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Thought for the Month:
So far from ignoring the material world, Christ said that He had overcome it. Man did not live by bread alone, but sufficient bread was essential. "Give us this day our daily bread." God the Father has provided an abundance of material things required for the "life more abundant" which Christ spoke about.
- - Eric D. Butler in "Releasing Reality" 1979
The Nation's Credit: Senator Richard Darcey, 1941 ( ALP, Tasmania)
Richard Darcey (1871 – 26 July 1944) was an Australian politician. Born in Launceston, Tasmania, he received a primary education before becoming an apprentice jeweller. He eventually became a jeweller in Hobart, and rose to become President of the Retail Jewellers' Association.
The following speech by Senator Richard Darcey of Tasmania is taken from
Hansard Estimates and Budget [SENATE] Papers 1941-42 (Revised)
On the 12 November 1941 : page 258-264
Senator DARCEY.- The banks can create as many millions of pounds as are required. It must be remembered that 21/2 (two and a half) per cent on a certain sum is equal to 5 per cent. on half of that amount. In December, 1937, Australia's national debt amounted to £1,262,911,649 0s. 1d. One person in the community, who signed himself "Patriot", was concerned about the magnitude of the debt, and accordingly he sent a 1d. stamp to the then Treasurer with the object, as he said, of reducing the debt to a round figure. Ufortunately, his purpose was not achieved, because between the time that he saw in the newspaper the amount of the national debt and the time when he sent the 1d. stamp to the then Treasurer, the national debt had increased at the rate of £1 13s. 4d. a second. The debt grows so quickly that it now amounts to £1,000,000 a week. It is still growing. Compound interest on that debt has got Australia into a deplorable state. Some persons in the community are forced to work five months in the year in order to pay their taxes. That is the position already when taxes have really only started.
Senator MCBRIDE- I should have thought that the honorable senator would have convinced a Labour government that taxation is not necessary.
Senator DARCEY.- At the moment, I am trying to convince the Opposition. I have stated facts in this chamber for several years, but previous governments have not heeded them.
Senator COOPER.- Even if the honorable senator were to convince the Opposition now, he would be too late.
Senator DARCEY.- Things are becoming so bad that the Opposition will be forced to listen to what I have to say. This country cannot pile up huge war debts and hope to meet its liabilities by means of taxes. I am obliged to tell the Opposition these facts because it is fighting against a budget which I am defending. There is only one way to avoid inflation.
Senator ARTHUR- What is inflation?
Senator DARCEY.- Inflation is the lowering of the purchasing power of the wages of the people. In South Africa efforts have been made to prevent inflation. Prices of commodities have been fixed, and heavy fines may be imposed on those who sell above such fixed prices. A man may be fined as much as £500, or given two years' imprisonment, for departing from the fixed price. In. Australia persons convicted of exceeding fixed prices were fined a mere £3 or £4.
Senator SPICER.- They can be fined as much as £500.
Senator DARCEY.- That may be, but
the fact is that they are not fined heavily.
The reason is that many of the people
who ought to be punished in this way
find the money for political campaigns.
Should the war continue for a few more
years what are our taxes likely to be?
Last year, the then Treasurer (Mr.
Fadden) introduced a budget covering
an estimated expenditure of £100,000,000.
This year the budget runs into
£325,000,000. I emphasize that the
interest on the national debt is mounting
all the time. Tens of thousands of
pounds have been spent in Australia to
inform the people that if they do not
buy war savings certificates and war
loan bonds the war effort will be retarded. I intend to ask what it has cost
Australia for advertisements urging the
purchase of war bonds and war savings
certificates. I shall tell the Senate how
the war savings certificates swindle is
worked. The private banks have sold
certificates to the value of £14,000,000.
A bank which can sell certificates of a
value of £100,000 puts the amount to the
credit of its cash reserves. It can then
advance to the Government credit
amounting to £800,000 on the strength
of that addition to its cash reserves, and
it can charge the Government 3 per
cent. on that sum. Do honorable senators
know of a bigger racket than that? That
is the kind of thing that went on with
the knowledge of the previous Government. I hope that it will not continue
under the present administration. No
private individual may hold war savings
certificates valued at more than £250,
but the private banks found a way to
get over that difficulty. They bought
certificates in the names of their
employees. These employees bought
them voluntarily, on the advice of the
manager of the bank. I do not know
what would have happened to them if
they had not taken his advice. Every
fortnight an amount was taken out of
their wages for the purchase of these
certificates and placed in the bank's reserves. Although it is said we are fighting
for so-called democracy, I maintain that,
since this war started, Australia has been
fighting with one hand behind its back
because of the financial system under
which we are governed.
Senator KEANE.- Amd then "welehed on the interest rate.
Senator DARCEY.- That is so. We
must remember that from 75 per cent. to
80 per cent. of all loans are subscribed
by the banks. Having realized that it is
easy to see who fixes the rate of interest.
As I have said on many occasions, interest
can be paid only by further borrowing.
That is why the national debt has increased so tremendously in the last few
years. In Hobart recently I was interested to hear a lecturer, an economist
of the Melbourne University, give his impressions of a visit to Russia in 1934.
Dealing with the Soviet's financial policy
he said that M. Stalin had a habit of
putting a loan on the market at 6 per
cent., and, when he got the money, of
lowering the interest rate to 3 per cent.
I point out that that practice is not
peculiar to Russia. I do not know
whether M. Stalin learned of it from
Mr. Lyons, or whether Mr. Lyons learned
of it from M. Stalin.
I have endeavoured
to give honorable senators some idea of
the mess we have got into as a result
of following orthodox methods of finance.
The only way Australia may be saved
from financial and economic ruin is by
a complete alteration of the financial
system. There should be a revolutionary
change in the finances of this country.
The word "revolution" means a violent
departure from existing methods or
ideals. A violent departure from orthodox financial methods must be brought
about in Australia if this country is to
be saved from financial insolvency. To
continue as we are going on to-day is
madness. History shows that on several
occasions one man has been right when
the rest of the world was wrong. One of
the new economists whom I follow has
said that banks do not need to have money
to start at all. This man was asked to
go to Ottawa to express an opinion on a
bank bill then before the Canadian Parliament. He was asked how much capital
a bank required before it should be given
a charter to trade. To the amazement of
his hearers he said, "A bank does not
need capital to start business. It
needs only buildings, books and pens ".
When a bank commences business it
invites people to make deposits with
it, and when it accepts deposits
it simply gives receipts for them.
But a depositor is given no security that
he will get it back again, if I deposit,
say, £100 in a bank, the manager says.
"We will pay you interest at the rate of
2 per cent. for two years ". I say, "All
right"; and I get a receipt for the
deposit. On the other hand, if I wish to
borrow £100 from a bank, the bank wants
a guaranteed security to twice the value
of the loan either in real estate, or bricks
and mortar, before it will advance the
loan. The banks are like the bookmakers.
The latter cry the odds, and you cannot
get a bet unless you take their prices. The
banks make all the terms. It is use-
less to go from one bank to another, because they have a gentleman's agreement.
Senator BROWN.- Ned Kelly.
Senator DARCEY.- They are worse
than Ned Kelly. The bushranger takes
the risk of being hanged, but the successful banker is admired by his shareholders.
I know wheat and wool-growers who
never saw a cheque for years because the
banks would not finance their clip, or
crop, until these were made over to them.
Ned Kelly was decent compared with
some of them. I do not blame the bank
managers. They have absolutely no say
in the matter. Many take their instructions from London, and London takes its
instructions from the Bank of International Settlements at Basle. That
bank is not subject to the law of any
country. Absolute power is given to it
under its charter. I do not wonder that
wars continue. One has only to examine
the directorates of any of the big armament firms in England, and on it he will
find ex-admirals and ex-generals who,
from. time to time, write to the newspapers
pointing out how unprepared Great
Britain is for war.
The PRESIDENT.- The honorable senator's time has expired.
Senator FOLL (Queensland) [9.5].- I congratulate honorable senators opposite on their occupation of the treasury bench. I join with Senator MeLcay in offering to render any assistance in my power, so long as the efforts of the Government are directed towards ensur- ing that this country shall maintain a full-time war effort in both men and money. I regret that the change of government occurred when it did, be- cause the country lost the services of a number of men who had gained a great deal of administrative experience in a hard school. In many instances these man were jOust beginning to gather the fruits of their labour. I resent very much the statement made by Senator Darcey that the Labour Government found everything in a mess when it assumed office. I take great pride in saying, as did Senator McBride and others, that when the his- tory of Australia'.s war effort is written, the people will appreciate what was done for Australia by the Lyons Government from the time of the Munich Pact until the death of Mr. Lyons, by the Meuzies Government, and by the Fadden Government. Members of those Govern- ments worked exceedingly hard in the interest of this country, and laid the foun- dations of a defence policy which has provided a wonderful bulwark for the defence of this country should we be attacked. Therefore I resent Senator Darcey's remark.
Senator DARCEY.- I criticized the previous Government only because of its financial policy. I said nothing about its work. I adhered to financial matters, and I claim that I have shown that in that respect the previous governments were incompetent.
Senator FOLL.- The governments to which I have referred can take great pride in their financial programmes and as has been pointed out by Senator Spicer, in the fact that costs have been controlled and interest rates have actually decreased. That is a very great tribute to the work of those governments. Commodity prices in this country have risen to a lesser degree than in any other country because of the fact that at the outbreak of war, the then Prime Minister (Mr. Menzies) realized the necessity for adopting a system of price control. That system was introduced as one of the first acts of the Menzies Government. The suggestion made by Senator Dareey and supported, by interjection, by some honorable senators opposite, that the Prices Commissioner, Professor Copland, was prepared to do anything to keep his job, is unworthy of him. I have been in frequent contact with Professor Copland since be was placed in charge of the price-fixing machinery of this country, and I think that the Minister for Trade and Customs (Senator Keane), who is in charge of the department in which Professor Copland holds a position, will agree that he has done an extraordinarily good job in most difficult circumstances. It ill becomes honorable senators to make remarks of that kind about a public servant who is unable to defend himself. Senator Diaozv.-I said it to his face. Senator POLL.-Professor. Copland has given remarkably good service to this country. Although he was in no need of a job, he came forward and accepted.."
The above was Senator Darcey's 1941 speech. The year is now 2011... What's changed?
"That is what I
mean when I refer to corrupt governments. Any one who sacrifices the interests of the people for the benefit of
profit-makers is a traitor. He is the fifth
columnist of to-day-the enemy inside
Think the GFC was big? You ain't seen nothing yet
writes George Monbiot in The Guardian October 12, 2011 - 6:55AM
Australian economist Steve Keen said the ingredients are there for another financial meltdown. I stumbled out into the autumn sunshine, figures ricocheting around my head, still trying to absorb what I had heard. I felt as if I had just attended a funeral: a funeral at which all of us got buried. I cannot claim to have understood everything in the lecture: Sonnenschein-Mantel-Debreu theory and the 41-line differential equation were about 15.8 metres over my head. But the points I grasped were clear enough. We're stuffed: stuffed to a degree that scarcely anyone yet appreciates.
Professor Steve Keen was one of the few economists to predict the financial crisis. While the OECD and the US Federal Reserve foresaw a "great moderation", unprecedented stability and steadily rising wealth, he warned that a crash was bound to happen. Now he warns that the same factors that caused the crash show that what we've heard so far is merely the first rumble of the storm. Without a radical change of policy, another Great Depression is all but inevitable.
The problem is spelled out at greater length in the new edition of his book "Debunking Economics". Like his lecture, it is marred by some unattractive boasting and jostling. But the graphs and figures it contains provide a more persuasive account of the causes of the crash and of its likely evolution than anything that has yet emerged from Constitution Avenue or Threadneedle Street. This is complicated, but it's in your interests to understand it. So please bear with me while I do my best to explain.
The official view, as articulated by Ben Bernanke, chairman of the Federal Reserve, is that both the first Great Depression and the current crisis were caused by a lack of base money. Base money, or M0, is money that the central bank creates. It forms the reserves held by private banks, on the strength of which they issue loans to their clients. This practice is called fractional reserve banking: by issuing amounts of debt several times greater than their reserves, the private banks create money that didn't exist before. Conventional economic theory predicts that when the central bank raises M0, this triggers a "money multiplier": private banks generate more credit money (M1, M2 and M3), boosting economic growth and employment.
Bernanke, echoing claims by Milton Friedman, believed that the first Great Depression in the US was propelled by a fall in the supply of M0, which, he said, "reinforced . . . declines in the money multiplier". But, Keen shows, there is a weak association between M0 supply and depression. There were six occasions after the second world war when M0 supply fell faster than it did in 1928 and 1929. On five of these occasions there was a recession, but nothing resembling the scale of what happened at the end of the 1920s. In some cases unemployment rose when the rate of M0 growth was high and fell when it was low: results that defy Bernanke's explanation. Professor Keen argues that it's not changes in M0 that drive unemployment, but unemployment that triggers changes in M0: governments issue more cash when the economy runs into trouble.
He proposes an entirely different explanation for the Great Depression and the current crisis. Both events, he says, were triggered by a collapse in debt-financed demand. Aggregate demand in an economy like ours is composed of GDP plus the change in the level of debt. It is the sudden and extreme change in debt levels that makes demand so volatile and triggers recessions. The higher the level of private debt, relative to GDP, the more unstable the system becomes. And the more of this debt that takes the form of Ponzi finance — borrowing money to fund financial speculation — the worse the impact will be. (emphasis added...ed)
Keen shows how, from the late 1960s onwards, private sector debt in the US began to exceed GDP. It built up to wildly unstable levels from the late 1990s, peaking in 2008. The inevitable collapse in this rate of lending pulled down aggregate demand by 14 per cent, triggering recession.
This should be easy enough to see with the benefit of hindsight, but what lends weight to Keen's analysis is that he saw it with the benefit of foresight.
In December 2005, while drafting an expert witness report for a court case, he looked up the ratio of private debt to GDP in his native Australia, to see how it had changed since the 1960s. He was astonished to discover that it had risen exponentially. He then did the same for the United States, with similar results. He immediately raised the alarm: here, he warned, were the conditions for an economic crisis far greater than those of the mid-1970s and early 1990s. A massive speculative bubble was close to bursting point. Needless to say, he was ignored by policymakers.
Now, he tells us, a failure to address these problems will ensure that this crisis will run and run. The "debt-deflationary forces" unleashed today "are far larger than those that caused the Great Depression". In the 1920s, private debt rose by 50 per cent. Between 1999 and 2009, it rose by 140 per cent. The debt-to-GDP ratio in the US is still much higher than it was when the Great Depression began.
If Keen is right, the crippling sums spent on both sides of the Atlantic on refinancing the banks are a complete waste. They have not and will not kickstart the economy, because M0 money supply is not the determining factor. ...
Read more: http://www.theage.com.au/opinion/politics/think-the-gfc-was-big-you-aint-seen-nothing-yet-20111011-1litt.html#ixzz1aXgUQNFK The Guardian