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Debt and the financial growth imperative
Sometimes I wonder whether the world is being run by smart people who are putting us on, or by imbeciles who really mean it! -- Mark Twain

• In a nutshell: statistics reveal that (a) during the growth phase of each credit cycle, net debt tends to grow faster than does the money supply, and (b) money and debt both grow faster than does the productive economy. The origin of this discrepancy can be traced to some fundamental design flaws in the operation of the financial system. These flaws are also responsible for driving a large part of economic growth. The end result is an unnecessary level of production and consumption, with its associated destructive social and environmental consequences.
read more ........

Australia's indebtedness is growing faster than GDP
See David Keane's letter to Australian senators

David's letter .........
David's article .......

WHO ARE WE ?

Economic Reform Australia (ERA) is a non-party-political organisation whose long-term objective is to achieve a socially, environmentally and financially sustainable economic system. Of particular concern is the drift away from sustainable and just societies around the planet. Fundamental monetary and financial reform is regarded as an essential prerequisite to the implementation of a range of other economic reforms aimed at tackling the world's social and environmental problems. The financial system currently operates in such a manner that debt, and interest on debt, grow at a faster rate than does the real economy. This flawed system has enabled global debt to balloon to a stupendous scale, and it continues to grow today unchecked, creating wide-scale and unrelieved suffering, particularly within developing countries. Consistent with these necessary reforms is a perceived requirement to allow decision-making on a range of issues to devolve to the community level as far as practicable. ERA is firmly opposed to neoliberal (economic rationalist) ideology, and supports measures which will help bring about more humane and cooperative social structures and preserve the integrity of the environment.

Specific short-term objectives include the task of educating and informing the population at large about the need to introduce fundamental monetary reform, to reintroduce an adequate regulatory framework for the entire financial system, to implement creative and viable schemes for funding essential infrastructure, essential services and environmental projects, to introduce a system of foreign exchange management designed to bring imports and exports into at least rough balance, to replace regressive forms of taxation like the GST with more progressive alternatives such as financial transactions taxes (examples being Tobin taxes, derivatives trading taxes and partial debit taxes) along with other reforms designed to ensure that multinational corporations contribute their fair share of tax to society, to reform the foreign investment review board, to implement a comprehensive and adequate incomes policy, and to replace Gross Domestic Product with a broader index of sustainable development within national planning calculations.

By these and other means, ERA seeks to persuade politicians and national decision makers to direct economic policies towards the needs of people and communities ahead of those of corporations, to reverse present trends towards a maldistribution of wealth and income, to strengthen democracy, to encourage community participation in decision-making processes at every level, and to return the ultimate control of the economic and financial system to the people. Essential outcomes of these reforms include the conservation of the environment and biodiversiy. ERA also seeks to liaise and cooperate with like-minded organisations within Australia and overseas, and supports projects which contribute to halting and reversing the deterioration of our planet's biosphere. ERA was one of the 1500 global co-signatories of the statement opposing the millenium round of globalisation arrangements, and has also opposed recent moves to re-introduce MAI (the Multilateral Agreement on Investment) by stealth via the World Trade Organisation.

DEBT IN AUSTRALIA

Australia's sovereignty has been sabotaged by a long period of financial and trade deregulation. As a result, Australia has generated massive debts, particularly foreign debt, and a financial system dominated by foreign exchange speculation and overseas ownership. Yet Australia is not alone. Today's international financial system has become a major threat to living systems around the earth. It generates levels of debt and interest on debt which enslave many national economies including Australia and the Third World.

In Australia, total public and private debt exceeds three trillion dollars (the most recent data can be obtained from the Australian Bureau of Statistics and from the Reserve Bank of Australia). Although most of this debt is private (and especially corporate), the simple fact is that the annual bill to the taxpayer for servicing government debt alone exceeds $20 billion. This money could be better spent on essential infrastructure and environmental projects. Furthermore, the total volume of debt (both gross debt and net debt) within Australia exceeds the volume of broad money by a significant factor, and has done so for many years. During the inflationary phase of the so-called "business cycle", total debt tends to grow faster than does the money supply. The overall debt load is only reined in by the inevitable recessionary phase - a necessary requirement of the prevailing monetary system if debt is not to become completely unsupportable with the passage of time. Owing to the perpetuation of this fundamental financial design flaw, recessions and depressions have become an inevitable recurring feature of our economic system.

SOLUTIONS

ERA's long term goal is to achieve a socially, environmentally and financially sustainable economic system. In the shorter term it advocates the implementation of:

1. Community Loans (known in the US as Sovereignty Loans) for both infrastructure and environmental projects;

2. An Impex-style system of foreign exchange management, designed to bring exports ansd imports into at least rough parity;

3. Financial transaction taxes to discourage currency speculation;

4. A reformed FIRB (Foreign Investment Review Board).

ERA also supports:

5. A progressive taxation system designed to achieve a more equitable distribution of income and adequate employment;

6. Replacement of the dole with universal employment income insurance;

7. More generally, a guaranteed adequate citizen's income;

8. Encouragement and incentives for LETS (Local Exchange Trading Systems);

9. Tax incentives and regulations designed to encourage environmentally sustainable industries.

An ERA membership application form may be obtained by clicking on the link MEMBERSHIP APPLICATION

It would be appreciated if new members would calculate the part of the year remaining and remit the appropriate pro-rata amount, or alternatively pay for the following year as well. All members are entitled to receive the regular 20-page ERA newsletter, and are entitled to vote at monthly meetings and participate in organised activities. A full list of papers by COMER economists, known as the COMER papers, is available on request from ERA EMAIL or our postal address:

These papers are available individually at the cost of copying and postage to members and subscribers.

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