Taming the wild beast

Doris Phelps

Ever since someone first thought of the idea of man-made robots, there has been speculation as to whether it would be possible for man to invent a robot more powerful than himself, which would then be able to rule the world. The present financial system, which also is man-made, seems to be

something like that. ln September 2011, Kevin Rudd MP said “The global economy is a wild beast. We must tame the wild beast.”

Thus the public is encouraged to believe that the economy has acquired a life of its own, and that booms and depressions are inevitable, and nothing can be done about it. it’s a natural part of the system.

But inflation and recession are not natural, nor are they related to the seasons or the amount of production that the nation is capable of. This was demonstrated most clearly during the depression of the 1930s, when goods were piling up for lack of buyers, while people starved because of lack of money to buy the goods. Inflation and recession have no relation to reality. They are related to manipulations of the money system.

It used to be implied by both capitalists and socialists that there was a set amount of money in the world. The socialists claimed that some people were poor because the rich ones had cornered most of the money. The capitalists were sure that if they were allowed to have control of the money, some of it would somehow “trickle down” to the masses.

By now it must be clear to most people that the amount of money is not fixed. It can be increased or decreased as wished by those with the power to do so.

lt seems to be accepted that the Reserve Bank can to a certain extent manipulate the money in circulation by raising or lowering the official cash rate and through this other interest rates, thereby encouraging or discouraging people’s borrowing and spending. When interest rates are lowered and people feel confident enough to borrow more, this increases the amount of money in circulation.

When Mr. Rudd came to power as Prime Minister, he was very careful to emphasise (Dec. 2007) that he believed that the Reserve Bank should be independent of the government. He said he would move quickly to shore up the independence of the Bank, and would introduce statutory requirements making the position of the Governor of the Bank more independent. l wonder why?

How can politicians govern properly if they have no power over the money supply and interest rates? It seems clear that the Federal Government should have control of the Reserve Bank, as it once did of The Commonwealth Bank. Then, perhaps those who go into politics with the best of intentions could do the good that they want to do, instead of having to make up excuses as to why they are breaking their well-meant promises, as they battle helplessly with the “wild beast” which ties their hands behind their backs.

There must, of course, be sensible limits to the money supply, but the limits should be decided by our elected representatives, not by an independent body. And in a democracy, if our representatives went beyond sensible limits, they could be voted out. An independent body cannot be voted out.

l look forward to the day when politicians can listen to the voters, rather than being influenced by independent bodies or man-created wild beasts.

Doris Phelps is an ERA member residing in SA, and a regular contributor.