26 thoughts on “Monday Message Board

  1. Reality is sinking in at last it seems…

    Leading economic forecaster Access Economics warns in its quarterly Business Outlook, released today, that the nation’s economic boom will “unwind scarily fast”, halving corporate profits, costing more than 300,000 people their jobs and blowing out the current account deficit to more than $100 billion.

    “Batten the hatches. This is not just a recession. This is the sharpest deceleration Australia’s economy has ever seen,” the report says

    And here’s why: Brad Setser: This really doesn’t look good

  2. Just wondering if you’ve tapped into any of the latter day Digital Economy discussion. Seems the Digital Economy is going to be the saviour of the human race (or at least the US) according to one lobby group.

    Over here we’ve been having a discussion about DE on the DBCDE website that got mostly hijacked by the discussion of internet filtering.

    One comment on a post on stilgherrian read;

    The government is filling a void better filled by private industry. If the internet was as horrible and nasty as you claim it is, wouldn’t the free market rush to fill the void? Wouldn’t business interests demand that the internet be made a better place before attempting to do business there?

    Well, that isn’t happening and e-commerce is now massive. The internet isn’t going away, no amount of pornography can make the internet unattractive to business. The internet is not going to collapse under the weight of paedophiles trying to access it. It already would have done so.

    The government is filling a void better filled by private industry. If the internet was as horrible and nasty as you claim it is, wouldn’t the free market rush to fill the void? Wouldn’t business interests demand that the internet be made a better place before attempting to do business there?

    Well, that isn’t happening and e-commerce is now massive. The internet isn’t going away, no amount of pornography can make the internet unattractive to business. The internet is not going to collapse under the weight of paedophiles trying to access it. It already would have done so.

    Do you have any thoughts?

  3. carbonsink,
    Bull markets tend to begin when the last bear has been driven out of the market. Bear markets tend to begin when the last bear has been driven out.
    I would say that the last bull is about out of the market now.

  4. Bruces:

    Does anyone have a good article on how and why Australia survived the East Asian Financial Crisis of the late 1990’s ?

    Was it solely due to the economic genius of John Howard or were other factors involved ?

    Best Regards,


  5. The sort of folk wisdom quoted at post #3 simply has no predictive value. It is a self fulfilling propechy as in “when the bears leave it will be a bull market, or even a tautolgy as in “when the are no bears it’s a bull market.”

    Of better predictive value is Steve Keen’s debt analysis which predicts (very strongly) that de-leveraging, debt reduction and the bear have a long way to run. Several years in Keen’s opinion I believe. When you look at the debt overhang his graphs show (larger than the Great Depression) you might tend to agree.

    Look at his “The Merciless Exponential Debt Explosion” on utube. The intro is tedious and unpromising but the guts of it is good. It could have done with a little editing up front. Can’t academics edit? 😉


  6. Just wanted to mention the human side at the beginning of the year.

    [Adapted from Economics: An introduction to traditional and radical views, p.268. Hunt & Sherman 1981]

    Once upon a time, far out in the midst of a mighty ocean, lay a small island.

    100 fishermen and their families lived happily on the island, which provided them with all that they needed for clothing and shelter; as did the ocean their food. The climate was simply wonderful.

    For sustenance, the fishermen fished by hand for 6 hours each day, dividing the catch at day’s end. This ancient custom was called “sharing” and served all as one.

    In their leisure time, the people had another custom, equally ancient, called “feeling good”. And it was through feeling good that they appreciated and felt gratitude for the gift of life, loved and cared for each other, and found inspiration to create beauty in their daily lives.

    One day, playing idly with some hemp fibres that grew abundantly nearby, the idea of a fishing net dawned in one fisherman’s mind. After some discussion, 50 agreed to fish for 12 hours a day whilst the other 50 wove the nets. On using the nets, the fishermen discovered that it now took only half the time to catch their daily quota. This left them with 3 extra hours each day to either maintain the nets, be creative in some way or simply rest and feel good.

    Unfortunately, one cunning and more unscrupulous islanders also had an idea. Gathering 9 of the stronger and more brutal of his friends, he explained his selfish plan. The next day, they announced that a new principle called “private property” was to be instituted. This specifically referred to all the waters surrounding the island, all of the hemp, and all of the harvested or manufactured produce such as fish, raw hemp, rope, and nets – now owned by the ten. We will have, they proclaimed “a private enterprise economy”. This they explained meant that the other 90 were free to work for them or not. Those who did would be paid a wage determined by the product of the nets that they made, or the fish that they caught. Those who did not would be paid nothing. Anybody found violating the laws of private property would be punished: – two or three of the more daring heard muttering some protest, were immediately beaten up and tied to trees for a few days to prove the point. The other islanders, seeing no alternative, had to ‘freely’ apply for jobs.

    50 caught the fish, 10 repaired the nets, and 30 made luxury goods for, or became servants of the ruling 10 who became known as ‘capitalists’. A new word called ‘profit’ was coined to account for the fish and luxuries provided to the capitalists through the sweat of others, and another ‘surplus labour’ for the employees who produced these non-essential goods and services. Islanders now no longer related to or viewed each other simply as human beings – since through a reward system they were further conditioned to compete with each other.

    The capitalists announced inheritance laws so that their children would always own the means of production. Productivity and capitalists’ profits increased and the amount of labour needed to produce the essential food and nets lessened, matched with improving levels of technology. The abundance of food allowed the population to expand – although capitalist policy always regulated access to the produce.

    Capitalists, becoming used to a life of luxury appointed ‘police’ to enforce the laws of private property, then had no function other than to feel good (at the expense of others) or be creative (which they had no idea how to do or value, even in the beginning) – or continue on as predators, and widen their world of property and power. However, fearing the workers greatly outnumbered the police, they decreed that each worker must be schooled in ‘social science’, and hired social scientists to devise a theory that the production of fish required both capital and labour. The system is fair and just they said, because each receives a wage commensurate with their productivity, and each is free to work or starve as they choose. Understanding what was in their workers’ hearts they sold the lie that only by competing successfully and rising up the ladder of success in property and power could workers ever regain their freedom to feel good. Children of the capitalists were sent to their own private schools to learn how to manage capital and labour.

    To the extent that the workers believed the social scientists all was peaceful and tranquil. If they did not accept this ‘theory’ and attempted to withhold some or all of the surplus from the capitalists, the police moved in and punished them severely. If the more thoughtful of the workers attempted to promote memories and values of feeling good and call out for the freedom of their birth-right, the social scientists stepped in to reprogram them. Meanwhile the fish stocks were becoming seriously depleted and the hemp was dying off.

    When the poor eat fish it is turned into excrement. When capitalists eat fish it is turned into excrement also! The only difference is it costs everybody else a lot more to produce it.

    Only the children, too young for social science,
    watched the Sun rise each day over the beautiful island,
    In the midst of a mighty ocean ……

    Watched, and played, and enjoyed, and appreciated, Life as it truly is in all of its beautiful abundance ….
    Their hearts for the time being full.

  7. John, it seems like the Rudd government and the major banks are going to bail out the commercial property sector to the tune of $50 billion in order to avert a crisis.

  8. Problem is jrbarch that that society did not form overnight due to such a conspiracy on some small island. If all you economy involves is fish, nets and a hundred people it is easy to organise, the problem is it doesn’t.

  9. The result of the Gaza massacre is neither victory or peace. If this result is not a complete failure of public policy, I do not know a more telling example.

    Both sides are predictably mentally digging in for the long haul. Hamas, will probably emerge more extreme, as those do inevitably who are pushed over the boundary of a mere emergency. Uri Avnery attempts to comprehend the Israeli governing psyche.

  10. Andrew Reynolds @ 3:

    There are plenty of bulls left. They have been out in force recently pointing to the fall in the Libor (and the apparent thaw in global credit markets) as the beginning of the turnaround.

    Australia really hasn’t come to terms with the GFC yet. We are economic overhang. Interest rate cuts, tax cuts, and Kev’s largesse have kept the economy going for a few more months, but we’re living on coal and iron ore contracts negotiated at the height of the resources boom, and pretending they’ll continue forever.

    This is Australia’s Wile E. Coyote Moment

  11. carbonsink @11. True, a lot of foreign exchange has been earned from exporting coal and iron ore and, I understand, corporate tax revenue was very positively affected. However, the previous government was hoarding a lot of the additional revenue. Hence, with the exception of those who earned higher incomes in W.A. (while creating a shortage of skilled labour elsewhere) the rest of the population (except the CEOs of some companies) didn’t really see much of the cash flow. Wouldn’t this suggest that as the mining boom patters out, many people in the work force will not notice much?

  12. Mining collapse and complete collapse of the Australian economy because the mining boom collapses is another bit of nonsense. In 1999 or the mining companies were in the doldrums and had been there for years. So they have had a five year run? Is that all? We were all alive and doing OK when miners were in the doldrums. They really are not the be all and end all and cant be relied on – they have periodic surges but most of the time they are flat. They are going to be even flatter now.

  13. Alanna:

    Sure, we were ok in 1999 when mining was in the doldrums, but since then the manufacturing and non-resource export sectors have been smashed as Australia morphed into a quarry for Asia. Today there’s very little to fall back on. We don’t do much in this country that the world wants, and I doubt we can keep the economy going just by selling houses to each other.

    Ernestine Gross:

    Unfortunately the government became addicted to mining income in the later years of the Howard govt, and it funded much of what middle-Australia now expects: generous family welfare and lower income taxes — impossible without the billions from resource company taxes.

    Mining income (would have) also funded Kev’s big increases in health and education spending … which either won’t happen now, or the deficit will blow out to mammoth proportions.

  14. Carbonsink#14 So what? let the deficit blow out. Its been a long time coming and it might actually return the government more than the all the promised trickle down jobs that have not arrived.

  15. @ carbonsink
    “I doubt we can keep the economy going just by selling houses to each other.”

    – perhaps we can mine houses – ie sell houses to the highest bidder within an open (international) market. I saw a link on Roubini’s site to a Griffith Uni economist who was proposing this.

  16. carbonsink @14. True, there was some last minute income redistribution (your family welfare) and there were income tax cuts, starting at the top, funded from the said mining boom tax revenue. However, this was at a time of accellerating food, rental, petrol prices and interest rates (falling purchasing power of wages for many). Taking these changes into account and assuming at least partially off-setting policy measures are taken, I doubt that a ‘monumental
    deficit blow-out’ is a necessary consequence. I am raising these points because a non-trivial amount of media commentary seems to relate to the US rather than Australia (as if Australia has to follow the US). Furthermore, the swings from a no deficit (maximum surplus) objective to the amount of a deficit doesn’t matter is something which doesn’t make sense to me.

  17. nanks

    Aren’t there two huge problems with the international house market:
    – will the buyer automatically get right of entry to the country?
    – if not will rental returns justify current prices? In most OECD countries I’d say not.

  18. Ernestine Gross @ 14 wrote:

    a non-trivial amount of media commentary seems to relate to the US rather than Australia (as if Australia has to follow the US)

    Its true that we don’t have to follow the US, but we do have to follow Asia, because this has been the source of almost all our growth in recent years. As Brad Setser points out Asian trade has fallen off a cliff in recent months, and I don’t know how that can’t have serious implications for Australia.

  19. @socrates – I was thinking more of domestic concerns. It struck me as bizarre to think that someone could propose selling off the nations shelter without in any sense considering the impact of that sale upon people requiring shelter either now or in the future. Would we want the nations food or water supplies controlled by external interests? Or our military or medical capabilities, should we outsource them?

    To me this was an example of the (all too familiar) reification of the economy – as if the economy has some existence outside of its social construction and that existence must be nurtured and sustained.
    This is not of course to say that ‘the economy’ is not a useful abstraction for the purpose of analysis. I’m all for multiscale analysis but that analysis must eventually be grounded.

  20. Theo,

    I posted the following to the ‘Skeptics Field Guide’ web site that you have given as your home page:

    Do you fellows accept the laws of physics?

    If so, I look forward to seeing you tell me why the article http://journalof911studies.com/volume/2008/TheMissingJolt.pdf is not absolute proof that the South Tower was brought down by a controlled demolition on 11 September 2001.

    I won’t hold my breath waiting for their response.

    Of course, you can rise to the challenge in the meantime if you wish.

  21. Sorry JQ if this is off-topic for your blog. Just indulge me one comment to @ Daggett.

    That paper is laughable, I’m sorry. Using high-school kinematics equations to “model” the tower collapse. Even at high-school physics level we expect students to discuss error and their confidence in their measurements.

    Here’s just one obvious methodological flaw. They say: “We have chosen a well known video clip of the collapse associated with French film maker,
    Etienne Sauret.” And “Each frame
    is approximately 0.033 seconds in length (33 thousandths of a second).”

    Without verifying by testing the camera this was shot with, they don’t know that this was the frame rate (even if this is what it was stated to be, you need to test equipment and make sure it’s calibrated). Until this is known, every calculation is meaningless. They should also state an estimation of error in all their measurement. A measurement without stated error is meaningless in physics.

    Of course, further to this, unfortunately actual real engineering problems, and real life (not “idealistic”) physics requires calculus. That’s just for 2D problems, let alone 3D.

    To give you an idea of the level of physics required, have a look at this paper about “singing wine glasses” – a simplified 2D model.pdf

    A relatively simple physics problem, studied under controlled and repeatable conditions. Just compare the level of mathematics…

    Perhaps I should submit this experiment to the journal you cite?

    JQ. I shall not post about this topic again, it’s boring and usually ends up being a waste of time.

    Thanks in advance for indulging me once…

  22. Firstly, Theo, I have respected Professsor Quiggin’s request not to pursue this topic on the “It’s Over” thread even though his stated reasons make no sense to me and he did say that we could write about this “on one of the regular open threads”, so I don’t see why you or I need feel any need to apologise to him for having done so.

    Theo wrote, “(This topic) boring and usually ends up being a waste of time.”

    Well, I am sorry you feel thus.

    Would you be happier if those of us who dispute the US government’s explanation of the September 11 attacks bit our tongues whenever Bush apologists trot out 9/11 to excuse each and every crime committed by Bush since 11 September 2001?

    From where I stand, if Bush chooses to hide behind September 11, then I think I am equally entitled to demand that all those outstanding questions surrounding the events of that day be properly answered.

    In point of fact, I fully accepted the Big Lie of 9/11 until roughly a year and a half ago. I actually defended the invasion of Afghanistan until about then believing that the perpetrators of 9/11 were there.

    You have not rebutted in any way the paper “The Missing Jolt: A Simple Refutation of the NIST-Bazant Collapse Hypothesis”.

    Firstly, the authors of the paper never attempted to “model” the tower collapse. (For that matter NIST which was charged with explaining the ‘collapses’ has failed to produce any “model” either.) They simple made measurements based upon available video evidence to see whether or not a sudden abrupt deceleration of the top 12 floors could be detected.

    Without that abrupt deceleration impact it would be impossible to explain the structural failure of the lower 92 floors undamaged by fire, that is, unless explosives were used to destroy their structural strength before the top 12 storeys impacted.

    Even if we can’t be completely confident of the actual speed of the video, and even given the lack of total precision and problems of foreshortening etc. it seems inconceivable to me that if there was a jolt it would not be evident in that video.

    In any case, as the measured acceleration of around 75% of free fall at all times is roughly what we would expect (barring the lack of a jolt) it seems highly likely that the camera speed was 300 per second as the authors claimed.

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