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catallaxy in technical exile

Advance Australasia Fair!

with 97 comments

Long before John Howard ever apologises to the Aborigines, he may well be forced to apologise for that underarm delivery, if this report is to be believed.

The House of Representatives Standing Committee on Legal and Constitutional Affairs – a genuinely bipartisan body – is considering the possibility of harmonising Australia and New Zealand’s legal systems, with a view to possible future union. New Zealand was one of the seven colonies prior to Federation (it was commonly described as ‘Maoriland’ in magazines like The Bulletin; the moniker was in no way disparaging). For various reasons, it didn’t join the Federation in 1901 (WA almost did a runner as well, but that’s another story). Steps on the proposed path to union include the introduction of a common currency and ceding responsibility for certain types of legislation to one parliament or the other.

Obviously, serious differences like when in the sequence of pre-game events the All Blacks get to perform the Haka, or whether John Howard should apologise to the generations of Kiwis traumatised by having to wear baby-poo beige one day uniforms as well as having the Chappell brothers bowl underarm at them, will have to be resolved. Added to these are trivialities like the fact that Maori land rights are protected by the Treaty of Waitangi, while a very different situation pertains here.

The full report is available here. Go check it out, and let me know what you think.

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Written by Admin

December 4, 2006 at 11:42 pm

Posted in Uncategorized

97 Responses

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  1. I hope Daniel Barnes stops by for a visit. The whole concept made my head spin…

    skepticlawyer

    December 4, 2006 at 11:45 pm

  2. Like I said. We should embrace Cam’s idea of a South Sea Republic. Much like a “Union of South Sea Republics” which totally disgusts Steve Edwards.

    We should at least be in a common market with no external tariffs with the Pacific Islands. Seems like we are pretty close, our military is everywhere but Wellington. I speculate there is a benefit for all in making these places States in a federation or republics within a Union which have their own tax base, rather than relying on ours to establish law and order.

    Mark Hill

    December 4, 2006 at 11:57 pm

  3. Surely harmonising legal systems is down the list somewhat? Or perhaps certain sectors could be done before others, we don’t need a big push to do it all at once?

    And a thought occurs – IP ‘harmonisation’ with regard to our “free trade” agreement with the US consisted of us conforming to their system. Won’t Australia’s greater say in various areas mean that NZ has to submit to our systems?

    Mark, who is Cam?

    fatfingers

    December 5, 2006 at 12:19 am

  4. I’ll have to hit the hay soon, ff, but once I’ve devoted my standard hour to chambers cleaning tomorrow, I’ll have a gander at the report.

    I have no view on this at all, apart from the obvious one that it allowed me to crack a couple of sporting jokes. More think time required!

    skepticlawyer

    December 5, 2006 at 12:26 am

  5. ABL

    We a pretty close to having free and open trade with these guys. I don’t what’s in it for us though. We’re better off than they are and with the welfare state we have, they would just march into a bonanza of goodies.

    If it’s a loose federation in that they take care of their own financial needs I don’t any point at all other than making up numbers. In fact it would be a dangerous situtaion because all you would need is a party offering all these goodies.
    I don’t see what we get out of it other than headaches and the potential for our money to ripped off through transfer payments. These places are walking basket cases.

    JC.

    December 5, 2006 at 12:27 am

  6. I think our nations would be better served by remaning independent with the current common market structure. I can’t see interest rates increased to control a boom in WA and Queensland being popular in Waikato or Christchurch, so a common currency is also not attractive. We just need to look to the European Union for the merits of such political unions. We need less state infrastructure, not more, which would be the tendency of any union between Australia and New Zealand.

    I’d even go so far as to advocate a decentralisation of current federal power to the states (including revenue raising). Then states would be able to more easily compete between themselves for favourable welfare, legal, regulatory and taxation regimes and Australians would be more free to choose how much government they desire. A mass migration of Australian libertarians to the Tasmania, ACT or NT may see these small legislatures adopt increasingly libertarian policies.

    Brendan Halfweeg

    December 5, 2006 at 12:34 am

  7. “A mass migration of Australian libertarians to the Tasmania, ACT or NT ”

    Nice appealing places there, Brendan ….. NOT

    Jason Soon

    December 5, 2006 at 12:36 am

  8. “A mass migration of Australian libertarians”

    If only there actually was a ‘mass’ of libertarians 🙂

    fatfingers

    December 5, 2006 at 1:00 am

  9. “A mass migration of Australian libertarians to the Tasmania, ACT or NT ”

    Nice appealing places there, Brendan ….. NOT

    Point taken, but it would be these smaller legislatures that would be more likely to innovate on policy to compete against Victoria and NSW, in similar ways that Singapore and Hong Kong have competed. On the other hand, the natural competitiveness between Sydney and Melbourne may lead the state governments into competition for big business.

    I simply can’t see any benefit to adding to the Australian federation when we should be concetrating on fixing the commonwealth. This will be a costly and bureaucracy increasing exercise that will only push us towards increased state control.

    Brendan Halfweeg

    December 5, 2006 at 1:09 am

  10. The Top End’s great, Jason.

    Shame on you!

    C.L.

    December 5, 2006 at 1:21 am

  11. What about an Australian “free state project”? In the US a group of libertarian have picked New Hampshire as their most suitable candidate (no seatbelt laws, liberal gun laws, no income tax etc) and they are now encouraging libertarians to move there to maintain small government presure.

    Which state would we choose in Australia? I would suggest the only real options are WA or Qld. SA & ACT sucks. NSW & Vic are too populas. Canberra too cold & boring. NT too empty. I pick Qld because I’m already here… 🙂

    I agree with further decentralisation and competitive federalism… but that is not necessarily inconsistent with some sort of south pacific union. Closer to ties with the pacific would stop them being basket cases and potential future threats.

    (…as GMB would love to tell you, they are all heavily funded by China, a country that is currently attempting to secretly invade Australia and eat your children and force us all to give land rights to lesbian whales).

    John Humphreys

    December 5, 2006 at 1:25 am

  12. For god sake Humphreys wake up. Of course china would have operatives here. Why wouldn’t they want to know what the hell is going on in their biggest supplier of raw materials. They are selling serious weaponry to some of the most distasteful regimes going in order to secure raw material supplies. Why would you think they wouldn’t mess round in our neck of the woods. They’re scared shitless about their supplies.

    Industrial espionage is an important facet of their operations around the world particularly the US. Why not here?

    JC.

    December 5, 2006 at 1:45 am

  13. If only there actually was a ‘mass’ of libertarians

    Wealth is the great liberator, as people continue to increase in wealth, the power of the state will diminish. We are already beginning to see this in state education with increasing proportions of Australians choosing to educate their children privately. Despite the non-level playing field that state education enjoys, we still have sufficient freedom to choose non government schools. We are already seeing downward pressure on the welfare state through employment growth, downward pressure on the national health system through private insurance. Australians may not be libertarians, but they are choosing non-government solutions in their personal lives. As this process continues, Australian voters will wonder why they spend time every 3 years voting on what the state will do for them, when in reality they are doing for themselves and don’t need the state. Wealth will allow Australians to opt out of the state and eventually see the state for what it is, a parasite on their good works.

    I haven’t really though about this too much, but going on Andrew Leigh’s predicted 2006/07 figures of a median individual income of $27,000 and a household median income of $69,276, once median household real income rises to $140,000 and median real personal income reaches $55,000 (assuming similar proportion between personal and household medians), we will all be very rich indeed. Assuming that we can maintain a real growth rate of 2.5% and wages grow proportionally with national GDP, we will reach these income levels in 25-30 years. At this sort of real median income level, Australians won’t be need mass government programmes and income redistribution will be thought of as a quaint throw back to when Australia and Australians were poor.

    Of course, that is not a reason to suggest we couldn’t get there faster by reducing government intervention now. Perhaps then Le Monde will publish an article “We are all libertarians now”, then bitch and moan about why the French state had to collapse first before it realised the error of its welfare ways.

    Brendan Halfweeg

    December 5, 2006 at 1:58 am

  14. “as people continue to increase in wealth, the power of the state will diminish”

    So how to explain the growth of the power of the state over the last hundred years?

    “Assuming that we can maintain a real growth rate of 2.5% and wages grow proportionally with national GDP”

    Big assumptions that I would not like to bet on. Still, I hope it happens that way.

    fatfingers

    December 5, 2006 at 2:32 am

  15. Shit.
    I just fell off my chair and really hurt myself after reading and agreeing with fatso.

    What happened fats, you turned all libertarian on us or is that someone posing as you?

    JC.

    December 5, 2006 at 2:39 am

  16. Brendan

    Good ideas but…. don’t forget that poverty is a relative thing. A poor person here would be considered extraordinarily wealthy in Black Africa.

    In other words a real income of $60,000 in a few decades will have the left party demanding welfare support for the “disadvantaged”

    JC.

    December 5, 2006 at 2:43 am

  17. So how to explain the growth of the power of the state over the last hundred years?

    There is a certain level of wealth in which democracies begin to feel they can and should help the lesser off. So the state redistributes income, slowing down economic growth on the basis of decreasing poverty and increasing opportunity for those at the bottom of society. Yet, individuals have struggled on despite the chains they have had imposed on them by the majority, and to show that the individual’s course is always the most moral, they having brought their brethren along with them through improved standards of living that have been enabled unconsiously through the labours of capitalists and entrepreneurs.

    The state has merely lived like a parasite off of the taxes of individuals, but once individuals become wealthy, the state’s influence diminishes. Of course while many remain tethered to the state, the state will still be able to wield power over all. Once we are all so wealthy that the majority do not rely on the state for income support and public services, the path of the individual will become self-realising. Increasingly Australians are choosing there own paths, pursuing divergent paths for which the state is finding increasingly difficult to deal with, such as the so called brain drain.

    The rise and fall of 20th century totalitarian states demonstrates merely that the liberal democracies path may be flawed, but is much more preferable to anything else which men can contrive.

    Brendan Halfweeg

    December 5, 2006 at 3:40 am

  18. JC: “Of course china would have operatives here.”

    I don’t know where you got the idea that I disagree with you. I know China has operatives here. I know we have operatives in China. Same is true (in both directions) of the US, Peru, Singapore, Estonia & pretty much everywhere else. That’s how the game works.

    As a general rule, if somebody introduces themselves as the second assistent to the ambassador then make sure you don’t drop any state secrets… 🙂

    John Humphreys

    December 5, 2006 at 3:59 am

  19. Someone above mentioned competition between Sydney and Melbourne. What competition? As the old saying goes, there’s Sydney and there’s the bush.

    Rococo Liberal

    December 5, 2006 at 8:41 am

  20. Free trade with the pacific region: YES

    Free movement within the pacific region (as per nz): YES

    A common government: NO WAY.

    I’d rather spend time figuring out how to bring about an end to federation. It has been an utter failure. It was meant to remove trade barriers but has increased them massively and merely shifted the interface at which they apply (ie inter household rather than inter state).

    As for currency. The Australian dollar is amoungst the most heavily traded currencies on the planet and it’s defacto coupling with commodity prices makes it amoungst the most stable. New Zealand would be best served by adopting a “fixed exchange rate” monetary policy and targeting the aussie dollar instead of targeting domestic interest rates. It would be good for trade, it would enrich both nations and it would create a much bigger capital market for both regions to enjoy.

    terjepetersen

    December 5, 2006 at 9:02 am

  21. Who is Cam?

    Cameron Riley, http://www.southsearepublic.org/

    I don’t agree with everything there. Its just forward thinking IMO.

    Mark Hill

    December 5, 2006 at 10:13 am

  22. There are spots where I think Brendan’s right, and spots where I agree with ff. Complicated. I have to say the idea of full union (ie NZ becomes a state of Australia and we finish up ‘the Federation of Australia and New Zealand’) strikes me as really, really strange.

    skepticlawyer

    December 5, 2006 at 11:35 am

  23. Free trade with the pacific region: YES

    Free movement within the pacific region (as per nz): YES

    A common government: NO WAY.

    Second that.

    I’d rather spend time figuring out how to bring about an end to federation. It has been an utter failure. It was meant to remove trade barriers but has increased them massively

    Rubbish! I don’t have to pay tariffs at Wodonga or Coolangatta and nobody else does either. Look at the barriers in place in the 1890s, look at the barriers (?) in place today, and be prepared to retract this statement. Look at the organisation of policing, education and health services and realise that both the national level and the local level are simply inadequate to provide these. As I’ve said here and there, some jurisdictions within Australia are too small to support effective government, so let us have no more nonsense that the Northern Territory is somehow comparable to Hong Kong.

    There should be a common currency across Australia, New Zealand, all Pacific Forum nations and East Timor. I don’t care what it’s called and I don’t care if we have to have new banknotes with Bradman on one side and Hillary on the other. Economic and military stability in the region is in our national interest (and NZ’s) and other functions of government can be done at the local level.

    Yet, individuals have struggled on despite the chains they have had imposed on them by the majority, and to show that the individual’s course is always the most moral, they having brought their brethren along with them through improved standards of living that have been enabled unconsiously through the labours of capitalists and entrepreneurs … Once we are all so wealthy that the majority do not rely on the state for income support and public services, the path of the individual will become self-realising.

    What a load of hippie twaddle! Part of my social contract is that I want the state to protect me & mine from Rodney Adler, Brad Cooper, Ivan Milat and Alan Bond, and will vote accordingly, regardless of their personal economic circumstances. Until all choices are infinitely well informed, and until all cartels have been abolished, it is crap to talk about the supremacy of choice.

    Andrew Elder

    December 5, 2006 at 11:43 am

  24. That is why I think a “Union of South Sea Republics” is a better idea.

    Now this is a bit out there. Bear with me. Australia, Fiji, NZ, PNG, Cook Islands etc Federate.

    There is a national Government for all countries, like our Federal Government. I say we put in ona tropical paradise, opposed to Canberra. (Perhaps a man-made island for the extropians???).

    The nations do not become states. Old or new state/provincial borders are used, as are local Govenrments. (I would prefer several smaller States in Australia with some places having combined local and state Govenrment [let’s call them regions], others still having seperate State and local authorities).

    The Federal President/PM has Chancellors and Vice Chancellors (in addition to a VP/Deputy Premier) in each nation appointed from the locals enforcing Federal law and being the representatives of the civilian head of the ddefence forces (like junior VPs and Scretaries to the PM) and these guys are next in line before cabinet secretaries/Ministers in the event of death or illness. The Federal Parliament would choose the new VP from the Chancellors and the new President would choose the new Chancellor from the country that had one promoted to VP.

    So the nations still exist in an administrative sense, and probably at sports if they coose to do so.

    There would be no extra layer of Govenrment, federally they would be integrated and locally they may be integrated with provincial Govenrment.

    I would prefer Presidential Govenrment elected preferentially (same for Governors and Mayors), the legislature of each jurisdiction elected from a single house hare-clarke PR system and the judiiciary of each elected using approval voting (first past the post but you can vote once for as many candidiates as you like – which removes the threat of politicising [if that can be said] the judiciary. A bill of rights, citizen referenda and recall voting as well. I would have obudsmen, and appoint counsel to judges if they needed them (i.e non-lawyers). I would codify common law and set legal judgements along the lines of the inquisitorial system but still use the adverserial system, minus juries (as we would have elected judges and magistrates anyway).

    Mark Hill

    December 5, 2006 at 12:02 pm

  25. Mark, We should embrace Cam’s idea of a South Sea Republic.

    The title South Sea Republic comes from a Louisa Lawson quote in the late 19thC newspaper The Republican where she argued for “a great republic of the southern seas.”

    I personally think bad governance in the south pacific is endemic enough that Australia should extend it bureaucratic and political institutions to the south pacific islands. That would include currency, it would also include defence. I don’t see it working without the ADF having total control of military assets and it becoming a multi-ethnic force.

    The major destabilising force in many of these instances are the military and police who side with opposing political factions. If the Fijian military for instance is subsumed by the ADF and learns something of the ADF’s commitment and history toward civil rule then many of these instances will work themselves out politically and democratically without coups and juntas – like what Thailand has.

    I don’t think a union between Australia and New Zealand has any value. In that instance decentralisation is superior avenue and that means NZ remaining a soveriegn entity. The only way I can see that type of arrangement being of benefit in the Pacific is if Au and Indonesia become equal partners in the same way France and Germany did in the EU.

    The EU was started for the purpose of stopping continental European warfare between France and German once and for all (the UN was supposed to serve the same purpose). If there was some Pan-Pacific Union – it is pointless without Australia and Indonesia sheathing their sabres and combining their complementary economies.

    cam

    December 5, 2006 at 12:11 pm

  26. Thanks Cam. I must admit my instinctive suspicion of ‘super-states’ comes to the fore wrt any proposed union with New Zealand. Also, too, I’m pretty sure that the locals in Fiji will see us as interfering colonials if our interactions with Pacific nations are mishandled.

    skepticlawyer

    December 5, 2006 at 12:26 pm

  27. Why the suspicion about super states? Was there more or less coercion, graft and waste in pre Napoleon Germany or post unification under Bismarck?

    If the EU were libertarians and not socialists, libertarians would love it. If we decentralised power and local mayors became welfare barons and mini central planners decentralisation would be unpopular. Authoritatians who rule a alrge country have a threat of seccessionists, authoritarians who in common rule a series of small fiefs have no threats of seccession. Where was a peasent in Lincolnshire to go if repressed? Wheras the Roman Empire began it’s fall when it taxed too heavily.

    New imperialism/colonialism would not be a problem if we adopted a truly federal system of Government.

    Cam, was the quote made while the Australiasia council was still running, and in what cintext was it made?

    I think there is a long-run benefit in Federating with NZ. Perth is roughly the same distance to Canberra. Ditto FNQ. Are there any paticularl administrative or cost problems? Keeping the union or making a new one removes the future possibility of trade barriers and hositlities.

    Mark Hill

    December 5, 2006 at 12:40 pm

  28. Rubbish! I don’t have to pay tariffs at Wodonga or Coolangatta and nobody else does either. Look at the barriers in place in the 1890s, look at the barriers (?) in place today, and be prepared to retract this statement.

    Andrew I am not willing to retract the statement. I stand by the statement I made. The federal government has been bad for trade. The fact that you are more interested in cross border trade than inter-household trade is your own bias.

    Every time an Australian attempt to trade their labour for goods and services they are struck by a massive set of tariffs. These tariffs distort both the incentive for trade and the benefit of trade. And when we look at who imposes these tariffs it is overwhelmingly the federal government.

    And another thing, Australia had a common unit of account across the entire continent before federation. So it did not unify us in any financial sense.

    The only positive thing to come out of federation is a common cultural identity that has allowed us to achieve a high degree of social cohesion. However with a common dominant language in all states in 1901 (with perhaps NT being an exception) this was probably likely anyway. Looking to New Zealand and the common cultural bond between Kiwis and Aussies I think it most certainly would have happened.

    Australian Federation has not delivered any significant benefits and it has caused a lot of problems. I don’t think the egg can be easily unscrambled but we could start by having a much smaller federal government.

    terjepetersen

    December 5, 2006 at 1:02 pm

  29. if we join up with NZ would we be maoried?

    Bring Back CL's Blog

    December 5, 2006 at 1:10 pm

  30. NZ has big potential racial problems which they have recently bought off with racial quotas and preferences. Why would we want to buy into that shit?

    JC.

    December 5, 2006 at 1:19 pm

  31. Skeptic Also, too, I’m pretty sure that the locals in Fiji will see us as interfering colonials if our interactions with Pacific nations are mishandled.

    Arguably Australia’s hands-off policy to the South Pacific in the 70s was a result of rising nationalism in those island states because of our interference prior. The wheel has probably turned enough that many of the governments wish our co-operation in stabilising their affairs – with East Timor and the Solomons being good examples. If Australia does adopt a PEPC style situation with them it should be expected that half a century later will see another rise of New Guinean and Fijian nationalism – unless those island states prosper from the arrangement.

    Many of those super-state arrangement aren’t really about soveriegnty anyway, but defraying the cost of being a nation-state. The EU allows smaller nation-states to exist as they can outsource the capital intensive components of being a nation-state to the EU. Such as currency, foreign policy, economic regulation, defence etc. The EU has plenty of small states now, and may see more in its future.

    Rather than a super-state Australia should probably leverage its wealth to make it cheaper for the island nations to be nation-states. The means they will have to out-source currency, foreign policy and defence to Australia – which is well within our capability. It may be worth pursuing if it can bring stable and good governance to those nations – otherwise not.

    Mark, was the quote made while the Australiasia council was still running, and in what cintext was it made?

    The Republican didn’t publish for long. IIRC it ran for about a year in the late 1880s. So it was right around the time that the push for federalism was starting to hit the public conscience. Their republicanism was Bulletin style republicanism. Basically ethic nationalism with political equality inside that ethnicity. Universal suffrage, political rights etc. Like the Bulletin they saw Europe and Britain as a moral corruption toward the goal of Australian achievement and equality. So it had some of the utopianism of Deniehy and Harpur.

    cam

    December 5, 2006 at 1:19 pm

  32. Cam
    The reality as I see it is that a lot of the Pacific natives have a serious problem dealing with a modern world. In some of those countries/Islands the IQ of the general population is barely above 65/100. We would be buying into all sorts of problems with welfare being one issue that wil not go away.

    In a sense we would be sellijg our credit rating for zilch. in fact we would be paying these countries to use out credit rating. It’s a bad deal for us.

    It’s not as through we a short of land. We could just as easily increase our population through smart immigration polices.

    65% of young Dutch want to get the hell out the Netherlands. Get them in.

    JC.

    December 5, 2006 at 1:25 pm

  33. Folks, could I refer you to the fourth paragraph of this as a potentially illuminating non-state perspective? This, and the fact the NZ Commerce Commission has it all over the ACCC.

    Mark, I don’t see the difference between a South Seas Republic and the current setup with a bit of vigilance on the part of the Australian government. Fijians and Solomon Islanders, to use contemporary examples, have to learn to get along and when they forget the ADF steps in.

    A “federation” between a nation of 50,000 and one of 20m is an unnecessary administrative measure. Colonialism has been tried-and-died.

    Terje, I think inefficiencies due to cartelisation (which, admittedly, are inextricable from rent-seeking) are more significant than tariffs. Nice try at dodging practical matters of government, especially when you consider that government provides many of the means by which the benefits of trade can be enjoyed (you’ll cover that in second year).

    The only positive thing to come out of federation is a common cultural identity that has allowed us to achieve a high degree of social cohesion.

    I don’t have a “bias” about cross-border trade, what I have is an awareness of history. Once you understand the history of prying economic instruments from the clutches of the old British colonies, the benefits of federation will become clearer. Australia had a cricket team 24 years before it had a federation, so clearly there’s more to it than social cohesion.

    NZ has big potential racial problems

    No, it doesn’t.

    Andrew Elder

    December 5, 2006 at 1:39 pm

  34. All one need to do is look at the EU and that is enough to put paid to such a stupid idea as a republic of the South Pacific.

    I can see it now; the democratic deficit would grow and grow as non-elected officials and politicians decide to “harmonise” everything in the interests of them and theirs.

    As forthe person who suggested there be a regionbal common currency, fornicate off to the la la land to which you belong, you absolute git! The Euro has utterly failed because it has nothing of substance behind it. Why would the south pacific peso do any better? What is it with you internationalist wallies who can handle a bit of currency conversion?

    Rococo Liberal

    December 5, 2006 at 1:42 pm

  35. Great post again, andy. It would be even better if people understood what the fuck you’re trying to say.

    NZ does have big racial issues. Racial preferencing explains it.

    JC.

    December 5, 2006 at 1:44 pm

  36. What a excellant conflation of intelligence and education. Well done there, chap.

    gilmae

    December 5, 2006 at 1:44 pm

  37. Good Points R Lib.

    The Euro only looks good at the moment because the US has done everything it can to debauch it’s currency.

    In any event there is nothing to stop these places from using the Aussie Dollar as the national currency, or pegging for that matter. Nearly all are fixed to the OZ or NZ dollar anyways.

    JC.

    December 5, 2006 at 1:49 pm

  38. Ummm, gilmae, who was the snark for? Just wonderin.

    Or even if it was a snark…

    skepticlawyer

    December 5, 2006 at 2:12 pm

  39. NZ does have big racial issues. Racial preferencing explains it.

    Let’s look at the assumption behind this: the government acted, therefore it must be right. Bit of a departure for you JC.

    30% of New Zealanders are Maoris or Pacific Islanders. They are overrepresented in prisons and poverty indecies, underrepresented in positions of power, have lower life expectancy and suffer other disadvantages. That said, many countries have racial and other social divisions, and they tend to handle it a lot worse than NZ does. Even famously tolerant Canada, with its Quebecois and native Americans, has it worse than NZ. Hence: while NZ’s position is less than ideal, almost every other society in the world has it worse than them. Big problems? Hardly.

    Andrew Elder

    December 5, 2006 at 2:27 pm

  40. Great points, Andy. As usual you end up blowing yourself up with your own arguments.

    “Let’s look at the assumption behind this: the government acted, therefore it must be right. Bit of a departure for you JC.”

    That’s right it’s good assumption. Racial preferencing and affirmative action programs are the usual prescription by the left to slove racial issues. It has nothing to do with whether I agree or disagree with preferencing.

    “30% of New Zealanders are Maoris or Pacific Islanders. They are overrepresented in prisons and poverty indecies, underrepresented in positions of power, have lower life expectancy and suffer other disadvantages.”

    Thanks for saving me the time to look up the stats to prove my point…… which was

    … why do we want to buy into that sorry mess.

    You are such a loser, andy. I now know why the young Libs gave you the bullet.

    JC.

    December 5, 2006 at 2:35 pm

  41. “Mark, I don’t see the difference between a South Seas Republic and the current setup with a bit of vigilance on the part of the Australian government. Fijians and Solomon Islanders, to use contemporary examples, have to learn to get along and when they forget the ADF steps in.

    A “federation” between a nation of 50,000 and one of 20m is an unnecessary administrative measure. Colonialism has been tried-and-died.”

    From those two paras, I can’t figure out what your position actually is…what I propose is a real Federation anyway, not a sham.

    “Rather than a super-state Australia should probably leverage its wealth to make it cheaper for the island nations to be nation-states. The means they will have to out-source currency, foreign policy and defence to Australia – which is well within our capability. It may be worth pursuing if it can bring stable and good governance to those nations – otherwise not.”

    Why not just federate then, Cam? Why would that be better?

    “In a sense we would be sellijg our credit rating for zilch. in fact we would be paying these countries to use out credit rating. It’s a bad deal for us.”

    Well JC and Roccoco Liberal, the EU might have nothing behind it, but the Euro did require Portugal and Greece to run balanced budgets and have monetary discipline before the union. All we need to do is the same without getting mixed in the same crippling industrial policies as France and Germany. Why does a national credit rating matter anyway boys?

    Mark Hill

    December 5, 2006 at 2:37 pm

  42. Andrew, the only “means” for trade that government provides is a framework of property and contract law and possibly roads and defence. All the rest of the things it provides are things it took away in the first place, currency being the most obvious example.

    Rococo, how has the Euro failed? It has provided Europe with a common unit of account for the first time in decades. It has obvious long term risks associated with the abuses of central power, however to date it has been a largely positive force. The EU is one of the few attempts at loose federalism that might actually work. It has given people the freedom to vote with their feet, it has opened up trade within europe and it continues to be unable to interfere in any significant way with the financial affairs of executive governance thus laying the groundwork for competitive federalism. Unlike the USA (or Australia) it is a system of federalism that does not give significant fiscal authority to the centre and so far I think it is a great achievment. Europeans have been smart enough to slap down any attempt at qualitative enlargement while being open to geographic enlargement. The EU is imperfect but it represents a far better approach to federalism than those attempted elsewhere. Essentially because there is no powerful central executive authority.

    terjepetersen

    December 5, 2006 at 2:39 pm

  43. JC, you only have a point if you asume Australia has no racial or other social problems, and if you assume sarcasm has any force at all. Wrong on both counts.

    Did you get abused by Young Libs as a child? They seem to be very important to you. They needn’t loom so large in your dreamings.

    From those two paras, I can’t figure out what your position actually is…what I propose is a real Federation anyway, not a sham.

    You can’t have a “real” federation between two such unequal parties. If these countries want their nation-states they should have it, but it is in our national interests to have more involvement in those countries than we’ve had. You might call this a “sham” but like democracy, all the alternatives are inferior.

    All the rest of the things it provides are things it took away in the first place, currency being the most obvious example.

    Here I go again, rifling through the annals of Australian history trying to find an example of currency not provided by the state being taken away by it … no, nothing. Have to assume Terje knows nothing about Australian history.

    Andrew Elder

    December 5, 2006 at 2:59 pm

  44. I’ll let Terje show how you are wrong on currency Andrew.

    I don’t know why you think unequal parties cannot Federate, it is in their best interests to do so and they lose the importance of their seperate indentities and collectively gain a new one. I am talking about creating a new nation state whilst keeping the old countires as administrative units. No country would be dominated or bullied around by a dominant partner, because there would be no true partnership as an amalgamation.

    But then you go on to defend interventionism after attacking imperialism, then defend democracy after attacking a straw man of the smaller states federating into us rather than with us into a new entity. Again your position seems unclear.

    Perhaps I don’t think you quite first understood my very far reaching proposal.

    Mark Hill

    December 5, 2006 at 3:07 pm

  45. new zealand exported inflation targeting to the world (namely the US and australia) why would they want to peg their currency to the AUD…

    they should take the radical next step of selling the central bank to some private firm, and let people use whatever the hell currency they want…

    they might just pick the AUD

    c8to

    December 5, 2006 at 3:24 pm

  46. “JC, you only have a point if you asume Australia has no racial or other social problems, and if you assume sarcasm has any force at all. Wrong on both counts”

    Do you get stupider by the hour, Andy. This is not a comparison as to who has the worst racial problems. And no I did not assume we don’t have racial problems. You did, by going off this tangent.

    What they have which is bigger than ours is a large affirmative action progra…..as i said is a sure sign of racial problems. Do keep up, your slowness

    JC.

    December 5, 2006 at 3:43 pm

  47. Terje
    The Euro is a rotten currency. It was set up at the very beginning against the wishes of the german public. That alone disqualifies it.

    Don’t get carried away with the current strength of the Euro at present. Even dead cats bounce.

    JC.

    December 5, 2006 at 4:00 pm

  48. If we get to be a near-libertarian setup. Where even small communities can have what amounts to a PARTIAL secession after a single pebiscite……

    Then if any of these sovereign countries like New Zealand, or and of the Pacific Islands. Or Papua…. If any of these countries want to come under our orbit for awhile and then a little while later leave again that ought to be easy enough.

    We have to sort out under what circumstances a small territory can leave on a PARTIAL-secession basis. And on what circumstances they can leave entirely and be totally sovereign.

    And what that latter part comes down to is a bit like what skeptic was saying about the stealth fighter.

    Dudes should come and go as their local community votes it. But a partial secession only ought to be where a region gaining total sovereignty would jeopardise our ability to exercise the “EFF-OFF” factor.

    That is we need to know that if some community gets to secede that isn’t going to lead to big foreign countries having an intelligence-gathering presence here or yet even setting up bases for forward defense.

    Obviously we would gain in our a ability to deny access to our region for a potential invader if we had materiel on various islands and so could converge on intruding subs, aircraft carriers and planes from all directions.

    From all directions on the map. Heights in the sky and depths of the ocean. That is to say from all angles.

    But once that nasty-business is sorted out folks should be able to come and go from our national orbit on the backs of a single plebiscite.

    The country can leave again and we wish them well. But we keep the bases and we decide who projects power into the region.

    Well actually we don’t. Not right now. We have decided its aok for the Chinese Communists to have an intelligence prescence on our Continent.

    And this despite the fact that there has been no secessions at all.

    [EDIT BY ADMIN – I, GRAEME BIRD, WILL BE FORCED TO APOLOGISE TO FDB BY HAVING THIS COMMENT FORCIBLY INSERTED IN ALL OR MOST OF MY COMMENTS UNTIL I VOLUNTARILY RETRACT OR APOLOGISE TO FDB FOR MY VILE COMMENT ON THE GAIDAR THREAD]

    GMB

    December 5, 2006 at 4:11 pm

  49. Here I go again, rifling through the annals of Australian history trying to find an example of currency not provided by the state being taken away by it … no, nothing. Have to assume Terje knows nothing about Australian history.

    Lets assume that you take a technically narrow view of Australian history and that it started in 1901. Then at that time the primary currencies in circulation were either issued by state governments or were issued by private banks. Both forms of currency were effectively abolished in 1910. The first by the “Australian Notes Act of 1910” and the second type by the “Australian Bank Notes Act of 1910”. So at the time of federation privately issued currency was already circulating in competition with currency issued by state governments. But maybe your “annals of Australian history” are missing the year 1910.

    Lets assume the longer view of Australian history since 1788. The first recorded currency of significance in European Australia was rum. It was not a currency decreed by government edict but a product of necessity. Of course those in government positions (ie the Rum Corps) quickly find a way to make a profit from this situation. It was nearly 25 years before the govenor (Macquarie) managed to displace rum as a currency and introduce a government imposed currency, however this delay was not from any lack of trying.

    I don’t think much work has been done on currency in Australia prior to 1788. However I think that the anecdotal evidence that rare Ocre from the NT was traded and valued right across the eastern part of Australia indicates a fair possibility that it operated as a form of currency. Although I would expect that it was not a solo act and barter was probably also a prevalent means of trade.

    terjepetersen

    December 5, 2006 at 4:41 pm

  50. The Yolgnu word for ‘money’ is ‘rapiah’, clearly borrowed from Maccassan traders, with whom the Yolgnu traded extensively before 1788. I don’t know the extent to which the two groups developed a currency as opposed to barter, though.

    skepticlawyer

    December 5, 2006 at 4:48 pm

  51. The Euro is a rotten currency. It was set up at the very beginning against the wishes of the german public. That alone disqualifies it.

    Don’t get carried away with the current strength of the Euro at present. Even dead cats bounce.

    The German mark was imposed by the occupying forces after WWII. So I would not get too sentimental about it. If the “Mark” which was imposed on the German people was a good currency than the EURO can’t get disqualified just because it was imposed. Unless you are claiming that the Mark was a rotten currency, in which case it would be helpful if you would explicitly say so.

    I hate the term “strong currency”. It leads to the implication that a “stonger currency” would be better. Which is not true at all. A stronger currency means deflation. What you want is a “stable currency”. A reliable unit of account that cheats neither creditors or debtors and allows commerce to more easily transend both space and time. To date the EURO is better than the Mark and every indication is that it will remain better than the Mark.

    terjepetersen

    December 5, 2006 at 4:52 pm

  52. I don’t know the extent to which the two groups developed a currency as opposed to barter, though.

    Currencies emerge naturally from barter. It is how rum came to be the currency of NSW. It is how gold came to be the currency of the world. It is how cigarettes become the currency in prisions. Once the intensity of barter is sufficient currencies always emerge. The formation of currency comes as readily to humans as language. Unfortunately governments regulate currencies more heavily than they regulate alphabets.

    terjepetersen

    December 5, 2006 at 4:57 pm

  53. Terje

    Are you seriously equating the mark and the way it was imposed with the shananigans played by the eurocrats (and France) in forcing the German people to do away with the Deutschemark and into the rat infested euro. Some liibertarian you are.

    No national referendum was ever held in Germany to accede to the wishes of the people. It was imposed on them by an elite group of idiots who thought they knew better.

    The budget defict limits set by the Maastricht treaty were broken the first day the euro was issued by France Italy greece spain and portual. this is a disgrace.

    moreover time will tell whether a fiat currency without political union will endure. I wouldn’t be putting all my long term holdings in that currency though.

    JC.

    December 5, 2006 at 5:11 pm

  54. “Currencies emerge naturally from barter.”

    Do you believe or even read what you write? You support the euro yet make the above comment. from what barter arrangements did the euro develop, or the greenback for that matter?

    JC.

    December 5, 2006 at 5:13 pm

  55. I aint apologising to FDB.

    He’s apologising to me.

    For being such a callous bastard as to laugh at free-enterprise people who have been poisoned.

    That could have been me throwing up and near death and he would be snickering just the same.

    And a second apology is due at this horrid leftist bastard affecting to miscontrue what I said as an actual threat against his family.

    Thats just fucking ridiculous and the dirty socialist knows it.

    You see both I and Gaider are anti-socialists. So to FDB we are non-persons. And it doesn’t matter how shabby our treatment if the persecuter is ideologically sound in FDB’s book.

    You apologise FDB you loathsome bastard.

    If it wasn’t bad enough, the attitude you revealed about Gaider, you just don’t know when to be quits.

    Now you are just multiplying your wrongdoings by throwing a tantrum.

    [EDIT BY ADMIN – I, GRAEME BIRD, WILL BE FORCED TO APOLOGISE TO FDB BY HAVING THIS COMMENT FORCIBLY INSERTED IN ALL OR MOST OF MY COMMENTS UNTIL I VOLUNTARILY RETRACT OR APOLOGISE TO FDB FOR MY VILE COMMENT ON THE GAIDAR THREAD]

    GMB

    December 5, 2006 at 5:21 pm

  56. GB
    How about a mutual apology. He apolgizes for showing his callous leftist streak in public and you aplogise too. That’s fair isn’t it.

    I’m just trying to broker a solution here.

    JC.

    December 5, 2006 at 5:25 pm

  57. You don’t even have to apologise, Graeme. He actually asked for a retraction. All you have to do is say something like ‘I retract what seemed like a threat but was really a joke that went over the top’

    Jason Soon

    December 5, 2006 at 5:27 pm

  58. JC,

    I was not saying “all currencies emerge naturally from barter”. What I was saying was that all barter systems that operate with enough intensity and for long enough lead to an emergent currency irrespective of government action. Of course that claim is a little flaky around the edges because objectively defining “intensity” is difficult and examining every example of history is not possible. However if you can tell me about any era or place in which there is/was a lot of barter for a sustained period of time (eg a year or two) and no emergent currency (or currencies) then I will be impressed.

    Many currencies emerge via government fiat. And some currencies that emerge via fiat later become a form of market based currency unconnected to government (eg the Swiss Dinar in Kurdish Iraq before the Americans invaded). And some currencies that are created by government fiat in one area emerge as the natural market chosen currency in other areas where there is no legal requirement to use it (eg US dollar in black markets around the world).

    Now can you please clear up whether you claim that the Mark was a rotten currency, or whether you retract the idea that imposed currencies are automatically “rotten” currencies. Answering this really would certainly fascilitate a discussion of what is good and what is bad about the EURO. It is of course reasonable for you to retract the claim and then cite other reasons why the EURO is a rotten currency and I will be happy to discuss each of them in turn. Some of them I may even agree with (eg there were better ways to advance the monetary affairs of Europe that did not involve creating another bloody central bank).

    Regards,
    Terje.

    terjepetersen

    December 5, 2006 at 5:31 pm

  59. Are you seriously equating the mark and the way it was imposed with the shananigans played by the eurocrats (and France) in forcing the German people to do away with the Deutschemark and into the rat infested euro.

    Actually on the question of imposing a currency the mark seems worse than the euro because it was imposed by an occupying foreign force whilst the Euro was adopted by a democratically elected government. I really think this is a dead end line of argument for you JC. Retract it and then cite some more intelligent reasons.

    terjepetersen

    December 5, 2006 at 5:39 pm

  60. You shouldn’t be taken in by this jerk Jason.

    Thats the lamest accusation imaginable.

    He’s just another socialist whose a socialist even though socialism killed 100+ million people last century.

    He’s happy with the killing and he let that slip.

    And now he’s compounding his hatefullness with these ridiculous accusations.

    [EDIT BY ADMIN – I, GRAEME BIRD, WILL BE FORCED TO APOLOGISE TO FDB BY HAVING THIS COMMENT FORCIBLY INSERTED IN ALL OR MOST OF MY COMMENTS UNTIL I VOLUNTARILY RETRACT OR APOLOGISE TO FDB FOR MY VILE COMMENT ON THE GAIDAR THREAD]

    GMB

    December 5, 2006 at 5:39 pm

  61. Of course the Mark was not a rotten currency as as far Fiat currencies go. it served the German public well.

    It was a hard currency in the sense that the central bank paid more attention to not letting it debauch like the rest of the majors. Strength or weakness in an everyday sense has nothing to do with it. Take a look at the money supply growth in the area and compare that to the Dmarks. Euro M3 has been growing at around 9% since inception.

    You need to retract you comments about how great the Euro is. It was imposed without due recourse to the german people.

    JC.

    December 5, 2006 at 5:42 pm

  62. The budget defict limits set by the Maastricht treaty were broken the first day the euro was issued by France Italy greece spain and portual. this is a disgrace.

    Which bit was the disgrace? The deficit limits or the fact that they were broken. If you mean the former then I agree. The deficit limits were a stupid idea. The solvency or otherwise of a national government is irrelevant to the value of a transnational currency. And in fact it is irrelevant to the value of a national currency also unless the government decides to use monetary policy as a means to inflate itself out of debt.

    terjepetersen

    December 5, 2006 at 5:43 pm

  63. Take a look at the money supply growth in the area and compare that to the Dmarks. Euro M3 has been growing at around 9% since inception.

    Who gives a shit about M3.

    terjepetersen

    December 5, 2006 at 5:44 pm

  64. Terje

    You’re barking mad aren’t you. The occupying force did an act of kindness by introducing a currency to allow a battered people to survive. it could have been disbanded at any time after by the duly elected governement. yet you persist in suggesting the euro was introduced to the germans in a democratic liberal way.

    It was forcibly imposed on them by the elements in the government who got taken in with the EU crap.

    What you are insinuating is nothing short of Eurobabble

    Me retract? seriously can you see straight or are you just another EU apologist who pretends the current structure is honky dory as far freedom goes.

    And you call yourself libertarian?

    JC.

    December 5, 2006 at 5:52 pm

  65. ” Who gives a shit about M3. ”

    That about says it all.

    Terje, Do yourself a favour and don’t discuss anything about monetary economics as you seem to know sweet fuck about it.

    JC.

    December 5, 2006 at 5:53 pm

  66. it could have been disbanded at any time after by the duly elected governement.

    It was. They now use the EURO.

    And you call yourself libertarian?

    You’re the one who thinks that private banks engaging in the credit creation process is a problem. Hell why not complain about M4 while we are at it.

    You’re barking mad aren’t you.

    It probably looks that way to somebody that doesn’t know what they are talking about.

    terjepetersen

    December 5, 2006 at 5:57 pm

  67. ” The solvency or otherwise of a national government is irrelevant to the value of a transnational currency.”

    If you don’t impose borrowing limits and budget constraints it becomes the equivalent of the tyranny of the commons.

    In other words the lessor countries could use it by piggbacking the credit rating of the bigger economies… ie in this case Germany.
    If they defaulted the debt would be socialized. that’s why germany rightfully imposed limits.

    the south basically cheated form the first day. Good way to start a party.

    JC.

    December 5, 2006 at 5:59 pm

  68. ” You’re the one who thinks that private banks engaging in the credit creation process is a problem. ”

    Money supply growth comes from the innards of the central bank, in this case the ECB. It has nothing to do with private banks and the credit process in terms of me being critical of it.

    JC.

    December 5, 2006 at 6:01 pm

  69. That about says it all.

    Terje, Do yourself a favour and don’t discuss anything about monetary economics as you seem to know sweet fuck about it.

    Did you know that the US Federal reserve ceased measuring M3 in March this year. Maybe they should also do us a favour and stop discussing money. However I suspect that it is unlikely. In the mean time I will continue to try and educate unreformed monetarists such as yourself.

    And I think you’re sweet also.

    terjepetersen

    December 5, 2006 at 6:02 pm

  70. If they defaulted the debt would be socialized.

    Crap. If they defaulted those that they owed money to would wear the cost. In other words if you invest in bonds you run the risk that the government can’t or won’t honour the debt.

    terjepetersen

    December 5, 2006 at 6:05 pm

  71. The fed ceasing to measure M growth is a huge mistake and they will pay dearly for it.

    But no matter, there more ways to skin cat. We are able to see hwat their up by watching fed balance sheet growth. It more informative anyways.

    JC.

    December 5, 2006 at 6:06 pm

  72. If you don’t impose borrowing limits and budget constraints it becomes the equivalent of the tyranny of the commons.

    If you impose borrowing limits it becomes tyranny of central government. And the reason I like the EU is that any notion of central government is very weak and feeble.

    terjepetersen

    December 5, 2006 at 6:06 pm

  73. We are able to see hwat their up by watching fed balance sheet growth. It more informative anyways.

    Do you mean M0. Now that would be something intelligent to watch. Although obsessing about growth in M0 is also silly. The issue that is of primary concern with any currency is its “value” not it’s quantity. There are two sides to the supply and demand equation and you seem to want to ignore the fact that international demand for the Euro as a reserve currency necessitates an increase in supply (ie more M0) unless they want to go into a period of deflation like Japan did in the 1990s.

    terjepetersen

    December 5, 2006 at 6:09 pm

  74. Not all money is held in bonds, Terje.
    A government default in say Spain would also be felt in Germany if thewre weren’t these rules.

    It’s also one of the reasons Germany insisted on sovereign risk.

    More to the point, i suppose you think the intoduction of the Euro was a good thing for germany . It was liberal too, right?

    JC.

    December 5, 2006 at 6:10 pm

  75. Not all money is held in bonds

    No kidding. However we were talking about government debt and what happens when they default.

    terjepetersen

    December 5, 2006 at 6:14 pm

  76. More to the point, i suppose you think the intoduction of the Euro was a good thing for germany.

    Compared to a Europe of floating currencies it wass absolutely a good thing for Germany and the German people. Except for those working in the currency business I suppose.

    terjepetersen

    December 5, 2006 at 6:15 pm

  77. ” There are two sides to the supply and demand equation and you seem to want to ignore the fact that international demand for the Euro as a reserve currency necessitates an increase in supply (ie more M0) unless they want to go into a period of deflation like Japan did in the 1990s. ”

    M3 growth, which incidently is something the ECB watches primarily because the Bundesbank insisted on it has been increasing at around 8% since inception…. well before international demand for the Euro set in.

    Moreover, international demand for a currency shouldn’t by itself require an major increase in money supply gowth.

    and what and how is Japan a valid analogy to this . japan failed because of a asset/debt callapse brought on by inflated values.
    Japan is a horrible analogy.

    JC.

    December 5, 2006 at 6:17 pm

  78. How exactly has this been good for Germany?

    And wouldn’t it have been better from a libertarian perspective if the people had chosen the currency?

    What good has germany got out of this?

    JC.

    December 5, 2006 at 6:20 pm

  79. Yes the ECB watches M3 because there are still unreformed monetarist floating around making jobs for statisticians. However the German central bank also engaged in this folly so we can’t be too hard on the ECB.

    Japan is relevant because it shows that interest rate loons don’t know what to do when interest rates are at zero and demand for yor currency is leading to deflation because you have not figured out that you can expand M0 without targeting interest rates.

    Inflation is a monetary phenomena. It is caused purely by the dynamics of supply and demand for a currency. Monetarist understand this at least in so far as the supply bit is concerned. What gives me a giggle is listening to you tell me that unlike inflation the deflation in Japan was something other than monetary. That it was a product of “asset bubbles”. Now you sound like a confused keynesian who wants to blame a monetary event on private sector banks and market failure due to bubbles. And you call yourself a libertarian.

    terjepetersen

    December 5, 2006 at 6:35 pm

  80. From a libertarian perspective it would certainly be good if the German people were free to choose their own currency through an emergent market process (unless you’re a democrat). However so long as we have tax laws that are defined in terms of a particular unit of account, the demand for the government nominated currency will always tip the market towards the currency the government prefers. It is after all the gorilla in the room. So long as we have tax and fiat currencies we have to deal with options that are inheriently not libertarian. So the best we can hope for is a monetary system that approximates as best as possible what a libertarian world would create. And it would not lead to a world of widely floating currencies defined by national borders. It would create something more like e-gold or the promisory notes backed by gold and used in Australia prior to 1910 (and missing from Andrews history book).

    terjepetersen

    December 5, 2006 at 6:46 pm

  81. Terje

    lets not start another banking thread here as you don’t really seem to understand.

    “Yes the ECB watches M3 because there are still unreformed monetarist floating around making jobs for statisticians.”

    Is money neutral, or not, terje

    If it isn’t tell us how the central banks ought to be measuring/ controlling M growth.
    If is is neutral, tell us why it is so.

    You seem to be in the neutral camp. but it is better hearing from you.

    ” However the German central bank also engaged in this folly so we can’t be too hard on the ECB. ”

    Terje, the Buba watched the money supply because it wanted a stable currency regime. It did so and was the most successful central bank since the war primarliy because their one and only mandate was price stability..

    “Japan is relevant because it shows that interest rate loons don’t know what to do when interest rates are at zero and demand for yor currency is leading to deflation because you have not figured out that you can expand M0 without targeting interest rates.”

    At zero interest rate, the expansion of the money supply should be limitless in theory.

    “Inflation is a monetary phenomena. ”

    Yes it is.

    “It is caused purely by the dynamics of supply and demand for a currency”

    Not exactly. It is caused by the central bank increasing the money supply or using the monetary base to increase the money supply at too high a rate. We don’t know where the money will be funnelled. It can go to bid up goods and services like it did in he 70’s or it can go to bid up asset prices like it did in Japan and the US in the 90’s, causing asset price inflation or a bubble.

    “What gives me a giggle is listening to you tell me that unlike inflation the deflation in Japan was something other than monetary”

    Please point to where I said it was something other than money.

    “That it was a product of “asset bubbles”

    Well yes. The inflation/ asset bubble was caused by a monetary expansion. someone who isn’t confused like you would undstand this.

    “Now you sound like a confused keynesian who wants to blame a monetary event on private sector banks and market failure due to bubbles.”

    Where did I say that, Terje? Stop being so dishonest because you lost the argument. As far as I am concerned there is never such a thing as market failure.

    JC.

    December 5, 2006 at 6:59 pm

  82. point 80 is pretty good. Do you have a socialist twin that pretends is you.

    JC.

    December 5, 2006 at 7:02 pm

  83. Is money neutral, or not, terje

    If it isn’t tell us how the central banks ought to be measuring/ controlling M growth.
    If is is neutral, tell us why it is so.

    You seem to be in the neutral camp. but it is better hearing from you.

    You seem reasonably smart so I will give you the detailed version. But only if you promise to listen carefully.

    The central bank should absolutely control the growth of M0. You can’t impose a fiat currency and then refuse to manage it. Well at least you shouldn’t if you want to be a responsible dictator.

    M0 is the stock of currency in circulation (ignoring other minor technicalities). The value of the currency is dependent on two factor and two factors only. Those factors are supply and demand. A central bank has complete control over the former and no direct control over the latter.

    People use currency for a multitude of purposes. However essentially there are only three significant purposes. And it is the dynamics of these three purposes that determine the totality of the demand half of the above value equation.

    One purpose is to fascilitate trade (ie as a medium of exchange). The more trade there is within a region the greater the demand will be for currency (ceteris paribus). This is why the Reagan tax cuts were disinflationary. It is why the economic contraction brought on by the plague in medieval Europe was inflationary. It is why a supply contraction brought on by drought in a highly rural economy is inflationary. It is why the massive growth of Britian during the 1800s was mildly deflationary across that century. All these changes to output and the rate of change effect the demand for currency. It is also why stagflation can exist. And it is why trying to slow the growth of your economy is a utterly stupid remedy for inflation.

    However there are other things that can be used as a substitute for currency in terms of this function as a medium of exchange. The major rival to currency as a medium of exchange is something we call credit. This is the stuff that gets added to M0 to form M1,2,3,4 etc. It is the stuff that gets moved from one bank ledger to another when most businesses pay their bills. The more of this stuff the more of it will substitute for currency as a medium of exchange. In this sence it acts as a product substitute that dampens demand the way that people will drink Pepsi if Coke is not on the menu and vise versa. So the growth in credit aggregates (eg M3-M0) can indeed lower the demand for currency (M0). More on this issue in a minute (and on why I don’t give a shit about knowing M3).

    The second purpose for money is as a store of value. Again there are substitutes. You can buy land or lumber, shares or satin. Most non perishable goods offer the capacity to store value. And again the pepsi/coke effect can impact the demand for currency. One very big source of demand for currency as a store of value is in fact foreign central banks. They have a huge impact on the demand for our currency. As do all foreign parties that buy and sell and hold our currency. Credit can also act as a store of value but on aggregate the number of parties in debt is countered by the number of parties in credit and the net wealth represented by all credit cancels out to zero.

    The third purpose of currency is a very critical and massively underated consideration. Currency can act as a unit of account. This unit of account defines what the bank owes you when your savings acount says “Westpac owes JC $50”. It is what defines the concept of Bill Gates being worth $100 gazillion. It is what allows me to say if you deliver all those cattle to me in 12 months time I will pay you $500. The unit of account funtion is not something that credit can do but rather it is something that the existance of credit depends on. Credit is entirely dependent on an external unit of account such as that offered by currency. Credit is definitely not a dimensionless quantity. If you had a bank account that said “Westpac owes JC 50 goats” then the unit of account would be goats and even if both you and the bank owned no goats you would both be interested in the current value of goats.

    This last function of currency is in fact why inflation and deflation actual matter at all. It is only because we wish to write contracts and operate lines of credit that will be settled at some future date that we as creditors and debtors actually care about the value of our unit of account remaining stable. If all business was done as it is in a spot market then none of us would overly care what the inflation rate was doing. However we all have morgages or leases or bank accounts or salary contracts or equipment finance or any number of other commercial relationships where the ongoing value of the unit of account is highly relevant.

    Okay so the central bank controls M0. And the value of currency is dependent on both supply, which the central bank can control, and demand that is driven by hundreds of factors that are all hidden below the surface and not possible to measure in any meaningful way. M3 tells us a little about the substitutes that exist for currency but it tells us nothing about the totality of the demand for our currency. Measuring M3 is like looking at a photo taken from the southern side of a possibly hollow icebeg and seeing the view of the above surface ice from this single aspect claiming to have some useful insight into how much this thing weighs. Its a futile and ultimately pointless measurement.

    So what does that leave us with? When modifying M0 what should the central bank use to close the loop? What should be its guide to monetary policy if monetary aggregates are worthless? Ideally of course the thing that matters is that they watch the value of the currency. If they can keep the value stable then they can infer that supply is matching demand. The question then is how do you measure “value” in a manner that is timely and allows you to adapt your monetary position to track towards stability.? This quetion of how to measure value is an involved question with some simple answers but some long explainations required. So we will be at this for a while longer if you will stick with me and you want me to go on. For now I will give you some historical ways that it has been done before getting into the guts of it (assuming you want me to go on).

    Here are some ways that the value of a national currency can be measure.

    1. From after WII until the early 1980s Australias central bank measured the value of our currency using the US dollar. From about 1950 until about 1970 they fixed the exchange rate to the US dollar (ie targeted a stable value according to their chosen measure for value). From the 1970s they moved to a crawling peg. Before 1970 this was a great system. After 1970 it proved to be quite terrible. One has to look at the stablity of the underlying yardstick for value that was being used to understand why.

    2. For most of the history of the USA the value of the US dollar was measured using gold. It was fixed at 20 oz of gold for much of it’s history and at 35 oz of gold for much of the 20th century. Again the success or otherwise of this system can only be understood by looking at the yardstick for value that was being used.

    3. In Australia today the central bank tries to fix the value of the Australian dollar using a basket of consumer goods called the CPI to measure value. However over the short term this is a pretty unworkable approach so they use an interum target which is the price of credit (ie interest rates). In my view this is a pretty lousy system for several reasons but it is how they do it.

    4. Keynes recommended a system based around an international commodity index called the bancor. This system was never implemented however essentially it entailed a basket of commodities (eg oil, wheat etc) being a yardstick for value and central banks would then use this to measure the value of their currency.

    All these systems have a lot in common. Under all these systems the central bank modifies the size of M0 on a daily and even hourly basis and continuely observes the impact on the value of the currency. By constantly adjusting M0 in this process (called open market operations) and by constantly refering to their preferred measure of value they hope to create a stable currency.

    However these systems also have some fundamental differences. And that is that each measure of value has some strengths and some weaknesses.

    Of course other systems have been tried. In the early 1980s a number of countries stopped trying to target value and instead tried to the quantity of demand for the currency directly. They used aggregates such as M3 to try and know the weight of the iceberg. However the zealots were quickly kicked out of the key positions and we went back to targeting the value of currency rather than the quantity.

    Regards,
    Terje.

    P.S. This is all basic supply-side economics for anybody that has ever formally studies supply-side economics. And I suspect that in Australia I am probably the only one that can come close to making that claim.

    terjepetersen

    December 5, 2006 at 10:17 pm

  84. point 80 is pretty good. Do you have a socialist twin that pretends is you.

    That’s either a compliment dressed up as an insult or an insult dressed up as a compliment. I’ll assume the former.

    terjepetersen

    December 5, 2006 at 10:20 pm

  85. At zero interest rate, the expansion of the money supply should be limitless in theory.

    In theory but not if you stop pushing up M0 once you hit zero. And this is essentially what happened in Japan for a decade. They hit 0%and as deflation cut in the real interest rate remained high. However without pushing M0 up harder interest rates at zero was not loose enough to kill the deflation. Of course they could have pushed harder but instead they started blaming private banks and real estate investors and foreigners and anybody but their own stupid myopic interest rate target. And deflation did not end until they got past this self imposed limitation and invented a new game called “quantititative easing”. Then in essence they kept pushing up M0 and watched other indicators of value, such as the exchange rate and YEN denominated commodity prices.

    Citing asset prices as the cause of deflation is nuts. It is even more nuts than blaming wage rises for inflation.

    terjepetersen

    December 5, 2006 at 10:39 pm

  86. Well yes. The inflation/ asset bubble was caused by a monetary expansion. someone who isn’t confused like you would undstand this.

    So deflation was caused by inflation? Wow I get tied of this explaination. It is turbo charged stupidity.

    terjepetersen

    December 5, 2006 at 10:40 pm

  87. Do you have a socialist twin that pretends is you.

    Do you know what. Both Karl Marx and Adam Smith believed in an identical approach to maintain a stable currency. Now which of them do you think I agree with?

    terjepetersen

    December 5, 2006 at 10:49 pm

  88. Terge

    Point 83. Agree for the most part.

    Point 85 Agree for the most part.

    Point 86 Disagree

    Japan ran a monetary expansion for the good part of the 80’s. An easy money policy causing the largest distortion is world history.
    For example the emperor’s place was at one stage worth more than the state of California.

    The final manifestion was a large correction in asset prices as ra result of terrible policy managment and finally a deflationary spiral in asset prices.

    point 87 i was kidding.

    I n any event I elft you some questions to answer about the Euro that you seemed to have glossed over.

    JC.

    December 6, 2006 at 12:41 am

  89. Damn thats a lot of agreement.

    I’ll try and dig out up the Euro questions tomorrow. Feel free to restate them in point form if you think it will move us forward quicker.

    terjepetersen

    December 6, 2006 at 1:09 am

  90. Point 86 is about the Austrian Business Cycle Theory. There really shouldn’t be any disagreement between the two schools. Credit mispricing causes malinvestments and the subsequenting fall in the demand for labour and higher real prices is how it washes out, after the unssutainable investments collapse, usually after someone applies the brakes when real wages fall due to the value of money falling too far.

    Supply side economics does not advocate resource mispricing. I don’t see any disagreement.

    Mark Hill

    December 6, 2006 at 10:55 am

  91. Mark,

    Most of the disagreement between supply-side and the Austrians is mostly related to Rothbard not Mises. And supply-siders claim Mises as one of their own anyway. They also claim Adam Smith and Karl Marx. Essentially they can claim such diverse personalities because supply-side is firstly a descriptive rather than normative model of the world and all these authors assume the key assumptions of the supply-side model. Keynes doesn’t fit which shouldn’t surprise because supply-side was really a response to all the things that were wrong with the Keynesian outlook. Although even Keynes himself said some pretty supply-side type things (that were mostly ignored by his followers).

    I think that I don’t have too much problem with the malinventment concept except in so far as people try to describe it as having causative properties in relation to monetary events. The misallocation of investment is a symptom of monetary instability and not a cause. It is like saying that inflation is caused by a wage-price spiral when clearly the wage-price spiral is the result of inflation not the cause.

    I am happy enough to concede that if you have several years of high inflation followed by several years of high deflation things are going to be much worse than if you have several years of stability followed by several years of deflation.

    High inflation followed by high deflation is essentially what happened when in 1925 Churchill imposed a deflation on the British Commonwealth following the inflation that happened in WWI. Both were entirely monetary processes brought on by first ending the gold standard (WWI) then returning to it it at a very deflationary price level (1925).

    Regards,
    Terje.

    terjepetersen

    December 6, 2006 at 11:44 am

  92. JC,

    Please restate the EURO questions that you think are significant and that you think I have not addressed adequately.

    Regards,
    Terje.

    terjepetersen

    December 6, 2006 at 12:32 pm

  93. “I think that I don’t have too much problem with the malinventment concept except in so far as people try to describe it as having causative properties in relation to monetary events.”

    Who?

    No Austrians surely.

    [EDIT BY ADMIN – I, GRAEME BIRD, WILL BE FORCED TO APOLOGISE TO FDB BY HAVING THIS COMMENT FORCIBLY INSERTED IN ALL OR MOST OF MY COMMENTS UNTIL I VOLUNTARILY RETRACT OR APOLOGISE TO FDB FOR MY VILE COMMENT ON THE GAIDAR THREAD]

    GMB

    December 7, 2006 at 11:39 am

  94. GMB,

    You are probably right that this is not a fair assesment of Austrians. It is a misrepresentation of Austrian thinking and whilst I some times notice malinvestment spoken of as a primary cause it probably has more to do with sloppy language than a fundamentally flawed outlook.

    Generally the only significant disagreement I have with Austrians relates to Rothbards hostility to fractional reserve banking. The only way I could object to fractional reserve banking would be if banks claimed to be keeping the cash in a private vault allocated to the deposit holder. Almost everybody I know is aware of the fact that banks take the money invested by people through demand accounts and invests it through lending. And I have never seen a bank claim otherwise.

    I think that Austrian economics is more theoretical and supply-side economics more operational. Austrians seem to be more normative and supply-side more descriptive of what is. Ironically that is not how the media paints the picture.

    I think few of the differences are necessarily fundamental. Supply-side has many more differences with the likes of monetarism or keynesianism than it does with the Austrian school of thought. Although obviously on most issues you can always find people from other schools of thought that you disagree with.

    To me it is like the Austrians are usually talking about what shape the lego blocks of liberty should be, whilst supply side is looking at what the impact is of current lego structures. It’s a bottom up versus a top down analysis with a lot of cross over.

    Regards,
    Terje.

    terjepetersen

    December 7, 2006 at 12:31 pm

  95. Generally the only significant disagreement I have with Austrians relates to Rothbards hostility to fractional reserve banking.

    Well this thread should go for a few hundred more comments now….

    Steve Edney

    December 7, 2006 at 12:50 pm

  96. No, no… another banking thread!

    skepticlawyer

    December 7, 2006 at 8:38 pm

  97. At this rate I think it will only just make it past 100.

    terjepetersen

    December 8, 2006 at 5:22 pm


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