Stimulus Packages

A wag interviewed on TV the other day about economic woes expressed delight at being stimulated by the Prime Minister's 'package'. You can't take a breath without seeing some sort of economic stimulus being mentioned, except in those parts of the globe where national banruptcy has already made that last-course action impossible.

Nice to see the schools get a big chunk of the money, after more than a decade of neo-illiberal fantasy belief that if you pumped enough public money into private schools , the 70% of all students in public schools would jump ship into the magically-appearing new shiny privates. They liked using the tax dollar to prop up private businesses like health as well, to the tune of billions a year. Private enterprise is so efficient it can't survive without lashings of hard-earned taxes, just as doctors, firm believers in the free market, suck the public teat so magnificently.

Unfortunately none of the packages will work, I'll put (your) money on it. The same idiot economic philosophy responsible for this mess, and which didn't see it coming even when it had us parked on the level crossing with the handbrake on, is now instant-wise (just add water) and knows the way out. Please. The current government means well, and the package will have some effect, but because all of the major players around the world use the same idiot philosophy, all of them ignore the elephant in the rooom - debt.

Some simple figures show the problem. In the US private debt is running at around 42 trillion dollars. With the latest stimulus package there the government intervention, described variously as enormous and socialism run amok, is now less than 2 trillion. Like bashing a blue whale with a toothpick. There and here the neo-con loons are seething with indignation at this great market intervention. Labor always leaves us in debt, all the usual reds under the bed rubbish. It wouldn't leave us in debt if Johnny and Pete, the dynamic fiscal 'does my boom look big in this?' duo, hadn't vomited largesse to the tune of $500 billion in the past decade, each election time, like the taxing and spending capitalist true believers they were. Imagine if they'd left even 10% of that behind , we'd be able to afford this package without even bothering the red inkwell.

Why did loony capitalism not see any of this coming, and why now will it not admit that had even the slightest fault in bringing it about? It all comes back to their guiding philosophy, which over the years was distilled even further into a set of portable morality tales that don't even have any necessary connection with economics - thus their wide appeal. They worship the individual. So much so that nothing above the level of the individual even exists - it's all a fiction. This they derived from Jeremy Bentham and his utilitarianism, a philosophy of human behaviour that says we only ever act for our own 'utility' (normally happiness). So if it feels good and makes us happy, we go for it, and if not, we don't. Economists of the loon ilk liked this so much they even use 'utils' as a unit of measurement in constructing their indifference curves.

Thus the noble words from the capital-L Liberals and other neo-cons about sticking up for the individual, and rewarding hard work rather than nanny state handouts, and bloody inefficient government and bloated bureacracy. The la-la land social theory of this self-equilibrating market of individuals always has the same result of enormously enriching a select few (who, thanks to the culture warriors, aren't even an elite - the elite *spit* are the leftie pinko commie edumacated types), while trashing public institutions that were built over many years of hard slog, by individuals to help individuals. As Galbraith said, private affluence and public squalor. In no other sphere of life would an idea so at odds with the reality it actually brings about survive a day.

So the individual is everything, and on top of that is also always 'rational'. (Who'd believe this? Do these people know any other people?) So decisions made by individuals are the pinnacle act in a loon economy, and if they want to take on a truckload of debt to buy every kid in the house their own plasma TV and sports hatch, then good luck to them. Howard and his like-minded therefore totally ignored the ballooning private debt in the economy, all the while engaging in repeated public masturbation about the government debt they were busy slashing (in the process shifting costs of many previously collective processes back onto individuals, further inflating the private debt balloon). It was this private debt that, along with China's shiploads of money to pay for our resources, gave us an appearance of galloping towards economic nirvana for the past decade.

Now debt is literally seeping from the eye sockets of great swathes of loon-loving Aussies, and no matter how much stimulus they have lavished upon them, they're unlikely to go out and spend it because they're flat stinking broke trying to pay off the house which doubled or tripled in 'value' in only 10 years. So any stimulus received will likely go straight into paying off the debt. Wait until house prices drop (it's already starting), and drop, and drop, and...they'll be even more screwed because the place they paid $300,000 for might now be worth $160,000, so they're paying back almost twice what the house is actually worth.

As Steve Keen daily so brilliantly explains, the debt-deflation process appears to be well underway, and it only gets progressively more horrible from here.


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