Wednesday, 28 September 2011

Tony Abbott a better fit in the DLP?

For the last month or so I've been wondering if Tony Abbott is politically closer to the Democratic Labor Party than he is to the Liberal Party. After all they have many things in common:
  • A conservative Catholic outlook on life
  • A lack of commitment to, or rejection of, the traditional Liberal Party preference for individual rather than collective bargaining
  • A rejection of neo-liberal economic policies
  • A role in the running of unions
If Tony Abbott had joined a political party some forty years ago, would it have the Liberal Party, or might he have sort out the DLP?

According to Phillip Coorey in Abbott must stick to values: Costello Peter Costello might well be asking the same question. Indeed, Peter Costello reports in Liberals must protect values of freedom and choice that:
Over that time, most of the DLP membership slipped away. Some went back to the Labor Party - their home before the split which led them to form their own party in the 1950s. Some joined the National Party and many joined the Liberal Party. In his recent memoir, the Coalition finance spokesman and former federal director of the Liberal Party, Andrew Robb, tells of working for the DLP at elections in the 1960s. Tony Abbott also worked closely with the DLP in his student days.
Mr Costello then goes on to write
The Liberal Party was also fiercely anti-communist. It didn't have a significant Catholic membership and Catholics in senior positions in the parliamentary party were the exception rather than the rule. The fact that many of the old DLP supporters were able to find a home in the Liberal Party indicates how it widened its appeal, at least in terms of religious background. Most senior players in the federal Coalition today were educated in the Catholic school system - the leader, the leader of the house, the shadow treasurer, shadow attorney-general and finance spokesman. This development is a credit to that education system and also, I think, to the leadership of the Catholic Church which has managed to retain the orthodoxy of its flock as the Protestant churches have drifted into theological liberalism and political trendyism.
I think Mr Costello might be showing his Baptist roots in that last sentence. Mr Costello then goes on to look at the statements of National Senator Barnaby Joyce on protectionism and against free trade, inferring that Senator Joyce might also be politically closer to the DLP.

So, it seems that the Liberal Party, at least at the Federal level, is now run by the DLP.

Tuesday, 27 September 2011

Taxing the rich

The economist looks at taxation and the class war in Hunting the rich. The article suggests that it would be more appropriate for the rich to pay more - although it advocates doing so through a reduction in deductions rather than an increase in marginal rates.
There is a basic bargain to be had. Imagine a tax system which made the top rates on wages and capital more equal, and which eliminated virtually all deductions. To avoid taxing investments twice, such a system would get rid of corporate taxes. It would also allow for a much lower top rate of income tax. The result? A larger overall tax take from the rich, without hurting the dynamism of the economy. Now that would be worth blowing your horn about.
I guess no one has ever told them about dividend imputation.

As I mentioned, the article advocates making the tax system more efficient by reducing deductions allowed:
The scope for doing so is most obvious in America, which relies far more than other countries on income taxes and has a mass of deductions on everything from interest payments on mortgages to employer-provided health care, so taxes are levied on a very narrow base. Getting rid of the deductions would simplify the code and raise as much as $1 trillion a year. Since the main beneficiaries of the deductions are the wealthy, richer folk would pay most of that. And since marginal rates would be untouched (or reduced), such a reform would do less to discourage them from creating wealth.
I partly agree with this. I personally think that, generally speaking, deductions should only be allowed for legitimate income producing expenses. However, Governments also use deductions as a legitimate way to encourage certain activities - e.g. donations to charity (although you could argue that it's a fairly inequitable method as it tends to favour those on higher marginal rates). I'm not sure what the impact on the rather depressed US housing market would be if the deduction for interest payments on the home mortgage was taken away. On the other hand, it would help reduce the tendency of Americans to over capitalise their family home.

The author of the article also suggests shifting more of the taxation burden from income to property:
In Europe, where tax systems are more efficient, one option would be to shift more of the burden from income to property, which would collect more from the rich but have less impact on their willingness to take risks. The “mansion tax” proposed by Britain’s Liberal Democrats would thus do less damage than the 50% rate. And on both sides of the Atlantic there is room to narrow the gap between tax rates on salaries and bonuses and those on dividends and capital gains. That gap explains why Mr Buffett, most of whose income comes from capital gains and dividends, has a lower average tax rate than his secretary. It is also the one hedge funders and private-equity people have exploited to keep the billions they rake in.
The above paragraph really looks at taxing the value of assets (a "mansion tax"), capital gains and dividends. I think there's a great danger in property taxes - it's very easy to tax someone beyond their ability to pay. An income tax does seem more equitable than a "mansion tax".

Taxing capital gains is a little complicated - on the one hand the gain is income, on the other it's probably not appropriate to tax it at the tax payer's full marginal rate unless there's an offset for the impact of inflation. That's why, in Australia, we only pay 50% of our marginal rate if the asset has been held for more than 12 months. There's also the Laffer Curve to consider as detailed in last year's The Register article Bloody George's Budget: How bad is it really?.

There are several options for taxing income from dividends. Treat them as normal income and tax them accordingly, recognise that tax has already been paid and so tax them at a lower rate, or implement dividend imputation. As a share holder I do prefer the latter and it does seem equitable.

The Economist also suggests removing corporate taxes. This to my mind, would be a mistake. A superficial argument can be made that corporate income would be taxed when it's paid as dividends. However, this ignores certain realities:
  • Not all companies pay dividends
  • Not all dividends are paid to shareholders in the country where the income is earned
  • There would be additional incentive for people, especially higher income earners, to use corporate vehicles to avoid tax
In summary, I think the article in The Economist is interesting, but I don't necessarily agree with some of the solutions they put forward.

NAB Article: The Productivity Puzzle

The National Australia Bank has written a paper on productivity growth: The Productivity Puzzle. The paper looks at labour productivity and suggests that recent productivity declines might well be due to cyclical fluctuations; activity in the mining and utilities industries (as they build new productive capacity); and declining real labour costs (which may encourage more labour intensive production).

It's worth a read if you have any interest in this area.

Edit 28/9: Alan Kohler addresses the issue, and the NAB paper in Digging into productivity, the Aussie miner's way.

Edit 12/10: Ross Gittins in Look within to pick up productivity discusses the management style in those businesses that are most productive:

Edit 18/10: Glenn Dyer at Crikey discusses a Sydney Morning Herald report on employee productivity in At last, something that makes sense on productivity. The report includes the findings on a survey of employees on drains on productivity and identifies the main culprits as management issues, organisational structure, lack of innovation and outdated technology. Dyer looks at the performance of Goldman Fielder as an example.
The management practices that do best, according to the study, are being highly responsive to changes in customers' and suppliers' circumstances, encouraging high employee participation in decision-making, achieving on-the-job learning through mentoring and job rotation, making effective use of information and technology and attracting and retaining high quality people.

Of course, different managers have different cultures or styles. Some emphasise results, some their people and some coping with change. The study finds all three approaches can make a high-performance workplace. The one style that doesn't work is the ''control'' culture.

Wow. How'd you like to work for such a boss in such an enlightened business? Pity is, such firms accounted for only 15 per cent of the sample.

The current poker machine controversy

Here in the west, as Geoff Gallop has highlighted in WA - the no-pokies state we don't have poker machines in pubs and clubs. Nor do we have their associated problems. Yet our bowling clubs still manage to operate and we still have ANZAC day.

Over at Crikey Ben Eltham has written Transparency please! Why the tax breaks for pokies clubs? where he suggests that the various clubs don't give anywhere near as much back to the community as they claim. Most of the comments are also very instructive.

Edit: 30/9: Jonah Lehrer has written and lectured about how slot machines are addictive.
At this point, our dopamine neurons should just turn themselves off: the slot machine is a waste of mental energy. But this isn't what happens. Instead of getting bored by the haphazard payouts, our dopamine neurons become obsessed. The random rewards of gambling are much more seductive than a more predictable reward cycle. When we pull the lever and win some money, we experience a potent rush of pleasurable dopamine precisely because the reward was so unexpected. The clanging coins and flashing lights are like a surprising squirt of juice. The end result is that we are transfixed by the slot machine, riveted by the fickle nature of its payouts.

"The trick of a one-armed bandit," Montague says, "is that it provides us with the illusion of a pattern. We get enough rewards so that we keep on playing. Our cells think they'll figure out the pattern soon. But of course they won't."

Edit 22/10: Gareth Hutchens in Time to play it straight in licence-to-punt debate writes how clubs are using the word "licence" to frame the debate:

THE clubs are being deliberately misleading when they tell us that a precommitment card for poker machines will be some kind of "licence". It won't be.
Edit 23/10: Dr Charles Livingstone in Why $1 pokies are a good idea thinks that restricting maximum bets on pokies to $1 the way to go:
To Clubs NSW and their supporters, the only option is business as usual. Unfortunately, business as usual means that significant numbers of people will continue to be chewed up and spat out by their system of harm production, which operates on an industrial scale. There is little doubt, however, that the majority of Australians want this situation changed, recognising that having a million or so Australians adversely affected by pokie-derived gambling problems at any one time is not acceptable. Introducing $1 maximum bets and other changes to pokie limits would achieve this, at comparatively low cost to operators and without great disruption to pokie users.
Edit 4/11: Support seems to be growing for a $1 bet limit.
Edit 5/11: Malcolm Farr makes some good points in Pokie palaces are sucking the life out of communities.
Edit 14/11: Charles Livingstone looks at the cost of implementing $1 maximum bets in No pre-commitment to the truth in pro-pokie compaign. Also killing the feature and The key to helping pokie addicts lies in lure of the feature.
Edit 7/12: Senator Richard Di Natale, Green's spokesperson for gambling attempts to rebuff criticism of their policy in $1 bet limits: a seat belt, not a silver bullet.

Sunday, 25 September 2011

Ross Gittins on Industrial Relations

Ross Gittins in Reith is wrong: happier staff means greater success in the workplace argues that employers might get greater productivity out of their employees by providing a trusting workplace rather than by using individual contracts.

I'm of the opinion that, beyond a certain level, money is not a positive motivator. There are plenty of people who willingly forgo higher income to stay in a job they enjoy. However, money can indirectly be a great demotivator. If you think your efforts aren't being valued then you're not likely to be very happy or motivated in your role. Some of the most effective ways to tell an employee they're not valued are to pay someone else of equal or lesser talent more (which is why many organisations don't allow their employees to disclose their salary to co-workers) or to offer a lower annual pay increase than was expected. Even then it's not the money that's important - it's just that pay increases are often the only form of recognition many organisations provide to their employees.

Have a look at the video by Dan Pink on the surprising science of motivation at TED.

Back to productivity and industrial relations. I think it's worth noting that Germany and Japan have had very successful manufacturing industries despite, or is that because of, a highly unionised workforce. The thing they have in common is a cooperative industrial relations system (something Paul Howes touched on in Q&A a few weeks back). Admittedly Japan's productivity hasn't been doing as well over the last decade. However, this is more due to Japan's aging workforce rather than its industrial relations system.

There's a great story of how Toyota, through a cooperative team approach transformed General Motor's worst auto plant into its best.

Edit 12/10: A couple of interesting articles - The impact of high pay and Incentives at work: who gets what what really works.

Saturday, 24 September 2011

The role of financial deregulation in US economic problems

Paul Krugman and Robin Wells, in Wall Street's reckless recidivists, discuss the role of financial deregulation in the financial crisis the USA has experienced over the last few decades.

Friday, 23 September 2011

Keith Tantlinger

Keith Tantlinger died last month aged 92. You're probably asking who Keith Tantlinger is? Well, he's the engineer who invented the modern shipping container. Go to The Register and read the article The amazing shipping container: How it changed the world. To quote:
He's someone you almost certainly haven't heard of and someone who – along with Malcolm McLean (no, not McLaren) – changed our world to the extent that it would have been almost unrecognisable to our forefathers. They also – if you want to squint at it – made the European Union redundant six months before it even started.
The Telegraph has an obituary for Keith Tantlinger and discusses the history of the shipping container. It's an informative read and well recommended.

Some interesting posts

High Court and the Malaysia solution discusses how some people would argue that we should intervene to protect asylum seekers but not intervene to make their homeland safer.

Politics, pessimism and perspective compares the current state of Australian politics with previous times.

Dealing with Rick Perry asks:
How is it possible for a hard-line Christian to successfully lead a secularised nation to the promised land if they believe the Bible to be inerrant and morally sufficient? Why waste time and effort on representative government and its tortured processes, if you already have in hand a divine statute containing the requisite answers? Is democracy just a means to theocracy, the Constitution subservient to the Bible?

Extremists who despise America may be insular and misanthropic, but at least they’re internally consistent in rejecting liberal democracy for a political system based on what they believe to be superior God-given laws.

On any reasoned account, Perry is either confused, lying about his conservative orientation or intends to foist his religious orthodoxy upon the American people from within the White House. Perhaps all three.
Why the Lone Star State Shines So Bright explains why Texas is doing better than the rest of the USA. To summarise: oil; tighter financial regulations and an expanding population.

The Vigorous Virtues discusses American decline and argues that just cutting Government and the nanny state won't invigorate the USA.

Reverse Verification

I had never heard of the term reverse verification before reading the blog post Reality, climate change and reverse verification. It's an interesting concept and explains a lot. To quote the above blog:
Says Rosen: “Verification, which is crucial to journalism, means nailing down assertions with verifiable facts. Verification in reverse is taking established facts and manufacturing doubt about them, which creates political friction, and the friction then becomes an energy source you can tap for campaigning. It’s a political technique.”

As he points out, this is the modus operandi of Rick Perry, Republican nomination for president. We also see it here in Australia, especially with the debate on climate change.

Julia Gillard takes a position on responding to climate change. Based on the science, we need to do this to achieve that by then. By adopting quantitative targets, she risks being seen as out of touch with reality. If she admits the science is meaningless, she’s hammered for imposing a regime of questionable worth (which is happening anyway).

Conversely, those that cast doubt on the numbers, something more easily done from opposition, can gain political credibility by appealing to our intuitive sense that reality cannot be quantified.

Income Distribution in the USA

Some people are commenting on the rising disparity in wealth in the USA - in particular the fact that 23% of the country's wealth is held by 1% of it's people. It hasn't escaped notice that this statistic has occurred three times the America's history (1856, 1928 and 2007) and each time the country subsequently experienced a financial crash. This site discusses the issue. While there's some merit in what the site has to say I think the author is probably exhibiting his own bias.

It's interesting to compare the stimulus packages in Australia and the USA. In Australia the stimulus package seems to have had several components:

  • Cash payments targeted at families on low to middle incomes. The idea seems to have been that lower income earners are more likely to spend the money and so spread the stimulus. This especially assists the retail sector - a major employer.
  • Small community construction projects. The idea here seems to have been to assist the construction industry - and industry normally badly hit in an economic downturn. Small projects (e.g. children's playgrounds in parks) were selected as they could be quickly implemented.
  • A free home roof insulation program. Again this could be quickly implemented and would stimulate the construction industry. An additional benefit would be the increase in energy efficiency of the upgraded households. Unfortunately, this program became mired in controversy after the death of several workers and several fires.
  • The "Building the Education Revolution" (BER) that provided funds to schools for the construction of a new buildings (e.g. libraries, gyms, new classrooms). Again this stimulated the construction industry, although the time frames were longer.
So basically, Australia's stimulus package was directed at lower to middle income households and the construction industry. These measures, together with continuing economic growth in China due to its own stimulus packages, meant that Australia never went into recession.

Thursday, 22 September 2011

Capital Punishment

Georgia has just executed Troy Davis despite wide spread doubts about his guilt. The Daily Beast has a primer on the case.

Capital punishment has been in the news in the USA recently due to the Davis case and Texas Governor Rick Perry's bid for the US Presidency. In 2004 Perry denied an appeal by Cameron Todd Willingham who was then executed despite scientific evidence that the conviction was flawed. It's then alleged that Perry obstructed a subsequent investigation into the case. The New Yorker published an excellent article on the case. Although long it is well worth the read.

If you don't have time to read the New Yorker's piece then try reading this summary at the LA Times or this Salon interview with a co-director of a documentary on the case. To quote from the LA Times article:
Perry, who may soon announce his presidential bid, oversaw the 2004 execution of Willingham, a father of three convicted for the apparent arson murder of his young daughters. Problem was, the evidence used to prove Willingham set the fire that killed his children was based on shoddy science and obsolete investigation techniques, facts that were brought to Perry's attention before Willingham's death. Declaring his innocence to the end, Willingham was executed 12 years after his children's deaths.
Edit 29/9: Time have an interesting article on the unreliability of witness testimony.

Edit 11/3/2015:  An article claiming a key witness in the Willingham case was pressured to lie in return for a reduced sentence.

Wednesday, 21 September 2011

Tony Abbott said NO

It appears that Tony Abbott will not support the Government's amendments enabling offshore processing. Mr Abbott is dressing this up in terms of protecting asylum seekers. I for one don't believe him - I have absolutely no doubt that he would quite happily forsake those very same protections if he thought doing so would deliver him Government. If he was really concerned about the plight of asylum seekers sent back to countries that haven't signed the UN convention on refugees why does he have a policy of turning the boats around? It seems to me that Mr Abbott's real desire is actually to keep the boats coming so he can use their arrival to attack the Government.

That said, I'm not upset about the blocking of this legislation. My preference is for onshore processing or, even better, processing before asylum seekers even get on the boats.

However, in my opinion, by blocking these amendments, Tony Abbott hands the Government a powerful tool to use against him. I can just see the advertisements come the next election:

Tony Abbott said NO on action to stop the boats
Tony Abbott said NO on action to fight climate change
Tony Abbott said NO on action to help Queensland rebuild from devastating floods and cyclones
Tony Abbott said NO to tax reform and tax cuts
Tony Abbott said NO to pension increases
Tony Abbott said NO to action to fix our hospitals
Tony Abbott said NO on action to fix broadband
Say NO to Tony Abbott

Thursday, 8 September 2011

Tony Abbott caught out being all things to all people again

It seems Tony Abbott is trying to be all things to all people again. The North West Star is reporting that Tony Abbott is advocating fibre for Mount Isa:
Mr Abbott expressed his concern about the inadequate telecommunication infrastructure in remote and rural communities, including Mount Isa.

He said Mount Isa should have access to fibre optic cable as soon as possible and should not be excluded from the National Broadband Network due to its remote location.

"It would significantly improve broadband and mobile phone coverage in the region," he said.

"It's the sort of thing we could get cracking on straight away."
So, is that an endorsement of the NBN by Mr Abbott? Probably not. I'm sure his story will change once he's asked the question by the national media.

Interesting article on John Maynard Keynes

John Maynard Keynes was probably the most influential economist of the Twentieth Century. Nicholas Wapshott has written A Keynesian by any other name, an interesting article where he asked what it means to be Keynesian.

Worth a read if you want to know more about the man.

As an aside, one of my favourite quotes is attributed to Keynes: In the long run we are all dead.

Reagan, tax increases and the Tea Party movement

I started writing about the Tea Party movement the other day. In an early draft, which didn't make it into the final blog, I discussed how President George W. Bush cut taxes like his hero President Ronald Reagan. However, unlike his father and President Reagan, he didn't increase taxes when he needed to. That's significantly contributed to the size of the US federal deficit and the national debt.

By a happy coincidence, Mark Barabak has just Reagan an odd fit for red-meat Republicans. In the article Barabak opens by stating that the Republican presidential candidates are about to "pay lavish tribute" to President Reagan. The then goes on to compare how President Reagan was actually a very pragmatic politician and was prepared to compromise when it was necessary and in the interests of the country.
As president, the conservative shining light approved several tax increases to deal with a soaring budget deficit, repeatedly raised the nation's debt limit, signed into law a bill granting amnesty to millions of illegal immigrants and, despite his anti-Washington rhetoric, oversaw an increase in the size and spending of the federal government.
By current Tea Party Republicans standards that would almost make him a communist.
Reagan's willingness to compromise has also fallen out of favour in a Republican Party fired up by its give-no-quarter Tea Party ranks. ''People that pragmatic now are what they call RINOs,'' Mr Spencer said, using the epithet ''Republican in name only''.
Don't hold your breath waiting to see that reported by Fox News.

Michael Pascoe and the June quarter national accounts

Back when Channel 9 did do serious current affairs on a Sunday morning I used to enjoy Michael Pascoe on Business Sunday. One of the joys of the Internet is that I can read his columns even though he's not published in any of our myriad array of newspapers in Western Australia.

Yesterday he discussed the June quarter national accounts. I think the article is worth a read.

Ross Gittins on The Politics of Self-interest

Ross Gittins is one of my favourite economics writers. He really has some interesting things to say.

By coincidence, the other day, while pondering the Tea Party movement, I was thinking of the famous John F Kennedy line "Ask not what your country can do for you, ask what you can do for your country".

Then Ross Gittins wrote the oped Politics of self-interest feeds the inner beast. Ross quotes from President Kennedy when discussing politicians exploiting cost of living issues. I think the article is well worth a read.

Wednesday, 7 September 2011

More on Asylum Seekers

Alan Kohler has raised the interesting point that the recent Government loss in the High Court is due to the incompetence of the Howard Government, not the Gillard Government. Of course almost all of the criticism in the media is being directed at the Prime Minister and Minister, with the people responsible for writing the legislation getting off scott free. But that should hardly be surprising given how the media is currently reporting political issues.

While Opposition Leader Tony Abbott has offered to assist the Government in amending legislation to allow offshore processing, he's only willing to do so if Manus Island and Nauru are ruled in and Malaysia is ruled out. Interestingly, it's being reported that in a Government briefing officials from the Immigration Department, Attorney-General's Department, DFAT and the acting national security adviser will tell Tony Abbott that:
  • A move from offshore to onshore processing will likely lead to social problems similar to those in London and Paris.
  • Tension will be created when large numbers of people overflow from detention centres into the community.
  • Around 600 people a month would "flood" into Australia.
  • The Malaysian solution represents the best way to deter boat arrivals.
  • The Howard Government's Pacific solution didn't work.
  • Detention in Australia is expensive and does not deter boat arrivals
  • Asylum seekers often send young boys on boats in the hope that they sponsor the rest of the family.
  • Towing boats back won't work.
  • Nauru and Manus Island are not a solution because virtually everyone who was determined to be a refugee was resettled in Australia.
While some of these arguments sound compelling I doubt that they will sway the Opposition Leader. In my opinion, Tony Abbott is probably more interested in not solving the problem for the Government provided he can be seen as being tough on asylum seekers. Of course he may well try to cloak everything in an argument over refugee's human rights. But we all know that's not true.

Edit: Looks like I was right. Phillip Coorey and Dan Oakes are now reporting that Opposition Leader Tony Abbott has rejected the Malaysia plan:
TONY ABBOTT is refusing to help the government revive the Malaysia plan despite being told by senior Immigration Department officials that a return to the Pacific solution will not stop the boats and that a ''game changer'' like Malaysia was needed.
Of course he wants to reject the Malaysian deal, especially if it results in more than 600 boat arrivals a month:
The same officials warned separately yesterday that the proposal by the Labor Left to revert to onshore processing would result in more than 600 arrivals by boat a month, swamping domestic detention facilities in a year, and resulting in the cultural problems facing European cities with a high influx of immigrants.
Tony Abbott's priority is becoming Prime Minister, not "stopping the boats" or "securing our borders". He's happy for things to stay the way they are:
The Opposition Leader was unmoved last night, ensuring the policy stalemate will continue.
For him the briefing was probably a waste of time. It's not like he went in with an open mind:
Before the briefing he said that ''as far as I am concerned, Malaysia is out'' and that remained his position afterwards.
It might however provide some cover to the Government. At least they might be able to deflect some of the blame for new arrivals onto the Opposition. Although I doubt they will get very far with many of the shock jocks.

Edit: An interesting Crikey article on What Metcalfe said … or is understood to have said
Edit 6/10: George Megalogenis on Diplomacy is lost amid our leader's backyard squabbling.
Edit 24/10: David Marr - Politicians' claims about arrivals have little buoyancy. Also Media Watch on Today Tonight's rather shameful and misleading claims about asylum-seekes.
Edit 21/11: Michelle Grattan notes that there's Nothing budging but body count.
Amber Jamieson in The consequences of turning boats back: SIEV towback cases examined the "case studies of boats that were previously turned back under the Howard government".

Tuesday, 6 September 2011

The Tea Party

The influence of the Tea Party movement within and outside the USA is a real cause for concern.

Bob Altemeyer wrote The Authoritarians that discusses how traditional conservatism in America has been hijacked by the "Religious Right" and amoral authoritarian leaders. He also wrote Comment on the Tea Party Movement that builds on his earlier work. Both are worth reading and can be freely downloaded from his website.

A substantial source of funding for the organisations behind the Tea Party movement are the Koch brothers. Have a read of The New Yorker article The Billionaire Koch Brother's War Against Obama if you want an idea of the people that are really setting the agenda.

Unfortunately, we now seem to have some imitators in Australia. Annabel Crabbe wrote recently that Our culture warriors are fanning too much foreign fare and I guess the Australian Tea Party is an example.

The Tea Party probably wouldn't have gotten anywhere without Fox News. For an interesting article on the guy behind Fox News have a read of the Rolling Stone article How Roger Ailes Built the Fox News Fear Factory.

Edit 5/10: A Bloomberg article on Kock Industries Koch Brothers Flout Law With Secret Iran Sales.

Edit 16/2/2013:  Study Confirms Tea Party Was Created by Big Tobacco and Billionaire Koch Brothers

Wind power might be reducing energy costs

I've read a fair bit that suggests that wind power is far from the best source of renewable energy. For example:

Save the planet: Stop the Greens
Eco investors demand (even) more sweeteners for low carbon energy
Stand by for more big, windfarm-driven 'leccy price rises
'Leccy price hike: Greens to blame as well as energy biz
Climate Change 'wise men' recommend more nukes, power cuts

(The Register does have some reporters that are sympathetic to the arguments of climate change skeptics).

However, yesterday I came across the article Parkinson: why wind is cutting energy costs which claims that the deployment of wind farms is driving down the cost of electricity. Wind still relies on MRET subsidies, however its low variable marginal cost means that it gets priority over more expensive generators thus reducing prices.
It seems that the Australian economy has quite a future, at least according to the guy who, ten years ago, predicted that the Australian dollar would reach parity with the USD.
And Australia? ''Australia is positioned where everybody would like to be,'' Courtis says. It has the benefits of being a rich country without the debt burdens of the US, Britain, Europe or Japan, and the ability to exploit the rise of the developing countries.
Things don't look quite so good for the US and Europe as they try to inflate their way out of their debt problems.
One result, he predicts, is that governments and central banks will try to inflate their way out of their debt problems. ''The public hasn't cottoned on yet. When you see people queuing around the block to buy gold coins, you'll know they've worked it out.''

Monday, 5 September 2011

A great comment

Michelle Grattan wrote an opinion piece Gillard needs show of control and opened with:
JULIA Gillard has been cornered by the High Court decision and, foolishly, in her anger and policy anguish, she is turning on the justices. It's a bad look.
Comments tended to vary but were on the whole critical of Gillard - although most of them seemed pretty partisan. However, I did find the comment by Tony at 5:53AM amusing:
Get rid of her I say and here unaustralian government.
Put Abbott in charge and let's get this place moving.
I want an Australia where:
1 There is no carbon tax/ETS. Replace it with Direct Action. OK direct Action is still a tax and is likely to be less efficient but don't worry as it will probably not even be introduced.
2. The miners get another tax break.
3. Company taxes aren't reduced.
4. Spending on infrastructure is reduced.
5. Welfare for the middle classes is increased.
6. Tax rates on higher income earners are reduced.
7. Superannuation is not increased and maybe even reduced.
8. Asylum seekers are sent to Nauru where they can be held prior to all of them coming to Australia.
9. It is easier to sack workers.
10. Thousands and thousands of public servants are sacked.
11. A protection wall on all local industries is put in place.
12. Unfettered gambling rights are allowed to all.
13. Attractive and enticing ciggie packaging is brought back.
14. Where spending on public health and education is reduced.
15. All sport is put on pay TV.

We want OUR Australia back!!!!

Saturday, 3 September 2011

Ross Gittins on Economic History and Debt

Ross Gittins has written an interesting article discussing the findings of the book This Time Is Different: Eight Centuries of Financial Folly by Carmen Reinhart and Kenneth Rogoff.

According to Gittins, the authors of the book studied financial crisis going back more than 800 years and found many that history seems to repeat:

In their landmark study of hundreds of financial crises in 66 countries over 800 years, Reinhart and Rogoff find oft-repeated patterns that ought to alert economists when trouble is on the way. One thing stops them waking up in time: their perpetual belief that ''this time is different''.

But, as we're witnessing at present, even when economists and financial market players have been hit over the head by reality, their ignorance of history stops them understanding what happens next. Wall Street and Europe fondly imagined the Great Recession was behind them, only to discover it's still rolling on.
So the current problem with sovereign debt was eminently predictable if people had been familiar with similar crisis of the past.

The authors say a more accurate name would be the Second Great Contraction. ''The aftermath of systemic banking crises involves a protracted and pronounced contraction in economic activity and puts significant strains on government resources,'' they say.

They show that, in the run-up to America's subprime crisis, standard indicators such as asset price inflation, rising leverage (debt relative to the value of assets), large sustained current account deficits on the balance of payments and a slowing trajectory of economic growth exhibited virtually all the signs of a country on the verge of a severe financial crisis.

Gittins then points out that the culprit is not just greed but excessive debt.

The authors' studies lead them to a different culprit: debt. Credit is crucial to all economies, ancient and modern. Progress would be a lot slower without it. So the point is not that credit is bad, but that it's dangerous stuff.

''Balancing the risks and opportunities of debt is always a challenge, a challenge policymakers, investors and ordinary citizens must never forget,'' the authors say.

But ''if there is one common theme to the vast range of crises we consider in this book, it is that excessive debt accumulation, whether it be by government, banks, corporations or consumers, often poses greater systemic risks than it seems during a boom.

''Infusions of cash can make a government look like it is providing greater growth to its economy than it really is. Private sector borrowing binges can inflate housing and stock prices far beyond their long-run sustainable levels, and make banks seem more stable and profitable than they really are.''

It seems that sovereign debt defaults aren't as unusual as we think.

We've come to believe sovereign debt defaults are unthinkable and extremely rare. This may be partly because ''a large fraction of the academic and policy literature on debt and default draws conclusions based on data collected since 1980''.

The book focuses on two particular forms of financial crises: sovereign debt crises and banking crises. The present global crisis began with failing banks and has now proceeded to the threat of sovereign debt default.

Which, having looked at more than a mere 30 years of data, we now discover is quite common. Had economists been researching the question with the diligence of Reinhart and Rogoff - who put most of their effort into assembling a massive database covering 66 countries for up to 800 years - they may have come up with a little statistic it would have been handy to know a bit earlier.

On average, government debt rises by 86 per cent during the three years following a banking crisis. And that's not the cost of the bank bailouts. It's mainly because banking crises ''almost invariably lead to sharp declines in tax revenues as well as significant increases in government spending''.

Gittins concludes that:
Had we known our history, it wouldn't have surprised us that, when you start with heavily indebted governments, a banking crisis soon leads to a sovereign debt crisis.
I guess debt is like explosives. If used well it can allow you to accomplish far more, but if handled carelessly it can destroy everything you've built.

Friday, 2 September 2011

The High Court and the Malaysian Solution

I was always somewhat ambivalent about the Government's "Malaysian solution". On the one hand I oppose off shore processing and I think we really need to show our compassion. On the other hand I don't want to see any more people drown making that perilous crossing.

So I'm not upset about the High Court decision. I am a little confused though, about what it means for Manus Island and Nauru. I really hope it means that both are off the table. Of course that won't stop Tony Abbott and Scott Morrison spruiking Nauru. But then neither of them give me any pride in being Australian.

I do think the idea of a regional solution to refugee processing has merit. Perhaps the best way to "stop the boats" is to process the refugee claimants in Malaysia or Indonesia before they ever get on a boat. It might mean that we end up taking a few more refugees, but I think we can cope (Canada takes over 165,000 per year compared to our 22,000).

Of course Labor may well fear an electoral backlash. But let's face it - the bigots are going to be voting for the Coalition anyway. A more compassionate policy may at least stop the haemorrhaging of progressive voters to the Greens (who have been very effective at wedging Labor on this issue).

Edit: An interesting opinion on the issue.

Edit 12/10: Malaysia a better option for asylum seekers, says UN:
ASYLUM seekers would receive better protections in Malaysia under the Gillard government's proposed transfer deal than being held in indefinite mandatory detention in Australia, the United Nations High Commissioner for Refugees office has said.

Australia ''would fall well short'' of the human rights criteria demanded of Malaysia under the deal signed in July, the UNHCR's regional representative, Richard Towle, has told a parliamentary inquiry.
From Between a rock and a hard place:
Asylum seekers I spoke to in Kuala Lumpur this year were well organised in communities and had control over their family life and the day-to-day struggle to make ends meet, if not over their destiny.

Asylum seekers I met in Perth airport lounges, discharged from psychiatric units for mental illness and on their way back to the island jail, were clearly medicated, beaten by their circumstances and bewildered.
The article then goes on to document the problems asylum seekers in Malaysia have with not being allowed to work, including being sent to gaol for 12 months for working illegally.
This is the UNHCR's point: If asylum seekers have the legal right to work in Malaysia, it fixes the biggest problem in this country immediately. The Malaysian government had said the Australian ''transferees'' can legally work, and it was also preparing to extend work rights to all refugees.

Australia, however, has given no sign it is prepared to stop the mandatory detention of asylum seekers. The mental health toll in its detention centres is well documented.

Refugee lawyers put the counter-argument: After the prolonged detention, those who have had refugee claims accepted in Australia step into the sunlight - they are assisted with some of the world's best refugee resettlement services.

In Malaysia, they wait years and years for another country to accept them for resettlement. And it may never happen.
Not easy this refugee stuff.