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Discussion in 'The Economy' started by try anything once, 12th Mar, 2009.

  1. try anything once

    try anything once Well-Known Member

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    melb
    There has been a lot of comments lately that most of the stimulus cheque would not get spent but would go to paying down debt.

    I don't understand why the gov didn't strike a deal with VISA or Mastercard to issue everyone with a debit card with the $950 in it so that the money would have to get spent?

    I know credit spending has had a lot to do with the current fiasco but it does seem like an obviou ay to make sure the money gets spent!

    BTW, anyone done the math on how $60Billion is going to get paid for in the long run? I guess we only have 4 or 5 million taxpayers in the country, so we are each going to be up for 12 - 15K extra taxes? On second thoughts high income earners will probably be up for 3-5 times this amount!!
     
  2. Chris C

    Chris C Well-Known Member

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    2nd Apr, 2008
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    Brisbane, QLD
    There were talks of a voucher systems being used as opposed to cash handouts, but like most government initiatives the costs of regulation and oversight of vouchers far outweighed the benefits (and IMHO spending the handouts on luxury consumer items would only further hurt the economy).

    I'd like to make the point that I believe that a lack of spending is NOT the problem, if anything the problem is actually that we have gone out and spent too much on credit and now that the money markets are tightening up causing deflation, which has made it more difficult to get money to pay off our existing debt and now everyone is frantically trying to pay down debt which only fuels the deflationary contraction.

    Moral of the story - using credit for anything other than increasing productive output is asking for trouble.

    So that unfortunately means buying clothes, ipods, plasmas, holidays etc on credit is not stimulating the economy in the long term because that money still needs to be paid back and the reality is that your expenditure on those items hasn't increased your productive capability, which means that you will ultimately have to enter a period where you are spending less than what you earn in order to pay back the debt, and during that period which will mean less money being spent in the economy (like right now). I should point out that expenditure on the above items would be unlikely to stimulate the economy much any given that none of those products are largely manufactured in Australia severely restricting the multiplier effect of the fiscal stimulus.

    This idea of "spend money for your country" is completely ridiciulous and taken out of context of what quality use of credit is. It is actually important that people realise that this money from the government is still "credit" it's just lent to us by the government for which we will pay back via future taxes. Therefore with the money still being a debt we should be only looking to spend that money on items that go towards improving our productive capabilities, or paying down debt (which would just make the payment a debt transfers from private households to government).

    This is a recession we can't avoid, but it was brought about by or silly management of money and belief that cheap and easy credit would be available forever and that we would have to pay the piper.
     
  3. bigbuddha

    bigbuddha Well-Known Member

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    17th Jan, 2007
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    Location:
    Brisbane, QLD
    Chris C,

    I totally agree with what you have just said. Well done.