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.
{ 11 comments… read them below or add one }
While I agree that public spending and over taxing are not the answer to everything, I believe that the government still has an important role to play in the economy of a country. The idea that markets are self regulating and that market forces should not be tempered with has been proven wrong many times in many places.
The following quote from your post makes me think that maybe you’ve been brought up on the comic book of Friedmanism?
“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.”
Your logic is based on shaky assumptions about human nature.
“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. ”
What you say there Chris is NOT even half the story. The only way to read mainstream newspapers or anything published by the media monopolies is this – “take the opposite view of whatever they say or state, and THAT is the truth.”
Kris admits: ‘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.’
Is it really so amazing? The media that people have been conditioned to believe for most of their lives will only publish the commentators who agree with the media controller’s agenda, which in turn is influenced by the banks which finance him, the views of advertisers upon whom he depends for most of his income, and a desire for profits.
Kris claims that what he has been saying for 18 months has been right… but I ask, who has been listening to him? It’s a sad fact that the number of people who believe little websites like this one are outnumbered thousands if not millions to one by the products of the mass media. Given that, is it any wonder our message never seems to get through?
Money Morning is a nice little website and I give it credit for trying. But until we get a network of TV channels, radio stations, newspapers, and business magazines all prepared to publish similar messages we will be deluding ourselves to think we can influence enough people to change the corrupt world we find ourselves in.
School “hall building” program was a complete waste of resources. Friends working in construction industry told me how the schools asked for the money to be spent perhaps on an extra classroom or a library etc. But no, the only thing they could have is a hall. Even if they had one already.
But the program kept building sub contractors (bricklayers, plumbers etc) so busy, their rates went up. The cost estimators could not accurately cost the job because by the time they submitted the estimation, the rates went up again!
I think we are all agreed that the government of today is a far cry of what it needs to be. The question remains – as the actual citizens the government represent, what can we do (apart from voting) to change how the system operates? Clearly the current system of lie through your teeth with false promises to get elected then do whatever the hell you like has simply ground us down to the point that we find ourselves in. distanced from politics, cynical and worst; most people have no idea that all of this nonsense goes on in the back ground because the government are protected by for starters themselves and then the media because of financial benefits. Today’s government is a legalized racket, whats worse is that we have allowed this to happen.
Yes, unfortunately, this is always the tendency to be like this. While the good people are going about their business, there is always a parasitic minded group of people who would rather live off other people’s labour than putting in a decent day’s work of their own. And once they find and manage a scam that works, and worse, they manage to pass it into law, all the money they channel their way then can be poored into maintaining the status quo, to protect themselves from ever being dislodged from their privileged position. For this, they need a constant stream of revenue to feed, not only themselves, but the many hangers on, the ever growing numbers of leeches, drones and parasites that protect them out of their own self interest.
But don’t worry, Rudd’s 150 bureaucrats we are already paying for administering and auditing a yet non-existent ETS are probably hard at work figuring out how to impose this massive new tax on us. By hook or by crook, they will find a way of ensuring that they do not get disbanded, losing all those cushy, well paid jobs at our expense.
Kris – That is one hell of a tortured example. That case is not about a minimum wage, but minimum working hours. I for one agree that the concept of minimum working hours seems dumb in these sorts of cases, even though it might still make sense in others.
But if you want to argue for abolishing the concept of a minimum wage, or that of a minimum price on labour on an hourly basis, then you should argue for the idea that these kids should be allowed to work for $2 -$3 per hour, if that is something they would be willing to accept.
In fact, why don’t you do that, and let’s see how plausible your arguments will sound?
AC wrote: ‘I think we are all agreed that the government of today is a far cry of what it needs to be. The question remains – as the actual citizens the government represent, what can we do (apart from voting) to change how the system operates?’
Forgive me if I correct you about the government representing we citizens: they claim to, but in fact act only in the self interests of themselves and their mates.
What can we do? You can forget about voting for a start. In all of my adult life my vote has made not even the slightest difference to the result. I would be surprised to see any proof that the experiences of any other of our contributors had been any different.
That leaves some sort of revolution as the only other tactic likely to be effective. If you are not ready for that there is little that you can change in your lifetime.
But mass revolutions can get messy. They might do a good job of kicking out the ones in power but then discover they don’t have a better system to immediately put in its place, and before they develop one they find that scoundrels as bad as the ones they just deposed have somehow come to power. There must be a better way.
Our systems of government, flawed as they are, could be acceptable and gradually improved if they were run by people who could be trusted to work for the citizens of Australia, and nobody else. Perhaps the people in the public service and politicians could be driven to serve us by something more powerful than the perks and bribes that seem to drive them now: personal fear. If a politician lived in fear of being assassinated every time he did something that displeased his electors we would could expect to see a dramatic improvement in the behaviour of politicians.
It’s interesting to muse over what could be achieved by a small army of skilled assassins. I would not dare to advocate trying to form one for fear of what asio and the government might do to me… but if you wanted some help, Usama bin Laden would probably be willing.
Lol, Dave. According to some accounts the CIA use him, so it would not be without precedent.
maybe they will get us all to talk like JULIA GORILLAA too
Julia Gillard??? lol
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