Australia – A Continent That’s Adrift but Salvageable

There’s a whole lot of stupid coming from the Australian government these days. This particular type of stupid isn’t your average stupid. It’s a maximum strength stupid that is produced when your average, run-of-the-mill stupid is no longer stupid enough to meet the needs of the Australian Treasurer. It is a sort of supernatural stupid. What do you get when you cross mainstream economics with a ghost hunter TV show?

Paranormal Economics – extreme stupid.

The Australian government’s policy of Sound Finance is an example of Stupid Economics. Add the Treasurer’s insights and Sound Finance wanders beyond stupid and into the realm of Paranormal Economics.

Prior Treasurers worshipped the market gods and sought the advice of mainstream alchemists and diviners to interpret the will of those market gods for the Australian economy. The Treasurer, Scott Morrison, wants to go a step further and apply “science” to the Australian government’s religion, introducing whole new possibilities for stupid. Instead of relying solely on the entrails of economic models to divine the market’s will, Scott apparently thinks that EMF detectors, digital voice recorders, the SB7 Spirit Box and night vision cameras have a role to play. These instruments will allow us to hear, see and speak with the market gods directly. Scott has been on a few “scientific investigations” already, wandering about in darkened rooms where the wounded wombats wail and all is eerie. Things would go bump, doors would slam and John would cry, “Who is here? Is somebody here with us? Speak to us! Come to the little red light on this device and tell us what you want us to know.” It was indeed the market gods and they spoke to John. He went public recently with his evidence. Want to know what the gods told him?

Firstly, the market gods demanded that he maintain the government’s current policy of deficit reduction towards surplus and to keep wage suppression going at all costs. Then the market gods told him to blame the government’s inability to meet its goal of achieving a budget surplus on workers who do not have high enough wages to pay taxes.

Behold! The Australian Treasurer and star of the hit TV show, “Scooby-Doo”: Shaggy Morrison. Get that man a rather large sandwich, find Fred, Velma and Daphnie and fuel up the Mystery Machine – We need to get to the bottom of things and uncover what spectre is causing Australia’s “spending problem”.

“Zoiks! It’s the low wage working man and woman who can’t pay taxes!” – Scott “Shaggy” Morrison

Before you say that I am demonstrating highly unprofessional conduct in this article, I would refer you to my blog posts Haruspicy, Haruspices and Macroeconomic Policy and Brief Notes on Professionalism where I discuss the subject in depth. In short, I do not feel that I should respond to this level of unprofessional nonsense and pure stupidity in a professional manner. This kind of stupid deserves to be ridiculed.

Also, most of you in the UK reading this article are dead familiar with the TV show and the character Shaggy and I do realise that the name can be a bit amusing. But, let me assure you that the name “Shaggy” is a reference to the man’s appearance and intellectual level, rather than his propensity for frequent sexual encounters. Judging from the character’s general unkempt appearance, that propensity is nil anyway. Then again, what do I know about such things? I’m an economist and not a linguistics expert or sex therapist. Never mind, as this is a reference to John Fraser go ahead and laugh.

What else can one say about a man who has decided to step into the public eye and boldly go where no idiotic human being has ever gone before? A lot, frankly. But I won’t. I’m saving up those words for later on. Statistically, a complete and utter imbecile of Scott Morrison’s calibre will show a wonton disregard for the purpose of his cerebral cortex on an endless basis and so, is 100% prone to further bouts of extraordinary stupid and I wish to be prepared with enough jokes in reserve. Within this brief article, I want to do something entirely useful instead by getting down to the brass tacks and explain how we can salvage Australia.

Australia does, in fact, have a spending problem – It’s not spending enough! The nation has been in an income recession for so long, one would think that the government’s intent is to make itself so unprosperous and dysfunctional that it qualifies to join the European Monetary Union. The Australian government thinks and acts as though it were an EZ nation that is devoid of its own currency. The Australian government both issues and controls the Australian dollar. The government issues a free-floating, non-convertible currency and does not have to tax or borrow to fund spending, but the government chooses to do so. It’s bond issuance and tax accounts are mere rituals that the government voluntarily engages in which then mask from the public the true operational reality of federal spending. In other words, it purposefully issues bonds and maintains tax accounts in order to put up appearances of dependency on the private sector for its daily bread, when in fact, the Australian government is the sovereign. Unlike other sovereign governments who also voluntarily restrain their currency-issuing power, the Australian government is an extremely wimpy sovereign that is happy to abdicate its power to its own subjects. If the UK government is “King Sterling the Confused” then the Australian government is “King Pussy the Great”. It has absolutely no will to get up and assert its God-given authority over the A$ and the economy for fear of angering the imaginary market gods. Much of this recent pussification of the Australian government is due to the Liberal Party’s influence.

Who is the Liberal Party? The only real way to describe the Liberal Party would be as Gríma Wormtongue to King Theoden. They are the Grima Wormtongue to the Australian government. Neo-liberalism is Saruman. As King Theoden was rendered pale, weak and helpless to act with eyes glazed over, unable to do anything but the will of Saruman, so is the Austrailian government under the spell of neo-liberalism with Wormtongue (the Liberal Party) keeping a watchful eye over the sovereign government ensuring that it is unable to do anything but the will of neo-liberalism. For those of you who have seen “The Lord of the Rings” trilogy, I think I’ve made myself quite clear here. If, by the off chance you haven’t, watch it and then you will understand me.

I simply cannot be more clear to the Australian people.

Thankfully, we do not need the likes of Gandalf the Grey and sorcery to break the grip of the Liberal Party and neo-liberalism. We simply need to understand, firstly, that the sovereign is not himself. He is incapacitated and cannot do his job as a currency-issuing sovereign government, because he is controlled by toxic entities masquerading as public officials who claim to be acting in the best interests of the people and the Australian economy. And secondly, while democracy still exists, we have the power to cast out these vulgar, idiotic cretins from every corner of government with a vote. No magic, no spells, no covert means necessary. Simply shove their bullshit “sound finance” up their sorry asses sideways and set fire to it, then kick them all down the stone steps and out of government for good, replacing them with people who know what the hell they are doing and who are willing to do it. Next, we introduce the Australian people to the government’s actual duty – the pursuit of Functional Finance.

The actual job of the Australian government as a currency issuer is to deficit spend for full employment and the public purpose.

Because the Australian government is the monopoly issuer of the Australian dollar, it is the currency-issuing and regulatory authority and its duty is to intervene in the Australian economy.

The only objective of the Australian government as a currency issuer is to ensure a stable and prosperous economy indefinitely.

Fiscal policy should never be directed for the purpose of managing the Australian government’s budget, but rather, it must always be guided by whatever is needed to sustain a prosperous, stable economy.

Taxation is not and can never be a revenue source for the Australian government as the Australian Dollar is a free-floating, non-convertible currency that is issued only by the Australian government. Since there is no peg to gold nor to another currency, the Australian government’s supply of Australian Dollars is always equal to infinity. The purpose of taxation today is to cause a demand for A$, modify behaviour and reduce spending power to control inflationary pressures. The Australian government simply requires no income at any time to enable spending.

Treasury bonds are corporate welfare and are also used by the RBA to drain excess reserves should the necessity arise in order to maintain its target interest rate. Bonds are never financially necessary for the Australian government.

The Australian government spends by crediting bank accounts with its IOU (A$) and so, it simply cannot “print money” to fund its spending. “Printing money” was a spending operation during the gold standard. Today, it is both obsolete and quite impossible.

The Australian government must always maintain a desirable level of aggregate demand. Should unemployment rise because of insufficient levels of aggregate demand, the Australian government must either cut taxes or increase government spending. If aggregate demand is too high and threatens inflation, then the Australian government must either increase taxes or reduce government spending.

As to monetary policy, the Australian government must ensure a rate of interest which results in the greatest amount of investment. Ordering the RBA to maintain a zero interest rate policy is preferential. Treasury bond issuance should be terminated.

Full employment is a condition that is necessary for a prosperous, stable economy and it is a condition that the market alone cannot achieve or maintain under any circumstances. It is the responsibility of the Australian government to create a situation of full employment and sustain it indefinitely. The most efficient means available to achieve that condition is by the Australian government introducing a Job Guarantee at a decent wage for all who are willing and able to work. The Job Guarantee scheme will replace the specious NAIRU concept, ending involuntary unemployment while ensuring price stability.

Since private sector employers can hire workers from the Job Guarantee, in good economic times, the Job Guarantee pool of workers will shrink as labour enters private sector employment and so, the budget deficit will automatically shrink. In a downturn, affected private sector workers will return to the Job Guarantee and the pool will expand as well as the budget deficit. The Job Guarantee ensures that the budget deficit is always at the desired level necessary to maintain full employment automatically. Should wage-price pressures threaten inflation, when the Australian government acts to reduce aggregate demand, labour will simply transfer from the private sector to the Job Guarantee pool, thus attenuating inflation without creating unemployment.

The first step is to reach the people of Australia with the message of reality. They must understand that mainstream economics is nothing more than religious mysticism that disregards the reality of the Australian government being the sole currency issuer in favour of divining the will of the market which is actually subject to the Australian government. It is a fantasy which is highly detrimental to the people’s well-being. Once reality is accepted by a majority, we can then act to cast out the mystics and soothsayers who control the Australian government and who suppress its ability to do its proper job – ensuring the public purpose and a stable economy for well-being of the Australian people. Australia is adrift, yes, but she is quite salvageable.