[jeffkrol]

In an effort to bridge the continents:

Today the Australian government demonstrated how poor their grasp of macroeconomics is and how badly they are managing our economy. In response to the very destructive floods that have ravaged the most populated states on the east coast (Queensland, NSW and Victoria) and wiped out billions in income-generating assets and businesses, they decided to increase taxes to “pay” for the reconstruction relief. This is at at time when the economy is slowing, inflation is moderating and the banks cannot get enough treasury debt to satisfy their prudential requirements. Further, it is at a time when there are 12.5 per cent of willing labour resources lying idle and long-term unemployment is rising. I noted in yesterday’s blog – Its grim on both sides of the Atlantic – that things are really bleak in the UK (now contracting again courtesy of its government policies) and in the US (about to contract courtesy of its government’s mismanagement). In both cases, the malaise is being caused by a dysfunctional ideology being imposed by policy makers onto very fragile economies. Well it seems that the madness along the coastlines of the Atlantic has crossed the Pacific. The imposition of a flood levy is a nonsensical and destructive policy act.

billy blog Blog Archive The madness along the Atlantic crosses the Pacific

Did the President reflect on why China might be “out competing” the US? Answer: no! Reason 1: they pay very low wages and suppress union activity – but that cannot last forever as the workers will revolt and claim a greater share of real output. Reason 2: the Chinese state is not imbued with the neo-liberal fiscal conservatism and have a strong commitment to the development of public infrastructure. When the recession hit their export revenue, the Chinese government pumped massive amounts of state money into the domestic economy, knowing that rising unemployment would threaten political stability. They kept their economy growing strongly throughout.

As an aside, I just love the way they call this commission and others like it “bipartisan” – when it is clear that only one economic ideology is reflected in its work and research methods. Being purely neo-liberal is not bipartisan. It is a stacked deck from the start and its conclusions should be largely disregarded.