Posted by: graemebird | February 7, 2009

Paradox: Non-Monetary Economic-Abuse INCREASES (nominal)Pre-Tax Profits.

QUESTION:  

We could do that  (ie sack all the public servants and slash government spending in half)  but what happens if there are no jobs and the labor market isn’t able to accommodate them in one go? They go on the dole.

ANSWER:

Fisk is right. The dole is cheaper then any public service salary. But this is why you have to try and deep-six their redundancy in favour of a tax voucher. A voucher with some sort of time factor attached to it. We can afford a more generous tax voucher. We cannot afford for them to be swanning around on the dole, or kicking back on the redundancy. You want them desperate to get work immediately, and willing to work for very little, so that business profitability may be restored via access to low nominal wages and salaries. Not via deficit or consumer spending.

If you see my tax scheme for defacto getting rid of the company tax, you’ll see that such a tax scheme ought to get pretty much everyone employed at least part-time. We might think about bringing down the dole $50 per fortnight or $100 per fortnight to really force people to accept at least some casual work to top up their dole winnings. 

With a reserve asset ratio and dropping this religious stupidity in favour of the sanctity of unlimited bank-cash-pyramiding……. if that idiocy is put aside then cash-injection can be made at a high enough level to immediately hit the spending level you wanted to restore (BUSINESS!!!!!!!!! spending level. Not government or consumer spending) and you freeze it at that preferred level with the help of the reserve asset ratio.

The moral suasion comes in at this point. For everyone to try and get wages down. At least to not have wages rises in the permanents, and to slash casual work pay rates. If permanent salaries and wages are rigid, the very least we have to be able to do is have the casuals earnings diving or soaring. Also to increase savings………

The higher is savings AND the lower is government spending, the greater is the proportion of spending in business-to-business expenditure, and this is the category from which wages/salaries are paid. Hence moral suasion towards savings, and massively reducing government spending, is where the funds come from to employ people.

PARADOXICAL: DEFICIT SPENDING AND NOMINAL PRE-TAX-PROFITS.

It should be noted in passing that extra deficit-spending and extra consumer-spending both artificially pump up before-tax profits. Since this spending leads to extra revenues without extra cost of goods sold.

Most business-to-business spending, becomes cost of goods sold in the next time period of course. Hence deficit spending will wreck the economy and impoverish everyone, and yet in the next time period the Keynesians will be saying “ho ho, look at profits and GDP, they are restored”. Which is idiotic. Since now wealth creating spending is reduced in relation to total spending, real wages have been devastated, and GDP is only artificially increased by more consumption and government splurging.

This is one reason the myth of the validity of Keynesian ideas is so persistent. Since these measures artificially make it look like there is a recovery without the advent of the recovery itself. Like getting a chimney sweep from the orphanage with pale cheeks, and slapping him on the face until his cheeks go red, so that the rich lady who wants to adopt someone thinks that this one is healthy. Supposing the next boy has tuberculosis. His cheeks are red and healthy looking also. He is akin to an economy that has allegedly “recovered” via extra government spending. Just a coincidence that “Consumption” is another word for tuberculosis. 

These FISCAL depredations on the economy NEVER come out of pre-tax profits. Only monetary collapse can devastate nominal pre-tax profits. Fiscal abuse, offshore hurricanes, drought, and carpet-bombing cannot reduce nominal profit-share in the economy as a whole, for any given currency-area. Quite the contrary.

One could use personification and imagine this as the sort of triage that happens when a kid falls into the frozen water and before he blacks out his body tries to get as much of the remaining oxygen to the brain as possible. Pre-tax profits are maintained. Always the wage and salary earner pays the cost in real terms in that it is HE who is deprived of the effects of the extra capital accumulation that would have occurred if business-to-business spending had been at a higher proportion to other forms of spending.

If there has been a devastating monetary collapse we want to restore some sort of REASONABLE overall profitability. But we want to restore AFTER-TAX profitability. And this we want to restore by businesses spending on depreciable gear to reduce recurring costs, and by new labour coming on stream at low cost. And it goes without saying that we want to restore this via getting rid of any taxes on retained earnings, if not the company tax itself.  (Still to absorb all the labour in a hurry I tend to lean towards defacto getting rid of the company tax in the medium term by recourse to the scheme I mentioned in another thread.) 

Also since we know that with an RAR we can restore an appropriate amount of business spending at break-neck-speed, well we can do that. But cash-injection is no safe way to actually END a recession. Only to reduce the time spent in recession.

We have the empirical evidence that the Keynesian nightmare of all these unemployed people, resultant from cutting thousands or millions of people off the public tit……….. we have the empirical evidence that this is a myth, if not a lie. 

In the US , when the soldiers came back from World War II, they were all quickly employed, and that was when the post-1929 economy finally recovered in reality, and not just on the books. The real depression went from 1929 to 1946 and the 1946 recovery in real terms was an explosion of living standards the likes of which had never been seen before. We have as much to work with now as they did then, so much has democratic thieving snowballed. 

The Catallaxians laughed at my distress when Gruen and Leigh were hired for Canberra jobs. But its no laughing matter. You really have to have people who know what they are doing and who are not going to advocate economic-abuse, call it a cure, and claim that their outrageous vandalism worked, when there is some feeble cosmetic recovery in nominal profits and GDP.

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Responses

  1. What social program do you benefit from? (Don’t try t make me believe you actually are financially self sufficient.)

  2. I’m a taxpayer. I fund investments in taxeater ego. I’m not on that level of the food chain dopey.

  3. Imagine that? We actually have some bludgers around the place that think that someone else doesn’t have to be paying the bills.

    Imagine the delusional thinking in THAT???

  4. LISTEN TO THIS SILLY POOFTAH MARK TALKING:

    “Maybe you should go to university and learn economics for a semester and see if you like it if you have a strong amateur interest in it.”

    I HAD COMPLETED MY ECONOMICS DEGREE AROUND ABOUT THE TIME MARK WAS BORN. IN FACT I UNDERSTOOD ECONOMICS MUCH BETTER THEN MARK DOES NOW BY THE TIME I WAS ABOUT 15.


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