Friday, 30 December 2016

NY Resolution! To find where money comes from.....

New Year Resolution – To find where money comes from!

And the how, when, where and why of our money system.

For starters; ‘Money does not grow on trees, it is easier than that.’ writes Dr Steven Hail of Adelaide University. ‘To cut a very long story quite short’, he states:

 1.     When the Government spends it creates money.

2.     When the Government taxes it destroys money.

3.     Government ‘debt’ should not be thought of as ‘debt’ in the conventional sense at all. It is better thought of as a form of money.

4.     The Government cannot run out of money, and as long as it doesn’t guarantee to convert its money at a fixed rate into anything it could run out of, it faces no financial restraints at all.

5.     However it faces real and ecological restraints, because we can run out of people, skills, technology, equipment infrastructure, natural resources and ecological space.

6.     The Government is NOT a household and NOT a business, and has nothing at all in common with a household or a business where financial matters are concerned.

‘Understand  all of this and I think it will change your perspective on many things.’ offers Dr Hail. (Especially on the wisdom and ethics of PMs and Treasurers – the ones in the limelight or shadow ones!  CC)

These quotes are from his paper, ‘Paying for public services in a monetary sovereign state’ published in the journal of the Economic Reform Australia, Nov/Dec 2016 issue and available online on the ERA blogsite, and on this blogsite - which is the more digestible version for lay people
Go to it! Dr Hail’s, ‘very long story’ is well argued, and very readable and informative. 

This writer believes it is important for citizens to seek a greater understanding of our monetary system* because it is now such a major feature of our lives and politics. Indeed continuing public ignorance will allow our politicians and their friendly interviewers to browbeat us into accepting needless austerity and cuts to important services.

Follow your resolution and you will come to perceive how superficial – if not downright misleading - are the questions and responses given in the mainstream media on treasury matters.
Colin Cook

* Professor Thomas Picketty, author of Capital in the 21st Century, speaking on ABC Lateline last October whilst visiting Australia

“There are always a different solution to every problem and I think in the end what is key, the democratisation of economic knowledge to which I am trying to contribute can also contribute to the democratisation of society and if people are more active citizens, it can feed into more noble forms of political mobilisation which in the end can make a difference.”

Or, less eloquently, Get clued up about economics and money, then get active - and we might get  more decent, worthwhile  politics. CC

Tuesday, 27 December 2016

National Myths and Land

National Myths and Land


Our myths of 'rugged independence' and egalitarianism, the dream of home ownership and the Cinderella status of local government in Australia have a common root - our access to land across the centuries.
This paper examines the connections  and explores the concept of The Commons of the UK and the 'Act of Enclosure' of this continent in1788. Our attitude to land and how it is very largely determined by financial considerations is examined. The possibility of the 'hip pocket nerve' being harnessed to encourage a more conscious, respectful and honouring  attitude to the of privilege of land ownership is floated - not optimistically!
My paper was prompted by Mungo McCallum's Quarterly Essay No 36 (Black Inc ISSN 1832-0953), informed by James Boyce's, 'Van Dieman's Land' and at least two of Henry Reynolds books and I am pleased to record my appreciation of those stimuli.


In the Quarterly Essay No 36, Mungo McCallum cites several Australian myths as having been recognised and used by Kevin Rudd, ‘to take them (i.e. us/ the electorate/Aussie battlers/working families) to a country which has never really existed and probably never will, but which is the Australia to which they wish to belong’. Must we share the pessimism that Australia, in reality, will never come up to the hopes and expectations of Australians? 

Of the myths, two may usefully be viewed through the prism of modern Australia’s, attitude to land, real estate, the soil; ‘our claim to rugged independence’ and ‘the idea of an egalitarian society’.

The Commons and Independence 

In his very well researched history, Van Diemans Land (Black Inc. 2008), James Boyce relates how the early convicts there felt they had been dumped on the edge of a vast common. Ironically, many had been sentenced to transportation because they had been caught using the commons of England in traditional ways – trapping and snaring game, ways which had been made illegal under the Game laws and Acts of Enclosure. Boyce’s Introduction contains many  references to the convicts’ acceptance  of sharing resources  with Aboriginals and each other – land, water, game – and their adaptability  to go bush, to obtain ‘the essentials of life from the new land’.  ‘Van Diemen’s Land was aught but a vast common’ quotes Boyce, p70, Ref32. Defining his book as ‘an environmental history’ with the main interest of how the environment changed the settlers, the early chapters contain many specific references to Tasmania as a common and its effect on the early settlers, how the free access to the natural resources led to much entrepreneurial activity

So there was rugged independence in the early days of settlement and it was engendered by easy access to common land and its natural resources.
Commons are, to this day, very important parts of British society but the concept of shared use of the land is not a basic feature of modern mainstream Australia. English Commons have featured strongly in my own history having been an active Commoner of Ashdown Forest in Sussex (exercised my ‘Rights of Common’ to wood for fuel, bracken for litter and heather for thatching etc during the 60s and 70s).
The present UK Commons – and they are countless, many not publicly marked – are the remnants of the countryside still not fully privatised, remnants left over from the time before ‘ownership’ and formalised property rights, centuries ago. In the British Isles there were small communities simply living off the land, simply sharing what resources there were to provide rudimentary shelter and sustenance; Iron Age stuff and earlier – as seen on TV’s ‘Time Team’ with Tony Robinson! The present Ashdown Common, 3,000 acres between London and the south coast has a number of villages, dwellings, cricket pitches and tennis courts, a golf course, wild deer, it supports Commoner’s sheep and occasional cattle, has many horse trails and footpaths. It is its present size because the local inhabitants, the commoners of 1400 AD resisted attempts to enclose the late John of Gaunt’s estate; the later earl got his way with about half but that was 600 years ago!

Thus the commons of those northern isles supported many communities which in due time – with many battles, invasions, resistance and general skulduggery - coalesced into the sort of central government we know today. But the close association with the land persists in the English psyche today so that Bill Bryson can write of it as ‘the cherished land’ (UK Magazine, Resurgence No245). It is crisscrossed by footpaths, bye ways, tow-paths, bridle paths – many dating from Roman times and earlier – rights of way in use today and is adorned with marshes, moors, fells, forests, woodland and ponds having public access rights which are fiercely defended against all comers – sadly not always successfully. It is this literally ‘grass roots’ history that gives strength and meaning to Local Government in the United Kingdom today.
In contrast, the Van Diemen’s Land/early Australian experience of commons was harshly suppressed by Lieutenant Governor George Arthur in order to supply a servile workforce for the growing number of free settlers. In chapters 12, ‘Controlling the Convicts’ and 13, ‘Imposing Dependence’ James Boyce shows how Arthur, with British support and experience, used every device – secure barracks to prevent ‘fraternising’, informers, a police force comprising two-thirds serving convicts,  meagre carrots and very heavy sticks – to secure the desired servility.  Before 1820 many ex-convicts and some still under sentence had been allowed plots of land to build crude shelters on, or small land grants for subsistence living for themselves and families; some had licences to resources to support rudimentary commercial enterprises. But Boyce quotes, page 156, a John Henderson complaining that a low-born migrant, ‘soon imbibes such ideas of liberty, equality and independence’ that renders him totally useless ‘for the situation of a subordinate’.  This was no way to run a prison nor to support the ambitions and provide the free labour for the increasing numbers of free-settlers and must be ended. Lt.Gov Arthur was the man to do this - though there was much resistance and opposition and total success was never quite achieved.

The myth of ‘rugged independence’?  Is it some ancient, primitive dream from another continent that hardly stood a chance on this one? Or simply a matter of us living in denial of the harsh realties of how this was broken? Or the remnant of the opposition to Arthur’s punitive regime, extant still? This is my hope.


Egalitarian Society – Jack’s as good as his master

According to Boyce, the Van Diemen’s Land  experiences would not remain  isolated to the island population because the colony was a very significant part of the early European settlement of this continent; by 1830 it held 24,000 of the 71,000 non-indigenous population, 60,000 of the 126,000 acres in cultivation, more than half the numbers of sheep etc. As other parts of the continent were settled, the free-settlers, the land grantees needed skilled and obedient bush-men, shepherds and stockmen to work their land. The free settlers may have been skilled at managing accounts, have the contacts for trading and the necessary capital but without the servant ‘boots on the ground’ no enterprise could succeed. Many Van Diemen’s Land ex-convicts migrated from their island prison, the oppression, vicious memories – AND glimpses of independence - to help settle the other colonies, particularly Victoria.

And maybe this is where the myth of an egalitarian society started; later it was enshrined legislatively, we are all equal before the law in theory at least. But on the ground there was, of necessity, a partnership of the experienced ex-convict, low-born European and the settler, the landowner usually of the European elite. But equality always was a myth. The concept of the Commons – worryingly seen in Van Diemans Land to engender ideas of independence and equality – did not take root and flourish in the new continent. It was reaching its ‘use by’ date in England and other parts of Britain. In late 18th and early 19th century in the UK, the Enclosure movement was in full swing – huge tracts the Commons were being enclosed by the Acts of Enclosure passed by the parliament at Westminster to, inter alia, improve agricultural production needed by a fast growing, urban population; people turned off or encouraged to leave their rural subsistence migrated to towns to become part of the industrial revolution - and they multiplied.

So it was the Enclosure movement – or more precisely the idea of absolute property rights under the Crown - that dominated here not the concept of common land; and that always meant a population divided as in England. Landowners, the landlords, and the others - those with secure land and those without secure access to land. Henry Reynolds in his ‘Frontier’ (Allen & Unwin 1996) quotes EJ Hobsbawn, ‘that what happened to land determined the life and death of most human beings in the years 1789 to 1848’ and goes on to examine the close parallels between the conflicts in Europe and the British settlement of Australia; ‘the Aboriginal experience can be profitably compared to those of the squatters (mostly commoners really; author) on the shrinking commons, the foresters and men of the fens who struggled to maintain a traditional economy in opposition to the ever growing commitment to absolute property rights.’ (Ibid, Conclusion part III)

How did we get here... 

White Australia started as a continent of Crown Land with a recognised, and armed, central authority willing and able to dispense privileges, particularly land grants and titles, whereas Britain started, centuries ago, as common land with dispersed and independent communities evolving through self-managed hamlets, fiefdoms and great estates to towns providing a high level of sophisticated trading. (G M Trevelyan’s English Social History is an excellent reference; esp. Chapter XII, Dr Johnson’s England.) In Australia, the pre-existing, Aboriginal self-managing communities were practically wiped out and replaced by communities entirely dependent on a higher, centralised authority – which was in turn, for many years, entirely dependent on the British on the other side of the world.

This top-down establishment of authority, law ‘n order, is why Mungo can write, ‘…our history is that of a people who have willingly acquiesced to authority….have generally been content to do as we are told’ and speak of ‘our habit of obedience’. It also accounts for the Cinderella status of Local Government in Australia and, more fundamentally, the absence from the Australian psyche that local communities should manage their own affairs.

Our rugged independence and idea that we are an egalitarian society are myths entwined with the history of our relationship with the soil of Australia.

The Australian Dream 

Another myth used by Prime Minister Kevin Rudd quite dramatically, but not listed by Mungo, is that every Australian can own their own home. Well, maybe it is a dream that is rapidly becoming a myth.

As part of the stimulus response to the Financial Crisis of 2008, Kevin Rudd doubled the Howard Government’s First Home Owners Grant and renamed it ‘Boost’. This extra money injected into the housing market was welcomed by many ambitious young couples, the building industry and development lobby.  But the millions of dollars fed into the bottom of the market, has had a huge multiplier effect as existing home owners have moved up the property ladder by borrowing more against the inflated sale price of their erstwhile home. In consequence, as we entered 2010 our national  household debt has become larger than our GDP for the first time ever, mortgage debt being the largest single element and FHOB has, indeed, been a major boost.

Thus as Prime Minister Rudd collects political points for making home ownership easier for some and preventing property prices from falling, overall the price of housing has been increased and affordability reduced.  But, often overlooked, is a land element to this myth; homes/housing comprise a structure AND the land upon which it stands. You must be affluent or credit-worthy to get access to the land before you can build your house. Access to land is not an unqualified right of citizenship.

The Uncomfortable Whispering

Two of  myths listed by Mungo – ‘rugged independence’ and ‘egalitarian society’ - plus the unlisted ‘home of ones own dream’ thus drag strong shadows cast by our present relationship/attitude to land; for want of a better phrase, our lack of intimacy with the land, the absence from our lives of day to day contact with the soil in a manner that reminds us how totally dependent we are upon it. There are, of course, exceptions; individuals and groups throughout the country that regard their land with respect and reverence through daily contact; I know many in Tasmania. But when, say, retirement beckons, it is the monetary value of that land that will determine the choices made; money matters. It is impossible to escape from the prevailing economic realities. Were these realities fully encapsulated by a Governor of the Reserve Bank a few months ago when he was reported as declaring, ‘Housing is just something we consume - like, food, television or cars’? (Dr Guy Debelle, Asst Governor, Finance, RBA at the Whitlam Institute, Aug 09)

Few of us have the daily use of ancient rights and there is the uncomfortable truth that we are all living on dubiously 'enclosed' property and that fortunes and political influence can be gained by trading in this legally sanctioned contraband. This subconscious unease is what Henry Reynolds has documented as ‘The Whispering in our Hearts’ Is this the underlying cause of Mungo’s conclusion that Kevin Rudd using myths - plus commerce-centred politics and mortgages - can take us to a never never land?
Must we share Mungo’s saddening projection?

The Hip-Pocket Nerve and Land Consciousness

Today’s urban Australian cannot understand, probably has no inkling even, of what an Aboriginal elder means by, ‘The earth is our mother’ or ‘we belong to the earth’. A shift in consciousness might have been started if ‘Aboriginal Commons’ had been legislated instead of ‘Native Title’; the latter has connotations of absolute property rights, the former of ancient rights established in the Dreamtime. We obviously cannot put the clock back to become commoners and yeoman farmers, still less hunter-gatherers in order to establish a close and meaningful connection to the soil but is there some new approach that can raise, in the public consciousness, the fundamental importance of land, our relationship and access to it?

Mungo correctly observes that ‘the electorate seldom forgets the hip-pocket nerve entirely’. Maybe if that nerve could be stimulated regularly in a way to remind land owners and occupiers how privileged they are to have such access to the essential for life, enjoyment and industry, then over time - maybe decades - our connection to the land would become more respectful, conscious and ethical. I am suggesting a shift in the politics of taxation by the introduction of a Federal Government mandated flat rate land tax collected by the States (it could used to offset the GST until its abolition) quarterly through the present Local Rates administration. Each quarter, those fortunate enough to have unfettered access to a part of Australia would thus be reminded of that privilege and be prompted to take stock as to whether it was worth their while or not; if not, there would be another ready to make profitable and/or enjoyable use of that parcel of land.

The moral case for flat rate land tax is inescapable. If you want a piece of Australia for your exclusive use, then you pay the rest of us to keep away. A flat rate with full public disclosure, no exceptions, would see all pay their proper share of the defence and servicing costs – communications, labour, environmental – in proportion to the value given to their asset by the community at large. And the liability could not be dodged, moved to a tax haven or creatively accounted down to negligible proportions!

There would be many spin-offs for such a levy – including stabilising the price of land, freeing the economy from some existing tax burdens, reducing the power of the ‘Jobs, jobs, jobs’ mantra, giving the Reserve Bank more levers - not just interest rates, etc.  But it is the sub-conscious recognition of the place land must have in our hearts, life, economy and well-being that would be the greatest and most lasting benefit of the regular reminder of the privilege of land ownership.

We will continue to be lead….

What are the chances that such might be promulgated and applied with bi-partisan support?

Very many of our wealthiest list property as their main or secondary source of wealth – check the BRW 200 List – so they would be opposed. The development lobby comprising the best and brightest speculators in the land  - and the most generous political donors - are implacably opposed to land tax because it renders holding land idle unprofitable. The Real Estate ‘industry’ likewise - but with much less justification – sees land tax as a threat to their profits and, very significantly, because they are major buyers of advertising space in all the mainstream media, one can bet on a very bad press for a nation-wide land tax. Additionally, there are possibly a few amongst the political and bureaucratic elite that have, as a back-up to their ‘quite-adequate’ pensions, a property asset or three and they would not look favourably upon anything that impinged on that – regardless of the public benefit involved.

One can say that the chances of the above suggestion being taken up are close to Buckley’s. The political response to the Henry Tax Review will, almost certainly, confirm this. But until we are able to establish a more honouring, more reverential, relationship with the land, one that recognises that access to land, holding land is both a right and a privilege, one that silences ‘that whispering in our hearts’, I believe Mungo’s conclusion will hold: we will continue to be led ‘to a country which has never really existed and probably never will, but which is the Australia to which we wish to belong’.


Very pertinent to Australia today, the unintended Tasmanian experiment of 1805 to 1820 – so wonderfully documented by James Boyce – illuminates the effect of land access/property rights upon a society; easy access to land and natural resources engenders ideas of independence and encourages enterprise and personal initiative. The converse propositions are also true. 
These have been well understood and used by elites for at least one century. In the late-19th century essay on property rights, ‘Archimedes’ attributed to Mark Twain (Google ‘Archimedes Mark Twain’) the author, having earlier outlined how ‘we’, the top echelons of society, would enjoy untold wealth and all possible luxury without stooping to get ‘our’ hands dirty or mixing with the common people, enthuses, ‘What a beautiful arrangement – ambition urging in the front and fear and want bringing up the rear!’ Countering the challenge that the people would surely wake up to the situation, he writes, ‘Nothing of the kind, the people are as good as gold    …. and I appeal to the facts of today to bear me witness’. That century-old exhortation can be applied to Australia today.

Colin Cook,
February 2010, edited December 2016

Friday, 23 December 2016


My comment on Michael Keating’s piece on MYFEO 
on Pearls and Irritations blog of 21.12.2016

Whilst I totally agree with Michael’s remarks about the rating agencies (See* below. CC) I find the attention given to budget surpluses, budget repair and ‘living with our means’ saddening. It is as though we are still on the Gold Standard and that no-one has heard of FIAT money. 
The purpose of Government should be building the ‘best and fairest' democratic society we can ‘with all the means at our disposal’ and theses include the ability to create as much ‘means of exchange’ as we need to ensure all the other ‘means’ – skilled work force including teachers, academics, natural resources, know-how and enterprise etc – can be fully engaged in the project.
Would you trust car repair to anyone who demonstrated a lack of understanding about how cars work? Recently the PM told State Premiers that the Federal Government was not an ATM.
But note:
  •  an ATM is a machine that dispenses spending money ONLY if some-one has put the money into it beforehand and 
  • secondly, this is exactly how the Government DOES see itself. 

The PM’s comment shows he neither understands how the Federal Government does create money nor how ATMs function.

There is an excellent article by Dr Steven Hail at Economic Reform Australia's blog 'Paying for public services in a monetary sovereign state’ that is definitely worth a read.

*Michael Keating's observations on Rating Agencies 
The ratings agencies should have been totally discredited, following their performance in assessing credit worthiness in the lead-up to the GFC. Furthermore, and contrary to popular opinion in Australia, when countries have lost their triple AAA credit rating in the past (Japan,2002 and the US, 2011) it had no detectable impact on financial prices (see posting by Stephen Grenville, former Deputy Governor of the RBA, 18 December). As Grenville argues, ‘Financial markets make their own judgements about risk, without the help of ratings agencies, .. so it’s time to stop genuflecting at the ratings altar’.