31 thoughts on “Weekend reflections

  1. Paul Walter, here’s your belated reply from last week’s weekend reflections (sorry about the delay).

    ‘I just can’t see, like so many others here, how capitalism can keep its credibility as to the legislation of “easier” measures like the one you are proposing, when public feeling is kept high by acts of bad faith typified by the US bail out, Sol Trujillo and PacBrands. We would get the sort of atmosphere you seek if we got even the slightest sense of “lead from the front”, shared adversity and even a skerrick less opportunism and bad faith from some. But its all take and no give with capitalism.’

    I would agree, only I wouldn’t put it down to (genuine) capitalism but to the sort of thing Kevin Carson characterises as “Vulgar Libertarianism”, the wolves in sheep’s clothing. As the anti-League of Nation groups of the last century put it, it is “an evil thing with a holy name”.

    “And taxation seems one of the very few ways that the better off can be made to pay at least a fraction of their dues, for social infrastructure that they also benefit from, even if its only the form of defence, or the fact of their workers as educated and healed by civilisation, in the world outside their mansions.”

    Here I disagree, mainly because of what I called the two wrongs thing. First, merely being better off, just like inequality, doesn’t automatically mean ill gotten gains although it does rather suggest it under present circumstances. Second, paying taxes isn’t even making reparations for those that do owe them, since the government gets it and not the victims. Over and above that, all the things you list that they benefit from are the sort of things that should be engineered out, i.e. arranged to happen separately from governments. Simply making the rich pay for them is to entrench a lock that should instead be loosened. I would only ever accept that sort of thing provisionally, as a lesser evil to be going on with while looking for a way out, not as a justification.

  2. PM Lawrence, thanks for civil reply.
    Now, down to business.
    “… the government gets it (tax “reparations”)”.
    Yes, it is then employed to develop a level playing field thru education, health etc.
    Unless the government involved has been captured metaphorically or actually by, vested interests. Which vested interests (mediocrities?), you might ask, echoing Friedrich Nietzsche, but am using the term in the convential sense for the purposes of this exercise.
    We do have a problem of this kind in Australia. Hence much of the discussion recently about FOI and commercial in confidence re, “tunnels to nowhere” and the destruction of environmental commons for lout “developers and their “mates” in the system. To many there seems a fine line between initiative and enterprise benefitting the many and the sludge of graft, that holes the lifeboat for all.
    Deregulation was implemented by neolibs, not leftists and Burkean conservatives interested in the priority of ethical issues and the value and viability of the community. Come to think of it “Freedom” was as likely as much an excuse for just getting at the goodies, as representational of the legitimate aspirations of humanity.
    You may well claim libertarianism was hijacked by spivs as an alibi for their twisted agendas borne of lack of self knowledge. The balance between the needs of the individual and the needs of the community as represented by representative government, emasculated as it has become over the last generation, is prior in a healthy state since it is mediated by the balance between order and anarchy also. In other words, is the nihilism of unrestrained Wall st in its recent mindset any less detructive in the end than the nihilism of a supposedly statist Beria or Dhzersinsky? They all represent themselves as establishment or forces of legitimate order, look personable themselves and have others firing various
    “bullets” of different types of human destruction, for them.
    Where then does real government reside? Multi national corporations, the modern ancestors of the robber barons of Feudal times. No, not alone. Nor do we understand what “the state” actually means. If we had global government of a global state outside influences would not be rebellion against a centre; all would be welcome at the table. What we have is actually anarchy in the nihilist sense, at least at one pole. How hollow the claims of the USA as detached champion for truth and justice first; the closest we get to government in a unified state, so the actual mechanism of “government” may be a bit more complex,oppressive and less obvious than what is imagined by people influenced by debates couched in current terms.
    You also may claim that globalisation demands that regions and locations have to cede local imperatives to big business or other power formations in the interests of business and or international competitiveness( masking greed?)
    I wonder, can’t humans communicate to a more constructive level than the level that occurs just now?
    No, probably not.
    Perhaps the immanent truth is that power is ubiquitous, the individual’s rebellion against ubiquitous power formations for survival seems set to continue as the natural order denuded of ornaments of romantic euphemism (“freedom”, “self expression” etc), left, right, democratic, libertarian or whatever. It always seems to revert to default.
    For the libertarian, too, is faced with the problem of ordering or/and arrangement of human affairs for mutual survival, the balancing of altruism and self regard contra Hobbes, with conflicts probably inevitable, regardless of which “ancien regime” has been overthrown.

  3. The NSW government doesn’t take its marching orders from Standard and Poors, no way. Apparently, it takes them from Credit Suisse. Here’s the NSW government’s latest press release on energy:

    New South Wales Energy Reform

    A secure, affordable, and reliable long term supply of electricity is vital to making sure the NSW economy, families and businesses can prosper and grow.

    The Rees Government is taking every possible step to ensure that NSW has the strongest possible economic foundations. This means taking important decisions on electricity reform.

    It’s more important than ever for the Government to act to remove barriers to private sector investment in NSW, like those that exist in the electricity industry.

    NSW needs to develop new power stations to meet the State’s growing energy needs. Every dollar the NSW Government spends on power stations is a dollar less for spending on essential infrastructure and services like health, education and transport. The Government is implementing these measures so that from now on the private sector, rather than the Government, bears the investment burden for new power stations.

    Currently, the private sector is reluctant to invest in the NSW electricity market because it is dominated by Government enterprises, so the Government’s goal is to create an environment where the private sector will have greater confidence to make the large investments necessary to build new power stations.

    These proposals represent a unique and attractive strategic opportunity for private sector market participants to gain market share and presence in Australia’s biggest and most important electricity market. So the Government is confident this will be a well contested process.

    The exit of Government from energy trading activities and a strong market presence by the private sector are essential pre-conditions to those same companies delivering investment in new power stations.

    The Government’s plans also strike the right balance between securing future electricity supplies and looking after workers and families. The Government’s plans contain strong protections for electricity industry workers and continue price regulation for small customers until at least 2013.

    Long term economic investment and growth in NSW requires a secure, affordable, and reliable supply of electricity. The Government’s plans will help deliver this for the people of NSW.

    Information about the Government’s energy reform plans will be placed on this website as it becomes available.

    The Minister for Finance will hold a briefing session for industry participants on Thursday 12 March in Sydney. For further details and to register their attendance, industry participants should contact:

    Daniel Stockmann
    Credit Suisse
    Tel: (02) 8205 4512
    Email: daniel.stockmann@credit-suisse.com

    WTF? GFC anyone?

  4. Congressman Wright Patman, was for 40 years chairman of the US House of Representatives Committee on Banking and Currency and for 20 years tried to repeal the Federal Reserve Act.

    In 1941 he said

    “When our Federal Government, that has the exclusive power to create money, creates that money and then goes into the open market and borrows it and pays interest for the use of its own money, it occurs to me that that is going too far. I have never yet had anyone who could, through the use of logic and reason, justify the Federal Government borrowing the use of its own money. I am saying to you in all sincerity, and with all the earnestness that I possess, it is absolutely wrong for the Government to issue interest-bearing obligations. It is not only wrong: it is extravagant. It is not only extravagant, it is wasteful. It is absolutely unnecessary” (Patman 1941).

    The reason that we continue to do this is that we need to create money some way and creating money and backing it with debt an easy way to do it and people who create money this way and charge interest on it immediately earn interest without having to worry about creating anything productive.

    However, we can create money by backing it with new productive assets instead of backing the money with debt. Let us take notice of Patman and stop creating money by lending money we do not have. Let us create money by first producing an asset to back the money.

    How do we do create money without creating debt?

    We create zero interest special purpose money that can only be spent on creating a new productive asset. After it has created the asset the money can be loaned and can attract interest. No debt is created but there is new money in circulation.

    If we create money this way then we will have zero inflation provided in total we create assets that produce more money over their lifetime than they cost. In other words our investments give a positive return.

    Do things this way and governments do not go into debt and if we invest in productive assets that do some social good like investing in infrastructure to reduce greenhouse gas emissions then we can solve other pressing problems that have difficulty attracting investment.

    Can someone tell me why this will not work? If you can’t then tell me why you are not lobbying the government to do it?

  5. The stockmarket has crashed (and banks refuse to lend) because assets were valued at too much money. (Whether the money existed is not the point).

    So placing more money into the system only makes matters worse.

    Prices (not low-end wages, not pensions) must fall.

    Unfortunately, for British capitalists, once you have reduced interest rates to zero, there is no other option, so they do this in desperation.

    All fake prices have been introduced by commercial enterprises, and the business mates in parliament, who have totally subverted the economy for their own private greed.

    Increasing final consumption expenditures (bonuses, pension increases etc) funded by increased taxes on rich fools, makes much better sense to me. This ensures reasonable businesses stay viable.

  6. Last year Larry Lessig (Professor of Law, Harvard) changed his focus from protecting open source concepts (Linux’s GPL and Creative Commons) towards combating the root of the problem, the power of lobbyists representing rich and powerful minority interest groups.
    Larry has recognized that the power of these lobbyists leads to policy corruption not only in the area of Intellectual Property policy but in all areas of policy. He is attempting to combat this influence.
    It seems to me that the influence of credit ratings agencies is one of the more extreme forms of this corruption. The power that these unrepresentative swill wield is completely out of proportion. They are unanswerable to anyone, their processes are hidden, if they are corrupt you cannot show it.
    That they are corrupt is beyond question. Non-commission sovereign debt has been rated less than the commission paying toxic sludge they have destroyed our financial system with.
    Yet our sovereign governments remain beholden to these shysters, they need recognized ratings.
    I can only suggest that anyone with any ideas on countering this improper influence contact Larry, http://www.lessig.org/blog/

  7. SJ;

    Re: the press release;

    “Every dollar the NSW Government spends on power stations is a dollar less for spending on essential infrastructure and services like health, education and transport.”

    Since the 1990’s about 30% of the services the public sector provided have been privatised. (utilities, health, education, roads, transport, pensions, etc, etc,etc). We now pay the private sector to provide a large proportion of these services.

    The quandary of privatisation is that since the 1990s, public sector revenues as a proportion of GDP have stayed at over 30%, yet the services that the public sector provide have halved.

    They are not spending it “on essential infrastructure and services like health, education and transport.” as the proportion of GDP the public sector spends on the services has declined markedly.

    Under the guise of privatisations, the public sector has effectively stolen 15% of Australia’s GDP and they are not inclined to give it back or do anything constructive with it.

    In Australia’s case, there is some truth to the saying ‘taxation is theft’.

  8. Tony, your mistake is to believe the NSW Labor Government. (I haven’t read what the Liberals have said to justify their opposition to privatisation, but it cannot be more wrong than what you’ve quoted, and at least they got the answer right)

    It is not true that “Every dollar the NSW Government spends on power stations is a dollar less for spending on essential infrastructure and services like health, education and transport.”

    Money spent on power stations is an income earning investment. If that investment is not made or if assets are sold off, the government loses the corresponding income flow. There is no additional money for general government spending.

    Hence, it is no surprise that large-scale privatisation has not led to any real change in either the services provided by the general government sector or to the tax required to support them.

  9. JQ;

    I am against privatisation, but probably for a different reason than you are.

    You state that;

    “if assets are sold off, the government loses the corresponding income flow”.

    Well, the government have sold off a large proportion of their income producing assets since the early 1990’s (circa Keating), but there has not been a loss of “corresponding income flow”. On top of this the government have received the capital value.

    Taxation and total government revenues have stayed at about 30% of GDP since 1990. see table 27.19

    The income producing assets have been sold off where is ” the corresponding income flow” losses? Taxation and total government revenues are still 30% in 2007.

    The government is increasing taxation by stealth, by not reducing their charges when they no longer provide the service.

    If they continue to rip us off in this fashion, it is better they keep providing the service.

  10. Let me try to state the problem and solution again and see if someone can point out any flaws.

    Money is a promise to exchange it (money) for something of value. The first money was probably created as a token that could be exchanged for some grain. People could now use the token to exchange other goods and services knowing that if they did not want anything else that others were able to exchange they could always go back and get the grain and the token would be destroyed.

    This system works well. The problems arose when we decided that we would create money (a promise) to exchange something on the basis of another promise or debt. When it became promises on top of promises then we have trouble and experience has shown us that it cannot be fixed through regulation. There are just too many ways the system can be manipulated when we have promises made on the back of promises on the back of promises…. We need to change the underlying structure.

    The structural change is to ban the creation of new money on the back of a another promise – or debt. Only allow new money to be created when we have an asset to back the new money. Only allow debt to be created when we have an asset, including money, to back the debt. This breaks the link between money and debt. They are two different sorts of promises and they are no longer linked.

    Banks are trying to get new assets created when they create new money by issuing it backed by debt. They will lend you money – and charge you interest – if you promise to repay by creating an asset of value but they want security if you do not repay. Hence the reason why creating more money through creating more debt is unlikely to work as Gordon Brown hopes, or Kevin Rudd with his stimulus package. The reason is that there are less trusted assets against which to lend money and the assets that are there are already committed.

    However, if you give people zero interest money that must be spent in producing an asset of value greater than the money given then we can create new money without creating debt. The money is notionally lent and will be notionally repaid through the collection of taxes on the profit made on the asset.

    It will be simple to introduce and it can be done quickly – a couple of months can get the system underway – once the decision has been made. To do it effectively the government needs to do it even though it is theoretically possible for anyone to do it – with or without government involvement.

    I believe this is the underlying idea of Islamic banking although it is expressed in a different way as a banning of interest. You only have to ban interest on new money before it is backed by an asset. It does not matter if you pay interest on money that represents a productive asset because that promise can be kept and it is called rent on the underlying asset. So if you have money backed by assets then you do not call it interest you call it rent.

  11. Well, the government have sold off a large proportion of their income producing assets since the early 1990’s (circa Keating), but there has not been a loss of “corresponding income flow”

    Do you really think governments still receiving dividends from Telstra, Commonwealth Bank, privatised electricity companies etc.?

  12. JQ @ 11,
    “Do you really think governments still receiving dividends from Telstra, Commonwealth Bank, privatised electricity companies etc”

    No, but they were “receiving dividends from Telstra, Commonwealth Bank, privatised electricity companies etc”.in 1990 and those revenues were included in the taxation and total government revenues figures which came out at about 30% of GDP in 1990.

    Those income revenues from “receiving dividends from Telstra, Commonwealth Bank, privatised electricity companies etc.” are NOT INCLUDED in the taxation and total government revenues figures for 2007 (as they were privatised), yet the government income is unchanged at about 30% GDP. They are charging us for something they no longer provide and in my book that is theft.
    (see links @ post 9)

    Privatisation is increasing taxation by stealth and the public sector has effectively stolen 15% of Australia’s GDP, because when the assets were sold off, the “government [is not loosing] the corresponding income flow” they are maintaining it.

  13. Gthorpe#6 says
    “Last year Larry Lessig (Professor of Law, Harvard) changed his focus from protecting open source concepts (Linux’s GPL and Creative Commons) towards combating the root of the problem, the power of lobbyists representing rich and powerful minority interest groups.”

    Larry is on to something there Gthorpe. Separate the private sector from the public sector with a clear demarkation line. Firstly we need to fund electoral campaigns with taxpayer funds and ban all political donations everywhere.

    Some claim this isnt fair because it impedes a persons right to express himself politically. This is nonsense. It is fair if it applies to all without unambiguously. Your political expression also appropriately resides in your vote or your volunteered time to assist your chosen party, not your donation.

    Increase the reuneration of those willing to perform high level public or political service under these conditions, to attract individuals with expertise and penalise with the utmost severity any political representative or government official caught with $1 of private sector influence in his pocket.

    Until this happens the instutional embezzlement under regulation that closes its eyes as well as inappropriate government decisions, failure to act on important matters, will just go on and on to our cries of “what on earth is the government doing / thinking? Have they gone completely mad?”.

  14. I have something in common with Ikonoclast. I look back and see typos, missed and swapped letters everywhere. So sorry – Im in a hurry to go and swim in the northern beaches shark pit.

  15. John Says:

    I haven’t read what the Liberals have said to justify their opposition to privatisation…

    It’s a number of things:

    1. Against the public interest (though it’s probably only the Nationals that really believe this part)

    2. NSW Labor will stuff it up (can’t really argue with that)

    3. GFC and ETS mean that now isn’t the right time.

    ABC story from back in August 2008 is here.

  16. 15# SJ

    Bazza saw an opportunity to take Iemma down, plain and simple. It worked and I am onside with that with the ridiculous right wing approach of the dysfunctional NSW State Labor government with their disastrous PPPs and fumblings with a market based approach. To imagine the libs are not opposed to privatisation (of electricity or anything else) at State level is a complete myth. Of course they are but this is politics, not ethics or deep economic intelligence.

    Neither party is yet to hear what the the electorate and nor are they listening.

  17. Raivo Pommer


    Merrill hat nun vor dem obersten Gericht des Staates New York Klage eingereicht. Eric Heaton habe am 3. Februar bei Merrill gekündigt und noch am selben Tag bei der Deutschen Bank angefangen. Er habe damit Konkurrenzschutzklauseln verletzt, erst nach Ablauf eines Jahres hätte er bei einem Wettbewerber beginnen können. Außerdem breche die Deutsche Bank den Schutz von Firmengeheimnissen, Heaton habe Kenntnisse über sensible Informationen wie Kunden und Geldquellen von Merrill Lynch. Die Bank will nach Angaben ihres Anwalts 100 Millionen Dollar Schadenersatz.

    Die Deutsche Bank wollte sich zu dem Streit nicht äußern. Aus ihrer Abwerbestrategie macht sie allerdings keinen Hehl. Bei der Bilanzpressekonferenz Anfang Februar hatte Vorstandschef Josef Ackermann angekündigt, die Bank wolle die Krise nutzen, um Talente von schwächeren Konkurrenten zu locken. Er deutete damals an, er könne sich vorstellen, dass vor allem Mitarbeiter von Banken unter Staatseinfluss gerne zu einem Institut wechseln, das frei von politischen Einflüssen sei. Die amerikanische Regierung hat die Bank of America, die Merrill Lynch im Herbst übernommen hatte, mit 25 Milliarden Dollar gestützt. In Bankenkreisen heißt es, angeschlagene Häuser wie Merrill wehrten sich auch deswegen so aggressiv gegen Abwerbeversuche, weil sie fürchteten, dadurch weiter geschwächt zu werden.

  18. For those like me who dont read German Ill translate the prior post at 17

    Merrill is now before the Supreme Court of the State of New York complaint. Eric Heaton was on 3 February in the case of Merrill and terminated on the same day with Deutsche Bank started. He had thus violated competition safeguards, until after the expiration of one year if he had a competitor can begin. Furthermore, Deutsche Bank interrupting the protection of company secrets, Heaton had knowledge of sensitive information such as customers and sources of money from Merrill Lynch. The bank wants its lawyer, according to 100 million U.S. dollars for damages.

    Deutsche Bank wanted to submit the dispute is not resolved. From their Abwerbestrategie however, makes it no secret. At the annual press conference in early February, chief executive Josef Ackermann announced that the bank would use the crisis to talent from weaker competitors to lure. He indicated then that he could imagine that, especially employees of state banks under the influence will be happy to change an institution that is free from political influences is. The U.S. government, the Bank of America, Merrill Lynch, which took over in autumn, with 25 billion U.S. dollars based. In banking circles it is called, houses such as Merrill posted fought back so well so aggressively against Abwerbeversuche because they feared further weakened them.

  19. I was thinking about writing about financial risk management to clear up issues relating to the GFC but I want to talk about epistemological arrogance.

    No one knows all the facts about finance, economics, energy policy etc. No one has a repository of all the knowledge in the world. No one is all-seeing, all-knowing but for some reason, people believe that the Government or the banks or the regulators are all-knowing and all-seeing. This trust that the general public place in them is because of their arrogance in conveying this. Take Kevin Rudd. His arrogance is massive, believing that it is either his way on everything or the alternative is to do nothing. But he somehow believes that despite his and his advisors lack of experience in finance, banking, or corporate management; only they have the knowledge to fix things up today and keep them fixed for the future.

    One of the most interesting insights from Alan Greenspan’s book “Age of Turbulance” is when he visited the crumbling edifice of Soviet Russia. He wrote (pg 128):

    “At the pinnacle sat Gosplan – which, as one analyst memorably put it, dictated “the type, quantity, and price of every commodity produced at every single factory and plant across 11 time zones.”

    While Kevin Rudd does not want us to turn into communist russia, why does he think that he and he alone have the ability to determine executive salaries? Why does his party believe that they can set specific awards as determined by the unions under new industrial legislation? This arrogance in believing that they can manage the nation will only lead to inefficiencies being built into the national economy and will result in the productive and competitive sector subsidising the unproductive and uncompetitive sector. This is not good for Australia.

    Why is it that Labor and the Greens, indeed, any party that espouses grand visions and five or ten year plans believe that society will suddenly change according to plan?

    It is arrogant to believe that the Government has an unrestrained knowledge and power to direct resources for the “public good”. Or that they can direct individuals and communities to change their behaviour to fit a government programme.

  20. This is what I wanted to write about the GFC.

    There is a large misunderstanding about the underlying causes of the GFC and the widespread use of financia products. This has been caused partly by our desire to find a culprit and partly because journalists do not understand finance.

    Financial instruments are used to diversify and reduce risk to individuals or institutions. The first recorded “future” was in classical greece and aimed to secure future price of grain. Financial instruments have been traded and exchanges have been set up.

    A bank or financial institution can deepen the risk that they take and then diversify this to other firms. Much like an insurance company insuring an individual and then reinsuring over certain components of that loss. This worked initially. Some institutions had a lot of risk, but diversified it enough to reduce the change of collapse but not enough to bring the system down. In effect, the risk to the system was spread around and “thin”.

    Over the past 10 years, financial companies have decided to “diversify” risk by using an assortment of financial products beyond the plain vanilla products of forwards, futures and options. However, when the company reduced their risk exposure (or so they thought), they deepened it by taking on more risk from higher lending. More diversification and more lending leading to a symmetrical increase in risk. The system could not longer support the collapse of a bank because risk went from being “thin” across the system to “thick”.

    This is where the subprime mess comes into effect. The subprime underwriters Fannie and Freddie reduced the risk to the mortgage lender of these mortgages from blowing up. Fannie, Freddie and the mortgage lender then passed part the risk onto someone else. Other institutions thought “Fannie and Freddie are government protected, we’ll take this because it is lower risk”. Fannie and Freddie were extremely successful in off loading some of their risk onto others and the amount of subprime borrowing exploded. Approximately 50% of all subprime lending was done in 2006 and the total amount of subprime mortgages issued were $1.2 trillion.

    Because of the deepening of risk, the assumption that Freddie and Fannie were safe because of the US Government guarantees and because institutions thought that they had diversified risk, when the mortgage market collapsed the effect was doubly catastrophic… we are seeing it’s effect today.

    One thing that has struck me is that people thought that the banker were being irresponsibe by going into these products. Some were horrifically constructed (I’ll put an example up later on) but the reasoning behind it was not greed or bonuses, but rather to reduce the risk to clients and shareholders. Further, the Government in the United States wanted votes, provided a guarantee to Fannie and Freddie and helped cause some of the chaos.

  21. Sean G, you have described how the financial system was able to collapse, but not the ‘underlying causes’.

    You have helped to show how fragile the whole system was, how poorly constructed, and I have my own ideas on the role of greed in this sloppy construction or house of cards or bubble, but it was high oil prices which pricked the bubble or nudged the house of cards and sent it all tumbling down.

  22. The underlying cause is the deepening of risk within the system. The system can take on speculation and periodic crisis and not faulter on the scale that we have seen since Lehman’s have collapsed.

    Let me put it this way. Why were banks able to lend so much money when their capital requirements are meant to be 8%? Because they could diversify risk by selling a chunk of their assets (loans to customers) to others. Multiply that many times over and you start seeing a bank as a factory that converts loans to customers to products to sell.

    It also meant that banks did not have to fight for depositors, did not need branches to reach out to customers and this helped to exacerbate societies borrowing glut.

  23. I will put some bones onto the issue of spreading risk. In the eary 2000s when we had a massive crash in the financial markets we did not see anything like the problems today. The risk was spread thinly rather than deeply.

    Take Credit Default Swaps which are an insurance product over another derivative. This means that if Bank A had a derivative that blew up then Bank B would pay Bank A insurance for that product. It is insurance.

    Well in the early 2000s there were about $2 trillion nominal CDS. So once netted the losses would be lower of course and considering that these were across multiple banks and products the damage to an individual bank was mitigate.

    In 2008 there were $61 trillion nominal CDS contracts. That is what I mean by a symmetrical deepening of risk. When a financial product blows up (subprime CDO) then the impact is far larger for the entire market than before.

  24. SeanG, according to your description, there wasn’t anybody among the so-called experts in the big end of town of the financial world who wasn’t totally confused. Talking about arrogance associated with the acknowledged problem of centralised decision making, surely these people, together with the rating agencies are winning out in a big way.

  25. The financial collapse comes from the way we expand the money supply.

    Currently we expand the money supply by creating money first then the assets to back them.

    The solution is to create the assets first then expand the money supply by the value of the assets we have created.

    In my previous comments I have outlined the mechanism to achieve this.

    The reason it will solve the GFC is that it will make money retain its value and make money markets stable and predictable. Each country can do it unilaterally without harming any other country.

  26. I thought that it would be a good idea to introduce a regular feature to this regular feature. A weekly population overload horror story. Today’s post draws attention to the likely prospect that Melbourne’s major arterial roads will soon be converted into parking lots as our population starts nudging five million.

    Here is the Age covering a report which lays out the looming horrors awaiting unsuspecting Victorian motorists. Not to mention ecologists who might hope for a greener, more pleasant urban highways and byways:

    AUSTRALIA is facing a looming transport crisis with highways and arterial roads set to be choked with thousands of extra cars, trucks, buses and motorcycles.

    In an alarming scenario after decades of under-investment, government research given to The Sunday Age suggests Australia’s addiction to cars and trucks will soar in the absence of massive new investment to modernise transport networks.

    The report by the federally funded Bureau of Infrastructure, Transport and Regional Economics predicts Australians will be driving 55.8 billion kilometres a year on the non-urban part of the national road network by 2030 — 50 per cent further than now, and a distance equivalent to 186 round trips to the sun.

    It follows growing concern about congestion in Melbourne after booming population growth.

    We can add road traffic queues to our other list of queues in call centres, schools, hospitals, car-parks, day-care centres, public transport, affordable metro housing.

    You know, all the little stuff that go to make up the fabric of every day life. Slowly being torn to shreds by the colossal weight of massive un-catered for population growth.

    Pales into insignificance I know, compared to the latest violation of ME cease-fire or Bush’s unauthorised wire-tap or some such outrage du’jour.

    I know I bang on about this endlessly – its one of my many idee fixee [sic], according to one unkind critic. But it seems worthy to mention given that liberals of all parties are determined to re-make the country according to the “debtquity, diversity and density” program.

    Happy trails, pardners!

  27. Ernestine Gross @ 12.47 – “SeanG, according to your description, there wasn’t anybody among the so-called experts in the big end of town of the financial world who wasn’t totally confused. Talking about arrogance associated with the acknowledged problem of centralised decision making, surely these people, together with the rating agencies are winning out in a big way.”

    At this moment they are losing in a big way. Job losses are rife amongst banks, hedge funds and rating agencies. The damage caused has been so large that they ain’t arrogant no more!

  28. Yes, SeanG, the arrogance may be less obvious (not for S&P, IMHO), but the damage is left. We call this a monetary externality. In particular, there are many people in the so-called global economy (ie outside the US) whose savings (in the macro-economic sense) have been squandered. I don’t know any finance industry person who hasn’t moved his or her personal portfolio into cash before Christmas 2007 – of course I don’t know them all. The wealth redistribution effect is non-negligible, to put it mildly.

    “Awfull”, Her Majesty, Queen Elizabeth II, is reported to have said when being told No, in answer to her question: Hasn’t anybody noticed?. No additional words are required.

  29. Why I am contesting the Queensland state elections as an independent

    Long-time environmental and anti-privatisation activist James Sinnamon who, stood for Lord Mayor of Brisbane in 2008, explains why he is standing as an independent candidate against Queensland State Treasurer, Andrew Fraser, what he hopes to achieve and how you can help.

    Contents: End privatisation – stop the liquidation of Queensland, End Queensland Government encouragement of population growth, Demand action against homelessness and housing unaffordability, Labor’s coal exports – a crime against this and future generations of humanity, Why a vote for me is not be a wasted vote, To intending Labor voters:, To intending Green voters:, To intending Liberal National Party voters:, What you can do.

  30. Ernestine Gross @ 8.53pm – yes, those who have saved have been basically hammered into oblivion.

  31. The Rudd govt is trying to get indigenous leaders to agree on a replacement for ATSIC. I’d say the whole self-determination model is wrong in principle. But I only go by evidence, rather than eternally springing hope. A real political party pooper.

    It seems my skepticism is shared in an unlikely quarter. Ms O’Donoghue socked it too “stunned indigenous leaders” behind closed doors in a way that would do credit to a long-winded Strocchi comment rant:

    FORMER ATSIC chief Lowitja O’Donoghue has unleashed a furious attack on the disbanded body, claiming its male leaders were preoccupied with drinking, gambling and womanising.

    At a closed-door meeting in Adelaide yesterday, where indigenous leaders were hammering out how the successor to the Aboriginal and Torres Strait Islander Commission should be constituted, Ms O’Donoghue said the organisation she headed for six years in the 1990s “supported the greedy, not the needy”.

    “I am sick and tired of going to conferences and forums where gambling becomes the priority,” she told stunned indigenous leaders, who were meeting to consider models for the new indigenous representative body promised by the Rudd Government.

    “In the afternoons there are empty seats all around the room because too many people are off gambling on horse races or poker machines,” she said.

    “I don’t believe in a democratically elected representative body for indigenous people. It doesn’t work because of nepotism.

    It seems that even former chiefs of ATSIC share my idee fixee regarding the political deformities of cultural liberalism. If Pauline Hanson had said something a fraction as incendiary as that, why she would have been expelled from the LP. Oh, wait a minute…

    How the worm has turned.

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