What a farce this last week has been.
It’s proven yet again that the mainstream economists in Australia haven’t got a clue about real economics.
But that’s not surprising, since every last one of them has been brought up on the comic book economics of Keynesianism.
We call it comic book because it’s as though they believe the government is some sort of artist that can draw a bag of money and voila! Problem solved.
Then there’s the idea that governments can steal money from taxpayers in order to spend money on stuff that no one wants or needs.
The fact is, the local and global economic data that has emerged over the past week has proven that what we’ve been saying for the last eighteen months has been right. And what the mainstream economists, central bankers and mainstream commentators have said has been wrong.
They’ve got it so wrong it’s amazing that anyone still listens to them.
Yet, sure enough, you should expect to see the mainstream fawning over every word that comes out of the mouths of Craig James and the rest of them. As they provide their solutions to the problem they didn’t see coming.
Needless to say, they’ll get it wrong again.
But that’s the problem when you’re not only wearing rose-tinted glasses, but when you’re looking in the wrong direction as well.
Economic trick of the light
Perhaps some of the most ridiculous statements we read in the press are how this or that could “stall” the recovery. Hello! There is no recovery to stall. The so-called “recovery” is nothing more than a mirage, a charade, a trick of the light.
In fact, you could say that those who have claimed there has been an economic recovery should be arrested for fraud and deception.
So, let’s look at the facts. And remember, this is the sort of thing we’ve been banging on about since late 2008, so we’re not using ‘Harry Hindsight’ here.
Whichever way you slice and dice it, it isn’t possible for a government to stimulate an economy to recovery. In fact, a stimulus does the opposite, it pushes the economy further into trouble.
When a government spends, it steals money from the private sector – individuals – and then allocates the money to pet projects and specific special interest groups – infrastructure and construction mainly.
The result is that there is less money for the individual to allocate to their own saving or spending.
Take the ridiculous schools project. The building of new school halls or gyms was clearly not a priority for parents. If it was a priority, then parents would have voluntarily donated funds to the local school so that it could build the school hall or gym.
The fact that parents chose not to is iron clad evidence that individuals had other priorities.
Those priorities were either to build up their savings, reduce debt, or to consume other products or services. It most certainly was not to allocate money towards building a new school gym. Although you could argue it was a priority, but they were waiting for someone else to pay for it!
Naturally, the money the government spends has to come from somewhere. That somewhere is you, even if you don’t have kids. Regardless of whether the spending has been financed through increased taxes or debt the outcome is that you will eventually pay for the infrastructure spending – either now or in the near future.
Because never forget that the government doesn’t have any of its own money. Every dollar it has is as a result of forcibly and violently taking it from you through taxation.
The consequence of its spending actions, the futile attempt to hold up the economy, is that it denies the individual control over a portion of their own money.
It’s simple maths. And it’s undeniable.
Others lose out
And what it means is that thanks to the misallocation of resources to infrastructure and construction, other sectors of the economy lose out.
The retail sector was another one that gained from the stimulus handouts, but as you’ve seen from recent retail sales numbers the effect from the stimulus bribes is almost over.
The sector received a short term boost, but that has now evaporated as the cost of the stimulus has to be repaid. And it’s being repaid through a maintenance of the current tax rates rather than the government cutting or abolishing taxes – now that would be a real stimulus.
But if you want more proof of how a government destroys jobs, look no further than page 7 of today’s Australian Financial Review (AFR).
We’ve received quite a number of emails recently from some readers appalled our attack on the minimum wage and other government involvement in the labour market.
But this news item is proof of how minimum wages create unemployment. Here’s a quote from the article:
“Matthew Spencer has worked in a hardware store after school for three years to save up for a car. But now the year 12 student will not earn enough cash to pay for petrol after his work hours were slashed from the roster because of a ban on shifts of fewer than three hours in the new retail award.”
The regulations state that employees must be paid for a minimum of three hours even if they only work for 1 or 2 hours.
In other words, it’s a minimum wage. Say the hourly rate is $10 per hour, that makes it $30 for a three hour shift. However, if the young lad only wanted to work two hours, his effective hourly rate would be $15 per hour.
Yet the young lad is prepared to work for $10 an hour. He’s made a personal choice to work for less than the mandatory three hours. But that is now illegal.
So, what is an employer going to do? The employer will tell the lad that his services aren’t required because the employer doesn’t want to pay $15 per hour when the going rate is only $10 per hour.
What the government has done is made it illegal for this young lad to work the hours that he’s chosen to work. The government has made it illegal for Matthew to express freedom of choice over his own working hours.
Think about it, he’s met with his employer three years ago and they’ve agreed to a work roster that is of benefit to both sides.
The employer can get someone in to work during a busy period perhaps, and Matthew gets to earn a few extra dollars that perhaps doesn’t interfere with his schooling.
But that’s not good enough for the meddling government. An agreement between two responsible people has been outlawed. The government has decided it would rather see Matthew out of work rather than allow him to earn a few bucks to pay his own way.
It would prefer to see him not earn a private income but instead perhaps rely on government subsidies paid for by other taxpayers.
It’s a perfect example of how minimum wages create unemployment. As we’ve written before, a person who is prepared to be paid 1 cent below the minimum wage will be breaking the law if they do so.
And now, due to the minimum working hours law, if Matthew works for two hours and fifty-nine minutes then he and his employer will have broken the law.
Arguments that minimum wages protect vulnerable employees is just bunkum. Minimum wages do the opposite, they ensure those very same employees become unemployed instead.
Trade unions destroy jobs too
The misinformation on minimum wages is almost as bad as the misinformation on trade union membership.
You’ll often hear union leaders tell the media how union members earn higher incomes than non-union members.
Now, at face value that may be correct. However, it’s only half the story.
Because if it was a fact that joining a trade union increased your wage then 100% of the work force would join a trade union. Even if you didn’t like trade unions you would join one because you know it would guarantee higher pay.
Employers that tried to bar union membership would go out of business because no-one would want to work for them, and employees would naturally gravitate towards jobs that allowed union membership.
So why is it that trade union membership has been on the decline for years?
The simple reason is that the wage demands and minimum wage conditions demanded by trade unions cause unemployment in the sectors dominated by the same trade unions – except the coercive (public) sector of course, where there is no profit motive and money can be simply stolen from taxpayers to pay for it!
Although it may be true that union membership offers higher wages, it comes at the expense of jobs. The higher wages can only be provided if an employer makes workers redundant or does not hire new staff.
How often have you seen unions bargaining for voluntary redundancies, and claiming they’ve got a good deal? That’s because they’ve sacrificed a percentage of the workforce to enable those remaining to get a payrise – and then they blame the capitalists.
That’s why trade union membership is falling. Sure, those that remain in their job may be able to secure a higher wage but they only do so because the employer has to get rid of other workers.
In other words, not only do minimum wages cause unemployment to those most in need of work, but trade unions cause unemployment to the same group of people as well.
The stark, sad and sorry facts are, that those such as central bankers and governments who believe they can manipulate an economy by fiddling with interest rates or setting arbitrary minimum wage or minimum hour conditions, do nothing more than create bigger and deeper problems for individuals and the economy.
This past week has confirmed and proven this more than any other week over the last eighteen months…
And it’s set to continue.
Cheers.
Kris.
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Julia Gillard??? lol
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