Posted by: graemebird | August 18, 2010

One Reason Why Deficit-Spending, In Response To Recessions, Is So Incredibly Harmful.

A country like ours, that has suffered long-term balance of trade difficulties … A country that is losing its industrial base … A country like ours that has a low savings rate, and tepid rate of progression of economics life …. such a country ought not permit any deficits in any government (or any government department), state federal or local.

But this being the case, once you go into recession …. once it is established that the private economy is hurting, it is far less acceptable to run deficits. Deficits are a total disaster when it comes to taking such action as is needed to bring the economy back to health. As a practical matter we can no longer go with the traditional Austrian formula of allowing the money supply to implode. This prescription was invented under gold-fractional-reserve, and outside of the information age. This point of view was right and excellent for the conditions that this point of view related too. The conditions that were present in 2007 were quite different and what was needed was the combination of raising the reserve asset ratio, and new cash creation, via the retirement of debt ….. in order to stabilise business revenues and let the shake-out begin.

So what I’m saying is that you must use monetary policy appropriately (and by monetary policy we DON’T MEAN SUBSIDIES TO THE FUCKING BANKS. There are only two appropriate levers of monetary policy and no others) but under no circumstances can we use deficit spending.

A small interesting little story was in todays Australian, which made me think of a way of explaining why fiscal deficit spending is always unacceptable, but far more unacceptable when one is trying to recover from a recession.

Actually I cannot find the original story. But its basically the same story as below:

More later when I’m back on mobile-internet.



  1. chimpigna :
    18 Aug 2010 4:41:22pm
    I take it you will boycott any infrastructure Labor implements,including the NBN?
    If not why not?

    Reply Alert moderator

    Graeme Bird :
    18 Aug 2010 7:11:07pm
    Why would I? I’d have more right to use the infrastructure then its supporters. After all I’m a taxPAYER while the supporters are taxEATERS.

    Elsewhere you will see that I am in support of an NBN 2.0 with the following characteristics:

    One that is paid for out of the surplus. One that passes at least modestly passes a cost-benefit analysis. One that MOST PARTICULARLY has been allowed to undergo a cost-benefit analysis. One that has not been formulated with the help of international-banker welfare-queens and crime syndicalists. One that is rolled out patiently, and wherein the speed of the rollout is only accelerated, when it can be shown that to do so, offers greater cost-effectiveness …….

    … And so on.

    In other words I’d want the scheme to be run by people who understand reality, and know how to do these things without blowing out costs. People not unlike myself.

    I don’t have any comments on the coalition alternative. But at least there is a CHANCE that they will wind up getting the scheme half-right, being as they aren’t in quite such a mad rush about it.

    The scheme ought to have been started a lot earlier. Two decades ago. But nothing like this ought ever be rushed.

    As Julius Ceasar liked to say: “Make Haste Slowly.”

    Reply Alert moderator

  2. Graeme Bird :
    18 Aug 2010 7:41:43pm

    Consider the wasted greatness of Japan. Because they were such wealth-creators the debt-pushers took to them, and destroyed their economy. When the wealth begins to be created the taxeater and banker parasites will not be long in the waiting.

    As evidence the Japanese governments debts exceed that of any other government. Its an absolute disgrace. Although by some measures the Americans are in more debt trouble, just as a central government deal, the Japanese beat all others for fiscal stupidity.

    So when it comes to debt we have nothing to learn from the tragic experience of Japan except WHAT NOT TO DO.

    Yes we need to have a blindingly fast internet system. Yes the core of it ought to be fibre-optics. But lets evolve this thing consistent with surpluses, and an end to any government debt.

    Japan is an example of what NOT to do.

    Reply Alert moderator

  3. “Girls are more likely to tune out by dissociating, which tends to draw less of a punitive response. A space cadet girl will generally be easier to be around than a Bird-type male.”

    Not something YOU ever want to forget THR.

  4. Wild Rivers Outrage

  5. Graeme Bird :
    20 Aug 2010 8:08:24pm

    The essential reality that separates the Labour party is the fervent belief in two totally wrong paradigms. The Keynesian paradigm and the global warming paradigm.

    The Keynesian paradigm was wrong and ridiculous from the start. The Keynesian paradigm is a failure on straight logical grounds. It CANNOT be true under any circumstances since it is irrational.

    Now the global warming paradigm is also wrong. But once upon a time it started out as a standard bit of inductive armchair thinking. This armchair thinking was reasonable, but it turned out to be wrong.

    Since Labour is fervently basing policy on these two wrong paradigms, and they refuse to face reality, all policy coming from Labour will be dysfunctional and harmful. Never has it been more important in post-war Australian history, to remove the government of the day from power.

    It all comes down to the election tomorrow. The damage done by Labour if they are returned to power will be a human tragedy of huge proportions.

    Reply Alert moderator

  6. Graeme Bird :
    20 Aug 2010 7:54:25pm

    Don’t gloat jaycee. Stealing, ruining peoples lives, and then justifying it with Keynesian claptrap, is nothing for taxeaters to be gloating about. Of course this monstrous spending spree, and the lying claim that it saved the economy, are outrages to be taken personally. Anyone who has even a shred of patriotism, or human feeling, has to take personally the actions of Labours wrecking-crew ascendancy.

    I’m not going to sing the praises of any politicians other than Barnaby Joyce and Dennis Jensen. So I’m not going to act like Tony is some sort of new messiah. But never has it been more important for Labour to lose the election tomorrow. If Labour wins tomorrow the damage will be incalculable.

    Reply Alert moderator

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