Article item posted on Tuesday, June 16th 2009 at 12:12 pm

Well, well, well.  How did it come to this.  We were told we were fiscal men and women of steel us Australians – right?

Didn’t little Johnny wax lyrical about how he and us had the world in our hands and the economic security of the future all thanks to the piles of minerals we’ve been digging up like good little worker bees for the last decade?

Let’s see, that was up until and just before the federal election.  You remember, that’s when you got to go to the polling booth and tick those boxes with names for guys and gals you probably wouldn’t buy a used car from if given a choice.

Right?  Well, don’t be to hard on Little Johnny.  He’s a Conservative and it’s probably terminal.  But what about PM Kev?

Truthfully, when Labor PM’s start talking “Fiscal Conservatism” it’s either time to put down that stubby and get off the couch and get scared – or make a mental note to pay more attention to whom you’re voting for next time.  Or both.

Which brings us to the current situation.  The “International Monetary Crisis”.  Otherwise known as the “Fiscal Blackhole”, the “Millennium Money Marathon” or “Struth! We are buggered aren’t we?”

We’ve got Captain Obama of the US Free Enterprise firing proton bailout torpedoes in desperation at merchant bankers, insurance companies and wall street investors who, like all good Klingon’s are duly cloaking their exposures and burying them in their “disclosure” documents.  Consider Berkshire Hathaway Chairman, Warren Buffet’s somewhat livid response to the magnitude of the financial mess when he said:

“These instruments [derivatives] have made it almost impossible for investors to understand and analyse our largest commercial banks and investment banks . . . When I read the pages of ‘disclosure’ in (annual reports) of companies that are entangled with these instruments, all I end up knowing is that I don’t know what is going on in their portfolios. And then I reach for some aspirin.”

Panadol, Warren, it’s milder on the stomach than Aspirin and tends to work faster, something you’re stomach is going to need in the coming months and possibly years.

The Rudd Stimulus Dud

That Rudd is following, like a faithful merino to the shearing sheds, with his stimulus packages the likes of Obama and other heads around the world and not getting it that the system of promoting credit is badly broken is cause for great concern.

That the pain of saving money, governments and consumers, is sorely needed so that business’ can more quickly and more easily recapitalize, saving and creating jobs and pulling us out of this hole with viable infrastructure through production, hasn’t occurred to them.

Now, I know what you’re thinking here.  Business capitalizing?  Have I wandered onto some Conservative blog clandestinely run by the Liberal party?

Nope.

The equation is simple.  I’m no conservative, nor am I a socialist.  I prefer a balance between the two.  Rampant trade unions are no better to my mind than rampant multi-nationals.

But business is a bigger word and we need to consider it for what it is.

Business is small business to larger businesses.  Most people are not employed by multinationals.  Most people are employed by small business and bigger businesses.

They, businesses need access to cash – credit.  Equity in business is not just “profit” though most people think of it as that.  Equity is loans.  Money to do business with.  Loans so that a business can afford to import and export goods, pay wages and pay taxes.  This credit comes from banks the same way as the credit for your home loan comes from banks.  The banks are starting to wind up lending in this country.  Overseas it’s almost ground to a halt.  A halt caused by credit debt so large it outstrips the worlds gross domestic product for decades to come.

It’s broken and throwing money at it by way of “stimulus packages” is akin to giving a body builder massive doses of anabolic steroids.  The athlete gets bigger and appears stronger in the short term, but later is prone to break out in cancers and other horrible ills.

I’m not alone in this view.  It’s shared worldwide by others better known than I.  Germany is making noises of discontent, some US Democrats aren’t to pleased and of course one can always count on the Republicans to make noises of opposition (regardless of what they really believe it would seem).  I wager Australia’s own conservatives the Liberal Party would be nodding along at this point.

But while we’ve got their attention, consider this.  Any “fix” must entail the illimination and outlawing of the kind of shenanigans we’ve seen in markets, not just on Wall St, but worldwide.  Hedge funds, shadow banking, all the nasty little grubby schemes.  The likes of Bernard Madoff and Enron are the inevitable outcome of a system tailored to their existence.

I love free enterprise, I love business and I love a system that gives a fair go to the aspiring and established entrepreneur and the worker.  That system is not broken.  What is broken is the system of lending to high risk debtors, so high risk that they bet on their failure and inevitable foreclosure as a way of making money.  Of financing outfits like Storm Financial in Queensland.  The Americans call them Ponzi schemes.  We call them pyramid schemes here.  Call them what you will they are illegal in both countries.

The present system is like a game of musical chairs.  From painful lessons of childhood all of us know how that ends up.  Sooner or later the music always stops and somebody – you, you’re buddy or that girl in the red dress – end up with, well nothing really!

We Need A Scheme To Build Our Nation – Not Make Beggars Of It’s Inhabitants

That’s right.  We need to stimulate growth.  Stimulating growth doesn’t mean handing out millions of dollars for our children’s children to pay off.  A desperate bid to get consumers to go out and spend even more money on plasma TV’s so Gerry Harvey can say “Ta, mate!” and close some more stores.

No.  We need a scheme that builds business and in turn builds jobs.  That helps business produce products for consumption here and abroad.  Businesses producing employ workers and pay taxes.  Workers pay mortgages and taxes and consume.

Make no mistake –  a leader parading around calling for anything less is the Emperor with no Clothes.

David Scott Kane

Member Australian Democrats.

Tags: australia, australians, bailout, bankers insurance, berkshire hathaway, blackhole, blog, business, chairman warren, choices, commercial banks, conservatives, democrat, democratic, democrats, depressions, disclosure documents, financial mess, fiscal conservatism, international monetary crisis, investment banks, klingon, last decade, marketers, merchant bankers, millennium money, money, obama, polling booth, rudd, tax, taxes, wall street investors, warren buffet, worker bees

Other Readers Also Enjoyed

• Australia is drowning in debt – not Government borrowings – the private hellish sort that drives misery, paralysis even suicide.
• Victorian & Australian Small Business – All The Risks, No Security, No Respect But Truckloads of Government Red Tape
• Trickle-down effect discredited
• Home-buyer Health Hazard
• Senate Rejects ETS – Would The Democrats Have Improved and Passed this Law?
• Abbott writes ‘Kick Here’ on the Liberal rump. The ALP and Voters will take him at his word