The state of the economy at the street level

[Jack Aubrey]

A view from an inner-city, leftist:

While I do understand the idea that recessions can be "good" for an economy, I think they are universally bad for society. A two or three year recession can destroy the lives of hundreds of thousands of people and put young people, in particular, behind the eight ball for a decade or more. At a time when many people are already in precarious employment, a genuine recession would be likely to create a permanent class of "working poor" - as in the USA.

I know that many people now have a negative reaction to the whole idea of "the welfare state" but it has generally worked to create stable economies and societies where it has been applied since WW2. The social benefits are fairly clear - including lower real crime rates, an educated, generally healthy workforce and lower levels of inequality within and between generations. Yes, we can grumble about "free riders" and people "exploiting the system" but the actual costs of putting up with these things are really pretty low compared to the benefits we all receive. Personally, I think we are too judgemental of other people's choices and situations and we tend to react too negatively to the individual examples of "young dole bludgers" and " drug addicted single mothers" that are fed to us by a media that makes its money out of our outrage. I have never seen a situation where the moral panic over some class of people "getting away" with receiving welfare has been justified by the actual stats - the vast majority of welfare recipients are people who simply find themselves in a bad situation and would rather not be receiving assistance at all.

I know many people who, at one time in their lives, have fallen into one of the categories of "unworthiness". Either they or their kids have mostly gone on to become "good", productive citizens. I doubt that would have happened if they had been "thrown off" welfare when they needed it.

There's both a moral/ethical and economic basis for supporting a "welfare state" that goes beyond discussion of the worthiness of the individuals receiving any particular form welfare. I'd personally go further and say that the fact that we feel it necessary to differentiate types of welfare at all is questionable. A needs-based system (taking into account both income and capital), simply administered, with minimal coercion and enforcement, would IMO produce similar results at around the same economic cost. Any "sticks" we feel necessary to move people off welfare should be balanced by positive support such as financial counselling, retraining and helping the socially isolated reconnect with their communities.

It has been said many time before but taxes are the price we pay for a civilised society.

Thus ends the sermon.

 

[Value Collector]

I borrow $1 and pay interest only, I then get a higher paying job which allows me to borrow another $1 and repeat. Total debt has grown with no circulation and the value of the debt plus the interest paid stays with a person who has more money they will spend in a lifetime

your claim was that super rich people could just build up dollars in their bank accounts and not circulate them.

If you were able to go to the bank and borrow an additional dollar, that means that their money isn’t “locked up”, it is available to be lent out, and hence it is “circulating”.

 

[SirRumpole]

It has been said many time before but taxes are the price we pay for a civilised society.

I believe that the way automation and intelligent machines are developing we will have to start looking at a "universal basic income" at some point in time.

If people keep getting replaced by machines then we will have to start taxing machines and software used to build AI and give this money back to people so that they can then spend it on the products of machines.

Some may call a UBI "welfare" , but I don't think it is, it's simply redistributing money from the producers to the consumers. If we don't do this then I foresee economic collapse where goods are sitting around on docks or warehouses because people can't afford to buy them.

People who want more money will obviously go into professions where original thought is needed (like programming the machines) rather than where processes can be automated.

 

[Value Collector]

I borrow $1 and pay interest only, I then get a higher paying job which allows me to borrow another $1 and repeat. Total debt has grown with no circulation and the value of the debt plus the interest paid stays with a person who has more money they will spend in a lifetime

your claim was that super rich people could just build up dollars in their bank accounts and not circulate them.

If you were able to go to the bank and borrow an additional dollar, that means that their money isn’t “locked up”, it is available to be lent out, and hence it is “circulating”.

——————-

Also, your last point about the rich lender having more to spend when you pay interest is exactly my point.

you owe a dollar $1, he has a $1 asset.

you pay interest, he earns interest.

the net effect on the economy is $0.

my original point what just stating that when people see growing global debts They seem to think the world is getting poorer, but it’s not like That, all it means is one group owes another group future labour.

 

[Value Collector]

I believe that the way automation and intelligent machines are developing we will have to start looking at a "universal basic income" at some point in time.

If people keep getting replaced by machines then we will have to start taxing machines and software used to build AI and give this money back to people so that they can then spend it on the products of machines.

Some may call a UBI "welfare" , but I don't think it is, it's simply redistributing money from the producers to the consumers. If we don't do this then I foresee economic collapse where goods are sitting around on docks or warehouses because people can't afford to buy them.

People who want more money will obviously go into professions where original thought is needed (like programming the machines) rather than where processes can be automated.

I agree with you That automation will eventually create the need for universal income.

but I don’t see the need for a “machine tax”, the “machines” will still be owned by companies and individuals and you would simply just have to continue charging company tax, personal tax as we do. (Along with mining royalties, gst etc)

Currently about 90% of the proceeds any company’s out put gets diverted to pay Employee wages and taxes.

only about 10% of a companies output goes back to the owners.

As the need for employees drop, either prices of the goods sold will drop with it (which is good for society) or profits will rise (creating more taxable income), or a combination of both.

 

[Value Collector]

Still don't agree.

When the options are - go into debt - or blow up the economy - there is no choice.

Again you can’t have it both ways,

If you think debt saved us from the economy blowing up, then the current interest payments represent a good investment.

If you think the debt was a bad idea, and didn’t have a net benefit, then it was a bad choice.

 

[SirRumpole]

As the need for employees drop, either prices of the goods sold will drop with it (which is good for society) or profits will rise (creating more taxable income), or a combination of both.

We can argue about the mechanisms, if your way provides sufficient revenue for a UBI well and good, if not something else will have to be done.

eg if the prices of goods drop then GST revenue will decrease and maybe increased take from companies won't compensate. There are lots of swings and roundabouts in the tax system.

 

[Jack Aubrey]

I believe that the way automation and intelligent machines are developing we will have to start looking at a "universal basic income" at some point in time.

If people keep getting replaced by machines then we will have to start taxing machines and software used to build AI and give this money back to people so that they can then spend it on the products of machines.

Some may call a UBI "welfare" , but I don't think it is, it's simply redistributing money from the producers to the consumers. If we don't do this then I foresee economic collapse where goods are sitting around on docks or warehouses because people can't afford to buy them.

People who want more money will obviously go into professions where original thought is needed (like programming the machines) rather than where processes can be automated.

The UBI idea is probably the most interesting economic debate going at the moment. I find it particularly fascinating that it is often Billionaires like Bezos and Musk who raise it while both the traditional left and right both find reasons to oppose it. Richard Nixon's US administration was actually working towards something like a UBI ("negative income tax") in the 1970s before he had the mishap with tape recordings.

I think countries like Australia and the US will have enormous difficulty even discussing it as it is so easily characterised as welfare and we have demonised welfare.

 

[PZ99]

Again you can’t have it both ways,

If you think debt saved us from the economy blowing up, then the current interest payments represent a good investment.

If you think the debt was a bad idea, and didn’t have a net benefit, then it was a bad choice.

I don't think either of those things.

I think some debt was unavoidable regardless of policy so therefore choice was removed.

I also think subsequent polices + carry over structural deficits have made it worse which goes to my original point as to why debt obligations are harder to meet than ten years ago - because the debt is higher.

 

[Value Collector]

The UBI idea is probably the most interesting economic debate going at the moment. I find it particularly fascinating that it is often Billionaires like Bezos and Musk who raise it while both the traditional left and right both find reasons to oppose it. Richard Nixon's US administration was actually working towards something like a UBI ("negative income tax") in the 1970s before he had the mishap with tape recordings.

I think countries like Australia and the US will have enormous difficulty even discussing it as it is so easily characterised as welfare and we have demonised welfare.

I think we are basically half way there in australia, with the dole and pensions.

I think it needs to be phased in very slowly, only raised up to a comfortable living wage slowly once it truly becomes impossible to find work, and that is still a fair way off.

 

[tech/a]

I think we are basically half way there in australia, with the dole and pensions.

I think it needs to be phased in very slowly, only raised up to a comfortable living wage slowly once it truly becomes impossible to find work, and that is still a fair way off.

The state will find you work---comrade!

 

[Value Collector]

The state will find you work---comrade!

hahaha.

bulldozers are banned, the are the enemy of the common man, melt them down and forge 1 Million shovels, and we will have full employment.

 

[rederob]

The state will find you work---comrade!

But there are no jobs.
Then make it your job to find work.
Who will pay me?
The state.
But there are no jobs.
Are you being paid?

 

[fiftyeight]

my original point what just stating that when people see growing global debts They seem to think the world is getting poorer, but it’s not like That, all it means is one group owes another group future labour.

I am just thinking out aloud here, I have not spent a huge amount thinking/reading about this.

An increasing number of people's future labour (time) is owed to a few very.

 

[qldfrog]

Fed government is pushing 4billions to qld for infrastructure work, all paid on debt of course
@SirRumpole is now a big fan of Morrison and shrieking of joy like a teenager at an Ariana concert

 

[Smurf1976]

The laughable bit about claims of getting the budget in balance recently have had nothing to to do with good management and everything to do with our resource base generating wealth, despite no value adding happening in Oz.

I've always thought it somewhat bizarre that governments seem so proud about their ability to get their own budget into anything other than a truly disastrous position and yet claim to be "managing" the entire economy.

If someone's going to actually manage the economy, most of which is in private hands, then it ought to be beyond question that their own house is in order.

A step further back from that, I've always found the argument about governments being no good at running relatively simple businesses to be a strange one. If you can't employ the right people and leave them to run the water or power supply well then pretty clearly you're going to be way out of your depth trying to run an entire government. The claim amounts to someone applying for a job as a general manager and arguing that they'd be a good GM on the basis that they were a terrible worker and an even worse supervisor. A strange logic indeed.

 

[Value Collector]

An increasing number of people's future labour (time) is owed to a few very.

if they choose to set their finances up in a way that they are living off debt then yes they will owe future labour to some one else, I don't think there is anything wrong with that.

when you say its owed to few, I think thats a bit wrong, I mean if you owe $15,000 on a CBA car loan and your Grandmother is sitting a $15,000 CBA Term deposit, technically you just owe your grandmother $15,000 and the bank is acting as a middle man managing the loan and taking the risk and being paid to do so.

Loans are just funded by everyday Aussies indirectly through deposits, So you might look at all this consumer debt as being funded by Billion dollar companies with Towers in the city, But in reality its the your neighbours in the suburbs that are funding your loans, especially as Peer to Peer lending takes off.

 

[satanoperca]

Loans are just funded by everyday Aussies indirectly through deposits

Really?

 

[Value Collector]

Really?

Mostly yeah, and bonds and some other securities.

 

[satanoperca]

Really.
"Banks obtain funding from four main sources: retail deposits, wholesale deposits, wholesale debt and equity. Excluding equity, around one-third of major banks’ funding is from retail deposits. These are sourced from households and small- to medium-sized businesses. Another third of non-equity funding is from wholesale deposits, such as those from large corporations, pension funds and the government. Short- and long-term wholesale debt account for most of the remaining third of funding."

"The share of funding sourced by the major banks from wholesale debt markets was little changed over 2018. Within this, the major banks shifted their funding slightly, moving away from short-term debt toward long-term debt (Graph 4). A large share of wholesale debt funding for the major banks is sourced from offshore markets, mainly in US dollars."

Just collecting some value.