Thursday, October 23, 2008

Unchained views and the Economic Stimulus Package

... politically the package is a sure winner that will provide some economic stimulus but we must not lose site of the fact that paradoxically, the nations chances of coming through this are at least enhanced, by measures that helped decimate the Howard Government ...

As financial markets reeled this past fortnight, I kept myself busy enjoying the restaurants and sights of the Broadbeach locale, I make no apologies. While major world banks and Governments strived to muddle their way through the crises, an effort that included some unwelcoming discussion from the usual suspects about the nasties of capitalism, I could not help but shape my own thoughts on the emerging crises. To be sure, the intention was to recoil from the news and resultant politics if only for the holiday period, logically though, one could not escape the incessant stream of related news and diverging opinions. Indeed, there is much to be said about the political and economic news of the day.

In point form, and rather belatedly, I offer my unorganized and unchained views on a series of events that present great challenge, at a time where balanced examinations are called for, and the ideals of capitalism, as the best economic system for long-term prosperity, now more than ever, necessitates strong unyielding affirmation from its advocates. As President Bush said when recently announcing plans to host an international summit to tackle the crises:

…. it is essential that we preserve the foundations of democratic capitalism, commitment to free markets, free enterprise, and free trade. We must resist the temptations of economic isolationism and continue the polices of open markets that have lifted standards of living and helped millions of people escape poverty around the world ...
>> A shift in focus from classical West to East was always to be expected as many infer the rise of China and India however, capitalists have nothing to apologize for. Not least, till our society creeps below that of socialist North Korea and the like. In recognition of the unprecedented level of prosperity it produced let us continue on the path of capitalism with less of the government manipulation and intrusion witnessed of late.

>> Is it right to squander government surpluses on lower and middle class welfare? The decision to triple the first homeowners grant to $21,000 not only makes it difficult for successive governments to wind back in future, but also will only serve to increase property pricing - demand leading to pricing increases is not rocket science.

>> Why do we speak in terms of crises in Australia? The language that has accompanied the release of the $10.4 billion dollar economic stimulus package has been nothing short of extraordinary. Swan suggests it is the greatest crises since the depression; and the PM evokes the words of FDR in his justifications. On one hand, Mr. Rudd tells us we are well place to weather the storm and that our banks are the safest on the globe while systematically performing a dramatic backward somersault on fiscal policy.

>> Self-interest is good! As individuals, we ought to be applauded for seeking to be the best we can, not merely for ourselves but for our families, our local communities, and the nation. By mine, there is something intrinsically wrong with viewing such notions as greed.

>> The assault on executive remunerations within our financial institutions is pure nonsense. I have not come across any evidence to suggest that high salaries have weakened or compromised Australian banks. Place restrictions on remunerations and the best and brightest will simply go offshore.

>> How many common folk understand and/or are willing to acknowledge that the massive budget surplus carelessly used by the present Government is primarily available because of over 11 years of sound economic management made possible by Howard/Costello.

>> Some sort of economic stimulus was called for, but why to the tune of $10.4 billion, how was this figure arrived at; is it too much to ask? Pertinent questions but not according to our Prime Minister - I am thinking over-reaction by a government intent on grand gesturing. I am thinking higher than expected inflation and unemployment.

>> Was it correct to embrace such mammoth fiscal measures following the recent 1 percent interest rate cut by the reserve bank? At the end of the day, it amounts to ‘on the run’ Government spending that could well drive the budget into deficit, make no mistake the latter is highly probable in 2009.

>> We could all be excused for suspecting that the measure is also intended to provide a response to calls for greater assistance for pensioners and homebuyers, recall the Governments response to Opposition pleas for an immediate $30 per week rise in the single age pension, when it accused the Opposition of engaging in political stunts.

>> Of course, politically the package is a sure winner that will provide some economic stimulus but we must not lose site of the fact that paradoxically, the nations chances of coming through this are at least enhanced, by measures that helped decimate the Howard Government – workplace reform. Be sure that both Kevin Rudd and Julia Gillard are all too aware of this as they consider restoring the ways of old – workplace rigidities and collective bargaining.

>> I can understand the frustration of those enterprising hard working families that pay the most tax and yet get overlooked for assistance. They also do not receive cheap medicines or childcare, and now they must look on, knowing that some eighty percent of Australian families will get Rudd’s Christmas present deposited into their accounts between 9 and 19th of December.

>> Washington and New York can be excused for taking a hard panic line to the current crises, but not so Melbourne and Sydney. The reaction has caused fear and remains over the top. History has a way of repeating itself in varying degrees; I suspect that within 12 months the market will be up 20%. Recall the spring of ’87, investors seemed perplexed as share prices tumbled, everyone feared inflation, unemployment, and rising costs. Not long after, in circa ’91 the Keating Government in its flawed wisdom felt it had to slow things down with the R we had to have. We soon roared into the dot com craze of circa 2000 and got our fingers burned again … It’s what economies and markets do, go up and down but mostly up. So what does our present Government do? It gives away a staggering 48% of our surplus.

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