DORIS PHELPS’ thoughtful, articulately written article in The Murray Pioneer on December 16 gives a good overview of the ‘money-go-round’ which is the essence of the financial system.
However, she also queried why students of economics are not taught the principle that bank advances create bank deposits and this is true in the case of fundamental economics studies – but the monetary system is studied in greater depth towards the end of the economics degree (or at least that was the case in the 1970s).
Students of basic economics are taught that economics is not a study of money but of scarcity, where dollar amounts are ascribed to the value of goods and services produced, with money being a measure of productivity rather than as an end in itself.
Price is a reflection of the scarcity (or otherwise) of the goods and services produced.
If supply is short, demand will increase, raising prices.
Conversely, if supply is abundant then demand will reduce and prices will fall.
In economics it is fundamental that goods and services must have what is known as value; the value of production being reflected by the demand for what is being produced.
To take a simple illustration, we must all eat to survive and accordingly the price for agricultural products which supply food will remain a reflection of the supply of food available.
On the other hand a butterfly farmer may be likely to attract less interest from potential buyers (apologies to butterfly enthusiasts) because by and large the butterfly is seen as less than necessary to the survival of each of us and our species as a whole.
If we take basic economic principles of supply and demand and apply those same principles to money itself (remembering that money in itself has no value – its only value is what we are able to do with it) Doris Phelps has described it perfectly.
If the government printed 10 per cent more money there would be more of if about, so its value would fall by that same 10 per cent.
However, timing issues can be important, as was demonstrated by the government’s stimulus package during the global financial crisis when it effectively printed $900 worth of money for each taxpayer to prevent the economy from going into recession before the construction projects (with their multiplier effects) had the chance to kick-in.
This created a ‘plus’ for retailers but a minus for Australia’s financial reserves.
The underlying message is that we must produce at least as much, or more, than we consume or we will find ourselves in the same position as the Greek economy.
Doris Phelps has also highlighted the less-than-enlightened tendency of our species to build cities on our most productive lands.
When we look at the exit packages offered by the government, with its associated requirement that the land be unproductive for at least five years (with some 20 per cent of local fruit properties affected), the result is the same as that described by Doris. Congratulations to Doris on her article and hopefully there will be many more to come.
MALCOLM DAWS
Renmark
REPORTS OF exploding bird numbers, and wetlands which haven’t had water for over 100 years miraculously springing back to life in the Murray Darling Basin highlight the resilience of our environment
Whilst hell would have to freeze over before green groups and other so called ‘experts’ apologised for slandering communities reliant on water in the Murray Darling Basin, the cold start to summer shows anything is possible.
An independent audit is needed to ensure funding wasn’t being siphoned off and wasted by organisations that continually make spurious claims.
My members are sick and tired of the histrionic merchants in the green and scientific spheres talking rubbish in order to scare the public, politicians and bureaucrats into funding their spawning empires.
Anyone, be it a farmer, scientist, politician, environmentalist or member of the public who tells you they can accurately and routinely second guess nature is full of it.
The worst drought in Australia’s recorded history was not caused by irrigators, as recently claimed by the Australian Wetlands and Rivers Centre director, Professor Richard Kingsford.
It is absolute bollocks for Professor Kingsford to publicly claim ‘chronic water over-extraction’ was to blame for the ‘crisis’ in the Murray Darling Basin.
The flooding rains which began in the Northern Basin in 2009 followed the worst drought in nation’s history, proving exactly what is meant by a boom and bust environment. Simply taking water off irrigators would not have stopped the massive decline in wetland size and bird numbers during the drought.
During the darkest days of the drought irrigators had no water allocated to them and as we always said, it would take rain and lots of it to make the country boom again and we were right.
The fact that wetlands and bird numbers can bounce back so quickly to near record levels makes the claims made by some scientific ‘experts’ and repeated ad nauseam by green groups often chasing donations sound as hollow as a dairy farmer’s bank account after a 10 year drought.
Far too many green groups and scientific organisations have a symbiotic relationship, yet time and time again all they proved is they don’t need a long neck to be a goose.
TOM CHESSON
CEO
National Irrigators’ Council
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