Australian Economics

[DavidSSS]

Hahaha what government invented the wheel pray tell? Any government invention was at the expense of consumers, because the government can only steal and re-direct resources. So any time their agents invent something, the government first had to take resources from where consumers wanted it most and directed it to something else. In spite of that, comparing the innovations from the market to innovations of the government is like comparing RIchmond's 2019 side to University's 1914 side.

Here are some government funded or directly invented innovations:
Graphical User interface
Computer Mouse
WiFi
Internet
Antibiotics (invented and developed at public universities, commercialised and profited from by private companies).

Looking pretty damned good and that's just a quick list of 5 I came up with in seconds.

What innovations has the market come up with apart from toxic financial instruments?

DS

 

[Giardiasis]

Here are some government funded or directly invented innovations:
Graphical User interface
Computer Mouse
WiFi
Internet
Antibiotics (invented and developed at public universities, commercialised and profited from by private companies).

Looking pretty damned good and that's just a quick list of 5 I came up with in seconds.

What innovations has the market come up with apart from toxic financial instruments?

DS

Everything else.

 

[Brodders17]

Everything else.

that looks like an admission of defeat to me.

 

[TV Josh]

No, through consumer purchasing decisions. The prices will tell the market what technologies to develop.

Looks like the prices are going to tell the markets to develop green renewables post-COVID. Starting, naturally, in QLD, the Sunshine State;

"Queensland Premier Annastacia Palaszczuk said she was "extremely confident in the outlook for renewable energy" in her state, and announced her government was backing construction of Australia's largest solar farm, near Chinchilla.
The Queensland government will underwrite private developer Neoen's $570 million in the Western Downs Green Power Hub with a commitment to buy 320 megawatts of power through the state-owned energy company CleanCo.
Ms Palaszczuk said "new economy minerals" such as copper, cobalt, zinc and lithium, which are needed to build wind turbines, solar panels and batteries, could boost the state's mining sector and lead to new manufacturing jobs.

"I want to see batteries manufactured here in Queensland because that means more secure long term jobs," she said."

Renewable power to boom on cheap money as coal loses out, Garnaut says

Don't fear debt to fuel a green economic recovery from the coronavirus pandemic, economist Ross Garnaut says.

www.theage.com.au

Life is great in the Sunshine State.

 

[Giardiasis]

Looks like the prices are going to tell the markets to develop green renewables post-COVID. Starting, naturally, in QLD, the Sunshine State;

"Queensland Premier Annastacia Palaszczuk said she was "extremely confident in the outlook for renewable energy" in her state, and announced her government was backing construction of Australia's largest solar farm, near Chinchilla.
The Queensland government will underwrite private developer Neoen's $570 million in the Western Downs Green Power Hub with a commitment to buy 320 megawatts of power through the state-owned energy company CleanCo.
Ms Palaszczuk said "new economy minerals" such as copper, cobalt, zinc and lithium, which are needed to build wind turbines, solar panels and batteries, could boost the state's mining sector and lead to new manufacturing jobs.

"I want to see batteries manufactured here in Queensland because that means more secure long term jobs," she said."

Renewable power to boom on cheap money as coal loses out, Garnaut says

Don't fear debt to fuel a green economic recovery from the coronavirus pandemic, economist Ross Garnaut says.

www.theage.com.au

Life is great in the Sunshine State.

I think only state enterprises will be looking to purchase power from these sorts of deals. Everyone else that needs to remain profitable won't touch it with a 1 foot pole because not only is the price low when it generates, but you still have to have firming generation behind it to cover your position. You're also at the mercy of the frequency control markets. If you're a retailer it is much cheaper to purchase the RECs or even just pay the penalty if you don't have enough.

 

[TV Josh]

I think only state enterprises will be looking to purchase power from these sorts of deals. Everyone else that needs to remain profitable won't touch it with a 1 foot pole because not only is the price low when it generates, but you still have to have firming generation behind it to cover your position. You're also at the mercy of the frequency control markets. If you're a retailer it is much cheaper to purchase the RECs or even just pay the penalty if you don't have enough.

I think the cliche is 10 foot pole1 foot is a bit short mate and would indicate some interest in the idea!

 

[Giardiasis]

I think the cliche is 10 foot pole1 foot is a bit short mate and would indicate some interest in the idea!

Haha oops! Missed the 0!

 

[TT33]

I think the cliche is 10 foot pole1 foot is a bit short mate and would indicate some interest in the idea!

At the moment it should be at least a 1.5 metre pole.

 

[TV Josh]

Speaking of which, this is hilarious

 

[IanG]

Modern Monetary theory is an emerging economic theory that overturns many commonly accepted ideas about the economy especially budget deficits, there's a nice write up on the ABC web site today:

Why everything you've been told about debt and deficits could be wrong

A new economic theory emerges that could rewrite our understanding of how governments create and spend money and what type of society we can afford to build.

www.abc.net.au

 

[MD Jazz]

Modern Monetary theory is an emerging economic theory that overturns many commonly accepted ideas about the economy especially budget deficits, there's a nice write up on the ABC web site today:

Why everything you've been told about debt and deficits could be wrong

A new economic theory emerges that could rewrite our understanding of how governments create and spend money and what type of society we can afford to build.

www.abc.net.au

This was discussed recently on another board.

You should always remember that old saying, when its too good to be true....

Did Lyle Lanley write this?

 

[Midsy]

This might be a dumb question but anyway...

The coronavirus has countries throwing money around like we all live in money trees. Living in the UK, I know that our level of borrowing has gone through the roof. No doubt future taxes are coming to help pay it back. But with sooo many countries borrowing sooo much money to pay for everything, who does the lending...? Where does the money come from? Is it purely quantative easing?

 

[DavidSSS]

This might be a dumb question but anyway...

The coronavirus has countries throwing money around like we all live in money trees. Living in the UK, I know that our level of borrowing has gone through the roof. No doubt future taxes are coming to help pay it back. But with sooo many countries borrowing sooo much money to pay for everything, who does the lending...? Where does the money come from? Is it purely quantative easing?

Not sure about other countries, but I understand that in Australia, the government issues bonds, these are sold on the bond market, and the reserve bank then buys them back. Effectively creating money out of thin air especially as the government effectively owes the money to itself.

Another factor is interest rates. They are very low for everyone, but for a sovereign borrower I think they are at around 1%. In any case they are at or very near (even below) the inflation rate. So, in real terms, they make a profit out of borrowing.

Also, inflation is a great solver of debt in history, inflation erodes the value of debt. This is why the powers that be want to control inflation - too low and the massive private debt held by most people is a real issue in terms of if it will ever get paid back (a lot of loans, especially loans to buy houses, are predicated on increasing income but also on the repayments staying stable in money terms but effectively reducing in real terms after inflation - no inflation, you have a problem), too high and those who lent the money get burned.

DS

 

[Giardiasis]

This might be a dumb question but anyway...

The coronavirus has countries throwing money around like we all live in money trees. Living in the UK, I know that our level of borrowing has gone through the roof. No doubt future taxes are coming to help pay it back. But with sooo many countries borrowing sooo much money to pay for everything, who does the lending...? Where does the money come from? Is it purely quantative easing?

Who does the lending? The process David outlined is correct. The government sells bonds to the market (mostly commercial banks and super funds) and then the RBA comes in and buys the bonds from the commercial banks/super funds. To do so, they create the money out of thin air. It is pure counterfeiting yet for some reason the RBA is allowed to do that yet everyone else would be thrown in prison. This process therefore increases the supply of money, which in turn will have the effect, ceteris paribus, of increasing prices throughout the economy. It will also lead to misallocation of resources because the rate of interest gives business' the incorrect signal to begin long-term investment decisions based on cheap debt due to the money printing and not because the real pool of funding has increased.

So who does the lending? You and anyone that holds AUD. You are lending to the government without your consent, because it is much easier for the government to do that than to force you to pay via taxation. It is easier to steal when the victim doesn't realise they are a victim. Government's around the world are engaging in wide scale monetary debasement, which is leading to capital consumption a.k.a. wealth destruction. They are burning the furniture to provide short-term warmth.

 

[Baloo]

Prison, theft. All were missing is the threat of violence for the trifecta.

 

[DavidSSS]

Aah, but if you are the sovereign issuer of a currency, it ain't counterfeit. This is an issue the European countries who are part of the Euro have, they are no longer sovereign issuers of currency.

It is a bit circular though: this will destroy wealth and create money out of thin air, but, then again, we measure wealth in money so creating money creates wealth . . . as long as the money holds it's value.

Burning the furniture to keep warm, sounds like the same impact privatisation led to!

DS

 

[Giardiasis]

Aah, but if you are the sovereign issuer of a currency, it ain't counterfeit. This is an issue the European countries who are part of the Euro have, they are no longer sovereign issuers of currency.

It is a bit circular though: this will destroy wealth and create money out of thin air, but, then again, we measure wealth in money so creating money creates wealth . . . as long as the money holds it's value.

Creating a fancy title of sovereign issuer doesn't magically transform counterfeiting, the broad effects of currency debasement are the same no matter who performs it.

It is not circular. Money is one of the most confused aspects of a market economy. Money's value comes from it's ability to be used in exchange for goods and services. If you create more money, then you aren't creating wealth, you are creating more claims to goods and services, which is why if money is created out of thin air, ceteris paribus, people will want more of it before they are prepared to trade goods and services for it. In addition, it will lead to malinvestment, which will damage the economy's ability to maintain its stock of capital goods and hence reduce the quantity and quality of the goods and services available for consumption.

It is amazing how people get confused by this. If you arrived on a poor island isolated from the world, do you think increasing their supply of money is what will make them more wealthy? Primary school kids understand what high IQ university educated morons don't.

 

[DavidSSS]

Gia, you're missing the point.

Being a sovereign issuer of currency does transform the currency into a measure of value, does mean the currency can be used for exchange, in an artificial way, creating more does increase wealth.

Wealth is a means to secure future consumption and accumulation of more wealth (measured in a sovereign currency). But what is the point of accumulating so much wealth that you can never consume it all, you can never spend it all on goods and services because you have too much wealth? The only point of massive wealth is power.

You can imagine an isolated island and create a theoretical outcome but there never have been blank slates to work on. If you arrived at an isolated island and gave every resident $US1million they would be more wealthy, even if that money was just printed by the US government. Because they would be able to buy goods and services and they would be able to use those funds to accumulate more wealth, which they otherwise would not be able to do. If you give them monopoly money (not a sovereign currency) then they would not have the ability to exchange it for goods and services or use it for accumulation - it is different.

DS

 

[Giardiasis]

Being a sovereign issuer of currency does transform the currency into a measure of value, does mean the currency can be used for exchange, in an artificial way, creating more does increase wealth.

What gives money its value is not the point here. The point is, what effect does increasing the supply of money have on its value. Increasing the supply certainly benefits a select group of people, namely the first users of the new money, however it does not change the level of wealth in the economy (i.e. real goods and services). As I have argued, it actually works to reduce the level of goods and services on offer because of it's effect on falsifying interest rates, which lead to incorrect resource allocation decisions on an economy wide scale.

Wealth is a means to secure future consumption and accumulation of more wealth (measured in a sovereign currency). But what is the point of accumulating so much wealth that you can never consume it all, you can never spend it all on goods and services because you have too much wealth? The only point of massive wealth is power.

You are confusing concepts here. Money is a means to secure future consumption. In any case, what has any of this got to do with the point about the effect of increasing the supply of money of its value? You are missing the point.

You can imagine an isolated island and create a theoretical outcome but there never have been blank slates to work on. If you arrived at an isolated island and gave every resident $US1million they would be more wealthy, even if that money was just printed by the US government. Because they would be able to buy goods and services and they would be able to use those funds to accumulate more wealth, which they otherwise would not be able to do. If you give them monopoly money (not a sovereign currency) then they would not have the ability to exchange it for goods and services or use it for accumulation - it is different.

You don't need to test whether 2 + 2 = 4. You know it to be true through logic alone. Just like you don't need to test the theoretical exercise I went through to know it to be true. It is strange that you challenged that point and then went ahead and used a theoretical example to demonstrate your point!

The exercise was an isolated island, so giving them USD wouldn't do them any good because they are isolated from other places that will give them goods and services for USD. Give everyone of them $1 million in their local currency and it is obvious this will not benefit them. Let's assume they aren't isolated. Giving them USD will certainly benefit them as they can exchange it for goods and services. Has this action increased the level of goods and services in the world economy? Of course not! You have conferred a benefit to the residents of Isolated Island, however everyone else in the economy will suffer a decrease in their purchasing power thanks to the effect of increasing the supply of money. There is no wealth created by increasing the supply of money. Does it matter whether they printed the money themselves, or that the US government did it and gave it to them? Of course not, because it doesn't matter who does the printing, the effect is the same.

 

[Brodders17]

The exercise was an isolated island, so giving them USD wouldn't do them any good because they are isolated from other places that will give them goods and services for USD. Give everyone of them $1 million in their local currency and it is obvious this will not benefit them. Let's assume they aren't isolated. Giving them USD will certainly benefit them as they can exchange it for goods and services. Has this action increased the level of goods and services in the world economy? Of course not! You have conferred a benefit to the residents of Isolated Island, however everyone else in the economy will suffer a decrease in their purchasing power thanks to the effect of increasing the supply of money. There is no wealth created by increasing the supply of money. Does it matter whether they printed the money themselves, or that the US government did it and gave it to them. Of course not, because it doesn't matter who does the printing, the effect is the same.

You seem to be saying that a country printing more money will increase the wealth in that country, but not in the world overall?