As a follow up to my last post: as sometimes a go ballistic with this kind of things, I prepared a more elaborate and hopefully level-headed one on the BCA Budget Submission. You can find it here:

http://aussiemagpie.blogspot.com/2010/02/uninterested-advice.html

You will find that I abstained from commenting the Submission from a chartalist perspective. I did this deliberately in an attempt to use the very neo-classical logic to show its short-comings.

I also abstained from commenting parallel debates overseas. In the UK and the USA this is a major topic and one that will have further repercussions here. But I decided, for brevity’s sake, to let this debate for another opportunity.

Balancing Act: Fiscal and Policy Priorities to Support Growth
http://www.bca.com.au/Content/101654.aspx

This is the analysis I submitted to another friend’s website:

“At the moment, I don’t dare to state what could be the end result of this move by the BCA.

“At one hand, the Rudd government is starting to feel that voter support is falling. This might make them reluctant to move openly to satisfy their corporate masters.

“On the other hand, Rudd has boasted of being a ‘fiscal conservative’ and we know what that means.

“And Abbott and co are not beyond trying to depict themselves as champions of the oppressed: remember the short-lived ‘Abbott’s battlers’? They could resurrect it.

“As the RBA will not be changing their policy of raising interest rates, the combination of higher interest rates, fiscal cuts and worsening global economic outlook could have severe recessive consequences by middle to end of the year.

“These people should be grateful that stupidity, incompetence and greed are not crimes punishable by death.”

When it comes to politicians, they can get things wrong out because they do not understand what they are talking about or they can choose to misrepresent the facts for political ends. I’m not sure what is worse: an ignorant politician or a dishonest one. Unfortunately in the case of Barnaby Joyce, I fear he is politicking and ignorant when it comes to the national debt.

Thanks for your comment about the mortgage piece…as you correctly identify, sometimes the topics that interest me most and the topics of broadest interest are quite different!

Also, I do plan to keep going with the monetary theory posts.

But -to tell the truth and I mean no offense here-, as is often the case, people in economics overlook politics. It was Turnbull and Hockey who started the latest debt scaremongering episode in Australia: with their “indebting our children’s future”. Pretty much like The Simpsons’ Mrs. Lovejoy “Think of the children”.

Other than the punch line, it was the same story: public and private debts together, as if they were the same thing.

Asked about what they would have done differently, they both pointed to cut down the “cash splash”.

What Joyce is doing is just to rehash the same BS, now replacing the “children’s future” with the “sovereign debt default” (I suppose that Joyce can actually read, and has read that there’s a country called Greece, that has debt problems; ergo, let’s say the same about Oz, as it sounds scary).

Regarding CDS: there are rumours that Goldman Sachs has aided Greece in hiding their debt, while betting that the euro will fall. And Joe Stiglitz and others have advanced the hypothesis that part of the crisis is due to an speculative attack against the euro, similar to that credited to Soros against the pound.

Let’s wait and see.

Cheers

Marco

PS: I’ve read your Mortgages in Australia piece and I found it extremely useful, for a variety of reasons. Although it may not be as glamorous as other topics (like sovereign debt defaults!), I believe as a matter of public interest, it’s superior. And you write in a very didactic way, such that the public in general can understand your ideas!

- that quote is refreshingly honest :-)