Decentralising Australian cities. Why the dream is as far away as ever.

Decentralisation?   The dream throughout Australia’s history and a key driver for the creation of Canberra and the government investment in Albury Wodonga in the 1970s.

Today the dream lives on as our major cities Sydney and Melbourne start crushing those who live in them with house prices bloated on mountains of private bank created credit.

Barnaby tells young folk to go west and live in Tamworth!

Nice ambition Barnaby but a complete waste of time while the fundamental Australian economic model, since the deregulation of banking in the 1980s, is about driving private bank credit creation at unproductive but highly profitable purposes.
Make a note of that Barnaby and other enthusiastic decentralisers – nothing will happen while unproductive but highly profitable purposes are the objective of most private bank credit creation.

By unproductive I mean it does NOT clearly or directly expand the productive capacity of the economy.

Pumping up the prices of existing assets is the King of unproductive private bank credit creation.

The most favoured geographical locations for unproductive bank credit creation are those with assets most likely to rise and the assets most likely to rise are those controlled by those with access to private bank credit creation.  Those with best access to credit are those with assets that are being pumped up with private bank created credit.

Good morning Mrs Chicken meet egg!

The bigger the city the more attractive they generally will be for unproductive asset pumping private bank credit creation.

Where will the poor and immigrants want to move if they are smart ?

To the cities drowning in unproductive but profitable credit creation and at least some RBA and APRA endorsed “wealth effect” crumbs falling from the tables.

Good luck decentralising Australia when this giant monetary magnet is sucking everything to the centre.

There are good reasons why Australian Prime Minister Ben Chifley was not a fan of private bank credit creation.

Hard for any of this to change when almost all of the economic ‘glitterati’ make no distinction between private bank credit creation for speculation – on asset prices – as against real productive investment and they themselves huddle under the open fire hydrants of unproductive credit and insist it is as natural as mother’s milk.

All their ‘theories’ ignore the distinction between productive and unproductive credit creation as well.

Funny about that!

Even if you are scared by the idea of real monetary reform (I.e. no private bank credit creation – just intermediating) at the very least you can demand that private bank credit creation be restricted so that productive credit creation is encouraged and unproductive credit creation is strongly discouraged and limited.

It is a simple test.

Does the private bank credit creation clearly and directly expand the productive capacity of the economy.

If not limit the amount credit that is made available or increase the price (though the latter will tend to follow the former anyway).

When the cities lose this massive advantage people will leave them in droves for places where they have the space and opportunity to do stuff that is productive rather simply parasitical or just raise their families and live happy normal lives like we used to – i.e. before the 1980s when the process of deregulating private banking credit creation really took off.

Oh and allowing our taxpayer guaranteed private banks to borrow offshore so they can offer even cheaper unproductive credit creation to asset price speculators is simply crazy on stilts,  but even generally nice guys like Ross Gittins support that.

While others like David Uren reckon selling off Australia fast is the best thing we can do.

If you want decentralisation then you need to start with the driving force of centralisation.

Dysfunctional and unproductive private bank credit creation.

The book Princes of the Yen by Professor Richard Werner is an excellent place to start learning more about the important distinction between productive and unproductive private bank credit creation.  Though it seems to be out of print (judging from the price) and the e-book appears to have vanished as well.

Fortunately, there is an a movie of the book!

Categories: Macrobusiness

2 replies »

  1. Wow. This is the 2nd time TODAY I’ve come across a book on monetary policy priced north of $100 USD. (The other is Stephen Zarlenga’s “The Lost Science of Money.”)

    Michael Oswald’s cinematic version of “Princes of the Yen” is fantastic, though. It’s one of those documentaries you watch and think, “Has this actually been going on?! Why didn’t I hear about this years ago?” What’s even more amazing is that Oswald made the film on a 500 GBP budget, at least according to


    • Yes – I don’t know what the story is about Princes of the Yen as I bought the e-book and the paperback a little while ago for ‘normal’ prices. I haved tweeted Prof Werner to find out.

      I also have a hard back of Zarlenga’s (sadly recently passed) book and it is great – the book and the quality of the printing. I asked him about an e-book but he was worried about piracy. The problem though is that the book is so big you can’t carry it around. I real shame because essentially no one in Australia is going to read a book that costs them close to $200 AUD to get delivered and is the size of a block of wood. That is a loss. There are pirate PDF copies floating around but I would prefer to buy the e-book and for a low cost paperback version to be on shelves in Australia.


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