Comments on: Budget backdrop is chaos and crisis http://www.crikey.com.au/2009/05/12/kohler-budget-backdrop-is-chaos-and-crisis/ now with extra source Sun, 12 Feb 2012 02:48:10 +0000 hourly 1 http://wordpress.org/?v=3.2.1 By: James Guest http://www.crikey.com.au/2009/05/12/kohler-budget-backdrop-is-chaos-and-crisis/#comment-26430 James Guest Tue, 12 May 2009 08:47:49 +0000 http://www.crikey.com.au/?p=57364#comment-26430 Alan, Crikey doesn't allow me at present to blog as Vlad the Impaler or Peter the Great so I am confined to some of my own more than usually careful opinions. Let me catch your attention with a boast. I wrote on 13 January to a very well known economist "my forecast for the stock market is that it will stagger up, swinging still quite wildly, until May, possibly even 20 per cent but probably nearer 10 per cent net, then just stagger and swing, very likely down a bit, as the realisation spreads that the world recession or US, Japanese and European recessions will last quite a lot longer than now implicit in the stock markets, and then have another bit of optimistic running up towards the end of this year." I hope you are right about the green shoots being celebrated too soon and that this will be understood soon because I have punted heavily on both parts of my prediction being true. Please consider a few points. One is that three years of a Fightback level of GST from 1 Jan or 1 July next year would do a lot of repairing of the budget without hurting the economy. Over $20 billion a year in extra revenue wouldn't be a bad start. Another is to recognise that, while Malcolm Turnbull's only poltical hope is to damn the stimulus packages, decry the debt, and hope that times are bad enough next year for all the criticisms he has been making (many of them justified) since early last year to make him look good and remind people that the Howard-Costello years were prosperous, nonetheless he is leading a whole lot of middle aged young Turks who aspire to be heroic Austrians (by Hayek out of Chicago) and wouldn't know what you are talking about if you pointed out that, for all the good work he did, Milton Friedman's monetarism was not part of the anti-bastard Keynesianism which worked from the 70s onward. Perhaps you could enliven imaginations a bit by pointing out how well a new Gold Rush would serve us. Unfortunately there don't seem to be any new Aztec, Inca or Indian princes' treasturies to loot to keep us all pedalling hard in our First, Third and other World economies so.... why not accept that, as long as China and Japan (in particular) don't pull their support for the world's reserve currency and the Treasury bonds denominated in it the US has an almost limitless supply of really cheap credit, as good as a gold supply and potentially made costless if the plug is pulled and the earning rate on US bonds turns out to have been decidedly negative. Point to that a. to stop people anathematising the US money printing and b. to make sure that everyone understands that Australia can't do the same so it is very important for the stimulus packages to be no more than is absolutely necessary to prevent collapse of confidence or banks and for them to be extremely well targeted to investment which will have a positive return, such as ports and even railways. Not that the would-be Austrians should be allowed torget that even insulating houses employs contractors who employ people, pay taxes and that the savings on energy bills by householders are at least a positive if not easy to measure in national aggregates. Alan, Crikey doesn’t allow me at present to blog as Vlad the Impaler or Peter the Great so I am confined to some of my own more than usually careful opinions. Let me catch your attention with a boast. I wrote on 13 January to a very well known economist “my forecast for the stock market is that it will stagger up, swinging still quite wildly, until May, possibly even 20 per cent but probably nearer 10 per cent net, then just stagger and swing, very likely down a bit, as the realisation spreads that the world recession or US, Japanese and European recessions will last quite a lot longer than now implicit in the stock markets, and then have another bit of optimistic running up towards the end of this year.” I hope you are right about the green shoots being celebrated too soon and that this will be understood soon because I have punted heavily on both parts of my prediction being true.

Please consider a few points. One is that three years of a Fightback level of GST from 1 Jan or 1 July next year would do a lot of repairing of the budget without hurting the economy. Over $20 billion a year in extra revenue wouldn’t be a bad start. Another is to recognise that, while Malcolm Turnbull’s only poltical hope is to damn the stimulus packages, decry the debt, and hope that times are bad enough next year for all the criticisms he has been making (many of them justified) since early last year to make him look good and remind people that the Howard-Costello years were prosperous, nonetheless he is leading a whole lot of middle aged young Turks who aspire to be heroic Austrians (by Hayek out of Chicago) and wouldn’t know what you are talking about if you pointed out that, for all the good work he did, Milton Friedman’s monetarism was not part of the anti-bastard Keynesianism which worked from the 70s onward. Perhaps you could enliven imaginations a bit by pointing out how well a new Gold Rush would serve us. Unfortunately there don’t seem to be any new Aztec, Inca or Indian princes’ treasturies to loot to keep us all pedalling hard in our First, Third and other World economies so…. why not accept that, as long as China and Japan (in particular) don’t pull their support for the world’s reserve currency and the Treasury bonds denominated in it the US has an almost limitless supply of really cheap credit, as good as a gold supply and potentially made costless if the plug is pulled and the earning rate on US bonds turns out to have been decidedly negative. Point to that a. to stop people anathematising the US money printing and b. to make sure that everyone understands that Australia can’t do the same so it is very important for the stimulus packages to be no more than is absolutely necessary to prevent collapse of confidence or banks and for them to be extremely well targeted to investment which will have a positive return, such as ports and even railways. Not that the would-be Austrians should be allowed torget that even insulating houses employs contractors who employ people, pay taxes and that the savings on energy bills by householders are at least a positive if not easy to measure in national aggregates.

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