If ...

If you want to protect the most in need and for the future in terms of economy you need to positively skew the distribution of wealth (no pun intended). This basically means that whilst there are still the rich class we raise the lower income brackets closer to the average income, the income that most people earn and that which is the most influential in the economy. When pressure is placed on the average household then those who fall below it aren't left out in the cold so to speak and support agencies aren't pushed beyond their limitations to the same degree as they would with a normal mode of distribution of wealth. The most in need would essentially be in the same boat or close to the same boat as those people with the average income.

Handout mentality is the wrong solution

We need to put an end to this handout mentality. The availability of a handout is a disincentive for solving one's problems through one's own means or skills.

What we need are jobs so that people can apply their skills for there own benefit and the benefit of the economy.

Many business operate inefficiently because either they cannot or are reluctant to take the risk of accessing the loans that would make their business more efficient. This traps them in state that limits their capacity to offer employment or otherwise create employment for their suppliers through the increased activity arising from that loan.

Instead of simply frittering away our children's right to lower taxes in future (by making handouts) we could make secure loans to business that MUST BE PAID BACK IN FULL AND WITH INTEREST.

The interest rate could be relatively low and consistent with the RBA cash rates or the government cost of raising money through rates attached to its bond issuance. It allows the business owner to access the government's credit rating in order to carry out activities that are profoundly in the national interest. This also ensures our children don't suffer by being forced to pay back the bill we are now creating for them with the paternalistic handouts.

Every green should know our children will be less wealthy than us due to the expected negative impacts of climate change on our national productive capacity and the real prospect of a reduced global population in future. This seriously compromises their ability to pay back our collective bill.

An example of a business having inadequate capital for efficiency is someone who runs a diesel generator in a remote location to produce power, yet they cannot raise the capital to put in solar panels that would reduce their diesel bill. The reason solar is cheaper can be seen by comparing the solar plant up front cost with the the present value of the next 20 years of diesel bills. In this comparison solar is about half the cost and potentially much lower if you allow for uncertainty in future diesel prices. I am talking here about a hybrid system without batteries. The generator runs when the sun cannot provide the power. So the solar plant has the effect of reducing diesel consumption.

Right now business will labour on each year paying the diesel bill and endure the risk of a business killing sudden run up in diesel prices because they can't escape the current expensive paradigm because no one will lend them the money on such long term to do so.

This is where government can step in and make loans to these businesses and give them the security and confidence in knowing they won't be hammered by future high interest rates. The money will be paid back. Emissions will be reduced. Employment will be created in making these solar plants. Our kids won't have to pick up the bill for our outrageous selfishness.

In Australia each year we produce a huge amount of electricity using diesel, particularly in off grid locations. This could be halved through this approach.

This is just one example. There are many other examples of businesses trapped into using high cost methods because they can't access the capital to get them out of that paradigm and thus permit them to employ staff with the money saved by the more efficiency method. Many business owners work inhumanly long hours because they simply cannot afford to employ and take on the attendant financial risks of having staff.

the inconvenient economic truth

Unfortunately, and not surprisingly, either, nobody here seems to understand the true reason for the GFC. Debt.

For over twenty five years, I could not understand why as a civilisation we have this fascination with Economic Growth. Everyone tells us that growth is good for us, even though most of us don't like it, and consternation abounds when it goes away, as is happening right now. Well, it's all clear as a bell now. Capitalism, and its cousins the Free Markets, are fundamentally flawed. Capitalism is doomed to fail, no matter what we do, and here is why.

Everything around you is based on debt. Everything. The car in your garage, the garage, the road outside, the paper you are holding in your hands, the solar panels on our roof, was all paid for with money, and money is debt, (www.moneyasdebt.net/) 99% created out of thin air by the Reserve Bank. In fact, much of this 'money' does not exist at all now, thanks to computers which are able to make electronic ledger entries in spreadsheets to the tune of any millions you like if the spending can be justified by later earnings. But there's a sting in the tail of all this debt: the money to pay the interest on that debt does not exist either!

So to create the interest payable, even 'more stuff' needs to be built or manufactured or invented. Newer better faster computers, bigger houses, bigger cars, plasma screen TVs, more air conditioners, and of course the interest money on that 'stuff' doesn't exist either, so the dog starts chasing its own tail..... except this dog's tail keeps growing, and it will choke the dog. I hope you are still with me on this, it is very important.

The other aspect of all this growth, is that it is exponential in nature, flattish to start with, then they go skywards. So many things are now growing exponentially, like population, numbers of cars, roads, houses, debt itself, carbon emissions, water consumption, computers, topsoil loss, fisheries collapsing, that the list is way too long to publish here. As Chris Martenson says in the Crash Course “if you feel as though your life is accelerating out of control, well that's because it is...”
http://www.chrismartenson.com/crashcourse

Now, have you noticed how, even just a few years ago, if you had a million bucks you were very rich, but today the very rich are all billionaires? And that when they talk about economic matters now, increasingly, the word Trillion is entering the vernacular? You have to put this into perspective actually. A Million dollars is a pile of tightly packed $100 notes about one metre high. But a Billion dollars is a pile one kilometre high! I can still get my head around that, almost..... but a Trillion dollars, well that's something else altogether, that's tightly packed $100 notes laid horizontally all the way from here (the QLD Sunshine Coast) to Sydney!! Just let THAT sink in for a while, because they are using piles of money that large to bailout failed companies and banks where Uncle Sam lives. Money supply, therefore, is also growing exponentially.

OK, now back to the fundamental flaws. Because debt has been growing exponentially and is going up that chart with the train, the amount of money required to pay all that interest will not be paid in Trillions... but Godzillions! Still with me? Trouble is, there are not enough resources left to build $Godzillion economic growth, and so the debts can never be repaid. NEVER.

Economists continue speaking in forked tongues, saying we have a financial crisis on our hands, when in fact we have a DEBT crisis.

When Peak Oil caused the price of oil to reach $147, everything (petrol, food, building, and most services) went up with it. The Powers That Be, assuming inflation was causing this, raised interest rates. How helpful was that? Treasury doesn't seem to understand that inflation is caused by too much money being circulated (remember, they print it!), thus causing money to be worth less, and the cost of everything going up. This time, however, it wasn't inflation that caused price rises, it was Limits to Growth. The government is now clutching at straws, they do not understand Limits to Growth. Computer says NO! Limits to Growth means, the debts cannot ever be repaid.

All this was predicted, as long as twenty years ago. In fact, Limits to Growth were predicted more than thirty five ears ago by the Club of Rome. Remember them? But nobody listened, and now we have a huge problem to sort out. I have some ideas on how to fix this mess, but they are all way too controversial to happen before the entire deck of credit cards falls over in a big heap. A several Trillion dollars heap. Rudd and Co have no idea what to do, they are borrowing ever more money and throwing it at the problem, when in fact someone ought to be shouting “STOP!” very very loudly. But there you go, this is all too much, it wasn't meant to happen, and the best they can do is clutch at straws and hope it will all go away.

But it won't go away, and soon, we will all be on our own. Will we let the multinationals repossess everything because they screwed up? Should we bail out stupid car companies because they ignored all the warnings about Peak Oil and Climate Change and insisted on making us cars that eat the planet? Or do we retake the streets and tell them to get lost (I'm being very polite here!) because we don't want them doing any more damage?

Food for thought for 2009. A crisis is a terrible thing to waste. What are we going to do about it? And just how do we pay for the New Sustainable World Order?

Debt

In a sign of the panic gripping Washington's policy-makers, one of Barack Obama's key economic advisors, Paul Volcker, has warned a gathering of his leading peers that the crash of 2008 might be "the mother of all financial crises... I don't remember any time, maybe even the Great Depression, when things went down quite so fast, quite so uniformly around the world". Volcker, chairman of the president's Economic Recovery Advisory Board and former chair of the Federal Reserve, told a conference at Columbia University's Centre for Capitalism and Society on 20 February that the crisis was "characterised by being very international" and was the product of deep global imbalances.

But it is not only for their candour about the scale of the crisis that Volcker's Columbia comments are notable. The former Fed chief admitted to his star-studded audience (including celebrity economist Jeffrey Sachs, George Soros and three Nobel Prize winners) that the profession of which they were all a part had failed. The breakdown of the world financial system has "occurred in the face of almost all policy and intellectual analysis... Even the experts don't know what's going on".

http://www.wsws.org/articles/2009/mar2009/volc-m12.shtml