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Weekend reflections

May 14th, 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. Chris Warren
    May 14th, 2010 at 15:18 | #1

    Maybe there is someone who knows the ins-and-outs of Australia’s foreign flows.

    If Citibank Australia purchases funds from overseas at 10% and lends then in Australia at 10% which is then exported, presumably there is no tax payable in Australia.

    Of course if Citibank Australia had borrowed these funds from its offshore parent, Citibank offshore could easily have gained a profit [for example if its cost of funds is 8%].

    If Citibank lends for housing – there is no GST?

    So where is the taxation opportunity? under which guideline/policy?

  2. Ernestine Gross
    May 14th, 2010 at 17:10 | #2

    In the meantime Enrico Fermi’s self-regulation spirit is alive and well on the thread which was supposed to be closed after 20:30 yesterday, 13/05/10, and again after about 11:30 today, 14/05/10.

  3. gregh
    May 14th, 2010 at 17:52 | #3

    a while back JQ asked for positive programmes for the Left. I think the destruction of the mass media, as ‘mass’ media, qualifies, as does a general reduction in the promotion of all sorts of awful values under the guise of freedom and money. For example, the film “The human centipede” is disgusting and should only be allowed in the context of a dominating media that upholds different values, as should the whole ‘torture porn’ genre’ eg the SAW franchise, but no end of others. My personal view is – all things considered – I’d be happy to try a few decades without any cultural input from the USA even though I know that the USA produces some wonderful work.

    How can the left maintain freedoms but minimise the impact of a dominant value system that expresses itself through Murdoch Media and film such as mentioned above? Please no-one trot out the utterly vacuous claims that people have ‘choices’ to be influenced or not influenced by such media.

  4. Alice
    May 14th, 2010 at 19:47 | #4

    @Ernestine Gross
    I noted Fran didnt accept Bilb’s summation on Langs paper even after JQ closed the thread and came back with yet another lengthy post – maybe needs to go find somewhere more sympathetic to overstay the welcome. Incredibly rude and incredibly obvious.

  5. Alice
    May 14th, 2010 at 19:50 | #5

    I note…whilst the Murdoch media was supposedly apalled by the actions of its Storm management…it has enough money to bankroll a court case against the NRL. What do we expect from the Murdoch empire? All we get is duplicity and lies.

  6. gregh
    May 14th, 2010 at 21:06 | #6

    and for something nice
    Do Ravens Show Consolation? Responses to Distressed Others

  7. gregh
    May 14th, 2010 at 21:39 | #7

    somehow seems to have a wider currency than just climate change

  8. John H.
    May 14th, 2010 at 23:36 | #8


    A little while back the below came up. Not that surprising, there is that famous elephant episode where on the migration they visit some elephant remains, a type of graveyard. It wasn’t that long ago we were warned about anthropomorphising animal behavior. Completely the wrong way around, we are risen apes, not fallen angels.

    Chimps confront death in human-like ways


  9. Donald Oats
    May 15th, 2010 at 01:13 | #9

    @John H.
    Indeed, in the 70′s I recall reading about scientists criticising other scientists for failing to maintain an objective and detached attitude, if that is the right expression, with regards to animals behaving in ways that may be construed as possessing intent. The paradigm was that the scientist mustn’t project their expectations of particular intent based upon mere external factors – ie the animal’s behaviour – as that would be subjective.
    All good advice, except that a few scientists took it to heart and went to 11 on it. The fatal flaw is that animals do in fact have nervous systems, brains, adrenal glands, organs and a heck of a lot of similar DNA to us, especially in the case of gorillas and the like. If we see a response by a dog to a nasty sting, is it reasonable to at least tentatively link the yelp and whining, then the licking of the stung area, and the quiet whimpering, to the kind of pain we would feel if stung too, pain caused by the injurious toxicity of the sting? A dog’s nervous system should presumably function in much the same manner as a human’s, and principles of evolution are there to support such a “leap in the dark”, as I once heard it described. Taking the flawed argument to its logical conclusion, since no two people are truly identical, one person observing another should avoid projecting their own typical motivations upon another person’s observed actions. Afterall, we should not assume that other people are like ourselves just because they have by and large the same parts as us.

    The problem is that in the 70′s some scientists simply weren’t interested in the animal as a being, just in case they lost their objectivity as they saw it. They should have paid more attention to research into neurological processes, and then perhaps they may have appreciated that identifying the behaviour and possible goals driving that behaviour, was not a loss of objectivity.

    While scientists have generally abandoned the pure Pavlovian dog-and-bell experiment as an exemplar, people at large seem to have some difficulty in seeing animals as beings in their own right – pets excepted, ironically enough. Instead, we hear nonsense about certain animals – fish mainly – not feeling pain. I wonder just how far down the “family” tree we would have to go in order to find an animal which doesn’t feel pain upon severe injury, and performs overt behaviours as a response to that pain? Anyone know?

    Personally I’ve seen pets perform some fairly interesting stunts without training or witnessing anything like it before their debut. One such stunt involved a pet dog and a pet juvenile cat. The dog was lying near an internal doorway and the cat seemed to be trying to provoke the dog into chasing it – walking past it and flicking its tail into the dog’s face, and eventually swiping it with a paw. Then the chase was on, on a slate floor I’ll add, and the cat, who was in front with dog right behind, chucked a full backward somersault and landed on the dog’s back at the rear end, claws stuck in the dog’s fur! Having witnessed the initial provocations by the cat, and then the complete backflip onto the dog’s back, I just can’t shake the feeling that the cat had thought of this neat trick beforehand, and then engineered the whole chase in order to try it out. Don’t get me wrong here, I’ve seen plenty of evidence of both cat and dog having severe limitations on their intelligence when compared to a human – or any of the great apes. But the thought lingers…

  10. John H.
    May 15th, 2010 at 01:50 | #10

    @Donald Oats

    I wonder just how far down the “family” tree we would have to go in order to find an animal which doesn’t feel pain upon severe injury, and performs overt behaviours as a response to that pain? Anyone know?


    In Bright Air, Brilliant Fire: On the the Matter of the Mind, the author, Gerald Edelman, states that one of his colleagues suggested consciousness may be present all the way down to the snake, but only if it lives in warm climates! Tongue in cheek but in recent years there has been a flurry of research that demonstrates the consistent trend of us having previously under-estimated the awareness, emotionality, and cognitive capacities of other animals.

    How far? Mammals, marsupials, in the very least. Wonderful Tibetan Buddhist quote:

    Taming the Tiger: Tibetan Teachings for Improving Daily Life
    Akong Tulku Rinpoche

    “It is hard to imagine how a fish feels when it’s hooked and dragged from the water, or a fox which is hunted to death, but we can sure that we wouldn’t enjoy such experiences.”

    We tend to perceive ourselves as qualitatively different from other animals. While there is some merit in that perspective it does reflect the ghosts of dualism, as if somehow nature has passed us by and we have become transcendent. Darwin once wrote:

    Darwin’s M Book

    “Origin of man now proved. – Metaphysics must flourish. – He who understands baboon will do more towards metaphysics than Locke.”

    That isn’t entirely correct but it is a long way in the right direction.

    Your cat dog story. When I was young the family would spend sometime just watching the cat and dog play games with each other. Very similiar to what you are describing, with the cat initiating the action and the dog joining in. They were having great fun and we were enjoying the spectacle.

    That animals do not have our cognitive capacity does not mean that animals do not have our feeling capacity. These matters, however, are very difficult to penetrate. It is interesting to note though that if feelings are truly in the domain of the limbic – amygdala – vta – Nacc dynamics, and that is problematic, then we need to confront the very real possibility that their capacity for emotion is not that far removed from ours because the growth of the human brain from the primate lineage is principally about rapid encephalisation but the limbic structures did not increase in size at anywhere near the rate of the neocortex. If you are interested in such matter “The Symbolic Species” by Terrance Deacon is worth a read; particularly as it raises some very interesting questions about the imbalance in neurotransmitter availability(in particularly serotonin and dopamine, to a lesser extent norepinephrine and acetycholine) arising from this differential growth patterns.

  11. Chris Warren
    May 15th, 2010 at 10:31 | #11

    As debt mounts, even the IMF has started shrieking from the sidelines;


    As with the Great Depression, our capitalist governments will do precisely the wrong thing now. To supposedly cut deficits they will, as a group, disproportionately cut wages and pensions.

    This will jeopardise consumption – the whole basis of the Keynesian hymn.

    No capitalist will produce goods and services if there is no consumption.

    Ann Pettifor had this nicely summed-up in her book “The Coming First World Debt Crisis” published when the global economy appeared to be booming and celebrated by financiers, journalists, economists, and politicians. Pettifor concluded (2006);

    There is little understanding of the threat posed to these (national) debts by recession and deflation, and there have been very few attempts to learn from the Japanese crisi which began in 1989, and from the Asian crisis of 1997.

    Pettifor listed potential triggers for a future First World debt-deflationary crisis.

    1) climate change shock
    2) house prices crash
    3) rising interest rates
    4) US deficit
    5) collapsing US dollar
    6) oil price shock

    Which in essence, are precisely the events filling our newspapers today.

    All this, because we cannot control our banks, supermarkets, miners, and other big companies such as QANTAS, Microsoft, and so on.

  12. gregh
    May 15th, 2010 at 13:04 | #12

    @John H.
    @Donald Oats
    @John H.
    time to quote Bentham on the rights of animals
    “the question is not, Can they reason? nor, Can they talk? but, Can they suffer?”
    from An Introduction to the Principles of Morals and Legislation

  13. Ernestine Gross
    May 15th, 2010 at 13:04 | #13

    @Chris Warren

    Some of the issues arising from your post have been discussed on this blog-site under the heading ‘financial capitalism’.

    I’ve argued repeatedly that the existing balance sheet approach to conceptualising and measuring money is inadequate. The balance sheet approach to money is inadequate because financial securities which have a non-linear pay-off function cannot be represented in financial accounts. All derivative securities fall into this category, including the by now famous colatoralised debt obligations (CDOs) and swaps.

    Furthermore, all results in general equilibrium theory since Radner (1972) have been igored during the great move forward to the 19th century that came along with financial market deregulation that was part of the doctrine known as economic rationalism in Australia (naive market economics in continental Europe, later neo-liberalism). The insight from Radner onward was that financial markets raise specific issues that are not present in otherwise identical models of economies. This stuff is abstract, yes, but that does not mean it is useless. (I am not saying you have argued that it is useless. I am saying it because during the period from about mid-1980 onward, there was emphasis at universities on teach ‘applied material’, ie teach the past methods used in practice.)

    For the IMF to say now that governments have to reduce their deficits (their old mantra) is an insult for all those countries where people and operating businesses had savings in real national currencies (eg Euro) from wages and profits. These real savings were exchanged for private money (junk bonds, to use a collective term) generated by Wall Street investment banks (misnomer). The confusion comes about because the private money is denominated in the same currency units as the fiat currency.

    It is now history that governments ‘bailed out banks’ because there was an accute risk of the entire global financial system collapsing (ie we all look at empty sheets of paper when hearing the phrase financial markets).

    The term ‘bail-out’ is not good enough. IMHO, a more descriptively accurate term would be private junk money was converted into national currency units.

    To reduce ‘government debt’ would, IMHO, require cancelling all private money while keeping the nominal price system in the productive sector of the economies approximately steady for a ‘sufficiently’ long time. This would presuppose an accounting system other than what we have. It would involve some redistribution of wealth (negating the so-called profits in at least part of the financial system) to get to something closer to what is known as a minimum wealth constraint in the said theoretical models of competitive private ownership economies.

    You may appreciate that I am writing with a very broad brush and the last paragraph above should not be read as a prescriptive measure but part of the outline of what the problem is.

    PS: My humble opinion is based on PhD research I supervised during 1999-2001.

  14. Michael of Summer Hill
    May 15th, 2010 at 14:59 | #14

    Update, Update, Update, the Greens are calling for an audit into one of Tony Abbott’s major political donors for possible breaches of electoral laws going back to 2001. Yes that is wright 2001. According to the lastest report ”The Warringah Club failed to adequately meet the NSW Election Funding Authority’s disclosure requirements four times, with the first instance pursued by the Crown Solicitor. This suggests its administrators either have something to hide or at best have a flagrant disregard for accountability.” I always knew he was a neo-conservative illywacker.

  15. May 15th, 2010 at 16:24 | #15

    This article by Guy Pearse on Aussie coal is a remarkably good read:

    King Coal

  16. Alice
    May 15th, 2010 at 17:01 | #16

    @Fran Barlow
    So Fran …are you for or against Rudd’s rent resource tax on the mining industry??

  17. Alice
    May 15th, 2010 at 17:15 | #17

    Oh and it would appear the liberals are cosying up t0o big Coal even further if you read this

    “In Perth, the Liberals this week blitzed mining companies, sending out 450 letters seeking a “direct financial contribution” for a marginal-seats campaign to kill the resources super-profits tax.”

    Yeah…business as usual from the liberals…the party for big business and stuff everyone else as long as they get their donations. The whole political system in this country is stuffed…may as well hand over management to the deep pocket Miners.

    As Chris said somewhere else…its all because we have failed to control big business…like the banks, big oil, big coal, big supermarkets and now here, we find liberals prostrating themselves before big coal.


    Its time Rudd raised the stakes and reminded people just who the liberals really are…WORKCHOICES….and supporters of big dirty industries – in fact I suspect they would support the porn industry if they could get a big donation.

    Creepy. Just creepy.

  18. Freelander
    May 15th, 2010 at 17:59 | #18


    Hey ‘Saw’ is an Australian conception. Maybe they’re complaining in the US about the negative input from Australian media culture?

  19. Michael of Summer Hill
    May 15th, 2010 at 19:42 | #19

    Alice, according to one of the architects of the resources super-profits tax, Chris Murphy, today claimed Australia will be as much as $2.1 billion a year better off, lifting household spending by 0.4% and adding 0.7% to the gross domestic product which contradicts Tony Abbott’s false claims.

  20. Alice
    May 15th, 2010 at 19:45 | #20

    Then I see Rudd ‘advertising’ on TV tonight his health care reforms….

    We dont need ads. We need action and we need to think politicians arent mindlessly wasting our taxes on TV ads, just trolling for votes. Get on with the job (fix it) and have some discretion and care in how you spend our taxes. That doesnt include prime time TV ads. Howard took this bit of putrid wastage to its zenith. Now Rudd doing the same…as well as big ears.
    Have these people no conscience? Its my money not theirs to waste.

  21. May 15th, 2010 at 20:08 | #21

    On another website I post at one of the contributors suggested a novel and administratively simple way to put a substantial price on carbon emissions — simply abolish the tax deductibility by businesses of energy costs. No new laws need to be passed by the senate or even the House of Reps, so tough luck Liberals. No complex accounting and compliance would be necessary so no new bureaucracy would be needed, making transaction costs nearly nothing. It wouldn’t just cover Australia’s 1000 largest companies either. Every business would be in.

    As compensation, the goverment could simply

    a) set aside 80% of the revenue gained for lifting the bottom tax threshhold
    b) use the other 20% to give cash (quarterly and scaled from the bottom up) to people under $22,000 who won’t get enough under a) to compensate them for price rises.

    So it’s revenue neutral. No GBNT arguments, as tax is the same.

    You could allow those using certified low-net-carbon energy in business to claim this as a deduction based on the proportion of their energy coming from non-thermal fossil sources. You could even allow householders buying certified low carbon energy to sell these credits to companies via an exchange, allowing renewables to compete in the household energy sector. You could introduce it with almost immediate effect.

    That would surely be a saleable political program. I’m going to write to my local member with this one.

  22. May 15th, 2010 at 21:45 | #22

    From the article I lnked above …
    With every tonne of coal generating 2.7 tonnes of CO2, our exports generate more than 750 million tonnes of CO2 annually – much more than the emissions occuring in Australia. The plan to double exports before 2020 puts us on track to overtake Saudi Arabia as the world’s largest carbon exporter in the next 15 years.

    A case for imposing a tax on coal (and the associated CH4 escaping from mines) based on the $100 per tonne that CC&S would need to be profitable?

    I’d say so.

    Chances of that happening? Zip.

    It would be brilliant though.

  23. greg
    May 15th, 2010 at 22:27 | #23

    I think you’ll find that SAW was written after an analysis of the US market and for the US market – and of course the idea that because something is written by Austalians it isn’t dominated by USA values is very naive

  24. Donald Oats
    May 15th, 2010 at 22:47 | #24

    @Fran Barlow
    I like it! It would hurt renewables too, but the simplicity of it has a lot to commend it. [No doubt someone will now retort with a list of reasons why removing tax deductability of energy use by business would actually make people use more, not less :-0 ]

  25. Donald Oats
    May 15th, 2010 at 23:11 | #25

    Indeed. William Blake’s “Tiger Tiger” poem uses that notion of ethics of suffering rather obliquely, but to devastating effect. He puts the question to us all that if (a Christian) God exists and is responsible for genesis, then why deliberately create vicious killing machines like the tiger, who must kill (a lamb in Blake’s poem) in order to live? It is a wonderful poem with the raw and fearsome beauty of the tiger there to see, posing the question as to why a creator would want it to kill and eat cute (in counterpoint) utterly dependent and cutesy lambs. Couldn’t tigers and lambs have both been herbivores? [Yes, the lamb is an icon from the biblical stories, and Blake was all over it.]

    Even without the religious/theological subtext, it is a great poem IMO.

  26. May 16th, 2010 at 00:46 | #26

    @Donald Oats

    I can’t see how it would hurt renewables. It would privilege them, since they would be deductible and tradeable. All of a sudden the public gets to learn about cap and trade. No more of this “it’s all too confusing” patter.

  27. Donald Oats
    May 16th, 2010 at 08:41 | #27

    @Fran Barlow
    I shot from the lip concerning renewables; any effects are going to differ depending upon whether we are talking about distributed (home-based or micro-community-based) renewables or larger scale power generation and feed to a region, like the current fossil-fuel power station + distribution network. As consumers find an inflationary hit over the short to medium term, caused in the main by businesses passing on some/all of the impost of loss of tax-deductibility of power, they may look for ways of rebalancing their home budgets, eg. by cutting power consumption generally. This would mean less money available to any power company, renewable based or fossil-fuel based.
    Larger businesses may find that becoming more energy efficient is one way of reducing the burden of energy costs and thus reducing the size of price increase passed onto customes; however, that doesn’t necessarily favour alternative energy over fossil-fuel based energy, unless there are other incentives to invest in alternative energy.
    So long as renewables are deductible (and tradeable) for businesses then alternative energy take-up would be favoured, probably sufficiently to make a decent difference to current take-up rates.

    Just to be clear: I still agree with you Fran that removing businesses’s tax deductibilty on energy expenses is a great idea. Removing subsidies for fuel used in the energy and minerals exploration sector is another simple mechanism with immediate effect.

  28. Freelander
    May 16th, 2010 at 09:11 | #28

    @Donald Oats

    The idea that animals don’t have intent etc., is simply part of the human centric and ‘humans are special’ view of the universe propagated by a monotheist religion which puts humans at the centre of everything and even has its God as the implicit servant of humans.

    Humans are simply animals. It is magical thinking to imagine that we are not part of nature and that other animal do not possess, in kind, intent in the way we do. It is a pseudo-objectivity to think, as Descartes did, that all other animals are nothing but automatons, little mindless machines.

  29. Freelander
    May 16th, 2010 at 09:18 | #29


    And, call me naive, but “The human centipede”, didn’t that come out of the mind of someone from Holland? Not that I have anything, in principle, against blaming the Americans for everything.

  30. greg
    May 16th, 2010 at 09:36 | #30

    could be – I don’t blame the USA for everything anyway – my post was perhaps ambiguous about that, but actually doesn’t state that all that is awful comes from the USA

  31. Freelander
    May 16th, 2010 at 09:47 | #31

    Let’s agree that the US is certainly no light apon a hill.

  32. Michael of Summer Hill
    May 16th, 2010 at 09:58 | #32

    Update, Update, Update, today Michelle Grattan poses probably the most important question for some time ‘is the Coalition a credible alternative’? A quick glance shows the Coalition seems to be disjointed, lacking talent (albeit Turnbull), prone to innuendoes and rhetoric, and lacking policies. To answer Michelle Grattan’s question, Labor seems to be more credible and believable.

  33. May 16th, 2010 at 10:09 | #33

    @Donald Oats

    As consumers find an inflationary hit over the short to medium term, caused in the main by businesses passing on some/all of the impost of loss of tax-deductibility of power, they may look for ways of rebalancing their home budgets, eg. by cutting power consumption generally. This would mean less money available to any power company, renewable based or fossil-fuel based.

    Which is one of the things we would want to achieve, of course, but on the whole, the purchase constraint is modified by the cash assistance and/or lowering of tax rates.

    Since energy efficiency is the cheapest way to abate emissions quickly, its OK if businesses also take this course, but after tax the cost of renewables falls relative to dirty sources. And even the household sector can benefit by buying renewables, trading the certificates and/or redeeming them against tax.

  34. Alice
    May 16th, 2010 at 11:42 | #34

    @Chris Warren
    Chris – this one is for you and its very scary but I cant help feeling the financial markets are a sham (and under the control of a few firms) – Why has the financial sector grown so obese in so many industrialised nations?. If they are supposed to facilitate real production, why have so many other sectors declined to be oustripped many times over by the growth in financial services share of GDP…


  35. Donald Oats
    May 16th, 2010 at 13:16 | #35

    Yeah, the opinion that animals are nothing more than unintentional automatons looks more and more untenable as we go up the “evolutionary tree”: even invertebrates have a number of book entries for being able to plan and adapt – cephalopods being a great example. Then there are rats – I’m sure a biologist somewhere could enlighten us on rat facts for sneaky. A magpie that has befriended me has displayed pretty directed behaviour and more importantly, sudden changes in routine (concerning being fed some magpie snacks) to a new one. Perhaps it isn’t too hard to rationalise such changes as chance events, or as the bird-brain equivalent of a stochastic search of the best ways of accessing food without undue danger, or some similar mindless process. To me it looks like learning, based upon circumstance and consequents of raw emotions like fear, desire, hunger, anxiety, satisfaction/satiation, etc. Humans do it all the time without realising it most of the time. Higher functions and emotions are almost certainly manufactured out of the building blocks from the raw, minimal emotions necessary to drive an animal to survive.

    Sorry to stray so far from topic, John Quiggin, I’ll leave it there.

  36. Alice
    May 16th, 2010 at 18:20 | #36

    @Fran Barlow
    Yeah sure Fran …I thought you would move to some other pro business point of view. “Cap and trade” – just another scam that the investment banks can make million dollar bonuses whilst ordinary people get ripped off.. (like Telstra shares for Moms and Dads, like super, like if the government recommends it as an invtesment…then run a mile as fast as you can).

    Cap and trade? Sure. It wont work. Only the heavy hand of regulation is going to work Fran if ever our governments get their hands out of the pockets of Big Business donations first (bought – they have been bought and now stand slavering unwilling to upset their feeders)..are you mad Fran or are you helping the investment banks make even more?

    All these pie in the sky ideas like more nuclear, trading rights on a free market (which isnt free and has been hijacked by elite bankers). Wake up and smell the decay but it doesnt surprise me one bit you would push the market (read Goldman’s market) solutions. Just so misdirected it isnt funny – its sad.

    Your “free market trading” solutions dont exist.


  37. Michael of Summer Hill
    May 16th, 2010 at 19:25 | #37

    Update, Update, Update, last week Tony Abbott falsely claimed the new Resources Rent Tax’ would hit consumer pockets as a result of price increases in building materials, gravel, phosphate and food. But today Treasurer Wayne Swan came out swinging claiming Abbott ‘hasn’t got a clue about the Tax’ and is talking gibberish.

  38. Chris Warren
    May 16th, 2010 at 22:02 | #38


    Interesting, but it follows the Minsky line, wailing about some forms of debt, without looking at the whole picture.

    These folks want a regulated capitalism.

  39. Jarrah
    May 17th, 2010 at 00:03 | #39

    “Cap and trade? Sure. It wont work.”

    I prefer a straight Pigouvian carbon tax, but you should look here (“A 2003 Office of Management and Budget (OMB) study found that the Acid Rain Program accounted for the largest quantified human health benefits of any major federal regulatory program implemented in the last 10 years, with benefits exceeding costs by more than 40:1″) before you judge cap and trade too harshly.

  40. Jarrah
    May 17th, 2010 at 00:03 | #40

    Hm, looks like an HTML fail. Here’s the link: http://www.epa.gov/AIRMARKET/cap-trade/docs/ctresults.pdf

  41. May 17th, 2010 at 05:41 | #41


    I find it the near hysteria over cap and trade by some to be perplexing. Essentially, it’s a way of working out each share when you have to divide up something that if finite with an imprecise value amongst an imprecise number of claimants based on how much each needs it. An auction is one administratively simple way to do this. Money supply is of course finite and the traded objects are portions of currency.

    Some of the hysteria does sound like those Biblical stories about pharisees in the temple and the broader claim of the connection between money and evil.

    Providing the cap is easy to specify and maintain and the qualifying articles of trade equally so, there’s no problem. Comparisons with derivatives markets fail, because these slipped the bonds of precise specification, becoming arcane and too remote from the articles to which they referred, so that transparency was lost.

  42. Michael of Summer Hill
    May 17th, 2010 at 08:20 | #42

    Update, Update, Update, latest report suggests Australia’s big mining companies have privately conceded to the Federal Government that they can afford to pay more tax on highly profitable ventures’ contradicting Tony Abbott’s false claims. To make matters worse for the Opposition leader’s incompetency the Treasurer’s office has acknowledged a range of new ventures and projects have been given the green light. The Opposition must now be pondering whether they made the wright decision dumping Turnbull for someone who has no expertise and/or knowledge of taxation matters.

  43. Alice
    May 17th, 2010 at 08:59 | #43

    @Chris Warren
    Chris – I think I want a regulated capitalism – trouble is we dont have enough of it now and the power shift from the people supposedly in a democracy to governments working parastically, symbiotically, with large businesses, for and against the people is disturbing and apparent.
    Today in yet another boring poll from newspoll…..all our conservative media did across the country was report that Gillard was gaining against Rudd. What the media failed to report is that their favoured son isnt too popular and that the greens show the most growth of all.
    Yes we got the sanitised version “Gillard gains against Rudd.” Damn slanted reporting.

  44. Alice
    May 17th, 2010 at 09:52 | #44

    @Fran Barlow
    And you dont think that with Goldman and other investment banks running the trades that
    “Comparisons with derivatives markets fail, because these slipped the bonds of precise specification, becoming arcane and too remote from the articles to which they referred”

    You dont think the investment banks will be working as we speak on derivatives based on cap and trade and climate change until they become so remote from the articles to which they were supposed to relate to…as well ?

    Isnt that what investment banks do…? Isnt that what they have been doing? The market is rigged but you want a market solution. Its laughable.

  45. May 17th, 2010 at 11:16 | #45

    I have to agree with your sentiment, Alice. We need solid regulation when it comes to derivatives of derivatives of derivatives that are split up, recombined, repackaged, etc. The inability of the financial industry to self-regulate with regard to rigorous quantification and risk assessment was the market failure half of the GFC backstory. We shouldn’t be complacent about that again, and if the inferior path of cap-and-trade simply must be followed, then it must be designed with these potential problems in mind.

  46. Alice
    May 17th, 2010 at 11:35 | #46

    Agree totally Jarrah.

  47. Fran Barlow
    May 17th, 2010 at 13:03 | #47


    I absolutely agree. As in any functional market, the articles of trade and the value of them in context must be equally clear to all players. What happened with the derivatives is that accountability disappeared in practice, and many of the instruments were utterly opaque to buyers and sellers. When the whole structure came crashing down it wasn’t even clear who owed what to whom and so everyone went onto a purely defensive posture magnifying the effect of the failure.

    None of this has anything to do with how one might trade RECs. These certificates could be issued by a suitably resourced state or federal department, based on data supplied by the relevant energy companies — which, given that they are small in number, would be easy.

  48. Chris Warren
    May 17th, 2010 at 14:31 | #48


    Unfortunately, in a closed economy, without increasing population, debt, or inequality, even regulated capitalism is unsustainable.

    When you scratch a “regulated capitalist” at best you find a market socialism, at worst a fascist.

    As the globe as a whole is closed, an regulated capitalism in one state (eg Australia) comes at the cost of debauched regulation in oppressed labour regimes in other states (eg there is no minimum wage in Malaysia).

    Regulated capitalism is immoral. It is the lemon tree of economics.

  49. Ernestine Gross
    May 17th, 2010 at 15:33 | #49

    “The money supply is finite”. What a nice line from the days of Leon Walras (around 1900) and Friedman, Milton, and the apostles of the Chicago School. It is out of date.

    As can be seen from Radner’s (1972) theoretical model, there is no natural lower bound on an economy with a sequence of commodity and financial markets. That is, without further assumptions, the economy is unbounded and this is due to financial securities. This is a crucial difference which cannot be treated with vague terms such as “arcane”. On the contrary, the model is quite precise.

  50. Ernestine Gross
    May 17th, 2010 at 15:37 | #50

    @Chris Warren

    May I ask for a reference for reasonable precise theoretical model of “capitalism”? (Not Karl Marx, das Kapital). During the past 20 to 30 years, institutional changes have been introduced under the heading ‘market economics’. IMHO, ‘capitalism’ is not the same thing as market economics. But I may be wrong.

  51. Ernestine Gross
    May 17th, 2010 at 17:28 | #51

    “Fear wipes $40b off the market ” (ASX market)


    Is it “fear” or is it another one of the financial land mines go off. How many more?

  52. Freelander
    May 17th, 2010 at 17:45 | #52

    Fear might stand for ‘fundamentalist economists’ arcane rigor (mortis)’.

  53. Ernestine Gross
    May 17th, 2010 at 19:22 | #53


  54. Chris Warren
    May 17th, 2010 at 22:18 | #54

    Ernestine Gross :
    @Chris Warren
    May I ask for a reference for reasonable precise theoretical model of “capitalism”? (Not Karl Marx, das Kapital). During the past 20 to 30 years, institutional changes have been introduced under the heading ‘market economics’. IMHO, ‘capitalism’ is not the same thing as market economics. But I may be wrong.

    Quite a Gen-Y dilemma here, – what is a reasonable, precise, theoretical model of capitalism but not Marx’s Capital (?!).

    You cannot provide a reasonable precise theoretical model of capitalism outside Marx – you just end up with a sociological mess (Weber, Habermas etc).

    Most economists refuse to provide a model of capitalism, instead we get ‘market economy’, ‘private enterprise’, ‘investment’ and supposedly ‘competition’. But these all exist under market socialism.

    But capitalism is based on two different types of “profit” – [1] the profit someone obtains from their own labour and [2] the profit obtained by accumulating the produce of others.

    Naturally this existed under fuedalism and colonialism. Under capitalism this general mode of accumulating profit [2] is driven by capitalists using Capital in particular.

    If there is no accumulating other peoples produce, as a function of capital, there is no capitalism.

    As G D H Cole said – Marx’s Capital is not an easy book to read. Poor ‘ol Keynes found it ‘dreary, out-of-date’ etc. and according to Joan Robinson he never managed to read Marx.

    For those who have read and understood Marx’s “Capital”, a key point is that Capital is not productive – it only produces a competitive advantage thereby accumulating the produce of others (until equilibrium).

    Capitalism is based on the belief that capital is productive in itself. This is the camouflaged capitalist presentation of its accumulating of others produce (as in mode [2] above)


  55. Alice
    May 17th, 2010 at 22:34 | #55

    @Ernestine Gross
    F.e.a.r…..n.e.a.t….you two are a pair of cards!

  56. Alice
    May 17th, 2010 at 22:38 | #56

    @Chris Warren
    Which brings me to an interesting thought Chris…that “capitalism” may perhaps have been thus named after Marx’s book and that perhaps he was the only economist to model capitalism, instead of only parts of markets that got added and bundled eg as micro and macro??

  57. Donald Oats
    May 17th, 2010 at 22:55 | #57

    Just saw the news story about yet another Catholic priest covering up paedophilia. Aside from the awfulness of it, what is surprising is that the priests doing the covering up are implicitly admitting that they do not personally believe in their own faith. If they did believe in it, they would be only too certain that covering up paedophilia by other Catholic priests means a one way trip to Hell, or at the minimum no ticket to Heaven. They should be shaking in their robes at the thought of God punishing their continuing transgressions.

    So far several – an understatement – Catholic priests have been discovered to have covered up ongoing sexual abuse, or the knowledge of past abuse. I don’t think hiding behind confession is a possibility for a Catholic priest in this situation. They are damned by their own hand – if they actually believe in the Catholic Christianity. If they don’t, then covering up a crime is a matter of judgement concerning the cost to them for dobbing in another Catholic priest, versus the benefits of covering it up. A career priest may well feel that a cover up is good for the Church and therefore good for them.

    Summary version: Catholic priests who cover up the criminal transgressions of other Catholic priests are complicit in crime, but more importantly, are exposing the fact that they don’t believe that God would punish them for such a crime, and that in turn makes one suspect that these priests don’t believe in what they are selling. If they don’t believe in their own Catholic Christianity, then why an outsider (eg member of public who attends Mass) would believe in it is beyond me.

  58. Alice
    May 17th, 2010 at 23:01 | #58

    @Ernestine Gross
    Ernestine..there is more to come. It isnt over and it wont be over until the hot air is ripped out of the major financial institutions one way or another. Id rather see 40 bill taken off Goldman and friends to be honest until they start acting like responsible bankers and not swindlers (in fact Id rather see Goldman Sachs wiped off the planet for good).

    The trouble is the correction needed will punish a lot of innocent people…so tell me why Goldman should survive? The governments dont have the money for a second bail anyway. Im sure it will come to this. The bailouts were a drop in the ocean against this ugly receding king tide caused by unfettered free market Wall Street. Thankyou Mr Greenspan, thankyou Milton Friedman and thankyou the conservatives in the United States (dont forget that idiot black sheep son of the Bush family) and elsewhere with their self destructive free markets worship.

    Market fundamentalism gave business elites the chance to absolutely corrupt whats left of governments in many industrialised nations. I dont know how we can recover. It wont be easy. According to Citicgroups chief economists “correcting fiscal deficits will be a drag on growth for years to come”…well if it helps sink Citigroups profits…fine..let it drag.


  59. Alice
    May 17th, 2010 at 23:17 | #59


    Scroll down and read the second comment…apparently, to the Argentinians…Greece looks all too familiar.

  60. John H.
    May 17th, 2010 at 23:32 | #60



    You might be interested in Supercapitalism by Richard Reich. He outlines how modern business practices are overwhelming democracy.


  61. Donald Oats
    May 18th, 2010 at 00:11 | #61

    Did anyone see the complete interview of Tony Abbott on the 7:30 Report tonight (ie 2010-05-17)? I only caught a few sentences but it looked like Kerry O’Brien knocked Abbott of his perch by questioning him over his about-face on select issues, and Abbott’s responses became weaker and weaker and less credible by the second. Talk about digging a hole for yourself…

  62. Freelander
    May 18th, 2010 at 02:51 | #62

    @Donald Oats

    “See no evil”

  63. Fran Barlow
    May 18th, 2010 at 08:59 | #63

    @Donald Oats

    Indeed … and even his specification of the statements he would have us rely on, those carefully scripted statements, sounds less than “truthy”.

    If Abbott, as he acknowledges, reserves the right to be “less than accurate” and to “over-extend” in the heat of poltical argument (and here we might recall his claim that the RSPT was “Rudd’s attempt to kill the mining boom stone-dead”) then it is easy to see the carefully scripted statement as simply a different means to inadequate candour. In this context, scripted statements are simply the flipside of the coin to reckless commentary, with the one attempting to hide the sentiment lurking behind the other.

    What was fascianting about Kerry O’Brien was that almost for the first time, a journalist attempted something like a deconstruction of Tony Abbott’s modus operandi. In the case of some people, there is more to them than meets the eye, but in Abbott’s case, O’Brien showed that there was a good deal less.

    Behind the carefully scripted Abbott image of a passionate man who is a straight shooter, lies an indolent and vacuous dissembler, who is a plaything of interests he scarcely understands, let alone is in a position to control.

  64. Alice
    May 18th, 2010 at 09:37 | #64

    @Donald Oats
    Abbotts skill lies in stabbing other liberals in the back. Im sure John Howard, Nick Minchin, John Brogden, Brendan Nelson and Malcolm Turnbull would all agree for different reasons.. but when he is not part of a plot he hasnt actually got much to offer…good 2IC?

  65. Alice
    May 18th, 2010 at 10:07 | #65

    @John H.
    John H. We know all this..which brings me back to the idea (Ernestine’s of a spin tax).
    We know we get bombarded with ads that want us to think “BP is green”, the “government is good”, “new health care reforms will help us” “the state govt has a new transport plan”…when the reality is so much uglier and the bed closures and staff cuts continue ubabated, and the roads compress us into a gridlock because they have not changed in thirty years, and and the trains are unreliable and packed, while the population grows.

    We know already that neither government here, nor large corporate entities are what they say, or do what they promise when we vote for them (and often permit the unthinkable and the destructive to play out under our noses)….and this all reflects, globally, in the financial markets that arent what they appear either.

    Of interest is the abuse being directed towards the Greeks by the media now. They are “shameless” ” have been living like profligate children..decadent..corrupt…and now they get their “just retribution in austerity measures”…but a comment that really caught my eye in one paper was this….

    “they have not been wanting to pay theier taxes”

    Well pardon me but I can think of whole tribes of corporations and individuals and political groups in many western industrialised nations that have been arguing they dont want to pay their taxes either…

    Are they all decadent and corrupt too??

    Maybe not wanting to pay your taxes is irresponsible. So how does that sit with the “lower my income taxes crowds”. Are they leading us down the path to a similar fate as Greece? I must confess, the way I feel about modern governments, and their friends, is that I dont want to pay mine either. Everyone at the top is cheating tax and getting clean away with it.

    So lets start with the supercapitals paying their tax, and they can set an example to the middle classes and the lower classes in Greece before they caste the first stone at the decadence of the “Greeks”.

    Governments could end the decadence if they werent so busy partying with, consulting, getting “advice from” and helping the truly decadent in this world.

  66. Fran Barlow
    May 18th, 2010 at 10:08 | #66

    I found this amusing:

    First muslim wins Miss USA

    Not a burqa in sight …

    Personally, I’m not a fan of beauty contests, but I might well give this a pass on an up yours to religious fundies basis.

  67. Salient Green
    May 18th, 2010 at 11:18 | #67

    Alice @ #17 great post and let’s hope our latex-spined Labor Government makes the mining Supercapitals pay their fair share of tax.

  68. Freelander
    May 18th, 2010 at 11:52 | #68

    Anthony Alphonse Abbott is a remarkable individual. As a young man, he considered he had the natural moral leadership qualities, first to be a priest, while at the same time considering he didn’t have the moral qualities to be a father to his pregnant girlfriend’s child (better just to have the kid be given away, or why not aborted?, and as it was, much later Tony finds out he was cuckolded), and following that, considers his moral leadership qualities instead call him to be a politician, and then prime minister. With his christian sense of morality, not for him the mere mortal constrains of needing to tell the truth. Hell, he didn’t mean that. He had his fingers crossed behind his back. Beside his god is a frequent forgiver of sins, and Tony always has his eye on accumulating a few more frequent flyer points. Just a few more and he’ll be able to walk on water. He already can convert water into wine, and he does love a good drop.

  69. Ernestine Gross
    May 18th, 2010 at 11:54 | #69

    @Chris Warren

    Thank you for your considerate reply. If you wish, I’d like to respond by interpreting some of the information and terminology in terms of theoretical developments since the 1950s with the aim of comparing notes rather than to debate (I find ping-pong debates not helpful nor do I find ‘schools of thought’ helpful to address practical problems).

  70. Ernestine Gross
    May 18th, 2010 at 11:58 | #70

    A.A.A. labels (ratings) have been known to be misleading.

  71. Freelander
    May 18th, 2010 at 12:05 | #71

    Yes. It is amazing how you can package a sub-prime politician with a Credibility Default Swap.

  72. Freelander
    May 18th, 2010 at 12:08 | #72

    Credibility Default Swap = I tell lies but I have a ‘get out of jail free card’.

  73. Freelander
    May 18th, 2010 at 12:09 | #73

    Default = it ain’t my fault, de fault is someone else’s.

  74. Ernestine Gross
    May 18th, 2010 at 12:41 | #74

    A CDS popped and, I understand, the smh decided to its own (unscientific) survey on the rating implications.

  75. Ernestine Gross
    May 18th, 2010 at 12:43 | #75

    “to its” should read to do its. Sorry

  76. Alice
    May 18th, 2010 at 12:55 | #76

    LOl – oh thats funny…all of that string of posts Freehumour….!!

  77. Chris Warren
    May 18th, 2010 at 14:45 | #77

    @Ernestine Gross

    OK, but I think you will find the literature since the 1950′s very convoluted, and confusing, as the artificial economic circumstances in the West (now unravelling), led to artificial discourse in Western economic and Marxist arenas.

    The theoretical developments since the 1950′s have not been useful as they have been tainted by Western motives infused by post-war global economic reorganisation.

    Although, outside the West, Edvard Kardelj’s work needs greater recognition.

  78. Michael of Summer Hill
    May 18th, 2010 at 21:19 | #78

    Update, Update, Update, Opposition leader Tony Abbott lashes out at his opponents for telling the gospel truth about him telling porkies. But Abbott can only blame himself for misleading the Australian public and is not fit to lead the Opposition let alone becoming Prime Minister and should resign immediately.

  79. Alice
    May 18th, 2010 at 21:43 | #79

    @Michael of Summer Hill
    I knew it Moshie. AAA rated Anthony Alphonse Abbott just isnt any good without his….knife… (to be used against his dissenters in the liberal party). It would be anyone’s fault but his. He is a bit like John Ibrahim only his cross is worn by other ex liberals.

  80. Michael of Summer Hill
    May 18th, 2010 at 21:56 | #80

    Alice, Abbott is finished for he has no credibility and should have known better than deliberately mislead the Australian public.

  81. Freelander
    May 18th, 2010 at 22:54 | #81

    Let’s hope young Tony holds on ’till the election. But knowing the liberal party they may well roll the dice again before November. Either way, it is starting to look increasingly like they will be rolling the dice post-November.

  82. Michael of Summer Hill
    May 19th, 2010 at 02:46 | #82

    Update, Update, Update, after reading Turnbull’s speech at the NSW Bar Association seminar in Sydney yesterday, I am of the opinion that the Liberal’s made the wrong decision in ousting Turnbull from the leadership. Furthermore, many are wondering as to why I keep siding with the man. Well the answer is simple, the Liberal’s need strong leadership and someone who knows what he/she is talking about and not some gibberish bulldust.

  83. Alice
    May 19th, 2010 at 20:13 | #83

    @Michael of Summer Hill
    Im backing a Turnbull comeback myself Moshie….it wouldnt surprise me at all…but first they have to roll the embarrassingly incompetent “Mack the Knife.”

  84. Alice
    May 19th, 2010 at 20:17 | #84
  85. Michael of Summer Hill
    May 19th, 2010 at 22:44 | #85

    Alice, last week Tony Abbott promised Joe Hockey’s reply to the Budget would outline the promised savings in his speech to the National Press Club but today the bear could only promise $46 billion savings without providing any details. What a fiasco.

  86. Michael of Summer Hill
    May 19th, 2010 at 23:52 | #86

    Alice, it seems today Joe Hockey dug his own grave for in his reply to last week’s Budget he not only failed to provide any specifics but no costings as well and is not fit to be Shadow Treasurer. And to top it off he is just as incompetent as Tony Abbott. What a fiasco.

  87. Michael of Summer Hill
    May 20th, 2010 at 07:33 | #87

    Update, Update, Update, it seems the temperature is rising and the climate is changing within the Coalition as they descend into chaos for yesterday not only was Joe Hockey dodging the media, but as Phillip Coorey says Andrew Robb released 42 ‘dodgy accounting’ measures in Coalition’s $46.7 billion fantasy ”savings” Budget reply. What a fiasco.

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