This week saw me in a bit of an argument about the merits of Jean-Paul Sartre's philosophy with a Christian who just came in with "Behold the moral emptiness of French Existentialism. I blame Nietzsche". That was a red rag to a bull, but the alarmingly funny thing (as in not hah-hah) was that the Christian didn't even know how deeply fucked up and offensive his rejoinder was, and kept digging himself into the ground. He just didn't get it until I turned the rhetorical device on to him to ridicule him.
So if you're wondering why I'll be saying "behold the empty" and "I blame (x)" in the coming weeks, it is to rub more salt into the wound and have a little fun with the outright obnoxiousness and insouciant petulance in the device.
Years ago at BTF, somebody quipped that they were getting sick of movies where a bearded wizard would appear and say "Behold!" You know those movies. LoTR, Harry Potter and any number of the rip offs. After that it became a bit of a joke where people would sign in to BTF as 'the Bearded Wizard' and type "Behold!" and nothing else.
So Who Are We Beholding?
Pleiades sent in this link because he would like you all to know that if debt was a problem, Tony Abbott and his sidekick Boy Blunder and Worst Treasurer Ever Joe Hockey have racked up even more debt than at any time under the previous ALP government. It's a pretty telling article so don't miss it.
That chart above tells us where we sit in the wide world of government debt. Greece is bad, so is Portugal, and Italy. Their problem is that they can't devalue their currency to get back into the export game and start paying off debt because they're Euro nations. Japan is - to put it bluntly - trying to inflate away the problem by printing money and calling it Abenomics. There are lots of other countries sitting above 50% GDP.
This raises a couple of questions. One is, is it really all that bad to be in this kind of debt as government? Sovereign risks aside, like where Argentina is being barred form paying creditors by a New York court, Governments of countries can't do the bolt. It's not as if you turn up one day and Japan or Italy have moved elsewhere like some failed business leaving behind an empty shop. And contrary to the people who make back-of-the-envelope calculations and doom-laden pronouncements about public sector debt, nobody has ever figured out really how much is too much debt to carry into the future, given that a sovereign country can always inflate away the debt. Public debt is not like private debt in that crucial sense.
In one sense public debt is more like a mortgage.
People take out mortgages that are way above their net worths all the time. And banks figure that's okay because the people are going to keep paying money like rent. If governments make sound choices in infrastructure investment, then they can borrow money and the infrastructure would provide the lift in productivity to help pay off the investment at an accelerating rate. What low debt says about Australia is that for all the talk of being the infrastructure Prime Minister, Tony Abbot is actually unwilling to be that infrastructure Prime Minister in his deeds. Instead, he wants Australia to pay for its way through direct taxation (i.e. your PAYG), shunt out the GST receipts to the states, and see what the returns are like on mining.
Given that commodity prices falling are directly impacting mining-dependent states like Western Australia and Queensland, it's become a recipe for a recession. The Federal government is going to let the states twist in the wind while it happily cuts away at things they oughtn't. We'll leave that discussion for another day.
The second question it raises is how can they move the discussion forward into borrowing to invest when they've demonised government debt to the degree that they have? I'm not asking how they sleep at nights. I'm sure it's crooked with a side order of shitting their beds. I'm asking how on earth this eminently inept government is going to do anything that actually involves infrastructure investment that increases productivity? Remember, this is the same bunch of luddites who want to dumb-down the NBN and dismantle the Green energy sector; let the automotive industry leave and shutdown whole swathes of manufacturing in Australia; sold off agribusiness to the Chinese; allowed rampant property speculation that has resulted in killing the margins of businesses - their alleged base. Having established fine economic-vandal-credetials, how in the name of Schumpeter are they expecting to encourage economic growth without investing in the economy?
We all know how mendacious and scurrilous these people were in their election campaign when they claimed Australia was in danger of becoming Greece. When you look at that chart above, I can't stop laughing at how asinine their campaign claims were. Look at all the countries we would have to pass on the way to becoming Greece. Some of them are powerhouse economies, even with great amounts of debt. I guess it's like that Forrest Gump adage: Stupid is as stupid does. We sure elected a bunch of stupid-doers.
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