The budget

[Leftofcentresalterego]

Frogen - since we are way beyond the stage where we can barter for everything, currency is critical. This being the case, the only entity capable of issuing the currency (the federal government of course) is absolutely crucial in the economy. Without their spending, we are fucked.

White Indigne - I often disagree with Frogen but at least he makes it clear what he means. I have no idea what the fuck you are on about. You been hitting the kava?

[JW Frogen]

Currency does not create wealth, work does. This is a law of nature, you have to expend energy to get energy. Sorry, there is no other way.

Currency just notes it on a piece of paper.

The reason we are in so much economic trouble now is because we forget this.

[Leftofcentresalterego]

Christ on a bike Frogen - what do you think it is that gives us the ability to usefully exchange the goods and services that are the proceeds of that work? Refer back to where I said "we are way beyond the barter level".

The chief reason we are in so much economic trouble is because we have been swayed to believe that markets - including financial markets - are not only capable of effective self-regulation but that this is the ideal state.

[Ethnic]

There are alot of scare campaigns rearing their ungly heads at the moment. There will be pain, yes, but we should be able to get through it. The optimistic predictions from Treasury should be ignored, what they say will happen and what reality makes happen are two different things.

By the way what direction must the GFC take to get rid of the two dickheads from the A&R Computers and Designer Direct ads? Monk any suggestions????

[JW Frogen]

Your Christ on a bike is the same cross as the financial industry crucified us on.

Once again, you cannot create real economic value without real economic productivity. Be that the financial sector or the government. You can not print your way out of this.

[Jovial Monk]

Watch ABC, play DVDs etc, subscribe to Foxtel etc: free to air commercial TV sucks!

[Ethnic]

ABC it is then. Any excuse to see my beloved Barrie Cassidy.

[Jovial Monk]

Old craggy face, eh?

Last weekends Insiders was well worth watching: no Cane Toad, Dolt or Poisoned Dwarf. Just Annabel Crabbe, George Megalogenis and some older guy I didn't catch the name of--Brian Toohey???

George has pretty well stripped the veil of assumed competence from Costello.

Yes, the Fibs are spreading fear about the size of the deficit and debt, feel sure Rudd will move to counter this.

$390Bn of once-in-lifetime mining boom wasted--we could still be in the black if it hadn't been wasted

[Leftofcentresalterego]

Before stating that we cannot "print our way out of this" as you call it, I would draw your attention to the fact that following the stimuli, retail turnover went up and unemployment went down - in a recession when logically retail sales should be falling and unemployment rising. So clearly this printing of money (a misnomer by the way) has already had a positve effect. Further positive effects will arise as the infrastructure projects kick off around the country.

Can you see how government spending is creating demand? Demand that would otherwise be sliding down the shit chute.

I am still intruiged to hear exactly how you believe productivity itself somehow magically creates the medium of exchange. So the process of economic growth somehow funds it's own continued growth by somehow creating the medium of exchange needed to make the goods and services broadly usefull - all in the absence of the only entity empowered to issue Australian dollars. Of course! It must be the magic of the free market. We don't need to understand it, we just need to believe. Well I'm interested in understanding how the magic works - tell me how economic growth simply creates the medium of exchange to perpetually fund it's own expansion without the need for federal government spending.

I still don't think you've commented on the strong growth and very low unemployment in the previous age of federal deficit (1-2% GDP on average) spending.

[JW Frogen]

It is implicit in the term you use, medium of exchange, implying something must be exchanged. Goods, commodities, services. Any currency (or credit exchanges) are simply a promise that the benefits of economic productivity (real economic activity that produces, goods, commodities, services, can be obtained by using that currency. The currency has no intrinsic value on it’s own, it is a promise of future value.

If one prints in extreme excess of the productivity rate, or GNP, the perception of what that currency can buy diminishes; the currency becomes less and less valuable as a medium of exchange. Inflation. The same is true if a government has more debt than the markets believe it’s productivity or GNP can pay off. The debt itself is a promise that if goods are accepted from that borrowing it will be paid back in a currency that holds it’s value to actually obtain real econmic goods or invest in future private production.

People will not just give their economic productivity way for magic paper the government prints wily nilly. One sees this in Zimbabwe, where the government printed money in excess of national productivity, most of the economy has move to other countries currencies or even the batter system.

As to the particular debt Australia is racking up, I am not saying it is all unjustified in an economic crises if it is kept to a level our future GDP can easily pay off, but at the rate this government is going they are now talking about a decade long burden on that currency (or tax revenues, burdening future production) or more, so they are reaching some limits.

Of course government spending can spike short term economic gains (or long term if it is in infrastructure that provides real future value to productivity gains) but those spikes in consumer spending are usually temporary, then we are still left with the bill in interests on bonds issued necessary to fund the debt or inflationary pressure on the currency.

If one looks at the Great Depression and Roosevelt, every time he spent big he got improved economic conditions only to see a serverel drop as the tax bills came due, the economy never had a chance to return to a natural level of goods in exchange for currency as the government kept temporarily spiking it then inflicting suffering on private investment from the tax burden. Fortunately the raw capacity of the US at that time was huge, and the massive expansion of markets the US gained at the end of WW2 allowed for economic productivity to vastly exceed debt levels, there by keeping pressure off the American currency.

So any debt we presently rack must be considered in relation to what we believe Australia’s future GDP will be.