graphs from St Louis Fed Reserve before). There are many ways to create money:

    OK but

    There is only two sources of real money

    Notes and coins
    Commercial bank credit

    Base money (notes and coins + central bank credit) use to be the main restriction on the amount of commercial bank credit (by enforced fractional banking rules). But these fractional banking restrictions have now been dropped now so the commercial banks and willing lenders today determine the size of the money supply.

    So base money is largely irrelevant today. Except as a part of the commercial banks capital.

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    Louis Hissink

    RJ,

    Various comments here but I suggest you grab hold of a copy of the book “The Evid Princes of Martin Place” by Chris Leithner. He goes into some detail on fractional reserve banking and its effect on money supply etc.

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    RJ @ 66:

    There is only two sources of real money

    Notes and coins
    Commercial bank credit

    This is confusing cash with money. Money comes from wealth. It is a commodity exchange system and as such, it is neither created nor destroyed.

    The GFC has hit the US and Eurozone the hardest because they are the most protected economies in the world today. The result of the GFC will be the easing of trade restrictions to redistribute cash to countries with a greater monetary base. The US and EU are simply going to have to suck it up and deal with the consequences of their protectionism.

    ROM @ 37:

    Regardless of any supposed system of finance or the way it is implemented, the entire global financial system is based on continuous growth in both material goods and in the monetary supply. We see this almost pathological adherence to growth at all costs in the constant political and business demands for an ever increasing population as we are told, this will increase the size of our economy and ensure further [ business ] growth. To what ends are never revealed or I suspect thought about much by those demanding the increased population base.
    Just that they will make more money and increase their wealth one way or another with more people to sell to.

    Economic growth is expressed by an increase in wealth/money. This translates to an improved standard of living. It is not dependent on population. This is a fallacy which needs to be overcome. As the basis of malthusian rhetoric I’m always appalled when this argument is trotted out. The technological revolution that the computer has delivered in terms of productivity gains should not be underestimated in terms of its impact upon monetary growth. Software has done to professional vocations what the steam engine did to manufacturing in the industrial revolution. Some long term perspective is needed to properly evaluate the money supply versus productivity gains of the last couple of decades.

    History will judge some of the economic alarmism being pedaled by some sections of the financial community, very poorly indeed. This is not the great depression and there are no tent cities springing up in parks across the US or EU. It might be time to cut those signs from around your necks, they seem to be cutting oxygen to your brains.

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    Mark D.

    By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.

    This and other opinions expressed here make me think that you are all missing an important detail. Banks and governments are controlled by the wealth holders. They always act in their best interest. We “less than wealthy” have to withhold our value and stop being slaves to the systems created by governments, banks and the wealthy slaveholders that run the systems. We can start by voting for the lowest possible taxation. This certainly includes carbon taxes of any kind.

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    RJ

    Waffle: @ 70

    I am not confusing cash with money. And money does not come from wealth. Money comes by either printing notes and coins (around 3% today). Or by commercial bank JEs / credit (around 97% today. It was 50% around 1950)

    There is no limit to money except various rules and agreements (and the limit of interest on debt). A Government could set up a commercial bank tomorrow and credit this bank with central bank credit (maybe at 0% interest) but for various agreements (or lack of political will) to stop them doing this.

    If additional money or credit is created prices will increase. This is the main reason why house prices have risen so much over the last 30 or so years. There could the same number of houses but the value of each one increased due to an increase in the money supply. So wealth in terms of physical assets could stay the same. But money could increase (inflation) or decrease (deflation). This impacts on the assets value.

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    Roy Hogue

    Jo @59, 61,

    About that easy money…where do I get some? It seems like I have to actually work for mine. Am I doing something wrong? ;)

    But kidding aside, the free lunch will trip up more people than you ever imagined. It traps so many, in fact, that the EU is up to its eyeballs in trouble it doesn’t know how to get out of. I may catch some flak for saying this but their free lunch is over. And the rest of us better wise up soon or we’ll go down that same drain.

    Just throw a little more money here and a little more there and it’ll all work out isn’t working out anymore. We’ve been selling ourselves down the river for a long time (read Mark Twain if that term isn’t familiar) and now there isn’t any more river left. And for some odd reason we always sell to the lowest bidder.

    Will anyone in the audience who has confidence in their government please stand up…(anyone?)…I thought so.

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    Graeme Bird

    “Those who are arguing for ‘booms and busts will still happen’ and ‘banks cause the booms and busts’ need to study more.”

    The boom and bust cycle is a direct result of fractional reserve banking. Its a banking cycle. Always has been. There may be a reflexive idea of blaming the government and letting off the bankers. But this is a bit pointless. They are really part of the same racket. Govybank. Bankyment. Only the bankers get the lions share of the money creation loot. Hence we have to wonder if the bankers aren’t the senior partners. In the Northern Hemisphere they seem to be in charge.

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    ul

    Hi Jo,

    sorry but I think this is the worst post ever here.

    To learn from Hunter Lewis about Keynes is like learnig about Lindzen at Real Climate. It´s too black/white for me.

    Hayek said this about Keynes:”He was the one really great man I ever knew, and for whom I had unbounded admiration. The world will be a very much poorer place without him”(http://en.wikipedia.org/wiki/John_Maynard_Keynes)

    A blog post is certainly not enough to discuss these thinks, but for fun here is video of Mr Reich:

    http://www.youtube.com/watch?v=JTzMqm2TwgE&feature=player_embedded

    and an answer:

    http://www.youtube.com/watch?v=mXm4j2ORYcg&feature=player_embedded

    anybody here who actually read Keynes ?

    skeptical greeting, Ul from Germany, a socialist county according to guys like Hunter.

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    pat

    26 June: UK Daily Mail: Tom McGhie: Energy giants want billions for back-up to windfarms
    Britain’s richest energy companies want homeowners to subsidise billions of pounds worth of gas-powered stations that will stand idle for most of the time.
    Talks have taken place between the Government, Centrica, owner of British Gas, and other energy companies on incentives to build the power stations needed as back-ups for the wind farms now being built around the country.
    It is understood 17 gas-fired plants worth about £10 billion will be needed by 2020.
    The Energy Department has been warned that without this massive back-up for the new generation of heavily subsidised giant wind farms, the lights could go out when the wind dies down…
    As in previous subsidies, homeowners would be asked to pay for them through yet another levy on their fuel bills, which are already expected to soar by up to 20 per cent this year alone…
    http://www.dailymail.co.uk/money/article-2008055/Energy-giants-want-billions-windfarms.html

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    pat

    can’t recall seeing this posted here before…

    21 June: ABC: Sabra Lane: Republic defeat was my greatest win: (Nick)Minchin
    A self-professed climate change sceptic, he also talked about carbon emissions.
    “I must say when I first learned of the existence of the Australian Greenhouse Office, I assumed it was responsible for supplying tomatoes to the Parliament House kitchen,” he said.
    “But no, as I soon learned as industry minister, it was in fact a government-funded redoubt of veritable soldiers in a war against carbon dioxide.
    “Thus upon leaving the Parliament I’m contemplating the foundation of an organisation called the Friends of Carbon Dioxide.
    “Membership will of course be open to all, including the plants whose very existence depends on CO2.” …
    http://www.abc.net.au/news/stories/2011/06/21/3249841.htm

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    Roy Hogue

    Britain’s richest energy companies want homeowners to subsidise billions of pounds worth of gas-powered stations that will stand idle for most of the time.
    Talks have taken place between the Government, Centrica, owner of British Gas, and other energy companies on incentives to build the power stations needed as back-ups for the wind farms now being built around the country.

    Pat,

    Yea and I have some very valuable stock in a beautiful bridge in New York City, 100 years old, toll bridge too, very profitable. You should buy in while you can. I’m only selling because I need some fast cash (never mind why). Best bargain around by far.

    Or:

    The British taxpayer is being gouged to pay for generating capacity the utility knows good and well will really be doing the work but they don’t want to pay twice, once for hot air and yet again for the real thing. Can you blame them?

    On second thought, don’t buy any stock in New York City bridges. Buy oil and gas.

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    pat

    just tuned into abc news radio and abc radio national and, as usual, within seconds, there was the “climate change” agenda. RN finished by saying the “non-partisan” and “independent” Connor noted that “young” people were more willing to pay more, without mentioning whether the “young” polled even pay any electricity or other bills!

    however, nothing beats AAP’s “spin” on News Ltd site here:

    27 June: News Ltd: AAP: Andrea Hayward: Lowy Institute poll finds 41 per cent of Australians think climate change is a serious problem
    A LEADING climate change advocate maintains public sentiment for climate change action is improving despite a poll showing support has dropped to a record low.
    According to the Lowy Institute poll, 75 per cent of Australians believe the federal government has done a poor job addressing climate change.
    Just 41 per cent think the issue is a serious and pressing problem, down five points from last year and 27 points since 2006.
    Australians are also much less willing to pay a price to tackle climate change, with 39 per cent not prepared to pay anything extra…
    Analysis of talkback radio by the institute showed an improvement in support for climate change action since February, Mr Connor (chief executive of The Climate Institute, a non-partisan and independent research organisation) said.
    “I’m not at all relaxed but I think we are seeing a turning point.”…
    “There was bipartisan support for action and the emissions trading scheme and an international legal agreement (in 2007),” Mr Connor said.
    A strong commitment by Britain to act on climate change had also improved attitudes by Australians to a carbon price, he said.
    http://www.news.com.au/national/lowy-institute-poll-finds-41-per-cent-of-australians-think-climate-change-is-a-serious-problem/story-e6frfkvr-1226082373562

    the Fairfax spin:

    27 June: St Marys-Mt Druitt Star: Fairfax’s Lenore Taylor: Climate plan leaves voters cold
    SUPPORT for climate action continues to erode and more Australians say they don’t want to pay anything to help reduce greenhouse emissions as the Gillard government prepares to unveil a carbon tax that will impose costs on industry and families earning more than $150,000…
    But an annual poll by the Lowy Institute underlines how hard it will be to sell the new tax, with 39 per cent of Australians saying they are not prepared to pay anything to combat global warming, almost double the proportion who were prepared to pay nothing when the Rudd government was working on its first emissions trading scheme in 2008.
    The proportion of Australians willing to pay up to an extra $10 a month on power bills also slid from 32 per cent to just 19 per cent and those willing to pay between $10 and $20 a month fell from 20 per cent to 13 per cent. The proportion willing to pay more than $20 rose slightly to 22 per cent.
    Declining support for climate action was also evident in the numbers who agreed that Australia should take action even if it involved “significant costs”, which fell to 41 per cent from 60 per cent in 2008…
    The chief executive of The Climate Institute, John Connor, said a recent Nielsen poll and an analysis of talkback radio comments by Media Monitors suggested a gradual turnaround in declining support for carbon pricing in recent weeks, after the Lowy Institute had gathered its data.
    The Media Monitors analysis of hundreds of talkback radio calls across the country showed that in February and March calls had been “strongly unfavourable” while by May and June they were “moderately unfavourable”, with a significant increase in favourable calls as discussion focused on the compensation package and the need for action…
    While claiming he was “full of optimism” a carbon tax deal would be clinched, the Greens leader, Bob Brown, said yesterday a carbon price would have a minimal impact on a coal industry making record profits, but the industry would eventually have to be replaced by renewables…
    http://www.stmarysstar.com.au/news/national/national/general/climate-plan-leaves-voters-cold/2207413.aspx

    from the Lowy site:

    Lowy Institute: Download the Poll Report
    Support for the most sceptical position that ‘until we are sure that global warming is really a problem, we should not take any steps that would have economic costs’ is up six points to 19% and has nearly tripled since 2006 when just 7% of Australians held this view. Support for this option increases with age with just 11% of 18 to 29 year olds holding this view compared with 28% of Australians 60 years of age and older…
    A greater proportion of younger Australians are prepared to pay higher amounts with only 12% of those aged 60 or older willing to pay $21 or more extra per month, while among those aged 18 to 44 years 27% are willing to pay this much….
    http://lowyinstitute.org/

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    brc

    RJ :

    the interest rate of this central bank credit has an impact on the market but how much?

    You can’t skip across centralised fixing of the price of money by a centralised government monopoly as though it is a minor feature. People here are concentrating on the mechanism of funds making their way into the economy, but missing the main point – why people choose to borrow. Sure, you can blame fractional reserve banking if you like, but lending only takes place when there are people to borrow. Borrowers respond to the price – the interest rate. The interest rate is fixed by a central entity. That is then considered the ‘risk free’ rate because it generally applies to government bond issues. That risk free rate is an input to countless models and projections throughout the economy, from mortgages to industry finance. Millions of investment decisions are made based on a price which is chosen by a small group of people, who think they can read the tea-leaves of a broader economy and get the exact price right. Sure, they may be smart people and have reams of the best information at hand, but they still can’t provide the extremely accurate information that a market can provide. As I said, the best way to find out the price of lamb is to go to the market and listen. It’s not only totally accurate, it requires no special information gathering skills. Imagine a clique of lamb-farmers meeting 6 times a year, and reading weather reports, projections of lamb-eating, detailed farm information, and then setting the price of lamb. They would get it wrong, every single time. You’d either end up with not enough lambs at the market, or so many lambs you would end up feeding lamb cutlets to your pets. That’s exactly what happens with central bank price fixing of money.

    With easy money, bad investment decisions are made because anything with half a chance of returning cash in the future suddenly looks worthwhile. Things that wouldn’t normally return an investment suddenly get built. We’ve all seen the empty shopping centres, the deserted office blocks. Money flows into unproductive channels based on the incorrect price signal that comes about from central planning. When the price of money is forcibly lowered to zero on the whim of a board, you can expect money to flow into everything. The particular asset that bubbles the most will be a function of some other, unrelated meddling or fashion. Those that protest the modern market is too complicated and sophisticated need to step down from their pedestal and realise that options and futures were developed in Babylon, and there is truly nothing new under the sun with regards to finance.

    There will always be a cycle to the markets. However, the crushing boom/bust cycle we currently have is made far worse by bad decisions made on the way up to extend booms by lowering the price of money, plus meddling governments not allowing the chips to fall where they lay. A recession is needed to clear out the bad debts, to collect the shirts of those who have lost them, and to allow unproductive debt to be written off. Trying to keep alive dead industries and investments with bailouts and money printing just makes it worse. It’s like a hangover- you need to purge the toxins. Sure, you can get a little buzz with some hair of the dog, but keep doing that and the eventual hangover is going to be that much worse.

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    KeithH

    To my mind, the biggest factor destroying the economic viability of “working families”, those people most beloved in Labor election campaigns, is the availibility and indiscriminate use of credit cards and the seemingly uncappable exorbitant interest rates banks are allowed to charge.

    Whilst their CEO’s are paid obscenely huge salaries with extra bonuses if they can icrease profits (generally by cutting staff and services and finding new ways to screw money out of the public), banks actively encourage everyone they can to go further into what becomes for many, massive unpayable debt. Incredibly, they then partly use the excuse of ‘provision for bad debts’ for imposing the crippling rates of interest!

    It would do far more for people if Governments addressed and improved such basic issues, instead of looking to tax the air we breathe which, no matter how many tame scientists they and the UN appoint to panels, will never bring about the science fiction comic-book scenario of puny Man controlling either the Earth’s temperature or it’s chaotic climate!

    As for economists, a favourite saying in the old days was:

    ‘If every economist in the world was laid end to end, they wouldn’t reach a conclusion’ !

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    I was lucky enough to have a few cameo’s in the 2nd rap – was great fun! :)

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    Bulldust

    Greg Sheridan puts it in simple terms (even Jooyla should be able to understand) in The Australian:

    http://www.theaustralian.com.au/national-affairs/a-lethal-blow-for-government-scheme/story-fn59niix-1226082376158

    If the US is not doing anything about CO2 emissoins then why are we?

    I am not holding my breath for the pathetic MSM to ask this question of the PM. Least of all reporters on shows like Meet the Press. The modern media is a joke.

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    [...] not just with the 3 Bad Boys of science (climate, environmental & health science) but also in Economics. Here is a vivid new video explaining clearly, with captivating rap music, the battle in [...]

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    val majkus

    ANOTHER DAY ANOTHER POLL

    Do you think tackling climate change should be a priority for Australia?

    Read more: http://www.theage.com.au/opinion/politics/an-inconvenient-fallacy-20110626-1glmu.html#ixzz1QQxu7j5H

    and read Prof Carter’s op ed in the Age
    Andrew Bolt says Prof Carter is now fleeing the country

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    Chuck

    interesting poll at the AGE

    Do you think tackling climate change should be a priority for Australia?

    at the moment yes 28%, no 72%

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    Andreas

    KeithH, it doesn’t make much sense to on the one hand rail about the availability and indiscriminate use of credit cards, and then on the other complain about ‘exorbitant’ interest rates. You’re arguing for less reliance on credit, but then arguing the price of such credit should go down. A lower rate would surely simply encourage more debt.

    Brc, it’s not just the price – interest rates – that enter the equation. Yes an artificially low interest rate will make all sorts of bad projects appear profitable, but at the same time people’s irrational expectations about future profits can fuel a bubble – so long as the perceived gains are high enough then the cost of money is but a minor hurdle. Bubbles have happened in the past without governments setting interest rates and the end results have been just as nasty. Yes a market sans government intervention will allow people to short such bubbles and hence bring some sanity into it, but timing when a bubble will pop is a very tricky risky thing.

    I generally agree though that governments should step back and let bubbles collapse naturally, however many people who acted prudently and wisely will become collateral damage in any collapse. Society as a whole then has an interest in the extension of bank credit, and the reasons for said extension. Personally I think the answer to that is banks being kept under tight reins to prevent the extension of credit for merely speculative, rather than productive, purposes. “Investment” in housing for example is usually no such thing.

    Individuals should absolutely be accountable and not be sheltered from the effects of for their decisions, but where their choices impact us all government intervention may be a necessary evil.

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    pat

    Bulldust -
    u r right – the americans are doing nothing:

    20 June: UK Daily Mail: U.S. military spends a cool $20billion on air conditioning annually in Iraq and Afghanistan
    The alarming figure is more than Nasa’s entire annual budget and trumps the amount the G-8 has pledged to aid Egypt and Tunisia.
    It’s even more than the clean up cost of BPs Gulf oil spill..
    For Anderson (Steven Anderson, a retired brigadier general who served as General David Patreaus’ chief logistician in Iraq)the military would save money by going green. He claims experiments with polyurethane foam insulation tents in Iraq cut energy use by a staggering 92 per cent, taking 11,000 fuel convoys off the road.
    But getting the top commanders to embrace change has been hard.
    ‘People look at it and say “It’s not my lane. We don’t need to tie the operational commanders’ hands” – things like this,’ he said…
    http://www.dailymail.co.uk/news/article-2008422/U-S-military-spends-cool-20billion-air-conditioning-annually-Iraq-Afghanistan.html

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    pat

    26 June: Gold Coast Bulletin: Foreign investors see risks down under
    According to the national accounts, released this week, foreign investors sold $1.9 billion of Australian equities in net terms in the March quarter. This compares to the December quarter where they bought $28.5 billion of equities.
    Economists believe foreign investors – the bulk of whom come from the US and increasingly Asia – are seeing Australia as a risky option for their cash due to concerns over our minority government, to interest rate rises and the carbon tax…
    “On the carbon tax, they are concerned it could be implemented in a way that may adversely affect Australian mining or coal companies compared to say mining companies in other countries or that it may be too heavy-handed and adversely affect the economy.”
    Mr Oliver (AMP Capital chief economist Shane Oliver) said the jitters from foreign investors had contributed to the Australian share market under-performing global markets of late…
    http://tools.goldcoast.com.au/stories/47288901.php

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    Kevin Moore

    In Bob Hawkes address to the Fabian Societies Centenary dinner in 1984 part of his speech went thus -

    “….which is the allure of modern Soviet Communism,and of Fascism its running mate….”

    So, left wing – right wing, Capitalism – Communism, They are both wings of the same bird.

    http://www.geoffstuff.com/Hawke%20Fabian.pdf

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    pat

    89% of 3,400-plus say NO at present…

    Poll: Will it be good for Parliament to have the Greens in control of the Senate?
    http://www.couriermail.com.au/news/national/heres-why-the-greens-keep-leaving-themselves-open-to-jokes-about-gay-whales/story-e6freooo-1226082391000

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    Roy Hogue

    @ 84,

    Personally I think the answer to that is banks being kept under tight reins to prevent the extension of credit for merely speculative, rather than productive, purposes. “Investment” in housing for example is usually no such thing.

    If only someone somewhere in the halls of government actually believed this…sigh.

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    John Watt

    I think it was Bohr the Nobel prize winning physicist who chose early in his career to do physics and not the much more messy unpredictable field of economics. This current topic is evidence of the prolems Bohr envisaged. Gillard and Co have been successful in taking the focus off the science. Someone needs to drag the debate back to the science. A simple explanation of the real processes by which atmospheric CO2 drives temperature change would be a good start! Any takers?

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    MattB

    Bulldust “based on this policy alone I could never vote Labor again”

    never say never… after all Howard used to have the same policy, and who knows Turnbull may again too. You’ve got to vote for someone! well technically anyway.

    Jo glad you appreciated/got my #1 comment;)

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    Bulldust

    MattB:
    Hey if Labor drops the stupid policies I would reconsider my vote. As long as they keep pushing industry destroying policies that have no positive effect on the climate and the nation I cannot vote for them.

    You know as well as I do that Howard would not have pushed the ETS agenda… it was a non-core promise if you will… he was desperate for votes at the time. Besides, I voted Rudd in 2007 as I was sick of the Howard lies and hadn’t researched the climate science in any depth at that point.

    A lot can happen in politics in a short timespan … I won’t speculate What might happen in the future. I am sure Abbott is fully capable of pushing vote destroying policies as well.

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    Graeme Bird

    “Hayek said this about Keynes:”He was the one really great man I ever knew, and for whom I had unbounded admiration. The world will be a very much poorer place without him”(http://en.wikipedia.org/wiki/John_Maynard_Keynes)”

    He may have said that but its complete nonsense. Keynes was economically illiterate. He barely had any training in economics, doing a single term with Marshall before teaching the subject. His General Theory is testimony to his ignorance on every page. Whereas people like you and Professor Keane do indeed understand how banking and monetary economics works, Keynes did not.

    This is a classic case of the cult of personality swamping a subject, much like the Einstein cult swamped physics.

    I find Professor Keane hard to comprehend. Observant and economically literate himself, he nonetheless still flies the flag for Keynes, and went so far as to approve of the labor governments insane stimulus package.

    But there is a bit of a tradition about this. The Keynes cult so fantastically engulfed economics that even his critics had to pay all this homage to this imbecile, even as they went to turn around and criticise his ideas in the most diplomatic ways imaginable.

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    Graeme Bird

    If we are to run a fiat currency, the only stable version of this is 100% backing …. with growth-deflation. I define growth-deflation as the condition where business revenues are growing all the time but so slowly as to leave a situation where almost all prices are falling most of the time. Transitioning to 100% backing is technically easy. But you will be taking on the entire planet of bankers who have nothing if not a sense of entitlement, and in the Northern Hemisphere may have gotten themselves in as part of a money-creation/covert operations nexus.

    Growth deflation is technically (from the economics perspective) a harder aspect of the transition, since to get there without pain requires us to bring debt levels way down. There can really be no fair and balanced version of capitalism without these monetary conditions. The prohibition on bank-cash-pyramiding, or on any other sort of phantom supply, ought to be total.

    Your average punter has next to no understanding of the gargantuan wealth destruction the current financial arrangements have wrought. Neoclassical economists are so ignorant they still talk about such things as “efficient capital markets” as if this were the reality and not something to aspire to. Funnily enough it is often Keynesians like Professor Keane, and Professor Quiggin, who (despite their religious handicap) seem to be able to see through these bogus “efficient market” dogmas. What is really going on is an orgy of inefficiency, wealth destruction, and thieving.

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    RJ

    brc @ 80

    You have a lot of faith in markets. And it seems a limited understanding regarding money.

    I dislike big Government. But also realise the limitations of the market. Especially in regard to money.

    Any Govt (or population) that lose control totally over the money supply is asking for problems (look at the Euro countries).

    Why. There are a number of reason. Usury is the big one though. If bank profits are too high (and this is worse in a mature economy. Fast growing economies not so much) the accumulating interest will eventually destroy the economy and banks (its almost a mathematical certainty)

    http://www.seek2know.net/money.html

    Money is created when banks lend it into existence When a bank provides you with a $100,000 mortgage, it creates only the principal, which you spend and which then circulates in the economy. The bank expects you to pay back $200,000 over the next 20 years, but it doesn’t create the second $100,000 – the interest. Instead, the bank sends you out into the tough world to battle against everybody else to bring back the second $100,000.”- Bernard Lietaer, Former Central Banker

    Or

    http://www.youtube.com/watch?v=_doYllBk5No

    The best solution I have seen is for the Govt to create the money (or credit) and the market (commercial banks) to allocate this money (with no fractional element at all and control on interest rates). The interest / profit shortfall would then be released as interest free money (to finance Govt deficits).

    But today we are mostly so use to the current money system that many can not see beyond this system, or the problems with it. Yet the biggest banks in NZ and Australia up until recent years were Govt owned (and both countries were better off especially NZ that is now drowning in debt).

    And notes and coins (debt free money) made up around 50% of the money supply (now 3%) as recently as 1950. The current almost 100% debt based money system with the banks (and markets) doing almost as they see fit is not working and needs change.

    Private ownership for goods and services with Govt as the ref is OK. It is not for money.

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    MattB

    Just pondering the Lowy Poll… headlines scream that the public is cold on climate change…. but when you look at the stats: http://www.abc.net.au/news/infographics/lowy/2011/

    you see that 41% of Australian’s support action to stop climate change by taking steps that are low in cost, and 40% think we should be taking steps now even if this involves significant costs.

    The ky for the ALP is to win the PR battle to portray a modest ETS of only 5% reduction as being a step that is “low in cost”. Then they have 81% on board. COmpared to Abbott’s expensive DIrect Action plan.

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    manalive

    brc (60):

    Me? I just want to live in post WW2 west germany. From rubble to world leading in one generation. Now that’s free markets at work

    I’m no economist and I can see that on the empirical evidence of the post-depression ’30s, the nations which adopted Keynesian pump-priming fared worse than those which didn’t.
    However the injection of 1.5 billion 1948 dollars into the West German economy alone by the US government’s Marshall Plan certainly has a Keynesian ring to it and was similar to the system recommended by Keynes post-WWI in The Economic Consequences of the Peace (1919).
    Of course Germany, as well as most of Europe, was in ruins and a ‘Keynesian’ remedy may have been the only possible course in those very special circumstances, particularly with the threatened spread of Soviet domination to western Europe.

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    Damian Allen

    POLL: Do you think tackling climate change should be a priority for Australia?

    http://www.theage.com.au/polls/opinion/politics/climate-concerns-20110627-1gmft.html

    Vote now !

    The obvious answer is “NO” !!

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    MattB

    I was going to say, manalive, that the priming of West Germany as a successful nation by the booming post-war US (which had emerged unscathed from WW2 and needed to keep those factories busy) as a barrier against the DDR and Soviet Union and as a Cold War PR/propaganda Poster Boy is hardly an icon of Hayekian economics.

    What economics is CHina backing out of interest… one could well imagine in 50 years that BR’s post in 60 would be stating he wished to live in post GFC China rather than the economic rubble of the USA and Western Europe.

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    manalive

    MattB (99):

    you see that 41% of Australian’s support action to stop climate change by taking steps that are low in cost, and 40% think we should be taking steps now even if this involves significant costs

    Being an advocate of a carbon (CO2) tax and presumably the higher the better, you would be strongly in favour of a plebiscite on the issue then — yes?

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    Athena

    Well, we’ll help – Can’t pay your debts? we’ll take your Gold P.I.G.S.

    http://maxkeiser.com/2011/05/31/keiser-report-neo-feudal-gulag-casino-state-e151/

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    Dave

    Times are changing!

    1. Giles Green Parkinson from Climate Spectator almost admits CO2 tax is usless – http://www.climatespectator.com.au/commentary/eu-carbon-zero-sum-game?utm_source=Climate%2BSpectator%2Bdaily&utm_medium=email&utm_campaign=Climate%2BSpectator%2Bdaily

    2. The Age does a reversal – tp://www.theage.com.au/opinion/politics/an-inconvenient-fallacy-20110626-1glmu.html#ixzz1QQxu7j5H and does this report.
    Compliments of Val @ 85 above.

    The tide isn’t rising – it’s turning!

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    MattB

    manalive, call me old fashioned but I prefer electing governments to make decisions, and then judging them on those decisions at the next election.

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    MattB

    manalive:
    “Of course Germany, as well as most of Europe, was in ruins and a ‘Keynesian’ remedy may have been the only possible course in those very special circumstances, particularly with the threatened spread of Soviet domination to western Europe.”

    be cafeful how you rationalise things:

    “Of course the climate science indicated significant impacts if nothing was done…. a Keynesian remedy may have been the only possible course in those very special circumstances, particularly with the threatened impacts of climate change.”

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    Brett_McS

    The irony is that not even Keynes advocated stimulus spending using borrowed money. His idea was that surpluses would be built up in good times to be drawn on in bad times. Still nonsense, but not as egregious as what is being done now in his name.

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    Matt

    People mistakenly believe that central banks are controlled by the government. Ask them a simple question, if your central bank can and does create money at will (or institute necessary “quatitative esasing”), then why do tax payers have to pay interest on the government’s debt?

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    Brett_McS

    MattB: It’s a little bit different when that decision is the exact opposite of what was promised in the preceding election – without even any attempt at a justification for the reversal. What is Gillard’s credibility level now, when she ‘promises’ to do something after the next election? About the true dollar value of a Carbon Credit?

    Contrast Howard going into an election saying he would introduce a consumption tax.

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    brc

    For sure the Marshall plan helped to rebuild the economies of war-smashed europe. But you’re kidding yourself if you think the Marshall Plan is what put West Germany ahead. By that reckoning, France, the UK, Holland and Belgium should have all excelled and been Wirtschaftswunder economies. Further, West Germany actually paid all the Marshall Plan money back. And all the while (up until 1955) the allies actually made the West Germany government pay them to be there. All these amounts dwarfed the Marshall Plan loans. You might also look at the widespread looting of important German patents and scientists by the allies, further putting the country back, not to mention the dismantling of the coal and steel industries to prevent re-armament. In short, the idea that $1.4 billion in loans was the cause of the nearly-unbroken 40 years of growth of a smashed and looted war economy to the powerhouse of Europe is laughable. If you could just give economies a little $1.4 billion push and get them growing for 40 years I wouldn’t be arguing against Keyenesian idiocy as often as I can. $1.4 billion in 2011 dollars is about $12.5 billion – or less than Gillard wasted on school halls. So let’s not give undue credit to the Marshall Plan and Keynesian practices in general.

    No, most people will ascribe the West German economic growth as (a) building off a low base, and (b) the economic policies of Ludwig Erhard who was first the minister of economics and then the chancellor in later years. Surprise, surprise, Erhard’s policies were based on the Austrian school of economics. And the first thing he did was abolish price controls and create a sound currency. That was the Deutschmark which was still one of the world’s most stable currencies up until the Euro replaced it, indeed the Euro is more like the DM than any of the other inflation-destroyed currencies that went into it, such as the lira, drachma or franc.

    He also would reject calls for special protection for german businesses, and the usual sorts of lobbying that gives us a cosy government/business cartel. He strongly oppposed the formation of the pre-cursor to the EU, but was defeated on that, giving us now the pan-national hungry beast of the EU. He restricted welfare to a small amount and the economy grew and grew. But the powers that be battled him, and eventually welfare and business protection overtook the German government. But his legacy was a strong and vibrant economy that grew to be the mainstay of Europe, which it still is today.

    You can twin-study the West German economy with that of the UK – Churchill ran on a platform of implementing neo-liberal policies but the public voted for the Labour party and it’s socialist platform. From the worlds first industrial economy to the worlds first former-industrial economy in record time. As the unionists, communists and socialists wrecked their way through the UK economy the industries fell one-by-one. Shipbuilders, carmakers, railways, aviation – all fell to the ills of the socialist meddlers while Germany powered ahead. The UK pound sank and sank and lost it’s status as a worldwide reserve currency. Eventually the socialists ran out of other people’s money and the sick economy had to have a strong dose of maggie thatcher to get it going again.

    In short, I think modern day Australia could do a lot worse than study this period in history for West Germany and see what takeaways there could be. It would also do well to study the UK and avoid making the same mistakes there. A smaller government, more distance between large corporations and the government, a strong, stable currency and true freedom of markets, choice and individual freedoms. This is the only prescription for healthy economic growth, and it’s been proven time and again with diverse economies. Which is why I get continually frustrated that bloated and distorted Keynesian policies, combined with larger and larger governments seems to be the way things are going, despite all the historical evidence pointing to this model as a complete failure throughout history.

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    Brett_McS

    Matt: Was the central bank of Zimbabwe controlled by the government? You are conflating two types of control: Executive (governmental) and consequential (international markets).

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    RJ

    Matt @ 109

    It depends what you mean by money. Central bank credit is not really money. Try going into a central bank and opening up an account and raising mortgage finance from this central bank to buy a house. (only commercial bank credit can be spent in the real economy)

    The central bank though is the commercial banks bank. Central bank credit can and is used by commercial banks to settle with other commercial banks. And this central bank credit can be created by a JE as commercial bank credit is.

    Re interest on Govt debt. It could be eliminated tomorrow. QE reduces Govt debt by replacing Govt / treasury bonds (issued to fund Govt deficits) with new central bank credit.

    So why is this not done (using QE to wipe out Govt debt). Two reasons. One is the commercial banks would fight this strongly as they lose income (interest on Govt bonds). Secondly Govt debt places a limit of high spending Governments and the voters who support them (ie most today). Governments claim they need to reduce spending because of interest on Government debt (even though debt could be wiped out by central bank JE’s to create new central bank credit)

    But note that this option is not available to individual countries in the Euro (which is one reason why some are now in such a terrible state). The US is currently effectively funding their Govt deficits with central bank credits (indirectly via QE). And the UK has to a lesser extent as well.

    “If our nation can issue a dollar bond, it can issue a dollar bill. The element that makes the bond good, makes the bill good, also. The difference between the bond and the bill is the bond lets money brokers collect twice the amount of the bond and an additional 20%, whereas the currency pays nobody but those who contribute directly in some useful way. It is absurd to say that our country can issue $30 million in bonds and not $30 million in currency. Both are promises to pay, but one promise fattens the usurers and the other helps the people. ” – Thomas Edison, The New York Times, December 6, 1921

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    manalive

    brc (111),
    Very true, the West German recovery was certainly remarkable (I for one am an admirer of their supremacy in automotive engineering), but I don’t think the comparison with Gillard’s school halls is apropos, as at least the urban populations in 1948 were practically starving and that $1.4 billion would have had a far greater relative effect.

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    CameronH

    brc @111. It is interesting that the other stand out economy after WW2 was Japan. The Japanese also followed a classical liberal economic approach. This was instigated and lead by Tanzan Ishibashi, a Japanese Classical Liberal activist, who headed up the Ministry of International Trade and Industry. To quote Ronald Kitching from his book “Understanding Personal and Economic Liberty”: Despite advice from the Americans to raise taxes and employ Government “Initiatives”, he insisted that the key to reviving the domestic market and ending the post Korean war recession was not a siege of administrative guidance and fiscal austerity but a series of whopping tax cuts”. The rest as they say is history.
    It is also interesting to know that when China decided to become more market oriented in the early 1980′s that Premier Deng took as an adviser Professor Gregory Chow, a free market classical economist from the USA. China’s markets are now considered to be more freer than Australia’s. Perhaps our leaders show try and learn something about economics and history before they begin to transform us into a third world country.

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    MattB

    “The rest as they say is history.” – what as in Japan having had a completely stagnant economy for 20 years?

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    CameronH

    Unfortunately for the Japanese citizens, after the 1990 recession Japan caved into the Keynesian stupidity and began to meddle in the economy with Government initiatives and stimulous packages. The result was more stagnation and a steady march down the road to ruin. That is were the Western economies are now going. Australia is only doing OK because of the demand for resources. Various governments over the years, by following Green/Socialist and Keynesian dodgy brothers economic policies have destroyed most of the productive sectors of the economy. Agriculture is now on it knees and they are now going after the mining sector. It you have any wealth it is nearly time to pack up and move.

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    1DandyTroll

    The issue is this:

    If you were a company owner, the big dawg as it were, would you want to hire climate communist airheads acting like windmills, getting paid two to three times as much as ordinary hardworking folks (who subsequently are the ones who has to shell out for all that extra two to three times for those “extra” important knobs) but who’ll only have, at best, a 25% efficiency level compared to the everyday hardworking folks?

    Yes, that’s right folks, the crazed climate communist hippie parade just want what the greek socialists had on everybody else’s expenses. :p

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    KeithH

    Andreas @ 87

    “it doesn’t make much sense to on the one hand rail about the availability and indiscriminate use of credit cards, and then on the other complain about ‘exorbitant’ interest rates. You’re arguing for less reliance on credit, but then arguing the price of such credit should go down. A lower rate would surely simply encourage more debt”

    I understand your point Andreas but let me expand to clarify.

    I recognise the old days of waiting for goods until one has the cash to pay for them have gone forever and credit is here to stay. However, the banks must accept responsibility to only issue cards to those who can afford them if they’re to be used for long-term credit and to set suitable limits judged on each applicant’s situation.

    Responsible use of credit facilities should be a basic part of any relevant subject taught in our schools.

    I’m not necessarily arguing for less credit however desirable that may be argued to be, but all involved must endeavour to ensure the credit given is affordable and remains so.

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    Bulldust

    MattB:

    Oh dear…

    you see that 41% of Australian’s support action to stop climate change by taking steps that are low in cost, and 40% think we should be taking steps now even if this involves significant costs.

    The ky for the ALP is to win the PR battle to portray a modest ETS of only 5% reduction as being a step that is “low in cost”. Then they have 81% on board. COmpared to Abbott’s expensive DIrect Action plan.

    Or put another way, well over half of Australians only think we should spend a small amount or nothing on “stopping climate change” (whatever that means).

    If you ask Australian’s what they think a “small amount” is, I doubt they are going to say tens of billions of dollars, which is what the current “small carbon price” is going to cost us.

    Also, you should stop trying to portray a 5% reduction in GHGs as a “small” reduction. The business as usual has Australia’s GHGs increasing, so the actual reduction implied by a 5% reduction, relative to today’s emissions (or whatever the benchmark is), is more like a 20-25% reduction. This is a very significant reduction in GHGs and economy crippling.

    Given that you have been around a while and should have been able to absorb these basic facts by now, I can only assume you are being deliberately disingenuous.

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    My observations on Hayek v Keynes / CAGW alarmists v skeptics are more fundamental. In brief

    - CAGW & Keynes see climate / economies as being essentially unstable (Tipping points seem to parallel unemployment equilibriums and positive feedbacks parallel the Keynesian multiplier).
    - Both CAGW and Keynesians (not Keynes himself) believe that you can successfully model the essential features and relationships of the relevant systems.
    - That a few global measures are all that is required to describe the system. Here the Keynesian macroeconomists (with national incoming accounting) are on firmer ground that the average global temperature and atmospheric CO2 levels. For economics, see Hayek’s Nobel Prize lecture, for CAGW, see Bob Carter’s book linked in the margin.

    More detailed observations are on my blog here.

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    Kevin Moore

    John Lennon of Beetles fame is quoted as having said:-

    “Our society is run by insane people for insane objectives. I think we’re being run by maniacs for maniacal ends and I think I am liable to be put away as insane for expressing that.That’s what’s insane about it.”

    http://www.a-tangled-web.net/pathocracy.htm

    “Babylon was a golden cup in the hand of the Lord,making all the earth drunk. The nations have drunk of her wine; therefore the nations are insane. Suddenly Babylon has fallen; and it is broken….” Jeremiah 51:7-8

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    Kevin Moore

    My link at 121 is no more apparently. However this link here is very interesting:-

    http://www.disclose.tv/forum/pathocracy-brave-new-world-or-1984-t15454.html

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    Ross

    Completely off topic but this just shows what dogged determination can achieve and what a big slap in the face for the UEA / CRU “looks”like

    http://climateaudit.org/2011/06/27/ico-orders-uea-to-produce-crutem-station-data/#more-13981

    ( PS. I hope the determination of the Thompson’s eventually gets similar results in the courts )

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    Bulldust

    Gerard Henderson has an excellent, calm, rational piece at the SMH asking for double standards to be removed from the media and climate science debate:

    http://www.smh.com.au/opinion/politics/cool-heads-needed-for-climate-talk-20110627-1gnfj.html#poll

    There is a poll attached which asks “Do you think tackling climate change should be a priority for Australia?” and so far 6,183 have responded, with 65% saying NO!

    Kevin Moore… like Monckton’s Nazi reference, people coming to sceptical websites quoting bible verses ain’t helping the debate. Are you deliberately derailing the subject matter or trying to devalue the site?

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    TimFromOz

    val majkus @ 85

    I was updating the stats in comments on Andrew Bolt’s blog last night and the poll had less than 24 hours to run (mid-teens I think). Now? Two days left!

    Apparently the article is far more popular than they anticipated, so mabey they’re giving more time to their reader base to post votes and make the result look better.

    Still, 6425 votes @ 10:17 with 64% saying No.

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    Kevin Moore

    Bulldust @ 124

    I do not understand how a quote from the Bible can be equated with something that Lord Monckton said when referencing archetypal behaviour.. How can it be interpreted that I am devalueing the arguement? Are you trying to debase the Bible?

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    brc

    Japan lost the plot when they discarded their liberal economic policies and started being Keynesians on the advice of muddle-headed economists. Their central bank artificially set the price of yen to zero, borrowed a ton of money and told everyone they were going to stimulate their way back to growth. 20 years of a dead economy walking later, and it’s about time they admitted they’ve got it all wrong and start again. Write off all the bad debt, liberalise the economy and let the price of yen float back to a realistic level. But they won’t do it, and instead they have ‘too big to fail’ walking dead institutions destroying value on a daily basis. And all because people have been hoodwinked into believing that governments are the best source of solutions to their problems. If only people realised that governments are generally the source of problems rather than solutions, and kept them small to limit the damage they could do, then growth could return to economies again. When you have the productive portions of the economy in a minority, and all the value is being leached away to non-productive parts, that’s when things go downhill. Non productive parts of the economy are the parts that have been chosen by central dictat rather than by market choice. THat’s what you get when you throw a pile of borrowed money at pet-projects in the name of Keynes.

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    brc

    @KeithH @ 110 : I agree that credit cards are not the problem. The problem is the lack of financial education in the people who apply for them. Students should be leaving year 7 understanding how credit cards work, and why they are a bad idea. Education is a much better strategy for dealing with these products. Personally I think it’s ridiculous that we are talking about all sorts of limits with gambling and smoking but harvey norman can still get away with ’4 years interest free’ type advertising. People just hear ‘free money’ and go for it, not understanding what they are doing. The one role for governments here is regulation on finance, and in this part they are failing completely.

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    pat

    with unemployment on the Gold Coast at 6.9%, we have the following (btw i love possums):

    28 June: Gold Coast Bulletin: Lucy Ardern: Possum wins in battle over trees
    A PESKY possum has been saved from the ultimate tree change, able to keep its home despite costing a prominent Gold Coast developer $2 million.
    Following a drawn-out legal battle with the Gold Coast City Council, Norm Rix has agreed to protect the marsupial and two of the six trees the council wanted left standing so he could begin work on a development at Days Rd, Upper Coomera.
    The high-end residential development plan includes more than 100 units and houses and is valued about $85 million.
    The possum lives in one of the trees…
    Mr Rix, who is also planning a commercial development adjacent to the residential subdivision, criticised the council for its handling of the matter and said he had only signed the agreement so work could begin.
    “The arborist is predicting the two trees will die in six months to two years anyway,” he said.
    “All of this is just sheer bloody-mindedness on their behalf. We will have to catch and relocate the possum anyway.”
    Mr Rix said ratepayers’ money should not have been wasted on the legal fight.
    http://www.goldcoast.com.au/article/2011/06/28/328011_gold-coast-business.html

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    Andreas

    KeithH @ 119

    I see your point Keith and I am in general agreement with you. Borrowing money for merely consumptive or speculative purposes on an individual level might be okay, but when you magnify that out and the majority are doing it, it’s a cancer – a recipe for rampant inflation, a boom, and then bust. The ‘Hayekian’ solution would be to let the market set the cost of money and in theory this will ensure debt will only be used for productive purposes – maybe, but I’m doubtful. An alternative is to ensure banks are tightly regulated so as to limit access to credit for dubious purposes, and to ensure society understands the risks associated with credit while encouraging a strong savings ethos.

    I liked Gina Rinehart’s comments, quoted on Andrew Bolt’s blog today: “for the cost of building this trial mine alone which you see today, I could have bought myself a beautiful new private jet. But you’ve seen these trucks and shovels out there, who would be paying the wages of these contractors if I had spent that on a luxurious private jet and 2 pilots instead?” Indeed. That doesn’t just apply to billionaires, it applies to us of all.

    To anyone, I recommend this brilliant article “Inflation’s Moral Hazard” by Theodore Dalrymple

    “But asset inflation—ultimately, the debasement of the currency—as the principal source of wealth corrodes the character of people. It not only undermines the traditional bourgeois virtues but makes them ridiculous and even reverses them. Prudence becomes imprudence, thrift becomes improvidence, sobriety becomes mean-spiritedness, modesty becomes lack of ambition, self-control becomes betrayal of the inner self, patience becomes lack of foresight, steadiness becomes inflexibility: all that was wisdom becomes foolishness. And circumstances force almost everyone to join in the dance.”

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    Alice Thermopolis

    1. Bank of International Settlements must have read Hunter Lewis’s book.

    http://www.bbc.co.uk/news/business-13922857

    27 June 2011

    “Interest rates must rise worldwide, says BIS A surge in lending due to low cost of borrowing in emerging economies has resulted in higher prices.

    The Bank for International Settlements (BIS) has warned that low interest rates across the globe are a threat to world financial stability.

    The BIS warned low cost of borrowing had resulted in a credit and property price boom that was fuelling inflation, especially in emerging economies.

    However, BIS warned that the policy may prove to be counterproductive.

    “The prolonged period of very low interest rates entails the risk of creating serious financial distortions, misallocations of resources and delay in the necessary deleveraging in those advanced countries most affected by the crisis,” the bank said in its annual report.

    The BIS is an organisation of international central banks which is not accountable to any national government.

    2. Garnaut has a Keynsian ideology – and similar aspirations. Will he be the first Governor of his Carbon Bank? YES!

    Alice (in Warmerland)

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    Kevin Moore

    Re big government versus individual rights, this link is on topic – Alan Watts.

    http://www.scribd.com/doc/19389126/Blurbs-AprilMay-2007

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    Kevin Moore

    And Alan Watts latest material re Fabians, Banks, big government etc here:-

    http://www.cuttingthroughthematrix.com/radio/Alan_Watt_Live_on_RBN.html
    [The above link seems dead. Did you mean:
    http://www.cuttingthroughthematrix.com/radio/Alan_Watt_CTTM_Live_on_RBN.html ?]ED

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    RJ

    “Interest rates must rise worldwide, says BIS A surge in lending due to low cost of borrowing in emerging economies has resulted in higher prices.

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    RJ

    @ 132

    “Interest rates must rise worldwide, says BIS A surge in lending due to low cost of borrowing in emerging economies has resulted in higher prices.

    This is a bit late isn’t it. The problem now is too much debt. Or more correctly too much interest on debt.

    Raising interest rates will just make this problem worse unless there is a debt write down. The Govt could do this by QE but not the Euro countries.

    There needs to be Govt debt write downs and procedures to allow people to walk away from debt. For example as they do in the US by just handing the house keys back and leaving behind the unpaid mortgage.

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    Graeme Bird

    We have to raise interest rates since not to do so is a further subsidy to the banks. The market spoke in 2008 and would have wiped out every fractional reserve bank on the planet and most particularly the derivatives providers. That they survived is an artificial thing. An imposition.

    You can increase interest rates and introduce new cash to retire debt at the same time. That is to say that interest rate policy need not stop you from increasing or holding steady business revenues.

    In light of the fact that the banks would have been wiped out you could legislate partial Jubilee for their debtors. But on the principle and not the interest. We cannot be shy about wiping this bloated monstrosity out. In the Northern Hemisphere particularly they are stealing with a mind-boggling sense of entitlement as if they were the Aztec royal family.

    Interest rates ought to be high in order to stimulate savings and to better direct available funds. But the government needs no banker to increase the amount of available funds in nominal terms.

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    RJ

    @137

    I’m unsure what you are saying.

    Commercial banks mainly make their profit on net interest. That is the difference between interest paid and interest charged. If the banks pay more for interest (on bank deposits) they will just charge more on mortgages etc.

    And where is this new cash going to come from. At present cash can come from notes and coins or commercial bank credit. That’s it. At present around 97% of new cash comes from bank credit. Any new cash from bank credit will also increase debt. In the current climate with high debt a contraction in the money supply is more unless debt is reduced.

    The current banking system is not really working but I think raising interest rates could make a bad situation worse at least until debt is written down

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    Graeme

    Big Government overspending allows for malinvestments such as green power, ETS, and other Green scams. The big government unwind that has already started will see these malinvestments unwind as the market escapes the ham fisted clutches of the worlds central planners and reverts to the mean which is far below the current positions.

    I.e. Asset deflation with inflation of consumables and commodities, government debt defaults and hyperinflation of fiat currencies. The touch points are Japan, Greece, Portugal, Ireland, Spain, Italy, the middle European countries such as Hungary, and the United States. China’s boom will collapse due to the massive malinvestment and corruption in China. They have massive bad debts in their municiple level governments and rampant inflation that will drive a hard landing. The Australian, Canadian, Brazilian and South African economies will tank when China falls over. Australian governments will go into massive deficit due to loss of tax and mining royalty revenues, and the AUD will drop back below .70 US cents. The local stock market will tank and the two speed economy will become one speed only – reverse. The local housing markets in Australia and Canada that have been propped up by the mining boom will become subprime and collapse resulting in the insolvency of the big 4 banks in australia that all have 50% or more of their books in Real estate. The Australian Government will bail out the local banks and hang the local taxpayer on the debt hook. Timeframe? – this will kick off within the current election cycle and the next Australian Federal Government will inherit an enormous mess.

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    Graeme Bird

    “Commercial banks mainly make their profit on net interest.”

    Not even close. Fractional reserve banks make their profits on new money creation. Without new money creation these bloated ticks would almost all be fundamentally unprofitable and there would be a massive and righteous shakeout.

    “And where is this new cash going to come from.”

    The mint obviously. If the government creates the new money it can retire debt with it. Or raise the tax free threshold with it. If they allow the banks to do it then thats a dead-weight loss.

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    Graeme Bird

    “Big Government overspending allows for malinvestments such as green power, ETS, and other Green scams.”

    Well yes of course. Govybank. Bankyment. An inseparable joint racket going on down the line since Cosimo Medici and before. But note that its the financiers corrupting government budgetary practice by arranging for the loans to these governments. Who would spend nothing like they do were it not for the debt pushers. They would then prioritise more, and wealth destruction would be less.

    Instead the debt-pushers want to be bailed out by the European taxpayers. When you here of a “Greek bailout” it must be understood that there is no such thing. Its a banker bailout. And the bankers have corrupted the politicians to such a powerful extent that the politicians will put the rich banker interests above the interests of the voters.

    The bankers destroy wealth by allocating funds to subsidise bad budgeting. Then they turn around and want to be bailed out for these bad loans. We therefore are paying for these bankers three or four times over. Its an unbelievable racket.

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    RJ

    @ 140

    Not even close. Fractional reserve banks make their profits on new money creation. Without new money creation these bloated ticks would almost all be fundamentally unprofitable and there would be a massive and righteous shakeout.

    This is not correct. For every commercial bank credit (for say a new mortgage). There must be an equal deposit (as the mortgage is used to buy a house that the seller deposits with their bank) You do not even need to read up on this. Work it out for yourself. If HSBC bank (or whatever your bank is) credit your account (a temporary loan). You use this money to buy goods from me. I then deposit this money with my bank. So new commercial bank credit always results in debt (you) and a deposit (me) when this money is used (and at that point new money comes into existence). It’s two sided never one sided with commercial bank credit (unlike central bank credit or notes and coins).

    “And where is this new cash going to come from.”

    The mint obviously. If the government creates the new money it can retire debt with it.

    Sorry but this is also incorrect. Back in the 1950 for example Govts did this. Printed cash (notes and coins) to pay their expenses (or retire debt). Notes and coins are debt free money. But notes and coins are hardly used today. Govts pay by credit. And they raise this credit (to cover a Govt deficit) from the market in exchange for Govt (treasury) bonds.

    If Govt debt is too high and they have their own currency they can reduce it by QE. But this step is not inflationary. It simple converts one liquid asset (Govt bond) into another one (central bank credit).

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    brc

    RJ – you and I will never, ever agree on anything to do with finance or money. I’m going to leave it at that.

    But this statement :

    …they can reduce it by QE. But this step is not inflationary

    You’ve got to be joking. The US has done QE1 and QE2 and smashed the value of their dollar and sent costs spiralling. Not inflationary? Oh, my aching sides. The only reason rampant inflation hasn’t YET taken off is that much of the created money is sitting in bank balance sheets, waiting to be lent. The other is that they are fighting deflationary forces of deleveraging credit. But still they’ve created inflation in balance sheets and asset markets – which was the federal reserve’s stated aim. Not inflationary? All prices going up across the board isn’t a rise in costs, it’s a drop in currency. Gold hasn’t increased in value – it’s still worth about the same when expressed against other real things, same as it has for millenia. It’s the currencies that are falling in value, precisely because they have printed (actual or virtual) too many of them.

    I’ll leave my last word on this to Milton Friedman:

    Inflation is always and everywhere a monetary phenomenon.

    Amen, Milton, amen to that.

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    RJ

    @ 143

    Be careful of misinformation. Banks and the market dislike QE because it reduces their income. Why. Because Govt bonds that earn interest are exchanged for central bank credit that does not.

    As you note above QE has NOT caused overall inflation. In fact the money supply in the US has decreased in recent years even with large QE

    http://webofdebt.files.wordpress.com/2011/05/510-11.gif

    As with CAGW people need to start thinking for themselves and using common sense. What is QE. It’s a process where central bank credit replaces Govt bonds. Why. To reduce Govt debt when it becomes too high often when the market refuses to continue buying Govt (treasury) bonds. This replaces one very liquid bank asset (Govt bonds) with another one (central bank credit).

    Logically how can this cause inflation. The commercial banks are in fact in a slightly weaker position as they earn less from the taxpayer (interest on bonds).

    The ignorance regarding money and banking is high. People often refuse to think it though as many do with CAGW. They just accept misinformation (QE is money printing for example) from people who will benefit financially from the current system.

    Inflation might occur but it has nothing to do with QE. (Except that this might allow Govts to continue running large deficits. But this is a Govt spending issue not QE).

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    RJ

    And here’s another viewpoint on recent hyper inflation. It explains why inflation can take off to the extent it does in some countries.

    http://webofdebt.wordpress.com/2010/12/02/is-qe2-the-road-to-zimbabwe-style-hyperinflation-not-likely/#more-976

    Anatomy of a Hyperinflation

    Professor Michael Hudson has studied hyperinflation extensively. He maintains that “every hyperinflation in history stems from the foreign exchange markets. It stems from governments trying to throw enough of their currency on the market to pay their foreign debts.”

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    Graeme Bird

    “This is not correct. For every commercial bank credit (for say a new mortgage). There must be an equal deposit ”

    Yes of course. But they are lending the money to each-other. So the bank-to-bank interest rate cancels out. Effectively the new money is pyramided up for free.

    It remains the case that fractional reserve banks make their profits on new money creation. They pyramid the new money up on top of the cash. But they cannot do so without keeping credit accounts with each-other. Thats part of the money creation process.

    If bank A pays bank B a billion in interest in a year, and bank B pays bank A a billion in interest in that same year the scam hasn’t cost them anything. The interest they pay to each-other cancels.

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    Graeme Bird

    “Be careful of misinformation. Banks and the market dislike QE because it reduces their income. Why. Because Govt bonds that earn interest are exchanged for central bank credit that does not.”

    Now you are just being silly. They will only sell their bonds at rates favorable to them. So they gain on every transaction. The bonds are not acquired by compulsion. Then the banks get to pyramid up on the new monetary base. So banks love quantitative easing. Quantitative easing, like everything else the central bank does, is for their benefit.

    But they wouldn’t like it if it came with a reserve asset ratio. Since that would be the government clawing back its capacity to create new money at the expense of the banks doing it.

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    RJ

    Yes of course. But they are lending the money to each-other. So the bank-to-bank interest rate cancels out. Effectively the new money is pyramided up for free.

    No. The new money (or really commercial bank credit) always has an equal deposit. A will pay B for goods or a service who will deposit this money.

    Either with the same or another bank. If with another bank then the banks settle using central bank credit.

    So the new credit is created from thin air (by JE) but it is not free in the way notes and coins are.

    It is very simple yet so many are confused by this.

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    RJ

    Now you are just being silly. They will only sell their bonds at rates favorable to them. So they gain on every transaction. The bonds are not acquired by compulsion. Then the banks get to pyramid up on the new monetary base. So banks love quantitative easing. Quantitative easing, like everything else the central bank does, is for their benefit.

    If the Fed (or central bank) purchases crap assets I agree. It may be the reason why banks like QE1 but not QE2

    http://www.webofdebt.com/articles/bernankes_helicopters.php

    The Fed’s earlier attempts at QE involved swapping $1.25 trillion in mortgaged-backed securities (MBS) for dollars created on a computer screen. As noted in the NPR segment, many of those securities have come due and have gotten paid off, putting cash in the Fed’s till. The Fed now proposes to use this money to buy long-term Treasury debt rather than MBS. That means the Fed will, in effect, be buying the government’s debt with dollars created on a computer screen. The privately-owned Federal Reserve is not actually an arm of the federal government, but if it were, the government would thus be printing its way out of debt – just as Helicopter Ben proposed in 2002. Recall that he said, “the U.S. government has a technology, called a printing press” – the U.S. government, not the central bank that has done all the QE to date.

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    Myrrh

    For every commercial bank credit (for say a new mortgage). There must be an equal deposit (as the mortgage is used to buy a house that the seller deposits with their bank).

    Deposits can be used to create money out of thin air, by banks allowed to lend out a fraction of that amount, not of the money itself, which isn’t theirs to lend, but non-existent non-material equivalent. Or even multiplications of debt to create money, by calling the debt a promissory note.

    http://www.truth-it.net/money_creation.html

    So banks actually create money out of someone’s loan, so isn’t the morgage not at all with the banks but with the person taking out the loan? The banks are only ‘facilitators’ – the person who takes out the loan should perhaps be asking for a bigger percent of the profits the bank is making on this. And, doesn’t appear to have any right to claim the property either.

    http://moneyisdebtisslavery.blogspot.com/2010/05/money-debt-slavery.html

    See post Monday May 17 2010 Money=debt=slavery for central bank money creation out of nothing which the early US tried to stop, it was re-introduced in 1913 and the money supply is again in the control of private banks.

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    RJ

    Myrrh

    Lets assume a new bank open in the UK (ABC Bank) It ahs capital of 100 million that they deposit at 4% on the ST money market

    ABC’s first banking transaction is a mortgage loan to Myrrh. You use this to buy a house from RJ.

    I open an account at ABC Bank as the interest rate on deposits is good

    So their balance sheet at this point is

    Assets
    ST Loans 100 million at 4%
    Loan to Myrrh 1 million at 10%

    liabilities + SHF
    Deposit RJ 1 million at 3%
    SHF 100 million

    The money supply has increased by 1 million because of this transaction

    The net interest earned by the bank on this transaction is 7% (10% minus 3%). This 7% covers the cost of running their business plus any bad debt write off’s

    If the loans were always paid back to the same bank (as in the example above) they could lend any amount of money without getting into grief (as long as their lending is sound).

    But if it’s paid into another bank ABC has to settle with this bank. For example if RJ paid 1 million into HSBC (rather than ABC) then ABC would have to use 1 million of their ST funds to settle with HSBC bank. This settle is done through the central bank.

    In the past fractional banking rules limited banks to around 90% of base money. Base money in the above example would be 100 million times 90% equals 90 million. This fractional banking rules were removed over the last 30 years. So banks lent more than they held in base money and then after the event raised money to settle with other banks on the ST money market. Banks that did this (like RBS) collapsed when the ST money market dried up after Lehmans in 2008.

    So
    fractional banking no longer applies now.
    Banks earn their profits on net interest.

    The problems occur when

    Banks profits are too high. (due to debt issues as noted above)
    Banks are allowed to create money without restriction (other than willing lenders) as they were after the fractional banking restrictions were removed.
    Irresponsible banks and the bond holders who financed this lending are protected by the taxpayers when the sh+t hits the fan. As for example Ireland.

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    RJ

    See post Monday May 17 2010 Money=debt=slavery for central bank money creation out of nothing which the early US tried to stop, it was re-introduced in 1913 and the money supply is again in the control of private banks.

    Yet the US did well up until recent years

    The problem in recent years in the US are in part caused by

    The move away from notes and coins (debt free money) to bank credit (debt based money). This was bad for taxpayers / good for banks.

    Removal of usury laws Usury statutes in the United States http://joannenova.com.au/2011/06/keynes-versus-hayek-big-government-versus-individual-rights/comment-page-4/#comment-367708

    Removal of fractional banking restriction etc

    Banks need to be controlled or they can own everything due to their privileged position (to create new credit / money). Many Govts did not.

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    Myrrh

    RJ – The money supply has increased by 1 million because of this transaction.

    Because the million from ABC to Myrrh wasn’t transferred to RJ but created out of the iou from Myrrh?

    Which is what I was saying, or rather repeating,that the banks create money out of debt.

    but if it’s paid into another bank ABC has to settle with this bank. For example if RJ paid 1 million into HSBC (rather than ABC) then ABC would have to use 1 million of their ST funds to settle with HSBC bank. This settle is done through the central bank.

    Which created it out of nothing?

    So fractional banking no longer applies now. Banks earn their profits on net interest.

    Are you really saying that fractional banking no longer exists in the major world banks?

    Yet the US did wellup until recent years

    Depends what you mean by the “US”. The Federal Reserve is a private banking organisation with full control over the money supply, it lends to the government and charges interest. It’s debt collection arm, the IRS again a private company based in Puerto Rico, collects the interest in taxes. Not illegally note, it requests payment, it doesn’t demand… However, since 1913 the general populace have been brainwashed into believing it is a demand from the government and that it is mandatory… Actually, it’s against the constitutional rights, but that’s another story.

    The problem in recent years in the US are in part caused by the move away from notes and coins (debt free money) to bank credit (debt based money). This was bad for taxpayers/good for banks.

    That’s the fractional reserve banking, creating money out of debt, isn’t it?

    Removal of fractional reserve banking restriction etc.

    Only a matter of degree, surely? The base still remains that it’s money created out of debt?

    Banks need to be controlled or they can own everything due to their privileged position (to create new credit/money). Many Govts did not.

    When was this stopped and who stopped it?

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    Kevin Moore

    For an in depth study into how Keynes economic theories were designed to promote his Fabian Socialist/Communist philosophy,see:- http://www.alor.org/Library/FabianSocialistContributiontotheCommunistAdvance.htm

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    RJ

    Myrrh

    So fractional banking no longer applies now. Banks earn their profits on net interest.

    Are you really saying that fractional banking no longer exists in the major world banks?

    The fractional banking percentage restriction was initially ignored by commercial banks and then totally removed. Gordon Brown did this in the UK for example. Rather than trying to enforce these rules it was let the market (willing lender and willing borrower) decide. This almost guaranteed a boom and bust

    So bank credit was once restricted by base money (central bank credit + notes and coins). But work it out on a spreadsheet

    At 90% restriction. Base money of $100 multiplies to $900 of commercial bank credit. So a money supply of $1000.

    At 99% restriction. Base money of $100 multiplies to $9900 of commercial bank credit. So a money supply of $10,000.

    Once a bank goes over 100% (as the likes of RBS, Halifax and Northern Rock in the Uk did) there is no limit on bank credit except willing lenders.

    Most fail to understand the significance of this change and the impact it had on the economy. I guess it is so simple most miss the point. It almost guaranteed a boom as at least some banks will lend recklessly. And others will finance their reckless lending (esp if the taxpayers protect the sick banks and their bondholders when it all blows up).

    Various parties (BIS for example) are now trying to bring this problem under control by imposing capital lending restriction on commercial banks (rather than base money restriction on lending).

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    RJ

    The problem in recent years in the US are in part caused by the move away from notes and coins (debt free money) to bank credit (debt based money). This was bad for taxpayers/good for banks.

    That’s the fractional reserve banking, creating money out of debt, isn’t it?

    Notes and coins are debt free money. As the economy grew (in the past) and more base money was required. This was printed and spent into existence by the Govt. This did not create Govt debt.

    Today Governments finance their deficits almost entirely by Govt bonds. This is debt that the taxpayer has to pay back plus interest

    People criticise QE but this can reduce Govt debt as explained above. It can be used to finance Govt deficits with the equivalent to debt free money. As the Govt in effect raises money (credit) from itself rather than from the market.

    NB. This even applies in the US as Fed profits are now returned to the US treasury (since the 1960S).

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    Myrrh

    RJ – I’m having a real problem following what you’re saying. You claim that fractional reserve banking no longer exists and then describe it as still existing. You say banks now make money only on the interest difference of a transaction (and do not create money out of debt) and then give an example which shows they have precisely created money out of debt. You say fractional reserve banking restrictions were at first ignored by the banks and then the restrictions were removed altogether by Gordon Brown – and still you say that there is no more fractional reserve banking!

    Now, as I’ve had to do on several occasions when discussing AGW with some professing themselves skeptics all the while promoting AGWScience fiction memes and the imposition of carbon taxes etc. even though they say they don’t believe CO2 a problem, either you’re not being logical in your analysis, or you’re deliberately presenting a totally false idea of the banking system now, as some benign profit only from fascilitating loans for example, all the while deliberately fudging the fact that banks still create money out of nothing.

    Gordon Brown gave the central bank independence to go full throttle with creation out of debt, fractional reserve banking as you’ve described, and having so organised itself among the band of merry bankers has even got the people to pay for the inevitable crashes through taxation besides the usual claw back from repossessions, etc.

    Are you in PR from some banking organisation??

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    Myrrh

    Banking P.R. – Public Relegation.

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    RJ

    Myrrh:
    July 1st, 2011 at 8:43 pm

    I can’t explain it any more clearly. I have sat down with people at times but firstly I need to smash their pre conceived but incorrect views. This is the hard bit.

    What I suggest is drop all pre conceived ideas and think it all through logically. Say imagine moving to another planet and setting up one bank that opens an account for everyone where people all agree just to use that banks credit (money).

    Then allow another bank to open etc. How do these two banks settle. Assume its by setting up a bankers bank (called a central bank)

    This web site is excellent. Explains complex issues very clearly

    http://webofdebt.wordpress.com/

    And this video explains the interest problem very well

    http://www.youtube.com/watch?v=_doYllBk5No

    But banks are not really to blame. It’s people who vote in Govts that fail to regulate banks adequately. Due in large part to almost complete ignorance of the money system.

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    Mark D.

    Folks, pardon the interruption, Thanks for some good links (whilst arguing). Can you provide a link or information about the ratio of actual currency (coin and paper) to what banks claim to have in assets? Most bothersome to me is that there seems to be virtually no money. Instead a vast Ponzi scheme with banks moving money around in an electronic virtual world.

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    RJ

    Most bothersome to me is that there seems to be virtually no money. Instead a vast Ponzi scheme with banks moving money around in an electronic virtual world.

    By money I assume you mean cash and coins?

    What is more important is the financial position of the bank. Are their loans sound and likely to be paid off. Or risky and over valued (has enough been provided for likely future bad debts).

    And what is the banks exposure. For example would a small increase in bad debts send the bank under. Or not.

    And at the end of the day the Govt can always step in to save a bank. They should not protect bond holders (just depositors up to a certain limit) though as for example Ireland has done. Bond holders invest money and if invested poorly or carelessly should lose their investment.

    But bank credit is a ponzi scheme. In other words principal is always used to repay interest. This is why usury laws have at times restricted bank profits. Otherwise debt will start to exceed by a dangerous amount the credit available to repay it.

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    Myrrh

    RJ – What I suggest is drop all pre conceived ideas and think it all through logically. Say imagine moving to another planet and setting up one bank that opens an account for everyone where people all agree just to use that banks credit (money).

    Then allow another bank to open etc. How do these two banks settle. Assume its by setting up a bankers bank (called a central bank.

    I really don’t have entrenched ‘pre-conceived’ notions about all this – merely imbibing information and regurgitating, and you’re still saying one thing exists and the other doesn’t and then giving examples of the other as existing in practice.

    This web site is excellent. Explains complex issues very clearly.

    http://webofdebt.wordpress.com/

    As an example..

    I looked at http://webofdebt.wordpress.com/the-global-debt-crisis-how-we-got-in-it-and-how-to-get-out/

    It says: “Contrary to popular belief, most ofour money today is not created by governments. It is created by private banks as loans.

    Which is what I’ve been saying. Banks create money out of debt, out of loans. You appear to think that they have equal money to the loan being made. As in the example you gave, you appear to have missed that no money of the banks was necessary in first creating an extra 1 million from your deposit – it came out of the loan to Myrrh created out of an i.o.u. The bank didn’t subtract a million from its own stash. But now, there’s two million extra created, from Myrrh’s i.o.u. an imaginary million has been paid to RJ who happens in the first case to deposit it at the same bank, so they’ve created two imaginary millions. If you deposit the imaginary money from my i.o.u. in another bank, it’s a profit of two imaginary millions shared by two banks. Then, they get into selling/lending each other the imaginary i.o.u. money, from which they can also keep a fraction as reserve and do more such ‘investments’ with other banks. All, if the loan is a mortgage, using the property as an asset to be passed around in such inter banking shenanigans.

    (Which is why if you’re being repossessed the first thing you should ask for is proof of ownership! The bank who first mortgaged the property has already covered its ‘costs’ some, say thirty, times over – it is no longer the owner because it has sold it on in these virtual transactions.)

    Anyway, the paragraph from the site you recommended goes on: “The private system of money creation has grown so powerful over the centuries that it has come to dominate governments globally.

    This is the real problem. It doesn’t matter which government is in power, once the banks get their mitts on government borrowing they have an enormous source of fractional reserve money creation out of nothing opportunities. The Federal Bank is such, private consortium of bankers creating booms and busts at will and the IMF is the bank of all banks in this – it is taking whatever assets it can get of a country in debt to them. Sell some islands said Merkel to Greece.. Utilities and land to pay the debt and a sovereign nation is no longer sovereign, and the people put into slavery by crippling taxes to pay the extortion money interest to the banks.

    But, you should note, that many governments are complicit in this – their policies protecting this banking practice in order to create and/or maintain this bwanking cartel, which as noted here comes from the Fabians, and change of ‘party’ irrelevant because the leaders are Fabian trained or influenced, as in the UK.

    But anyway, back to the link. It goes on to say how money is created:

    How Banks Create Money. The process by which banks create money was explained by the Chicago Federal Reserve in a booklet called “Modern Money Mechanics”. It states:

    “The actual process of money creation takes place primarily in banks.” [p3]

    “[Banks]do not really pay out loans from the money they receive as deposits. If they did this, no additional money would be created. What they do when they make loans is to accept promissory notes in exchange for credits to the borrowers’ transaction accounts. Loans (assets) and deposits (liabilities) both rise [by the same amount].” [p6]

    “With a uniform 10 percent reserve requirement, a $1 increase in reserves would support $10 of additional transaction accounts.” [p49]

    A $100 deposit supports a $90 loan, which becomes a $90 deposit in another bank, which supports an $81 loan, etc.

    That’s the conventional model, but banks actually create the loans FIRST. (Picture how a credit card works.) Banks need deposits to clear their ougoing checks, but they find the deposits later. Banks create money as loans, which become checks, which go into other banks. Then, if needed to clear the checks, they borrow the money they borrow the money back from the other banks. In effect, they borrow back the money they just created, pocketing the spread between the interest rates as their profit.(

    That’s fractional reserve banking, still alive and kicking.

    The history of how this evolved is interesting, and that follows next: “How the System Evolved” – do read it.

    I’ve been reading some pages from Keith Weiner Daily Capitalist and he too seems to confuse the basic system of fractional reserve by not actually describing fractional reserve but saying there’s nothing wrong with it except a problem with ‘duration mismatch’, but these are two competely different creatures. Duration mismatch can become a problem if it gets the timing wrong, but it’s built on the lender knowing that the bank will be using his deposits for other things, for which he gets interest in return, and is not thus the same as creating money out of nothing, out of debt by loans, and multiplying that imaginary money many times over by pushing it around banks. I don’t have a page handy for Weiner, readily available online, but this rebuttal interesting for seeing the difference:

    http://www.acting-man.com/?p=6891

    So, two examples here of fractional reserve banking in its basic premises not being understood, not being taken into account in the confusion of mixing it up with other things. And from the page following, an explanation of how money is created out of debt which is also mixed up in the confusion of banking concepts:

    http://www.ozconspiracyhouse.org/frontend/2011/06/20/the-moral-hazard-of-modern-banking-how-banks-create-and-destroy-money/

    Actually, I think the history from the site you linked is worth putting in here, my link above the global debt crisis how we got in it and how to get out:

    How the System Evolved

    The current system of privately-issued money is traced in “Modern Money Mechanics” to the 17th century goldsmiths. People who left gold with the goldsmiths for safekeeping would be issued paper receipts for it called “banknotes”. Other people who wanted to borrow money wer also happy to accept paper banknotes in place of gold, since the notes were safer and more convenient to carry around. The sleight of hand came in when the goldsmiths discovered that people would come for their gold only about 10% of the time. That meant that up to ten times as many notes could be printed and lent as the goldsmiths had gold. Ninety percent of the notes were basically counterfeited.

    This system was called “fractional reserve” banking and was institutionalized when the Bank of England was founded in 1694. The bank was allowed to lend its own banknotes to the government, forming the national money supply. Only the interest on the loans had to be paid. The debt was rolled over indefinitely.

    That is still true today. The U.S. federal debt is never paid off but just continues to grow, forming the basis of the U.S. money supply.

    This is what the founding fathers of the U.S. constitution were fighting to get rid of, see Jackson on this. The fight was lost in 1913 when Wilson went on an ego trip from bwankers massaging him. I read somewhere that he came to his senses later and realised he’d singly handedly f*ck*d the U.S. by bringing back the same system which was the reason America originally fought to get out of the thrall of British banking control.

    And, although I haven’t followed it up, some say that the same players control both systems, if so, maybe his act could be seen as treason?

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    Myrrh

    Sorry, there should be an end blockquote after “forming the basis of the U.S. money supply.”

    “This is what the founding fathers of the U.S. constitution” on, is my comment. Should have previewed.

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    Myrrh

    Mark D – there’s certainly a concerted effort by the banks to get all paper money out of the system, all the better to run the scams and take control of the individual’s money, and the individual.., but how this actually plays out against the usual printing of more money/taking it out of the system in the planned inflationary booms followed by the busts I don’t know.

    It is a giant ponzi scheme, and the people at the top are mega rich from it, but these people, those who think they’re ‘really’ in control, appear to be united in this other agenda where this is only a means to an end – the banking scam built on the goldsmiths enrichment scheme in other words appears to have been taken over as have governments to promote an ideology which appears to have a life of its own and so no one in control, Kevin Moore’s link 155, rather people from disparate backgrounds working to infiltrate the ideology into every aspect of life and through whatever means or political parties or strata of society they can get themselves into, from the Fabians.

    I think what we’re seeing now is that as a ‘pyramid’ scheme with a lot of the players better defined. The Communists think they are the great infiltrators, the Fabians think likewise, the various fascists, royalists and so on, all thinking they’re using the work of the others to get themselves to the top of the heap. But they’re all really united in one thing, moral bankruptcy. As all history teaches, this is nothing else but a variation created out of egos who think themselves superior to others; self-delusion mistaking power for intelligence, a genetic dead end to creativity can’t bear living creativity in others.

    I don’t hear it so much nowadays, but it used to be that the term Anarchists was given to those of ‘commie’ leanings, another use of propaganda pyschology by real commies and fabians I should think, who are anything but, desiring as they do the complete central control of societies. Anarchy means ‘without a head’, i.e., the freedom of the individual, the antithesis to the goals of central control. The U.S. constitution, in my opinion, is the best we’ve managed, so far, to organise the principles of an-archy, by a government under the will of the people. But that’s been undermined so much now that even Americans don’t understand what they had. They think they have a ‘democracy’. Another clever ruse to keep them in ignorance of what they’ve lost by calling it what is isn’t.

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    Mark D.

    Myrrh @163

    But, you should note, that many governments are complicit in this – their policies protecting this banking practice in order to create and/or maintain this bwanking cartel, which as noted here comes from the Fabians, and change of ‘party’ irrelevant because the leaders are Fabian trained or influenced

    I only learned of the Fabians as a result information gleaned here at this AU site. That was a year or two ago. Since then I’ve done my best to inform any and all here in the USA. The Fabian influence has to be stopped.

    Thanks for confirming my observations. Large banks, governments, large corporations and socialist democrats are all the same thing.

    RJ @ 162, yes I meant cash and coin.

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    RJ

    @ 163

    Which is what I’ve been saying. Banks create money out of debt, out of loans. You appear to think that they have equal money to the loan being made.

    No. Its a fine point but this is not correct. And until you understand why you will be confused by the banking / money system.

    There are two types of money

    Debt free money. For example notes and coins
    Debt based money. For example commercial bank credit

    So money today is either notes and coins (about 3%) or commercial bank credit (around 97%). So today we have almost totally moved to a debt based money system.

    Debt based money

    Banks today create credit on a computer screen (say a bank loan). And at the same time this will always generate these transactions when this loan is spent into existence.

    A1 A debt liability for the borrower (say a mortgage at 10% interest)
    A2 An equal debt assets (in the banks books)

    And for the person who receives the credit (money)

    B1 A debt assets (the deposit with the bank)
    B2 An equal debt liability (the bank owes the depositor money)

    And if the depositor banks at a different bank to the payor a settlement between the two banks. One bank will have to settle with the other bank. This settlement is done through the central banks (within countries) or the BIS (between countries).

    So banks do not create money out of (or from) debt (or deposits). Money is credit and debt. Whenever credit is created there is always an equal (except for higher interest bearing) debt. Many miss this point and form incorrect assumptions about banking.

    Debt free money

    Cash and coins is similar but different to bank credit. The Govt can create this from thin air (it has value because of what it can purchase backed by Govt laws) without an offsetting deposit against the Govt. In the past commercial banks use to recycle cash and coins but today even this no longer applies as Ellen explains above.

    That’s the conventional model, but banks actually create the loans FIRST.

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    RJ

    @ 163

    and is not thus the same as creating money out of nothing, out of debt by loans, and multiplying that imaginary money

    This is one of the pre-conceived misconception many people have. There is not ‘real money’ and ‘unreal or imaginary money’.

    Money is just a medium of exchange. It can take the form of gold, silver, sea shells, bits of paper or bank credit.

    One is not real and others fake or fraudulent. What is real money is what society (Govt) decides is real money. And today that includes bank credit.

    Problems occur when the supply and charge for money or credit (interest) is not properly managed. And this is what is happening at present.

    Banks are making excessive profits. So much that the interest on debt is starting to seriously harm countries.

    And the supply was not regulated especially when the fractional banking restriction were removed in recent years. The resulted in an rapidly expanding money supply. A lot of this credit was directly into housing pushing house prices up.

    How to introduce a more stable money system, where the benefits are more evenly shared between risk takers and the people, is a big issue that needs addressing. Otherwise a few will own everything when many struggling to survive.

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    RJ

    And here’s an interesting article that cover the interest on debt problem. If banks make enough on net interest to cover expenses and make a small profit (under 1% of GNP in total according to Steve Keen) then things are fine.

    If banks profit equals say 2% of GNP how can this problem be solved. Easy. The Govt releases debt free money equal to this amount then the interest problem (debt liability is more than the money supply) disappears.

    One way to do this is by QE where Govt bonds are converted to interest free central bank credit. In this way total debt is reduced to the total money supply.

    This solution will also work at higher % level but then inflation will become a problem.

    Another solution is simple to write off debt and start again. At the very least Govt should never step in to protect careless bond holders as was done in Ireland. Or really is done whenever the IMF steps in to rescue a country but is really just protecting bond holders and banks.

    http://vidrebel.wordpress.com/2011/06/30/1054/

    2) The bankers who wrote The Federal Reserve Act in 1913 knowingly engineered a Fatal Debt Bomb into the legislation. This is true. When you go to a bank to get a loan, the banker created ten thousand dollars in new money by entering that amount onto a checking account. Notice that if you signed a note for simple interest at 10%, you will owe the banker $11,000 in one year’s time. He only created $10,000 so how do you pay him back the principal plus interest? Good question. What he does is to create more money through more loans so there is enough money to pay the note plus interest.

    This means that the total amount of debts in the society are growing at a compound rate. Bankers have known since the Babylonians that unchecked exponential growth of unplayable debts will destroy any nation with a Debt Bomb. This is what is happening to America and the world today. Michael Hudson wrote about the Babylonian solution. They developed a formula that told them how long this rising tide of Unpayable Debt could grow before they had to cancel all the debts and start over again.

    Let me repeat that the bankers have known this for over 4,000 years. But they have made sure that you know nothing of it because they want to foreclose on you and your nation so they can but everything for pennies on the dollar in bankruptcy proceedings.

    The Russian demographer Borisov tells us that the bankers starved millions of Americans to death in the 1930s rather than allow people to understand the Babylonian solution. The Bible writers copied this concept when they wrote of the Jubilee cancellation of debt.

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    Mark D.

    RJ @ 168

    Otherwise a few will own everything when many struggling to survive.

    I’m thinking it is already too late. Government gets 30%-50% by taxing, banks get another 10% to 15% on interest and fees (my guess). Inflation takes another bite. Leaving not much left for me and forcing me to have to invest in markets (risky) and use credit (also risky).

    Very depressing. I think we should use our remaining credit to buy food, weapons, ammunition, tools, gold and silver bullion, hide it all and file for bankruptcy.

    3% coin and cash!
    97% debit based!

    What percent of economies is off the radar?

    for example barter based, illegal (drug trade) or stolen

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    john hopkins

    It is the Milton Friedman chicago school of economics who push and pull on the string of monetary policy according to the theories of Hayek; in Magggie Thatchers Britain it lead to huge unemployment and scorched earth economics, then the freeing of credit was done during the Bush years led to the GFC, both conservative policies from the hayek school yet you attribute the control of Money supply and interest rates mistakenly to Keynesian policy making, Keynes is about control of aggregate demand and there is school called New Keynesianism which is about balancing the 4 sector macro economy, not your simplistic antiquated notions. You have a subtle right wing axe to grind, the carbon tax is not a big government left wing socialist keynes plot as you so suggestivelly allude, it is nothing more than good old time honoured economic and accounting practice of shadow pricing, or transfer pricing or carrying the burden to society of polluters real cost to society, yes but I hear the liberals scream JOBS JOBS JOBS, bollocks, since I was a young man ox fettlers, IBM Punch card operators, Compomotrers,Service Station Pump Attendants,Department Store lift operators, and thousands of careers in the Public Service have gone the way of dinosaurs, when I entered University as a young man my Economics Professor had the foresight to say then the job most of you will be doing in 20 years time does not exist now! Evolution and entrepeneurs being the ceasellessly moving creative forces they are let things be and forget about saving stinking rotting decaying planet destroying industries, move on to the future. Which bring me to my final point is that you maintain that big government and keynes are Industry supported that is a largely conspiratorial right wing myth, the dominant school in Big Accountancy and Management Consultants Wall Street and Finance and backed by big business the bush and reagan and thatcher Major blair and the new British administrations are primarily CHicago School of Economics,derived from the self interest theories of Hayek, Privatisation, self regulation model you can see by Obama’s complete failure to control Wall street. after he bailed them out they accepted the money as donations to their annual bonuses and fleeced their corporations; business as usual.(America’s Republican Congressman are the best politician’s Wall Street can buy completely against any intervention into the rights of people to Universal free Healthcare, if you can’t afford to pay health insurance you have the right to a free burial in an unmarked grave!,and the unfettered rights of the management of joint stock companies to act like complete thieving robber barons) Australia through Keating to an extreme version with Howard is (and even under Gillard, who is very circumspect about Govt intervention and is cutting the welfare sector slowly year by year)) basically Friedman accolytes, Keynesiasm is always kept alive and critically revived by journalists as a socialist demon because it creates a lot of jobs, however ultimately there is no other way to stave of a great depression other than the method devised by Keynes, your solution pull on interest rates and restrict money supply actually precipitates a greater and deeper recession, Hayek’s method was tried by Keating and Thatcher it lead to 17% interest rates in Australia and 8-12% unemployment worse than the GFC and 2nd to the depression. Similar or worse for Thatchers England. Get your economic facts straight before you push your right wing wheelbarrow.

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      You are massively confused about economic theories and politicians who simply used their rhetoric but failed to implement them.

      Milton Friedman’s Chicago School of Economics, “Monetarism” has nothing to do with the monetary economic policies of FA Hayek’s “Austrian” school. They held similar views on various issues but were world’s apart on economic theory,

      http://www.youtube.com/watch?v=fXqc-yyoVKg

      You then take political rhetoric that Thatcher spoke in relation to Hayek and confuse it with her actions and free-market economics,

      Thatcherism is all too similar to Reaganism: free-market rhetoric masking statist content. While Thatcher has engaged in some privatization, the percentage of government spending and taxation to GNP has increased over the course of her regime, and monetary inflation has now led to price inflation.” – Murray Rothbard, Ph.D. Professor Emeritus of Economics.

      Please don’t ever comment on economics again as you cannot even get the basics right.

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      Mark D.

      I have to agree with Poptech. Take a breath and start over otherwise take note of his last sentence.

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      Roy Hogue

      And all in one huge unreadable sentance. Forget Economics and study English!

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