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New sandpit

August 5th, 2011

Here’s a new sandpit for lengthy side discussion (general and nuclear-power related), rants on idees fixes and so on.

Categories: Economics - General Tags:
  1. August 6th, 2011 at 23:14 | #1

    Ted Evans Westpac made a big call – 4 interest rate cuts in the coming year. I see this prompted by a major decline in aggregate demand, probably due to sustained savings (debt reduction).

    Retail is screaming. Housing is deflating. We haven’t had a recession for 20 years. Is the party over?

  2. BilB
    August 7th, 2011 at 08:22 | #2

    DC,

    The world has a major problem, we have allowed a handfull of people to become so rich that they are above the law and are able to distort the political forces to their favour. In so many countries the greedy are determined to maintain their comfort at the expense of their countries. US, Greece, Portugal, Spain, Belgium, Italy, France. And then there is the huge list of failed states. It is a huge mess which has become steadily worse as populations have surged starting in the 50′s. Meanwhile resources are also stretched. Oil, water, phosphate, farmable land, flora and fauna. And all of that is before damaging climate change takes its toll.

    Well the party is not quite over if people make the right choices. But with our intensely polarised politics driven by the wealthy self interested 1% against the other 99%, I think that the prognosis is not at all good.

  3. August 7th, 2011 at 09:33 | #3

    BilB,

    Agreed. The public dialogue thinks current settings are perfectly alright. To speak out against them – as I do – pinions one as a Marxist and a firebrand revolutionary. Alternately, one is a counter counter revolutionary, and how twisted is that!

    I fret for young adults, joining the workforce with a lifetime of liabilities: education debts, superannuation for themselves and pensions for the boomers, and these crippling land prices.

    Tax reform is urgently needed – Land Value Tax and Mining Tax after Ken Henry. (I blog at: http://www.prosper.org.au)

    Meanwhile, mankind’s comprehensive exploitation of the earth will sink us all.

    Cloaked in gloom, let us step out into a fresh day and tear down the toll booths of the political and economic elites.

  4. BilB
    August 7th, 2011 at 10:44 | #4

    DC,

    I dont’t see our situation as being a Marxist trigger, though I was contemplating the similarity as I put the previous thoughts together, and the reason is that we are not suffering. Our lives, in Australia and much of Europe, are quite ok. The real issue is that the excess wealth is not being captured and government debt is mounting as governments provide the social services universally seen as being fair an proper from borrowings.

    All eyes will now be on the US to see how they react to China’s warning that the days of endless borrowing are over. This also brings up the issue of where else will China direct its surplusses. Warning::::::::: protect your property:::::::. Strengthen laws against excessive foreign ownership of land. And take notice that in China people are only able to posses land under a 99 year lease. The Chinese government owns all of the land in China. We need to make sure that they do not gain ownership of our land as well, permanently.

  5. Scott
    August 7th, 2011 at 11:38 | #5

    @BilB

    Frankly, when you consider what Australians have done to the land, Chinese stewardship of the Australian continent might not be such a bad thing.

  6. August 7th, 2011 at 11:47 | #6

    If we used the land as the tax base it would be a less attractive investment option for foreign owners. Better this way than constraining them to a 99 year lease, although that has its benefits too. What we currently do ain’t workin’!

    My Marxist comment was that any dissent from plutonomy can sound revolutionary and therefore RED!

  7. BilB
    August 7th, 2011 at 11:56 | #7

    Scott,

    You can only say that in ignorance of what the Chinese have done to their own land.

  8. BilB
    August 7th, 2011 at 12:06 | #8

    George W Bush in 8 years increases us debt from 56.4 gdp to 84.2 gdp
    while turning a blind eye to banking practices that effectively strip mine
    economies around the globe.

    http://en.wikipedia.org/wiki/National_debt_by_U.S._presidential_terms

    What has the money that Bush borrowed been used for? And will it ever generate a return???

    http://www.independent.co.uk/news/world/middle-east/blood-and-oil-how-the-west-will-profit-from-iraqs-most-precious-commodity-431119.html

    The role of oil in Iraq’s fortunes
    Iraq has 115 billion barrels of known oil reserves – 10 per cent of the world total. There are 71 discovered oilfields, of which only 24 have been developed. Oil accounts for 70 per cent of Iraq’s GDP and 95 per cent of government revenue. Iraq’s oil would be recovered under a production sharing agreement (PSA) with the private sector. These are used in only 12 per cent of world oil reserves and apply in none of the other major Middle Eastern oil-producing countries. In some countries such as Russia, where they were signed at a time of political upheaval, politicians are now regretting them.
    The $50bn bonanza for US companies piecing a broken Iraq together
    The task of rebuilding a shattered Iraq has gone mainly to US companies.
    As well as contractors to restore the infrastructure, such as its water, electricity and gas networks, a huge number of companies have found lucrative work supporting the ongoing coalition military presence in the country. Other companies have won contracts to restore Iraq’s media; its schools and hospitals; its financial services industry; and, of course, its oil industry.
    In May 2003, the Coalition Provisional Authority (CPA), part of the US Department of Defence, created the Project Management Office in Baghdad to oversee Iraq’s reconstruction.
    In June 2004 the CPA was dissolved and the Iraqi interim government took power. But the US maintained its grip on allocating contracts to private companies. The management of reconstruction projects was transferred to the Iraq Reconstruction and Management Office, a division of the US Department of State, and the Project and Contracting Office, in the Department of Defence.
    The largest beneficiary of reconstruction work in Iraq has been KBR (Kellogg, Brown & Root), a division of US giant Halliburton, which to date has secured contracts in Iraq worth $13bn (£7bn), including an uncontested $7bn contract to rebuild Iraq’s oil infrastructure. Other companies benefiting from Iraq contracts include Bechtel, the giant US conglomerate, BearingPoint, the consultant group that advised on the drawing up of Iraq’s new oil legislation, and General Electric. According to the US-based Centre for Public Integrity, 150-plus US companies have won contracts in Iraq worth over $50bn.
    30,000 Number of Kellogg, Brown and Root employees in Iraq.
    36 The number of interrogators employed by Caci, a US company, that have worked in the Abu Ghraib prison since August 2003.
    $12.1bn UN’s estimate of the cost of rebuilding Iraq’s electricity network.
    $2 trillion Estimated cost of the Iraq war to the US, according to the Nobel prize-winning economist Joseph Stiglitz.
    WHAT THEY SAID
    “Oil revenues, which people falsely claim that we want to seize, should be put in a trust fund for the Iraqi people”
    Tony Blair; Moving motion for war with Iraq, 18 March 2003
    “Oil belongs to the Iraqi people; the government has… to be good stewards of that valuable asset ”
    George Bush; Press conference, 14 June 2006
    “The oil of the Iraqi people… is their wealth. We did not [invade Iraq] for oil ”
    Colin Powell; Press briefing, 10 July 2003
    “Oil revenues of Iraq could bring between $50bn and $100bn in two or three years… [Iraq] can finance its reconstruction”
    Paul Wolfowitz; Deputy Defense Secretary, March 2003
    “By 2010 we will need [a further] 50 million barrels a day. The Middle East, with two-thirds of the oil and the lowest cost, is still where the prize lies”
    “That is our oil (Iraq), we should just go and take it”

    Donald Trump; presidential hopeful

  9. Chris Warren
    August 7th, 2011 at 12:26 | #9

    @BilB

    Well the party is not quite over if people make the right choices.

    But such code-words as “the right choices” are meaningless.

    What are these so-called “right choices”?

    Will the current crisis be resolved if wages and entitlements for workers and pensioners are cut?

    Will the current crisis be resolved if we have a large scale war and then following reconstruction of half the developed world?

    Will the current crisis be resolved if the population suddenly expands?

    Will the current crisis be resolved if we tax high wealth and eliminate compounding debt?

  10. BilB
    August 7th, 2011 at 13:11 | #10

    No No Chris,

    The “right choices” are the ones which do not lead to a deepening of the pending crisis. We won’t know that they are right until they are so proven. I believe that there is no doubt that the previous administration made a string of wrong choices the study of which might be a guide to the future. The people pulling the strings in the US Congress at present are the ones who made all of the previous (bad) choices.

    So they had better figure out what is >right< in a huge hurry.

  11. August 7th, 2011 at 13:45 | #11

    Pontificating about what the USA should and shouldn’t do is fun but ultimately sterile.
    A better Q to address is I, we and us. How may we best transition Australia to the land of freedom and opportunity it bloody well ought to be.

    “Experience demands that man is the only animal which devours his own kind, for I can apply no milder term to the general prey of the rich on the poor.” Thomas Jefferson.

  12. Freelander
    August 7th, 2011 at 14:45 | #12

    Following on from the Murdoch media sliming via the Oz, something that makes an interesting read is the article in The Monthly on The Australian’s pontificator-in-chief, Chris Mitchell.

    http://www.themonthly.com.au/power-rupert-murdoch-and-australian-s-editor-chief-united-states-chris-mitchell-sally-neighbour-3589?gclid=CPL_qMCtvKoCFdRvHAodvhnh5w

    Interestingly, the journalist who wrote the article seems to admire some of his disreputable traits.

  13. Chris Warren
    August 7th, 2011 at 16:38 | #13

    @BilB

    I’m still struggling with what you think these right choices are?

    What are “right choices”? What choices will “not lead to a deepening”?

    Is there any point in finding these in 20/20 hindsight?

    Isn’t your position like saying that bad things will be averted if we find “alternatives” or, man can travel back in time if we find the “means”?

    Erecting code words and constructing such truisms, is no response.

  14. BilB
    August 7th, 2011 at 17:37 | #14

    I don’t see what your problem is Chris. The US has rapidly mounting debt. Based on someone elses figures the household wealth of 1% is double that of the other 99% of the population. On top of that the US imports a huge volume of consumer goods from China. China has rigidly pegged its exchange rate to be fixed against the US dollar and its largest customer. This should open up an opportunity for money traders to balance the currencies but it is not possible to freely trade the rnb as the Chinese banks are strictly controlled. So where US manufacturers should be getting the signal from the global US dollar decline they are getting only part of a signal as goods are still cheap from China, Wallmart is safe for now. So with that mess they have to claw their way back from the edge of runaway debt.

    In amoungst that there are solutions, but they need political consensus in order to …..choose…..the optimal path back. The Iraq war which was all about the oil and cost the US 2 trillion dollars is unlikely to provide a return through the management of Iraq’s oil extraction to solve the US’s elevated government debt level particularly as the oil extraction is in the hands of consortium of private companies, and the government can only expect to get a return on that through taxation, not a popular word in the US. So the money has to come from somewhere, and is fairly obvious where. They have to finally decide to go down the path of taxing the most able. The US public have to choose the politicians most able to serve their needs and put that taxation regime in place. There is a lot of choosing there to do, Chris.

    Then again you might have a different take on the situation. What is your studied solution.

  15. Chris Warren
    August 8th, 2011 at 11:13 | #15

    @BilB

    I do not see that increasing inequality is a cause of the looming crisis – it forestalls crisis.

    I do not see that lack of free fx with RNB is a cause.

    So nothing here supports any so called ‘right choices’.

    Military expenditure and foreign seizure of resources can trigger a financial crisis and/or jeopardize recovery, but do not to cause structural crisis. These policies boost corporate profits which delays the onset of crisis.

    On the other hand, taxing the most able (including companies) is a suitable path as it will better balance gov. budgets and reduce the expectation of high profits, which will also support moderating the availability of credit. Presumably this policy can be supported by unions, churches, small businesses and large slabs of the middle class.

    But in the long-run, all economies need a firm base in non-profit based enterprises in all sectors. With associated policies (essentially aimed at using markets, unpolluted with debt, to match prices with real values) there will never be any form of structural economic or unemployment crisis.

  16. Mulga Mumblebrain
    August 8th, 2011 at 11:22 | #16

    Freelander, Sally Neighbour works for News Corpse (specialising in ‘analysis’ of Moslem ‘terrorism’)so sycophancy towards one of Rupe’s favourite functionaries is only to be expected. Her next assignment will be to write an expose on how Manning Clark was unkind to cats. Under Mitchell ‘The Fundament’ (The Fundamental Orifice of the Nation) goes from worse to comical. They have the standard couple of denialist confabulations today, and on the weekend, pushed a book by some oenologist who allegedly is responsible for Margaret River becoming a wine-growing area. Inter alia, this doughty chap, no doubt a keen amateur climatologist, has discovered that-wait for it- anthropogenic climate destabilisation has been hyped up by alarmists, and there’s nothing to worry about, Now that’s a relief. It makes me think, ‘though, that there must be other ‘niche’ denialisms where one could turn a buck. I mean, if The Fundament gives a plug to a denialist wine-maker, why not cash in on other fads, and pen a denialist cook-book, or the ‘Denialist’s Guide to Home renovation’-the possibilities are endless, and the PR (per Rupert, not the other orifice)services come free.

  17. Freelander
    August 10th, 2011 at 14:11 | #17

    Now we have a “children overboard” claim with the live cattle exports to Indonesia. A Liberal Senator is claiming that he has ‘evidence’ that the film of the mistreatment of cattle was setup with the abattoir worker being paid to kick an animal in front of the camera. In typical ‘even-handed’ journalist manner, Australian journalists are treating the ‘claim’ as serious, and interrogating the Animal Rights group rather than the Senator.

    Why don’t they investigate where exactly the children overboard claim came from?

    Climate Change denial, any issue, the standard for the looney right now is simply to make up some preposterous ‘evidence’. And, yet, FoxNews is taken seriously, and so is Tony Abbott on his continuous ‘No Lie Left Untold’ Australian tour.

  18. BilB
    August 10th, 2011 at 18:45 | #18

    The thing is, Chris, what is important is not how you see things, it is how the rest of the world sees the situation. The US is distraught at the locked rnb exchange rate. The tens of millions of Aericans out of work are distraught at the inequality.

    You are just not making sense.

    You say on one line……”So nothing here supports any so called ‘right choices’”, and then on another….”On the other hand, taxing the most able (including companies) is a suitable path as it will better balance gov. budgets and reduce the expectation of high profits, which will also support moderating the availability of credit. ” ….which is something that they have ot choose to do. In fact they chose not to take that very course, and now we have the mess of a continued recession fo the US. And that is pretty much how the rest of the world is seeing the situation.

    Choices. Like I said.

    And you last paragraph is sufficiently eutopian as to suggest that a mushroom omelette might have been involved in its conception. Wonderful intentions right up to where a bunch of marauding kids smash in the door of your restaurant and rob all of your guests.

  19. Chris Warren
    August 11th, 2011 at 00:00 | #19

    @BilB

    It is not how people see things – it is how events demonstrate things actually are. Of course the US is distraught, but so what. The world was distraught when Nixon defaulted on gold backing in the 70′s and with Greenspan’s stupid recent statement that America will never default on debt because it can always just print dollars.

    So what? America and Europe deserve to be distraught. It is the logical, structural requirement of capitalism in the long-run. Unemployment is a concomitant phenomena.

    You appear to have little understanding.

    I have very little patience with little tricks by trolls who take my original statement

    So nothing here supports any so called ‘right choices’.

    which obviously concerned the two prior associated points, and then falsely contrasting it with later material, now with the incorrect usage of “on the other hand” and also, now deleting intervening material. There is no “on the other hand”.

    So just scrape the mushroom omelette off your face, and don’t try introducing weird, noisy, associations with kids smashing doors of your restaurant.

    You will find enterprises based on non-capitalist-profits springing up all through South America, and being promoted in Australia by people such as Race Mathews and the Fabians.

    You obviously do not know what utopia represents. It was conceived of by Thomas More as a 16thC philosophical riposte to the traumas of early English capitalism principally associated with the savage enclosures. The exclusion of a English strata then is now being repeated in the exclusion of English youth today – with similar riotous results.

    Of course capitalists will refuse to accept increased taxes to protect society against the injustices and exclusions they have necessarily caused. Warwick Mackinnon and David Murray (Future Fund Chair) are both singing from this old-world Keynesian song sheet. They want more productivity from workers, even as the Commonwealth Bank walks away with over A$6billion of ill gotten dosh.

  20. Freelander
    August 11th, 2011 at 01:32 | #20

    @Chris Warren

    Yes. We (the US) won’t default we will just make what you get worthless! Even before the Euro came into existence the US and US-ophiles have bad mouthed the Euro to forestall replacement of the US dollar as the world reserve currency. And that bad mouthing has been very successful.

    More recently, the American-centric media has concentrated on the problems of the PIGS in the Euro zone, while ignoring the strength of Germany and France, to be contrasted with the US problems at Federal and State level. In fact, as the reaction to S&P providing a more reality-based rating of Federal debt demonstrated, talking in the slightest way realistically about American problems or failings is looked upon as positively unpatriotic, if not downright traitorous. The Americans seem to think all allegiance should be to them. Remember some of them were calling Julian Assange a ‘traitor’, because he was doing things the American administration didn’t like. Apparently there are no legitimate interests but American interests.

    As has been made clear time and again, the US establishment and majority of their electors do not consider they have any duties or obligations to the rest of the world when they consider their actions. Instead of the rest of the west forming a coalition to start to extract some reasonable behavior from ‘the land of the brave’, we have a succession of toadying politicians happily selling out their countries for a pat on the head and the occasional soothing word and speaking tour. We in the rest of the west need to wake up. The US is not our friend. And we are foolish if we let ourself be used as ‘client’ states.

    So far the US, who after all caused the GFC, and precipitated the terror that began the war on terror (although Margaret Thatcher did play a role) has only had straight talk from China on their latest silliness.

    There is now a loud and rampant herd of elephants in that room called ‘American issues’ where we all sit silent.

  21. Freelander
    August 11th, 2011 at 08:55 | #21

    A claim, repudiated by all three agencies and the French government, comes out of nowhere that French government debt is about to be lowered from triple A. Wonder where that came from? (Very convenient but doesn’t seem to have worked to take the heat off the US.)

  22. Sam
    August 11th, 2011 at 09:03 | #22

    The US sells lots of inflation protected bonds anyway; printing money wouldn’t reduce the real value of that debt.

  23. Freelander
    August 11th, 2011 at 09:18 | #23

    @Sam

    Starting in 1996 following the Boskin Commission the US started making improvements so that estimates of the CPI would no longer be being ‘biased’ upward by one percent. Under Clinton, that ‘improvement’ solved forward budget problems due to liabilities for government benefits which were linked to the CPI which is used as their cost of living index. Maybe they will need another Boskin Commission.

    Latest news! Nowhere found! Located in McLean, Virginia.

  24. Chris Warren
    August 11th, 2011 at 09:35 | #24

    @Freelander

    I would not be surprised if globalisation itself becomes a victim of the current capitalist crisis.

    We are subsidising American profits by purchasing billions of dollars of military equipment, high-tech engineering equipment and medical equipment from the US when we need to develop our own industry and training pathways.

    I am not sure whether we can say the US caused the GFC. Capitalism caused the GFC, the fact that US was the first, does not exonerate all the other capitalists who have destroyed their own economies and societies – Iceland, Ireland, Portugal, Spain, Italy, Greece, UK, and soon France.

  25. Freelander
    August 11th, 2011 at 12:55 | #25

    Agreed. The White paper was ridiculous and the toys the Australian military wants might be fun to play with but would provide no more defence for Australia than a roll of toilet paper. Before concentrating on more toys, Australia needs to sort out its military from the top down. For too long they have been a law unto themselves and have successfully resisted reform and don’t seem to understand that they must do what they are told. The b’stardisation has to stop as well as the successive scandals and s*xtual abuse.

  26. Freelander
    August 11th, 2011 at 16:38 | #26

    Very amusing to listen to the British moralising about the dreadful lack of morality amongst those staging the ‘English Summer’. The Arab Spring and now the English Summer.

    How can you expect those ‘downstairs’ to display morality or have any belief in morality when they see their ‘betters’ have no morals, are hypocrites, have unbridled greed despite their incredible wealth, and will do anything to get whatever they want?

    They have seen that the British Police are corrupt, politicians are in the pocket of those with power, that their politicians are corrupt, that they will lie to send them to die in foreign countries for no reason and that most recently another example of their greed through the uncovering of their wholesale cheating on expenditure claims (claiming amongst other things for maintaining a moat), that they will spend up big for an Olympic games them downstairs will never afford to go to, while cutting everything for the poor and leaving the rich virtually untouched. Difficult to expect the poor to continue to provide lessons in moral behaviour to the rich when the rich are uncovered for what they are.

  27. Mulga Mumblebrain
    August 12th, 2011 at 19:19 | #27

    Freelander, I’m with you (if I understand you correctly)that the US is attacking the Euro, in order to forestall its rise as a rival ‘reserve currency’ to the US dollar. The US ratings agencies downgrade a Eurozone country’s bonds, and various gamblers with ‘winning positions’ make a killing. The wealth and hedge funds, with access to trillions in black money in ‘tax havens’ (which are steadfastly protected by the USA)can move markets at will, and I’m sure they’re just as true ‘patriotic Amercans’ as any Tea Party Mad Hatter or Special Forces hit-man. Rumours get started, are given a run by the US media, and chaos ensues. Volatility might not be the investor’s friend, but the traders, wide-boys, barrow-boys and assorted shonks of the financial industry grifter elite just love it. As well as destroying the Euro threat it also satisfies the US Right’s determination to punish Euroland for treating its underclass (now about 90% of the population in the USA)like human beings. After all the really Right and proper way to deal with the steerage passengers is with that relentless social savagery and sadism that is such a mark of the USA. The Euroland losers actually expect free and decent education, decent healthcare, decent pensions and social welfare. For the Right, all these are inadmissable affronts to their sheer hatred of others and determination to kick away the ‘Ladder of Success’, and must be destroyed. Just peruse Greg Sheridan’s typically intemperate, and revealing, diatribes in ‘The Fundament’ in recent days. first deriding Europe for its economic woes, and secondly joining in ‘The Fundament’s’ cacophony of outrage and vituperation unleashed by the ‘Chav’s Revolt’ in the UK.

  28. Freelander
    August 12th, 2011 at 19:34 | #28

    An important part of the European sovereign debt problem, as identified by Stiglitz, is, once again, the Credit Default Swaps which lax US regulation allowed to come into existence. If Europe lets sovereign defaults happen then we will have Great Financial Crisis II, because those CDSs will be triggered all at once and those who sold the ‘insurance’ don’t have the where-with-all to back them up, that is, to pay out.
    http://www.project-syndicate.org/commentary/stiglitz141

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