Hello Readers,


Welcome to Australian Monthly News (Oz Ezine)!


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Contents


1. Today's Motivation.


2. Inspirational quote.


3. Useful Sites.


4. This week's sponsors message.


5. Editors notes.


6. Article


7. A little humour.


8. Ezineadnet advertisements.


9. Disclaimer


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1. Today's Motivation


"The way a team plays as a whole determines its success.

You may have the greatest bunch of individual stars in

the world, but if they don't play together, the club

won't be worth a dime."


Babe Ruth


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2. Inspirational quote.


Public opinion is a weak tyrant compared with our own

private opinion. What a man thinks of himself, that is

which determines, or rather indicates, his fate.


~ Henry David Thoreau (1817 - 1862)


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3. Today's Useful Sites.


What about TOMORROW?


http://www.tomorrow.org/links.html


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4. This week's sponsors message.


You are among the first to hear about it.. I GUARANTEE

you will be seeing this all over the place in the next

few weeks, so hurry and take a look at this:


 => http://www.list-twister.com/link/smartmoney


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5 Editors notes


Hi Friends


Welcome back to Western Australia. Hope your week has been

fruitful? The worldwide recession touching you at all?

Seems like it is similar to a very slow tide that comes in

over a couple of years wetting  everything and then recedes

to one day come in again. Us humans really find it hard to

accept that things have changed. Especially if it hits the

hip pocket nerve. So there has been a great deal of denial

around the world. And a great deal of imagining that it

would not affect us. That it is happening to someone else,

not me!


I can get that because I still see big momma's driving their

precious cargoes to the front door of the primary school in

great four wheel drive vehicles. Also the pundits predicting

green shoots as the tide of events reaches above their necks!


Funny how Japan has finally realised that because it doesn't

have any oil, it had better start making electric cars. And

the greener than grass people here denying nuclear power

plants while their governments continue to build coal fired

electricity generators. They scream to the rooftops we need

wind energy as the wind eases during the night!


What saddens me though, I will tell you. BHP Billiton and Rio

Tinto are merging into a mining giant. This is prophecy, but

will they not build computer operated machinery so huge that

it will gulp the side off mountains and dig holes to the bowels

of the earth to send it from our shores in mile long ships.

Till the day rapidly approaches that the hills are gone and the

holes are vast and empty. Will on that day these rapacious

creatures then just pack up and leave?


Leave the citizens of our country jammed in a thin strip around

the coastline in crowded suburbs, working for a pittance to

just exist?


I have seen over the last fifty years how in the farming

industry, farms taken over until one or two people own a whole

district and a machine does the work of hundreds of men,

machines operated by computers and the money is siphoned off

into shareholders, here and mostly overseas. While communities

and vibrant small towns shrink and die?


Governments are then called on to provide for the aging

population and to do so they implement draconian taxes,

regulations and rules until the citizens lose any vestige of

freedom they vainly imagined they once had?


Work till your 67 and what next?


Against the backdrop of rising interest rates?


I am not of the loony left, or the far right, just a bloke who

is concerned about the madly accelerating pace of life and

everything and everybody in it :-(


But back home here in old downtown Geraldton today, a huge cloud

band came across the West Coast this morning and delivered

soaking rains to the wheatbelt. Shades of old times!


Looks like being a good old normal season.


We are enjoying this winter and best wishes to our friends

in the Northern Hemisphere as you bask in the summer sunshine?


Kind regards


Stan Maley


Australia 0899652873


http://www.ozfamilyezine.com


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6. Article


History lesson for economists in thrall to Keynes  

 

 

 By Niall Ferguson


On Wednesday last week, yields on 10-year US Treasuries

-- generally seen as the benchmark for long-term interest

rates -- rose above 3.73 per cent. Once upon a time that

would have been considered rather low. But the financial

crisis has changed all that: at the end of last year, the

yield on the 10-year fell to 2.06 per cent. In other words,

long-term rates have risen by 167 basis points in the

space of five months. In relative terms, that represents

an 81 per cent jump.


Most commentators were unnerved by this development,

coinciding as it did with warnings about the fiscal health

of the US. For me, however, it was good news. For it

settled a rather public argument between me and the

Princeton economist Paul Krugman.


It is a brave or foolhardy man who picks a fight with

Mr Krugman, the most recent recipient of the Nobel Prize

for Economics. Yet a cat may look at a king, and sometimes

a historian can challenge an economist.


A month ago Mr Krugman and I sat on a panel convened

in New York to discuss the financial crisis. I made the

point that "the running of massive fiscal deficits in

excess of 12 per cent of gross domestic product this

year, and the issuance therefore of vast quantities of

freshly-minted bonds" was likely to push long-term

interest rates up, at a time when the Federal Reserve

aims at keeping them down. I predicted a "painful

tug-of-war between our monetary policy and our fiscal

policy, as the markets realise just what a vast quantity

of bonds are going to have to be absorbed by the

financial system this year".


De haut en bas came the patronising response: I

belonged to a "Dark Age" of economics. It was "really sad"

that my knowledge of the dismal science had not even got

up to 1937 (the year after Keynes's General Theory was

published), much less its zenith in 2005 (the year

Mr Krugman's macro-economics textbook appeared). Did I

not grasp that the key to the crisis was "a vast excess

of desired savings over willing investment"? "We have a

global savings glut," explained Mr Krugman, "which is

why there is, in fact, no upward pressure on interest

rates."


Now, I do not need lessons about the General Theory.

But I think perhaps Mr Krugman would benefit from a

refresher course about that work's historical context.

Having reissued his book The Return of Depression Economics,

he clearly has an interest in representing the current

crisis as a repeat of the 1930s. But it is not. US real

GDP is forecast by the International Monetary Fund to

fall by 2.8 per cent this year and to stagnate next year.

This is a far cry from the early 1930s, when real output

collapsed by 30 per cent. So far this is a big recession,

comparable in scale with 1973-1975. Nor has globalisation

collapsed the way it did in the 1930s.


Credit for averting a second Great Depression should

principally go to Fed chairman Ben Bernanke, whose

knowledge of the early 1930s banking crisis is second

to none, and whose double dose of near-zero short-term

rates and quantitative easing -- a doubling of the Fed's

balance sheet since September -- has averted a pandemic

of bank failures. No doubt, too, the $787bn stimulus

package is also boosting US GDP this quarter.


But the stimulus package only accounts for a part of

the massive deficit the US federal government is

projected to run this year. Borrowing is forecast to

be $1,840bn -- equivalent to around half of all federal

outlays and 13 per cent of GDP. A deficit this size

has not been seen in the US since the second world war.

A further $10,000bn will need to be borrowed in the

decade ahead, according to the Congressional Budget

Office. Even if the White House's over-optimistic

growth forecasts are correct, that will still take

the gross federal debt above 100 per cent of GDP by

2017. And this ignores the vast off-balance-sheet

liabilities of the Medicare and Social Security systems.


It is hardly surprising, then, that the bond market

is quailing. For only on Planet Econ-101 (the standard

macroeconomics course drummed into every US

undergraduate) could such a tidal wave of debt issuance

exert "no upward pressure on interest rates".


Of course, Mr Krugman knew what I meant. "The only thing

that might drive up interest rates," he acknowledged

during our debate, "is that people may grow dubious

about the financial solvency of governments." Might?

May? The fact is that people -- not least the Chinese

government -- are already distinctly dubious. They

understand that US fiscal policy implies big purchases

of government bonds by the Fed this year, since neither

foreign nor private domestic purchases will suffice

to fund the deficit. This policy is known as printing

money and it is what many governments tried in the

1970s, with inflationary consequences you do not need

to be a historian to recall.


No doubt there are powerful deflationary headwinds

blowing in the other direction today. There is surplus

capacity in world manufacturing. But the price of key

commodities has surged since February. Monetary

expansion in the US, where M2 is growing at an annual

rate of 9 per cent, well above its post-1960 average,

seems likely to lead to inflation if not this year, then

next. In the words of the Chinese central bank's latest

quarterly report: "A policy mistake ... may bring

inflation risks to the whole world."


The policy mistake has already been made -- to adopt

the fiscal policy of a world war to fight a recession.

In the absence of credible commitments to end the

chronic US structural deficit, there will be further

upward pressure on interest rates, despite the glut of

global savings. It was Keynes who noted that "even the

most practical man of affairs is usually in the thrall

of the ideas of some long-dead economist". Today the

long-dead economist is Keynes, and it is professors of

economics, not practical men, who are in thrall to his

ideas.


The writer is Laurence A. Tisch professor of history

at Harvard University and author of The Ascent of Money

(Penguin)

 

 

The source of this article is

John F. Mauldin

mailto:johnmauldin@investorsinsight.com


Investors, please visit;

www.investorsinsight.com


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7. A little humour.


A man watching a football match on TV kept switching channels

to a raunchy movie featuring a lusty couple.


"I dont know whether to watch them or the game," he told his

wife.


"For heavans sake watch them," said his wife. "You already

know how to play football!"


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8. EzineAd Net Advertisements


Please visit the link to view your advertisements.

http://www.ozfamilyezine.com/opportunities.html 


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