Tag Archives: insiders

Shorten Stupid, Swanning Around On Debt

15 Aug

Not only is our Treasurer unquestionably The World’s Stupidest Treasurer (“Wayne: OOPS! I Did It Again”).

The Assistant Treasurer wants his title.

From ABC Insiders (note carefully the emphasis added):

BARRIE CASSIDY: Now what’s happened to the budget bottom line? This promise to reach a surplus by 2012-13, will that now happen?

BILL SHORTEN: Well as our Prime Minister said, getting to a budget surplus is our objective.

And just referring to your earlier questions about the stock market and Australia and how we’re going, when you look at our public sector finance position in Australia compared to the Americans, the Europeans, we are doing very well.

Our net public sector debt at the moment is 7.2 per cent. Or to put it in plain English, if you as the Australian economy were bringing in $100,000 our net public sector debt is $7,000. Our interest payments are 0.4 per cent or $400 off a base of $100,000.

Oh dear.

This is not only the Assistant Treasurer.

This is also the Minister for Financial Services and Superannuation ( “Stealing Our Super – I DARE You To Ignore This Now” ).

As we saw with the RBA Governor, Shorten is either a liar, or a blithering idiot.

Or more likely both.

His “plain english” analogy is manifestly false and stupid.

And whether by accident or intent, it is inexcusably deceptive.

He is of course, obliquely referring to the preferred “standard” measure of government debt – “as a percentage of GDP”.

Regular readers (and Twitter followers in particular) will know my strongly-held views on the politically-convenient falsity of this measure.  I maintain that it is a completely invalid (and deliberately deceptive) measure by which to assess government debt levels.

“GDP” stands for “Gross Domestic Product“, and is supposed to be a measure of the market value of all real “production” of the economy.

The reality is far different.

Rather than actually measuring the actual market value of what is actually produced and actually sold (that is, real products/services that are of real value), the methodologies used for measuring GDP are, to be blunt, fudges. Invented by ivory-towered #JAFA‘s, disconnected from reality, in high-minded belief that they are “approximating” the real world. In the end, what we find is that the “GDP” (and thus, the economic “growth”) figures that we are given, are really nothing more than the grand sum total value of transactions (ie, buying and selling) in the economy.

So, to use a simplistic example – Person A pays Person B $5 for something, and Person B uses that $5 to pay Person C for something; the “GDP” measure considers that to be $10 worth of “GDP”. Note well: nothing new has necessarily been “produced” here. The same $5 has simply churned from one person, to another, to another, in exchange for goods or services. But for the purposes of the false GDP measuring stick, that series of transactions is considered $10 worth of “GDP”.

[Importantly, if the bankstering system creates 5% more new money (credit, ie, debt) out of thin air this year, thus devaluing the buying power of the money already in the system, and as a result, next year the same transaction costs $5.25 from Person A to Person B, and $5.25 from Person B to Person C, then the total ($10.50, versus $10 last year) would be deemed notional “economic growth” of 5%. When in reality, there may still be no new real wealth “produced” in that example … just a churn of more (devalued) money.]

Now most of us would think it quite stupid for a household or a business to measure its debt against the grand sum total of all its buying + selling (or spending + earning).  Instead, for budget purposes we measure our debt versus our income (or for Household Balance Sheet purposes, against our liquid, convertible-to-cash assets)

Likewise, when it comes to the national Budget, the Government should not be permitted to blur over and hide the truth of the issue by talking about the debts it accrues (for the taxpayer to pay back) as a percentage of all the buying and selling in the economy. Instead, it should be required to discuss the debts it accrues, as a measure of government debt versus government income.

Let’s consider a real world example.

In the 2009-10 Final Budget Outcome, we see the following:

2009-10 Final Budget Outcome, Part 1, Table 1

As you can see, the government’s income (Revenue) was $292.8 Billion.

It claims this was 22.5% of GDP. Meaning that the GDP calculation for 2009-10 must have been 292.8 / 0.225 = $1.3 Trillion.

Now, to use Shorten’s false, misleading and deceptive analogy, he would have us all think that the government was “bringing in” $1.3 Trillion.

And so, he would have you focus on the totally irrelevant fact that the government’s net public debt was “only” 7.2% of that $1.3 Trillion churned in the economy (or approx. $94 Billion @ June 2010).

Convenient bit of perception management.

Because it doesn’t sound like very much, when stated that way.

But … what if you instead compare the actual public debt number, not to the $1.3 Trillion in transactions churned in the economy, but to actual government income?

Using the same 2009-10 example, $94 billion in net debt, versus $292.8 billion in total income (ie, 32%) sounds a lot worse, doesn’t it.

And most importantly of all, it is an honest way of expressing debt that is far easier for average voters to understand.

When you look at it this way, what you see is a very different picture of government debt.

Presented in these terms, it is like a householder who earns only $29,280 in income, with a net* debt of $9,400.

Once you pay for all your costs of living out of your $29,280 in income, that $9,400 debt is not such a “low” figure after all. Servicing the interest and paying off the debt principal is not so easy, as the deceitful politician would have you imagine.

Finally, did you notice the last sentence that Shorten uttered?

Our interest payments are 0.4 per cent or $400 off a base of $100,000.

By now I hope that you can see how false, misleading and deceptive that statement is.

You now know that his analogy is completely false – that the government is not “bringing in” $100,000 with which to pay interest on the debt.  And neither is the economy – because that “$100,000” is simply the grand sum total of all the buying and selling in the economy.  It is NOT a measure of income, or of available cash!

If Mr Shorten were honest – or, had a clue what he was talking about – then what he should have said is this –

“Our interest payments are 3.74 per cent or $13,095 off a base of (an estimated) $349,961 in Income for 2011-12 alone”.

Source: 2011-12 Budget, Paper No. 1, Statement 9, Table 1

Swanning around with false, misleading, and deceptive statements about our economy typifies the gross dishonesty of our political “class”.

It’s not good enough.

I suggest that it is high time for fundamental changes to our system of governance.

A good starting point would be for us all to fully wake up to the reality of the kind of self-serving, short-sighted, dishonest and immature scumbags who populate our Parliament, and demand a change to the rules concerning eligibility for running for public office.

I vote for a Parliament of amateurs – regular people – with no one under retirement age allowed to stand for election –

No More Mañana Or Bananas In A Parliament Of Nanna’s

* “Net” debt” is another misleading and deceptive way in which all our politicians (except Barnaby Joyce) prefer to describe debt.

Referring to public debt in “net” terms (rather than “gross”) is another example of politicians wilfully ignoring reality, in order to gild the lily and make their own piss-poor performance seem better than it is.

“Net” debt is (simply stated) the total of debt actually owed by the government (ie, Gross debt), minus the value of “financial assets” held by the government. Australia uses the OECD definition (emphasis added):

Government net debt comprise all financial liabilities minus all financial assets of general government. Financial assets of the general government sector have a corresponding liability existing outside that sector. The exceptions are monetary gold and Special Drawing Rights, financial assets for which there is no counterpart liability.

Monetary gold and Special Drawing Rights may be included as assets of the general government sector or they may be classified as assets of the central bank, at the discretion of the government.

Source Publication:
The OECD Economic Outlook: Sources and Methods.

It’s important to note the bolded phrase in that definition.

Because in choosing to use “Net” debt as the preferred figure to talk about in public, the government (no matter the Party) is wilfully deceiving themselves, and the community.

Gross debt is what the government owes.

Net debt is gross debt, minus the government’s financial assets. And with the exception of gold and SDR’s, those “assets” are someone else’s liability.

To use the politically-convenient “net” debt figure (because it is lower thus sounds better than Gross debt), a politician must count their chickens before they’ve hatched. That is, by implication they are assuming that the counterparty who is liable for the “assets” they are counting on, can and will actually make good on their liability.

The GFC which never went away is a perfect example of why you can never bank on counterparties.

The only honest way to look at debt, is the simplest way.

What you owe to others, is what you owe. You cannot bank on what others owe to you before you get it, as a false justification for claiming that your own debt burden is less than it actually is.

End of story.

Australia, You Are All Idiots: Only Labor Knows What Is Best For Your Money

9 Aug

If ever a TV panel discussion typified the galactic disconnect between the collective wisdom of the Australian public, and the infinite stupidity of our self-proclaimed (pseudo)intellectual betters, then Sunday’s ABC Insiders program demonstrated it to the full.

The topic?  The government’s planned increase in the compulsory superannuation rate from 9% to 12% –

Is superannuation the wrong use of wages?

Watch the segment, and note carefully the man taking up the baton for the collective wisdom of Neville and Sue Ordinary Voter.

Mr Brian Toohey, of the Australian Financial Review.

An old bloke.

A gentle bloke.

A sometimes stammering bloke.

A thoughtful, observant bloke.

A bloke who wrote an AFR column titled “Big sister knows what’s best for you” on just this topic back in February (summary via Media Monitors):

Proposed increases to compulsory superannuation contributions are unwarranted and under-scrutinised. The Gillard government does not trust citizens to allocate their own resources responsibly. Federal Treasurer Wayne Swan spent the revenue from the failed Resources Super Profits Tax, now whittled down into the minerals resource rent tax, without considering future colossal expenditure on defence, health care, disability services and general maintenance of a rapidly aging population. Instead, these funds were allocated to the aforementioned super contribution increase and company tax cuts. Bill Shorten, Superannuation Minister, even told the Australian Workers Union conference last week that he would push for a bigger increase than had been initially announced. Enforced superannuation itself belittles the everyday, responsible citizen, and does not help ‘working families’ in the slightest.

Brian, you are my newest hero.

Note carefully too, those disputing most forcefully with Mr Toohey on the Insiders program.

The program host. A long time employee of the “Left”.

And a younger bloke. The Political Editor for a major city newspaper, and the most unashamed espouser of the arrogant “Government knows best, ordinary people are idiots” line of unreasoning.

What we have here then, is a 2-pack of Canberra press dogs, rounding on a wise old bloke.

And why?

Because he dares to declare that Neville and Sue Ordinary Voter are smart enough to know and do what’s best for themselves, with their own money.

Quelle horror!

Isn’t it interesting though.

Even when the facts prove they’ve been utterly wrong, these immaculately-clipped Canberra journo’s poodles will always return to their vomit.

Rather like their mates, the mainstream Australian economists.

Those same drooling imbeciles who all utterly failed to foresee GFC1 coming:

Senator Barnaby Joyce was laughed out of his opposition finance portfolio for his forecasts that included saying more than 18 months ago that the US could default on its debts.

It’s not so funny anymore, as veteran journalist Michelle Grattan said last week on Twitter.

“US struggling through its crisis – remember how we laughed at Barnaby when he raised the spectre of US default? Oops.”

Joyce certainly remembers.

“I got absolutely smashed by (Kevin) Rudd and (Lindsay) Tanner and Swan,” he said.

“To be honest, my own side got scared, and said ‘we think you’ve gone out on a limb’.

“There was a whole range of economists who all lined up to say how outrageous I was. Now the media is going back to those economists and asking how we got into this situation.

“I was listening to one last night, I was almost about to drive off the road it was pissing me off so much. I remember exactly what this person was saying on how wrong I was.”

Yes, dear reader.

Dogs returning to their vomit.

Seriously … Why Should Any Sane Person Trust Economists After The GFC?  You’d have to be scattered like a mad woman’s sh*t (h/t to reader Medusa Knows for that colourful line).

I found the cognitive dissonance of Mr Kenny particularly telling.

All the panellists recognised that (quite unlike our spendthrift government) ordinary Aussies have been responding to GFC1 by doing the sensible, practical, wise thing.

Saving money.

And yet, Mr Kenny still arrogantly insisted on spouting off with a high-minded stereotype – that if allowed to keep more of their own money, ordinary voters would spend it all on flat screen TV’s.

Whereas Mr Toohey sagely pointed out the truth:

You get better economic outcomes if you let people make their own mind up how to allocate their income … it’s just a matter of standard economic theory which happens to be correct in this case

Indeed.

And you get even better economic outcomes if you basically ignore everything the mainstream economists say.

Or best of all, if you adopt the opposite view to the “mainstream”, as your default position. On everything.

Adopting that contrarian attitude is at least partly how your humble blogger was (like many other ordinary Aussies) able to see the writing on the wall in America, when none of our mainstream economists could.

And contrary to strident “professional” “expert” advice, pull all his super out of the global sharemarkets in May 2007:

As we all know, the fit has hit the shan in global sharemarkets once again.

And what we have here, ladies and gentlemen, is a government wanting to force employers to somehow find another 3% (or more, if Shorten has his way) on top of workers’ salaries … to pour into the sharemarkets!?!

(Or, into something else?)

Do you really imagine that, in the present global economic environment, this would not lead directly to job cuts?

Do you really imagine that it would not lead to even more money going up down in red LED’s … with parasitical, useless, butt-lazy, white-collared, producers-of-nothing professional “fund managers” waltzing away with their percentage cut of your vapourised superannuation money, regardless of the outcome for you?

The Insiders panel discussion this Sunday typified one of the biggest problems in this country.

The arrogance of those who think they are better, and know better, than We The People.

Our lamestream ivory-towered Canberra lapdogs simply cannot bear to conceive of the possibility that (shudder!) ordinary voters might be the best people to decide what to do with their own money.

Hockey Supports Joyce

8 Mar

From The Australian:

Opposition Treasury spokesman Joe Hockey has been forced to defend fellow frontbencher Barnaby Joyce amid speculation the Nationals Senate leader will be dumped from the finance portfolio in the lead-up to the budget.

Love the biased opening statement – ‘forced to defend’.

I watched the interview on ABC1’s ‘Insiders’. Mr Hockey simply answered a question, posed near the end of an interview focussing on multiple other issues. On that basis, you could say that a politician is ‘forced to defend’ something every time they are asked a question!

The bush accountant asked for the finance position when Tony Abbott offered him a frontbench job after the former took the Liberal leadership in December.

More deliberate anti-Barnaby bias. ‘The bush accountant’. Right. A deliberate attempt to imply that, somehow, Mr Joyce’s accountancy credentials are inferior to those of a city accountant.  The University of New England, where Mr Joyce attained his Commerce degree, and CPA Australia, of which Mr Joyce is a Fellow, might just disagree with the implication that their standards vary depending on the locale of the applicant!

But the Joyce homespun style has been ridiculed by the government, and influential Liberals fear he has failed to make a mark with voters as the opposition tries to focus on economic management before the pre-election budget.

Oh really? These ‘influential Liberals’ – if existing, rather than just another figment of the msm’s anti-Barnaby imagination – must not yet have noticed this blog. Or the frequent pro-Barnaby comments on blogs and forums all over the internet, and in Letters to the Editor sections of major newspapers.

Mr Hockey insisted Senator Joyce would remain the opposition’s finance spokesman, describing him as a “very qualified, very focused individual”, and dismissing criticisms of his style.

A spokesman for Nationals leader Warren Truss praised Senator Joyce for “a brilliant job“.

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