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.

 

 

Which Vanguard ETFs are best to diversify into?

Welcome to Finance and Fury, The Say What Wednesday Edition This week the question is from Dan I am 21 and have about 70k in a term deposit and 5k in VHY and VGS ETFs. I am wondering whether over a period of 20~50 years I would be better diversifying into VAE or VGE...

Artificial Intelligence and Investing: The future is here

Episode 29 Artificial Intelligence and Investing: The future is here Today’s episode of Finance & Fury we’re talking about Artificial Intelligence taking over the ETF and investment market. The discussion was actually started by one of our listeners, Gabriel who...

Say What Wednesdays: Financial Advice – The process, the costs, and if seeking advice is for you

Welcome to Finance and Fury, the Say What Wednesday Episode, where every we answer questions from you guys! This week’s question comes from Nelson, “Hi mate, Love the podcast. Admittedly don't agree with some of your more conservative political opinions but that aside...

The circular economy – The greatest barrier to competition and choice, or the saving grace for our futures?

Welcome to Finance and Fury, the Furious Friday edition Last week - went over partnership programs and potentials for coercive monopolies – today – implementation of policies in the circular economy – SDG12 Today’s ep – go through google and the largest companies on...

We are entering new economic and investment territory – An introduction to QE, what does it look like and what does it mean for investments?

Welcome to Finance and Fury We live through transformational times – new environment for finance and investing   We are fast reaching the limits of monetary printing - markets are still trying to work out how to price that in Past model – print money Get GDP growth...

What does your path to Financial Independence look like?

Welcome to Finance and Fury, The Say What Wednesday edition Today is a special episode – we have another resource available on our Resources Page... the Monthly Investment Targets Calculator  Question from Nick “I’m sure as a Financial Adviser you are quite aware of...

Why do banks seem to have the ability to lend never ending amounts of money?

Welcome to Finance and Fury, the Furious Friday edition. Today – discuss the topic of banking policy changes and how this opened the gates for the potential of never-ending money supply in the modern banking system To start with – look at How does money get lent out...

Savvy Super: Tips on what you can do now with little effort or sacrifice to maximise your future

Episode 14 Savvy Super: Tips on what you can do now with little effort or sacrifice to maximise your future Have your Super set up – do yourself a favour! What will kill your retirement? Not looking at your super now. Would you trade 15 minutes now for $350,000 in 30...

Starting an online business or franchise

Welcome to Finance and Fury, the Say What Wednesday edition John’s Question: I thought a useful topic could be about pros and cons off starting a business and starting your own business vs buying a franchise system etc. and using a business to achieve financial...

Has the first domino in the next banking crisis fallen?

Welcome to Finance and Fury Snuck this episode in ahead of time – only reading about news yesterday – need to do some further digging – but is it Time to sell shares in anticipation of a crash? Today – run through some news that you might not have seen – financial...

Pin It on Pinterest

Share This