aussie stimulus flame-out, page-20

OK interesting thread developing here.

Government vs Private sector spending debate.

It really doesn't matter which entity is spending the money. What matters is the effectiveness of that spending.

If the private sector sees the government spending (taking the lead) but resists joining in because it is short term ineffectual spending then I would argue government spending is not good. Case in point - pink bats and schools program

The contrary also exists.

My father in law is quite the socialist and thus I often have arguments with him, especially on this topic. The fact of the matter is government spending is good, so long as it is visionary and will provide long term productivity outcomes,

My argument is that the government SHOULD have poured billions into our farming sector AND associated infrastructure. Fixing up our farming productivity would have regional and national productivity benefits. Such investment would increase our balance of trade and would act as a positive lead for other industries to invest.

I speculate that such spending would lead to increased manufacturing industries within Australia. A secondary onflow effect.

But for now we have to accept that the pink batts and schools program was the way Government wanted to spend. This type of spending was short sighted and ineffectual. Now we will have to live with the consequences (debt) and no real impact on GDP.

As this is a gold thread I am trying to bring in the relationship ........ tick tick tick.

The governments actions have polarized the markets/ economy's response towards a defensive strategy. Invest in less risky lower debt orientated ventures. I think this is the definition we are looking for when it comes to understanding what a recession might look like. In this light gold will do well, especially when looking at global events.

GC