In three recent articles I commented on the effects in Australia of idiotic political decisions in the current economic crisis, other countries' policies on Australia, and individual responsibilities or lack thereof.
In this article I make some comments on Keynes influence on political decisions, again with particular reference to Australia.
There is no doubt that John Maynard Keynes was a brilliant economist, very influential in the 1930s and subsequently. The latter is probably because he propounded that free markets were imperfect and that it was the job of governments to intervene.
What an irresistable invitation to any politician, although to his credit he also called politicians a bunch of liars!
Unfortunately, politicians and bureaucrats since then have lived up to his description by consistently misinterpreting and manipulating his theories to suit their own ends, to the disadvantage of the free market and consequently taxpayers generally.
What Keynes actually suggested was that, in the event of a downturn in an economy, governments should spend and therefore go into short term debt in order to stimulate it.
The important qualification was that the debt was to be short-term and the spending to be on investment into sections of the economy that created long term jobs and tax revenue from the income thus created, both company and individual.
This increased tax revenue was then to be used to pay off the short term debt as soon as possible.
During the current crisis, most if not all, governments have concentrated on throwing taxpayers' money into areas that stimulate consumption instead of investment.
This has added to the long term debt that they had built up over years in non-productive social experiments, bloated bureaucracy to administer these, and encouraging consumption over saving and investment.
Australia was one exception in that two years ago it had no debt, despite an enormous bureaucracy spread over three layers of government. Unfortunately Rudd has fixed that and plunged the country into debtor nation status since he gained power and is now seeking other sources to plunder to pay for his misguided policies.
It has been argued that Keynes theories may no longer apply in the modern world with its much more complex economy and financial system. However, the basic balance between supply and demand has not changed.
What has changed is the increased concentration on social programs and promotion of consumption, at least in the western world, at the expense of investment in productive enterprises and personal saving.
This has created an imbalance in economies that will take years to work through, mainly because Keynes theories have been consistently bastardised and manipulated by those in power to suit their own short term ends.
Friday 25 June 2010
Thursday 24 June 2010
Government Duplicity
In the current debate on the Resources Super Profits Tax (RSPT), the government is squandering $38 million in taxpayers funds in an advertising campaign that is not only inept but downright misleading.
True, the miners are putting out equally misleading advertisements, but at least they are not wasting taxpayers' funds doing so.
There are several aspects of the RSPT that are worrying, leaving aside the question of whether it is unconstitutional on the grounds that a State owns the resources within its boundaries and why it is applied only to this sector. (Why not apply it to, say, banking, which could arguably be accused of ripping off customers far more than miners?)
As it stands at present, the RSPT is collected by the federal government and used for federal expenditure, which means it will go into consolidated revenue and be used for whatever social programs the government chooses. These are usually poorly researched and implemented, witness the insulation debacle, and this close to an election, likely used for pork barrelling.
Resource rich States will have revenue from mining reduced and have to lobby the federal government for a return of RSPT money to fund projects needed at State level which are currently funded from mining revenue, like rail and port infrastructure.
Included in the RSPT is the proposal that miners will get a 30% rebate on exploration costs and a 40% rebate on losses incurred. This preposterous proposal has not been shown in the advertisements put out by both sides!
Not surprising, considering that it would lead to a taxpayer backlash when they discover only a relatively small number of mining explorations lead to projects that become profitable. Most taxpayers are unaware that of the around 900 mining companies listed on the stock exchange, only a handful are successful. Who can name more than a dozen?
Of course, the public sector would benefit enormously. Think of the jobs created in this unproductive sector as departments are set up to review State government requests for funds from the RSPT and applications for rebates from mining companies for exploration costs and losses.
Naturally, by the time these applications are made, the money already collected will have been allocated to some government project elsewhere (for the so-called benefit of the community overall), so the process will be made too difficult for many miners to bother with and proposals for future works will be postponed or abandoned leading to potential job losses and future revenue.
The whole idea of private enterprise is that companies make an offer to the public via a prospectus to invest in a project by means of taking up shares in the company in the hope and expectation of making money when it is successful via dividends earned on their shares and capital appreciation of their shareholding.
Shareholders enter the arrangement in full knowledge of what they are doing and bear the consequences of loss of capital if the company fails. In short it is a personal choice.
Governments can never replicate this process, instead they simply hit taxpayers with a bill each year to fund their, often dubious, projects, which are rarely run effectively or efficiently. Personal choice is not an option.
Just consider how government departments at Federal, State or Local level, if they have any funds left over towards the end of their financial year, rush to spend them on replacing perfectly good equipment, or send staff on unnecessary so called training seminars, or any number of other projects. Who in the public sector would ever think of returning the funds to consolidated revenue so that taxes can be reduced or the funds reallocated to more deserving areas?
The Federal government would be better off addressing the issue of reducing waste and inefficiencies in the public sector than interfering in the private sector.
Perhaps some steps in these directions will be taken by the new leader Julia Gillard, but that is probably too optimistic!
True, the miners are putting out equally misleading advertisements, but at least they are not wasting taxpayers' funds doing so.
There are several aspects of the RSPT that are worrying, leaving aside the question of whether it is unconstitutional on the grounds that a State owns the resources within its boundaries and why it is applied only to this sector. (Why not apply it to, say, banking, which could arguably be accused of ripping off customers far more than miners?)
As it stands at present, the RSPT is collected by the federal government and used for federal expenditure, which means it will go into consolidated revenue and be used for whatever social programs the government chooses. These are usually poorly researched and implemented, witness the insulation debacle, and this close to an election, likely used for pork barrelling.
Resource rich States will have revenue from mining reduced and have to lobby the federal government for a return of RSPT money to fund projects needed at State level which are currently funded from mining revenue, like rail and port infrastructure.
Included in the RSPT is the proposal that miners will get a 30% rebate on exploration costs and a 40% rebate on losses incurred. This preposterous proposal has not been shown in the advertisements put out by both sides!
Not surprising, considering that it would lead to a taxpayer backlash when they discover only a relatively small number of mining explorations lead to projects that become profitable. Most taxpayers are unaware that of the around 900 mining companies listed on the stock exchange, only a handful are successful. Who can name more than a dozen?
Of course, the public sector would benefit enormously. Think of the jobs created in this unproductive sector as departments are set up to review State government requests for funds from the RSPT and applications for rebates from mining companies for exploration costs and losses.
Naturally, by the time these applications are made, the money already collected will have been allocated to some government project elsewhere (for the so-called benefit of the community overall), so the process will be made too difficult for many miners to bother with and proposals for future works will be postponed or abandoned leading to potential job losses and future revenue.
The whole idea of private enterprise is that companies make an offer to the public via a prospectus to invest in a project by means of taking up shares in the company in the hope and expectation of making money when it is successful via dividends earned on their shares and capital appreciation of their shareholding.
Shareholders enter the arrangement in full knowledge of what they are doing and bear the consequences of loss of capital if the company fails. In short it is a personal choice.
Governments can never replicate this process, instead they simply hit taxpayers with a bill each year to fund their, often dubious, projects, which are rarely run effectively or efficiently. Personal choice is not an option.
Just consider how government departments at Federal, State or Local level, if they have any funds left over towards the end of their financial year, rush to spend them on replacing perfectly good equipment, or send staff on unnecessary so called training seminars, or any number of other projects. Who in the public sector would ever think of returning the funds to consolidated revenue so that taxes can be reduced or the funds reallocated to more deserving areas?
The Federal government would be better off addressing the issue of reducing waste and inefficiencies in the public sector than interfering in the private sector.
Perhaps some steps in these directions will be taken by the new leader Julia Gillard, but that is probably too optimistic!
Thursday 10 June 2010
Tips for Travellers to New Zealand's South Island
My first article covered our trip in the North Island. This article takes up the story where we travelled over to the South Island.
At our final destination in the North Island, the city lived up to its name 'Windy Wellington' & it was cold, so we gladly handed the car in & boarded the ferry for the South Island. Rental vehicles are handed in before boarding the ferry and you pick up another on arrival in the South Island if you have booked ahead.
Tip 1 - If you have a camera it is a good idea to take photos of various aspects of your rental vehicle to avoid any disputes later about damage caused during your rental. (We did not have any problems, but if the rental company sees you taking photos they are more careful when completing the handover documents!)
The ferry over from Wellington to Pickton is a pleasant way to travel between the islands if you are not in a hurry & the weather is not too rough. The trip was calm and the dolphins put on a spectacular show – the crew said they had seldom seen so many.
The scenery leaving the North Island & entering the South was pleasant with some sun to warm us up as we came into Picton down a sound that could have been in Scotland. We picked up our next hire car and drove right down to Reefton. The scenery initially was similar to where we had been in the North Island, rather boring & it was raining, but it became much more scenic as we approached the Buller river, and quite spectacular as we went up the gorge. The rain stopped after we arrived at Reefton, a neat & tidy little mining village down from the gorge, where we decided to spend the night.
Tip 2 – If you can spare the time, allow an extra day to explore the Buller gorge area.
We left for Hokitika on the West coast after enjoying a more scenic drive despite virtually continuous rain. We broke the journey at Hokitika for coffee and the town seemed to have seen some changes since we were last there. It is best known as being a centre for greenstone. We then pressed on in the rain past the Glaciers, which we had visited on an earlier trip, and stopped at Lake Paringa for the night.
Tip 3 – If you have time, Lake Paringa is noted for fishing and also allow extra to take in the sights on the way to and through the Haast Pass.
The trip from Lake Paringa to Wanaka was the most interesting part of the trip so far, with the road to Haast Pass wet but very scenic. The view from Knight's Lookout on the way to Haast was lovely and after we passed Haast Village, which we did not enter, the views grew increasingly dramatic, taking in waterfalls, hills wreathed in mist like one sees in documentaries of some of China's mountain areas. As we had visited the Glaciers before we did not stop there, but they are certainly worth a look. One traveller we spoke to felt the helicopter trip over them was the best money he had spent.
After the Pass, the road descended through country that a Scot would feel quite at home in, as it resembled areas one would see on the road to the Trossachs, around Loch Lomond, or the Campsies north of Glasgow. Wanaka was as touristy as we remembered, so we pushed on to Arrowtown over the Crown Range – a lovely route despite roadworks, with the leaves changing colour and terrific views over lakes Wanaka and Hawea – again very like Scottish lochs.
We set off for Riverton, where my partner's family live, via Flaxton and Kingston. The road then ran beside Lake Wakatipu, very scenic & again reminiscent of parts of Scotland. Unfortunately the Kingston Flyer was no longer operating; an old steam train that used to connect with the steamer Earnshaw from Queenstown & a popular tourist attraction. Apparently some idiots with grand ideas mortgaged the train to obtain finance for a major property development that never had a chance of getting off the ground, so the Flyer is now in receivership. After that, the trip south wended through rather boring dairy & sheep country & it rained all the way past Kingston.
Generally, the weather was ordinary, with one reasonable day followed by one overcast &/or wet. However, the natives were friendly, which we feel is always the main thing that makes or breaks a country for visitors. Other bonuses were that the food, beer & wine were good, the golf courses plentiful, reasonably priced & usually easily accessed - what more could one ask for, except that it never rain on a golf day?
The bits of the North Island we visited were nowhere near as scenic as the South. The best bits we saw there were the Coromandel Peninsular, with some lovely views, & the trip around Lake Taupo & over the very Scottish-like heather clad uplands to the Army Museum at Waiuro.
If I went back to the North Island, I'd make the Peninsular & Taupo my bases for golfing, as there are some good courses in those areas. In the South I mainly played near Invercargill, where there are some good courses, with Oreti Beach a tough links course & Invercargill rated in the top 5 in NZ. I also had a game at Arrowtown & there are several good courses near there too, like Jack's Point & the Hills where the NZ Open was held.
For scenery in the South Island, Buller Gorge was spectacular as was the Haast Pass. Arrowtown is also beautiful with a lovely drive from Wanaka across the Crown Range, but be aware that if you are travelling in a campervan, that route is off limits, although hire cars are OK.
Tip 4 – Make sure you check with the vehicle hire company you propose to use that they operate in both North & South Islands and also if they have any restrictions on where you can take the vehicle.
Tip 5 - If you can talk to locals or backpackers who have visited a place before you get there, do so, as it may save you a journey and disappointment.
At our final destination in the North Island, the city lived up to its name 'Windy Wellington' & it was cold, so we gladly handed the car in & boarded the ferry for the South Island. Rental vehicles are handed in before boarding the ferry and you pick up another on arrival in the South Island if you have booked ahead.
Tip 1 - If you have a camera it is a good idea to take photos of various aspects of your rental vehicle to avoid any disputes later about damage caused during your rental. (We did not have any problems, but if the rental company sees you taking photos they are more careful when completing the handover documents!)
The ferry over from Wellington to Pickton is a pleasant way to travel between the islands if you are not in a hurry & the weather is not too rough. The trip was calm and the dolphins put on a spectacular show – the crew said they had seldom seen so many.
The scenery leaving the North Island & entering the South was pleasant with some sun to warm us up as we came into Picton down a sound that could have been in Scotland. We picked up our next hire car and drove right down to Reefton. The scenery initially was similar to where we had been in the North Island, rather boring & it was raining, but it became much more scenic as we approached the Buller river, and quite spectacular as we went up the gorge. The rain stopped after we arrived at Reefton, a neat & tidy little mining village down from the gorge, where we decided to spend the night.
Tip 2 – If you can spare the time, allow an extra day to explore the Buller gorge area.
We left for Hokitika on the West coast after enjoying a more scenic drive despite virtually continuous rain. We broke the journey at Hokitika for coffee and the town seemed to have seen some changes since we were last there. It is best known as being a centre for greenstone. We then pressed on in the rain past the Glaciers, which we had visited on an earlier trip, and stopped at Lake Paringa for the night.
Tip 3 – If you have time, Lake Paringa is noted for fishing and also allow extra to take in the sights on the way to and through the Haast Pass.
The trip from Lake Paringa to Wanaka was the most interesting part of the trip so far, with the road to Haast Pass wet but very scenic. The view from Knight's Lookout on the way to Haast was lovely and after we passed Haast Village, which we did not enter, the views grew increasingly dramatic, taking in waterfalls, hills wreathed in mist like one sees in documentaries of some of China's mountain areas. As we had visited the Glaciers before we did not stop there, but they are certainly worth a look. One traveller we spoke to felt the helicopter trip over them was the best money he had spent.
After the Pass, the road descended through country that a Scot would feel quite at home in, as it resembled areas one would see on the road to the Trossachs, around Loch Lomond, or the Campsies north of Glasgow. Wanaka was as touristy as we remembered, so we pushed on to Arrowtown over the Crown Range – a lovely route despite roadworks, with the leaves changing colour and terrific views over lakes Wanaka and Hawea – again very like Scottish lochs.
We set off for Riverton, where my partner's family live, via Flaxton and Kingston. The road then ran beside Lake Wakatipu, very scenic & again reminiscent of parts of Scotland. Unfortunately the Kingston Flyer was no longer operating; an old steam train that used to connect with the steamer Earnshaw from Queenstown & a popular tourist attraction. Apparently some idiots with grand ideas mortgaged the train to obtain finance for a major property development that never had a chance of getting off the ground, so the Flyer is now in receivership. After that, the trip south wended through rather boring dairy & sheep country & it rained all the way past Kingston.
Generally, the weather was ordinary, with one reasonable day followed by one overcast &/or wet. However, the natives were friendly, which we feel is always the main thing that makes or breaks a country for visitors. Other bonuses were that the food, beer & wine were good, the golf courses plentiful, reasonably priced & usually easily accessed - what more could one ask for, except that it never rain on a golf day?
The bits of the North Island we visited were nowhere near as scenic as the South. The best bits we saw there were the Coromandel Peninsular, with some lovely views, & the trip around Lake Taupo & over the very Scottish-like heather clad uplands to the Army Museum at Waiuro.
If I went back to the North Island, I'd make the Peninsular & Taupo my bases for golfing, as there are some good courses in those areas. In the South I mainly played near Invercargill, where there are some good courses, with Oreti Beach a tough links course & Invercargill rated in the top 5 in NZ. I also had a game at Arrowtown & there are several good courses near there too, like Jack's Point & the Hills where the NZ Open was held.
For scenery in the South Island, Buller Gorge was spectacular as was the Haast Pass. Arrowtown is also beautiful with a lovely drive from Wanaka across the Crown Range, but be aware that if you are travelling in a campervan, that route is off limits, although hire cars are OK.
Tip 4 – Make sure you check with the vehicle hire company you propose to use that they operate in both North & South Islands and also if they have any restrictions on where you can take the vehicle.
Tip 5 - If you can talk to locals or backpackers who have visited a place before you get there, do so, as it may save you a journey and disappointment.
Tips for Travellers to New Zealand's North Island
Having just got back from a trip to New Zealand, during which we spent time in both North & South Islands, this first of two articles contains a few observations that may be of use to people who are looking to visit there, either for the first time or to areas that they have not already seen.
We flew into Auckland, arriving at night. Our travel agent had booked us a small hire car through Nationwide Hire Cars also known as Ezi-rent. We phoned the car rental company representative, who picked us up promptly, took us to the motel the company operated from after hours, handed the car over quickly & gave us a good briefing.
Tip 1 - If you have a camera it is a good idea to take photos of various aspects of your rental vehicle to avoid any disputes later about damage caused during your rental. (We did not have any problems, but if the rental company sees you taking photos they are more careful when completing the handover documents!)
However, our travel agent had booked us into a hotel on the north of Auckland. As it was night when we arrived, getting to the hotel was a nightmare, with Auckland's motorways resembling spaghetti junction & signposting poor.
Tip 2 - If you arrive at night in a strange town to pick up a rental vehicle, make sure your travel agent books you into accommodation near the vehicle pick-up point or that you have good maps!
Having no interest in cities, we got out of Auckland quickly the next day & explored part of the northern area, going up the east coast to Warkworth & returning via the west coast. We did not have time to go right up to the Bay of Islands. The bit we covered did not strike us as very interesting, although there were some pretty spots on the East coast, so we continued back south through Auckland & headed to the Coromandel Peninsular. The drive to Thames at the start of the Peninsular was through flat country & quite boring.
Tip 3 - I'd recommend to anyone wanting to get to the Coromandel Peninsular that they get a ferry over from Auckland as it would be more scenic than driving.
We explored the Peninsular up the West coast & down the East. There were some lovely views around the Peninsular, particularly on the North-West coast and some pleasant golf courses.
After that, we headed for Hobbitton ( Matamata) where we found it cost $58 each for a tour of the set used for the Hobbit village in Lord of the Rings, followed by a shearing demo. We felt this was a complete rip off, as as we weren't interested in sheep shearing, having seen plenty of that. We also read that the set was gutted and being prepared for the next Hobbit film, so we didn't bother going in & headed straight off to Rotoroua where we spent the night. We avoided the tourist traps of geyser parks and mud pools by walking the park near the hospital to see for free the steam vents & mud pools there, which were quite interesting but smelly, as you would expect.
Our next stop was Lake Taupo, which we explored briefly before setting off for Waiouru & the NZ Army Museum. The trip around the lake was quite scenic, but plagued by roadworks & the trip across the moors, used by the army for training, very scenic & Scottish looking with heather and dour, cloudy conditions. The Museum was excellent and there was a golf course in town, but it was raining, so we passed on a game.
We then pushed on to Palmerston North, but overnighted in a little place called Bulls – very homely & with quaint signposts, eg the library was signposted 'read-a-bull', the butcher 'eat-a-bull' etc.
The next day we continued to Wellington, where we found the drop off point for the hire car without difficulty, thanks to excellent written directions from our hire car company. The next day we walked around the Botanic Gardens, which were not particularly spectacular, but that was probably just the time of year. We also visited the Te Papa Museum, which was excellent, particularly the Maori exhibit.
Tip 4 - If you can talk to locals or backpackers who have visited a place before you get there, do so, as it may save you a journey and disappointment.
My next article will continue with our journey to the South Island of New Zealand.
We flew into Auckland, arriving at night. Our travel agent had booked us a small hire car through Nationwide Hire Cars also known as Ezi-rent. We phoned the car rental company representative, who picked us up promptly, took us to the motel the company operated from after hours, handed the car over quickly & gave us a good briefing.
Tip 1 - If you have a camera it is a good idea to take photos of various aspects of your rental vehicle to avoid any disputes later about damage caused during your rental. (We did not have any problems, but if the rental company sees you taking photos they are more careful when completing the handover documents!)
However, our travel agent had booked us into a hotel on the north of Auckland. As it was night when we arrived, getting to the hotel was a nightmare, with Auckland's motorways resembling spaghetti junction & signposting poor.
Tip 2 - If you arrive at night in a strange town to pick up a rental vehicle, make sure your travel agent books you into accommodation near the vehicle pick-up point or that you have good maps!
Having no interest in cities, we got out of Auckland quickly the next day & explored part of the northern area, going up the east coast to Warkworth & returning via the west coast. We did not have time to go right up to the Bay of Islands. The bit we covered did not strike us as very interesting, although there were some pretty spots on the East coast, so we continued back south through Auckland & headed to the Coromandel Peninsular. The drive to Thames at the start of the Peninsular was through flat country & quite boring.
Tip 3 - I'd recommend to anyone wanting to get to the Coromandel Peninsular that they get a ferry over from Auckland as it would be more scenic than driving.
We explored the Peninsular up the West coast & down the East. There were some lovely views around the Peninsular, particularly on the North-West coast and some pleasant golf courses.
After that, we headed for Hobbitton ( Matamata) where we found it cost $58 each for a tour of the set used for the Hobbit village in Lord of the Rings, followed by a shearing demo. We felt this was a complete rip off, as as we weren't interested in sheep shearing, having seen plenty of that. We also read that the set was gutted and being prepared for the next Hobbit film, so we didn't bother going in & headed straight off to Rotoroua where we spent the night. We avoided the tourist traps of geyser parks and mud pools by walking the park near the hospital to see for free the steam vents & mud pools there, which were quite interesting but smelly, as you would expect.
Our next stop was Lake Taupo, which we explored briefly before setting off for Waiouru & the NZ Army Museum. The trip around the lake was quite scenic, but plagued by roadworks & the trip across the moors, used by the army for training, very scenic & Scottish looking with heather and dour, cloudy conditions. The Museum was excellent and there was a golf course in town, but it was raining, so we passed on a game.
We then pushed on to Palmerston North, but overnighted in a little place called Bulls – very homely & with quaint signposts, eg the library was signposted 'read-a-bull', the butcher 'eat-a-bull' etc.
The next day we continued to Wellington, where we found the drop off point for the hire car without difficulty, thanks to excellent written directions from our hire car company. The next day we walked around the Botanic Gardens, which were not particularly spectacular, but that was probably just the time of year. We also visited the Te Papa Museum, which was excellent, particularly the Maori exhibit.
Tip 4 - If you can talk to locals or backpackers who have visited a place before you get there, do so, as it may save you a journey and disappointment.
My next article will continue with our journey to the South Island of New Zealand.
What is Wrong in the Australian Economy? - Personal Responsibilities & the Economic Crisis
This is the third and final article in this series commenting on various aspects of the current crisis as applicable to Australia.
The first commented on the Australian political scene, the second the effect other countries' policies have on Australia. This focusses on personal responsibilities.
In recent years the buzzword amongst libertarians has been “peoples' rights”, which completely overlooks the indisputable fact that every right carries with it a corresponding responsibility.
This, unfortunately, has been carried into schools and has led to a generation or two of adults who know all their rights, but are oblivious to their responsibilities in general and in particular the need to live within their means and support themselves by their own efforts.
Because of the deficiencies in the current education system in Australia & I suspect in other parts of the English speaking world, most will not have read any of Charles Dickens' classics, and so will be unaware of Micawber's famous quote in the novel 'David Copperfield':
"Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."
Unfortunately some academics with political influence have not assisted by arguing that credit is good for the economy and that printing money is not only a necessary, but a good thing whenever a correction occurs in the market. They completely overlook the fact that it should be a responsibility for all sectors of society, individuals, organisations, bureaucracies, and politicians, to live within their means.
Even more unfortunately, politicians no longer accept responsibility for any mess made by their departments. Instead they clearly feel it is their right to misappropriate taxpayers funds, already gouged from the workforce and companies, to fix a mess like the insulation debacle, or to run expensive advertising campaigns explaining why they think they are right, like proposing the asinine Resources Super Profits Tax (RSPT).
The companies opposing the RSPT have the right to do so to protect their international competitive edge for the benefit of Australia and are using company funds. In doing so they are also discharging their responsibility to protect the interests of their shareholders who have advanced the funds, after paying tax of course, to develop mineral resources for the benefit of all Australians.
By the same token, if politicians, on the advice of their departments or personally, make a bad decision, they have the right to fix or explain it to taxpayers. However, their responsibility is to ensure that the funds, in the interests of equity, come from their or the relevant department's existing budget, which has already been funded by taxpayers, and the persons responsible demoted or sacked, as they would be in private enterprise.
Unfortunately, the apathy of voters has allowed this situation to develop. However, this apathy appears to be disappearing fast as the current correction bites into their savings and they see how they have been and are being used. Even politicians' attempts to assuage public feeling about their mistakes, by spending lavishly on welfare projects that have little real benefit & which should rightly be the responsibility of individuals, seem to be loosing any appeal they might have had.
Perhaps the pendulum is beginning to swing at last to a position of equilibrium between rights and responsibilities.
The first commented on the Australian political scene, the second the effect other countries' policies have on Australia. This focusses on personal responsibilities.
In recent years the buzzword amongst libertarians has been “peoples' rights”, which completely overlooks the indisputable fact that every right carries with it a corresponding responsibility.
This, unfortunately, has been carried into schools and has led to a generation or two of adults who know all their rights, but are oblivious to their responsibilities in general and in particular the need to live within their means and support themselves by their own efforts.
Because of the deficiencies in the current education system in Australia & I suspect in other parts of the English speaking world, most will not have read any of Charles Dickens' classics, and so will be unaware of Micawber's famous quote in the novel 'David Copperfield':
"Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."
Unfortunately some academics with political influence have not assisted by arguing that credit is good for the economy and that printing money is not only a necessary, but a good thing whenever a correction occurs in the market. They completely overlook the fact that it should be a responsibility for all sectors of society, individuals, organisations, bureaucracies, and politicians, to live within their means.
Even more unfortunately, politicians no longer accept responsibility for any mess made by their departments. Instead they clearly feel it is their right to misappropriate taxpayers funds, already gouged from the workforce and companies, to fix a mess like the insulation debacle, or to run expensive advertising campaigns explaining why they think they are right, like proposing the asinine Resources Super Profits Tax (RSPT).
The companies opposing the RSPT have the right to do so to protect their international competitive edge for the benefit of Australia and are using company funds. In doing so they are also discharging their responsibility to protect the interests of their shareholders who have advanced the funds, after paying tax of course, to develop mineral resources for the benefit of all Australians.
By the same token, if politicians, on the advice of their departments or personally, make a bad decision, they have the right to fix or explain it to taxpayers. However, their responsibility is to ensure that the funds, in the interests of equity, come from their or the relevant department's existing budget, which has already been funded by taxpayers, and the persons responsible demoted or sacked, as they would be in private enterprise.
Unfortunately, the apathy of voters has allowed this situation to develop. However, this apathy appears to be disappearing fast as the current correction bites into their savings and they see how they have been and are being used. Even politicians' attempts to assuage public feeling about their mistakes, by spending lavishly on welfare projects that have little real benefit & which should rightly be the responsibility of individuals, seem to be loosing any appeal they might have had.
Perhaps the pendulum is beginning to swing at last to a position of equilibrium between rights and responsibilities.
Monday 7 June 2010
What is Wrong in the Australian Economy? - Three Observations
This is the second article in this series commenting on various aspects of the current crisis as applicable to Australia.
Effects of Other Countries' Policies on Australia
In my first article I commented on the effect idiotic political decisions had on our economy. This article focusses on the effect the policies of other countries have on us.
China's growth in recent years was responsible for the boom in Australia directly attributable to the mining industry. However, this growth is now faltering because the State imagined it could control both supply and demand and spent enormously on infrastructure projects, as well as building up a massive export manufacturing sector based on cheap labour.
In consequence, China now has several towns with no inhabitants and rapidly sliding property prices. Also, in view of the falling consumer spending in the USA and Australia after various fiscal stimuli are withdrawn, China will find it more difficult to dispose of its consumer goods.
Naturally that slow down in growth will have a flow on effect on the major suppliers of raw materials to it, like Australia.
The Greek currency crisis is playing out in Europe, with various other countries, like Portugal, Spain, Ireland & Italy, likely to place additional strains on the European Union. Whilst that is proceeding, imports and exports to and from those countries are likely to be slow, with consumers being forced to tighten their belts for some time to come.
After all, Greece only has total debt of $216 billion. Portugal's debt is $288 billion, Ireland's is $862 billion, Spain's is $1.1 trillion & Italy's is $1.4 trillion! Those figures make the $1 trillion rescue package announced recently seem insignificant. To add to the mix, Hungary appears to be in difficulties and although not part of the EU, it owes money to EU banks.
Unfortunately, over the years, general voter apathy and gullibility has allowed bureaucrats and governments of all persuasions in all countries gradually to increase control in all areas, aided and abetted by vocal minority lobby groups, who usually do not see past their own restricted areas of interest.
This growth of the non productive sector has placed increased burdens on society as a whole, with increasing taxes, whether named as such, or as levies or duties. In Australia, this is carried to excess by having three layers of government - Federal, State and Local.
The fact that has been brought home very clearly in the present economic crisis, is that government spending will only postpone the day of reckoning unless the slack, when it is withdrawn, is taken up by consumer spending.
That is not likely to occur, given the significant personal debt levels in many consumer societies which do not have the savings ethic of China, Japan and some other, principally Asian, countries. A sign of this occurring at present in Australia is the slowdown in retail sales.
That is a fact that has been overlooked by the politicians and bureaucrats cocooned in their air-conditioned offices in Canberra and elsewhere, secure in the knowledge that they can force taxpayers to fund their overseas trips, assorted well padded expense accounts and excessive unfunded retirement benefits.
Effects of Other Countries' Policies on Australia
In my first article I commented on the effect idiotic political decisions had on our economy. This article focusses on the effect the policies of other countries have on us.
China's growth in recent years was responsible for the boom in Australia directly attributable to the mining industry. However, this growth is now faltering because the State imagined it could control both supply and demand and spent enormously on infrastructure projects, as well as building up a massive export manufacturing sector based on cheap labour.
In consequence, China now has several towns with no inhabitants and rapidly sliding property prices. Also, in view of the falling consumer spending in the USA and Australia after various fiscal stimuli are withdrawn, China will find it more difficult to dispose of its consumer goods.
Naturally that slow down in growth will have a flow on effect on the major suppliers of raw materials to it, like Australia.
The Greek currency crisis is playing out in Europe, with various other countries, like Portugal, Spain, Ireland & Italy, likely to place additional strains on the European Union. Whilst that is proceeding, imports and exports to and from those countries are likely to be slow, with consumers being forced to tighten their belts for some time to come.
After all, Greece only has total debt of $216 billion. Portugal's debt is $288 billion, Ireland's is $862 billion, Spain's is $1.1 trillion & Italy's is $1.4 trillion! Those figures make the $1 trillion rescue package announced recently seem insignificant. To add to the mix, Hungary appears to be in difficulties and although not part of the EU, it owes money to EU banks.
Unfortunately, over the years, general voter apathy and gullibility has allowed bureaucrats and governments of all persuasions in all countries gradually to increase control in all areas, aided and abetted by vocal minority lobby groups, who usually do not see past their own restricted areas of interest.
This growth of the non productive sector has placed increased burdens on society as a whole, with increasing taxes, whether named as such, or as levies or duties. In Australia, this is carried to excess by having three layers of government - Federal, State and Local.
The fact that has been brought home very clearly in the present economic crisis, is that government spending will only postpone the day of reckoning unless the slack, when it is withdrawn, is taken up by consumer spending.
That is not likely to occur, given the significant personal debt levels in many consumer societies which do not have the savings ethic of China, Japan and some other, principally Asian, countries. A sign of this occurring at present in Australia is the slowdown in retail sales.
That is a fact that has been overlooked by the politicians and bureaucrats cocooned in their air-conditioned offices in Canberra and elsewhere, secure in the knowledge that they can force taxpayers to fund their overseas trips, assorted well padded expense accounts and excessive unfunded retirement benefits.
Friday 4 June 2010
What is Wrong in the Australian Economy? - Three Observations
There have been many comments in the media about the situation in which we find ourselves today as a result of the rampant greed displayed by financial institutions and the idiotic responses by assorted bureaucrats and politicians.
This article is the first of three commenting on various aspects of the current crisis as applicable to Australia.
Political Stupidity & its Part in the Economic Crisis
Many years ago John Maynard Keynes was held out as an economic guru and he remarked as follows about the veracity of politicians:
“Why has the world been so credulous of the unveracities of politicians? If an explanation is needed, I attribute this particular credulity to the following influences in part.
In the first place, the vast expenditures of the war, the inflation of prices, and the depreciation of currency, leading up to a complete instability of the unit of value, have made us lose all sense of number and magnitude in matters of finance.
What we believed to be the limits of possibility have been so enormously exceeded, and those who founded their expectations on the past have been so often wrong, that the man in the street is now prepared to believe anything which is told him with some show of authority, and the larger the figure the more readily he swallows it.”
Keynes theories are largely responsible for the current economic mess, in that they encourage political interference and over-regulation.
This in turn increases the cost burden to the individual taxpayer by having to comply with a plethora of petty laws and regulations and support unnecessary government departments.
It also erodes savings by the insidious effect of inflation caused by the enthusiastic use of the printing press by governments, which has a side effect of encouraging oversupply of credit.
Of course, the most recent example of this in Australia is the Resources Super Profits Tax, although its initials have given rise to an assortment of rather more appropriate names.
Even foreigners couldn't believe the stupidity of it. US commentator Dennis Gartman described it as being more typical of a South American autocrat such as Hugo Chavez, and said 'Never did we expect such nonsense from Australia. Shame on Rudd, he really should know better'.
Canada has been chortling quietly on the sidelines in anticipation of the benefits it will gain by being a more competitive place for mining investment. Other overseas companies interested in our mineral wealth will take the opportunity, if this tax is introduced, to buy into our mining sector and export any profits overseas.
What Rudd, a former bureaucrat, & his advisors, who would also seem never to have had any significant exposure to the private sector, clearly don't realise is that about A$100 million is spent in exploration costs for every economically viable deposit found and many projects in the pipeline have recently been put on hold in consequence. After all, who in their right mind would spend such large sums for a paltry 6% return?
About 41% of voting-age Australians are invested in shares. The resource sector makes up about 33.4% of the $1400 billion total market cap for the entire Australian market and superannuation funds hold around $120 billion, or 11%, invested in our resource sector.
Crippling the present and future value of the resource sector is going to make a big difference to the total value of these funds, and everyone will feel it, with voters being well placed to make their voices heard.
This article is the first of three commenting on various aspects of the current crisis as applicable to Australia.
Political Stupidity & its Part in the Economic Crisis
Many years ago John Maynard Keynes was held out as an economic guru and he remarked as follows about the veracity of politicians:
“Why has the world been so credulous of the unveracities of politicians? If an explanation is needed, I attribute this particular credulity to the following influences in part.
In the first place, the vast expenditures of the war, the inflation of prices, and the depreciation of currency, leading up to a complete instability of the unit of value, have made us lose all sense of number and magnitude in matters of finance.
What we believed to be the limits of possibility have been so enormously exceeded, and those who founded their expectations on the past have been so often wrong, that the man in the street is now prepared to believe anything which is told him with some show of authority, and the larger the figure the more readily he swallows it.”
Keynes theories are largely responsible for the current economic mess, in that they encourage political interference and over-regulation.
This in turn increases the cost burden to the individual taxpayer by having to comply with a plethora of petty laws and regulations and support unnecessary government departments.
It also erodes savings by the insidious effect of inflation caused by the enthusiastic use of the printing press by governments, which has a side effect of encouraging oversupply of credit.
Of course, the most recent example of this in Australia is the Resources Super Profits Tax, although its initials have given rise to an assortment of rather more appropriate names.
Even foreigners couldn't believe the stupidity of it. US commentator Dennis Gartman described it as being more typical of a South American autocrat such as Hugo Chavez, and said 'Never did we expect such nonsense from Australia. Shame on Rudd, he really should know better'.
Canada has been chortling quietly on the sidelines in anticipation of the benefits it will gain by being a more competitive place for mining investment. Other overseas companies interested in our mineral wealth will take the opportunity, if this tax is introduced, to buy into our mining sector and export any profits overseas.
What Rudd, a former bureaucrat, & his advisors, who would also seem never to have had any significant exposure to the private sector, clearly don't realise is that about A$100 million is spent in exploration costs for every economically viable deposit found and many projects in the pipeline have recently been put on hold in consequence. After all, who in their right mind would spend such large sums for a paltry 6% return?
About 41% of voting-age Australians are invested in shares. The resource sector makes up about 33.4% of the $1400 billion total market cap for the entire Australian market and superannuation funds hold around $120 billion, or 11%, invested in our resource sector.
Crippling the present and future value of the resource sector is going to make a big difference to the total value of these funds, and everyone will feel it, with voters being well placed to make their voices heard.
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