Rudd is out to destroy what’s left of our economy

5 09 2009

Let’s face it, most of our deluded commentariat has no bloody clue when it comes to economics. They didn’t see the Global Financial Crisis coming and they have absolutely no idea what actually caused it. Most of their “solutions” are also dead set wrong. They couldn’t predict then, and they can’t predict now. I wouldn’t waste my time listening to their so-called expert opinions.

The GFC was caused by the US consumer debt binge fuelled by Fed’s decision to keep the interest rates too low for too long which resulted in a husing bubble and overall lack of savings. As a result USA is drowning in debt. It produces less than it consumes and it has a gigantic government debt. Moreover, US economy is 70% consumption driven mainly by debt. The debt USA has no chance of ever repaying. Once the rest if the World fully understands this all bets are off.

Let’s be honest Americans need to stop consuming so much and learn to live within their means. Unfortunately team Obama tells them to do the opposite – borrow even more and spend even more. As a result we will see a more impoverished US where the GFC is only the beginning of a long and painful depresion.

So what does it have to do with Rudd? Well, Australian ecomomy is not so very different to the US. We consume more than we produce, whe have very high personal debts and we also have a head of state more obsessed with doing what is popular than doing what is right.

Before the GFC Australia was one of the very few Western nations free of government debt. Not any more. In the headlong rush to “do something” the government brought in a massive stimulus package that has a potential to commit the nation to more that $300 billion of debt. Rudd says he will return the budget into surplus, but I doubt it. He made no tough decisions to date and is not likely to do so in the future.

But stimulus is not even the main danger right now. Given that Australia has the same structural problem that the US, it would make sense to steer our economy away from excessive consumption towards greater production. After all, it was Rudd himself who said that he didn’t want to be a Prime Minister of the country that no longer makes things. Fine rhetoric, but how is introducing a new tax on production helps this? It doesn’t.

The new tax is of course the Emissions Trading Scheme or ETS. Whether you believe in Global Warming or not, CO2 is a by-product of industrial production – of making things. For example, making cars and beer produces a lot of CO2, while shuffling papers in a bank produces a lot less. Placing a tax on CO2 emissions will raise the cost of producing everyday goods in Australia and makes it more likely that producers will shift overseas to countries like China taking their CO2 emissions and jobs with them.

Unless Kevin Rudd plans to become the first non-Chinese head of China, he better get used to the idea that he is will become the PM who may just succeed in ensuring that Australia is a country that no longer produces things…

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