Upon reading RMIT economist Steven Kate’s article about how 21 economists recently signed a statement effectively endorsing Rudd’s cash-o-rama economics, I was reminded of the following exchange from the PBS series The Commanding Heights. As background, the episode covered how Keynesianism was eventually undone by stagflation and recession to be replaced by Hayek’s brand of free market small government economics:
NARRATOR: Thatcher squeezed government spending and cut subsidies to business. Thousands of bankruptcies and higher unemployment followed. Many saw her as uncaring. Britain had rarely been so divided.
CROWD OF PROTESTERS: Maggie, Maggie, Maggie. Out, out, out!
NARRATOR: Thatcher had no time for conventional, Keynesian economists who urged her to use government money to lessen the pain.
MARGARET THATCHER: Although 364 economists wrote to the Times and said, “This is outrageous; you’ll put us into a deep depression from a recession,” 364 were wrong, and the half dozen who supported us were right.
And those who urge us to relax the squeeze, to spend yet more money indiscriminately in the belief that we’ll help the unemployed and the small businessman, are not being kind or compassionate or caring. I have only one thing to say: U-turn if you want to. The lady’s not for turning.
When interest rates, inflation and taxes go up because of Rudd’s $300 billion + debt, then in the same vein as the 364 of old, our own 21 economists will be wrong and we will be proved right.
UPDATE I
Ah…emm:
The CBA will raise the interest rates on its home and business loans by 10 basis points to offset higher funding costs. The rate on its standard variable loans will rise to 5.74 per cent, from 5.64 per cent, from Monday June 15.
When one has the Commonwealth now competing for its share of funding, $300 billion and counting, the cost of borrowing is bound to go up. Increase in demand + supply constant = prices go up.