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Monday Message Board

July 21st, 2003

I’m not sure if it’s time for Monday Message Board, as it’s still Sunday in Maryland. But I guess blogging has its own time, and this is an Australian blog. So open up with your comments on any topic (civilised discussion and no coarse language, please).

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  1. July 21st, 2003 at 17:59 | #1

    Perhaps someone can help me with this question (apologies in advance for any naivety, economics ignorance, etc.):
    In Doug Henwood’s ‘Wall Street’, he states that the US financial system is ‘stupefyingly expensive, gives terrible signals for the allocation of capital, and has surprisingly little to do with real investment’. He supports the last point by presenting ‘Flow of Funds’ data which shows that between 1952 and 1997, 92% of capital expenditure was financed by internal funds (from 95-97 it’s 94.5%).
    Is he right to draw this conculsion from this data, and if so, how come we don’t hear more about it? Is the situation similar in other countries?

  2. July 21st, 2003 at 20:39 | #2

    Well, Doug is a number-cruncher of the highest order, and them data don’t allow any other reading but his, Gabriel. And that seems to lead to the book’s conclusion, that the financial and governance role of the stock market might as well be done away with. Money and credit are forms of social power that need institutionally to be constrained and monitored.

    Oh, and John. You can see the beltway from Maryland, no? Sniff the air for us. Is this administration and its coterie beginning to creak? And say g’day to Tim for us, eh?

    Cheers,

  3. July 21st, 2003 at 21:37 | #3

    Dear John,
    Are there any economists out there doing the calculations of what is going to happen when the running out of oil starts to hit home. I have read according to the most eminent US geologists that the bell curve hits in between 2015-2020. Is this considered too far away to worry about? Why is’nt this the most commonly discussed issue amongst academic circles-never mind the chattering classes? I was amazed to hear on the ABC the ‘esteemed’ professor of energy systems- a chair I had not heard exisited in Oz until today- talked of solar, Hrydo, wind power, nuclear, biomass. No mention of hydrogen. I was under the impression GM and other car manufacturers were preparing a new generation of hydogen powered automobiles. (See Scientific American piece of 2 years ago-reference supplied on request). The change over from one energy regime to another has got to be fascinating for specialists. Is it that the turmoil in any transition period is just too depressing and there are no convenient maths models appropriate to play with, that the topic is ignored? Or have I been looking in the wrong places, UNSW does not seem to have its eye on the ball.Or has hydrogen (rather than water dam power) disappeared off all agendas! I would be pleased to see any evidence that Aus academics are not sticking their head in the abundant sand!

  4. John
    July 21st, 2003 at 21:54 | #4

    Paul, the curve you are referring to is the Hubbert curve. As you’ll find from looking at related links, the ‘official’ US Geological Survey line is that there’s plenty of oil for decades to come. I keep an eye on this, but haven’t yet seen enough to convince me either way.

    In defence of the unnamed professor, my understanding is that hydrogen (as opposed to hydrocarbon fuels) is not being talked about as a primary energy source but a way of storing energy generated from other sources, so it does not belong in a list like the one you mention.

  5. John
    July 21st, 2003 at 21:57 | #5

    I think Wall Street might claim that
    (i) the market for takeovers provides guidance to capital allocation
    (ii) even if it has no effect on the production side, Wall Street provides risk management services for investors.
    I don’ t think the first claim holds up at all well to scrutiny. The second is trickier to assess, and is closely related to my work on the equity premium.

    Rob, I’ll say hi to Tim.

  6. July 21st, 2003 at 22:02 | #6

    and don’t forget your camera, John! heh heh.

  7. Jill Rush
    July 21st, 2003 at 23:06 | #7

    One thing about having troops and battles all over the world is that there are so many things to worry about about that you just think ‘What the heck”.

    There are so many wrong headed decisions being made where we are sold on the benefits beforehand and whilst I suspect the bad is lurking I wish to believe that I am wrong and the other point of view is right. I am invariably disappointed.

    I would like a bit more relaxation and comfort but instead feel horror on the fact that we have a guerilla war developing in Iraq – just as predicted but there has been so much triumphalism that it is hard to state this point of view.

    We have Australian citizens in dreadful conditions being handed over to those who have a firing squad in the background to receive a trial that will probably give a choice in blindfolds.

    We have a job network which was set up to give choice where there is no choice left and which is so structured that flexibility is gone too.

    A medical system which is quietly being turned into an americanised version along with the free trade agreement which will silence the voices of our own writers and artists. Is one paranoid for thinking that this is getting us ready to be the next state?

    Must be Monday Must be mid winter. Good things are all close to home.

  8. July 22nd, 2003 at 00:52 | #8

    Neat summary, Jill.

    Sigh.

  9. July 22nd, 2003 at 01:15 | #9

    John,

    Reading your chapter in the CEDA privatisation volume, is your Grant & Quiggin on the risk premium for equity a 2002 publication, as stated in the text, or a 2000 job, as stated in the references? And if you don’t do it in this article, do you happen to know the best or at least a good source for covering the ‘public cost of capital issue’? The best I take to be one that unpacks and lays bare the assumptions behind the different contenders. And that’s all I have on my shopping list for now, except to tell you to say g’day to Tim D for me.

  10. Observa
    July 22nd, 2003 at 01:19 | #10

    There are a few threads here which may be relevant to a question I have asked a relatively broad cross section of friends and acquaintances over a period of some time. It is a broad intuitive question, which I have found produces an overwhelming number of responses in the negative, which tends to fly in the face of current political/economic direction from both sides of the political spectrum.

    My question is- ‘If all the countries of the world were as successful as Australia(or US,Japan,etc), at utilising their natural environment for the level of production and output that we do, would the world be a better place in which to live?’

    Now I must confess that deep down this modestly successful market man, must answer NO. Perhaps the bloggers would like to take this litmus test themselves and state their answer. What about it? Yes,No or Undecided, accepting of course that you may like to qualify your answer eg U(undecided) because the question is too simplistic,blah,blah

    At any rate you might like to try it at the next dinner gathering and think about the response.

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