Posted by: graemebird | July 2, 2008

Gruens Columns At The Financial Review/Whats He Trying On?/Ending The Suspense/Public Goods, Bottlenecks And “Inflation.”

We have a generic cure for bottlenecks no matter what the history of the situation. This can be summarised as follows:

DO THE OPPOSITE OF WHAT NICK GRUEN IS ABOUT TO ADVISE HIS READERS IN HIS COLUMNS AT THE FINANCIAL REVIEW.

Nick will no doubt be blaming inflation on “bottlenecks”. Not on massive monetary growth by central banks but by “bottlenecks” since there is a new ex-socialist neoclassical consensus that seems to be getting about in this area.

I’m supposing that after attempting to fake some outer sheen of small-government cred he’ll work his way into a lather of thieving in reccomending an avalaunce of public goods spending, on borrowed money, with everyone with an economics degree who tows this thief-economics line winning great consultancy fees.

This is the opposite of how to deal with bottlenecks. The first step to dealing with any bottlenecks is firing all these Nick Gruens in the public service and forcing them to become bricklayers assistants and the like. Or at least do useful, voluntarily paid work that is not in their field of speciality. Since in their field of specialty these people can only do immense harm.

Sadly an idea that always had short legs is making a comeback. And thats the concept of cost-push-inflation. Even somewhat sensible people are starting to talk about this cost-push inflation. And in some ways its hard to blame them. Since the Reserve Bank and the banking system got away with expanding the money supply at outrageous speeds for so long and only had fairly low consumer-price-inflation, yet just lately they have been bludgeoning us into the ground with monetary collapse. And consumer prices have really taken off. So even the only half-ignorant economists, have been beginning to bring this cost-push-inflation furfie up to the front of the queue again. Which as I said is somewhat understandeable. But we will need to look at the way inflation rolls out all over again. So people can understand whats been going on.

I’ve never really talked about “bottlenecks” all that much in the past. I’m not really sure to what extent there is a good theory of “bottlenecks” in economic theory. But nonetheless I’ll be viewing matters with special attention to these alleged “bottlenecks” in order to pre-empt the sort of nonsense you will be getting by these fellows at Club Troppo.

To some extent Gerry Jackson has already looked at this rather unfortunate new excuse for massive thieving on borrowed money. I’m thinking of this article here:

http://www.brookesnews.com/072708capital.html

But I think we will have to look at things in greater detail. Good enough detail for people to see in their minds eye what is so self-defeating about this new borrow, steal and splurge on public goods gyp that the barely reformed communists, like Gruen, Leigh and others, will be trying to sell on you.

This idea that you borrow shitloads and splurge on this infrastructure is about as wrong as you can get. About 160 degrees wrong rather than 180 degrees wrong. But still wrong, wrong, wrong and it will make matter far worse.

So we will look at an old problem through a different prism. We will look at the old problem of consumer price inflation through the new prism of BOTTLENECKS. This will be no balanced survey of the process of how new money winds its way through the system. Rather it will be a discussion with these alleged BOTTLENECKS front and centre.

More Later.

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Responses

  1. Graeme
    Just because infrastucture bottlenecks aren’t relevant to inflation doesn’t mean that such bottlenecks don’t exist and aren’t a problem in their own right. The infrastructure owners have been arguing for some years now that they don’t have much incentive to invest because the regulators don’t allow them the freedom to raise prices as much as they want to.

  2. “I would like to see them show me how microeconomic reform and supply side tax cuts could do any worse than their plan. You seem to be inferring that the recommendation is expansionary fiscal policy.”

    From what I’ve read at Troppo, Prodeo, and other leftist sites, EXPANSIONARY FISCAL POLICY via public investment in infrastructure will indeed be the recommendation. Like what Costa is allegedly planning.

    “I would like to see them show me how microeconomic reform and supply side tax cuts could do any worse than their plan. You seem to be inferring that the recommendation is expansionary fiscal policy.”

    We need to be really careful with definitions. Like for example when I talk about a 15 year tax exemption for aquaculture to cope with the REAL environmental problem of overfishing ( as opposed to the fake environmental problem of “global warming” a shit-rain of nonsense descended on me to do with the idea of “industry planning” and “picking winners”. Now we’ve seen what was 90% bad with old-time industry planning and picking winners in the last few months. What with Rudd stealing off us and arbitrarily giving that money to already established multinational companies. There is something fucking Hitlerian about his approach and how I do hate the milky-bar-kid.

    We see then that at least 90% of what was wrong about picking winners and industry planning was:

    1. It involved more stealing rather than a reduction in stealing.

    2. It involved the glacial rather than the fast removal of tariffs.

    3. It involved micro-management by politicians revilling in their self-appointed roles of Captains of industry. Whereas this was an astounding presumption on their part since they were just thieves and votecatchers. And they had no aptitude to be running industries by any stretch of the imagination. This was an indecent role to be playing, even when performed by a decent and intelligent man like John Button. But Johns role was at least acceptable because he was moving the car industry closer to a more free enterprise footing.
    >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

    The whole point of the above Segway is just to point out how important it is to be clear and quite precise with definitions.

    “I would like to see them show me how microeconomic reform and supply side tax cuts could do any worse than their plan. You seem to be inferring that the recommendation is expansionary fiscal policy.”

    We need to know what is meant by MICROECONOMIC REFORM. We need to be able to split up which things commonly referred to under this banner are good and which are bad. Then we take the good things and see if we can cobble them together under a separate definition.

    “I would like to see them show me how microeconomic reform and supply side tax cuts could do any worse than their plan. You seem to be inferring that the recommendation is expansionary fiscal policy.”

    We need to know what exactly is meant by SUPPLY-SIDE. One supposes that SUPPLY-SIDE TAX CUT is clear enough in its meaning. But then again I’m not sure. So we ought to get these definitional matters cleared up before we proceed.

  3. “Graeme
    Just because infrastucture bottlenecks aren’t relevant to inflation doesn’t mean that such bottlenecks don’t exist and aren’t a problem in their own right. The infrastructure owners have been arguing for some years now that they don’t have much incentive to invest because the regulators don’t allow them the freedom to raise prices as much as they want to.”

    Right. But is this the ONLY reason why we have these alleged bottleknecks? Have you any case studies that we can point to? Make sure you get back to me on this. These are not rhetorical questions.

    You see with normal business in a properly competitive market the ability to jack prices up would force reinvestment on those characters who have that ability. They would know that 300% margins were not A FOREVER THING. Hence they would be forced into an astonishing amount of reinvestment in a race with others to become THE LOWEST COST PROVIDER.

    So supposing its all about the wharves. The docks. On the waterfront. Its fine to let these guys jack up the prices 300% during the peak of the day so long as this implies a massive dock-building campaign up and down the coast. If this is NOT implied then you may as well give it up and just hand over the Reserve Banks printing press to the majority shareholder of the company that owns the wharves……….

    …… And remember that if our Australian Economists have anything to do with it that majority shareholder will inevitably be the ruling party of our key strategic threat.

    Now Mark. Can you wait until we get a couple of other contributers as cover, and then you come in under a different name and work hard to keep your identity a secret even from me.

    I don’t want you wedded to former positions you’ve held in the past in an unthinking way. Nor do I want you guys pulling that JIVE-ASS deal where you suddenly put on the anarcho-capitalist hat and pretend to be a more truer friend of liberty than myself.

    You know the sham. You know the filibuster.

    Lets clear up the above definitional questions before I put in my new and highly involved treatment of the mechanism of inflation, through the prism of bottlenecks.

    It will be a big essay. But I think its better that we get these definitional matters thrashed out prior to me continuing with it.

  4. all this academic nonsense is unnecessary.

    the fighter for freedom needs only know one thing – that we should collect just enough taxes to pay for police and soliders. this could all be collected from import duties.

    Is this Mark Hill some sort of communist in deep cover?

  5. “Is this Mark Hill some sort of communist in deep cover?”

    Does someone want to buy this kid a dictionary?


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