Welcome to Finance and Fury, the Furious Friday edition.

We are continuing the series on supply-side economics. Today we will focus on the down-side of supply-side economics. Remember, supply-side economics believes that governments should remove barriers to production.

How is this done?

  • Lowering taxation and decreasing regulation
  • The aims of the policies?
  • What are the 4 major downsides?

Income Inequality:

  • Those that supply more also accumulate more wealth
  • Results in a disproportionate amount of the tax savings going to those on the highest incomes
  • More wealthy people is a good thing
  • More supply means lower inflation and cheaper goods
  • The billionaires of Australia own companies that supply jobs, they don’t sit on piles of cash
  • Countries with more billionaires have lower rates of poverty
  • We are very well off despite what you might think

 

Deregulation will Destroy the Environment and Public Safety

  • Experts do agree, lower regulation leads to increases in profits and increased GDP
  • Deregulating coal mining will lead to more destruction of the environment? Really? Cheaper and cleaner power isn’t appealing to you?
  • It’s about opening the door to new ideas and new creation of those ideas
  • Using the private sector to achieve the creation of new ideas, the government never innovates, just adopt it
  • Deregulation can lead to more competition within free markets for better ideas to replace old ideas
  • Who have higher safety rules? The government or companies internally?
  • Deregulation from the US about the railroad industry
  • There will be mistakes in deregulation, but compare that to mistakes in increased regulation

These first two strawman arguments highlight misconceptions, the next two arguments are real potential downsides

 

Budget Deficits

  • This comes from a reduction in tax revenue but maintained levels of spending
  • Lowering the tax rate increases wealth, so the pie to take taxes from is larger
  • Critics say under president Reagan, there were decreased tax revenues. However, there was a recession just before this.
  • Demand side economics increases deficits

 

Volatile Economy

  • Deregulation can make the economy more volatile
  • Like investments, volatility is your friend
  • The slow down in GDP growth is from the increased size of government, spending, debts, regulation increase, and increased taxes or introducing new taxes
  • When you look at a lassie-faire economy, it can be more volatile than a centrally planned one
  • When you look at the regulation of the taxi industry, it created an industry that needed protection from Uber. Because the regulation of taxies was inefficient.
  • Recessions occur when there are 2 or more consecutive quarters of negative gross domestic product growth. We are in a per capita recession as of this week.
  • Creative destruction – innovation is destructive
  • No government bailouts – recessions can be a forest fire, and bailouts incentivise moral hazardous behaviour
  • Deregulations and lending guarantees leads to the banks taking on additional risks if it is backed by the governments
  • No government stimulus, if there was a stimulus from the government – where did it come from? Do people actually spend it? Australia had a slow rebound from the GFC
  • Industries that require protection from the government lead to inefficient workforces. Look at the prior example of railroads and inefficient rail tracks.
  • Flying industries, the airline deregulation act of 1978 eased controls on fares
  • We will run through the policies of Thatcher in a few weeks. Lead to a massive loss of jobs in manufacturing.
  • Creative destruction does happen – this is what the government should focus on

In Summary:

  • We have explored the 4 criticisms of supply-side economics
  • It leads to inequality, deregulation causing a destruction of the environment and worker safety, deficits and recessions

Next episode: We will look more into recessions and some real-world examples of recessions. And we will break down supply-side theory and a demand-side theory for dealing with recessions.

Thanks for listening, if you enjoyed the episode please leave it a review on iTunes.

If you want to get in contact, you can do so here.

 

 

Cash rates decline – but will your mortgage repayments? As your savings rates certainly will!

Welcome to FF – RBA cash Rates are lower now – talk about flow on effects Today – Will you get mortgage cuts, how your savings will be affected, effects on the job market and wages.   Mortgage cuts Don’t expect the banks to pass on the Reserve Bank’s rate cuts in...

Eco-warriors are protesting for exactly what mining companies, Banks and the IMF want

Welcome to Finance and Fury, the Furious Friday edition Today is a Bonus episode on most recent series – Current events unfolding – Extinction Rebellion – Today focus more on the economy - Talk about How eco-warriors will collapse the economy – a self-fulfilling...

Red versus Blue team and wishes versus reality

Welcome to Finance and Fury, The Furious Friday edition.  Episode 2 in this larger series - The last episode – Talked about historical events – resulted from people acting out their conspiracy – act of making plans with a counterparty to commit an unlawful or harmful...

If the future of money is crypto currency, why might Bitcoin be a trap?

Welcome to Finance and Fury, Last Friday – new monetary reset might be going digital Today – Dive into Cyrpto/BTC potential traps of the future – The potential regulation and eventual centralisation of Cryptocurrency at the nation-state level – i.e. domestically in...

Financial weapons of mass destruction – derivatives disasters in Australia

 Welcome to Finance and Fury, the Furious Friday edition. This episode – will be looking at derivative disasters through in the history – looking at specific crashes of near financial disasters – that were contained Specifically – Look at a few examples in Australia...

(Intro Series) Translating Finance

Intro - Episode 2 Translating Finance Welcome to Part 2 of this intro series to Finance & Fury. Today I wanted to start this episode off with getting you to imaging you’ve hit the lotto jackpot! Say for instance, you’ve got a guaranteed million dollars per annum...

How to capitalise on the depressed global market and what investment strategies might be worth considering, if any?

Welcome to Finance and Fury, the Say What Wednesday edition. Question from John: “I have a question on how to capitalise on the depressed global market ie what investment strategies might be worth considering if any. I know it’s very much early days, but I’d be...

Investing for an income yield in the current economic environment – which asset class is best?

Welcome to Finance and Fury. In this episode we will be looking at where to invest in the current economic environments for yields, or passive incomes in the current environment. Best place to invest for yields changes, a lot of this has to do with market...

How to avoid financial distractions and hack spending habits.

Welcome to Finance and Fury, I hope you are all going well. Today we will be going through how to avoid financial distractions. This episode is a little bit of a follow up from the previous - as one of the comments I made was a little oversimplified – that was that if...

Who is responsible for your happiness and financial wellbeing?

Welcome to Finance and Fury Looking around in Australia - increasing disparity in wealth, and social fragmentation That social fragmentation means Australians are become "more self-interested, more materialistic, more competitive". Our largest challenge as a society...

Pin It on Pinterest

Share This