Another Monday Message Board. Post comments on any topic. Civil discussion and no coarse language please. Side discussions and idees fixes to the sandpits, please. If you would like to receive my (hopefully) regular email news, please sign up using the following link
http://eepurl.com/dAv6sX You can also follow me on Twitter @JohnQuiggin, at my Facebook public page and at my Economics in Two Lessons page
John Quiggin 
The level of dissaving in certain income deciles seems to indicate an approaching recession. The absence of any “rainy day” savings may lead to a sharp fall in consumer prices during the September quarter. After that it depends on how much of a bounce is obtained from the Christmas quarter. Deflation remains a real possibility over the next four quarters.
Gavin Schmidt argues that rhetoric might help to make the facts more acceptable.
Rhetoric does seem to be dominant in politics, policy formulation and decision making.
http://www.realclimate.org/index.php/archives/2019/08/just-the-facts/#more-22492
If there is a real risk of deflation is there any reason why we can’t give the treasury the power to create a small, unsterilized stimulus to keep inflation positive? Apart from the usual shock horror at the thought of doing something useful that hasn’t been done before?
Investors in Australian Government Bonds would of course want higher returns if the country demonstrated it was willing to use an unsterilized stimulus to avoid deflation, but when you think about it, that’s not actually a problem.
Unsterilised stimulus? What junk economics have you been listening too? Are you suggesting spilling red ink as demand management? You don’t have the data for that nonsense. The only valid demand stimulus is retiring debt with brand new cash. But to use that is to muscle in on the banking industries money-creation racket. Get some real economics. Nothing could be more harmful than putting it about that bleeding red ink is stimulatory.
Mr Bird. Let’s say I am very rich. So rich I can borrow one billion dollars. Let’s say I do that and then give it all away to everyone on Newstart and Youth Allowance so they all get around $1,100 each. I assure you that would stimulate the economy. If you doubt it, think about it for a bit.
Ronald +1.
Read it and weep. Money spent obviously does not equate to educational attainment but WOW, how this disparity keeps society ‘class-y’!
JQ said; “it’s perfectly OK to attack Shorten on the basis that he is a former trade union official, but it’s class war to mention that Turnbull is a multi-millionaire advocating policies that benefit him and people like him.”
“Wesley College, Haileybury College and Caulfield Grammar in Melbourne, together with Knox Grammar in Sydney, spent $402 million. They teach fewer than 13,000 students.”
= $31,000k per student approx. ..
“The poorest 1,800 schools spent less than $370 million. They teach 107,000 students.”
= $3,500 / student approx.
If you have ever looked at adverts for teaching staff at wealthy Catholic & independent schools, pedagogy and music feature prominently.
One data point…
3 x primary schools in my area. 2 x public and 1 x catholic. The 2 x public schools I was most familiar with, one had a teacher’s wife donate an hour a week for music for 500+ kids and NO music at the other. The catholic school has 8 dedicated music teachers. I couldn’t even book private music lessons and if I could, nothing under $80 an hour, because of 8 music teachers on full time wage at catholic school.
Here is the scary stuff. “… from the My School website — a dataset so tightly held that in the decade since its creation, it has only been released to a handful of researchers under strict conditions. Independently compiled by ABC News, it provides a more detailed picture of school income and expenditure than any publicly available data.”
Secrecy is the worst. This cannot go on.
Rich school, poor school: Australia’s great education divide
https://abc.net.au/news/2019-08-13/rich-school-poor-school-australias-great-education-divide/11383384
And JQ previously;
“Abbott was thrown out, in large measure, because he broke promises to match Labor on the Gonski and NDIS reforms. Turnbull was part of the LNP government elected on the basis of those promises, and is bound by them just as much as Abbott was. But, like Abbott, he is breaking his promises in a class-war fashion. In order to keep the (bipartisan) promise that no rich school would be worse off, he is breaking the promises made to poor state schools.
“In all of this, the class war aspect is pretty much undisguised. The one issue where Turnbull wants to maintain the old rhetoric relates to personal background. According to his backers, it’s perfectly OK to attack Shorten on the basis that he is a former trade union official, but it’s class war to mention that Turnbull is a multi-millionaire advocating policies that benefit him and people like him.”
https://johnquiggin.com/2016/04/12/a-class-war-election/
Just imagine the High Court in 2030 ruling ( in black ) on the ‘New and Improved’ industrial relations bill 2020, complements of a cpac powered amanda stoker.
Don’t worry about judges, we have a biased neural net in Amanda, powered by cpac, here and now. Amanda’s deplorable “not the right fit” workers, shows she is in dire need of new data and representative learning set.
But – Amanda Stoker began her career as a clerk and solicitor in Brisbane with MinterEllison. All is well then, in the land of “The Right Fit”.
She has testosterone too… “accusing the Coalition of being “tentative” after John Howard lost” is a brave, as in take no prisoners”, call.
And this would fit into any number of JQ’s recent posts…
“Liberal senator … sack workers who are not ‘the right fit’
…”Liberal senator for employers to be able to sack workers if they are not “the right fit”, arguing the Coalition is preparing to gut unfair dismissal laws.”
“Amanda Stoker – who made the remarks at the Conservative Political Action Conference on Friday – renewed the call on Monday arguing it was “untenable” to ignore industrial relations’ impact on productivity and accusing the Coalition of being “tentative” after John Howard lost the 2007 election in part due to its Work Choices reforms.”
https://www.theguardian.com/australia-news/2019/aug/12/liberal-senator-says-employers-must-be-able-to-sack-workers-who-are-not-the-right-fit
And in better news in Evonomics today… see the interesting to me, figure 3 “How productivity differences between workers doing the same task compare to income inequality within countries. Source: The Trouble With Human Capital Theory”
“Neoclassical economists resort to slight of hand to measure productivity differences, and so endlessly confirm their theory. But what happens if we try to measure productivity differences objectively?
We find that productivity differences cannot possibly explain income inequality.”
“The lesson here is that differences in workers’ productivity are tiny compared to differences in income. So it’s inconceivable that productivity differences (as measured here) can explain income inequality.”
http://evonomics.com/no-productivity-does-not-explain-income/
“Mr Bird. Let’s say I am very rich. So rich I can borrow one billion dollars. Let’s say I do that and then give it all away to everyone on Newstart and Youth Allowance so they all get around $1,100 each. I assure you that would stimulate the economy. If you doubt it, think about it for a bit.”
No you are completely wrong, unless the bankers use this borrowing to increase money supply there is no change in spending. Unsterilised is a misnomer otherwise “where is the money coming from?” Its true that the bankers use “sure things” to pyramid more money upon, and this is a net loss to the rest of the community. So your red ink suggestion is wealth destruction if it leads to the banks pyramiding more ponzi money, and absolutely useless for demand management if it doesn’t.
Whenever you get these stupid ideas again just keep repeating to yourself “where is the money coming from” until the delusion goes away. Only new cash creates new demand unambiguously. This is the only unsterilised stimulus. And in order that the banks don’t pyramid on the new cash, you need to be in control of a reserve asset ratio as well. So you need two tools for demand management. Two tools only and not three or more.
Now just in case you don’t get it, lets split up GDP into its component parts, because red ink does in fact increase nominal GDP. It reduces employment and leaves business revenues unchanged. But it will show up in the figures as increased nominal GDP.
GDP = C + (net) I +G + X – M
This is a highly netted figure because Gross I, in a modern economy (with an extended structure of production) is a far bigger figure than all the others put together.
Gross Domestic Revenue, or Gross Business Revenue equals :
GDR = C + Gross I + G + X – M
I like to call Gross I ” Business to Business spending”. Because you see most of the economic actors in the modern system aren’t directly working for the consumer. Most companies I have worked in, were companies who sourced everything from other producers, and sold only to other producers.
When you increase G and C without increasing the money supply you are redirecting spending not increasing it. So Gross I is reduced in favour of G or C. What are the effects of this in the next time period?
This is repeated over and over and over again empirically and we ALWAYS see it in the financial papers. But we don’t have the GDR figures (although a hard-working fellow could compile them.)
What happens is the following; Employment drops. Productivity DOESN’T increase, but productivity figures (based on GDP) DO increase. This is artifact and not reality. Its based on a kind of “one true metric” bias within the economics profession. Business profits increase but the share of labour income reduces. So red ink is deeply anti-social. (So if you want to increase welfare spending you should reduce public sector welfare, or banking welfare, and transfer the funds saved from less public sector or banking jobs.)
Why do profits increase? Because Business to Business spending becomes Cost Of Goods Sold in the next time period. But get this …. Consumer spending and Government spending are types of spending that DON’T become cost of goods sold in the next time period. So high C and high G leads to high (before-tax) business profits.
Why does red ink lead to reduced employment? Its because wages is a cost of goods sold. Its a business expense. If you redirect spending from business to business spending to C and G ……. therefore in the new time period you get higher profits and less wages. And it always works and it always shows up in the financial papers with the writers in amazement and wonderment. The fools start calling it a “productivity lead recovery” and they start talking about employment as a “lagging indicator.” Employment is NOT a lagging indicator its a better indicator than GDP itself. Because what really happened, is the red ink spree reduced employment directly.
If anything here doesn’t pan out by way of sheer serendipity (it always pans out as described but if it didn’t:) there would STILL be no excuse EVER for red ink. Because with the dual policies of new cash retiring debt (to increase demand) and increasing the reserve asset ratio (to reduce demand) you can hit any level of business revenues that you choose.
The ultimate end would be to have more cash than debt. So we are no longer a debt junkie economy. That would be a much better and healthier world. More sustainable with better price allocation and a lot less social stress.
This whole saga of misinformation is to glorify parasitical fractional reserve usury. This misinformation tells us who is in charge. The parasitical fractional reserve usurers are in charge. They have split the economics profession into two main camps. Those that never see public debt they don’t like and those that never see private debt they don’t like. Both types of debt are toxic. So its Keynesians and Neoclassicals. A few years ago, if you had gone over to Catallaxy, you would be amongst people who never saw private debt that they didn’t consider benign. Even after the 2008 banking collapse they maintained this mental discipline. Horrifying. They never saw any connection between all these loanable funds spent on land inflation and our lagging economic performance. They didn’t see a connection between loanable funds being thrown at useless undertakings and big trade deficits. Even basics like this were forgotten in favour of the ideology that private debt is good.
Its as though they were wanting to hollow out the economy like locusts. But both camps are wrong, and for pretty obvious reasons of international influence.
My local Federal MP, who is also the Shadow Minister for the Environment and Water, has been running the Courier-Mail line against the anti-Adani protesters in Brisbane, in particular Johnathan Sri’s violation of “the standards of our community” (her words) in comparing the protests with the Anzac Day march. This has prompted me to dig out this quote from Jim Cairns’ book on the Vietnam Moratorium Campaign.
“When 70,000 people sat down in Bourke Street, Melbourne, at 3:15pm on 8 May [1970], they were obstructing the street just as people obstruct the street for the Melbourne Moomba celebrations, or for the Anzac Day march, or to welcome the Queen… They claim that it is justifiable to occupy space in a street, once in a while, for the purpose of influencing public and national policy. Strange that in a democracy the claim is disputed.” Dr Jim Cairns, Federal ALP Member for Lalor, 1970, in Silence Kills, The Vietnam Moratorium Committee: Melbourne, pp.12-14.
What a pity that the ALP Left has forgotten its own heritage.
Mr Bird, I’ll make it simpler for you this time: I’m a billionaire. I’m not borrowing money. I have one billion dollars in my savings account. I take that money and I give $1,100 to everyone in Australia receiving Newstart or Youth Allowance. Do you think the people who get this money will, on average, increase the money in their savings accounts by $1,100 resulting in no real change in the economy or do you think a considerable portion of that money would be spent over the following few months increasing average consumption in those months.
I’m happy with a one sentence answer. You can use the time you save to go to the Duolingo site and learn a language.
Look you dummy. You are wrong. You don’t know the subject. I’ve outlined it very comprehensively above. So just read it over and over and over again, until you start to understand it. Where is the money coming from? Are you relying on the banks to increase the money supply or not? I already told you to keep asking yourself that question “where is the money coming from” until the delusions went away and you failed to listen. Get it right you dope.
In your example you have done nothing to increase the cash in the banks vaults. Don’t you see that? Either the truck comes out with the new cash, or the central bank creates brand new promises to deliver that cash, or else neither of those things happen and the banks have the same cash to work with as before. Don’t just sit their likee a damned moron pretending that you are the expert here. Read … and think. Can you try that for me? You were too busy being a smart Alec just to think about what I wrote.
Mr Bird’s comment policy mirror is broken “Look you dummy.”. Hint hint.
Graeme, if a wealthy person borrows a billion dollars against their capital as opposed to doing nothing, and distributes it all to Newstart and Youth Allowance recipients, unless that billion dollars is paid back more or less immediately (as in 100% of the recipients use it to pay off existing loans), then absolutely it creates new money in the economy. The money supply has been increased, not just redirected.
“unless that billion dollars is paid back more or less immediately”
And even in that case, it frees up a billion dollars of other money in the economy that now doesn’t need to be used to pay back loans.
Nick where is the money coming from and where is the cash coming from? Is there new cash sent out in the truck FROM THE MINT or promises to send that new cash out by the central bank and the mint on demand? (For obscurantist reasons the thieving bankers always try to substitute on-demand promises to supply, rather than the cash itself). If you don’t have that you haven’t changed the cash in the vaults of the banks.
Now you are saying that the money supply has increased? You don’t know that. You have no idea what the banking system is going to do. You are simply assuming that the Reserve Bank Governor is not minding the store. But why did you need the billionaire to try and manipulate the banking system into increasing the money supply? You could have retired a billion dollars in debt, printed the money up at the mint, and sent that billion dollars out in the truck.
The billionaire doesn’t control bank lending practices. The banks do and they make their minds up based on the cash or on-demand promises to deliver cash, that they have to work with.
Now stop typing. Don’t repeat back to me MMT nonsense until you understand what has been said already. .
Hello I am so excited I found your blog page, I really found you
by mistake, while I was searching on Google for something else, Anyhow
I am here now and would just like to say thank you for
a remarkable post and a all round thrilling blog (I also love the theme/design), I don’t have time to look
over it all at the moment but I have saved it and also added
in your RSS feeds, so when I have time I will be back
to read a great deal more, Please do keep up the awesome jo.
Click to access money-creation-in-the-modern-economy.pdf
Would we like an alternative social contract?
Transaction Man: The Rise of the Deal and the Decline of the American Dream
BY NICHOLAS LEMANN FSG
The Economists’ Hour: False Prophets, Free Markets, and the Fracture of Society
BY BINYAMIN APPELBAUM LITTLE, BROWN
…”This frees both writers to ask whether an alternative social contract might be imaginable, or preferable.”
https://www.theatlantic.com/magazine/archive/2019/09/nicolas-lemann-binyamin-appelbaum-economics/594718/
Thats right. Bank lending creates deposits which is new money supply. Banks pyramid on cash to create the money supply. So if your billionaire comes along, they are tapped out already. They’ve already pyramided on the money up to their teats. Your billionaire has no control over the situation.
Money creation is a bank-lead phenomenon and don’t forget it next time you come up with some dopey MMT inspired scheme to spray read ink everywhere. Only new CASH creation counts if you want to stimulate demand, and only a reserve asset ratio counts if you want to stifle it. Thats a two policy arrangement like I said. Not three, not four and not red ink.
MMT are the most horrific sort of macromancers around. Because just as the weight was building for real banking reform Mosler comes along, feeding candy to children, convincing them that its not necessary to lean on the banks, and instead we can simply practice fiscal incontinence. I must say his welfare ideas are very appealing. Very appealing. He’s a very worthy psychological operations man for the bankers. Thats where his work is. Thats where he comes from.
GB: They’ve already pyramided on the money up to their teats.
And yet somehow they earn record profits every year.
https://www.commbank.com.au/guidance/newsroom/cba-fy18-results-201808.html
Click to access 30-june-2018-basel-III-pillar3.pdf
GB: Your billionaire has no control over the situation.
It’s completely up to the billionaire how much capital they stake. If they put up a hotel chain worth $1.8 billion, or a 20% share of a leading global software firm, would a bank lend them the money? What was
Gautam Adani willing to risk?
There is no ‘tapped out already’. A solid low-risk loan *improves* your capital adequacy. It gives you the the ability to lend out more.
Go back and read what I’ve already written and think. Can you try that for me?
Panic and anxiety need to be added to the rhetoric to drive action over climate change.
David Wallace-Wells
Scientists respond to the above, no wonder it’s difficult for the average person to get a grasp on the situation.
https://climatefeedback.org/evaluation/scientists-explain-what-new-york-magazine-article-on-the-uninhabitable-earth-gets-wrong-david-wallace-wells/
Universal Basic Income is already policy in Australia.
“The Independent Schools Council reminds us, “due to the shared view of successive Australian governments …each non-government school child is entitled to a government contribution to the cost of their education.”
http://johnmenadue.com/chris-bonnor-rich-school-poor-school/
ABC visual…
https://johnquiggin.com/2019/08/12/monday-message-board-427/#comment-213241
Well I got up to the 17 minute mark on the climate change link posted by rog. I am not sure that I am going to watch the last 5 minutes or not.
Comment number 1. The author of the book said that eating beef would not be a problem if the studies are true that show feeding cows seaweed cuts their methane emmissions by 95% and there is a law requireing that farmers actually feed seaweed to their cattle. But that assertion forgets the well known fact that it takes 10 pounds of grain to produce one pound of beef.
Comment number 2, the author makes the comment that it is the industrialization of the previously non industrialized countries that is creating the “NEW” damage to the environment. This assetion is complete bull shit.
First of all much of the things that are being produced in China and India are being produced for the consumers of the USA and Europe and their colonies in Australia and New Zealand. Second of all even if China is producing 25% of the new CO2 immessions it is 20% of the world s population. The same thing can be said about India.
But what is more important than the numbers themselves is that this developement trend for China, India, Indonesia. Brazil and so on was easily forsseeable in 1985. Only a complete fucking Ostritch could not understand that if the leaders of the developed world would want the leaders of the developing world to take global environmental constraints seriously then the leaders of the developed world would have to radically change course FIRST!!
But the leadership of the west would point their fingers at the electorate and say, if we tried to make the changes that were neccessary we would in a very short time not be the leaders any more.
Bull shit! I would like to personally stake any leaders who would say that to a large slab of obsidian in the Australian desert in the summer time. These leaders have shown by their behavior over the past century that they are easily capable of manipulating the masses to get the masses to do what ever the elites damned well please.
So it was certianly with in the power of the elites to do the right thing.
Comment number 3. the author said that if we hit 2° warming it is still with in the power of humanity to prevent 4° of warming. The idea that humanity controls its own destinity is hopelessly outdated. Has the author never heard of tipping points. Once those tipping points get reached what happens next IS BEYOND THE CONTROL OF HUMANITY.
The only chance that humanity had to survive was if an extinction rebellion had broken out in the US military decades ago. But that did not happen. This failure of the US military decisively proves that teen age girls in neutral countries have more sense and integrity than the officers of the US military. But teen age girls in nuetral countries lack the physcial connections to move meaningful levers of power. In fact 100 million teen age girls in neutral countries lack the physical connections to meaningful (relevent) levers of power. Teen age girls and boys never had a chance to save their own futures.
When I was getting my military indoctrination it was impressed upon me that members of the military have to have a can do attitude if they are to be an asset to their nation. What a pathetic hoax that lesson turned out to be. The members of the US military and their allied underlings only had a can do attitudes for things that were easy to do considering the massive amounts of resources that they were entrusted with. Even worse they allowed themselves to be manipulted in to doing the things that did not really need to be done at all while diverting the rest of us from doing those things that really did need to be done in the best possible way.
The only thing that we have time for now is planting saffaron and hoping that it will spread and provide our food and our history with some color before the collapse of industrial civilzation and our extinction.
Even if my outlook on our future is to pessimistic it does not matter because planting saffaron is still the first step towards making a better future for all of us, except for those that will die before our future gets here.
It’s God’s will and He will sort it all out! Ask them, those that deny, those that alter communiques in drowning countries, ask them and if they have the guts they will agree. They know they needn’t worry as their excrescence will be ignored in the MSM, perhaps even praised.
Social dilemmas among unequals
“Our findings have implications for policy-makers concerned with equity, efficiency and the provisioning of public goods.”
“Our model allows for multiple sources of inequality. Subjects can differ in their endowments, their productivities and in how much they benefit from public goods. We find that extreme inequality prevents cooperation. But if subjects differ in productivity, some endowment inequality can be necessary for cooperation to prevail. Our mathematical predictions are supported by a behavioural experiment in which we vary the endowments and productivities of the subjects. We observe that overall welfare is maximized when the two sources of heterogeneity are aligned, such that more productive individuals receive higher endowments. By contrast, when endowments and productivities are misaligned, cooperation quickly breaks down.”
https://www.nature.com/articles/s41586-019-1488-5
OKAY!!
HURRAY!!
here is a new idea that no one has publically discussed as far as I know. It could be that the reason that no one has mentioned it is because it is such a BAAAAD Idea. In fact it could be my wurst idea ever.
Here is the background. Some parts of the world are converting oceab salt water to fresh water using very energy intensive processes. Yet Greenland is producing huge quanties of fresh water and dumping it in a place that humanity does not need it dumped.
For the time being humanity can not prevent that melting if it wanted to. But could it capturesome of that run off?
Humanity should not ask any Americans if capturing the run off is possible. OK i can imagine that flexible sluices would have to be designed and manufactured. But since this would be a peacful engineering project Americans would be completely unqualified. The sluices would have to direct the water run off in to super tankers. But these tankers would not have to be double hulled. if the hull ruptures it is no major problem.
Then the tankers would not have to operate at a high speed. 3 or four knots until they are in the ocean currents taking them south wards. Then they ride with the current down to Spain, Portugal. Morrocco, and Mauertanian. Then it could get taken in a pipeline or an underground canal further eastward.
Would that provide fresh water at a lower cost per unit than the current disalination plants?
Yes I have heard of the idea of bringing ice bergs by ship to the middle east. Is my idea even less practical than that?
God, a world in which the only times that I get to cheer is when I come up with a new idea that might not even be a good one is a world with a really pathetic lack of leadership.
The success of our species is much more dependent on good leadership that it is on making the correct choice between socialism and captialism. Good leadership can overcome the disadvantes of either system.
Goodly institutions help create goodly leaders.