16 thoughts on “Monday Message Board

  1. It will be interesting when Trump’s supporters realise that a 35% tariff is basically a tax increase.

  2. One interesting thing with Trump is what happens to the TPP. With the US out of it, it is being revised.

    Because the most damaging parts of the draft TPP were its intellectual “property” and “human services” (ie finance industry) provisions – parts of the agreement that were clearly “win-lose” rather than “win-win”, and which the US was to be the clear winner from. With luck a revised TPP may actually look more like a free trade agreement which would benefit all remaining participants.

  3. In an Alt-Fact world, I’m pretty sure that over 500m Americans were there at the Inauguration of the Head Trumpet. Or maybe even a billion of ’em? Who knew.

    If the Head Trumpet goes full on and tries to keep his economic promise—or was it an alt-promise—to create jobs for Americans (well, for more Americans than just his family), perhaps his plan is to increase military spending on a colossal scale, and to make it all in America. That would give him manufacturing and infrastructure jobs and indentures whereby young Americans do a period of military service in exchange for a paid for college/university education; it would also have the effect of making America the dominant military force, which is one way of honouring the much used “make America great” slogan of his. Since he has put so many multi-billionaires into positions of power, anything could happen; well, anything that is aligned with their money-making objectives, that is. Colour me cynical.

  4. @Donald Oats

    I colour you realistic. Anyone who thinks billionaires are going to make policies to reduce economic inequality would have to have rocks in their heads. As Joseph Stiglitz has essentially proved, rising inequality reduces economic efficiency in all economies so affected. I mean rising inequality reduces efficiency below what it otherwise could be given other efficiency gains like technology efficiency gains.

    People like Trump and Turnball, indeed almost all politicians, really enjoy telling lies. They love it. They get off on it. It gives them a real boost and the most accomplished of them have no “tells”. This all stands to reason. Current politics selects for telling lies. The most accomplished liars and the ones who really love telling lies, rise to the top. After all if you really love the central parts of your vocation, do have great ability at it and get just a few critical opportunities handed to you at the right times, then you really can go very far. Telling lies, telling lies continually and making sure they are huge lies are all absolutely central to our political-economic system now at the power-exercising levels.

  5. WASHINGTON – President Trump formally abandoned the Trans-Pacific Partnership on Monday, pulling away from Asia and scrapping his predecessor’s most significant trade deal on his first full weekday in office, administration officials said.

    Mr. Trump sharply criticized the partnership agreement during last year’s campaign, calling it a bad deal for American workers. Although the deal had not been approved by Congress, the decision to withdraw the American signature at the start of Mr. Trump’s administration is a signal that he plans to follow through on promises to take a more aggressive stance against foreign competitors.

  6. Ikonoclast :
    People like Trump and Turnball, indeed almost all politicians, really enjoy telling lies. They love it. They get off on it. It gives them a real boost and the most accomplished of them have no “tells”. This all stands to reason. Current politics selects for telling lies.

    Hmmm. I’m not sure that politicians particularly enjoy telling lies more than anyone else who wants to promote a world view. Some politicians admit distress with the process. You are, however, dead right that “Current politics selects for telling lies.” The basic problem (to me) is that voters suffering information overload respond emotionally rather than through anything vaguely resembling evidence-based rationality. Political success relies on tapping into and manipulation this emotional process.

    There’s an insightful media insider view of Trump and the bizarre disconnection of US political system by Matt Taibbi that illustrates this. (search: penguin books extract Insane Clown President Matt Taibbi and find the extracted book intro.) His description of the isolation of the politicians, event managers, and media into a virtual world – he calls it a “prison”- separate from the actual voters is well worth reading. It’s all fake news. Trump voters have responded intuitively by sending a wrecking ball into this system. They have my sympathy in that, at least.

  7. John Q,
    given the current Coalition heroics on reviving the TPP after the Donald withdrew US support, and uncritical media reporting here, have you any revised opinions on a new TPP?
    If US driven IP and ISDS are no longer relevant, what are we to make of any current touted advantages? Anyone else want to weigh-in also?

  8. On housing policy. Our biggest economic challenge. The current public debate is incoherent.

    Indicatively, homes in Aus are priced at $7 T and the Stock Market $1 T, unlisted businesses $ ?
    The land value component of avg homes has gone from 70% in many places. Indicatively there has been a wealth transfer of $3 T from market entrants funded by big mortgages to baby boomers and others over 30 years. As they could say – a major economic and moral failure with politicians and others often fuelling this wealth transfer.

    Avg prices have increased from about 3 times avg wages to 7 or 8 times in the last 30 years. i.e. 2.5 x real increase whilst the cost of construction in theory should be declining in real terms, but marginal in any event. The current prices are unsustainable as they depended on unsustainable rates of real price increases. Governments have also added to this by treating real estate as a money tree, whilst in reality government taxes et al are funded by those on mortgages.

    It is obviously the dominant asset class, and has been badly managed. It would appear to be the biggest economic and social policy failure of the last few decades as housing prices influence so much of our collective behaviour.

    My view is so much of the chatter is about symptoms (negative gearing, foreign investors, “affordable housing” et al) and most of the politicians haven’t a clue. Perhaps they treat it as political dynamite. The academics and professionals in urban and housing policy seem to be noticeably silent. The answer lies in treating urban planning as a major economic issue and perhaps given the most senior (!) Cabinet position until it is resolved. A modern day Haussman.

    My solution: To rezone sufficient land for medium density apartments (indicatively around 4 stories) so there is no shortage, AND no perceived shortage, of development sites for years ahead, and planning approvals are timely and orderly within the zoning system. High rise is not the answer as construction costs are towards twice medium density, high rise is a luxury and at best is a solution to the Manhattan problem (and noting that land in simple terms has no cost and its price is largely an artefact of government policy).

    Well planned medium density is easily the most cost-effective solution for future growth. People should have a choice of course and at the moment in the big cities we have an excess of freestanding and high rise accommodation, whilst medium density is undersupplied at a reasonable, and achievable, lower price within a good urban planned setting.

    Policy setting should be in place to ensure that the (re)zoned medium density will readily get to market and it is likely that a land tax based on unimproved capital values would be necessary to motivate sales of sites for redevelopment . In any event land tax has many desirable outcomes as discussed elsewhere . Land tax rates should, as a minimum, be set to motivate sales, and be offset by reductions in other taxes.
    The consequences of unconstrained medium density with land taxes:
    – lower land prices (perhaps a 50% reduction for medium density sites)
    – elimination of future expensive high rise
    – facilitate more public transport, cycling and walking
    – improved environmental, health and social outcomes
    – clustering of businesses in a smaller urban footprint with business efficiency
    – housing prices will reduce to more reasonable levels [the central objective]
    – RBA can then almost ignore house prices and set interest rates on other factors, say business activity, employment and exchange rates
    – as urban development is a major cost issue and as a consequence of increased housing, urban and business efficiency, plus environmental et al improvements, the average wealth in real terms would increase.

    The challenges seem to be the NIMBY problem and the transition years for those highly geared. Both of these are manageable.

    1 NIMBY: perhaps engage the grandmothers who are seriously concerned about affordability for their grandchildren. Grandparents mostly have no mortgages , other than re-morgages to help grandchildren.

    2 The highly geared recent 1st home buyers: Government help including by giving credit for land tax for some years.

    Highly geared investors – more thought required but certainly not a reason to not proceed and not an obstacle to reform housing policy for decades ahead.

    And a Centre of Excellence in Medium Density Urban Planning and Architecture, with many disciplines involved, even including Real Estate Agents. Medium density is a term to classify the building envelope, mainly height, say 12 to 15 metres indicatively. Within this envelope a full range of apartment sizes, types, fit out quality and features to meet market demand. At the bottom end modest sizes, bigger than shoeboxes with basic fitout, would easily be affordable without any need for unsatisfactory market manipulation by government.

    Another 50,000 words might cover the issues I have glossed over in this summary.

  9. @Wirram
    In regard to the TPP and the obvious proposal to replace the US with China, I am wondering whether those in the US Administration had thought through their decision. It reminds me of the Allied policy in the War II to keep Hitler alive, otherwise militarily competent people would run the German war policy.

    Better late than never, the rising trend in property values(at least where I live) has been obvious for more than 20 years. State housing seemed at one time to be a solution, which seems to have completely fallen away. There has to be more to urban planning than building freeways and converting public transits to toll ways. Similarly, it ought to include the natural environment, as indeed should agricultural land, such as the northern wheat belt in WA to address soil salinity.

  10. @Garis

    Thank you m8! A brilliant exposition of the entire problem and the main solutions in 815 words. I used Word to count them and now I will delete, or rather not save, the word document as I will not infringe your copyright ownership of that exposition.

    I already knew and agreed with all you put in the first six paragraphs but you did it much more clearly and succinctly than I could. The rest goes further than I had thought matters through and touches on areas outside of my learning like medium-density housing costs and comparative housing costs.

    You are right. It represents a MASSIVE economic failure and a MASSIVE wealth transfer: a moral failure as you say. Sorry for caps but I get absolutely furious about the stupidity of our politicians, the greed of our financial class, the culpability of hangers-on at this “free lunch” at the expense of ordinary working and unemployed people, and finally the sheep-like brainless-ness (or rather brain-washed, false consciousness) and docility of much of the population.

    And I say all this as a baby boomer generation member who has actually benefited from this set-up via primary residence appreciation. I have not, on principle, ever used negative gearing for property, shares or anything else. I think negative gearing is, quite frankly, morally criminal.

    I can see how this situation is holding back my now adult twin children. They both have good jobs (only due to getting professional university quals) but forming households with friends, acquaintances or partners is very hard to out of the question at current rents and house, apartment or flat prices.

    There is considerable social damage (not to my adult children who have the personal resources and parents to help them cope) but to many in the younger cohorts in general (say 18 to 28 or even now extending up to 34 or even 38. A society that does not support household formation (the stats are definitely going down) and does not provide viable alternatives (I see no significant kibbutzim movement in Australia for example) is a society headed for vastly more inequality and social and criminal problems in the long term.

    “Sow the wind and reap the whirlwind” is an evocative phrase from a well-known book. I am a scientific-humanist but I know a good poetic phrase when I see one. From climate change to social decline (from these more and more laissez faire policies made by and for the oligarchs and corporate class) we are indeed sowing the wind and we will reap the whirlwind. Or worse, our children will.

  11. @John Quiggin

    And so you did. Forgive me for a complete topic change here but I wanted to be able to actually reply to you directly to let you know that, if you haven’t seen this already, you may actually find it interesting:


    Throw in a hot salt generator or two (or maybe an ammonia closed circuit one?), and this kind of approach could be of considerable value in Australia, especially to reduce the “non-renewable base-load” requirement.

  12. @John Quiggin

    Well you may occupy the waiting rooms of impotence more often than the corridors of power, but at least you know where the corridors are and you even know some who walk them. Whereas i haven’t even made it into the outer carpark yet.

    So I’m happy to keep passing stuff like that on because it’s much more useful in your hands than in mine.

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