After watching Tony Abbott deliver his speech to the doyens of dummkopf at the Sydney Institute last night, the first thing on the agenda for the hardworking staff at The Post was to send the work experience kid to the supermarket to buy a fresh supply of industrial strength Bullshit Repellent – in bulk!
With only two weeks before ‘No-dough’ Joe Hockey brings down the Budget, we have the feeling that we’re going to need every can we can get our hands on.
As expected, Abbott’s speech was the usual mixture of 1% half-truth and 99% pure and unadulterated bullshit.
“Like households and businesses, governments have to live within their means”
Pssst, pssst – Bullshit!
Unlike households or businesses which are constrained by their income, governments that have sovereignty over their own currency and are monopolistic issuers of that currency, are not constrained by income but can create the funds needed literally out of thin air – which is what they do!
It’s called fiat currency and is not linked to the gold or any other standard.
“Every dollar that the government spends, is a dollar taken from the people in taxes or in borrowings. Everything the government does has to be paid for either by today’s taxes or tomorrows taxes – with interest”
Pssst, pssst – more Bullshit!
Governments which have sovereignty over their own currency can’t borrow from themselves so they can hardly charge themselves interest!
Nor are they reliant on collecting taxes before they can spend!
“While for a government to continue with a cycle of debt and deficit might save it from a bad headline, it wont help you – the people.”
Pssst, pssst, pssst – utter Bullshit!
The primary and sole purpose of government deficit (which is not debt) is to stimulate the economy through the creation of aggregate demand – the demand for goods and services which are provided through the private sector. When the government is in deficit, it means that the private sector is in surplus and therefore able to create more jobs in order to meet demand.
This leads to a flow on effect where people have more money and more spending power. In order to keep inflation in check from this increase in spending power, the government can either raise taxes or interest rates or both – depending on circumstance.
The government sector (the Public Service) serves as a back-up should aggregate demand dwindle. This means that if the private sector should slump, there are still enough wage earners to prop up the economy through spending.
Cutting spending in the public sector – reducing the size of the Public Service – does not create jobs in the private sector but rather serves to exacerbate the problem if the private sector is in a downturn.
So, if the government continues to run deficit spending and it doesn’t help “we the people” – who does it help – the stuff that’s left over in your wheelie bin after the garbo’s have been?
“I regret to say that this government inheritance of debt and deficit from the previous Labor government is worse than that inherited by the Howard government in 1996.”
Pssssssst, pssssst, psssssst, – complete and utter Bullshit!
Jesus wept, Moses crept, and Christ came home on crutches!!!
Is there any end to this mumbling mendacious Meat-head’s misguided monetary theories?
Governments do not inherit a previous government’s debt! It’s simply a record of the amount the previous government put into the economy to keep it stable.
Nor is this ‘debt’ transferable to future generations! The simple fact is that every generation consumes the goods and services which are produced in the economies of their time.
Governments cannot leave future generations much that will be directly useful to them except whatever it takes to ensure their future economy is in as good a shape as possible.
A good education system, a good health system, a good housing stock, a good transport system, and a clean and healthy environment.*
“This budget will bring us close to surplus over the forward estimates and on track to a strong surplus within a decade.”
Pssst, pssst, pssst – even more complete and utter Bullshit!
When governments are in surplus it means that the government is putting less money into the economy and therefore the private sector which is the driver of the economy is in debt and has to borrow at increasingly rising interest rates.
This in turn leads to loss of business confidence, rising unemployment and recession. For both the government and the private sector to be in surplus is an economic impossibility. It’s either one or the other, and as the aim is to keep the economy strong – governments have to continually run deficits – that’s simple economic fact!
“The government should do what people cannot do for themselves – and no more!”
Psssst… Not quite bullshit but not true either.
Abbott’s 1% of half-truth.
What Lincoln actually said was; “The legitimate object of government, is to do for a community of people, whatever they need to have done, but can not do, at all, or can not, so well do, for themselves – in their separate, and individual capacities.”
Significantly, Lincoln added; (This) requires combined action, as public roads and highways, public schools, charities, pauperism, orphanage, estates of the deceased, and the machinery of government itself.
Then again, truth has always been a stranger to Tony.
Peter ‘Jelly-back’ Costello (remember him? He was the one who was always going to challenge Howard for the leadership of the LNP but never quite got around to it and who loved to dish it out when in government but squibbed it when the Libs lost the election to Rudd), once remarked that ‘Tony Abbott is economically illiterate.”
For the first and more than likely the last time, the hardworking staff at The Post would wholeheartedly agree with his assessment.
Now hand me another can of Bullshit Repellant – this one’s already empty.
* A dip of the lid to Peter Martin and his blog site; Modern Monetary Theory:Real Economics.
Of course I love it. Am obliged to say that the reason many of the people who came from my site didn’t comment – or even read ! – your previous article is that they simply couldn’t work out how to reach it. I’ve long since whinged at you about this, Edward, and have no intention of whingeing any more. But I honestly believe that you’re losing readers because of the rather extraordinary setup of this theme …
They should enter the following without www. or http://
mugwumpost.wordpress.com. 🙂 🙂 🙂
i know how you feel ee but it’s worse when anyone from the left talks about getting back to surplus as this just feeds into and legitimises the myth.
i am starting to sense that something important is beginning.since the gfc there has been a public conversation about inequality and capitalism starting,muted at first but increasing lately and culminating in picketty’s book.who would have predicted a book about economics could become a world wide best seller.this i think indicates that the assumed disinterest and apathy of the masses is a little off the mark and also that our rulers are losing control of the message.before the web this book would have sank without trace.i reckon that there is a large amount of resentment waiting to be unleashed out there.as bob said “there’s a hard rain gonna fall”,i just hope it’s on the heads that deserve it.
I haven’t read Picketty’s book so I can’t comment. Yes, you’re right, the problem with today’s Left and I use the term loosely, is that it isn’t really ‘the Left’ but merely a Neo-lib lite version, and it goes to show that when it comes to economic theory, they’re just as misguided and ignorant as their ‘free market’ counterparts.
You’re also right in feeling that the times they are a changin’ After three and a half decades of ‘supply side’ economics, people are starting to wake up to the fact that the ‘trickle down effect’ is simply the rich pissing on the poor and then telling them they should be grateful that its raining.
Oh mama, can this really be the end? To be stuck inside of Mobil with the Memphis blues again….
What a great read.
Glad that you enjoyed it, Shaun. If you’re interested in learning more about Modern Monetary Theory which forms the bulk of my argument in this and other posts on economics, the following links maybe helpful.
Snowcow is a US site, so that some of the system differs slightly but the principle remains the same.
Bill Mitchell’s blog is pitched at an academic level but once again, I don’t think you will have any trouble understanding the thrust of his argument and it is also a very good ‘go-to’ site when ever you’re in doubt about the best way to counter Neo-lib economic bullshit and don’t have a can of anti-Bullshit repellant handy.
Finally, I threw in the YouTube vid for a bit of light, movement and colour.
Enjoy and thanks for the comment – they’re always welcome.