Here's an interesting collection of quotes by central bankers about how banks really work. It is dated January 26, 2012, well in advance of the Keen/Krugman debate.
Jesse Frederik, its author/compiler, opens the selection with these words:
"Does the ‘money multiplier’, this core concept of monetary theory, exist? Do banks need reserves before they create money? Not according to central bankers. Banks can create money at will, even without reserves, though they will have to find or borrow these reserves afterwards. But as the central bank has to provide these, this is not any kind of constraint, even when the central bank increases the rate of interest. "Some quotes which imply that central banks can not control the amount of money by influencing reserves". (Emphasis in the original)
My preferred quote, as it is more direct and concise:
"In the real world, banks extend credit, creating deposits in the process, and look for the reserves later." Alan R. Holmes, Federal Reserve Bank of New York (1969)
It seems Holmes agrees with good ole' George Bailey, then (see here and here).
Nicolas Sarkozy, junior partner of the Merkozy two-headed monster, seems set to lose the Presidency. After appealing (April 25) to a National Front audience of poor white voters ("Être traité de fasciste par un communiste, c'est un honneur!"; "To be called fascist by a communist, it's an honor!" My translation), Monsieur le Président ruled out any deal with far-right National Front (April 27).
Suggested slogan for M. Sarkozy's campaign:
Voter pour moi, pauv'con. [A]
The symbolism of Sarkozy's statement is hard to overstate: April 26 was the 75th anniversary of the bombing of the basque town of Guernica (north of Spain), by a combined Nazi-Fascist taskforce.
Acting in support of their local puppet, Francisco Franco, the German Legion Condor and the Italian Legionary Expedition were allegedly attempting to assess the effect of high explosive and incendiary aerial bombing on civilians. By most assessments, the experiment, considered a dress-rehearsal for Blitzkrieg, was highly successful.
Acting in support of her French junior partner, German chancellor Angela Merkel was quick to blast French "socialist" François Hollande's idea of changing the so-called "EU fiscal compact" (April 27). It's yet to be assessed what effect Madame Chancellor's statements will have on the French voter.
Combined with the resignation of Dutch PM Mark Rutte last Monday, one of her closest allies, Frau Merkel has her reasons to worry: observers believe the public might be tiring of the "expansionary fiscal contraction" (See here). Be that as it may.
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On both sides of the Atlantic, others have better reasons to worry.
USA GDP grew by a modest 0.5% quarter on quarter. Falling private investment and government spending seem to be driving the reduction. (See here)
But the US is still growing. British GDP shrank by 0.2% in the first quarter of 2012. The minister of State for Universities and Science, David Willets, clarified that it's not that the British economy is shrinking as a consequence of the Cameron/Osborne policies, but that the UK had an "unbalanced economy". (See here)
Moreover, "we have not deliberately taken the economy back into recession", said Willets. You have to understand them: it's not like anybody warned them what the consequences of their policies would be. Right?
But the prize goes to Spain. Last Thursday, S&P downgraded Spain's bonds two notches, to BBB+. Having previously forecast a Spanish GDP growth rate of 0.3% for 2012, S&P now forecasts it will shrink by 1.5%. Bank of Spain figures show that GDP contracted by 0.3%, QonQ, for the first quarter of 2012, while unemployment hits 24.4%.
Merkozy and their local representative Rajoy still have some reasons to celebrate, after all.
Image Credit:
[A] Nicolas Sarkozy. Wikipedia. Photo taken by Remi Jouan in May, 2007. No agreement of Jouan implied by my usage of the photo. For that matter, no disagreement implied, either!
Unlike similar sites overseas, in Australia comments to online pieces are usually pre-moderated: if you break the house rules, you are not published.
Well, I imagine yesterday must have been a busy day for the comments moderators of Fairfax Media. Have a look at this screen capture (apparently showing only op-eds/politics):
Click for a larger image
In my experience, highly commented pieces get something between 200 to 300 comments. You can see that there were two "entitlement" pieces above this range (one of them more than doubling it!).
Anyway, in my belief that one learns as much from the comments, as from the pieces themselves, I read most of the 377 comments to another of Peter Martin's pieces in the business section (not listed above): "The Painful Truth about Trying to Live on $35 a Day".
I'll pick a few of them for further comment.
After going into them, I'll point to a very good post by Matt Cowgill. If you are capable of rational thinking and believe most people are like you, you can skip the rest of my post: I dwell on irrationality.
Otherwise, you should read this first, and then jump to Cowgill's blog.
We Are Legion
The first comment:
" 'the single Newstart allowance now barely meets the median rent of a one-bedroom flat in Melbourne and Perth' "Since when is it expected that the unemployed 5% of the population should enjoy a standard of accommodation that is higher than that of 50% of the working population? The dole should be enough to cover the very bottom 5-10% rental range not the median rent. "Kaz | Online | 09:49AM" (See here. You will need to click on "More comments")
"Kaz" is commenting on Martin's statement that in Perth and Melbourne, unlike Sydney, the whole of the Newstart Allowance plus Rent Assistance ($304.95 per week) would be enough to cover the median rent of a one-bedroom flat ($300 per week).
What caught my attention is that "Kaz" does understand the notion of median: in the case of rents, it means if the median rent is $300, then half the rents are less than $300, half are more, as correctly implied.
So, "Kaz" has some basic statistics knowledge. This, however, does not imply ability to reason: "Kaz" doesn't realize that paying $300 in rent would leave nothing for other expenses.
In its defence, one could argue that perhaps "Kaz" was angered, did not think properly and wrote too quickly. Fair enough.
But there's more: by implication, "Kaz" appears to believe that "dole bludgers" should move to cheaper accommodation. While "Kaz" does not say this explicitly, it is a recurrent theme and is said clearly by others:
"They should only get enough to cover rent in an outer suburb, 3 meals a day at home and rates. If they want anything more they should work for it. The survey above asks working people how much they live on a day. We deserve the luxuries because we work for it. "Tim | Sydney | 08:04AM"
But real estate agents/property managers have a fiduciary duty of care to landlords. To rent a place they require applicants to prove their income. That's what they are paid for. If they don't, they could be sued for lack of due diligence.
So, if you're not employed, basically you can't just move to another rented place. Unless your Mum and Dad agree to take you back, you're stuck in your place, paying what you were paying before you got sacked.
That might be news to both "Tim" and "Kaz", but it was said explicitly by many in that thread (the first I found was StBob | Melbourne | 08:55AM).
I could say more about "Kaz" and "Tim", but let's leave things at that.
The point is not to single two bozos out and ridicule them, even if they deserve it (and these two really do). The point is that these are basic failings in elemental logic, a lack of common sense and ignorance of how basic things work (like what one must do when applying for a place for rent).
That so many people fail so abysmally in this account, does not bode well for public debate on this matter, because the problem is much more complex than that.
Consider this:
some commentators appear to be deliberately lying (see bbb | Prague 08:22AM and check here or here, to open tax calculators and make your own mind);
some welfare cheating may be real (JSP Worker | 04:23PM), but how much of it (Margaret | Canberra 02:42PM), and what to do about it (Depressed | 01:34PM and 02:56PM, also see here)
people talk about "dole bludgers" milking the system, but what about job agencies? See here. Are they actually helping job seekers to get a job? And also P | 11:53AM.
a system of welfare payments that could not have been better designed to foster pettiness among welfare recipients: "WOW, the unemployed get paid MOAR [sic] to sit on their asses than I ever did to GET EDUCATED... what a system!" (Newstop | Sydney | 11:21AM); "Why shouldn't mothers WITH A JOB be paid some of their salary when taking time out to have a baby. Much better option than the baby bonus that hands out cash to any bogan that has a baby" (Money for working mothers, not dole | Sydney, 10:56PM). Note: I am assuming these two comments, however petty, are genuine opinions. As bbb's case shows, they may be just lies.
a welfare system that seems designed to throw you into poverty before paying you: Phillip Green | Frankston 03:12PM.
a welfare system where "customers" appear to be kept uninformed of their entitlements. See the discussion related to PBS, and health care card, where even supporters of welfare payments ignore that there is a health care card!
Cowgill's Post
Having said all that, I recommend this post by Matt Cowgill. He deals with numbers and does so comprehensively; for better or for worse, I deal with ideology.
In a previous post, I mentioned that it's unusual to hear people talking about the experience of being a lower-class Aussie.
Well, I intend to touch part of this subject in this post. I will argue that Australian society is not as egalitarian as it is commonly believed.
Before starting: these posts provide details explaining why I feel "entitled" to speak on this subject. They also work as a warning: I am expressing personal views.
But instead of commenting myself, I will try to present mostly quotations from others. They reflect my personal experience, so you are free to disagree.
My first quotation comes from a reply to a recent post at Peter Martin's blog. I've commented on this subject before.
Martin reports that the Newstart Allowance (the notorious dole), plus AU$ 60.10 of rent assistance, add up to $304.95 per week. This is insufficient to pay for the $420 median weekly rent on a one-bedroom flat in Sydney (let alone any other expenses) and barely covers rent, leaving nothing else, in Melbourne or Perth, where rents are lower ($300). (See here)
An anonymous commentator replied to Martin (April 17, 2012):
"(...) None of this is coincidence. These policies are the way they are because both sides of politics despise unemployed people. It's a class hatred thing. And Labor is just as mean as the Libs on this. Listen for the dog whistle next time the Prime Minister refers to 'working' families". (My emphasis)
"But that's just one person's opinion", someone could say. "Can one find evidence of the contempt or class hatred this person speaks of?"
Let me try. Take shadow Treasurer Joe Hockey, who recently revealed his plan to end the "age of entitlement" in Australia (see here). Interviewed in ABC's Lateline, by Tony Jones, Hockey repeatedly refused to specify what entitlements he had in mind (see here):
"TONY JONES: OK, let's just try a couple of things. The baby bonus in Australia, would you keep that? Would you keep that or would you look at it because it's not means tested?
"JOE HOCKEY: Well I'm not going to get into cherry-picking Australian initiatives from London. What I'd say to you is that we need to continue to be vigilant. Welfare represents around a third of the entire Australian federal budget. It is an enormous cost burden."
"So, there may be a doubt", is a potential objection. "Maybe the entitlements to be cut are the so-called middle class and corporate welfare?"
Everybody else may have doubts here. Hockey's fans, however, did not have much difficulty guessing what entitlements were those and expressed that clearly in the comments section of Annabel Crabb's latest piece in The Drum (see 19 Apr 2012 5:32:51pm):
"Ahimsa_Fruitarian: The welfare parasites are there because the welfare is paid easily and for free. If the gov't stopped unemployment payment to the long-term unemployed then most of them would get a job fast.Employers can also help to make more jobs if that becomes an issue by being allowed to reduce wages so they can afford to employ more (U think this sounds crazy?) Think about it - it also means more productivity per employer so items become cheaper to make and buy. Farmers would be able to afford to grow fruits that now they say are too expensive in labour (wages) to grow. This means Australian farmers cannot afford to grow the world's best species of fruit trees, so that proves our present system of wage rises and taxes to pay welfare parasites does not work." (Emphasis added)
"Ah!", I can almost hear it, "That's just an isolated extremist".
Maybe. But if that was an extremist, it's not alone. In fact it has plenty company.
"There was a chilling line in a Daily Telegraph piece on girl gangs back in 2008. Reporter Lauren Williams had a 2.30am chat with a Glebe teen called 'Carson' in the article.
" 'Carson' explained why she and her friends stole.
" 'If the government gave us more money then we wouldn't have to rob people,' she said, apparently satisfied she had delivered an impregnable justification for purse snatching, shop lifting and mugging".
After suggesting that dole recipients tend to criminality, Farr goes on to explain that the unemployed are not meant to be comfortable: "comfort" (i.e. having a roof over your head and some money left to eat) would deny them the incentive to look for a job. Like cattle en route to the killing floor, they need to be probed to overcome their laziness. [*]
If subtler and more articulate (Farr, after all, is a professional journalist) this is the same argument made by "Ahimsa_Fruitarian". So, it's hardly an isolated thing.
I could present more examples, but I will limit myself to one more quote. This is the Lord Mayor of Melbourne, Robert Doyle's 23-10-2011 opinion piece, entitled "Selfish Rabble Got What it Deserved". (See here)
Its title is self-explanatory, but by "what it deserved" Doyle was referring to this:
"Doyle's disgust was directed at the Occupy Melbourne protesters against inequality, not against the unemployed", will be the objection now.
True, that was his ostensible target. So, this means he was justified to use unnecessary force against peaceful protesters against inequality?
Further, as in Crabb's case, his supportive readers clearly understood that the message was not limited to the protesters:
"Rob of Melbourne (Posted at 12:29 PM October 23, 2011) "great work robert doyle you have the support of the 99% and the losers who think they are will quickly realise they are nothing more than dole bludgers with too much time on their hands." "too many passengers (Posted at 7:46 AM October 23, 2011) "why does the media give these oxygen wasters publicity?. cut their dole,and give them a job. Until then they have no right to protest" (Emphasis added)
"Again, these are isolated extremists."
Well, if "isolated extremists" pop up everywhere, they don't seem "isolated" any more.
But extremists or not, these are Coalition voters, supporters or at the very least sympathizers. Are the Coalition politicians absolutely irresponsive to them?
I find it dubious. According to these last comments, dole bludgers have no right to protest. This is part of Hockey's speech:
"So perhaps what we are witnessing [the European welfare state] is a chronic failure of the democratic process.
"A weak government tends to give its citizens everything they wish for. A strong government has the will to say NO!"
This at least means that Hockey, like Farr, is an advocate of "tough love". From here to deny dole bludgers the democratic right to protest is a small step, one that Melbourne's Lord Mayor (a Coalition politician, if I am not mistaken) was only too eager to take.
It's time to face reality: it's not just the unemployed or the protesters. Watch the current affairs shows at channels Nine and Seven, listen to the talkback radio shock jocks, or read the so-called "right of centre" newspaper columnists. It's the "queue jumpers" (i.e. asylum seekers), the already mentioned "dole bludgers" (also "job snobs"), the "welfare queens", the "Bogans" and "Lebs", it's the low paid workers and the trade unionists ("union thugs"). Some years ago it was the "Wogs", "Chinks" and the "Abos".
If you are a poor Caucasian don't fool yourself into believing you are better regarded. (Overseas readers: Bogan is Aussie slang; basically, poor white trash). They won't call you that when asking your vote; they'll call you "battler", "aspirational Australian", "working families". But, deep down, they still see you as a Bogan, and you know it. So, let's quit pretending.
Chances are the objection now would be: "It's not right to bundle 'dole bludgers' and 'working poor' together".
Let me ask you, why not? Nowadays nobody is immune to graduating from "working poor" into "dole bludger" overnight. No one is more at risk than the working poor; but not even the so-called middle-class is free from that risk. In essence, if you work for someone else, you are one step away from turning into that most despised creature: the "dole bludger".
Don't get me wrong: I am a fucking wog and include myself in this "precariat" underclass and I do work, part-time (I lost my second part time a month ago, or so). I walk over a very thin line and any push could send me to the wrong side. So, now you'll understand that I use the pronoun "we" to refer to you and I.
In this sense, race and religion are the icing on the cake. It may make some of us even more hated and despised. But we all are already hated and despised! It's a "class hatred thing", as Martin's anonymous commentator put it.
And race and religion are used to divide us: to deliberately pit Bogans and Lebs against each other, for instance. (See here)
Having said that, does it mean every non-poor Australian (make no mistake, born here or "imported") hates and despises us? Clearly, that's not the case. There are genuinely egalitarian Aussies, perhaps most Aussies.
But this prejudice is by no means uncommon. It's not unusual at all among well-off Australians, whether locally born or "imported" (and the higher up the food chain, the more frequent it is). And, as far as I can tell, this applies regardless of religion, age, education, gender, sexual orientation.
That's why the Coalition will use this prejudice to get votes, while Labor either won't do shit about it, or might even join the bandwagon. Mark my words.
They will sell the view we are parasites, knowing full well that it's not a hard sale. So, for them, we are the parasites, not the miners who don't pay taxes, not the executives who get astronomical bonuses and tax concessions; not the equity fund that sold David Jones and ran away without paying taxes; not the swindlers from the "colleges"/"immigration agents" who took money from Indian students and forced them into slavery with their "permanent residence" courses: all of them deserve what they get, and, boy, do they get a lot! It's us who don't deserve crap.
The weather forecast? Incoming rhetoric thunderstorm in the months ahead: "Aussie battlers" this or that (even Abbott's or Hockey's battlers, for Christ's sake!), "aspirational Australians", "working families", pensioners vs "dole bludgers", "welfare queens".
Just watch the current affairs shows or listen to the radio in the coming months, count the number of times they mention those words and how many times people will mention that Fortescue Metals Group did not pay corporate income taxes until this year, and remember what I just said.
In fact, and to be fair, even some in our so-called Marxist/anarchist left are not immune to this (trust me on this).
Whether you are thinking about moving to Australia or already living here, the sooner you understand this, the better for you.
Notes:
[*] I suppose this would surprise Farr, but his account of unemployment ignores that perhaps unemployment exists because bosses sack people and then, well, don't want to fill the positions left vacant.
Others have argued abundantly, and much better than me, about this. Pick at random pretty much any of Bill Mitchell's posts, for example.
Updates: 22-04-2012. Okay, I'll cheat. I'll add one more quote. But it's for a good reason: it's very funny.
Fairfax Media's Tom Reilly (October 10, 2010) on our youngest billionaire, Nathan Tinkler:
"Clearly none of his cash has been spent on media training. When The Sunday Age called him on Friday about his interest in the Bathurst team, Tinkler exploded. " 'You're a f---ing deadbeat, people like me don't bother with f---ing you,' he said. 'You climb out of your bed every morning for your pathetic hundred grand a year, good luck'. "Angered by a previous story about his horse racing interests, he added: 'There's a tall poppy syndrome; you would have heard of that because you hang around with the deadbeats and the losers who have done nothing with their lives'." (See here)
If Tinkler looks with contempt at a journo, whom he thinks earns "one hundred grand a year", imagine what he would have said of people, like yours truly, who'd see a "hundred grand a year" as winning the lottery!
On top, Tinkler, who supposedly was once an electrician, has been mischievously described as a "bogannaire" (a portmanteau of bogan and billionaire).
Paraphrasing the TV add: "a professional soccer team, $X million. Good humour:, priceless!"
