I highly regard your sincere responses. You are not trying to trick anyone into believing in any rubbish. That’s why I want to convince you that there is no easy way out and any method should be considered even if it smells unpalatable.

I just have a simple question – do you think that we can grow productive economy in this country with the current current wages/salaries and current exchage rates with currences like RMB (or even Polish Zloty PLN or Czech Koruna CZK) and without imposing tariffs?

I have not invented the problem which is the GFC and globalisation.

Do you agree that either we will have a purely colonial economy (mining and agriculture) or we have to adjust our trade balance?

Do you believe in post-industrial service-based economy – banking, investment, reas estate? I don’t. I believe we must have a diversified economy not making everything (since we can trade) but manufacturing at least some hi-tech goods.

How can we adjust our trade balance if wages here are 2-3 times higher than in Poland where making cars actually makes sense? (and they are made there).

Do you think that we are 2-3 times more efficient here?

So what is better? To forget about manufacturing / making anything in Australia forever (including IT, energy-efficient cars and high-tech) or just become sober again, stop misleading ourselves that we can live forever on borrowed money/time and looting our natural resources? Even if we don’t like idea this is in my opinion the reality. We may hate it but the reality will come and bite us.

So what is your proposal? Lower the wages or let the exchange rate fall?

Or am I wrong and there is another possibility.

I would really, really like to be wrong. I will lose as well on the adjustment. I haven’t invented this GFC.

Suffice to say I cannot agree with what you advocate;
- confiscation of private wealth is acceptable
- structural devaluation of the AUD is preferred
- massive deficit spending and QE to fund short term political opportunity is good financial planning.
- it is healthy and morally acceptable for citizens to choose to be a burden on taxpayers via Govt handouts and largesse

All are repugnant options IMO. And thankfully enough other Aussies who care about our future think so as well.

Yes, I can hedge and do, but unfortunately many Australians don’t have that expertise available to them.

Your disclaimer (which I had already surmised) misses the real point. Inflation/deflation has nothing to do with impacting your “limited wealth” obviously. It is your proposals on taxation and Governance on the other hand that seek to materially improve that position primarily through confiscation of citizens’ wealth. I know it’s an old fashioned notion , but I still believe it is right and only fair that one has to first earn your income and then save/sacrifice over time in order to grow wealth. Rather than gain it “now” by confiscation through inter-generational theft and sticking a tin cup out to the Govt.

My disclaimer- No uni degree (as I’m sure is evident) , a trade began mid teens , Management experience- well traveled- worked full time for almost 4 decades- saved for retirement.

A new discussion point. That’s fun!

Went to the Hunter Valley for a weekend away and a wedding. Beautiful place with lots of productive farming land. Interesting to see how much the wineries must have borrowed in the last 10 years. The amount of money spent on gigantic, showy buildings and fresh plantings is phenomenal. Would love to see some numbers on gearing levels in the wine industry. My guess is that debt levels are through the roof.

In terms of the MSM. I like that term, because it implies that the views are mainstream. I am very interested in what the “herd” thinks and I see that regularly reflected in the media. I am not shocked by the MSM reporting. Nor do I believe that the MSM leads debate. Mostly the MSM follows the herd.

I agree there is vested interest in the MSM. So what? you’ll never remove that. I just live with it. The knowledge that vested interest exists also helps me to be more careful about who I believe and for what reasons I need to be sceptical.

Steve Keen has vested interest. We all do. We have to earn a buck to feed our families. That also is a given. Steve should be able to earn a buck from the media. He has spent a lot of time developing a theory that has value. Also Steve is good at articulating that theory. People now want to hear Steve’s theories and they should pay to get it. I hope Steve is being paid for his time. The public will benefit and so will Steve. Being in business is not evil! We all just need to be careful who to believe.

In case you didn’t catch Paul Krugman’s follow up Minsky post, here, he goes so far as to say “…I really am gravitating toward a Keynes-Fisher-Minsky view of macro…”

I agree with your observations. However I think that only foreign-denominated debt is what really matters:

http://www.aph.gov.au/library/pubs/rp/2008-09/09rp30.htm

If we look at table 5 I think we should only be seriously concerned about the currencies which can potentially rise. USD and GBP are potentially much weaker than AUD. We cannot print USD but this will be done for us for free. We will still have repay this debt but this should be doable once our trade balance is fixed. You know (and hate the idea) that we can and probably will have to print AUD to repay the debt in AUD. This may happen after the imminent collapse of USD – tomorrow or in 5 yeras time. Somebody has to be the first.

Our situation is pretty much similar to Argentina in 1999. They got away easily form a much deeper trouble. The currency had to be devalued and it was it.

Oh by the way they got rid of neoliberals in power and IMF. And clamped down on real pests – multinational corporations.

If you are concerned about the long-term fate of your investment – there are multiple ways you can hedge. Since you are aware of the problem now and well educated I am sure you have already undertaken correct hedging steps. I sincerely hope that you as MACCA will personally not lose much.

Why should we be so concerned about a certain group of mum-and-dad investors who will lose for sure if the likely scenario you are talking about unfolds? The same group of people benefited from the current bubble for example by buying real estate or participating in super funds – was it fair? “Easy come easy go”. Believe me or not but for some other groups of society like Generation X , workers or fresh migrants it is not so “easy come”.

What worries me is not the wealth destruction but the destruction of real productive economy. It started with the bubble and globalisation but depression can make it even more severe. This is what I really mean by destruction of our future.

If this destruction continues then we may be trapped with the foreign debt for decades.

The only way to restore the trade and capital flow balance is by getting rid of false wealth created by borrowing and leveraging – you would prefer by stopping spending now and deflation but I would still consider inflation because there is an additional price tag associated with the deflation.

Anyway what has to happen will happen regardless whether we like it or not.

Disclaimer: my very limited personal wealth will not be affected much whether this is a deflation of inflation. I don’t have much to lose. So my opinions are not affected by my position.

Could it be that recent open discussion of sovereign downgrades and the great tide of incoming Govt debt issuances is leading the bond markets to believe that monetization is increasingly the only ultimate option left? (unless of course profligate Govts can reign in their absurd levels of spending).

Massive deficit spending supported by monetization is a road to nowhere. In this environment bond markets set the terms, not economic theorizing. Perhaps a standard Maths lesson on the powers of compounded interest is in order for those who believe in the healing powers of QE. I could not have picked a better title for this article;

“The price of panic”
“Simon Johnson, described this as the “third stage” of the credit crisis: the first was last year’s financial implosion, the second was the economic crunch that followed and the third is a government debt crisis.”

“The Australian Office of Financial Management is now selling $1.5 billion a week in bonds to finance the Rudd government’s massive blow-out in the deficit and the yields are steadily rising – so far so good. The yield spread between the US and Australia is holding.”

“But by raising yields during a massive contraction in global GDP, the bond market is telling us there is trouble ahead – that the extra government debt may not all be able to be financed.”
http://www.businessspectator.com.au/bs.nsf/Article/The-price-of-panic-pd20090525-SCSSG?OpenDocument&src=sph

And if Australia hopes to avoid a disaster funding it’s 30% of GDP in debt, locked in with the Govt’s latest Budget, we had better hope that commodities return to boom prices- or else;

“We’re sunk if commodity prices fall”
http://www.theaustralian.news.com.au/story/0,25197,25531187-5015025,00.html

Stephen Mayne – tell us about your losses!

http://business.smh.com.au/business/how-to-make-75000-in-three-months-20090519-bdfd.html

I know we all get quite disillusioned towards the media at times, but don’t forget that Steve says he is less cynical because of his previous work history with quite a lot of experience in ‘media’. And as he says, ‘I also have the “Mainstream Media” to thank for the fact that my iconoclastic views on the GFC have achieved such widespread coverage.’

I like his analogy to journalists being like people on a production line – involving ‘reporting opinions on finance and economics uttered by representatives of other companies, and also individuals who have become “newsmakers” in their own right.’ As he says many journalists are generalists and just reporting a story, and may not agree with what the editor wants them to write, but like an assembly line worker they can’t stop the relentless production line.

Steve, I hope I haven’t mangled what you meant – this is what I understand you’re getting at!

As for trying to convince your friends, I and others on this site have said before that there are a lot of people who like to live with their heads in the sand, and isn’t there some old saying that it takes a long time to turn a big ship around? Just reading what I’ve typed I’ve realised that I now have friends say things like ‘I saw that Steve Keen you’ve been talking about on TV the other day’ etc… So I think word is getting around!

I’m hoping that when ‘The Pool Room’ is up and running we’ll be able to find a good balance of the Gems and Brickbats, with hopefully more Gems as more people in the media ‘get it’.

And tommyt you might yet get your seat on NASA’s next Mars probe!