OT: Current Affairs and Politics

[crocodile]

Not really. Socialism is what government intervention looks like, and disasters are when they're supposed to intervene.

What's wrong with private debt? This is the only time when the benefits of debt are directly linked to the consequences. Public debt allows some to benefit while others pay the price.

OMFG no it isn't. Government is wasteful and easily exploited for the benefit of the powerful. The whole problem of government is that it's by definition too big to fail.

If you're convinced public debt is preferable to private debt, we'll just have to agree to disagree.

Public debt is virtually never repaid so no price to pay. Within reason of course. As far as private debt is concerned it depends on the reasons that the debt has been incurred. Expenditure of capital stock for instance for the deployment of earning income is sound. Raising taxes to repay a debt that doesn't need to be paid is not particularly smart. Raising taxes to pay for infrastructure and programs that ultimately lift productivity is sound as well.

 

[crocodile]

Not if government spending is stopping people from doing it.

Increasing taxes isn't the only way to run a surplus. The government could also spend less.


You've neglected to mention that these aren't necessarily linear relationships, and that there are more factors than just economic growth = we can keep borrowing.

Well just like with COVID-19 we should leave some wiggle room so we are at least somewhat prepared for the things we can't predict.

Except for exceptional circumstances there should never be a surplus on the government accounts. This latest round of spending isn't as dire as it is made out to be. The dive in economic output certainly may be. A return to surplus under those conditions is suicide.

 

[Bandwagon]

Not if government spending is stopping people from doing it.

Sure government spending can supplant private sector spending in any given area, all that means is that money can then be spent elsewhere. If government spending is supplanting all spending, then we are no longer a capitalist economy.

There is no escaping the fact that governments running a surplus is contractionary.

Increasing taxes isn't the only way to run a surplus. The government could also spend less.

This entire conversation comes about from my comment regards people posting ideas of ways the government can tax them more. However yes, the government could spend less, but it amounts to the same thing, running a surplus is contractionary, there is no escaping that.

You've neglected to mention that these aren't necessarily linear relationships, and that there are more factors than just economic growth = we can keep borrowing.

Obviously there's a lot going on in how an economy works, I think that can go without saying. But there is a very simple relationship between growth and the ability to service debt, and thus the ability to carry more debt.

Well just like with COVID-19 we should leave some wiggle room so we are at least somewhat prepared for the things we can't predict.

Yes, the old saving for a rainy day. Albeit a slightly different version of it.

Don't you find it interesting how throughout 2013 we were told by this government ( then in opposition ) of the impending debt and deficit disaster, it was a f**king emergency apparently. They were touting our debt trajectory at some six hundred billion dollars and how disastrous that would be.

Roll forward six years, and hey presto, nothing's really changed. The actual debt has pretty much met their forecasts, 'cept the difference being it's been done under their watch and it's no longer a debt and deficit disaster, it's responsible economic management.

Now as late as January this year, amid calls from all corners upon the government to stimulate the economy due to insipid growth, or indeed the increasing potential for an actual recession, Josh and Scotty were still peddling the line of protecting the surplus ( you know, the one we supposedly banked prior to the last election ) because we needed to save for a rainy day, and unless we paid down the debt we wouldn't have the money to protect the economy from future disaster.

Two months later Josh and Scotty are rolling out 330 billion dollars of spending, spending which from all accounts we couldn't do because we'd spent all our rainy day money.

Two months ago we were outta "wiggle room", yet now we have so much wiggle room that we can find enough to announce the biggest single spending package this country has ever seen by a f**king huge margin.

What gives there mate?

I mean really, anyone who looks at that and doesn't come to the conclusion that the debt and deficit disaster was / is nothing more than a boogey man manufactured for the purposes of political gain is simply not paying attention.

 

[Poupou Escobar]

Sure government spending can supplant private sector spending in any given area, all that means is that money can then be spent elsewhere. If government spending is supplanting all spending, then we are no longer a capitalist economy.

There is no escaping the fact that governments running a surplus is contractionary.

Not when part of their expenses includes servicing debt.

This entire conversation comes about from my comment regards people posting ideas of ways the government can tax them more. However yes, the government could spend less, but it amounts to the same thing, running a surplus is contractionary, there is no escaping that.




Obviously there's a lot going on in how an economy works, I think that can go without saying. But there is a very simple relationship between growth and the ability to service debt, and thus the ability to carry more debt.



Yes, the old saving for a rainy day. Albeit a slightly different version of it.

Don't you find it interesting how throughout 2013 we were told by this government ( then in opposition ) of the impending debt and deficit disaster, it was a f**king emergency apparently. They were touting our debt trajectory at some six hundred billion dollars and how disastrous that would be.

Roll forward six years, and hey presto, nothing's really changed. The actual debt has pretty much met their forecasts, 'cept the difference being it's been done under their watch and it's no longer a debt and deficit disaster, it's responsible economic management.

I don't find anything governments say interesting. Their desired narrative is generally obvious before their statements are made public. However, what they do is very interesting, and it's interesting that conservative governments are now also heavily committed to spending, since many of their supporters now have more need of social services than jobs. I don't think this is a good thing at all. But when I'm retired I'm sure I'll be just as self-serving as the boomers and everyone else.

But I do suspect these demographic changes are going to lead to massive problems that we won't be prepared for, and our national debt position will be a significant part of that.

Now as late as January this year, amid calls from all corners upon the government to stimulate the economy due to insipid growth, or indeed the increasing potential for an actual recession, Josh and Scotty were still peddling the line of protecting the surplus ( you know, the one we supposedly banked prior to the last election ) because we needed to save for a rainy day, and unless we paid down the debt we wouldn't have the money to protect the economy from future disaster.

Two months later Josh and Scotty are rolling out 330 billion dollars of spending, spending which from all accounts we couldn't do because we'd spent all our rainy day money.

Two months ago we were outta "wiggle room", yet now we have so much wiggle room that we can find enough to announce the biggest single spending package this country has ever seen by a f**king huge margin.

What gives there mate?

I mean really, anyone who looks at that and doesn't come to the conclusion that the debt and deficit disaster was / is nothing more than a boogey man manufactured for the purposes of political gain is simply not paying attention.

Just like overreacting to COVID-19 (and I'm sure we are) is necessary to ensure merkins take it seriously, signalling that we are tapped out in the area of government spending is how we suppress dumb ideas like student debt forgiveness and UBI. This means that when an actual crisis (unlike the student debt 'crisis') occurs we are able to get massively into hock to try to deal with it.

Whatever level of debt we're in, how would things be now if we were already there before the Chinavirus happened? There are plenty of dopes with great new ideas about how the government should waste more money, and the never-run-a-surplus school gives them more ammunition.

 

[crocodile]

Not when part of their expenses includes servicing debt.

Not really. Debt servicing is simply the bond returns. The nominal growth in the economy over time more than covers this. The RBA conducts OMOs every day specifically to manage liquidity. The money supply must expand with growth. The new money is used to redeem outstanding bonds.

Government debt within reason is never a problem to a monopoly sovereign currency issuer. It only becomes a problem when the debt grows faster over time than economic output in real terms rather than nominal.

 

[Poupou Escobar]

Not really. Debt servicing is simply the bond returns.

Those bond returns aren't all being spent inside the country.

The nominal growth in the economy over time more than covers this.

Endless growth is an assumption, not a given.

The RBA conducts OMOs every day specifically to manage liquidity. The money supply must expand with growth. The new money is used to redeem outstanding bonds.

Government debt within reason is never a problem to a monopoly sovereign currency issuer. It only becomes a problem when the debt grows faster over time than economic output in real terms rather than nominal.

Weasel words, consider revising

 

[Gary Gutful]

within reasonable limits?

 

[Poupou Escobar]

That sounds reasonable.

 

[crocodile]

Those bond returns aren't all being spent inside the country.

They are issued in our sovereign currency. Unless some other nations accept Aussie dollars for payment, they will be spent here.

Endless growth is an assumption, not a given.

A valid assumption. Economies have been growing ever since the first caveman bartered a wolf skin for a sack of walnuts. There are periods of downturns but over time there always has been growth.

Weasel words, consider revising

Revision is not required. It is entirely correct. If you wish to refute it you'll need to do better than "Weasel words".

 

[crocodile]

within reasonable limits?

Yes GG. It was already explained what those limits are. To wit:

"It only becomes a problem when the debt grows faster over time than economic output in real terms rather than nominal".

 

[Poupou Escobar]

They are issued in our sovereign currency. Unless some other nations accept Aussie dollars for payment, they will be spent here.

Ok, let's say they're used to purchase renminbi.

A valid assumption. Economies have been growing ever since the first caveman bartered a wolf skin for a sack of walnuts. There are periods of downturns but over time there always has been growth.

Over time the population has 'always' grown as well, however that's a constant that is about to end.

Revision is not required. It is entirely correct. If you wish to refute it you'll need to do better than "Weasel words".

"Within reason" is a hell of a qualifier. What amount of debt is reasonable is the whole point of this discussion.

 

[Bandwagon]

Ok, let's say they're used to purchase renminbi.

Then whoever sold the Renminbi now has Aus dollars that can only be spent here.

Over time the population has 'always' grown as well, however that's a constant that is about to end.

About to change? In 50 odd years maybe world population may stop growing, that won't change the flight of peoples to the west though. In the words of JWH we will decide who comes here and the circumstances by which they arrive..........

"Within reason" is a hell of a qualifier. What amount of debt is reasonable is the whole point of this discussion.

@crocodile qualified it in linking it to economic growth. I don't think any attempt has even been made at qualifying what is 'unreasonable", or even why it might be so.

 

[I'm a loser baby...]

3?

 

[Eelogical]

Then whoever sold the Renminbi now has Aus dollars that can only be spent here.



About to change? In 50 odd years maybe world population may stop growing, that won't change the flight of peoples to the west though. In the words of JWH we will decide who comes here and the circumstances by which they arrive..........



@crocodile qualified it in linking it to economic growth. I don't think any attempt has even been made at qualifying what is 'unreasonable", or even why it might be so.

Planet Earth is like the Eels. It takes all the hits yet still survives.

 

[crocodile]

Ok, let's say they're used to purchase renminbi.

That only changes the pocket in which the money resides.

Over time the population has 'always' grown as well, however that's a constant that is about to end.

You're forgetting about productivity. "About to end". Like when. When that day comes it will be time to remodel. Until then, forget it.

"Within reason" is a hell of a qualifier. What amount of debt is reasonable is the whole point of this discussion.

I did qualify it.

"It only becomes a problem when the debt grows faster over time than economic output in real terms rather than nominal".

There's nothing new or exciting about this. Governments have treated debt in this way for centuries. Or haven't you noticed that governments across the world virtually never pay down their debt, even after a couple of centuries.

 

[crocodile]

Planet Earth is like the Eels. It takes all the hits yet still survives.

Well it took 34 years to get the first taste of the chocolates. Now 34 years after the last one and this contagion befalls us.

 

[Eelogical]

Well it took 34 years to get the first taste of the chocolates. Now 34 years after the last one and this contagion befalls us.

Yeah, well. It's all fun and games in the end. This year will be a train wreck no matter what happens from here on in. At least Mahoney gets time to recover...

 

[Poupou Escobar]

Then whoever sold the Renminbi now has Aus dollars that can only be spent here.

Well the point wasn't that they had cash to spend in Australia but that the debt is held by foreigners.

About to change? In 50 odd years maybe world population may stop growing, that won't change the flight of peoples to the west though. In the words of JWH we will decide who comes here and the circumstances by which they arrive..........

We will, and as prosperity declines xenophobia rises. Governments and their policies follow public sentiment, not the other way around. Already we have environmentalists challenging the idea that continual economic growth is desirable or even possible. That and the rise of fascism could be very dangerous, and we don't know how something like the first global pandemic of the information age will shape populism.

@crocodile qualified it in linking it to economic growth. I don't think any attempt has even been made at qualifying what is 'unreasonable", or even why it might be so.

Because what is a reasonable amount of debt today could change very quickly, the same way a nothing-to-see-here SARS-type virus in China quickly became widespread unemployment and unprecedented government debt.

 

[Poupou Escobar]

That only changes the pocket in which the money resides.

You're forgetting about productivity. "About to end". Like when. When that day comes it will be time to remodel. Until then, forget it.

I did qualify it.

"It only becomes a problem when the debt grows faster over time than economic output in real terms rather than nominal".

There's nothing new or exciting about this. Governments have treated debt in this way for centuries. Or haven't you noticed that governments across the world virtually never pay down their debt, even after a couple of centuries.

How much government debt was held by foreigners a century ago? What happens if they decide we're not in a position to refinance?

 

[crocodile]

How much government debt was held by foreigners a century ago? What happens if they decide we're not in a position to refinance?

A centuries worth of inflation would make their debt something we could satisfy with a whip around.

By the way, Australian Government foreign debt is so close to zero it is unimportant.