103 thoughts on “Sandpit

  1. @sdfc

    Their major problem is one of competitiveness in that real wages are too high. There are two ways of lowering real wages. Lowering nominal or money wages (deflation) or lowering real wages via inflation.

    This is the classic race to the bottom. Lowering wages, lowers final consumption expenditures. This destroys the circular flow.

    The major problem is that profit expectations are too high.

  2. @Ernestine Gross

    I am not a great fan of “labelling” but I believe that “Monetary Economics: An Integrated Approach to Credit, Money, Income, Production and Wealth”, Wynne Godley and Marc Lavoie, 2007. Palgrave MacMillan is not inconsistent with MMT. Stock-flow consistent dynamic models are obviously based on different assumption than mainstream equilibrium models (or rather certain mainstream assumptions have been rejected as incorrect).

    There are also other models which can be clearly put in the Kaleckian tradition. The recent paper written by W. Mitchell and J. Muysken for the CofFEE conference describing the processes leading to GFC can be probably put in that category.

    I don’t think that MMT is an entirely new school of economics, these ideas have been around for a while especially among the intellectual successors of J.M. Keynes, M. Kalecki and H. Minsky.

    The creative part is combining these ideas together, repackaging them and presenting them in such a way that they became quite attractive for non-economists. There are quite a few engineers and other professionals trying to make sense of what is going on around us in the economy and the MMT ideas are gaining traction.

  3. @Adam (ak)
    “The creative part is combining these ideas together, repackaging them and presenting them in such a way that they became quite attractive for non-economists. There are quite a few engineers and other professionals trying to make sense of what is going on around us in the economy and the MMT ideas are gaining traction.”

    Which pretty much explains the position I’m in. However, I’m tending to be pessimistic on seeing a useful model developed to capture most of what is happening. There appears to be an old economy and a new economy, fixed (tied) and floating & even manipulated currencies, more and less regulated systems and exchanges. There appears to be an awful lot of debt in the old economy’s financial systems which is producing outcomes which I assume would be very challenging to model accurately. Large institutions are failing but some are considered too large to fail often producing these ad hoc unconventional accounting practices in an attempt to bail out. We appear to be seeing such unconventional accountancy methods adopted more frequently as credit & funds are hard to come by.

  4. @Julie Thomas

    Hi Julie – nice to see a little intuition at work!

    I would express “the solution for the problem of ego” as already solved: when the last breath arrives ego is broken like a pencil; mind deflates like a balloon!

    There is a human side to us that seeks perfection and harmony, justice and Love, freedom – fulfillment. It is, I believe, the engine that drives the world.

    There is also something within us that is already in touch with the energy that is the source of all of these. It’s a matter of feeling – not thought.

    When we were kids we knew how to ‘feel’, and one of the things we felt was freedom. Then we went to school to be told everything is only grasped through the mind …. so,

    Only the human heart can feel free – hope that makes sense! Mind and ego are forever restless and can never be fulfilled, by nature.

    When the heart is given governance, then slowly, slowly, slowly, one can learn to use the mind as a tool without the tool controlling. Until that happens, chaos persists!

    In peoples minds, there are so many formulas (concepts) about what freedom actually is – “a few golden balls are rolled through the world and most (wo)men chase them … “[Krishnamurti].

    Maximising group and individual outcomes is a sensible and practical thing – as part of a whole. People have always desired peace and certainty – to my mind, so that they can find time to look within?

    Cheers …
    jrbarch

  5. Ken Fabos, the carbon tax will increase the cost of producing electricity from coal more than it will increase the cost of generating electricity from any other source. Personally I think this will result in Australia using less coal. I guess I could be wrong about this. I have been wrong about things before. Maybe electricity producers are into rebellion and the tax will just want to make them burn more coal.

    “Hey, electricty industry, what are you rebelling against?”

    “What’ve ya got? And icecaps.”

  6. Can Australia take twelve more months of listening to Tony Abbott? Toxic Tony really is turning out to be the one trick pony.

  7. @Abhoth the Unclean

    The best of all possible worlds might now happen given that Toxic Tony has not given his side a conscience vote, that is, if those on the coalition side decide individually to exercise their consciences anyway. I’ve never understood and never heard clearly articulated what ‘traditional marriage’ is being defended against? What exactly is the threat? Why should anyone care who someone else marries? What, other than simple-minded bigotry, is the source of the upset?

  8. @Ernestine Gross

    Thanks for passing on those bits of info.

    Your faith in EU decision makers however is not very convincing. Having a common currency zone, but no common government that exercises fiscal policy is simply bad economics. It’s got nothing to do with nationalism. If the EU to move forward to help its citizens, while also saving the Euro, suggested centralising government and collected taxes and made spending decisions from the EU commission, that would make sense in terms of economics – it would essentially be a federation of European countries. I understand that it is not a political reality, far from it.

    ‘Fiscal Union’ as has just been proposed is not close it. There is more to fiscal policy than balancing the budget.

    Re argentina, i did not bring it up as a comparison.

    If you only have time for mathematically rigorous econ, read Steve Keen. He has worked on simple dynamic models of Minsky’s Financial Instability Hypothesis, a key component of which is endogenous money creation. He’s also written a paper, the circuit theory of endogenous money, though he doesn’t include the government sector in this analysis.

  9. @adit

    The US has fifty states each of which collect their own taxes and operate their own independent fiscal policy. The same is true in many other federal systems. Not perfect, true, but certainly not as rapidly fatal as some seem to suggest. The Euro zone’s major problem is as JQ suggests, the ECB’s failure to use the tools at its disposal.

  10. @adit

    There seems to be some confusion going round over endogenous money. Under an interest rate instrument, the money supply is determined by the non-bank private sectors desired level of deposits and currency. If banks try to endogenously create more money than people want to hold, this creates downward pressure on the official cash rate and results in the central bank removing the excess cash from circulation in order to maintain the official cash rate at the desired level.

    The only way that the banking sector can create money on its own is by manipulating the margins between different interest rates (eg the official cash rate and the mortgage rate), which results in changes in non bank private sector money demand both directly and indorectly through its effect on aggregate income.

  11. @Freelander

    Obama tried large grants to the states as part of his stimulus package, but by in large the states used the money to reduce their indebtedness.

  12. @Tim Peterson

    Yes it is all true, but I would like to clarify the term “money”:

    1. “money” in the comment is used in the sense “monetary base” that is mainly bank reserves (cash held by the people also falls into this category). Banks can endogenously create monetary deposits when they extend loans. It is that deposit money (accounted for in M1 and other aggregates) what we (private sector agents) actually earn and spend. The size of the stock of MB has very little impact on anything in the economy (contrary to what the monetarists claim). But the statement in the comment is obviously 100% true.

    2. If the central bank pays interests on excess bank reserves then these excess reserves do not cause any downward pressure on the cash interest rate. This is currently the case in Australia (I provided links in the previous sandpit). This means that there is no need to remove excess cash by selling bonds (this is according to Warren Mosler the true operational reason for issuing bonds – the interest rate maintenance). So as long as RBA pays interests on excess bank reserves, financing budget deficit by currency emission (balanced by a Treasury’s overdraft at RBA) is not more inflationary than financing budget deficit by selling bonds. The only difference is that the prices of existing bonds change in time so that they can be used for speculation and hedging while central bank reserves have constant principal value. The bond yield curve is not a straight flat line, only the near end is anchored at the cash rate.

  13. jrbach lol I don’t want anyone to think I was using intuition! Are we allowed to use this way of ‘being-in-the-world’ yet, so I’m more inclined to blame my education in psychology and my personal interest in philosophy for my worldview.

    I am impressed with the ‘wisdom of the ages’ and in particular eastern wisdom, mainly because they weren’t monotheists; but I want there to be some ‘scientific’ basis for the wisdom before I act as it is was true.

    You say “I would express “the solution for the problem of ego” as already solved: when the last breath arrives ego is broken like a pencil; mind deflates like a balloon!” But can’t we do something about the dysfunctional ego before we die?

    Freedom from ego, like all freedoms, is probably something that one earns or learns. It seems to me that no political, economic and/or social system can give us freedom, but these systems should provide security and safety, so that we can learn to be free.

  14. I read the following paragraph in that latest review of John’s book that was mentioned earlier. Not able to critique his critique on economic grounds but there are things I thought didn’t make much sense and were just ‘silly’.

    But this paragraph on p. 8 was a doozy of silliness, I thought.

    “Irrationality is the great copout, and simply represents a failure of imagination.
    Rationality is so weak a requirement that the set of potential explanations
    for a particular phenomenon that incorporate rationality is boundless. If the
    phenomenon can be described, and we can find some regularity in it, then it
    can also be described as the outcome of rational behavior. Behavior looks
    random only when one does not have a theory to make sense of it, and explaining
    it as the result of rational behavior is literally what we mean by “making
    sense of what we are seeing.” If we are accustomed to observing people who
    do not have schizophrenia, we might describe a schizophrenic as “irrational,”
    but for a trained psychiatrist, a schizophrenic behaves in predictable ways. The
    schizophrenic has his or her own rationality, and hard work by scientists in the
    field of psychiatry has taught us how to intervene in the lives of people with
    this mental illness to make them better off.”

    What a load of rubbish. Don’t people in economics have to provide references for claims such as this?

    I’m not sure that there would be any real context in which a ‘trained psychiatrist’ would refer to a schizophrenic as ‘irrational’. The term is judgemental and provides nothing related to diagnosis or treatment, so a psychiatrist – trained or not – but are there untrained psychiatrists -would not use it, except perhaps when talking off the record to an economist friend?

    The whole paragraph, it seemed to me, is indicative of a desperate attempt to use pseudo-psychology to refute a point that is irrefutable.

  15. @Tim Peterson

    Yes. Analysis showed that the states efforts at fixing their balance sheets pretty well offset Obama’s stimulus efforts which resulted in an approximately zero net impact. Of course, without the Obama stimulus the states would have cutback even more savagely and would have had even worse balance sheets so the outcome would have been considerably worse. Fiscal coordination is sensible. Australia has the advantage of vertical fiscal imbalance with the states so poor they are under the thumb of the Commonwealth. Unfortunately they are not entirely powerless.

  16. @Julie Thomas

    Like a lot of terms, ‘rationality’ can be used for ‘bait and switch’. There are very strong versions of rationality where very strong norms of behaviour are at least implicit. But, when those who make strong use of easily refutable notions of rationality are criticized, they will, under attack, quickly switch and back pedal to defend a version of rationality so weak that no behaviour evades explanation as rational. Of course, the ‘rational’ explanations then, can only be provided ex post. In other words, the rational explanation ceases to be an explanation, having no refutable implications at all.

  17. Yes, the two-step of terrific triviality in this instance:

    People are infinitely farsighted with infinite computational power or whatever people do is rational, in the sense that they’re doing it, and people do what they think will maximise their utility.

    Whichever is useful at a particular instant.

  18. @Adam (ak)

    Shure: under a central bank interest rate instrument the reserves component of monetary base is whatever banks want to hold, above the legal requirement for bank reserves. Banks can create depsoits that are included in monetary aggregates by lending these reserves, but if the non-bank private sector doesn’t want to hold the additional money it will vanish.

    But just because reserves pay interest does not mean that banks demand for them is infinitely elastic when the official cash rate is above the rate of interest payed on the reserves. Dropping the cash rate target and injecting monetary base into the system while holding the interest rate on reserves constant would push the cash rate down to the rate on reserves. Then what you said would be true, unless banks dropped the interest rate on deposits, in which case the monetary impulse would continue to have a positive effect on asset prices even with the cash rate equal to the interest rate on reserves.

    Banks might also be tempted to loan out the excess reserves until the spread from the loan rates to the reserve rates fell to a low level.

    Eventually, what you say would be true: we would be in a liquidity trap with positive interest rates. But only after a significant of the new monetary base had its effect on asset prices, demand etc.

  19. Chris Warren :@sdfc

    This is the classic race to the bottom. Lowering wages, lowers final consumption expenditures. This destroys the circular flow.

    The major problem is that profit expectations are too high.

    High real wages clearly lower employment. It is an issue of competitiveness.
    Profit expectations drive investment and employment. Falling profit expectations put downward pressure on employment. Why you would believe otherwise is beyond me.

    I think you are confusing real and nominal wages.

  20. I’m still hoping that all you clever people will discuss the issue of the US Base.

    eg: some might think that it is treason to invite a foreign force onto out lands (and some might think it’s a really great idea).

    or: Some might think forward to a day when a GOP leader far more hawkish than GW gains the Presidency with a R Congress behind him. Such a one might seriously consider playing a game of big war games against China using the only place in the world that might seriously be considered the “perfect” battleground where nukes could be used – Australia.

    There appears to have been no debate, zilch, zip, nadda.

    Or is it too scary a subject?

    Or is everyone who reads this blog a died-in-the-wool Asian hater?

    Or does everyone seriously love the USA?

    pop

  21. @Freelander
    Tony is obviously obeying Leviticus 18:22 which clearly states same sex relationships to be an abomination as is the eating of shellfish(Lev. 11:10) We will need the shadow cabinet to decide which is the worse. We really need to also consider Exodus 21:7 which sanctions selling your daughter into slavery. Tony would probably encourage his party to allow a price to be set by the free market. Other conservative policy would sanction the owning of slaves so long as they are from neighbouring countries (New Zealanders would probably be ok but I am not sure about South Australians – Lev. 25:44), the putting to death of those who work on the Sabbath (Exodus 35:2) It goes on and on of course but one must have some consistency.

  22. @Abhoth the Unclean

    Maybe Toxic Tony is getting his instructions from George Pell. But even if same sex relationships are an abomination that by itself doesn’t seem to necessitate barring them from marring (each other).

    @The Peak Oil Poet

    I’m none to happy that Australia has been dragged into Obama’s attempt at reviving the Cold War, this time, with China as the principal baddie. I certainly don’t like them having a base here. But they have bases everywhere. Ultimately they run a great risk of doing what the Soviet empire did to itself – collapsing due to crippling expenditure on ‘defence’.

  23. @Ronald Brak
    Ronald, I think carbon pricing is essential but one that’s set at a level that won’t upset the coal industry too much – and I think that is the case with the current case – can only work if it’s followed by steep increases. Even the fall back position – go to gas for domestic consumption – seems to take as given that export coal continues unaffected. The Mining Council position is that they’ll oppose anything except all encompassing global agreements – a sort of reworking of Zeno’s paradox except in this version Archilles really never can pass the tortoise. Take as given they and their international allies will be working to prevent such a global agreement – not that it will be that hard.

    Maybe the one thing that will have an impact is the flow of carbon pricing dollars to R&D and subsidies to get some seeds sown. And the continuing remarkable progress of technologies like PV can I hope shift the balance.

    But, then we get the efforts of Deniers aka such devoted supporters of the Fossil Fuels that they’ll deny reality to defend it, Deniers like O’Farrell who wants to lay blame for rising energy prices on Greenies and Solar whilst simply disbelieving into non-existence the costs and consequences of unmitigated climate change. His threat/promise/payback for forced backdown on existing Feed in Tariffs – instituting a ‘Solar surcharge’ on everyone’s power bills to engender envy and resentment of ‘rich green yuppies’ whilst failing to mention the biggest installations were Schools, Councils, Community centres etc is very revealling of just how deeply compromised by the fossil fuel influence the Right has become.

    Domestic household PV as an ongoing thing is already dead in NSW. Should we have expected first attempts to integrate PV into building to deliver fabulous results from day one or recognise it’s the test case and learning experience that leads to more serious and better run schemes?

    It seems like the spoilers will do their best to compromise whatever policy gets put up and immediately follow up with complaints that it’s compromised and therefore it’s best to do nothing at all.

    There is criticism in order to achieve better results and there is criticism in order to prevent achieving any results at all. Not much doubt in my mind which form the Right in Australia is engaged in.

  24. @Tim Peterson

    It is true that if excess reserves are present in the banking system the overnight cash rate will stabilize at the lower bound determined by the excess reserve rate. In Australia that rate is 0.25% below the advertised cash rate. This may of course affect the deposit and credit rates as the costs of funding bank deposits would change. RBA can however adjust the rates in such a way that the final outcome of the monetary policy in a system without bonds will be equivalent to the outcome achieved when bonds are issued.

    The reason I am writing this comment is because I am not convinced that the following statements correctly describe the lending process: “banks can create deposits that are included in monetary aggregates by lending these reserves” and “banks might also be tempted to loan out the excess reserves until the spread from the loan rates to the reserve rates fell to a low level”.

    It is true that one can borrow cash from a bank (for example by withdrawing money using an ATM from a credit account) but these operations are not very common and tend to net out to zero over time as someone else will deposit cash to the same or another bank. The same applies to taking a loan from bank A to pay someone who has an account in bank B. We can describe these cash flow processes in terms of a stochastic process (a so-called random walk) which has expected value equal to zero but a non-zero probability of reaching or exceeding a given non-zero position (the probability increasing in time). I can provide references on request. If undesired net cash flow occurs a bank can undertake corrective steps by manipulating its interest rates.

    The only operations related to credit money creation/destruction which are atomic transactions in the database sense occur when a loan is extended/extinguished – both the deposit and loan accounts are incremented/decremented by the same amount at the same time. I can provide an example if required. These transactions alter the quantity of M1 held by the private agents. These transactions do not involve bank reserves. It is therefore not true that banks lend reserves. I am not addressing the issues of constraints on lending what involves bank capital and the valuation of real assets used as loan securities.

    Some transactions such as extending a mortgage loan and paying for a purchase of a house may be aggregated together so that bank risk is attenuated.

    Withdrawing money from a deposit account or transfer of money either to another account in the same bank or to an account in another bank can also be considered as separate atomic transactions. Only internal money transfers within the same bank do not alter the reserve position of the bank and the position of the bank against other banks. Bank reserves may be involved in other operations and as a consequence the reserve position may change. In that sense a bank need to have a reserve position and access to reserves in order to perform its functions. The reserve position of the banking sector as a whole can only be altered by the “vertical” transactions with the reserve bank or the Treasury.

    What needs to be emphasized is that a bank extending a loan creates ex nihilo new spending power (credit money), contributing to aggregate demand (the opposite process happens during debt deflation). Nobody takes a loan just to have more money due to the spread between the deposit and credit interest rates. Deposits created when loans are extended are spent contributing to aggregate demand.

    It is not true that banks simply allow for recycling savings as investment/consumer credit by lending out reserves as assumed in the money multiplier model. Loans create deposits and new deposits are spent contributing either to investment or consumption and investment leads to saving. Obviously investment can also be financed directly on equity markets. Quantitative macroeconomic models based on the principles stated above can be found in papers written by Kazimierz Laski and the WIIW school or (in the stock-flow consistent form based on balance sheets) by Wynne Godley.

    There are far reaching macroeconomic consequences of the statements that loans create deposits and banks do not lend reserves.

    This description of the lending process provided above directly contradicts the loanable funds market theory where it is assumed that pre-exiting monetary tokens are lent on interest to finance investment. Monetary tokens (M1) are not pre-existing but created (and destroyed) on demand. The causation does not go from the changes in the quantity of MB.

    This is what Bill Mitchell wrote:
    ” Loans are not funded by reserves balances nor are deposits required to add to reserves before a bank can lend. This does not deny that banks still require funds in order to operate. They still need to ensure they have reserves. It just means that they do not need reserves before they lend. Private banks still need to “fund” their loan book.”

    What I wrote above means that the IS-LM model is invalid and that there is no such thing as “liquidity trap” (but there is instead a debt deflation phenomenon caused by the disappearing flow of money – net repayment of loans). Paul Krugman’s model of a recession involving patient and impatient agents (but no banking sector) is also deeply flawed – even if under certain circumstances it leads to similar results as Kaleckian / Post-Keynesian models.

    All the macroeconomic models which rely on equilibrating of saving and investment on the funds market are fundamentally flawed. I am aware of the devastating consequences of this statement – the most of the mainstream macroeconomics is just pseudo-science, what is patently obvious to anyone who watched the GFC including its second phase and the leading economists wriggling like earthworms exposed to sun. These are elementary, econ-101 issues.

    The banking sector is at the heart of our monetary system and its functioning has real impact on the rest of the economy. We can ignore it at our own peril. The problem is not only related to malfunctioning of the banks, incorrect risk assessment and fraud but to the systemic design of the whole monetary system where the private debt could have risen to unsustainable levels and very few saw it as a problem.

    Until the mainstream economist (also the Neo-Keynesians) purge their minds from thinking in terms of the loanable funds theory very little progress may happen in terms of altering policy recommendations. We are stuck in the ruts of pre-1930ies thinking no matter how “progressive” these economists pretend to be.

    References:
    M. Kalecki “Theory of Economic Dynamics” p. 50, 73
    winterspeak blog “Banks are even more super than I thought”
    Bill Mitchell’s blog “The role of bank deposits in Modern Monetary Theory”

    Yes I know I am sticking my neck out on this forum but what I wrote is I think the core issue. If we don’t understand endogenous money it is all waste of time.

  25. @Adam (ak)

    You are quite correct that under endogenous money, banks loan/create money first then acquire reserves later. If the central bank was strictly targetting monetary base (like the Swiss CB in the 70s/80s) then it would function much more like the money mutliplier (with scope for additional credit being funded by, eg, selling mortgage backed securities and other securities on the banks balance sheet). This is a case of the Lucas critique: when policy changes, ‘shallow’ parameters change too.

    Note that these operations with securities change the money supply just like lending/repayment, and drive a wedge between money and credit growth.

    If a bank lends money to the non-bank private sector, funded by deposit creation, and the NBPS wants to hold 3 month treasury bills instead of money, then insipient downward pressure on interest rates would cause the central bank to remove this money from circulation.

    If the loan is spend on goods that are part of GDP, it will boost money demand by k/v, where k is the multiplier and v is the income velocity of circulation. This should be less than one, so some of the money created will reflux back out of the system.

  26. @Adam (ak)

    Also, banks lend reserves if the government creates more monetary base than they want to hold via monetized fiscal policy. In the first instance they lend it out in the official cash market. This lowers the interest rate on inter bank loans and leads to banks wanting to lend more to their customers, and at lower interest rates.

  27. @Freelander
    This all about power and control. If you let them marry you have to treat them as normal humans and people like tony have to have someone to be better than. Conservatives have to have over and under classes. someone to feel superior to and of course to do the heavy lifting. Gays and lesbians have to be put in their place and they have to know they have been put.

  28. Ken, here in South Australia the coal plants are scheduled to be shutdown and the coal deposits that fuled them are stranded – it’s not worth it to dig it up and export it anywhere else. Now those coal plants probably wouldn’t have been used here for too much longer as electricty from a new coal plant probably wouldn’t have been competitive as SA coal is very low quality, but I think it is fair to say that the carbon price has cut coal use here. Also, a lot of Victoria’s brown coal power plants are now scheduled to be shut down as a result of the carbon price, and that represents a large chunk of domestic coal use. Elsewhere in Australia a lot of electricity is generated from coal that has a marginal cost to the power plant of about $3 a tonne. This will go up to about $70 a tonne with the carbon price. While this isn’t enough to result in the shutting down of coal plants in good operating condition, it is enough to prevent any new coal plants being built. So while the carbon price is not high enough to eliminate domestic coal use in the short term, it is high enough to end it in the long term. As for the pricing not upsetting the coal industry much, well, some members appear to be both whining about a carbon price while at the same time laughing all the way to the bank. It’s a really terrible noise.

  29. William K Black fills in some blanks left by John Quiggin over at OWS: Occupied Media: Interview With Professor William K. Black

    So, this video took far too long to post due to technical difficulties (and we ultimately ended up posted without video). However, the content is amazing. The interview is with esteemed law professor Bill Black who has been a tireless advocate for reform of the financial system and prosecution of the system fraud that brought our economy to its knees. The title of his book really says it all: The Best Way to Rob a Bank is to Own One.

  30. Another day, another asylum seeker boat goes to Davy Jones locker. A huge spike in boat arrivals since the confederacy of dunces (High Court, Greens, liberal media-academia complex) succeeded in blocking a regional off-shore processing solution. All predictable, I’ve predicted how extreme liberalism leads to disaster since the early noughties.

    Obviously this vindicates the evil black-hearted reactionaries (Howard and his part-time synchophants like me) who were in favour of tough and effective border protection. But honestly I would prefer other less blood-thirsty ways of boosting my intellectual ego.

    Can we please just all agree that Left-liberals are “the kindest, bravest, warmest, most wonderful human beings we’ve ever known” but unfortunately have made a technical error which disqualifies them from making policy in this area. Then we can get back to adult supervision of citizenship policy, with less people smuggling and less people drowning.

  31. To make it pellucid clear, what I am after from Left-liberals, at least on this issue, is the humble utterance of that sobering three word phrase:
    “I was wrong”. [Pr Q, Fran, Gerard, I am looking at you all]

  32. @jrbarch

    Great piece.

    This from Dr. Krugman in an earlier piece cullen roche references is relevant for the discussions earlier.

    ““What has happened, it turns out, is that by going on the euro, Spain and Italy in effect reduced themselves to the status of third-world countries that have to borrow in someone else’s currency, with all the loss of flexibility that implies. In particular, since euro-area countries can’t print money even in an emergency, they’re subject to funding disruptions in a way that nations that kept their own currencies aren’t — and the result is what you see right now. America, which borrows in dollars, doesn’t have that problem.

    The other thing you need to know is that in the face of the current crisis, austerity has been a failure everywhere it has been tried: no country with significant debts has managed to slash its way back into the good graces of the financial markets. For example, Ireland is the good boy of Europe, having responded to its debt problems with savage austerity that has driven its unemployment rate to 14 percent. Yet the interest rate on Irish bonds is still above 8 percent — worse than Italy.”

  33. To make it pellucid clear, what I am after from Left-liberals, at least on this issue, is the humble utterance of that sobering three word phrase:
    “I was wrong”. [Pr Q, Fran, Gerard, I am looking at you all]

    It stands to reason that the more brutally refugees are treated, the fewer will turn up. I have never argued otherwise. We could get arrivals down to zero if we just put the Taliban in charge of our detention centers.

  34. @Jack Strocchi

    I’d like to see the comparative LQLY figures for those in the camps and those taking the irregular maritime option. Right after that, I’d invite the man from Strocchiverse to bend over and allow the kind of old fashioned adults he seems to favour to set him straight in the traditional way for getting his calculus wrong and in addition, for running this strawman/red herring.

    The Australian government is not responsible for people drowning at sea. These are no Australian licenced craft, and didn’t arrive at our invitation. One can make the claim that if we’d done a better job of processing at the major aggregation points, and shipped them in en masse, then there would have been no losses. I don’t hear the man from Strocchiverse or his fellow travellers from Lindsay advocating that however.

  35. gerard @ #34 said:

    It stands to reason that the more brutally refugees are treated, the fewer will turn up. I have never argued otherwise. We could get arrivals down to zero if we just put the Taliban in charge of our detention centers.

    Just as it stands to reason that there is no difference, none whatsoever, between the supposedly brutal treatment meted out in our off-shore processing regimes in Christmas Island, Nauru or (potentially) Malaysia and the Taliban regime or Nazi Germany for that matter. Which is why thousands of asylum seekers have been abused and killed in these centres over the past decade, personally I hear, by Ruddock Torturer-in-Chief or his henchman Chris Bowen. Oh wait a minute…that was in the Bizarro land of Left-liberals.

    Back in the real world the total number of asylum seekers killed or tortured by AUS authorities equaled precisely zero. All those who suffered harm were harmed by themselves after the failure or stalling of their less than credible claims. And of course ever since Howard and his henchman established Nauru as a deterrent to people smuggling the number of people drowned en route to AUS dropped down to, again that magic number, zero.

    Makes you think that perhaps those mean-spirited old reactionaries might have known a thing or two about ministerial responsibility and the competent management of a portfolio. Props also to Chris Bowen who has taken his responsibilities seriously as protector of both our national borders and the human traffic accross them.

    No thanks at all to his idiotic predecessor Chris Evans or the legions of Left-liberal fools in his amen corner, particularly the Greens with their odious Pharasaic morality always and every where stuffing civic policy up the maximum feasible extent. Since that motley crew have been in the saddle hundreds, I say again, hundreds of asylum-seekers have drowned in response to their more liberal and “humane” border protection regime. Not to mention thousands more getting accross without proper documentation or anyway to verify their claims.

    And the response of Left-liberals to the abject policy failure: a conspiracy of silence interspersed with the usual outbreaks of hysterical moralism every time their wisdom is questioned.

    Perhaps I am being too hard on Left-liberals, it is after all the season of good-will to all men and they do mean well. But they have had plenty of chances to review their perverse efforts and shown not the slightest inclination to back-down or at least back off. So I am in no mood to be charitable, unless there is some contrition and revision in the appropriate quarters.

  36. Fran Barlow @ #35 said:

    The Australian government is not responsible for people drowning at sea. These are no Australian licenced craft, and didn’t arrive at our invitation. One can make the claim that if we’d done a better job of processing at the major aggregation points, and shipped them in en masse, then there would have been no losses.

    And what if they wash up on our shores, a la Christmas Island? Still going to take the “its nothing to do with me mate, I just live here” attitude? I love the Pilate-ion way in which you wash your hands of the predictable consequences of your perverse policy. Being a Left-liberal means never having to say you are sorry.

    Reality is no respecter of your petty bureaucratic demarcation lines. The fact is that asylum-seeker numbers are highly sensitive to changes in AUS border protection policy (disruption, detention and distribution). In economic terms there is a highly elastic demand curve or strong “pull” factors. So whether or not a formal invitation (with RSVP!) is issued is irrelevant, the people smugglers pay attention to their likely reception.

    And the GREENs and their fellow travellers in the media-academia-judicial complex have stymied
    effective border protection, thus asylum seekers have been drawn to make the dangerous journey like so many moths to the flame. This has had an immediate and dramatic effect in vastly increased numbers of people smuggled and now, alas, people drowned.

    Your suggestion that the Commonwealth set-up a sort of maritime conveyor belt on the South East Asia littoral to invite and transport any and everyone desirous of seeking residency in this country is one for the ages. I can just imagine how the voters would respond to this doubling down of political folly. Quite surreal to, when counter-posed to the previous “no invitation to see here folks, just keep moving” stance.

    You spend a decade screaming hysterically about Howard and his supposed awfulness and yet when your mob run things (or rather take their hands of the tiller) people start dying by the hundreds. Paralleled by the anarchic situation in remote indigenous communities where Left-liberal self-determination policy reigned supreme, again with no accountability. With horrific consequences that kept getting worse with every decade, only lately arrested by Brough’s declaration of martial law.

    Of course it would be too much to expect a sorry from Left-liberals for all the chaos and misery their serial idiocies sow. Just keep going the way you are going until everything goes to hell in a hand basket and then blame it on Howard and his diabolical race card or some such occult force.

  37. @Jack Strocchi

    Australia’s borders are better protected from hate mongerers like yourself than people in search of a better life fleeing persecution, war, or famine.

    What you’re suggesting comes from the first principle that we should be keeping asylum seekers out. To do this and then claim some empathy for these people by suggesting that asylum seekers drowning is a primary concern that is addressed by tougher “border protection” is laughable at best, but more, disgusting.

    If what was moral or ethical (the lives of those seeking asylum) was actually a concern to you, you’d be asking to decriminalise people smuggling and supporting onshore community processing. Everything else is just noise.

  38. In the first six months of 2011 derivatives issued boomed by 18% to a mindblowing $707 TRILLION in face value.

    This writer (lengthy piece but easy to digest) mounts a very plausible explanation along the lines that the huge institutions have basically taken a massive short on the entire world and will simply own everything when they crash it.

    http://www.golemxiv.co.uk/2011/12/plan-b-how-to-loot-nations-and-their-banks-legally/

    He puts it more lucidly and coherently than that.

    Where and how is he wrong, anyone?

  39. Not even Scott Morrison is using these deaths for political point-scoring yet, but nothing can delay Jack. Of course, as usual it helps to get some perspective and wonder why this is such a uniquely sensitive issue in Australian politics when this is a country that has a remarkably small “refugee problem” by international standards: 8,250 claims in 2010 compared with 235,900 in the European Union and 78,700 in North America. 180,600 just in South Africa. Australia is 47th in the world when it comes to accepting refugees (we do our share, I guess, it’s just that we lack the resources that other countries, such as Pakistan and Kenya, have at their disposal).

    Onshore processing is obviously the norm in most of the world, and such hysterical Australian-style debates do not take place elsewhere, despite the massively larger size of the problem. Onshore processing was also the norm in Australia too, prior to the Howard years, including during the aftermath of the Vietnam War. That was an era (1970s-1990s) during which there was a tacit agreement by the political leaders of the major parties that they would not seek electoral advantage through stirring up racism and xenophobia. But since that time, due to some sort of strange cultural transformation, the international norm for dealing with refugees (onshore-processing) has become a radioactive political taboo in this country, and only become policy “accidentally”.

    Since nobody likes to admit to being a race-baiter, opposition to onshore processing is dressed up as being done out of concern that it will cause people to drown at sea. The more deliberately cruel the treatment given to refugees that arrive, the fewer will undertake the boat journey and the fewer will drown. But there has to be more to it than that, since the longest period of time that Australia went without any boat arrivals was during the 1980s, well before the introduction of offshore processing, or even mandatory detention! Mass drownings at sea, such as the 2001 SIEV-X disaster are a recent phenomenon resulting from the use of unseaworthy vessels and inexperienced crew – which is arguably a consequence of laws first introduced in 1999 that demand the confiscation and destruction of all vessels and the mandatory sentencing of all crew.

    With an efficient system for processing and resettlement of refugee claimants in Malaysia and Indonesia (countries where refugees have no recognized legal rights and cannot legally work or receive education) the demand for the services of people smugglers would obviously be reduced. This would be one way of reducing drownings at sea – decriminalizing people smuggling so that they could use proper vessels and crew, and/or vastly improving the speed of processing and increasing the number of refugees resettled from these countries. Perhaps the existence of such a system, with bipartisan support, following the Vietnam War was one reason there were no mass drownings of Indochinese refugees during the 70s and 80s such as those that have been occurring recently. However in the current political climate and with the current quality of political leadership, such suggestions seem truly outlandish. Alan Jones and the Daily Telegraph would have a field day. There’s no point in reducing drownings if you’re not also reducing arrivals, after all.

    Obviously it would also help reduce boat arrivals if Malaysia and Indonesia were signatories to the 1951 UN Refugee Convention where there existed “fair, effective and efficient procedures for the recognition of their status as refugees and appropriate reception conditions”. The fact that Malaysia lacks these procedures and is in fact a human-rights hellhole for refugees is the reason why the High Court made the decision that it did and torpedoed Gillard’s offshore processing “Solution”. Well it’s not the High Court’s fault that Malaysia sucks so much. Nevertheless, all Gillard had to do was amend the Migration Act to make dumping refugees in any old Third World pit legal, and the “Solution” could have gone ahead. The reason she couldn’t get the act amended is because of Green opposition and Coalition opposition. As a result of the unusual hung-parliament situation, we ended up with a refugee policy that is actually normal enough to belong to any other Western country. Actually little had really changed since there has been hardly any offshore proccessing for years anyway – due purely to the expense if not anything else. But being the pathetic “leaders” that they are, Gillard and Abbott immediately set about wailing to the entire world (people smugglers included) that this outcome meant that Australia was now WIDE OPEN, undefended against an impending armada of refugees, and it was all the others’ fault.

    Green opposition to these amendments in the Migration Act are only to be expected, since such amendments is contrary to internationally accepted human-rights standards that are part of the Green policy platform. In any other developed country (including pre-Howard Australia), these standards would be considered quite normal.

    Abbott’s opposition on the other hand is not based on genuine principles, but is instead purely a cynical political maneuver to deny Gillard any success on this issue, which is his own personal political golden-egg laying goose. Abbott clearly doesn’t care about the human-rights of those dumped into Malaysia, since his own policy involves turning ships around and sending them back without any responsibility for them whatsoever. He says he supports offshore processing but only if it is in Nauru. This is not a logical policy – it may have worked for Howard the first time around, but in the end almost all of the boat people that Howard sent to Nauru were found to be genuine refugees and resettled in Australia. So what’s the point? Spending years going mad while imprisoned on a desolate pacific island may be a disincentive to arrive but hardly any more of a disincentive then doing the same thing in an onshore detention center. But by blocking the Malaysian Solution because he’s worried that it might work, Abbott at least has something to crow about at the next election.

  40. @Megan
    Thanks for that link Megan. I found that view particularly interesting and I’m also curious to hear what other more knowledgeable people think of it.

  41. Not even Scott Morrison is using these deaths for political point-scoring yet, but nothing can delay Jack. Of course, as usual it helps to get some perspective and wonder why this is such a uniquely sensitive issue in Australian politics when this is a country that has a remarkably small “refugee problem” by international standards: 8,250 claims in 2010 compared with 235,900 in the European Union and 78,700 in North America. 180,600 just in South Africa. Australia is 47th in the world when it comes to accepting refugees (we do our share, I guess, it’s just that we lack the resources that other countries, such as Pakistan and Kenya, have at their disposal).

    Onshore processing is obviously the norm in most of the world, and such hysterical Australian-style debates do not take place elsewhere, despite the massively larger size of the problem. Onshore processing was also the norm in Australia too, prior to the Howard years, including during the aftermath of the Vietnam War. That was an era (1970s-1990s) during which there was a tacit agreement by the political leaders of the major parties that they would not seek electoral advantage through stirring up racism and xenophobia. But since that time, due to some sort of strange cultural transformation, the international norm for dealing with refugees (onshore-processing) has become a radioactive political taboo in this country, and only become policy “accidentally”.

    Since nobody likes to admit to being a race-baiter, opposition to onshore processing is dressed up as being done out of concern that it will cause people to drown at sea. The more deliberately cruel the treatment given to refugees that arrive, the fewer will undertake the boat journey and the fewer will drown. But there has to be more to it than that, since the longest period of time that Australia went without any boat arrivals was during the 1980s, well before the introduction of offshore processing, or even mandatory detention! Mass drownings at sea, such as the 2001 SIEV-X disaster are a recent phenomenon resulting from the use of unseaworthy vessels and inexperienced crew – which is arguably a consequence of laws first introduced in 1999 that demand the confiscation and destruction of all vessels and the mandatory sentencing of all crew.

    With an efficient system for processing and resettlement of refugee claimants in Malaysia and Indonesia (countries where refugees have no recognized legal rights and cannot legally work or receive education) the demand for the services of people smugglers would obviously be reduced. This would be one way of reducing drownings at sea – decriminalizing people smuggling so that they could use proper vessels and crew, and/or vastly improving the speed of processing and increasing the number of refugees resettled from these countries. Perhaps the existence of such a system, with bipartisan support, following the Vietnam War was one reason there were no mass drownings of Indochinese refugees during the 70s and 80s such as those that have been occurring recently. However in the current political climate and with the current quality of political leadership, such suggestions seem truly outlandish. Alan Jones and the Daily Telegraph would have a field day. There’s no point in reducing drownings if you’re not also reducing arrivals, after all.

    Obviously it would also help reduce boat arrivals if Malaysia and Indonesia were signatories to the 1951 UN Refugee Convention where there existed “fair, effective and efficient procedures for the recognition of their status as refugees and appropriate reception conditions”. The fact that Malaysia lacks these procedures and is in fact a human-rights hellhole for refugees is the reason why the High Court made the decision that it did and torpedoed Gillard’s offshore processing “Solution”. Well it’s not the High Court’s fault that Malaysia s*cks so much. Nevertheless, all Gillard had to do was amend the Migration Act to make dumping refugees in any old Third World pit legal, and the “Solution” could have gone ahead. The reason she couldn’t get the act amended is because of Green opposition and Coalition opposition. As a result of the unusual hung-parliament situation, we ended up with a refugee policy that is actually normal enough to belong to any other Western country. Actually little had really changed since there has been hardly any offshore processing for years anyway – due purely to the expense if not anything else. But being the pathetic “leaders” that they are, Gillard and Abbott immediately set about wailing to the entire world (people smugglers included) that this outcome meant that Australia was now WIDE OPEN, undefended against an impending armada of refugees, and it was all the others’ fault.

    Green opposition to these amendments in the Migration Act are only to be expected, since such amendments is contrary to internationally accepted human-rights standards that are part of the Green policy platform. In any other developed country (including pre-Howard Australia), these standards would be considered quite normal.

    Abbott’s opposition on the other hand is not based on genuine principles, but is instead purely a cynical political maneuver to deny Gillard any success on this issue, which is his own personal political golden-egg laying goose. Abbott clearly doesn’t care about the human-rights of those dumped into Malaysia, since his own policy involves turning ships around and sending them back without any responsibility for them whatsoever. He says he supports offshore processing but only if it is in Nauru. This is not a logical policy – it may have worked for Howard the first time around, but in the end almost all of the boat people that Howard sent to Nauru were found to be genuine refugees and resettled in Australia. So what’s the point? Spending years going mad while imprisoned on a desolate pacific island may be a disincentive to arrive but hardly any more of a disincentive then doing the same thing in an onshore detention center. But by blocking the Malaysian Solution because he’s worried that it might work, Abbott at least has something to crow about at the next election.

  42. @Jack Strocchi

    Amidst the stream, of consciousness emitted by The Man from Strocchiverse this stands out as particularly amusing, perhaps because it’s such a cliche:

    You spend a decade screaming hysterically about Howard and his supposed awfulness and yet when your mob run things …

    What can one do but laugh out loud at this nonsense? My ‘mob’ have never been close to running things. The right has always run policy in this country. For good or ill, this country is in the state it’s in entirely as a result of the decisions taken by one or other of the mouthpieces of business. For a brief period, in the early 1970s a slightly more liberal-inclined band of populists exercised a little bit of influence at the margins, but that was pretty much it. Since then (and of course up to that point) we’ve had rock solid rightwing government since Federation.

    You reactionaries love to run this “Bob Brown is the real PM” line to wedge the ALP, but last time I looked, the overlap between Greens policy and government policy was very limited. certainly, on asylum seeker policy, the ALP and the LNP are far closer together.

  43. Fran Barlow @ #42 said:

    What can one do but laugh out loud at this nonsense? My ‘mob’ have never been close to running things. The right has always run policy in this country.

    Tendentious and ahistorical rubbish. The general political rule for governments since the seventies is that (New) Right-liberals have economic policy, whilst (New) Left-liberals have ethnic policy. Fraser pioneered this settlement with his ill-fated attempt to win the ethnic vote for the L/NP.

    But it was formalised by Hawke who gave Treasury to Keating whilst immigration went to Hand, with predictably disastrous results, as demonstrated by the embargoed Fitzgerald commission. The Australian recalls:

    Former Labor finance minister Peter Walsh described immigration policy under Hawke as a process of blow-out and cave in. The immigration program numbers blew out above target, bloated by regular cave-ins to the ethnic lobbyists. Another former Labor minister, Gary Johns, saw its immigration policy as part of vote buying and branch-stacking.

    But most telling of all was the findings of the FitzGerald committee inquiry into immigration policy set up by the Hawke government. The committee, headed by Stephen FitzGerald, found a key problem in maintaining support for immigration was a profound distrust by Australians of the policy of multiculturalism.

    Historian John Hirst wrote in 1994: “Mainstream Australian society was reduced to an ethnic group and given an ethnic name: Anglo-Celt. Its right to primacy was denied; indeed, it became the most suspect of all ethnic groups given its atrocious past.”

    Left-liberals have been in the driving seat of policy in the three key areas of civic policy: multiculturalism, refugees and indigenes. And, naturally, these areas have turned into slow motion train-wrecks, calling forth quasi-martial law responses (chronically in the case of indigenes and refugee policy, occasionally in the acute phases of multiculturalism, such as Cronulla).

    This went on for the better part of two decades until Howard resumed adult supervision, pushing a more Right-“corporal” policy, which was both effective policy and popular politics.

    You are too modest by half with your plaintive cry of political impotence. The ideological balance swung back to idiot Left-liberalism when Kevin “Big Australia” Rudd won the 2007 election, floating to power on a raft of symbolic Left-liberalism eg Apology. But also substantive Left-liberalism, when he and his lap dog Evans dropped the Pacific Solution. Instantly this happened the people smugglers ramped up their action and the people drowning toll started to mount.

    But at least Left-liberals could admire themselves in the moral vanity mirror, that being the most important thing.

  44. Ahh from Pontius Pilate to Peter the thrice-denier, all in the space of a couple of comments. How quickly Left-liberals make haste to distance themselves from the gruesome results of their own handiwork.

  45. Jack, do you have anything on that $707 trillion ($707,000,000,000,000)?

    I don’t really care about where anyone decides they should send people to be mistreated or ‘processed’ or ‘humanely sent to deter others’ or anything else while ever the ‘push’ factors are left unaddressed, anyway.

    As far as I can tell, this $707 trillion is going to visit a great deal of misery spread fairly evenly around for all of us to experience, regardless of political allegiance.

    Any ideas?

  46. I’m guessing that the $707 trillion figure refers to the value of all the derivatives contracts, but the point of derivatives is that they are used to hedge so a lot of those are designed to cancel each other out and expire worthless. it is a little bit like if you added up all the money that punters could potentially win at the melbourne cup if every single horse won.

    Prof. Quiggin could you delete the duplicate comment #43? I reposted because I thought I could censor the word that put it into moderation but that didn’t work.

  47. Gerard @ #43 said:

    Not even Scott Morrison is using these deaths for political point-scoring yet, but nothing can delay Jack.

    Yes, its not as if there is any sense of urgency in the debate. Gerard would have us steel our wills to cope with another couple of asylum-seeker boats going to Davy Jones Locker rather than endure the unbearable tackiness of my hasty “political point-scoring”.

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