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Miscellaneous comments from 8 Jun 2015

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Comments on this page have been discontinued. Please add further comments here. - Ed, 2:39AM, 11 Nov 2015


As we hit peak debt, it is difficult to increase the money supply by taking on more debt. I do follow Steve's blog from time to time.

I am wary of the Positive Money movement, as it seems to be throwing the baby out with the bathwater, so to speak. Issues of high house prices aren't specifically to do with the fact that banks create money out of thin are (someone has to), but due to the more mundane, and well known problems of reckless and risky lending. A bank needs debts repaid in order to be able to issue more loans, and if these debts cannot be repaid, its ability to function is adversely affected. Asset bubbles are largely a social mania. The banks are responding to demand. The problem is perhaps they shouldn't be so accommodative, and that there are tighter regulations when taking loans for hard assets.

Also, I think money should be spent on what people desire, rather than what the government decides is necessary. While of course the government needs to spend tax dollars for infrastructure, having the government issue money by selective loans seems to just create the same issue with have with banks, but with the state. In fact, it could be worse as the government would be beholding to voting power. Think Gillards school halls program, to line the pockets of developers and construction workers to build things we may not have needed.

My understanding of a Modern Jubilee as described by Steve is that fiat money is raised in the same way as it is in Quantitative Easing, but the money would be directed to the bank accounts of the public with the requirement that the first use of the money is to repay debt.

Debtors would have debt eliminated or reduced, non-debtors would receive a cash injection, the value of bank assets would remain the same while the distribution would alter with debt-instruments declining in value and cash assets rising, bank income would decline since debt is an income earning asset for a bank while cash reserves aren't, income flows to asset-backed securities would fall since a substantial proportion of the debt backing such securities would be paid and members of the public (individuals and corporations) who owned asset-backed securities would have increased cash holdings out of which they could spend in lieu of the income stream from ABS's &c.

By instituting the above we are, basically, applying the 3 rules of Positive Money with some variations. A Modern Jubilee may not be the panacea of our current predicament, but like Positive Money it is a way forward where the public isn't beholden to banks and big business. The hard part as I see it is to convince politicians and governments to pick up on the idea.

If as part of a jubilee, money is put into an account with the requirement you pay debt, what happens if you dont have debt and are not a creditor, aside from your money in the bank?

Would this encourage people to not pay debt? Not demand payment as you will be paid anywhere? wont this make asset bubbles worse because they are the result of debt without strict repayment requirements?

It would seem to me, making it easier to not pay back debt makes problems worse. Debt has to be strict. It has to be repaid. Otherwise monetary systems are abused.

It is clear that much debt is due to greed and avarice. This should be allowed to ruin people to correct the economy. If someone owes more than they will ever produce, then tough.

The jubilee made sort of sense in an era of slavery and ancient monetary principles, but today doesn't make sense.

I did mean in my previous comment that debt incurred due to avarice and greed should be allowed to result in ruin. [1] In allowing this system to punish bad behaviour, such behaviour is selected against. I am not suggesting that a people of a country pay for their leaders' mistakes, or child pay for their parents, but people need to be responsible for their own chosen consumption pattern.

Our monetary system and government maintain a fantasy land, where money is free, and excess debt is OK, even if you can't pay it back. Jubilees encourage fantasy thinking. Consumption is real and can't be undone. If you go into debt, spend it, don't pay back, your consumption cant be undone, so I don't see why others should pay a tax to forgive such behaviour.

On the contrary, we must tighten up on debt. You MUST be able to produce the wealth equivalent to your debt. You MUST have capacity to pay back.


[1] In the previous comment, the words :

This should [not - Ed] be allowed to ruin people to correct the economy.

... have been changed back to the original :

This should be allowed to ruin people to correct the economy.

- Ed

As I understand the workings of a Modern Jubilee Dennis, debt must be repaid or reduced, there is no choice. If you don't have any debt the money from the Jubilee becomes a cash injection into your bank account. The cash injection as I understand it then becomes a stimulus to the economy as the public spend the money on goods and services.

Steve Keen also talks about Fractional as opposed Full Reserve Banking and much more in his article. The implication being that a Modern Jubilee would only be one of several strategies that would be needed to be put in place. Also, whether this is relevant or not, are there any restrictions on what you can spend the cash injection on. I may have to re-visit the article to brush up on the fine tuning of its implementation myself.

I view economics as being the study of the ecology of human civilisation. It is the study of how inputs translate to outputs, and the forces which promote or impede this. Therefore, economics is a matter of studying phenomena, rather than determining a good ideology. That is to say, economics isn't something you define then apply, it is a natural phenomenon you discover.

Economic ideologies, whether Marxist Socialism, Capitalism, Absolute Free Markets, modern Crony Capitalism, are all deviations from what is REALLY happening. You don't get to decide how the economy works. This is why the USA Fed's money printing program isn't working. Why 'stimulus' just delays the inevitable.

You can't fix a broken ecosystem just by injecting energy or nutrients. If the balance, the structure is broken, it will be weak. Period.

So I think our economic troubles are related not to whether interest rates are low, or whether property investors get tax breaks, but because our demographic and social ecosystem is broken, which yields poor result.

So we ask economists how to fix this. And Lo! Behold! What do economists suggest? Using economics to fix the problem! Well they would say that, wouldn't they? It's self interest to frame the problem as one of economic management and policy, because they'll be the ones given the money and power to fix it.

When the GFC occurred, we paid the` people who caused the problem money to fix it. They were they 'money men', and their 'solution', they told us, would get us out of this malaise.

So with debt, it is a matter of distribution of resources. Allowing debts to be forgiven leads to an economic black hole, where future earnings will be lost because of the mistakes of the past. It results in a physical manifestation, which can't be undone by changing digits in a computer.

Kelvin has discussed the FTA as well

On a side note, I was listening to Rafael Epstien on ABC Radio this afternoon, and he was discussing foreign investment in residential property and whether this would have an impact on affordability (it obviously does).

I noted he mentioned he had messages and calls to read out and answer soon, but oddly, he didn't seem to get around to it? Instead, he went on with two laboured interviews which made me suspicious...

The word "racism" is over-used and almost meaningless. It's just thrown at protester at anything contrary to the media, and governments. The objection to the China Free Trade agreement is that it could impose on our sovereignty, our trade freedoms and jobs. The "race" is not an issue. On the contrary, we should wear the label of "racist" as a badge of honour as a patriot.

The assumption is that the terms "racist" or "xenophobia" are supposed to be descriptive of a reality.

In a few cases, inadvertently, it is.

But the terms are used because they work. They use terms like this precisely because it gives a political one up when used. It works because the accused goes into a defensive posture and the West has a very strong reaction to it.

People complain about "racist" being overused, but they adjust rhetoric and moral stances and allegiences to avoid the term, which validates the power of the term, which encourages more use.

Its only overused because people consistently and reliably react in a very predictable manner. Why would they drop a political weapon that works so well?

The pro FTA lobby use it only because they can rely on the defensive reaction it will elicit.

So in this sense it is not overused, any more than the guns of the enemy firing at you are not overused as long as you keep going into retreat.

The only solution is to ignore and maintain an offensive stance.

Wow, some powerful metaphors here and a good explanation of the function of racism as used to stop democratic discussion.

At the start of RT's Boom Bust, at 17:30 +10 on 3 Oct 2015, Ameera David interviewed Bryan Caplan, an advocate of open borders from the United States. He was fully in favour allowing all refugees and immigrants to settle in Europe. He claimed that the current inhabitants of the countries to which the immigrants/refugees would gain from having large numbers of additional people in their country.

He was quick to concede that this would not seem to be the case in the short term, but claimed that the inhabitants would gain in the longer term. One citation to back up his claim was Julian Simon (1932-1998), notorious for his debates with Paul Ehrlich.

I'm struggling to think of an example where mass importation of people has led to the subsequent generations having more...

It doesn't work. The "It wont seem the case in the short term, but there is a longer term gain" is just deflection to avoid criticism when nothing good happens. He knows the media won't go back to him in years and ask him why it didn't work. They media never, ever do that. He won't be held accountable.

And again, why specifically Europe? China has empty cities yet these advocates don't bring it up. It HAS to be Europe. Even if just one European country says no, its a big deal. It has to be all of Europe, no exceptions.

I firmly believe, that the West is racist through and through, especially the pro-immigration advocates and open borders advocates. There is little difference in the degree of racism between say, Marine Le Pen, and your Liberal pro-immigration advocate, with a few exceptions to how it is practised. The populist right don't advocate population policy which will see identifiable groups of people being made a minority and the populist right work towards the benefit of their own.

Unless we change the way we develop our cities, particularly Melbourne, Sydney and Perth, we are going to turn one of the most liveable nations into a gridlocked, polluted urban mess, with millions of people blocked from opportunity in under-serviced and isolated sprawl as our population surges. And surge it will.

A high-level report to the government, released today, indicates the extent to which the legendary "lucky country" is, well, at risk of blowing its luck.

How the 'lucky country' is blowing its luck (7/10/15) | The Age

The comprehensive study into how to create smarter, more modern cities is by the Australian Council of Learned Academies (ACOLA),

Australia’s population is set to reach 37 million by 2050, which will almost double the number of people in Sydney, Melbourne and Perth.

The report finds that city planning needs to take a three-pronged strategic approach, including finding ways to reduce or avoid travel, shifting to more environmentally friendly transport and improving the energy efficiency of transport.

The report also says urban areas need to change from having a dense CBD with sprawling suburbs to polycentric cities with “nodes” which will bring people closer to places of work and recreation.

The full report is here: Delivering Sustainable Urban Mobility (pdf - 6.3M Oct 2015)

The report says that against the background of poor transport and reliance on fossil fuels, a business-as-usual approach will not work. As the Australian population continues to increase—and as that population growth is further concentrated in Australia’s major cities—so the social inequities, environmental pressures and economic consequences will intensify.

Melbourne and Sydney are expected to accommodate populations of more than 7 million people each in this century. Air and noise pollution are causes of ill-health while traffic accidents cause death and disability. By 2050, the Australian population is expected to reach 37 million, which will almost double the number of people in Melbourne, Sydney and Perth. The capacity of these areas to withstand the pressures of population expansion and
limited modes of mobility provision has finite limits. Nothing is said about the driver of this massive and implosive growth - our full throttle immigration rates!

It's been more than 40 years since the think tank Club of Rome published Limits to Growth. Despite high educational standards, our economists and governments leaders are still addicted to "growth"! It's alluring, and it's the easy way to keep up our GDP and demand for consumables, and housing demands. Considering that Victoria has the lowest fertility levels, and the highest rates of growth, this manufactured population growth is driven by unsustainable levels of immigration - that's silently been increased numerous times since the Howard era! (60% of our population growth is due to immigration). The costs of growth are compounding, and retro-fitting our city is becoming increasingly expensive. We need to redefine what we are aiming for, with our "economic growth" model. It's more than redefining how we "develop our cities"!

Actually Australia is more than ever living up to the original source of the "lucky country" saying: "a lucky country run by second-rate people who share its luck".

The bucket is full. If the old concept was still true and our new record migration numbers, but we see everything now worsening.

I note a lot of the commenters on that article published in The Age remarked about population being the issue, and that rapid population growth is neither desirable or inevitable.

The biggest issue isn't lack of knowledge, but fear and apathy. Apathy leading to inaction, and fear of being taken the wrong way. One of the big barriers is the intractable problem of addressing population growth without appearing xenophobic, a technically impossible task.

Comments on this page have been discontinued. Please add further comments here. - Ed, 2:39AM, 11 Nov 2015