Could anything be more contradictory?
Assistant Treasurer, Josh Frydenberg has just
returned from the World Economic Forum meeting in Davos with some pearls
of wisdom that have come from a suppository of wisdom that would put
Tony Abbott’s suppository of wisdom to shame, i.e., the Troika,
otherwise known as the EU Commission, the International Monetary Fund
and the European Central Bank.
They say a little knowledge can be a dangerous thing. Josh Frydenberg
came back with a little knowledge. He says that expectations of global
growth as expressed to him by those he met at Davos are “less sanguine”
than he had been expecting. He could have discovered that simply by
reading Bill Mitchell’s blog, or maybe even by sticking his finger up in
the cold, Swiss night air.
Ms Christine Lagarde, IMF (Photo: todayonline.com)
The lesson Frydenberg should have brought back with him is that the
decision by the Troika to inject One Trillion Euros into the banks of
its member states, after 6 years of austerity, is that austerity hasn’t
worked; that austerity stifles growth.
What Frydenberg has failed to ‘discover’ at Davos is that the IMF and
the ECB have consistently bungled management of the Eurozone economic
recovery right from the beginning by demanding impossible targets from
those members who have debt levels that will never be repaid.
They expected Greece, Spain, Portugal and Ireland to work miracles while Germany produced worthless surpluses.
The options for the new Greek government are to ignore current
austerity deals and start spending its way back to growth, strike a new
deal with the EU Commission, or leave the Eurozone, default on all debts
and start again. Either way, Greece is the winner.
The decision by the Troika to provide billions of Euros each month to
the banks of its member states over the next year is an admission of
failure. The banks, in return, will give them bonds with a note attached
reading: Thank you for the money. Here are some bonds which have an
asset value of zero. If things go as expected, we will buy these
worthless bonds back from you some time in the future, but don’t hold
your breath.
But, back to Frydenberg.
In the same interview he said, “It means we need to keep making
the case publicly as to why we’re doing what we’re doing, and that is,
trying to fix Labor’s budgetary mess that we inherited,” he said. “If we don’t bridge that structural deficit we’re only going defer the pain.”
It’s funny how any LNP member thinks that anything they say can be
justified so long as they include a swipe at Labor’s economic
management.
But it was his subsequent comments that cause a chill to ripple through the blood. “It’sreinforced in my mind why we need to successfully tighten our belts in
Australia, because we just don’t know when the next GFC will hit,” Mr Frydenberg said. Good grief, could anything be further from the reality.
He’s just returned from a meeting where he had been told that one
trillion dollars is going to be pumped into the Eurozone economy to get
it moving after six years of austerity, and he’s telling us that we
should continue our austerity program. Could anything be more
contradictory?
I can just see Bill Mitchell banging his head on his desk as I write.
How many roads must a man walk down before he can see that the
present ‘belt tightening’ of the Australian economy, let alone any
further plans, will most likely hasten a recession here that will
further reduce revenues and increase the deficit, but with no
compensating, value-adding improvement in our GDP?
If Frydenberg continues to look backwards at what he thinks is
‘Labor’s budgetary mess’ he will never grasp the root of the problem. If
the most recent inflation data tells us anything, it is that our economy is retracting and needs stimulus.
Ifhe thinks that structural deficits can be ‘bridged’ he has an odd grasp
of economics. Structural deficits are re-constructed, not bridged. And
therein lies the problem with neo-liberal thinkers. They get themselves
caught up using words they don’t really understand.
They are like robots acting on pre-fed data that only serves the interests of their programmers.
No comments:
Post a Comment