10 thoughts on “Monday Message Board

  1. The economics of drug trafficking seems to be a current media topic. I saw FOUR CORNERS on the ABC last night. The claims against a certain well known bank seemed pretty stark. But the economics seemed clear cut. Someone deposit large sums of money at one location then others draw on that via the digital money transfer system. This allows the bank to engage in credit creation so benefitting from those deposits. It is the so-called WIN-WIN situation that politicians seem to love. But economics usually only concerns itself with “Goods” not “Bads”. The dark web and black global economy remains shrouded in mystery.

  2. Adani update. The latest from Tim Buckley of IEEFA (****ieefa.org/wp-content/uploads/2018/04/Adani-Godda-Power-Project-April_2018.pdf), on Adani’s new Cunning Plan to rescue Carmichael. This involves shipping the coal by rail from an Indian port to a new inland plant at Godda in Jharkand, India’s largest mining state. Adani has sweet-talked or (you have to wonder) bribed the notoriously corrupt Bangladesh government into signing an astonishingly favourable 25-year PPA for one-and-a half times what they would pay for just importing excess Indian domestic capacity. The locals are proving more resistant to the snake oil – not surprising, as they won’t even get the mining jobs. Adani Power has not even completed land purchase, let alone financing.

    The striking news in the report is how dire the overall financial situation of Adani Power now is. The equity has shrunk to $443m against debt of $7.3bn, a debt-to-equity ratio of 16.5:1. With losses running at an annual rate of $300m, the company may soon become technically insolvent. It’s hard to see what is holding up the share price, that still values the company at $1.4bn.

    The gloomy accounts understate the true position. Adani has shut down the lossmaking Mundra megaplant, breaking its 2 GW PPA with the state government of Gujarat – the only potential buyer for the plant (at 1 rupee plus assumption of a pile of debt). Adani will sooner or later have to write off $1bn to $1.5 bn on this white elephant, according to Buckley, taking the company immediately deep into negative book value. These facts are readily available to Indian banks, public bodies and other investors. If Mundra ever restarts under public ownership, it will be with cheaper domestic Indian coal.

    It’s hard to disagree with Buckley’s conclusion: “Even if Adani Power continues to limp on, there is a strong likelihood that the company will be unable to obtain funding for the Godda project.”

    With the shutdown of Mundra and without Godda, there is no offtake plan for the Carmichael mine. Coffin, meet nail.

    The only good news for Adani (Australia) is that thermal coal export prices have bounced back to near $100/tonne. This will not be enough. The rise is very probably a blip, resulting from miscalculations by Chinese officials in 2017 over the pace of coal mine shutdowns and an unexpected surge in electricity demand. The mini-boom in Chinese coal imports, which also boosted American exports, is not likely to be repeated. Second, the higher price is a two-edged sword: it makes Australian coal mines temporarily more profitable – but accelerates the shift away from coal in the customer markets.

  3. Budget week, and no mention of the budget.

    I’ll skip straight to Bill Shorten’s budget reply. Sure, he addressed the immediate impact of the Liberal government’s shortcomings and foreshadowed a ‘fairer go’ for all Australians.

    But it was littered with standard neoliberal economic fare, from responsible budgeting to oh, God, the children, paying $18billion pa to the banksters. There was no challenge to the economic orthodoxy on deficits, no vision to change the institutional structure of predatory markets and no explanation of why the Australian government should not raise most of its debt from the Reserve Bank (so we all get the benefit of that $18billion).

    I recently read a short list of actions from progressive proponents to decrease inequality: more social housing, better health coverage, and better early child education. Non sequiturs all.

    The issue with western democracies is that they have not only not confronted neoliberalism, they have failed to understand its animus and hence its power.

    So here is my list. Capital gains tax on housing adjustable to the current median house price/annual income ratio. Company tax rate adjustable to the profit/wages ratio, and personal income tax adjustable to the Gini co-efficient.

    All Pigouvian taxes aimed at wealth. The neoliberals have no problem charging Pigouvian taxes on the poor, aka the tobacco tax, or in the negative by failing to pay a liveable NewStart allowance. But, no, the state can only ever lower taxes on wealth, never raise rates to achieve social outcomes.

    I’ve recently had two friends who consider themselves quite left come into multi-million-dollar inheritances, and good luck to them. What is strange is the disconnect between their world view and the position (or, as they put it, the responsibility) they now find themselves in. I don’t think there should be an inheritance tax, but I do think a functioning society would take measures to make such inheritances substantial rather than extraordinary.

    Which brings me back to Bill Shorten. The ALP adopts economic orthodoxy for expediency’s sake, because to do otherwise is both too hard and too risky. Unfortunately, this puts them on the side of the dodos (or third way protagonists), facing disruptive destruction of the social fabric around them with a nicer face, and better health care.

  4. when one turns ones back on a particular country and cultures way-of-life (running for ones life is a good reason),demanding that the country (with a different culture(unspecified)) learn the language of the country or culture that one left rather than one learning the language of the new home, comes under the heading of “you’ve got buckleys”.

    pretending that one can continue without change in the mores and lore of the situation abandoned ,also comes under the heading “you’ve got buckleys”.

    not to worry though, millions have managed without losing integrity or identity.

    it’s not so bad.


    you are not being discriminated against.

    you are whinging.

  5. The collapse of the blackmail case against John Setka and his mate from the CFMEU shows the folly of trying to criminalise industrial relations disputes. Surprise, surprise, the standard of evidence required in criminal cases turns out to be quite a bit than in higher than in civil cases. (Much to the chagrin of the Australian Financial Review. Stutchbury really should retire. But I digress.)

    This debacle should give pause to those who want to criminalise under payment of wages (‘wage theft’ if you prefer) or other bad behaviour by employers. But it probably won’t.

  6. Sorry, I posted the previous comment before I finished.

    Smith, the fact that the burden of proof in criminal cases is “beyond reasonable doubt” is no reason not to make wage theft a crime.

    All you need is evidence that the employing entity knew it was underpaying workers i.e. not paying them their Award, enterprise agreement, superannuation etc minimum entitlements.

    Clearly the current laws are not working.

    Employers have also learned that if a worker pesters them for unpaid entitlements, they can intimidate the employee by getting an intervention order or threatening them in some way (this happens a lot, check the case law on austlii). If wage theft was a criminal matter, workers could hand the matter over to the appropriate authority to investigate.

  7. A further point, the civil law system for retrieving unpaid entitlements is broken. It can be next to impossible to find a law firm to take on a complex case as unpaid entitlement cases are notoriously expensive to run. Lawyers will generally tell an employee to settle once the employer makes a halfway decent offer and the employers lawyers’ know this and take advantage of it.

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