Monday Message Board

Back again with 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 You can also follow me on Twitter @JohnQuiggin, at my Facebook public page   and at my Economics in Two Lessons page

67 thoughts on “Monday Message Board

  1. I had pizza today and turned out the water the dough was made with was imported form Italy. If we’re prepared to import utterly useless Italian water into the country but not human beings we’re clearly bloody messed up in the head.

    (See my caveat above about how we would all be better off if we stopped kicking people in the goolies.)

  2. Without the imported water you wouldn’t have had that pizza. Clearly, we go without loads of dough due to all the imported human beings. So much that as a result many natives all too often can’t afford even a home made cheese toastie, let alone a home.

  3. BP Australia has announced today the shutdown of the WA Kwinana refinery over the next six months. The site will be converted to an import terminal. It currently employs around 650 jobs, reducing to around 60 once the import terminal is completed.

    Energy Minister Angus Taylor reportedly said that the closure of the refinery would not impact Australian fuel supplies.

    Australia’s other remaining operating oil refineries are:
    * Altona, Victoria, operated by ExxonMobil, employs about 350 staff, 2019 output 5,220 mega-litres of refined products, some talk of closure since COVID.
    * Geelong, Victoria, operated by Viva Energy Australia, employs about 700 people, 2019 output 7,470 mega-litres of refined products, some talk of closure.
    * Lytton, Queensland, operated by Ampol Ltd, employs about 500 workers, 2019 output 6,300 mega-litres of refined products, has been on extended maintenance during COVID, considering closure.

  4. Svante, the reason why there are homeless people is because we obtain sadistic pleasure from their relative deprivation. We could have housed everyone 50 years ago if we wanted to and we can definitely do it now when we are much richer. So rich we can literally afford to pay a human being to cook a pizza for us with Italian water instead of turning on the tap.

  5. Ronald,

    Quite right. There is no reason not to house everyone who wants to be housed. Standard economics plus ideological inflexibility plus special incentives for the already wealthy equal multiple perverse outcomes including inequality, climate change and ecological collapse. When will we ever learn?

  6. Excellent (the best?) article from FT.

    Testing testing. Cry for Italy. Smart South Korea.–a05d898c5dcd5f5ee4ef1a0fa747bdd5.svg
    “South Korea launched a huge testing operation before its first major cluster of infections; Italy’s testing capacity expanded only after thousands of deaths”

    “Covid-19: The global crisis — in dataCharts and maps show paradoxes of a pandemic that has claimed a million lives

    By FT Visual & Data Journalism team
    OCTOBER 18 2020

    “As part of a major new series, the Financial Times has compiled chronological chapters of the crisis using information drawn from around the world.

    “Individually, each tells a small yet important part of the story. Collectively, they help explain the virus’s enormous death toll — and why its impact will last for years to come.”

  7. Excellent article from FT. Lots of comparitive graphs & refs. And ‘The FT’ said – “Leaders have vacillated between reopening to protect the economy and locking back down to protect citizens. Yet recent analysis suggests that this may well be a false trade-off.” [Link]

    Testing testing. Early.
    Cry for Italy.
    Yay for South Korea. 

    “In early March, Italy and South Korea appeared to be on similar paths”–a05d898c5dcd5f5ee4ef1a0fa747bdd5.svg

    “South Korea launched a huge testing operation before its first major cluster of infections; Italy’s testing capacity expanded only after thousands of deaths”

    “Covid-19: The global crisis — in dataCharts and maps show paradoxes of a pandemic that has claimed a million lives

    By FT Visual & Data Journalism team
    OCTOBER 18 2020

    “As part of a major new series, the Financial Times has compiled chronological chapters of the crisis using information drawn from around the world.

    “Individually, each tells a small yet important part of the story. Collectively, they help explain the virus’s enormous death toll — and why its impact will last for years to come.”

  8. The relative situations of the UK and Australia illustrate why Australia’s COVID-19 near-elimination strategy was correct and why the UK’s flattening-the-curve response was wrong. The empirical results are in, at least up to this point in time.

    Australia near-eliminated the virus except for the second wave outbreak in Victoria, which now appears to be back under control. Much of Australia’s economy can operate at nearly normal levels except for Melbourne and some continuing interstate travel restrictions. Of course, dangers still exist. This crisis is not nearly over, even for Australia. The UK on the other hand faces another one month lockdown with large economic constrictions. If Victoria’s experience is anything to go by, a month lockdown in the UK will not be nearly long enough; at least not for near-elimination. If the UK continues to follow its flattening-the-curve strategy it could face yo-yoing lockdowns for up to four more years. That will devastate their economy.

    Both countries had comparable possibilities at the start of the pandemic. Both are island nations capable of locking down all borders to air and sea travel. Both have reasonable public health systems although the UK’s was degraded more by neoliberal policies than was Australia’s. Australia is less densely populated and that certainly helps. But the central difference was that Australia chose the correct strategy and the UK chose the incorrect strategy.

    As at least two economists on this blog (Quiggin and Clarke) recommended and predicted at the start of the pandemic, an early, hard, lock-down to near elimination was (and is) the correct strategy. I also advocated early on a hard lock-down to near-elimination. This prevents deaths and lingering illness, not only among the elderly and those with co-morbidity but also among the health profession and among some as yet inexplicably vulnerable young people as well. In addition, the economic and social damage from one early, hard, lock-down to near elimination is much less than from indefinite yo-yoing lockdowns. Precisely as John Quiggin predicted.

    Once again, we see that the neoliberal elites governing the UK, USA and also infecting other nations with their idiotic anti-science, anti-people, anti-environment ideology, have absolutely no idea how to run a modern economy and society. Their prescriptions have lead to utter disaster everywhere they have been implemented. The neoliberals white-anted public and social systems. The failure of most neoliberal infected nations to resist the exogenous COVID-19 virus challenge is the irrefutable empirical proof of the inimical nature of neoliberal capitalism and how it weakens our societies. One wonders how much more proof people need.

    Going forward, we have to destroy and expunge all vestiges of neoliberalism from our political and economic system. That extreme form of unfettered capitalism, run for the rich only, must be consigned to the dustbin of history for as long as humans remain on this planet. Indeed, if we don’t consign neoliberalsm to the dustbin of history, then humans themselves won’t survive on this planet for much longer.

    We, who have fought and advocated against neoliberalism for three decades or longer, are now fully vindicated and proven correct on every substantial point we ever made. We must press our advantage, destroy neoliberalism and implement policies for the common wealth and public good.

  9. “Wicksell begat at least three schools of thought – the Swedish, the Austrian, and the Post-Keynesian.”

    “Modern, Pre-Modern, Or Post-Modern Money? A Brief Guide For The Perplexed

    “He was in consequence able toformulate his rich empirical insights into the medium that, by the late 19th and early 20th centuries, was beginning to be that preferred by self-professed ‘social scientists’ wishing to look scientific – again, mathematics. The models that Wicksell constructed were accordingly attractive not only to people who knewhow the banking and money markets actually work, but also to some (albeit too few!) practitioners of the new ‘science’ of ‘economics’ then busy displacing ‘pre-scientific’ political economy in universities worldwide.

    “While Wicksell made many contributions for which he is still celebrated today – earning him that rare economists’ accolade of ‘economists’ economist’ – the contribution for which he is relevant here is his having recognized from the get-go the central importance of what he dubbed ‘bank money.’ Wicksellian bank money is simply the institution-generated credit-money that I noted above in connection with endogenously generated credit-money. It is immediately spendable, bank-extended credit, made spendable by public authorization and recognition through chartering requirements, public payment system administration, and legal tender laws.

    “Most so-called ‘heterodox’ schools of monetary thought whose names you hear nowadays, from so-called ‘Post-Keynesians’ to that one Post-Keynesian offshoot called ‘MMT,’ are Wicksellians whether they know it or not. (Many do know it.) So are the so-called ‘Austrians,’ from Mises and Hayek through Schumpeter and all their contemporary American disciples, as they all readily admitted when they wrote. This is ironic, to say the least, given how self-styled Austrians and MMTers are often taken by outside observers to be existential enemies, not to mention how ‘Keynesians’ and ‘Post-Keynesians’ – to the latter which school Keynes himself adhered – are all the time at each other’s throats. It is also ironic in light of how many heterodox economists believe Wicksell to have been a ‘classicist,’ owing to misunderstandings that I soon will dispel just below.

    “But it is true nonetheless. Wicksell is parent to them all.”…

    Wicksell “… recognized that efforts at reform must be directed toward changes in the rules for making decisions rather than trying to influence the behaviour of the actors.”

    …” Instead, Wicksell posited, wealth created by growth would be distributed to those who had wealth in the first place. From this, and from theories of marginalism, Wicksell defended a place for government intervention to improve national welfare. Wicksell influenced the field of constitutional political economy. His 1896 work on fiscal theory Finanztheoretische Untersuchungen called attention to the significance of the rules within which choices are made by political agents, and he recognized that efforts at reform must be directed toward changes in the rules for making decisions rather than trying to influence the behaviour of the actors.[3]”

  10. Ronald says: OCTOBER 31, 2020 AT 11:31 AM,

    “we obtain sadistic pleasure from their relative deprivation.”
    – We? Perhaps you do. The rich are enjoying the hugely increased profits that controlling ponzi Big Australia grants them to have the time to indulge in sadistic pleasure spin-offs other than the wry smiles that useful idiots provide them. Btw, got any evidence at all?

    “do it now when we are much richer”
    – Again with the “we”, Ronald? Royalty is it? Btw, got any evidence at all?

    Anyway it’s utter rubbish you’re spouting Ronald, at best just recycled propaganda from those elites who rule. You really are dreaming, eg, for just one measure, per capita GDP has dived and continues to sink because of population growing faster than GDP because of sky high immigration rates for twenty years. This deliberately drives a race to the bottom on working conditions, stagnated/falling wages for most and ever increasing insecure let alone full time employment. Good for the 1%! Beyond their wildest dreams in this country is the size and rate of increase in the “reserve army of unemployed” (so necessary to capitalism – Marx) that you seem to be in full support of whether through ignorance or indifference. High immigration consequences driving ever higher debt driving up booming housing prices. How are yours doing? Unaffordable house prices as never before for the majority and driving far more homeless native numbers (absolute and relative) than before, let alone in 1970. Far more facts than you would care to read are apparently in the 3 contemporary reports I’ve provided you this week. Get with current times Ronald, and for a giggle try backing up your outlandish bogus statements with some “facts” for once.

  11. Ikonoclast says: OCTOBER 31, 2020 AT 11:41 AM,

    “Quite right.”

    Yeah, hard Right that is.

    “There is no reason not to house everyone who wants to be housed.”

    Wrong. It is obvious to blind Freddy there are plenty of reasons. But in this Big Australia you are rolling with, what’s your actual fix?

    “Standard economics plus ideological inflexibility plus special incentives for the already wealthy equal multiple perverse outcomes including inequality, climate change and ecological collapse.”

    That is a pretty good summation of Big Australia. And of course, fundamental to Big Australia is Big Immigration.

    “When will we ever learn?”

    In about a decade or two after the immigration tap is turned down to a sustainable level. The rich had to learn the corollary lesson and it’s taken them around 50 years to get the neoliberal globalised thing to here, so a decade or two would be a good turn around.

  12. Ronald/Ikonoclast, for starters see:
    Cameron Murray’s Fresh Economic Thinking blog, Wednesday, October 14, 2020

    If a politician says they want affordable homes, they are lying

    What chance does a political party promising to radically reduce home prices to improve affordability have of getting elected?

    The electoral calculus is simple. There’s no chance. If they say they want to, they are lying. This reality is why the Federal Budget included policies to boost housing demand but do not expand the supply low-cost housing alternatives.

    The reality is that the richest seven out of ten households own $7 trillion of housing wealth in Australia. That’s $7,000,000,000,000, or seven million-million dollars. Every single 1% price decline wipes off $70 billion from the balance sheets of these households.

    Yet we find ourselves in the bizarre situation where politicians are obliged to talk like they want home prices to be lower and “more affordable” but must act in ways that support higher home prices. We can only conclude that our housing market is exactly where we Aussies want it.

    Consider these figures from a recent working paper I produced with Josh Ryan-Collins. Bank lending for housing grew from 20% of GDP in 1990 to 80% of GDP today. Business lending for investment grew from 35% to 40%. We have used the power of banking to bid up house prices by trading them with each other while neglecting investment across the business community. No one saw a problem with this because it helped house prices grow.

    While the media celebrated the ‘booming’ real estate market, during the 2010s homeownership rates fell from 70% to 65% – back to levels last seen in the 1950s. The main difference between now and then is that governments of the 1950s intervened strongly to get more people into homeownership with public loans for new homes, direct public land provision, and rent controls on landlords that prompted many to sell to owner-occupiers. The state also provided extensive public housing alternatives, with nearly 15% of new supply being public housing in the 1950s compared to just 2% across the past decade.

    You can see why our housing situation is so attractive for the homeowning cohort by comparing the economic returns from housing to wages. In the seven years to June 2019, the median Sydney home earned as much from rent and capital gain as the median Sydney full-time worker! This is astonishing. Capital growth of all land, not just residential, went from 9% of GDP on average between 1960 and 1980, to 17% of GDP since 2000, roughly twice the relative return to landowners than just 40 years ago.

    Reversing these trends will benefit younger generations who are resigning themselves to the fact that homeownership is beyond their reach. While the “bank of Mum and Dad” has helped shift some housing wealth down the generations, it has entrenched inequalities. Waiting for inheritances won’t work either. The average age of receiving an inheritance is 64 years.

    Housing is a defining social issue of our time. We have many technical solutions in our working paper, but the sheer economic value at stake and the political realities of this mean that change won’t be easy.

    The problem with making home ownership more affordable is not a small elite locking the majority out: a lot of us (ie homeowners) have a lot to lose if we want to share the joy of a home of one’s own.

  13. High house prices are counter-productive for the majority of the population. From the figures above, 35% do not own a dwelling (house, unit, apartment or flat). Of the 65% that do I would hazard a guess that only 5% own more than one dwelling. That means 95% own no dwelling or one dwelling. High house prices are of no assistance to this 95%. The high prices are a negative for the 35% as it is too hard to purchase a dwelling. High house prices are even a negative to those who “own” one dwelling. Many are still paying mortgages for a start.

    High prices also mean changing homes is costly. The new home is expensive too and there are thus more costs to sell and buy as costs and taxes are percentages of sale-purchase prices. The extra equity is of little use unless speculatively negative gearing so this only helps the 5%.

    Only the top 5% (probably the top 2% actually) really benefit from high house prices. Politicians and their mates in big business are in the top 2%. They keep this system up for themselves. People are fooling themselves if they think their sole residence expensive-house is real convertable wealth. It is not realisable unless you want to pay rent again and be at the whim of a landlord. If owned outright, it can be re-mortgaged for a retirement overseas trips but that is (a) unwise [1] and (b) pointless now under COVID-19. Actually, the house is a money sink in many ways. Trades charge more because the house looks or is expensive. They assume the owner has capacity to pay and the owner has to maintain the property or lose value.

    People have been greedy, passive and foolish. They let neoliberalism take over. They refused to join unions. They refused to take strike actions. They refused to stand up to the neoliberal capitalists and vote them out. Now we face the consequences.

    Note 1. The bank will likely reacquire the house at some point. Interest rates could rise in future. Anyway, the children will need an inheritance since they can never afford a house otherwise. This is a bad state of affairs but given this bad state of affairs I personally consider it my duty to leave my property unencumbered to my 2 children when I kick the bucket. That will give them a decent stake. First, they are forced to go out and make a go of things themselves when young. That’s not a bad thin. The young are resilient and flexible. Then, if it’s too tough by the time they hit their 40s I will conveniently kick the bucket about then and they will get something.

  14. Housing is a quite sad topic. The problem in my opinion has little to do with neoliberalism in the narrower sense. In most places with high housing prices, there is lots of empty flat land around to build on. Some exceptions exist – gigantic cities like Paris where the most brilliant expensive public transport network and extreme density jut aren’t enough anymore to get people an affordable place with a decent commuting time, or places like Stuttgart that are surround by hills. Guess most of Japan is even worse.

    Albeit, those are not the only places with sky-high prices. Munich or my hometown are both places with artificial scarcity, based on density limits and mainly on just not allowing construction in the adjunct empty space. Ideally, new real estate would be government owned and there would be no windfall gains for agriculture landowners. There would also be a great plan with good public transport walk ability for shopping, maybe even wok and all that sure. Still, even the let just everyone built as he wants wherever he wants solution would be a major improvement to the ridiculous status quo.

    I’m not living directly in town – rather in a small commonality, that is legally separate from the town. Basically the only thing the council cares about is real estate kindergarten: Who’s farmers land will be turned into construction land? How will the spoils be shared between the commonality and farmer? Legally the farmer could be just expropriated at farmland prices. Granted, that takes some time in court, still it should be enough of a threat to get the prices close enough to that level. Somehow it never happens anywhere close to that price. Who will be then be allowed to buy the individual lots at a below market price? Preferably a married long term resident moving directly to the new house from his parents home.

    And let’s not forget the most important thing: The major shall not dare to allow more than 2 floors surrounded by a big garden, otherwise she will be stoned by all the villages rich retires: “I wasn’t allowed to build 2,5 floors either 40 year ago, why can he do it now, that looks so ugly and so big it’s covering my son (at least 6 meter away….). Result: Not enough construction, and a lot of it in the villages far away from the city, where everyone is commuting another unnecessary 4 km by car, whenever that farmer fraction wins the mayoral election.

    If you think all farmers want their agriculture land turned into construction land, at least if they can capture a sufficient part of the value gain, you’d be wrong. Some just got enough millions, hate any change and like to hoard it. Guess the part about the holiness of private property stopping the commonality from just expropriating the farmers at agriculture land prices is neoliberal in the narrower the sense. Piketty would albeit argue that is good old pre-industrial propietarianism. It’s not really better in the city. They could not even manage to get the subsidized student dormitories built next to the University campus, rather many require to change buses to get there.

  15. Svante, I used to own zero pairs of shoes. Now I own three. I have a friend who works in marketing who is so rich he owns a 10 year old car and recently bought a house. I have incredible wealth for only a few hours work a day. (I am paid for 37.5 hours. I work 20 hours. And it takes me 60 hours to do it.) We are wallowing in material largess.

  16. Well then Ronald, there’s some odd self referencing facts and good on lucky you and your mate for having things so good and doing alright for yourselves. No doubt you’ve told that poor bugger Jack too.

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