I don't watch free-to-air TV.  I think many would sympathise when I say that quality programs are virtually absent from the digital channels.  Even the news 24/7 news channel by the ABC isn't that good.  We mostly watch DVDs we hire from the Civic Video, almost all of the them are scratched horribly but that's beside the point.  What has happened to the content of TV programs?

Have you ever noticed:

1) Every channel has a government-related job every night... portraying the lives of cops, detectives, fireman, public hospital doctors (except for that Gray's spinoff), lawyers, judges and people with special gifts who help all of the above (especially cops)

2) A significant portion of reality TV shows are all about the government in action... whether it's defending the border or riding with the cops while they make arrests

3) The news + analysis (e.g. Today Tonight) are woefully inadequate to the point of nausea... you seriously could miss a world war watching the news while getting up to the minute detail of a Koala crossing the road

Against this Orwellian backdrop are the popular shows like 'Dancing with the Stars' and of course 'Masterchef'.  What was particularly interesting is that more people watched the final of Masterchef than the Federal Election Debate between Gillard and Abbott.  Personally I don't blame anyone who did, I didn't watch the debate as I knew it would be a painful experience for me to sit through two politicians putting me to sleep with their propaganda... and that was our only debate for the election.  More people, if given the option, would vote for Masterchef than for either Gillard or Abbott.  But maybe that serves the Feds more than passionate interest by the electorate.  If people willingly resign the fate of the nation into the hands of two clowns, maybe we won't see the joke.

I'm not saying that there is a government conspiracy to control what most of us watch on TV, but if there was... would it look any different?

Julia Gillard has called an election for the 21st of August, uttering the usual Labor rhetoric of a strong, sustainable, forward-looking economy with a budget surplus while simultaneously promising to spend money we do not have on 'world class' health, education and welfare. Translated, she will move the country further towards centralisation and big government, something very much in line with her socialist upbringing.

That little jibe aside, an important question is will a Liberal government do any better? We have mentioned earlier that, no matter who is elected, the trend of big government, privacy infringements and the erosion of freedom and liberty will continue. The only real difference is how fast it will occur: if Labor win, the trend will accelerate. At what pace I am not sure, but I have a feeling that with Gillard pulling the strings, nationalisation of various industries will definitely be in her sights (education, health and so on) along with wasteful green jobs and ineffective carbon schemes and green energy 'investments'.

So what if the Liberals win? The encroachment of big government will be a more gradual one but it will still continue. With that said, the result regardless of the election outcome will be the same: a continuation and worsening of the welfare-warfare nanny state where, to (poorly) paraphrase Mencken, we know what we want and the government is more than happy to give it to us good and hard.

The Liberals

The people who run the Liberal party have abandoned their roots and are no longer defenders of freedom. Decades of Liberal rule, the self-proclaimed advocates of small government and liberty, left our country with a federal government larger than ever. But it gets worse. Not only did they establish countless federal institutions and bureaucracies along with mountains of regulatory red tape, but this burden is now accepted as a matter of course (people forget that we did just fine without the useless, bloated bureaucratic departments that now exist). It is far harder to remove government apparatus once it is in place than it is to just stop the bleeding. However, that will be quickly forgotten in the flurry of campaign rhetoric and Labor aren't going to criticise something they can use when in government. Speaking of rhetoric, over the next month we will once again hear the usual lies of lower taxes, smaller government, more personal freedoms, then if elected see nothing of the sort. To quote P.J. O'Rourke, "the Democrats [Labor] are the party that says government will make you smarter, taller, richer, and remove the crabgrass on your lawn. The Republicans [Liberals] are the party that says government doesn't work and then they get elected and prove it."

The fact of the matter is the Liberals will evade responsibility for their big government legacy. They believe that it is not freedom that serves as the pillar of a functioning society but that the state, through brute force, is the answer to all of our problems. Instead of providing Australians with the liberty that they never hesitate to mention when giving emotional speeches, they instead left us with big government, two offensive wars, put Australia on the terrorism map and generally squandered most of the once-in-a-lifetime resource-fuelled influx of revenue. Will this change with an Abbott-led conservative government? Not a chance.

The ALP

Do I really need to say much here? The Labor party operates with a socialist ideology: there is no economic activity that they will not regulate to the nth degree. They used to have some redeeming features, social ones such as anti-war, pro-privacy and civil rights, but if the latest Labor term is anything to go by, these have long since been abandoned. So with their socially-liberal traits tossed out the window, we instead look at their stance and record on commerce - and it does not look good.

Indeed, it would appear that all property is up for grabs to control and meld in the name of moving Australia 'forward'. They will speak of how they successfully managed the economy through the GFC but all they did was kick the can down the road; their stimulus spending will only sustain us for as long as they continue to spend or stimulate spending in particular ways and in particular directions (arbitrarily). When the spending is wound up, the demand and the structure of prices dependent on it, along with resource and labour employment derived from it, will decline. This is why by avoiding technical recession, the Labor party merely laid the foundations for a future, more painful bust as now another layer of adjustments and realignments, on top of the ones needed before fiscal 'stimulus,' are required to fix the economy.

This is hardly what I would call sound economic management.

The Alternative?

Neither the Liberals nor Labor are going to move this country 'forward' in a positive way. They are both part of the same collectivist creed, two heads of the same beast. The only way to progress and move forward is through a belief in freedom; as Hayek said, "...to free the process of spontaneous growth from the obstacles and encumbrances that human folly has erected." We need to move away from centralisation and the idea that 'federal knows best'. I will once again leave it to Hayek, citing John Locke's Second Treatise on Civil Government, to provide direction that I feel we need to move to in order to progress: 

While in his philosophical discussion Locke's concern is with the source which makes power legitimate and with the aim of government in general, the practical problem with which he is concerned is how power, whoever exercises it, can be prevented from becoming arbitrary: "freedom of men under government is to have a standing rule to live by, common to every one of that society, and made by the legislative power erected in it; a liberty to follow my own will in all things, where that rule prescribes not: and not to be subject to the inconstant, uncertain, arbitrary will of another man." It is against the "irregular and uncertain exercise of the power" that the argument is mainly directed: the important point is that "whoever has the legislative or supreme power of any commonwealth is bound to govern by established standing laws promulgated and known to the people, and not by extemporary decrees; by indifferent and upright judges, who are to decide controversies by those laws; and to employ the forces of the community at home only in the execution of such laws." Even the legislature has no "absolute arbitrary power," "cannot assume to itself a power to rule by extemporary arbitrary decrees, but is bound to dispense justice, and decide the rights of the subjects by promulgated standing laws, and known to authorized judges, while the "supreme executor of the law...has no will, no power, but that of the law." Locke is loath to recognize any sovereign power, and the Treatise has been described as an assault upon the very idea of sovereignty. The main practical safeguard against the abuse of authority proposed by him is the separation of powers...

Sadly, the chances of a move in this direction are virtually nil. All we can do in the meantime is to continue to expose the fallacies that "...the insidious and crafty animal, vulgarly called a statesman or politician, whose councils are directed by the momentary fluctuations of affairs (Adam Smith)," repeat on a daily basis - a time consuming task considering their misleading claims and statements take minutes to utter whilst debunking them takes considerably longer - and slowly influence public opinion in the hope that eventually people will come to realise that the current system is fatally flawed and must change.

Recently Michael Pascoe released an article on Yahoo7 Finance that was one of the worst economic commentary fails in recent memory.  If you want to laugh and get angry at the same time, wander over and enjoy.

Here is highlight #1:

There are other less obvious cases though that seep into the collective memory unless challenged. For example, the idea that there is a lethal housing bubble in Australia and China that spells doom for our economy. These are important ideas to understand, so please bear with me as I deal with both of them by stealing the hard work of others.

There have been some credible and high-profile proponents of the Australian bubble argument - and some less credible. In my opinion, Dr Steve Keen falls into the latter category - he's the fella who predicted Australian housing prices would collapse by 40 per cent and that we'd have 20 per cent unemployment. 

That probably made him Australia's most famous economist for a little while during the GFC when he was given uncritical free runs on the likes of 60 Minutes and the 7.30 Report. He was also demonstrably wrong.

Far be it from a proponent of the Austrian school to defend a post-Keynesian, but Pascoe is twisting the facts himself.  Steve Keen made this fantastic prediction with a time horizon of 10-15 years, similar to the protracted deflation Japan suffered, rather than an overnight disaster that his critics continue to spin.  Moreover, the authors of this website are not as optimistic as Dr Keen over the speed of the decline.  I happen to believe that it is more likely that we'll experience a sharp decline over the next 5 years (due to rising interest rates, unemployment and the continued deflationary decline overseas).  But, regardless of it takes place 5, 10, 15 or 20 years from now, the test of a good economist is to see past his feet... something which Pascoe seems to clearly fail at despite the huge wave of data.  I'd like to remind him of another prophet of doom that experienced the same ridicule, Peter Schiff, who for over 5 years was mocked for predicting the collapse of house prices, employment and the general economy.  And despite house prices continuing to rise here, while everywhere else in the world they collapsed, both Schiff and Keen were dead right about the economic collapse while Pascoe was making statements like these in January 2007:

Most forecasters believe the US will manage to achieve a soft landing without tipping into recession, that China and India will continue to power ahead, that Japan is finally recovering and that Europe will do all right.... That's pretty much the view of the "official family" here - the Federal Treasury and the Reserve Bank. It's also the OECD and World Bank view and most of the major banks' chief economists don't stray too far from the path.  With forecasting of course, the majority is by no means always right, but the official family's collected wisdom tends to have a better track record than most.

Well it was right until it was wrong... and it's the same thing with house prices Mr Pascoe.  

He continues:

There are two essential parts to the question of whether Australia is suffering an unsustainable housing bubble. One is a simple matter of supply and demand - have we over-built housing thanks to a speculative investment boom the way housing was overbuilt in the US, Ireland, Spain et al?  The answer to that is easy: no. We have a shortage of housing, we've underbuilt. Our investment in housing, as a percentage of GDP, has been pretty much flat for the past six years despite record population growth. That's the main reason housing prices have risen.

This is laughable... and not in a funny way.  We have already repeatedly demonstrated that the shortage of housing is fiction (check our archives) and that house prices have sharply risen above 100 year inflation adjusted average that just happened to coincide with a massive expansion of money and credit, co-orchestrated by the central bank, banks and the government.  No mention of credit expansion by Michael Pascoe or that house prices are 6.5-7 times the earnings (which is usually 3 over 100 years).  Yet this and more data seems to not exist in the mind of Mr Pascoe.  

Instead he points to a speech by Ric Battellino, which apparently is supposed to prove that Australian households are not overburdened with debt.  Let's examine some of the statements in this speech:

As you know, household debt has risen significantly faster than household income since the early 1990s. At that time, households on average had debt equal to half a year’s disposable income; by 2006, debt had risen to around one and a half years’ income. Since then, however, the ratio of debt to income has stabilised... The current household debt ratio in Australia is similar to that in most developed countries (Graph 2).1  

Significant exceptions are Germany and France, where the ratios are lower, at around one year’s income, and the Netherlands, where the ratio is much higher – almost 2½ years’ income – due to the tax incentives for households to stay geared up.  All countries have experienced rises in household debt ratios over recent decades. Clearly, therefore, the forces that drove the rise in household debt ratios were not unique to Australia. The two biggest contributing factors were financial deregulation and the structural decline in interest rates.

What an admission... the central bank has acknowledged that lowering the interest rates and financial 'deregulation' (which really means government housing subsidies) has directly contributed to one the largest (if not the largest) gain in household debt in Australia's history, which wholeheartedly supports the contention of the Austrian theory of the business cycle that highlights the connection between interest rates, the expansion of money and credit with financial and productive discoordination in the economy.

The speech goes on:

Another factor that has contributed to the resilience of household finances is that, by and large, the debt has not been used to increase consumption. Apart from some brief periods, household consumption has not been unusually elevated during this period of rising debt. Rather, the debt has mainly been used to acquire assets.

This statement should make you laugh aloud.  I wonder what we call the accumulation of assets... consumption, I don't know?  Continuing...:

In summary, if we look at the way the increase in household debt has been distributed, what households have done with the money, and the arrears rates on loans, it is reasonable to conclude that the household sector has the capacity to support the current level of debt. Having said that, the higher the level of debt the more vulnerable households are to shocks that might affect the economy.

Let's really look at what this remarkable speech is summarising... household debt has risen according to the same pattern as the US and UK (both of which had an acknowledged housing bubble), but because house prices haven't collapsed here it must mean that we can sustain this level of debt far into the future.  The lesson from both the US and the UK is that everything seems like it will last forever until it all comes crashing down.  The speech also continues to talk about foreign investment and other factors and concludes that actually, the RBA isn't sure whether there is a housing bubble, but given that we've weathered the storm pretty well so far, it just might pan out.  This is far from convincing evidence and Mr Pascoe should know this.  There are specific reasons why the party is still happening in the Australian property market, the extension of the first home owners grant and the $900 cash splash are two big ones... but nothing lasts forever, as Mr Pascoe will soon find out.

God bless,

Washo