You can't make make this up: the government has decided to introduce new credit laws to punish "dodgy lenders". Not only does every lender now have to be licenced which in itself adds operating costs and red tape, but they're also subjected to laws requiring them to let borrowers "...request a variation to their credit contract if they suffered financial hardship." It's good to see that a voluntary contract between two parties is now worthless in this country. What's next, laws against usury?

It's always the same with the government: if the existing regulation doesn't work then just add yet another layer that strips even more liberties, adds more red tape, increases the costs for private enterprise and ultimately hurts the consumer, the very people they're trying to "protect". As interest rates rise thanks to cumbersome regulation and the inflation of the money supply, watch the government get even more heavy-handed in the loan industry. They will probably condemn lenders for charging "too much", like they can possibly determine what is "too much" or "fair" without the market's price mechanism. Then they'll force down rates, banks will stop lending (they'll probably simply invest themselves) and the politicians will "fight" the huge underground consumer loan industry they created that doesn't take your house, it takes your fingers.

The banks don’t prey on the poor. They offer them a service; no one is forcing them to agree to it. The price is right for them at the time they take the money, that’s perfectly legal. The right to buy or not to buy is vital to economic well-being and, of course, to personal liberty. Individuals need to be responsible for themselves and try to avoid the losses that result from mistakes. If people are constantly bailed out, the loss comes out of the public purse (or the lenders) and they are relieved of personal responsibility. They can then waste and lose just as much as their inherent laziness may dictate!

Remove all of the banking and lending regulation and allow the free market and competition to work. We're on a slippery slope to a place no one wants to go (politicians excluded) and these do-gooders who think they're saving the world are leading the charge, systematically removing individual liberties and freedom as they go. As Ayn Rand said, we support the smallest minority of them all: the individual.

While trawling the endless sea of information known as the internet you occasionally stumble upon a piece of work that 'jumps out' at you. Now, this isn't always in a good way: more and more often, especially in the midst of one of the largest global crisis's we have experienced, the socialists tend to show their true colours. You know the type, the one's who would never fully endorse free markets or capitalism, the ones who would always support additional regulation and 'favours' for interest groups no matter how ridiculous, while simultaneously claiming to be 'conservatives' or 'believers' in the free market. They see this as the perfect opportunity, the self-professed 'failure of capitalism' (when we all know that's not true), to spread the misery of socialism to us all. That's the true difference between advocates of laissez faire and big government: the former refuses to use, and fights against, the use of coercion on markets and individual liberties while the latter encourages it and actively seeks it.

The essay in question is a mammoth piece by Thomas Geoghegan, a Labour Lawyer, entitled "Infinite Debt - How unlimited interest rates destroyed the economy", published in Harper's Magazine (April 2009). The essay itself is far too long to reference or refute line-by-line here, but rest assured it's packed to the brim with a mix of fallacies, confusion, misunderstanding, emotional pleas and just plain old socialist drivel. In this article I will address just the final part of his essay, his 'five point plan' (no doubt a subtle reference to the five year plans of the communist countries?) for the United States.

"First, we have to pass a new type of law against usury that accepts the world in which we all live now. The saintly Illinois Senator Dick Durbin has proposed an amendment to the National Banking Act, to put a cap on interest at 35 percent. But that would let too many banks go on as before. Here's an alternative: let's cap interest at nine percent, then let a federal agency give exemptions to applicants - banks - that want to raise rates up to Durbin's limit (I would stop at twenty percent)."

"To get the right to this higher rate of twenty percent, however, the bank would have to demonstrate each year, to a federal agency, that it has a reputation for honesty and fairness and that it had not been found guilty of any fraudulent or bad-faith practices, such as the use of hidden fees or charges, or the unfair garnishment of someone's pension. I'm aware that this standard is vague. I suppose few licenses would be denied. But the very existence of this procedure - and the right of you and me to email our gripes to a federal agency with the power to exert extreme pressure - would have a chilling effect on banks and keep them from getting too near unconscionable conduct or charging the highest possible rates."

This first plan is particularly easy to refute, but first lets touch on the issue of usury, for the author attacks this concept throughout the entire essay. The definition of usury is interest on a loan. It’s perfectly natural and lawful and is as mutually beneficial to the borrower as it is to the lender. To assert that someone who has produced capital should then lend it out for free, without compensation (or at a rate of compensation lower than they deem fair), is preposterous.

Mutual, beneficial, voluntary exchange between two consenting individuals is perfectly fine. If they were coerced into accepting the contract then the contract is void, that’s called fraud. If not, then who is the author to decide what people should and shouldn’t be allowed to do? The owners of the capital are free to charge whatever they please: it’s their property you’re trying to borrow. If the author has a problem with it, he’s free to open up another payday stand next door and charge a lower rate of interest. This will do far more damage to the currently operating businesses than any amount of legislation, while simultaneously benefiting the customers, much more completely and efficiently than any amount of legislation. It would also be much cheaper than having the state enforce the regulations, with inspections, arrests and prosecutions. The only reason no one is opening competing loan businesses is because it's highly likely that they would lose their capital: they're not being compensated sufficiently for the risks they're taking with their property.If the government prevents someone from competing, well then there’s the problem! Legislative mandates on interest rates will simply result in the closure shops and leave customers without the service they want at a price they are willing to pay.

Back to the proposal, if this was put into law capital accumulation would fall to disastrous levels as there would be no interest in keeping it, slowing growth and progress significantly. If I have a dollar and someone wants to borrow it, I should be compensated for it. In the time you’re using that dollar, I can no longer use it. If someone forces me to loan it to you interest free, or at a rate below what I feel is fair, it represents a loss to me and a gain for you. When someone asks for a loan, they’re requesting a service. The lender has a right to refuse, or to require, as compensation, an equivalent service.

If the interest rate was forced downward by the recommended law above, the result would simply be a cap on the interest rate below its market-clearing level. What would happen? There would be an obvious and immediate shortage of credit. Not only is this inconsistent with intertemporal consumption preferences but it prevents the freedom of choice and destroys individual liberty. The banks don’t prey on the poor. They offer them a service; no one is forcing them to agree to it. The price is right for them at the time they took the money, that’s perfectly legal. By putting a cap on interest rates, they deprive the poor of this service, because no one would lend them a cent (see above). "If a man drinks wine and not water I cannot say he is acting irrationally. At most I can say that in his place I would not do so. But his pursuit of happiness is his own business, not mine." – Ludwig von Mises

"Second, we should have state-owned banks like the German banks known as the Sparkasse. Maybe each of the fifty states could charter its own bank. Each would issue credit cards at a rate much lower than what the private banks charge. Also: no fees at cash machines, no oppressive collection cases, no gratuitous destruction of people's credit ratings. The catch is that, as in Germany, the US Sparkasse would lend only to the most creditworthy people. That is, the state banks would set benchmarks not only for how the private banks should behave but how the people should behave as well."

Absolutely not. I gather he wants to appoint the boards of this “bank” and provide them with their funds by direct subsidies and by guaranteeing their investments with state bonds. This would, undoubtedly, lead to state-favoured businesses getting the majority of the “loans”. The burgeoning state control of business would swell the state bureaucracy and lead to widespread centralisation and corruption. Small businesses would fail and have their assets swallowed up by big businesses and big banks. No one would have to cater to consumers, just to bureaucrats (that’s how you would be one of the “creditworthy people”). Eventually socialism would ensue. Don’t believe me? This is almost, to the word, what the Italians did as they became enveloped in socialism before the second World War. I believe they call it Fascism.

"Third, we should have at least one or two "public guardians" as directors at the banks and other financial firms we have bailed out with $700 billion in taxes and all the money the Fed has printed. Every financial company into which we have "injected equity" should be required to have government-appointed directors, up to a third of the board. We can use these directors to nudge (if not dictate) what the banks and firms should do. For example, the directors should work to bring down credit-card rates. Through guardians, we can lower rates, bank by bank, by moral suasion and a certain built-in pressure rather than by external decree. The guardians should also demand of us good character if they bring down the rates. "Our directors" should help push capital into manufacturing. Of course, there has to be a reasonable profit, but sometimes a reasonable profit can be three percent instead of thirty percent."

I believe I covered this in the above paragraph. Welcome to communism! Enjoy your journey into poverty and the removal of human liberties! These policies will do wonders at making rich people poor, but they will do nothing towards make poor people rich. Indeed, most of these 'plans' would likely send us back several decades at least. On the issue of "public guardians", I believe Mises summed this up appropriately, "...if one rejects laissez faire on account of man’s fallibility and moral weakness, one must for the same reason also reject every kind of government action".

"Fourth, we should require the banks we bail out to cancel an appropriate amount of consumer debt - especially in instances where people would have paid back the principal by now had the interest rate been more reasonable. My retired schoolteacher, the one with the husband who is deep into Alzheimer's and who has already paid $3,000 on a $1,700 loan, should be let off the hook. The banks we have bailed out should follow the Golden Rule: just as their own debts have been written down or paid off, so they in turn should do unto others."

Here the author tugs on the heartstrings in an attempt to get someone out of a legitimate, binding, mutually voluntary and beneficial contract. People who produce goods can display them for the inspection of the buyer who is, at all times, free not to buy. The right to buy or not to buy is vital to economic well-being and, of course, to personal liberty. He is trying to turn this around, as if some authority, claiming to know what the people want, issuing orders for supply without being able to know the requirements of the buyers! This is how all the mess starts and is why no one saves – individuals need to be responsible for themselves and try to avoid the loss that results from mistakes. If people are constantly bailed out, the loss comes out of the public purse, and they are relieved of personal responsibility. They can then waste and lose just as much as their inherent laziness may dictate!

Don’t bail out the banks and don’t bail out the debtors. Bankruptcy exists for a reason. It’s the most effective way to reallocate resources in line with preferences, thereby reducing waste and hastening the recovery process.

"Finally, we should think about ways to "inject equity" directly into the accounts of working people rather than into banks. The best way to do this is to announce a plan to raise the gross replacement rate of Social Security from 44 percent to something closer to 65 percent, which is still short of the rate in many European social democracies. We can afford this as much as or more than they can."

"We could aim to reach that goal gradually, over the next twenty years, but even announcing the goal encourages future-oriented thinking. It would encourage people to believe that they could invest in real things again, instead of pinning their hopes on the false and predatory promise of a big, Vegas-style payout. The promise of a real public pension that people can live on would lead fewer of us to chase bubbles in good times, even as it gave all of us the confidence to keep spending when times were bad."

How? By printing more money? There's a huge disincentive to save in our society with the constant debasing of the dollar, debtor bailouts, heavy taxes and so on. Rather than forcing people to save (super) or providing them with a pension and other benefits (social security), a return to sound money so that savings aren't forever eroded (indeed their purchasing power would increase over time) would be a good start.

"Schumpeter feared that this kind of countercyclical thinking by people on the left would lead to a stagnating form of socialism, or even the end of capitalism, But socialism, in the state-run form he anticipated, is not inevitable, or even desirable. Social democracy, European-style, which Schumpeter did not expect, is desirable. Sure, I'd like the European governments to run up a bit of public debt to pump up demand over there - I don't think that's so immoral. What's immoral is to pump up demand, as we have, by handing out easy money at high interest and driving people into debt."

"Even in Babylon they spared people that kind of captivity. We now have to ensure our own country does the same."

This final section is full of fallacious arguments. He’s just dropped them everywhere. The problem is that to 'refute' all them (e.g. disprove socialism) requires far more time than I’m willing to give to this guy, especially as he hasn't justified any of his ideas with even an ounce of economic sense or theory, so I’m going to simply respond in kind: no, public debt is immoral; and yes, your policies WILL lead to socialism, wealth destruction and impoverishment. While it’s not inevitable, if people in positions of power are at all influenced by you, I fear for the worst. I’ll end with this: "As soon as we surrender the principle that the state should not interfere in any questions touching on the individuals’ mode of life, we end by regulating and restricting the latter down to the smallest details," – Ludwig von Mises.

Have a good weekend, and while you're out enjoying the many benefits that capitalism has enabled, be thankful that people such as Thomas don't yet have the necessary power to impose their will on others. While we have definitely moved further towards his dream of a socialist state in the past year, it's still early days and we can reverse the damage already done.

THE amount of tax paid by the average Australian has jumped by up to 40 per cent in just five years, according to new statistics -- Source.

Who would have guessed, taxes are increasing already! Just wait until the bill arrives for the Rudd National Broadband Network, stimulus packages and various other 'nation building' projects. Perhaps a return to the 1950s of 75% tax is on the cards in the near future?

Wow, would you look at the size of government soar!

Could we be on the way back up? I think so thanks to all of that Ruddness we're lucky enough to be getting! Stay tuned for an upcoming post on economic growth and government size.

The original post on 01/04/2009 was revised slightly and reposted on 09/04/2009

Mr. Rudd, along with his counterparts in the UK and US, are using this apparent “failure” of capitalism to further their socialist and power goals: a "New World" with the ultimate goal of increasing the size, power and control of the state. They are seeking to extend and expand the sphere of their operations, their interference in everyday life, leaving little room for anything to happen of its own accord, under the manifesto that Government Knows Better [1].

"Government debt paves the way for government control. Consider: Debt leads to taxation to pay interest. Taxation leads to more economic control over the people by the same government that ran up the debt in the first place. It's hardly extreme to conclude that escalating debt is part of a plan, such as a plan to establish a new world order." -- John F. McManus

The state has a poor investment track record, and its attempts to soften today's 'financial crisis' impact merely push malinvestment into the future, adding to today's debt burden in the process. Government's focus instead should be on the creative destruction of capital resident in over-capacity sectors of the economy.

The “false god of unrestrained financial markets” basis on which their respective propaganda machines are endeavouring to convince people to accept further intervention is unfounded in fact. We have not had “unfettered free markets” as they will have us believe. To see just how far we have strayed from a market-economy, or capitalism, one simply has to look at Karl Marx’s Communist Manifesto, which reveals their intentions [italics added].

1. Abolition of property in land and application of all rents of land to public purposes. – We currently have Eminent Domain laws in Australia, allowing government to seize land at will. This manifesto is not completely fulfilled but it’s hardly ‘free market’ – where individual property rights are of the utmost importance and there is no 'public' land.

2. A heavy progressive or graduated income tax. – Our tax system is one of the highest in the world. Not only that but there are countless ‘hidden’ taxes. A recent report by the Regulation Task Force estimated that the regulatory burden is effectively a 25% hidden tax-slug on all Australians [2].

3. Abolition of all rights of inheritance – While there is no direct inheritance tax in Australia, recipients must pay full capital gains tax on income and assets acquired from deceased estates.

4. Confiscation of the property of all emigrants and rebels – Not yet at least, albeit "hoon" laws come close.

5. Centralization of credit in the banks of the state, by means of a national bank with state capital and an exclusive monopoly – We have been operating with a central banking cartel, the Reserve Bank of Australia, since 1911 (formerly known as the Commonwealth Bank until 1959). It alone is allowed to produce legal tender, and central banks are the cause of many of the world's current woes.

6. Centralization of the means of communication and transport in the hands of the state – The Rudd government is rolling out a National Broadband Network and a National Internet Filter. Much of our road network along with the majority of our public transport is either state-owned or extremely regulated (e.g. taxis).

7. Extension of factories and instruments of production owned by the state; the bringing into cultivation of waste lands, and the improvement of the soil generally in accordance with a common plan – The Government is seizing control of various industries through "bail outs” and other forms of market manipulation. Even before the crisis they effectively controlled production in many industries through subsidies and tariffs.

8. Equal obligation of all to work. Establishment of industrial armies, especially for agriculture – Not yet, but how far away can it be?

9. Combination of agriculture with manufacturing industries; gradual abolition of all the distinction between town and country by a more equable distribution of the populace over the country – Not yet.

10. Free education for all children in public schools. Abolition of children's factory labor in its present form. Combination of education with industrial production, etc – Our ‘private’ schools receive the same amount of state funding as our public schools. True private education doesn’t exist.

Australia scores seven out of a possible ten of Marx’s Communist Manifesto. If this is not proof enough that we have not had “unfettered free markets”, then let us look at the method used to justify or support policies without valid economic argument. Manipulation in the form of moralism is used to refute logic; against theory is emotional prejudice; and against argument is reference to ‘the will’ of the state.

The crisis we are suffering is not a failure of free markets. It is the failure of interventionism and of the state. Anti-capitalist policies led to this crisis: central banks around the world manipulating interest rates and money supply; the regulatory burden (which has been poorly drafted by lawmakers and poorly executed by inefficient watchdogs); and  excessive levels of taxation (and the distortions they cause to the real economy); to name a few.

The so called ‘greedy capitalist’ leaders of big enterprise, contrary to the free market, no longer cared whether or not they satisfied the needs of the consumer in the best and least expensive way. They worried only about keeping up “relations” with state officials, protecting their interests with regard to tariff rates, wage negotiations before arbitration boards, and in governing bodies of cartels. In return, they contributed to non-busi­ness concerns – election funds, public welfare institutions, lobbysts and the like. This is not capitalism. This is not the “unfettered free market” at work.

If the state continues to use price, wage, interest rate and other controls to thwart the market and stop it from acting as a regulator of production then crisis is inevitable. Our current crisis as we degear from a leverage burden some 20 times global GDP has little to do with a failure of the free market, and more to do with the heavy hand of government intervention.

"A man who chooses between drinking a glass of milk and a glass of a solution of potassium cyanide does not choose between two beverages; he chooses between life and death. A society that chooses between capitalism and socialism does not choose between two social systems; it chooses between social cooperation and the disintegration of society. Socialism is not an alternative to capitalism; it is an alternative to any system under which men can live as human beings." - Ludwig von Mises, Human Action.

Only time will tell. It's going to be interesting period in history to say the least.

That's right folks, the government estimates that the new National Broadband Network (NBN) they're going to fly solo with will cost working-aged Australians (15-64) approximately $2,935 each. That's assuming the project is completed -- our government has a bad habit of either quitting mid-way (i.e. after an election) or having the project substantially increase in both duration and cost.

• Government rejects all five private sector bidders for the national broadband network, saying they do not provide value for money.
• National broadband "fibre-to-the-home" network now to be built over eight years by a company established by the Government.
• Network will give 90 per cent of homes, schools and businesses a connection of 100 megabits a second, 100 times faster than now.
• Those remaining will get a service of 12 megabits a second through wireless technologies.
• Will support 25,000 jobs a year for each year of construction, with 37 000 jobs in the peak year of construction.
• PM Kevin Rudd says infrastructure project is the biggest ever undertaken by an Australian government.
• Majority share of the company will be held by the Government, with private sector investment capped at 49 per cent.
• Up to $43 billion will be invested by the company in the project, including the $4.7 billion already allocated by the Government.
• Once the project has been up and running for five years, the Government will begin selling its stake in the company. -- Source
  

The government, in their wisdom, decided that the private sector couldn't provide 'value for money'. I suppose nothing would provide government with value though, those pesky private sector companies actually have to think about their customers and shareholders, while the government doesn't pay for anything themselves -- they simply take it from the taxpayers! How is the government creating these jobs? Everyone knows that the government doesn't produce anything, don't they? These 'jobs' are simply jobs that the private sector can no longer create (productive jobs I might add). They're jobs for something the people, individuals, aren't demanding: not only that, but they're jobs plus a layer of bureaucracy, in other words wasted capital.

All day the government has been stressing this is 'stimulus'; yet it's nothing more than fulfilling #6 on the Community Manifesto! We're moving further and further towards a socialist state and the noose around our necks has just been tightened again. If they really wanted Australian's to have fair internet, they would remove all of their regulations and controls on the industry; they would allow the market to function. But we all know Rudd doesn't have the people's interests at hand.

Then they have the galls to say they're going to start selling their stake -- that will surely end well! Why don't the government just skip this middle step (the NBN) and allow private competition with previous government monopolies (Tel$tra) to be free and unhampered!? Privatising this network, when the time comes, is hardly fair: the government has taken from taxpayers around the country to fund this project and is going to ask us to pay them, again, for the privilege of privatisation? Why is the government entitled to the revenue from this taxpayer funded project? It's ridiculous.

I'm not looking forward to being an Australian taxpayer when we eventually have to pay for all of this Ruddish. Expect either inflation (courtesy of the banking monopoly the government has: the RBA) or massive tax hikes or both in the future -- perhaps a return to the 1950s of 75% income tax is on the cards?

Rudd is planning a "Robin Hood" budget for later this year, stealing from the wealthy (savers) to pay for the poor (debtors). I always thought that Robin Hood stole from the state (the kings, royals and their friends) and gave back to the people? This is equivilant to the king stealing from his people then handing (some of) them back a small amount and asking them to say thanks! It's just another step towards a larger government, creating disincentives to work and save along with wealth destruction and moving us ever closer to serfdom. How much longer can this nanny state continue? Not only have they already horse drawn and quartered capitalism in this crisis (capitalism was NOT the cause!) but it's almost as if they're deliberatly getting every policy response wrong.

Our leaders wouldn't have anything to gain from socialism, would they? Great.

Some gold from Malcolm today, he really is running out of ideas. From the ABC:

Opposition Leader Malcolm Turnbull says Prime Minister Kevin Rudd is scaring people by describing global economic conditions as a cyclone.

"Using this type of extravagant language is very counter-productive," he told ABC Radio's AM program.

"Anyone that listens to that is hardly going to take their $900 and spend it - they're going to use it to pay off debt and put it into the bank."

According to Malcolm Turnbull, now that we're too scared to spend we might actually, gasp, start the road to recovery by increasing savings and paying off debt. Yet he chooses to use this as an opportunity to criticise the government?! This shows that both major parties have no idea what they're on about regarding economics. More spending on consumption will not create jobs; it will not pull us out of this crisis. It will only delay the recovery process. We need real savings and for people to pay off the debt they accumulated while living beyond their means. We need a reduction in the size of the state, not an increase. We need to remove the coercive cartel that the state has over banking and money, starting with the RBA. That is what Malcolm should be attacking the government over, not that we're "too scared to spend".

In reply to Malcolm, Wayne Swan chipped in with some usual idiocy,

"I simply reject the notion that there has been no significant impact flowing through from the Government's efforts to stimulate the economy," he told Radio National.

"The alternative is to sit and wait and do nothing and what that will produce is far higher unemployment, far higher lost output and enduring damage to our economy for the long term."

Mr Swan has refused to speculate on whether the country is already in recession but he admits that the nation faces a huge challenge.

"I don't think anybody can say what will occur as we go down the road with this global recession," he said.

Ah, the old "we didn't do enough" fallacy, the "it would have been much worse if we hadn't acted" Keynesian response to the repeated failures of their theory. Their "stimulus" will increase unemployment, it will distort the structure of the economy and will result in further pain in the future.

I have a pretty good idea of what will happen as we go down this slippery road to serfdom: a short-term "fix" through the continuation of a 'stop-go' inflationary policy (in other words, subsidise the banking sector -- Bernanke plans to inflate the money supply to the 'old' level that existed before the bank-created money began to unwind, in effect clearing the banks' debt by devaluaing the currency -- in other words, stealing from anyone who holds USD). Following the 'recovery', inflation will pick up and they'll start to 'tighten' their monetary policy, in the process causing all of the malinvestments that are only around because of the increasing rate of inflation to go broke. In the process, jobs 'created' there will be destroyed and we'll have unemployment in those sectors. We then have the next recession which will come around sooner and will be more severe. Unless these structural issues are resolved, we're destined to have booms and busts, becoming more frequent and severe each time.

Either we have a fundamental change in the way banking and money operate (i.e. free banking) and end this vicious cycle, or...and this is what I'm afraid of...we eventually fall into full-blown socialism.

In today's Unleashed, Bruce Haigh wrote an article entitled "What can Rudd do to restore a healthy economy?", outlining his thoughts on what the Rudd government should do to make sure our economy gets back on track. Initially I thought he was on to some good points, stating that Australian's haven't learnt much from the past...before unleashing against capitalism and promoting full-blown socialism.

Mr. Rudd has a responsibility in times of a shrinking economy to provide a minimum wage, housing, health care, transport and education for adults and children least able to financially cope in the forthcoming straightened circumstances. This is survival spending, it is not designed to create jobs; it is to keep people alive and healthy and to provide the means for their children to participate in and help engineer a revitalised economy when the global economic sickness has passed. This is basic humanitarian assistance; it will not in the short to medium term, of itself, rebuild the economy.

The only thing Mr. Rudd has a responsibility to do is to make sure this doesn't happen again. He needs to do exactly the opposite of what Bruce recommends above and avoid any and all involvement in the economy, financial system, education, health care and so on. We haven't been living with capitalism; on the contrary, we've had statists masquerading as 'capitalists' to suit their own personal endeavors. Rudd himself was a self-proclaimed believer in the market until this crisis happened, but he sure jumped ship quickly (he was always a socialist). There is no middle-ground (see The Myth of the Failure of Capitalism by Ludwig von Mises, 1932.

It can't happen overnight -- the state is so involved in everything we do it's going to be a slow process but these are the types of policies we need. From Friedrich Hayek in a 1975 Meet the Press:

"No, but it goes back to the same cause. The unemployment of which you speak, which is the initial cause, is due to labor being temporarily directed into places or activities or industries where they cannot be maintained without further inflation. Therefore you can only cure that by achieving a new redistribution of labor between employments. Adaptation to a condition in which aggregate demand need not progressively increase to maintain that employment."

"We mustn't assume that all problems are solvable in the short period. There are problems that we cannot solve or which trying to solve them quickly may do more harm than good."

Hayek was saying (he was talking about the U.S. economy) to do the opposite of what Bruce is recommending. The government created this distortion in the allocation of labour and the market needs to redistribute it to more productive areas. Any short-sighted attempt to "save jobs" will do more harm than good. Back to Bruce,

"Mr. Rudd will need to take some drastic and decisive action, taking into account the lessons learnt from the last Great Depression. He will need to cancel some overseas defence orders and rethink defence requirements and strategies, utilising local capacity, particularly in ship building. He will need to take over the local car manufacturing industry, which can also be used for defence production. These decisions will protect and provide new jobs as well as build a local defence production capacity in what will be uncertain times."

I agree with the removal of our (due to our alliance with the US Empire) overseas troop contingent but I'm not sure how to read the rest -- is Bruce really suggesting we mobilize our economy 1930s style to prepare for some (looking at his words, inevitable?) upcoming war? This won't protect jobs. This won't create wealth. Times are only uncertain because people such as Bruce are advocating full-on socialism as a response to the continued failures of the state!

The government needs to regulate the banking industry and get back into the business of banking. It needs to take over Telstra, railway infrastructure and rolling stock and providing an air service in remote Australia. The tyranny of distance demands it. User pays has failed, particularly in rural Australia.

No, the government has had its turn at running banking, telecommunications and public transport into the ground. It needs to remove ANY and ALL involvement in these industries as soon as possible. It needs to remove the red tape completely. It needs to stop creating monopolies through regulation and laws. It needs to let people decide what they want!

The federal government needs to take over the management of water and abolish water licences, as a short and long term stimulator of the economy, particularly the rural economy.

The water debacle is a creation of the government. How will more involvement solve anything? This is a touchy one though, because the state is so involved already (massive property rights issues) you can't just privatise the whole thing in an instant.

The private schools must fend for themselves, that's what private used to mean and the funding of public education significantly increased, particularly in the area of skill creation. Pulling out of depression will require it.

Here's an idea: cut all funding for schools and return the tax dollars used in it back to the parents. As with all of the above, spending needs to be cut dramatically and the market needs to be allowed to provide these services. Private schools can fend for themselves perfectly well -- that is, of course, unless they're competing with these "super schools" with endless pockets and no profit motive!

Import replacement needs to be encouraged and funded, directly, and from loans through the government bank.

Absolutely not. People should be free to choose where they buy their goods from. If there's a market for it, and people really care as much as you think about saving local jobs, then there will be an opportunity for profit (by charging premiums for "made in Australia" products) that entrepreneurs will capitalise on. Why should the government make this decision for us, at our expense? We need to remove all tariffs, subsidies and "import replacement" schemes as soon as possible.

This depression is a direct result of Globalisation. Australia should seek future protection from the buffeting of overseas financial institutions by exercising more control, discipline, stimulus and protection of its own economy.

You're right -- the U.S. Federal Reserve is the key culprit in this crisis, fuelling banks across the world with cheap credit and encouraging consumer debt. But we should not, under any circumstances, revert to a protectionist state-run economy. This cannot work and will serve only to lower our standard of living considerably. We can insulate ourselves against this sort of thing by abolishing the RBA, significantly shrinking the size and involvement of the state, and allow free banking (in other words, let banks create their own currency, backed by commodities of the markets choosing).

Despite what he says, Bruce obviously hasn't learnt anything from the past failures of the policies he advocates.