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Weekend reflections

March 5th, 2010

It’s time again for weekend reflections, which makes space for longer than usual comments on any topic. Civilised discussion and no coarse language please.

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  1. Rationalist
    March 5th, 2010 at 14:36 | #1

    I read in the news that China is targeting 8% growth this year. Just a question, how is China planning to power this growth (in terms of electricity generation)?

  2. March 5th, 2010 at 16:15 | #2

    Mostly coal, but they are trying hard with pretty much all the other forms of power generation. See the NYTimes:


  3. JM
    March 5th, 2010 at 16:37 | #3

    Here is an interesting exchange on the predictability of the recent financial crisis (the famous “who could have known” question), as well as the usefulness of standard economic models:


  4. Rationalist
    March 5th, 2010 at 16:45 | #4

    But they are still building 2 coal fired power stations per week right?


  5. March 5th, 2010 at 17:17 | #5

    Sorry, but I don’t understand your question? Was it a point disguised as a question?

    China is already the largest or second largest user of coal, and ~8% growth (mostly coal) is massive. I would have thought it would equal more than 2 plants a year, but that’s a guess.

    Doesn’t stop them from also being the largest user of renewable power and either the largest or second largest investor in renewables. It also has one of the most ambitious nuclear power policies.

    By comparison, electricity consumption growth in Australia has been around 1.5% for the last few years and we’re struggling to keep up with that.

  6. David Allen
    March 5th, 2010 at 17:54 | #6
  7. Rationalist
    March 5th, 2010 at 17:57 | #7

    Per week not per year.

  8. Alice
    March 5th, 2010 at 18:56 | #8

    @David Allen
    Austerity for Greece? Good for the bond markets? Oh …all must be alright with policy then.
    If the bond holders are happy the ordinary Greeks dont matter.

    Just so we know how it really goes.

  9. Chris Warren
    March 5th, 2010 at 20:51 | #9

    Austerity for Greece, UK bullying Iceland to repay bailout cash, and the US counters its debt by sending unemployment sky high.

    In Jan last year US unemployment was 7.7% – in Jan 2010 it was 9.7% (seasonally adjusted).

    see http://www.bls.gov/news.release/empsit.t10.htm

    I suppose the spin doctors will call the latest figure a ‘great success’ or ‘turnaround’ as the December ue figure was 10%.

    So in Iceland the cost of the GFC is squeezed out of taxpeyers, in Greece out of public sector workers and pensioners, and in the US, out of the foreclosed and unemployed.

    Just so bailed-out banks can get their profits and bankers their bonuses.

  10. Hermit
    March 6th, 2010 at 07:41 | #10

    Climatologist James Hansen has pointed out our coal export hypocrisy
    CO2 from Australian coal must generate over 600 million tonnes a year of CO2, more than all of Australia’s domestic emissions from coal, oil and gas combined.

    A couple of things should be pointed out. First we are giving other countries an advantage if we restrict domestic coal via an ETS and they have open slather using the same coal. Secondly the strong increase in coal exports to China and India tends to confirm those countries have looming supply problems. I suggest we place an export levy on coal and LNG equivalent to that paid by domestic consumers. The money can be paid into some clean development fund in the importing countries so long as it is paid upfront .
    Australia’s coal exports are to some extent an own goal. We double total CO2 emissions to our climate detriment and we give other countries an advantage we deny ourselves.

  11. Rationalist
    March 6th, 2010 at 09:00 | #11

    I think this is rather cute:

    ”If [Australia] continues to increase its export of coal it is, in effect, becoming a drug dealer for the world.”

    I for one wouldn’t take this view. Alternatively I take the view that Australian energy exports has a moral duality to it. Firstly, we are improving our own domestic economy. We are generating immense wealth for Australians, companies and filling the government coffers such that worthwhile programs can be run (in an ideal world all the programs run by government would be worthwhile!). Our kind host, John Quiggin, is paid a salary by a University in addition to getting funds from the Australian Research Council. Export of Australian mineral and energy wealth contributes greatly to general government funds.

    In addition, we are fuelling Asian economic growth. It allows previously poor Asian countries pull their people out of poverty, provide energy and industrial jobs to poor people. If we don’t export our energy wealth to Asia, the poor will suffer.

    I for one think it is morally reprehensible to restrict any form of energy export to Asia on humanitarian grounds alone. The fact that many Australians get wealthy too is also very nice.

  12. Hermit
    March 6th, 2010 at 11:06 | #12

    No problems with elevating the poor but should it be with a finite resource that has major side effects? A forced early transition away from coal and to a lesser extent LNG could be a blessing in disguise. With or without artificial carbon pricing these fuels will run out with China’s domestic coal peak expected by 2015. In that light Hansen’s analogy seems valid in that we are drug dealers whose customers must eventually suffer withdrawal symptoms. The world simply does not have enough fossil carbon for a billion people in both China and India to achieve Australia’s 20 tonne lifestyle in CO2 terms. Therefore we are offering false hope. At the same time we are imposing floods, droughts, firestorms and higher energy prices on future generations.

    As an aside I find it quite unnerving that for two and a half years Rudd has basked in the glory of signing Kyoto and giving condescending talks at climate conferences. Yet Australian coal, brown black or exported generates a billion tonnes a year of CO2. That is way out of proportion to Australia’s 0.3% of world population.

  13. David Booth
    March 6th, 2010 at 17:20 | #13

    Is it remotely feasible to construct a workable Activity Based Budgetary system to run 1000 nation wide hospitals? And if you created that model, to implement it in each hospital and add a new regional board structure (a sort of decentralised centralism if you like) and run this monster more efficiently than the current slushbucket system of funding?
    Is there any thinking in 2010 that the “Casemix” Activity Based Budgetary accounting system selected does anything to solve the current shortages of medical staff or improve service levels to the patients?
    Do we face a crisis in managerial control or is its just a matter of allocation of sufficient Federal and State funding to to Hospitals?
    Are we creating a “market-based” solution that will pitch hospital against hospital in a race to maximize throughput regardless of quality outcomes?

  14. Chris Warren
    March 6th, 2010 at 17:27 | #14

    Good to hear that the ALP members in Robertson have thrown out their rightwing trash.

    Belinda Neal is no more.

  15. sdfc
    March 6th, 2010 at 17:55 | #15


    The bond holders are funding the Greek government, of course it is important to keep them happy. If they think there is an increased risk of Greek default they will demand more of a risk premium for their investment, in other words Greek benchmark interest rates will rise even further.

    Why you think this doesn’t matter is anyone’s guess.

  16. Alice
    March 6th, 2010 at 18:15 | #16

    sdfc – No I dont think it matters at the expense of plunging working and non working Greeks into austerity measures which is exactly what is happening to keep the bondholders happy.

    Why you think this doesnt matter is anyone’s guess.

  17. sdfc
    March 6th, 2010 at 18:43 | #17

    Well Alice unfortunately that will mean the Greek government will have to pay an exorbitant price for its money to run these programs, assuming it can get funding at all. As government rates are also the benchmark for the economy as a whole this will also put added pressure on private sector funding costs a big negative for business and consumers in Greece. This will only make the situation in Greece worse. There are no free lunches in this world.

  18. Alice
    March 6th, 2010 at 18:50 | #18

    There are for the bondholders sdfc or havent you noticed. I also noticed a whopping big free lunch given to Goldman and Aig and others (..paid for by the hungry and those who lost their houses in the US..)

    Are you foooling yourself sdfc? “there are no free lunches”

    …there are in fact lots of free lunches…

  19. sdfc
    March 6th, 2010 at 19:03 | #19

    Alice that actually doesn’t have anything to do with the situation in Greece Alice unless you think in some crazy world that banking sector purchases of government debt actually raises borrowing costs.

    The US banking sector is sucking on the teat of the Federal Reserve not the bond market. Bondholders demand a return on investment commensurate with risk, nothing more. Would you not demand a higher return for higher risk?

  20. TerjeP (say tay-a)
    March 6th, 2010 at 19:22 | #20

    Alice – Greece is running a sizable deficit which is funded with borrowed money. If they default on their debt then nobody will be inclined to lend them any more. At that point they won’t just be trimming the budget deficit they will have to elliminate it entirely. That will entail far more spending cuts than the currently proposed austerity measures.

    Russia had this problem a few years back. In their case they slashed tax rates and the worst of it seems to be behind them now. I have no idea if this would work for Greece. However hiking taxes won’t help their economy so they need to start cutting spending. If they default then they will need to cut spending even harder.

  21. March 6th, 2010 at 20:56 | #21

    Interesting ‘Oil Drum’ on storing raw data.

    Looks at the “East Anglia CRU e-mails/raw data etc..” story and talks about destruction of raw data.



  22. Tristan Ewins
    March 7th, 2010 at 10:00 | #22

    Two new articles at Left Focus: PLS read :))

    ‘Recovery Requires Redistribution’:

    A post-Keynesian take on the causes of the crisis, and on hopes for recovery

    “An orderly unwinding of today’s massive debts and imbalances will only be possible through a recovery of demand, and one that is not fuelled by debt. ”

    see: http://leftfocus.blogspot.com/2010/03/recovery-requires-redistribution.html

    and: ‘Unions and Labor – Is Dean Mighell Right?’

    A response by Tristan Ewins to a call from unionist Dean Mighell for unions to disaffiliate ‘en masse’ from the Australian Labor Party. Also considered is the future of parties of the relative right in Australia, and the need to contest the ‘common sense’ of Australian politics…



  23. pablo
    March 7th, 2010 at 17:24 | #23

    @Chris Warren Yes Belinda is no more but I’m still waiting for some explanation as to how the two opposing camps in the Iguana affair could sign statutary declarations as to the truth of what happened. I certainly wouldn’t front up with a false one but then maybe there is something I don’t know.

  24. Alice
    March 8th, 2010 at 08:25 | #24

    @David Allen
    So David – German MPs have demanded Greece sell its own islands before it can get any help? In other words when Govts have privatised all else and have nothing left to sell….the great god market price and the oligarchs who have taken control will demand their land.

    What happens after that? Will they want the greeks themselves to be sold off as slaves.

    Time to nationalise the banks and the bondholders in Greece and shut the doors is my suggestion (and tell the Germans to go to hell).

  25. Ernestine Gross
    March 8th, 2010 at 09:39 | #25


    It is all very nice to argue for social justice and defend the underprivileged. I am all for it. However, it might be useful to first listen to what the (socialist) Greek Prime Minister has to say. He acknowledged on Australian TV that there are problems with corruption and the previous government has endulged in off-balance sheet financing (with the help of Goldman Sachs, which is now being investigated in Washington). Further, as JQ mentioned a long time ago, the pension age in Greece is 61 (in Germany it is 65). There may also be overhang problems from the conversion ratio of Drachmas to Euros. Nationalising the Greek banks and the bondholders (make slaves out of them?) may solve a problem but not the one in question. There is too much media hype of the sort that lives of generating bad blood.

  26. Alice
    March 8th, 2010 at 11:10 | #26

    @Ernestine Gross
    I understand your point but not at the cost of privatising Greek islands. That would seem beyond the pale and lest we be persuaded that Greece through its own corruption and its own shortcomings got itself into this mess rather than a rampaging herd of global market speculators as they rushed the exits in the tidal backsurge of the GFC , which I suspect is closer to the truth…

    Either way I am inclined to suggest closed capital mmarkets, temporary nationalisation and start concentrating on rebuilding their domestic economy.

    Privatising the islands is one step too far in this privatisation game and nations and lenders have already overplayed its hand in many countries….but the zombies are still here making the same suggestions.

    Dont ever forget Ernestine that it was Keynes thatb suggested nations in short term financial trouble should be assisted through a tax on surplus countries ie not funded with debt (and the ideological austerity measures subsquent fiscal conservatives in the IMF and WB threw in later by stealth).

    He was right…again. Since Keynes said it at Bretton Woods third world poverty has tripled. Its not about helping the poor Ernestine. Its about not sitting in wilful ignorance following policies that not only dont help the poor but they fail to prevent more and more nations from sliding into the global garbage bin.

    Slavery is the penultimate privatisation Ernestine. Thats where it could end if taken far enough.

  27. Ernestine Gross
    March 8th, 2010 at 13:53 | #27


    Acoording to wiki, Greece has over 6000 islands and islets (tip of a rock type of thing). Only 227 of the islands are inhabited and only 78 of those have more than 100 inhabitants.

    Nobody has suggested to “privatise the islands” (ie all of them) but part of the inhabited islands are ‘privatised’ (just like a block of land in Sydney). Furthermore, what is the difference between digging up and selling ‘rock’ (iron ore and coal) to other countries versus selling bigger pieces of rock protruding from the sea to residents domiciled in Greece or somewhere else in the EU or outside the EU? Other citizens from other EU member countries own houses in Greece and Greek citizens own appartments or other ‘things’ in other countries.

    I am afraid, if the Prime Minister of Greece says that past Greek governments are not without blame in the financial mess then I can’t simply ignore this, even if it matches with the statements by the EU Commission.

    To the best of my knowledge, Keynes, of all people, did not offer a one size fits all solution. His insights apply to circumstances similar to those at the time but not otherwise. Australia happened to be in a situation in 2007 which allowed limited aggregate demand management to counteract the fallout of the GFC in Australia.

    The Greek situation is not the same as the GFC fallout in the U.K. even though the tentacles of Wall street had reached the Greek government. (Yes government). It is the newly elected (late last year) Greek government itself that says the internal mess has to be cleaned up. The newly elected Greek government is said to have rejected the offer of Goldman-Sachs, late last year, to have more of the same that at least partly got Greek into trouble.

    IMO, one should leave it up to the Greek to decide whether they wish to remain in the EU (if the decision is ‘yes’, then printing money is not a solution, if they say no then the debt in foreign currency denominations remains as such) and to leave it to the EU governments to decide how and to what extent they can help Greece and over what period and under which conditions. The ‘mess’ cannot be cleaned up overnight. There is also Portugal, Spain and Italy that have non-trivial debt problems and all EU countries are under some stress, due to a variety of reasons, including the USA Wall Street debacle, albeit not to the same extent as in the U.S.A. The source of the problem in Spain is very different from that of Greece and so on.

    I’d say private or public ‘excessive’ debt is a non-trivial risk to enslave people. What is ‘excessive’ is of course not blatently obvious at all times and to all people.

  28. pablo
    March 8th, 2010 at 13:55 | #28

    With the northern summer approaching my suggestion is that Mr Papandreou put up all the tourist tariffs and government charges. It might cause a bit of a drop off, but there is only one Hellas for all those northern Europeans to flock to. Chances are that with problems in the Iberian peninsula that they might do the same. A suitably nuanced plea to those cashed up visitors about helping a victim of the GFC might also help.

  29. TerjeP (say tay-a)
    March 8th, 2010 at 20:40 | #29

    Time to nationalise the banks and the bondholders in Greece and shut the doors is my suggestion (and tell the Germans to go to hell).

    Cutting off access to foreign capital would necessitate even deeper cuts to government spending because they don’t have any other real means to continue with deficits. It is not the Germans who will be going to hell.

  30. Alice
    March 8th, 2010 at 21:01 | #30

    @Ernestine Gross
    Ernestine – there is also Iceland sliding into the abyss and the icelanders are adamant by referendum they want to default on their debt and let the British investors who invested in Icelandic banks set up by foreigners (you could barely call them banks could you?) when they handed out interest rates in excess of 10% to British investors and piled them into the ponzi scheme.

    Caveat emptor Ernestine. On Icleand – Im with the icelanders defaulting. Let Greece default as well and Spain and Portugal. How else are we going to get the global financial merchants to sit up and listen about the ponzi schemes they have been only too complicit in setting up?

    Let these speculative banks wear it. Did we really think a stimulus package the size of which was dwarfed by the bank bailouts would solve the disequilibrium in global financial markets? The money should have been applied to a fiscal stimulus in countries from day one, including Iceland, Greece, the US and the EU….not a massive bank stimulus.

  31. Alice
    March 8th, 2010 at 21:05 | #31

    @TerjeP (say tay-a)
    Terje – you ccut off access to foreign capital except for nationalised banks, and you use Govt debt – yes the deficit word to stimulate the economy and get jobs going again even if it means they build bridges and roads over Greece.
    Your cuts in Govt spending will take the Greeks nowhere Terje. You are part of the austerity team that just wont pass the ball here.

  32. Ikonoclast
    March 8th, 2010 at 22:04 | #32

    Can exponential growth in the use of non-renewable physical resources (e.g. coal) continue indefinitely in a finite world?

    Can exponential population growth continue indefinitely in a finite world?

    Can exponential pollution and destruction of the environment continue indefinitely in a finite world?

    All other questions are trivial compared to these.

  33. Michael
    March 9th, 2010 at 07:32 | #33

    Ikonoclast :
    Can exponential growth in the use of non-renewable physical resources (e.g. coal) continue indefinitely in a finite world?

    Don’t worry, if the price is right the market will sort it out.

    Can exponential population growth continue indefinitely in a finite world?

    Don’t worry, if the price is right the market will sort it out. Just get the government out of the way.

    Can exponential pollution and destruction of the environment continue indefinitely in a finite world?

    Don’t worry, if the price is right the market will sort it out. Just get the government out of the way and stop distorting markets.

    All other questions are trivial compared to these.

    Don’t worry, if the price is right the market will solve everything. The only thing the market can’t be trusted with is pricing carbon – that would just create a speculative market and be a “Great big new tax”.

  34. Ernestine Gross
    March 9th, 2010 at 08:41 | #34


    “On Icleand – Im with the icelanders defaulting. Let Greece default as well and Spain and Portugal. How else are we going to get the global financial merchants to sit up and listen about the ponzi schemes they have been only too complicit in setting up?

    Let these speculative banks wear it”

    Alice, I’ve got news for you. It is unsuspecting proverbial ‘moms and dads’ in many countries who will wear it, either via superannuation funds and pension funds, or via loss of income due to public and private enterprises going bankrupt, or indirectly via their municipal or other government agencies reducing services due to the financial consequences, or all of the above.

    The action reported in the following smh article is one that aims at sending a monetary message to a major player in the GFC.

  35. TerjeP (say tay-a)
    March 9th, 2010 at 15:14 | #35

    Alice – I’m not against a default by Greece. I just can’t see how it can be done without having to make even deeper cuts to spending. Even if you force nationalised banks to lend to the government it isn’t clear that they will be able to raise the funds in a post default world.

  36. Alice
    March 9th, 2010 at 18:09 | #36

    But Terje…at least tey have to raise less funds than pre default world.
    Britain defaulted on its obligations to the US post 1929 crash and insisted we honour our debts to the mother country.
    How did we do the Terje. Post default world is cheaper.

    I still say default – Iceland and Greece (and the rest).

  37. Alice
    March 9th, 2010 at 18:13 | #37

    @Ernestine Gross
    Bring it on Ernestine…they wanted the free market…I hope people sue Standard and Poors out of existence. If its the free market they want…let the litigants tear the ratings agencies apart.

    But when the ratings agencies fall in a heap…what do investors rely on to make sensible investment decisions?.

    Regulation Ernestine. Its only the reckless and the foolhardy who think we can do without it.

  38. boconnor
    March 9th, 2010 at 18:49 | #38

    Alice :
    @Ernestine Gross
    Bring it on Ernestine…they wanted the free market…I hope people sue Standard and Poors out of existence. If its the free market they want…let the litigants tear the ratings agencies apart.

    I doubt the litigants will win (unfortunately). I expect the contracts had paragraph after paragraph of “we give no warranty about anything we say” “don’t rely on our advice” “make your own enquiries” etc etc.

    Although it would be a hoot if they said those things in open court – would make a mockery of the rationale for the high fees – if their analysis can’t be relied upon and is no better than anyone else’s why use them?

  39. TerjeP (say tay-a)
    March 9th, 2010 at 20:23 | #39

    Alice – I think Iceland is in a better position to default. And all it is really defaulting on is it’s promise to bail out failed banks. Meanwhile the Australian government hadn’t guaranteed deposits but decided to shift in that direction (with cheers from the likes of you and JQ). Governments should not guarantee deposits and Iceland may teach lenders that even when governments guarantee deposits you can’t “bank” on it.

    In terms of Greece I think a lot hinges on how much of their deficit is interest payments. You may in fact be right. Another option other than a default is to renogotiate terms with the lenders. Maybe they defer repayment and zero out interest. That would burn the lenders but not so badly the Greece can’t borrow in the future. Still a complete default remains a viable option. The notion that buying bonds is a risk free investment is a zombie idea that should perish.

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