Australian economy heading for meltdown, warns Access Economics

[Diuretic]

Now, I'm all ears (eyes I suppose as I'm reading stuff).

If Keynesian economics isn't any good right now what should be done?

 

[Paulie]

Yeah, you're right, I haven't got a clue about this stuff, I should keep out of it.

Reagan was a Keynesian. That puts me right out of the ring then. I should know better than to take you on Paulie. Oh well, back to the drawing board wth me.

Reagan was a Keynesian. I need to remember that.

Hey, if you want to get all childish about it and throw a hissy fit because you were proven wrong, that's fine by me.

Reagan ran huge deficits. That is the very foundation upon which Keynesianism rests.

There's really no getting around that, Diuretic.

 

[gonegolfin]

So Brian. The free markets failed right?

What free markets?

- Do you mean the free markets where the supply and demand for money and credit is ignored and instead, bank reserves are manipulated to get the short term outcome the central banking system and government desires? We should have had a stiff recession early this decade. The Fed and government cut off the recession at its knees with artificially cheap money and credit. Hence, the excesses of the previous cycle were not purged from the system. But they do not go away. They rear their ugly head at the end of the next up cycle ... which is now. Yet now, we are applying the same interventionist measures to first, prevent a recession ... and when that did not work ... second, prevent a steep recession or maybe depression.

- Or the free market where housing is subsidized by the government through cheap mortgages and artificially low interest rates? These mortgages are then securitized and sold to investors (many foreign) with an implicit government guarantee that is now being tested and is wreaking havoc in the mortgage market.

- Or the free market where the big and powerful financial institutions are bailed out for their mistakes and the losses are socialized (it was prevalent in the 70's, 80's, 90's, and even moreso now).

- Or the free market where runaway government spending has led to increasing deficits, a soaring national debt, more restricted avenues with which to finance our debt, which in turn leads to higher financing costs? Yes, financing is still cheap, but it is because we are not in a free market. These higher financing costs have prompted the Fed to intervene into the agency debt and agency mortgage backed security markets and monetize this debt. This is because not only will the Chinese no longer finance our agency debt and agency mortgage backed securities, they are selling these securities from their reserve portfolio. Thus, the Fed is artificially manipulating interest rates to the downside. If that is not enough, the Fed is rumored to soon be monetizing the long end of the treasury curve. How is that for a free market? Or how about the intervention in the commercial paper markets and the money markets? Just take a look at the size of the Fed's balance sheet.

- Or the free market where the US has been dumping gold since at least the 90's to prop the US Dollar? Meanwhile, they have shifted their intervention to the futures markets where three or less banks have held a manipulative short position of 25% of gold mine supply for a year. It may only be one bank and that one bank is JP Morgan (dutiful assistant to the Fed). If you look at Silver, you will find the same activity ... but instead it is no more than two banks in on the action. Meanwhile we had a 2008 where physical demand for gold and silver forced prices of the physical metal well above the price suggested by the futures market. Hence, one supposed free market fractured into two markets ... one free and one not.

It is amazing to me that people are under the misconception that we operate in a free market. We are less free as time marches on.

Brian

 

[Paulie]

You'll find most of them claim in one breath that there is no free market and never has been, and then in another breath, blame the free market! I just don't get it.

Because banks and consumers got greedy in a market that was already FAR from free, it is somehow all the fault of the "free market", that liberals already claim never existed in the first place.

Quite comical when you break it down.

 

[Diuretic]

Hey, if you want to get all childish about it and throw a hissy fit because you were proven wrong, that's fine by me.

Reagan ran huge deficits. That is the very foundation upon which Keynesianism rests.

There's really no getting around that, Diuretic.

Hissy fit? Me? **** no, I'm interested to know how Reagan was a Keynesian that's all. I'm no economist I only have my views and opinions and average ability to work things out (NOT if it involves numbers, I can't do numbers).

Huge deficits are the mark of a Keynesian. Okay, got it. But isn't that only when it's necessary? I mean I thought Keynes argued that governments should not be frightened of going into budget deficit to stimulate the economy. But if the economy is going well it doesn't make sense that a budget deficit is required due to increased incomings from general economic activity? Running a deficit during good times would seem to me to be negligence and I don't know if Keynes would have approved.

Ideas?

 

[Diuretic]

Brian

So there's no such thing as a free market?

 

[Diuretic]

You'll find most of them claim in one breath that there is no free market and never has been, and then in another breath, blame the free market! I just don't get it.

Because banks and consumers got greedy in a market that was already FAR from free, it is somehow all the fault of the "free market", that liberals already claim never existed in the first place.

Quite comical when you break it down.

Paulie

Same question as to Brian. Is there no such thing as a free market?

Supplementary question - what's your definition of a free market? May as well get some sort of mutual understanding here. But don't use numbers okay?

Thanks

 

[Paulie]

Hissy fit? Me? **** no, I'm interested to know how Reagan was a Keynesian that's all. I'm no economist I only have my views and opinions and average ability to work things out (NOT if it involves numbers, I can't do numbers).

Huge deficits are the mark of a Keynesian. Okay, got it. But isn't that only when it's necessary? I mean I thought Keynes argued that governments should not be frightened of going into budget deficit to stimulate the economy. But if the economy is going well it doesn't make sense that a budget deficit is required due to increased incomings from general economic activity? Running a deficit during good times would seem to me to be negligence and I don't know if Keynes would have approved.

Ideas?

But that's exactly what Reagan did. He ran huge deficits to try and stimulate growth that was lost due to the early 80's recession. He may not necessarily have been as much of a Keynesian as Obama and his advisors are, but it at least goes to show that Keynesianism has not been dead since the 70's.

 

[Diuretic]

But that's exactly what Reagan did. He ran huge deficits to try and stimulate growth that was lost due to the early 80's recession. He may not necessarily have been as much of a Keynesian as Obama and his advisors are, but it at least goes to show that Keynesianism has not been dead since the 70's.

Is the only hallmark of Keynesianism running deficits? I mean Joe Blow could run a deficit in office due to negligence and claim he was a Keynesian, surely there's more to it than that. Did Reagan actually apply himself in a Keynesian manner?

And what was the cause of Reagan's budget deficits? Did he spend too much or did he cut taxes and cut govenment income? Or was there another set of reasons?

Where does Reagan's Trickle Down Economics idea fit in the overall scheme of his economic policies?

 

[Paulie]

Is the only hallmark of Keynesianism running deficits? I mean Joe Blow could run a deficit in office due to negligence and claim he was a Keynesian, surely there's more to it than that. Did Reagan actually apply himself in a Keynesian manner?

And what was the cause of Reagan's budget deficits? Did he spend too much or did he cut taxes and cut govenment income? Or was there another set of reasons?

Where does Reagan's Trickle Down Economics idea fit in the overall scheme of his economic policies?

I explained that earlier in the thread. He took a 3 pronged approach, and utilized Keynes in his deficit spending, Friedman in his monetarism (interest rate adjustments, think Volcker), and his own brand of econ, being the trickle down tax cuts. This is probably why you wouldn't NECESSARILY consider him a typical Keynesian, but he applied Keynes' most basic principle of deficits to finance a recession, so whether or not he was a "true Keynesian" is really beside the point. Ultimately, he utilized Keynes in Keynes' own basic ideology...finance a recession by increasing government spending.

Volcker's interest rate hikes killed the inflation of the 70's, but Reagan's deficit spending spurred inflation once again by the end of the 80's and into the 90's. It's a never-ending cycle. The government increases spending, goes into debt, borrows and prints their way out of it, inflation goes up, assets become inflated to bubble proportions, the bubble breaks, deflation sets in causing a recession, the government spends their way out of it, etc, etc, etc.

Keynes' model also requires the use of interest rate management, typically lowering rates to spur borrowing and spending in the private sector.

When you account for all this, you can hopefully see why many are dead set against Keynesianism, as it really doesn't seem to be "solving" ANYTHING, rather creating more problems down the road.

 

[gonegolfin]

Huge deficits are the mark of a Keynesian. Okay, got it. But isn't that only when it's necessary? I mean I thought Keynes argued that governments should not be frightened of going into budget deficit to stimulate the economy. But if the economy is going well it doesn't make sense that a budget deficit is required due to increased incomings from general economic activity? Running a deficit during good times would seem to me to be negligence and I don't know if Keynes would have approved.
Ideas?

You are correct about this. I do not think Keynes approved of adding to the deficit in good times. The problem is that you are dealing with the government ... and when times are good everyone wants to drink from the punch bowl. Drinking from the punch bowl is easier when you have central bank issued fiat currency with no constraints other than the ability to issue debt (the Fed cannot lend directly to the Treasury). It is even easier when you are the reserve currency of the world.

The problem is that the US economy has been weakened by so many of these cycles where we increase money, credit, and spending to escape recession, I do not think it is possible any longer to have an up cycle without continuing to deficit spend.

Brian

 

[gonegolfin]

Brian

So there's no such thing as a free market?

No, there is not. But the degree of freedom in a market makes a big difference. Our markets (US) continue to be less free.

Brian

 

[Toro]

I just hope the federal government gets over its fear of a budget deficit. To some extent they've been sucked in by the opposition's taunting about deficits. I'm no economist of course but those who know what they're on about are telling the feds not to get scared of deficit as in tough times governments have to do it to keep things going. So, while Chris Richardson has belled the cat that's a good thing because he's blunting the opposition's ability to scare the government. Those of us who read the newspaper and think about these things understand that it's necessary and actually good management.

You are seeing the same thing in Canada. Much of the population has become so averse to debt that they are arguing Canada should not run deficits.

 

[Paulie]

You are correct about this. I do not think Keynes approved of adding to the deficit in good times. The problem is that you are dealing with the government ... and when times are good everyone wants to drink from the punch bowl. Drinking from the punch bowl is easier when you have central bank issued fiat currency with no constraints other than the ability to issue debt (the Fed cannot lend directly to the Treasury). It is even easier when you are the reserve currency of the world.

The problem is that the US economy has been weakened by so many of these cycles where we increase money, credit, and spending to escape recession, I do not think it is possible any longer to have an up cycle without continuing to deficit spend.

Brian

To add to this, so that maybe Diuretic understands more where the anti-Keynesians are coming from...Each cycle of deficit spending that is implemented to "fix" a recession, will ultimately leave certain portions of the problem unfixed, unliquidated, whatever. Even if it somehow managed to erase something, it doesn't erase EVERYTHING, therefore the next recession that comes around is not just the product of whatever the current and/or recent environment brought about, but also the leftovers of whatever was not properly liquidated, or corrected from any PREVIOUS "stimulus" attempt. So you're left not only combatting the current problems, you're combatting older problems that were never even properly corrected to begin with, due to deficits leading to inflation, added debt, etc.

There just doesn't seem to be a rational reason to continue throwing such enormous amounts of money at a problem, the repercussions of doing so will become a burden for potentially DECADES to come.

Diuretic, what happens when the NEXT bubble bursts, from all this money being thrown at the CURRENT mess? Considering each one of these downturns is worse than the last, can you even conceivably imagine how bad it will be next time? Not only will there be THAT situation to deal with, which caused a burst, but you have a whole host of other problems adding to it, like all of the CURRENT toxicity not having even completely liquidated itself back to correction.

You kick a can down the road, and then the next can comes along giving you two cans. If you only fixed half the problem by the time the next can comes along, you still have 1 & 1/2 cans left to deal with that you need to kick down the road this time, leading to 2 & 1/2 cans that maybe one half of which was fixed, so you're kicking 2 cans down the road again, leading to 3, and so on. You're never catching up with the previous problems, and only stacking more on top of each other. It is highly unlikely that you will ever liquidate the entire mess by spending more money, going further into debt, and "printing" more money.

You certainly aren't going to help things if you continue to lower rates to near zero, and cause the population to ALSO increase their debt levels as well. Isn't that our current problem? EVERYONE is too far in debt? The government AND the people?

How sad that the only solution offered by our leaders is EVEN MORE DEBT.

 

[gonegolfin]

To add to this, so that maybe Diuretic understands more where the anti-Keynesians are coming from...Each cycle of deficit spending that is implemented to "fix" a recession, will ultimately leave certain portions of the problem unfixed, unliquidated, whatever.

Yes. As I stated earlier in this thread ...

"What we are experiencing is increasingly shorter (and less fruitful) boom cycles followed by larger (and more painful) down cycles. It then requires increasingly more inflation, than was required in the previous down cycle, to extricate ourselves from the present downturn. At some point the inflation will cease to work and you will have a depression. A depression much worse than if proper economic correction (aka, no artificial stimulus and government intervention) had been originally allowed."

"Each bull cycle is increasingly less fruitful and shorter (but requires increasingly more inflation to artificially generate), while each down cycle is more intense and more difficult to emerge from."

Brian

 

[Diuretic]

The first bubble I remember reading about (years ago and not in formal education) was the South Sea Bubble. That sounded a lot like wholesale fraud to me.

But as I understand it the bubbles you refer to are when the economy gets overheated - I'm trying to explain something I'm not sure of so bear (sorry) with me - such as when the real estate market prices housing at a rate that is (sorry) unreal.

But aren't bubbles endemic in a free (or mixed) market economy?
Aren't boom and bust cycles part of a free (or mixed) market economy?
If so then doesn't it make sense for government to increase its economic activity during the contracting cycle to try and shorten its duration and then ease off when the expansion begins again?

Surely if government didn't hop in and stimulate that the contraction would simply keep going until it found its - I don't know if there's a technical name, I suppose there is - natural bottom. But if it were allowed to do that wouldn't it (a) cause an immense amount of damage to companies and individuals, perhaps damage beyond recovery and (b) a whole lot of misery to ordinary people who are not, like the rich, protected from the vagaries of recession or depression?

 

[Paulie]

The first bubble I remember reading about (years ago and not in formal education) was the South Sea Bubble. That sounded a lot like wholesale fraud to me.

But as I understand it the bubbles you refer to are when the economy gets overheated - I'm trying to explain something I'm not sure of so bear (sorry) with me - such as when the real estate market prices housing at a rate that is (sorry) unreal.

But aren't bubbles endemic in a free (or mixed) market economy?
Aren't boom and bust cycles part of a free (or mixed) market economy?
If so then doesn't it make sense for government to increase its economic activity during the contracting cycle to try and shorten its duration and then ease off when the expansion begins again?

Surely if government didn't hop in and stimulate that the contraction would simply keep going until it found its - I don't know if there's a technical name, I suppose there is - natural bottom. But if it were allowed to do that wouldn't it (a) cause an immense amount of damage to companies and individuals, perhaps damage beyond recovery and (b) a whole lot of misery to ordinary people who are not, like the rich, protected from the vagaries of recession or depression?

This is when the moral hazard argument kicks in. By stepping in and spending their way out of it to somehow "lessen" the effects, not only are they adding more debt to the problem and not allowing the market's problems to properly liquidate, they are keeping society from having to learn from the mistakes that caused the downturn.

It's immoral to let everyone enjoy the market and benefit from it, but when times get bad, shelter them from having to endure the pain from the risk they took. Part of having freedom is having the freedom to FAIL, too. How do you learn from your mistakes and become a better society, if your government is sheltering you from having to handle ALL of the aspects of the market? You're not entitled to perpetual prosperity. If you're going to have a capitalist market that you have many opportunities to take advantage of and succeed in, then you also should be subject to the possibilities of failure as well. We're all living off the market, and as such, we all have a little bit of responsibility and accountability. Just because maybe you weren't flipping houses, or investing heavily in stocks, or taking part in the high end of the business aspect of the market, you were still living within the market environment and enjoying its prosperity regardless. Because of that, I believe that you deserve a bit of the responsibility. Everyone who benefitted from the good times, deserves to also endure the bad times as well. If you're not thick skinned enough to deal with both aspects, and PREPARE yourself for both, then you probably should move to a nice communist country that will take care of you completely.

It's a cop out to ask your government to bail you out when times get bad, in the face of you enjoying the market and benefitting from it when the times were good. We as a society ought to take responsibility for our own market, because our market is after all, what we make of it. Part of the reason consumers and business owners don't seem to be getting better at certain things, is because we continually have government stepping in and insulating us from having to actually LEARN why we failed, and make ourselves better from the learning experience. We get bailed out, and then we go hog wild again next time around because in the back of our minds, we know government will be there to save us from our own stupidity, apathy, carelessness, etc.

 

[Diuretic]

This is when the moral hazard argument kicks in. By stepping in and spending their way out of it to somehow "lessen" the effects, not only are they adding more debt to the problem and not allowing the market's problems to properly liquidate, they are keeping society from having to learn from the mistakes that caused the downturn.

It's immoral to let everyone enjoy the market and benefit from it, but when times get bad, shelter them from having to endure the pain from the risk they took. Part of having freedom is having the freedom to FAIL, too. How do you learn from your mistakes and become a better society, if your government is sheltering you from having to handle ALL of the aspects of the market? You're not entitled to perpetual prosperity. If you're going to have a capitalist market that you have many opportunities to take advantage of and succeed in, then you also should be subject to the possibilities of failure as well. We're all living off the market, and as such, we all have a little bit of responsibility and accountability. Just because maybe you weren't flipping houses, or investing heavily in stocks, or taking part in the high end of the business aspect of the market, you were still living within the market environment and enjoying its prosperity regardless. Because of that, I believe that you deserve a bit of the responsibility. Everyone who benefitted from the good times, deserves to also endure the bad times as well. If you're not thick skinned enough to deal with both aspects, and PREPARE yourself for both, then you probably should move to a nice communist country that will take care of you completely.

It's a cop out to ask your government to bail you out when times get bad, in the face of you enjoying the market and benefitting from it when the times were good. We as a society ought to take responsibility for our own market, because our market is after all, what we make of it. Part of the reason consumers and business owners don't seem to be getting better at certain things, is because we continually have government stepping in and insulating us from having to actually LEARN why we failed, and make ourselves better from the learning experience. We get bailed out, and then we go hog wild again next time around because in the back of our minds, we know government will be there to save us from our own stupidity, apathy, carelessness, etc.

The moral hazard argument. Firstly, I appreciate your bringing that up because I have never heard of it. But that's a good thing for me, I can try and find out about it and what it means. I know skimming a few items is a poor substitute for reading a textbook but it's all I've got to work with right now so it will have to do.

There's a moral question in my mind on this. Should the economy is allowed to collapse without support from government? Is it moral to allow those who were not at fault to suffer for the actions of a few who were criminal or negligent (or anything along the spectrum between those two points)? Isn't that collective punishment?

If that response is a bit esoteric then consider this. Should a government allow an economy to fail to teach everyone a lesson? To me that sounds like the sort of stuff the Brits did to poor old Admiral Byng, "dans ce pays-ci, il est bon de tuer de temps en temps un amiral pour encourager les autres.” I have to say I think I'd be grabbing a pitchfork (we Australians have had all our guns taken away from us you see ) to kick out of any office the bunch of sociopathically callous bastards that tried that one on.


As I understand it the market is just a mechanism and a small part of the overall economy. The market is about finance isn't it? All the buying and selling of stocks in corporations that do things like produce goods and services for consumption. I have no problem with an individual who is in the market and who makes bad judgements from going under. I have a major problem with the idea that corporations which are necessary (a necessary evil in my opinion) for a market economy to function, for the production of goods and services, should be allowed to fail and thus the production of goods and services by them to stop. I mean we're not talking a small business going under here, we're talking about corporations which are an integral part of an economy disappearing. Sure you might hear some cheering from the extreme left but no government can afford to let that happen in reality.

I think you might find that it's not “mistakes” that caused this gigantic failure but I agree there are lessons to be learned. What caused this failure was a complex combination of avarice, criminality, negligence and ideology and probably a few more other negative factors in there as well. A government can't afford to stand by, hands on hips, glaring at the malefactors and saying, “this is for your own good.” Everyone else in the real economy would be suffering far greater than those who were operating the market mechanisms in a criminal or negligent manner, the criminals and the negligent individuals wouldn't suffer, they have their wealth squirrelled away where it can't be touched. Mr and Mrs Average are the ones who would be suffering for the sins of others. It might be that those with an ideology of purity of the markets might be pained by the government stepping in to repair the economy and rebuild confidence in a market process but that's a bit of bad luck. Government is ruled by pragmatism, please spare me from any government that will allow ideology to dictate its policies in anything.

 

[Paulie]

Diuretic, think of it like this. You live in a country whose economy is booming because credit is expanding, people are spending, houses are being built, jobs are plentiful, wages are increasing, etc. Even if you weren't trading stocks, or flipping houses, you were still benefitting from that prosperity. If you were borrowing and spending like crazy, for instance, because the money was flowing like wine, you played your part. You can pretend that you had no part in the downturn, but you did. If you jacked up your credit cards, bought a ton of trinkets, and neglected to save for a possible downturn, you share some of the overall blame. If you're living well because of the investor class jolting the economy, and the middle class spending like drunken sailors, then you share responsibility too. When the market is prosperous, you share in the prosperity. When the market hits a downturn, you share in that too.

To answer the later question, the market isn't just the stock market. It's everyone who is collectively making a transaction for a good or service. Money exchanging hands constitutes the market, for instance. Unless you were living in the woods somewhere off the grid, bartering in some kind of closed commune amongst like-minded people, you were benefitting somehow from the entire market's period of success. So why should you not share in the failure as well, considering that as a citizen, you are partly responsible for the market in which you participate on a daily basis?

If you can be free to benefit from the market, you can be free to suffer the potential consequences of the risks you take, as well.

To me, THAT is what is "fair".

It works progressively, too. The investor class lost a LOT of money. Some should have lost entire businesses because of their malinvestment, misallocations, and overall risk-taking. But instead they were REWARDED for their mistakes by literally being given the blood, sweat, and tears of the taxpayer collective. If you ask me, THAT is the TRUE collective punishment. Taxing the whole country, devaluing an entire currency, to pay for someone else's mistakes.

Sure, some played by the rules, and bought a house they could afford, and are currently making good on their liabilities. They should not be TAXED to pay for someone else's risk, but they certainly can share some of the economy's downturn, considering, like I said earlier, they did benefit from the boom as well.

That's the ultimate difference in my opinion.

 

[Diuretic]

Diuretic, think of it like this. You live in a country whose economy is booming because credit is expanding, people are spending, houses are being built, jobs are plentiful, wages are increasing, etc. Even if you weren't trading stocks, or flipping houses, you were still benefitting from that prosperity. If you were borrowing and spending like crazy, for instance, because the money was flowing like wine, you played your part. You can pretend that you had no part in the downturn, but you did. If you jacked up your credit cards, bought a ton of trinkets, and neglected to save for a possible downturn, you share some of the overall blame. If you're living well because of the investor class jolting the economy, and the middle class spending like drunken sailors, then you share responsibility too. When the market is prosperous, you share in the prosperity. When the market hits a downturn, you share in that too.

To answer the later question, the market isn't just the stock market. It's everyone who is collectively making a transaction for a good or service. Money exchanging hands constitutes the market, for instance. Unless you were living in the woods somewhere off the grid, bartering in some kind of closed commune amongst like-minded people, you were benefitting somehow from the entire market's period of success. So why should you not share in the failure as well, considering that as a citizen, you are partly responsible for the market in which you participate on a daily basis?

If you can be free to benefit from the market, you can be free to suffer the potential consequences of the risks you take, as well.

To me, THAT is what is "fair".

It works progressively, too. The investor class lost a LOT of money. Some should have lost entire businesses because of their malinvestment, misallocations, and overall risk-taking. But instead they were REWARDED for their mistakes by literally being given the blood, sweat, and tears of the taxpayer collective. If you ask me, THAT is the TRUE collective punishment. Taxing the whole country, devaluing an entire currency, to pay for someone else's mistakes.

Sure, some played by the rules, and bought a house they could afford, and are currently making good on their liabilities. They should not be TAXED to pay for someone else's risk, but they certainly can share some of the economy's downturn, considering, like I said earlier, they did benefit from the boom as well.

That's the ultimate difference in my opinion.

Okay, when things are going well on the stock market the rest of us benefit as a by-product? That seems valid to me. Credit is easy to get, so we get it and buy stuff. Yes, that's what does happen, for sure.

Okay, I work for a living, I buy stuff I need and some crap I don't need but I just want. If that's being part of the market then yes, I'm in there.

If the market goes tits up and I can't get easy credit because of a credit squeeze, yes, I understand and accept that too.

The grubby bastards who caused this mess got a handout from the US government. Yes, agreed, disgusting. But I think that's qualitatively different from government (any, not necessarily the US) giving loans to struggling corporations (loans to be repaid) and governments who up their own activity to stimulate the economy.

On tax – I don't know what your government is going to do, if it is going to raise taxes, that's none of my business, but they'd want to have a damn good argument I think. I have no idea what ours is going to do. Due to just good luck (not good government over the past 12 years or so) our country has a surplus (thank you China) which it is going to use to try and get us through this storm. It may well go into deficit. Just on that and this is a political comment, our PM and Treasurer have finally allowed the “deficit” word to pass their lips. They had been spooked by the Opposition (the previous profligate government which couldn't organise a piss-up in a brewery but which benefited from the huge mining boom) into believing that deficit spending was evil. The Opposition knew that was bullshit but used it to scare the government. Thankfully the government wised up, probably after getting advice from its head of Treasury (a very smart bloke).

Down here we have a small economy by any standards and only 21m people. We don't have a complex society like the US. It really is difficult to stuff things up in a major way here. However the government has treated us like adults and told us that it's going to get rough. And it's started. Unemployment is creeping up. The mining boom (simple, dig it up, ship it to China; dig it up, ship it to China; repeat......) has finished (for the time being) and the knock-on effect is only too apparent. I agree, as Dr King once said, “We may have come here in different ships, but we're all in the same boat now.” We'll have to chip in and get on with it. But none of us (well not too many) want the government to sit on its arse and do nothing on the basis that lessons have to be learned. You see we didn't cause this. We stood watching the fight and someone sneaked a king hit on us and we went down on our knees. No-one here has to be disciplined because our financial sector (such as it is) was regulated and that regulation saved it from its own avarice. Having said that all of our four (yes, four, that's all) major banks have suffered from an exposure to the US in some way. But they were raking in the loot in the good times so now they too can tighten their belts and cop the losses.