From: suter@fawlty8.eng.monash.edu.au (Mr D. Suter)
Subject: Re: Will Victorians vote stupid yet again...?
Organization: Monash University
Distribution: aus
Date: Fri, 9 Oct 1992 02:24:03 GMT

In article <3314@ariel.its.unimelb.EDU.AU> cm@ariel.its.unimelb.EDU.AU (Charles Meo) writes:
>In <1992Oct8.044523.705@monu6.cc.monash.edu.au> suter@fawlty8.eng.monash.edu.au (Mr D. Suter) writes:
>>terms to the other parties. I admit that I'm just guessing, but
>>I think it likely that up to 30% of their revenue is wasted on servicing the
>>debt and on paying those lease agreements - it not just
>>the size of the debt itself! 
>
>I get a bit fed up when people who are 'just guessing' start mouthing off about
>government debt.
Well a LOWER BOUND is 15.5% by the Kirner govts own target debt reduction
platform. I don't think the above is a wild guess.
>
>One fact you might consider is that 65% of the external debt is in PRIVATE
>hands, and has nothing to do with the government. This is the fruit of another
I don't carry that debt. I don't vote
for the heads of these companies. It's regrettable but totally irrelevant
to what we are talking about. 
>In addition, MUCH (not all) of government debt is backed by assets whose 
>lifetime exceeds that of the debt. For instance, consider the water supply
>and sewerage facilities of a medium small town in the country. You might 
>be looking at $3m for a water treament plant and $5m for Stage 3 sewerage
>treatment (1985) so you BORROW because a community of a few thousand 
>doesn't have that kind of scratch lying around in cash. In fact, you`d be
>an idiot if you did. This will typically be a 15-20 mortgage over the rates
>of the community--but unless the town dries up and blows away this debt is
>solid as a rock AND the plant has a life of 40-50 years. In fact, people
>who suggest all government debt should be liquidated are stupid, because
>you are asking the present generation to pay for facilities which will
>extend far into the future. 
I generally agree with you. Although since every generation needs new
facilities I think it is a good thing if we fund most of it without debt
(i.e., we inherit from our parents subsidies on our current facilities
and we offer the same courtesy to our children.) Of course this 
doesn't rule our SOME debt (everything is ok in moderation) but
passing on a debt the size we are is irresponsible. When you get in
the situation where the debt is growing and you are paying significantly
more then 1/6 of your earnings just trying to stem the tide
(unsuccessfully) - then how well are we providing for those subsequent
generations - don't expect them to thank you - I wouldn't.
To use your analogy - "Thanks for the water plant but now I've
got to sell the farm anyway dad".

>
>What is lacking (from both sides) in the debt discussion is some analysis
>of how much of the government debt is 'OK' like capital assets above, and
>how much is money down the toilet e.g. lent to sharp operators by
>Tricontinental.
Agreed. However, you don't need all of the figures to see that our
present situation is not good. What you are talking about is defining
exactly how bad it is.
I don't like your simplistic division though. Just because an asset outlives
the lifetime of the loan does not make A PARTICULAR loan a good method
of financing the asset.
>
>But for heaven's sake, to suggest that capital creation by government
>should be paid for entirely in cash is RIDICULOUS! Government finance
>is not like household finance, and the sooner people get this
>through their thick skulls the better off we will all be. In fact, it should
>be engraved on a six inch nail and banged in--that might do it.
PLEASE READ MY POSTINGS - I have conceded/declared at least twice before
(and now a third time in this article) that SOME debt is ok.
>
>Let's get a bit sophisticated here...:-)
Yeah - like calling people thick skulled and suggesting one
bangs six inch nails through their skulls just because you either
didn't read the postings closely enough of because you came in
late to the discussion. That's the type of knee jerk sophistication
nobody needs.
d.s.
-- 
David Suter - Dept. of Electrical and
Computer Systems Engineering, Monash University,
Clayton, Vic. 3168, Australia
ph 565 5682 Fax 565 3454
Newsgroups: aus.politics