Rudd's $42 billion 'nation building' plan (1 Viewer)

[Gerald10]

I was under the impression that the existence of such sub-prime markets was a result of policy of the Clinton Administration. I can assure you that not many in the financial sector would provide such high risk loans without some form of state protection.

Intervention not market decisions resulted in the sub-prime issue.

If I'm wrong I'll gladly accept it, but that's what I thought the deal was.

To an extent mistakes were made. As I understand it Clinton attempted to make it easier to give loans to people who couldn't pay it back. But the financial institutions bundled them up and sold them because there was no rsik to them if they got rid of debts - in fact they would already have their returns from giving out the loan. Had that system been better regulated, particularly in relation to the ratings those loans recieved and the ability of Americans to walk away from their debts, the problem would have been smaller.

But still just because one intervention in the market failed that doesn't mean all market intervention is therefor bad. Its like saying that Hitler was bad, Hitler was human and hence humans are bad. Its failed logic.

 

[Funky Monk]

i love Krudd's package. It is massive and very satisfying.. Stimulating even.

 

[chicky_pie]

Senator Xenophon said blindly passing the package would be like buying a $42 billion car "without having a good look under the bonnet".

 

[H@wkeye!]

Yer, i heard that, what a metaphor, classy!

 

[Riet]

Ok, i'm going to come right out and say this. NO economic theory can truely explain why this crisis happened. This is because no economic theory can be proven in the real world. This theory is another attempt (not saying that it's a failed attemt) to explain economic happenings.

I've never heard of it, but from what i've read it seems to have some fundamental holes. Please do explain what you mean by 'free banking' and 'private currency', i really am confused. The banking (and finance industry) is regulated, things like reserve rate, and alike (and yes, they failed here - more thanks to the US though). Currency - if what you mean is exchange rates, are private. The RBA doesn't control it like in China, it floats depending on the market.

The RBA controls the interest rates though, they don't reflect the actual risk of lending.

 

[H@wkeye!]

That's what credit ratings, and high interest rates (RBA control's the cash rate, banks create their own *competitive* interest rates, varying for various uses, mortgages, savings etc...)

 

[sdent40]

Ok sdent40, first. The govt DOES NOT CONTROLL INTEREST RATES! The power to control interest rates (through the CASH RATE) is done through the Reserve Bank, a board within

The RBA is a government organisation, granted special powers by the state's legislation. If it were not for the state, there would not be a central bank with this kind of power.

Next, the govt is NOT taking money from one pocket and putting it in another, it's called FISCAL STIMULAS, the money is that money that the previous fiscal year, DID NOT SPEND (the surplus) and the other bits are loans.

Ok well I'm arguing that it's bad for the government to tax in the first place, so I'm saying that was wrong in the first place. But even if we were to leave that aside, the fact that the government is entering into debt now gives it future liabilities in the form of interest payments. It's not free to borrow money, and in order to pay this interest, the government must tax people in the future. So it's still redistribution, just in a slightly different fashion.

Also, the govt DOES NOT control exchange rates, they couldn't even if they wanted to.

I'm not really talking about exchange rates, this is missing the point somewhat (although the exchange rate is influenced by the printing of new money). I'm talking about the spending power of the dollar, which is continually decreased as the state prints new money.

Ummm what else, Ah, you're missing out the whole political side.

I'm aware of the political motivations behind this, but what we're discussing here is whether or not the government intervention helps.

However, not controlling the interest rate (laise fair) would be a disaster. it results in monopolise, which create unemployment, and inflation etc etc.

You'll need to explain this supposed connection between free market determination of interest rates and "monopolies, unemployment and inflation". Why do you think free market interest rates cause the above?

 

[H@wkeye!]

Ok, it's late and i'm tired, so i'm only to keep it short.

Bad for the govt to tax? What do you suggest, no central governemtn, people running around without leaders? there's a word for that chaos. govt's tax for a reason, so moeny exists for situations like this, and to pay for services like unemployment benefits and health care, etc. I'm sorry, but to say that the government shouldn't tax shows a huge amount of ignorance. And i'm not argueing that borrowing money creates interest payments and principle repayments, called "debt servicing", but it has to be done.

Spending power of money, also know as inflation (well that's when money depreciates). Yes, this will technically create inflation, but at a lesser rate, as we're in a very stable inflation range at the moment, and unemployment is far more important at this point.

Umm, political sides ignored, i do honestly think the intervention will help. How much, i don't know.

Free markets and interest rates, hrm, not totally sure what i meant by that. Free markets don't really determine interest rates. I can't think of an occasion when a central authority didn't create interest rates (in at least the last 150 years anyway).

What i meant, was if the govt and RBA, left the economy to do it's thing, what would happen would be large firms would take over all the small ones, creating monolopies, and not effectively redistribute the wealth. Without govt intervention, we'd not have things like minimum wage, automatic stabiliers (unemployment benefits) and health care etc. - I'm too tired to explain more now, i'll get back to you in the morning. I'm a little rusty on all this, i graduated in 07, and haven't really used it since...

Your Austrain economic theory looks interesting though, i'll have to do some reading on...

 

[sdent40]

NO economic theory can truely explain why this crisis happened. This is because no economic theory can be proven in the real world. This theory is another attempt (not saying that it's a failed attemt) to explain economic happenings.

The Austrian explanation fits the facts better than other theories

Please do explain what you mean by 'free banking' and 'private currency', i really am confused.

I mean a system where the government doesn't control so many aspects of the currency. A system where people are free to print and use whatever currency they want, start whatever banks they want - and let the market decide what currency will be used. Here's a link to the free banking wiki

When the government issues the currency and makes people use that specific currency, via stuff like legal tender laws, Australian Bank Notes Tax Act 1910, capital gains tax, land tax - it circumvents the natural free market "check systems" that exist. Because in a free market when a private currency issuer just starts printing money like crazy, people who don't want to have a devalued dollar can simply switch to another currency. With the existence of state legislation and rules, that becomes impossible to do, so the people are forced to live with a currency that loses spending power quickly. Inflation (referring to the expansion in money supply, not CPI), is a hidden tax on savings.

For some reason, those who were setting up these mortgages, were making a killing from it. Scary to think that the banks, or even the actuwary's (that spelt right?) within the banks couldn't see this coming...

The government meddling with the currency is what caused this "myopia" of the actuaries and banks, by artificially making more money available than what there should have been. In Austrian economics, the determination of interest rates is generally based on how much more you want something now vs how much extra you'd have to be paid in the future to get more than that. eg. "do you prefer $100 now or $108 in a years time?" It's a time preference thing.

When the government "prints money", they are making interest rates lower than what they would otherwise be, which creates malinvestment. Since many calculations regarding investment are required in a society as complex as ours, you can see why such a thing is so crucial to the function of the economy. And since the underlying interest rate was incorrect, the calculations were wrong and resources have not been allocated where they were most needed.

The existence of other regulations contributed to it too:
- Community reinvestment act - made it easier to give unsustainable loans
- freddie and fannie

Contrary to what Rudd says, this crisis is not about greed. This crisis is fundamentally due to the government control over currency.

 

[bwendan]

Why not just reduce corporate income taxes and personal income taxes by $42 billion?

That will do a lot more than taxing and spending while creating a lot of wastage in the process

 

[bwendan]

This is because no economic theory can be proven in the real world.

Why not?

Proposition 1: As a price of a good increases, the quantity demanded decreases.

Can't that proposition be tested and proved?

 

[Rafy]

House is still sitting. It's expected to vote on the bills at 5am.

$42 billion of expenditure really demands better scrutiny than this.

 

[katie tully]

$890m to fix regional roads and for local government infrastructure;

That's going to go far, ha ha ha.

Costello would have never allowed this to happen. We're going to need him back in 2 years to reign in government spending and increase revenue, so we can get fucked over again the next time you tards decide to vote in an inexperienced Labor government.

 

[H@wkeye!]

Why not?

Proposition 1: As a price of a good increases, the quantity demanded decreases.

Can't that proposition be tested and proved?

This is a very basic explanation, and only ever hold true under the assumption "when everything else is equal..."

Example, petrol price goes up, demand rises, or stays the same, inelastic good.
Or, a new uber expensive car comes out, more expensive than it's chief competitor, and it creates demand, not because of price, but due to luxury and inferior good's concept.
Lastly, new more expensive mobile phone comes on the market, and all of a sudden it's all the rage to have one, thus the increased price is matched with demand. This is where "supply creates demand" a neo-classical theory, it's best example.

So, an increase in price doesn't not always result in a decrease in demand. This is where economics fails to come to terms with the real world. If you had of said "it's all about supply and demand" then you'd have got it, that does explain everything, from a grass routes level.

 

[zstar]

Saying that the regulators committed an "innocent mistake" is the biggest understatement ever, In any private industry these people would have lost their job and been sued for such gross mismanagement but I guess the goobermint can make mistakes because they're so high and mighty and know better than us normal folk.

 

[withoutaface]

Can i just say i agree with David i think it should be given out but at the same time look at all the money that was given out before christimas to eveyone else but normal people who dont have kids or are age pensioners dont get me wrong the need it but why was money not given out to people who are low income earners like myself i think Turnbull she give us ago aswell with some money from the goverment we pay taxes aswell but never gey anything in return i think its out go at least you know we will go out and spend it as i know i will if we even get it you DICK TURBULL just because you earn millions a year why dont you take a pay cut along with all these other high paying prime ministers and make the banks cut interest rates and fee prices and those managers who keep asking for pay rises when they never get there hands dirty come on australia get behind this bill because we all deserve it.
P.S I think Turnbull is just pissed cause he wont get it and thats why he is being an ARSE.

From facebook.

 

[sdent40]

Saying that the regulators committed an "innocent mistake" is the biggest understatement ever, In any private industry these people would have lost their job and been sued for such gross mismanagement but I guess the goobermint can make mistakes because they're so high and mighty and know better than us normal folk.

+1
Not only do the regulators fail at catching frauds (even when they were warned about Madoff), they are actively harmful, because it makes people falsely think stuff is secure "cos the SEC is looking after stuff". Private watchdog groups do a much better job at spotting fraudsters than the government agencies will.

For proof, see this: One of Madoff's rivals (Harry Markopolos) had written to the SEC, telling them to investigate Madoff in May 1999! That's roughly 10 years before this whole story came out! There is even evidence that from back in 1992, Madoff was involved in some other scam. 16 years before this recent stuff came out!

Madoff wasn't even really "caught by the SEC", his sons were the ones to turn him in after he came and admitted it to them.

The SEC and government regulation pretty much could not have done a worse job. It's funny that when private business fails, people generally take their money out of that business. But when government fails, people seem to think the answer is "more government!" or throwing more taxpayer dollars at the problem. The solution is not that "we need better government regulation" because the insiders just game the system anyway (Madoff's family members were advisers to the SEC)

While we're on the subject of Ponzi scams/schemes, the dubious honour of running the largest ponzi scam in the world/history doesn't even belong to Madoff. That honour belongs to the US government for it's social security and pension scheme, which is so clearly unsustainable!

 

[katie tully]

Turnbull has a vagina. Amazing revelation.

 

[CIV1501]

That's going to go far, ha ha ha.

Costello would have never allowed this to happen. We're going to need him back in 2 years to reign in government spending and increase revenue, so we can get fucked over again the next time you tards decide to vote in an inexperienced Labor government.

that shit is gunna keep me in a job

 

[withoutaface]

Justin Simon wrote
at 10:27
Christine: No, I'm just of the opinion that you're a year 3 dropout who divides her spare time equally between drinking paint and mashing the keyboard with her forehead.

Response:
Christine Green wrote
at 10:32
Mmm right maybe if you were living in the dinosaur ages we might have seen you bashing ya head against a rock or something but no i get sick of using that shit as i use a computer all day obviously you have to much time on your hands to use all that crap.


Get stuck into the facebook group Katie. This is amazing.