Monday Message Board

Another Message Board

Post comments on any topic. Civil discussion and no coarse language please. Side discussions and idees fixes to the sandpits, please.

I’ve moved my irregular email news from Mailchimp to Substack. You can read it here. You can also follow me on Twitter @JohnQuiggin

I’m also trying out Substack as a blogging platform. For the moment, I’ll post both at this blog and on Substack.

24 thoughts on “Monday Message Board

  1. Harry, over to you…

    “Corporate profitability increasing per wages paid”
    Jim Stanford

    “Indeed, by the end of 2021, corporations made 62 cents in gross profit for every dollar they paid in labour compensation. That’s the highest in history – and more than twice the rate in the 1970s.”
    [Graph – “Corporate profitability increasing per wages paid
    “Gross profit per dollar paid in wages in Australia, 1960-2022.
    “Chart Source: Centre for Future Work calculations from ABS National Accounts  Get the data]

    “Richard Denniss: Huge profits are driving inflation – not low-paid workers”

    “In theory, competition between different companies is so fierce that if one company tried to gouge its customers, a rival firm would cut their lunch. And in theory if one company kept increasing prices even when their workers’ wages were falling, rival firms would steal their market share. But in Australia, such theory is next to useless…
    [Because… -link to Rod Simms below]

    “Our energy, retail, transport, grocery, banking and retail business are among the most concentrated and most profitable in the world.”

    “From groceries to energy, there’s not enough competition in Australia

    Rod Sims

    “To lift wages and productivity, and reduce inequality, government must push against the instincts of the corporate sector”

    “More Resources on Australia’s Wages Crisis”

    May 19, 2022

  2. “From groceries to energy, there’s not enough competition in Australia”

    Is this peculiar to Australia in any particular way? I thought it was a feature of capitalism (and in particular global capitalism) all around the world. In fact I would suggest – without any hard data – that over my lifetime (begun in the 1950s), competition has increased rather a lot in many sectors.

    I would agree that supermarkets (groceries) are dominated by Woolworths and Coles, and presumably they have far too much power over their suppliers, but in general this leads to lower prices for consumers, rather than higher ones. And in any case, at least in our corner in inner-north Melbourne, there is a reasonable amount of “local” competition, with IGA, Foodworks, a couple of other small chains, and independents. There are also several thriving fruit & veg markets.

    And in the area of household products and electrical items, the amount of competition is very impressive. We had occasion to fully furnish an apartment on the Gold Coast – there were probably twenty or more places within reasonable range to buy everything from beds to carpets to televisions, to cutlery, and sheets. And many of these places will price match any other legitimate offer.

    Even the big banks have a reasonable amount of competition these days, particularly as banking has gone increasingly online … we use several banking-investment companies that don’t have bricks & mortar premises anywhere – we don’t need them.

    Energy is a different matter – but being an old commie, I think natural monopolies that rely on huge publicly funded infrastructure, should be in public hands – water, gas, electricity, telecoms, roads, airports, ports, and so on.

  3. KT2, I don’t know where Jim Stanford came up with these figures but if they are based on the functional shares of labour and capital then they are distorted because of the inclusion of implicit rentals on owner-occupied housing in property income. With record property prices these would be significant. But I don’t know the reason for the figure he cites and it is irrelevant. It’s the same confusion that Ikonoclast makes in confusing normative arguments about what the economy should look like with positive arguments about where the economy is going.

    Richard Dennis and Roid Sims argue for increasing competition in Australian industry. I cannot think of a single economist in Australia who would disagree with that. It’s difficult though: We are small economy so local industries tend to be dominated by a few firms which does increase monopoly power. Opening up the economy to completely free trade would help but tariff barriers are already low so gains would not be that big and the dominant bservice sector locally is not subject to much international competition anyway. But any suggestions in this regard are welcome – but they have nothing to do with the current policy problem.

    Neither normative concerns about what the economy should look like or concerns about inadequate competition address the crucial issue of the wage-price spiral that seems to be unfolding in Australia, and internationally, at present. This would take Australia back to the 1970s as the attached editorial from the AFR today makes clear. With 7% inflation this year to more than dominate the 5.2% minimum wage increase that will spread to one quarter of the economy the trade union movement is already positioning itself for further “catch ups”. Listen to the teachers in NSW – “3.5% increase is not enough to cover price increases so we will go on strike”. Listen to Sally McManus.

    I have read John’s point that the trade unions are weaker than they were in the 1970s but is that true. We are currently experiencing the lowest unemployment for decades – this gives workers a lot of power at the bargaining table.

    This will be disastrous even if real wage reductions are foisted on workers. It isn’t a moral issue but a positive one. Avoiding something that you see as morally bad can lead to an outcome thar is morally much worse – a wage price spiral.

    A wage-price spiral will generate sustained high inflation and eventually to an inevitably tough monetary response that will push mainly minimum wage workers onto social benefits. In short stagflation. Tens of thousands extra on unemployment benefits, interest rates throwing people out of their homes because mortgages become unpayable, businesses failing and so on.

    I think we face a critical time in our history because of the sorts of partisan views being expressed by people who ignore the gravity of our situation. Inflation is a real problem and we want to get it back under control before inflationary expectations embed it permanently.

  4. Harry Clarke – I think you’re overstating the problem quite badly.

    We have had historically low interest rates since the Global Financial Crisis of 2008, and I think it’s high time that interest rates returned to historical “norms”. There are many people who rely on interest rates being semi-reasonable … a large number of people are living on fixed incomes, and interest rates matter to them critically.

    I have little sympathy for the home-buyer who mortgages themselves to the hilt to buy a slice of paradise somewhere … so many of them have over-reached because interest rates have been as low as 2.5%. Well, I’m sorry, but their desire to have almost interest-free huge money does not trump the needs of those of us who have been diligent savers, and who would like 6-8% return on our nest-egg to be the norm.

  5. Harry Clarke continues with an ideologically driven and intellectually dishonest analysis of inflation and a myopic prescription for placing the entire burden of inflation fighting on workers, especially low-paid workers.

    For ideological reasons, Harry ignores and refuses to discuss profit-push inflation and supply-shock inflation which are both large contributors to the current round of CPI inflation. He also ignores asset inflation from credit inflation.

    From the above article:

    “Nominal wage growth has languished well below that 3.5% benchmark since 2012. The last time wages grew at more than 4% was 2009.”

    So wages have NOT caused this inflation round. Workers have been, perhaps reluctantly, fighting inflation for the last decade by receiving low pay rises. It is time for those causing profit-push inflation with excess profits, low taxes and tax avoidance to pay their way and fight this round of inflation. The workers have sacrificed too much all ready and our nation is suffering more inequality because of it.

    But some don’t care about inequality and underpaid workers. They care only about their share dividends, property rents and positions of privilege based on their work-free income: income received for doing nothing but “owning”.

  6. Ikonoclast, If you had actually read the article you link to carefully you will see that I referred to it in my first sentence above. I was responding to KT2’s question – he he also linked to the article but I assume you didn’t read that either. You are not only insulting and disrespectful of the views of others but bone ignorant and careless.

    Nowhere in my piece did I state that wage increases had caused the current inflation. The factors initiating the current high inflation are irrelevant to the issue at hand – that wages are being set to compensate for past price increases – this I expressly stated above. The current high minimum wage increase will be more than offset by price increases by year’s end. Given the low unemployment rate now that sets the stage for a wage-price spiral as damaging as the one that occurred in the 1970s. As stated the ACTU and some public sector unions are already arguing for compensatory wage decisions.

    You might occasionally attempt to come to grips with an argument rather than launch into an unpleasant tirade.

  7. Harry,

    You ignore profit-push inflation, supply-shock inflation and asset inflation. You continue to ignore them because they are not convenient to your argument. For balance, you should be calling for all inflation causes to be addressed and not simply calling for workers to shoulder the full cost of inflation fighting. The only inference I can make from such unbalanced advocacy is that it comes from a position of asserting capitalist property rights over all other human and worker rights.

  8. From the bleachers – in the US, there isn’t nearly enough antitrust enforcement in some major areas. It is that we have weak laws, I think. It varies a lot though. We pay too much for internet access, for one thing. (And that is in a major city.) And people have probably already heard about our ghastly medical system. Otoh, restaurants seem to crash frequently (which I feel bad about …)

    I don’t know what caused inflation. I don’t feel persuaded by the argument some make here that it happened bc of the pandemic aid – though, I can’t say why, exactly, that sounds wrong to me. Likewise, I *feel* like I remember it being caused perhaps more by energy prices. I seem to recall those going up first – and then dragging everything else up. But, I could be wrong. (And I’d never heard of this profit-push idea … there may be something in that. I will go google it.)

    James, I don’t know if you’re around here, but if so, I have an idle question. If you had to choose between driving a really old car that got better mileage, v a 2009 car that eats more gas but has a “partial zero emission” sticker on it, should I assume that the old car lets out more ghgs? Does that seem like a safe assumption?

    I plan to dig out the paperwork from my last smog check on my hoopdie, but meanwhile, I am driving the bigger, less polluting one when I can. Meanwhile, I try not to drive much. It is just that people say cars are so much cleaner now, but then, people say a lot of things.

  9. Harry “”It may be some time before the underlying trend in business activity can be accurately estimated.” ABS below. Wages seem not to have the same estimation problem.

    N says “I don’t feel persuaded by the argument some make here that it happened bc of the pandemic aid”.

    N, & Harry & Ikon & all, Australian Bureau of Statistics says;

    “Company gross operating profits 
    Seasonally Adjusted
    10.2qtr 25.3yr

    “Wages and salaries
    Seasonally Adjusted
    1.8qtr 5.2yr

    “Company gross operating profits rose 10.2% seasonally adjusted 

    “Wages and salaries rose 1.8% seasonally adjusted

    “Suspension of trend series
    “The trend series attempts to measure underlying behaviour in business activity. In the short term, this measurement will be significantly affected by changes to regular patterns in spending due to the Coronavirus pandemic. If the trend estimates in this publication were to be calculated without fully accounting for this irregular event, they would likely provide a misleading view of underlying business activity.

    “It may be some time before the underlying trend in business activity can be accurately estimated.”

    “Business Indicators, Australia

    “Quarterly estimates of private sector sales, wages, profits and inventories

    “Reference period
    March 2022


    Key statistics

    “Current price estimates for the March quarter 2022:

    “Predistribution and profits: extract from Economics in Two Lessons

    “More generally, though, the idea that corporations are a natural part of the economic order, with all the human rights of individuals, and none of the obligations needs to be challenged. Limited liability corporations are creations of public policy, useful to the extent that they promote the efficient use of capital but dangerous to the extent that they facilitate gross inequalities of income and opportunity.”

    Chris Warren says:
    January 28, 2012 at 9:12 am

    “You cannot target inflation or GDP, or unemployment, if you do not target profits.”

  10. Published today (Jun 28) by the Australian Security Leaders Climate Group was a report titled Food Fight: Climate change, food crises & regional insecurity.

    Ahead of the report’s release, the former Australian defence force chief Chris Barrie said a rapidly heating planet “fundamentally threatens our ability to secure our food and water supplies”.

    “It is clear that a lack of food – driven by war, climate change or a combination of both – can destabilise and lead to even more conflict,” Barrie said.

    “Food insecurity is a growing crisis brought into the spotlight by the invasion of Ukraine, and it is a crisis that Australia is ill-prepared for.”

    Meanwhile, a new landmark study published by the US Marine Corps University concludes that the activities of government military and intelligence agencies over the next decade are accelerating the likelihood of triggering a worst-case ‘Hothouse Earth’ scenario that would make the planet “unliveable for most species”.

  11. Jim O’Neill 2022 from Harry.
    “A wage-price spiral is a ticket to revisiting the 1970s

    2017… “Jim O’Neill on why globalisation will die unless wages rise”


    Harry Clarke says:
    June 27, 2022 at 10:55 am
    “This would take Australia back to the 1970s as the attached editorial from the AFR today makes clear.” And the highky acckained writer you refer to says one thing this year and another in 2017… “Jim O’Neill on why globalisation will die unless wages rise”

    Except Jim O’Neill’s last paragraph of the 2022 AFR piece you refer to Harry …”Without price stability or productivity improvements, generous wage, fiscal, or monetary policies will represent nothing but false promises.”.

    Productivity improvements he notes in 2022, are not being invested in by capital to a sufficient amount. So how will “just wages” be the only cause of inflation? Jim O’Neill specifies other factors beyond wages.

    How many wage rise vs inflation disconnects can wage earners bear whilst profits are 10-25%,  (as can be seen in the ABS data I linked to above.)

    How about Harry, you tell us how tax & investment effect inflation. Prices cintain mire information than just “wages”.

    “A wage-price spiral is a ticket to revisiting the 1970s

    “Without price stability or productivity improvements, generous wage, fiscal, or monetary policies will represent nothing but false promises.”

    Jim O’Neill
    Jun 26, 2022

    “Policymakers should tell businesses to forget about tax cuts unless they can marshal evidence to show that such measures will boost productivity.

    “Decades of corporate tax cuts do not appear to have boosted business investment and productivity in any meaningful way.”

    “Jim O’Neill on why globalisation will die unless wages rise”
    Updated Mar 8, 2017

    “Half joking that his remarks would cause a “shudder” for most people of his generation – which started its professional life in the hyper-inflation era of the late 1970s and early 1980s – the former Goldman Sachs economist said his profession’s top-down obsession with weak productivity growth missed how much the labour market has changed over that time.

          “For more than three decades, the ease with which companies can hire and pay for labour has made it easier to employ more people than is strictly needed from a productivity point of view, he suggested.

          “From 40,000 feet we all sit around in many of these [advanced] countries debating why productivity has fallen sharply – actually it is one of the simple reasons, again, why we economists as a collective profession are occasionally useless.

          “Because the price of labour and the way it’s employed has become so flexible, it’s been perfectly rational for the past 30 years for more labour to be employed at the expense of [productivity performance].”

          “One of the things that George Osborn and I discovered – and his advisors agreed, and we pursued with some controversy particularly from [the UK business community] – was to deliberately introduce policy to quite dramatically boost minimum wages.

          “Some politicians were shocked that somebody from the Conservative Party would do that. It’s being done as a way to deliberately deal with this issue. ”

    Jim O’Neill, Baron O’Neill of Gatley

    “O’Neill sat in the House of Lords as a Conservative life peer from 28 May 2015 to 23 September 2016. After leaving the Conservatives, he then sat as a non-affiliated member of the House of Lords 23 September 2016 to 9 October 2017, and he has sat as a member of the crossbenchers since 9 October 2017.[23]”'Neill,_Baron_O'Neill_of_Gatley

  12. When big inflation hits, we choose a side: i.e., we say it is naughty for wage earners to demand a larger wage packet, in light of the rampant inflation they are subjected to. So, we blame the “naughty” wage earners for simply wanting enough money to stay even with inflationary pressures. On the other hand, we fail to castigate the other economic powers in the Economy, i.e. the producers, the distributors, the retail outlets and the Amazons of the order-industries. Why is it that an economic question, i.e. what will workers do in the face of high inflation, become some kind of moral judgement about that class, rather than some other class of players in the same damn Economy? Something about the rough end of a pineapple, I think.

    I’ve lived through the Fraser 21%, and the Recession-we-had-to-have, etc. Ultimately, most economic forces are ones that require a rather difficult navigation, and even then some of those forces overwhelm whatever a single country could hope to offset. It is such a simple piece of conceit to place a moral judgement upon wage earners for seeking a higher wage, given the so obvious inflation they feel every day. Yes, their response feeds back into inflation; yes, that is a difficult matter; that doesn’t mean the wage earners are morally deficient or somehow not taking one for the team, like perhaps some of the political class hope. Crikey, the CEOs now earn up to tens of thousands of what the proverbial cleaner does…it was once more like a few multiples of that minimum wage, not this stratospheric situation we have now. I think that government responses have to accept the reality that wage earners will react, and will be legitimately reacting, to the inflation they are faced with. Working for a better environment must take into account the needs of the lowest wage earners, and probably the average wage earner.

    On to housing. Right now, I have met two people for whom housing is a zero. Like, 4C degrees, overnight. Meanwhile, we have 0.2% vacancy rate in the CBD! Like, I have never in thirty and then some years heard of a vacancy rate below 1%, let alone 0.2%. It’s insane. Rents must be crushingly high…oh, wait, they are. Why is this, though? We have fewer people in the country, thanks to two years of Covid. Sure, that’ll eventually re-equilibrate, but at the moment, too many people cannot be the main reason for such tight rental markets. I’ve seen a similar phenomenon with housing in the more rural towns. Why, again; why? Only some of it could be from investment behaviour. The rest of it is rather unexplained. I read a very unsatisfactory article on the ABC website only yesterday; it attempted to explain the current situation as due to a multitude of separate factors…well, good; but no, the factors presented cannot be the drivers. If you suddenly depoppulate the CBDs of overseas full-fee paying students who work nights at cafes and pubs and clubs, how is it we now have the lowest unemployment rate since I was a lad? It doesn’t make sense.

    In the words of a certain politician, “Please explain.”

  13. I have, after many years beating the drum for the EV transition, finally aligned my actions with my beliefs, and ordered an electric Hyundai Kona. My hypocrisy score has gone down.

    Will I be out of pocket? Conveniently for analysis, you can still buy the same car with a gasoline engine. (This is becoming rare, as new EV models like the Hyundai Ioniq are usually built on specific electric platforms, not polyvalent ones). The price difference in Spain on the website is about €7,000, after the government subsidy also of €7,000. This includes a scrapping incentive of €2,500.

    EVs are much cheaper to run. My car comes with a free charger from electricity company Endesa. There is a startling promotional electricity price of €0 per kwh if you charge only at night. That will stop after 10,000 km. But the variable charge for night-time electricity under my current domestic supply contract is a negligible €0.003 per kwh on my latest bill – 79% of it is fixed charges. How come? Probably because 20% of Span’s electricity comes from 7 GW of ageing but reliable nuclear reactors, which must run even when there is little demand, as on summer nights. These will all close between 2027 and 2035. They will have to be replaced at night, especially in winter, by new wind and storage. These are not must-run so the price will presumably rise.

    Let’s guess an average night-time variable electricity price of 2c/kwh, consumption of 14 kwh per 100km, and mileage of 100,000 km over ten years. The total fuel bill will be €280. With the gasoline version, at 5l per 100km and a gasoline price of €2 per litre, it would be €10,000. The upside price risks are much higher for gasoline. Ignoring savings on maintenance, breakdowns and possibly insurance, the comparison on a total cost of ownership breaks even at 7 years with the subsidy and 14 years without.

    Since I’m 75, I’m getting the 39 kwh battery with a modest WTLP rated range of 307 km. The 64 kwh version has a rated range of 484 km and a €5000 hike in the price. The difference for me is having to stop twice for recharging on a hypothetical trip to Lisbon or Madrid, so what. It´s hard to justify the bigger battery on a TOC basis, but it could work out if you do a high enough mileage. Incidentally, for most drivers the higher electricity price at en-route fast charging stations is just a rounding error in the total fuel bill.

    Conclusion: my green virtue (and lowering my asthma burden) is not really going to cost me anything. Join the club.

    PS: Endesa’s loss-leader marketing bears thinking about. We live in an economy of fat, greedy and politically influential monopolists. Fossil fuel companies have a simple line on the energy transition: they are against it. For electricity companies, it’s more complicated. On generation, cheapness, reliability, flexibility and reputation argue for renewables, legacy assets for fossil, plus the nuisance of competition from home solar: the balance is shifting towards renewables, but it’s not simple. However, electricity companies have no such internal conflicts over electric vehicles. These are entirely good news for them, and a great marketing opportunity. It’s now fossil Godzilla versus electric King Kong. Pass the popcorn.

  14. Congratulations!!! That’s awesome. I hope it is a happy color.

    I would very much like to go electric some day. I don’t come from new car buying people. And I just don’t have the income to make it feasible. I think the most likely scenario is either someday finding a decent used one (and the used car market is really horrid for buyers right now, plus the added uncertainty of new tech), or, possibly more likely?, is that someday it will be affordable to retrofit an old car.

    That appeals to me as classic cars were so much more beautiful anyway.

    There was, for a while, an option to lease these extremely cute little electric imports. The thing is, the range was too short. I don’t drive much but I need at least 100 miles, bc one of the places I drive to is an apartment building with no chargers in it yet. (Though, I suppose, I could look into doing something about that.) I have forgotten which import company it was. I think they were only offering them bc California made them.

    I could though just rent a car by the day. I should look into how much that would be. I mean, maybe just the gas savings would make it even out, or close. Hmm. That hadn’t occurred to me before.

  15. KT2, I guess it sounded like I was against higher wages? Not at all! Apologies if I sounded that way. I mean, I could *imagine* a place where unions were too strong, but it ain’t here! Ha, unless maybe the public ones, politically. But I’ve never crossed a picket line. Until this generation, we were all union people. (Well, that is, we union’d up as soon as it was feasible. There are some stories there.) And some of us still are.

    I hope to see the current unionizing trend in the US continue, and it would be great if we could re-introduce a cap on CEO pay as a multiple of entry level, in our state. (Is there a term for that?) That just seems like basic good sense, and at least worth a try.

    If an economy is like a body, we need to get the circulation going better than it is now. For the good of everyone.

    Meanwhile, short term, we need to figure out how to get all these people fed. I don’t remember my Econ that well anymore, truth be told. If you have inflation, is it better to give away food, or give people cash? Yeah, that sounds like a question that would change depending on the location. All I really want to say is, I hope we won’t let our inflation worries stop us from helping.

  16. James Wimberley: – “I have, after many years beating the drum for the EV transition, finally aligned my actions with my beliefs, and ordered an electric Hyundai Kona.

    How long before you take delivery?

    Meanwhile, Tom Quinn tweeted a thread yesterday (Jun 28) about scenarios on how long it would take Australia to transition its vehicle fleet away from petroleum fuel dependency.

  17. Don says “we fail to castigate the other economic powers”. See below.

    Don – “Crikey, the CEOs now earn up to tens of thousands of what the proverbial cleaner does…it was once more like a few multiples of that minimum wage, not this stratospheric situation we have now.”

    Professors (yes you too),
    Q: What effect have the concepts of;
    – “shareholder value”, 
    – tied to executive remuneration and 
    – stock / share buy backs 
    – wages,
    – investment and
    – productivity? 

    To what extent does “shareholder value” exist in Australian markets?

    Lenore Palladino says “Stock buybacks are one of the drivers of our imbalanced economy, in which corporate profits and shareholder payments continue to grow while wages for typical workers stay flat.” (^17)

    – “When it comes to bad ideas, finance certainly offers up an embarrassment of riches” including “Efficient Market Hypothesis”. (^1)

    “Shareholder value is the dumbest idea in the world.” Jack Welch (^1.)


    By James Montier
    December 01, 2014

    “Executive Summary

    “When it comes to bad ideas, finance certainly offers up an embarrassment of riches
    – CAPM,
    – Efficient Market Hypothesis,
    – Beta,
    – VaR,  – portfolio insurance,
    – tail risk hedging,
    – smart beta,
    – leverage,
    – structured finance products,
    – benchmarks,
    – hedge funds,
    – risk premia, and
    – risk parity
    … to name but a few.

    “Whilst I have expressed my ire at these concepts and poured scorn upon many of these ideas over the years, they aren’t the topic of this paper.

    “Rather in this essay I want to explore the problems that surround the concept of shareholder value and its maximization.

    “I’m aware that expressing skepticism over this topic is a little like criticizing motherhood and apple pie. I grew up in the U.K. watching a wonderful comedian named Kenny Everett. Amongst his many comic creations was a U.S. Army general whose solution to those who “didn’t like Apple Pie on Sundays, and didn’t love their mothers” was “to round them up, put them in a field, and bomb the bastards,” so it is with no small amount of trepidation that I embark on this critique.

    “Before you dismiss me as a raving “red under the bed,” you might be surprised to know that I am not alone in questioning the mantra of shareholder value maximization. Indeed the title of this essay is taken from a direct quotation from none other than that stalwart of the capitalist system, Jack Welch. In an interview in the Financial Times from March 2009, Welch said “Shareholder value is the dumbest idea in the world.”

    “Download to read the full article.

    Via link from;
    “The greed undermining privatisation and demutualisation”
    … [Telstra, Commonwealth Bank,  AMP, NRMA and St George, QR National, NIB]
    “Driving the pay escalation is the concept of “shareholder value” (i.e. the share price). A paper by James Montier seven years ago proposed “shareholder value” was the finance world’s dumbest idea.
    “Qantas has seized control of what used to be the agrarian socialism formula of privatising profits and socialising losses.

    “The government was too dopey to follow the American GFC lead of taking equity when bailing companies deemed too important to fail.

    “An opportunity lost – the chance to reinstate the steadying influence of the common wealth investing for the long term.”

    [I sold my AMP shares at $19. Fell to $9 within 3 mths I think. Demutualisation boutique investment managers bought wineries with “fees”, capitalised in land zoning as suburbs and lifestyle blocks. Capital gains now unearned intergenerational wealth. Yes, I personally know them.]

    “Share buybacks

    “Economic impact

    “Only when Rule 10b-18 was implemented in the US, stock repurchases were seen as “virtually unregulated”. According to the Harvard Law School Forum of Corporate Governance, stock buy back programs are “drivers of our imbalanced economy”, in which poverty increases and corporations are less willing to increase worker’s wages.[17]”

    “Examining Corporate Priorities: The Impact of Stock Buybacks on Workers, Communities and Investors

    Lenore Palladino

    …”but the funds spent on buybacks are then unavailable to be spent on the types of corporate activities that could make the company more productive over the long term: investments in future productivity and in the workforce. Stock buybacks are one of the drivers of our imbalanced economy, in which corporate profits and shareholder payments continue to grow while wages for typical workers stay flat.”…

    “Stock Buybacks Are Premised on a Flawed Model of Corporate Governance

    “However, shareholders are not the sole risk-takers, as other stakeholders also take risks: Employees risk the loss of their sole source of income, and the entire society risks suffering from the negative externalities created by the production process.”

    Lenore Palladino 2019
    Senior Economist and Policy Counsel at the Roosevelt Institute. This post is based on her recent testimony before the United States House of Representatives’ Committee on Financial Services.

    Australian “failed” share buyback examples;

    “When buy-backs go wrong

    1. National Australia Bank (ASX:NAB) buys back shares at $40.94 and raises two years later at $21.50″…

    “Why you should be wary of share buy backs”

    Anthony Aboud 
    28 August 2019

    “In a recent interview to the Economic Club of New York, Stanley Druckenmiller eloquently broke down the numbers. He made the point that corporate debt has increased from $6 trillion in 2010 to $10 trillion today. Despite this, earnings have only increased by $500 billion in aggregate. Unfortunately, this increase in debt is not going towards innovation or growth capex, but rather buybacks.

    “Over the period 2010 to 2018, buybacks rose from 20% of capital expenditure to 55%, with a much higher stock market… I was afraid that people were going to do stupid things and indeed they have”.

    Shudder – Margret Thatcher & Kenny Everett together! 
    “Everett openly supported the UK’s Conservative Party under Margaret Thatcher and made publicity appearances at conferences and rallies.”

  18. N, Geoff: Thanks. The car the dealer could offer for July is a cheerful blue. I suspect delivery would be longer for the flashier 64 kwh battery version. I suspect the EV transition will go faster in commercial vehicles once it gets going, from (a) the shorter working life (b) owners who think in terms of ToC not sticker price and do not suffer from range anxiety (it’s enough or not).

    ToC is the rational way to choose. Unfortunately it’s inherently iffy. But even a crude attempt like mine is good enough to sort the choices into three boxes on cost, “significantly cheaper”, “significantly dearer”, and “about the same”. Unless you live in the Outback, and most Australians do not, EVs are clearly well ahead on driving comfort and convenience, not to mention green virtue.

  19. Is The Philips Curve a zombie?
    The Philips Curve renders “… the power play between workers and capital is hidden” according to Bill Mitchell,.

    Q: to what extent is / has / does the Philips curve utilized in Australia and recently in wages submissions?

    If the power play between workers and capital is hidden, markets don’t get all information and can never clear, except toward their own capital gain to provide equilibrium, leaving workers as market & inflation stabilisers. “…Keynes, considered the American proposals for salaries to be “monstrous”, but lost the argument.” from “Christine Lagarde, scourge of tax evaders, pays no tax” below.

    Via Bill Mitchell.
    – Christine Lagard uses 3,700 ECB workers as inflation  stabilisers… and 
    – the “New Keynesian inflation model is unfit for purpose” and 
    – the Philips Curve renders “… the power play between workers and capital is hidden” according to Bill Mitchell. And “there has been controversy over the usefulness of the Phillips curve in predicting inflation”. Wikipedia below. 

    JQ said “On balance, I think macroeconomics has gone backwards since the discovery of the Phillips curve in 1958”

    “European Central Bank chief Christine Lagarde rejected union calls to peg wages to inflation at the Frankfurt-based institution as consumer prices in the eurozone soar.

    “Indexing the wages of employees to inflation was “not desirable and not intended”, Lagarde said in an internal memo to staff on May 5, seen by AFP.

    “In the note, first reported by Bloomberg News, Lagarde said many staff were “disappointed” by the increases they received this year under the current pay formula in light of high inflation.

    “Consumer prices in the eurozone rose at an annual pace of 7.5 percent in April, an all-time high for the currency club and well above the ECB’s two-percent target.

    “Our mandate is price stability and we will do what is needed to ensure that inflation stabilises at our two-percent target,” Lagarde said in the memo to the central bank’s roughly 3,700 staff.

    “The ECB’s management is asking us and all workers in Europe to take the hit for the sake of maintaining price stability,” said Carlos Bowles, vice president of the IPSO union, which represents ECB employees.

    “Clearly this line of reasoning is not something that we and other European workers can accept,” he said.

    Bill Mitchell is not impressed and (I think?) stucks the boot in to micro;

    “New Keynesian inflation model is unfit for purpose”

    “The capacity of workers “to recoup losses in purchasing power”, or firms “to compensate for squeezes in profit margins” is typically absent in the mainstream Phillips curve.

    “So the power play between workers and capital is hidden.

    “3. “a weakening in workers’ bargaining power), will result in a “flattening” of the Phillips curve, a well documented stylised fact.”

    “4. The “New Keynesian Phillips curves” approach, “suffers from serious practical shortcomings”.

    “Most importantly:

    “The state of macroeconomics: it all went wrong in 1958”

    JANUARY 5, 2013

    “On balance, I think macroeconomics has gone backwards since the discovery of the Phillips curve in 1958 [1][2]. The subsequent 50+ years has been a history of mistakes, overcorrection and partial countercorrections”

    “Broadly speaking, as far as academic macroeconomics is concerned, DSGE has won the day, not so much by force of argument as by maintaining control of the criteria for publication of journal articles in the field: it’s OK to assume full employment, and ignore inflation, but not to omit rigorous microfoundations for your model. On the other hand, with the collapse of the intellectual case for austerity (though not its political dominance), the terms of public debate are set almost entirely by New Old Keynesians like Krugman and DeLong (that’s true, even if you don’t believe, as I do, that the outcome of that debate has been a knockout win for the Keynesian side).

    “Christine Lagarde, scourge of tax evaders, pays no tax”

    “During the 1944 economic conference at Bretton Woods, where the IMF was created, American and British politicians disagreed over salaries for the bureaucrats. British delegates, including the economist John Maynard Keynes, considered the American proposals for salaries to be “monstrous”, but lost the argument.”

    3 days ago, Christine Lagarde said “But if supply shocks drag on and inflation continues to exceed wage growth by a wide margin, losses in real income could intensify and the excess savings buffer could be eroded. The resulting hit to demand could test the resilience of the labour market and possibly temper the expected rise in labour income.

    “In this setting, we have markedly revised down our forecasts for growth in the next two years. But we are still expecting positive growth rates due to the domestic buffers against the loss of growth momentum.

    “Price stability and policy transmission in the euro area”

    Speech by Christine Lagarde, President of the ECB, at the ECB Forum on Central Banking 2022 on “Challenges for monetary policy in a rapidly changing world” in Sintra, Portugal

    Sintra, 28 June 2022

    [PDF] What’s up with the Phillips Curve? – European Central Bank › pdf › scpwps

    These explanations can be grouped in four main classes: (i) mis-measurement of either inflation or economic slack; (ii) a flatter wage. Phillips curve

    Click to access ecb.wp2435~42e97b8aaf.en.pdf

    “Drivers of underlying inflation in the euro area over time: a Phillips curve perspective

    Prepared by Elena Bobeica and Andrej Sokol

    “Published as part of the ECB Economic Bulletin, Issue 4/2019.

    “In this article we review the evolution of euro area HICP inflation excluding energy and food since the Great Financial Crisis through the lens of the Phillips curve.

    Phillips curve

    “The long-run Phillips curve is now seen as a vertical line at the natural rate of unemployment, where the rate of inflation has no effect on unemployment.[7] In the 2010s[8] the slope of the Phillips curve appears to have declined and there has been controversy over the usefulness of the Phillips curve in predicting inflation. A 2022 study found that the slope of the Phillips curve is small and was small even during the early 1980s.[9] Nonetheless, the Phillips curve remains the primary framework for understanding and forecasting inflation used in central banks.[10]”

  20. The Consequences of pandemic responses, Ireland edition.. .
    – not having and not updating:
    Sensible Bayesian priors?

    “Ireland’s COVID Response, Part 4: The Definition of Insanity…What have we learned?

    Sam Enright

    “This is the final part of a four-part series on Ireland’s Covid response. I recommend you read parts one, two, andthree first. Any facts not linked are sourced from the book Pandemonium: Power, Politics, and Ireland’s Pandemic.”

    “Insanity is doing the same thing over and over again and expecting different results.
    -Attributed to Einstein (falsely of course)

    4.1. The phrase “no evidence” is bad science communication

    “NPHET also claimed in the early days that there was “no evidence” that masks work. There were in fact several pre-pandemic papers on the efficacy of face masks, albeit of low quality (ethics rules mean that randomising who gets a mask and who isn’t allowed).

    “But that’s not really the point. NPHET failed to have remotely sensible Bayesian priors, i.e. initial probabilities which are updated when new information comes in. Your prior belief that physically blocking the flow of particles would impede the spread of a respiratory illness should be very high. For me to be convinced otherwise would require several high-quality studies show null or negative effects. It is simply not rational to be totally agnostic.”

  21. Groan! Dominated by Delaware.

    “The laws governing the affairs of large corporations have thus primarily become the laws of Delaware.” 

    From “The Rich Get Richer” review of “Rethinking Securities Law” by Marc I. Steinberg

    “The Rich Get Richer
    Jed S. Rakoff

    “The law professor Marc Steinberg lays out a series of reasonable proposals for reforming securities law, but Congress is unlikely to act.”

    “In what quickly became a race to the bottom, New Jersey and Delaware were the two chief competitors. But the Delaware General Corporation Law, enacted in 1899, reduced corporate taxes and shareholder “interference” with management to an extent that not even New Jersey could match. As a result, Delaware became the primary site of incorporation of most large US (and a great many foreign-owned) corporations, including more than two thirds of all Fortune 500 companies.

    ‘Despite occasional competition from Nevada and other states, Delaware’s dominance as the preferred state of incorporation, and its corresponding primacy in the development of corporate law, has been further solidified by its constant attention to the needs and desires of corporate management. Delaware law offers corporations, for example, freedom from liability for managerial actions taken in the exercise of “business judgment,” protection from unwanted takeovers, anonymity of ownership (especially for “offshore” companies), and, overall, very light regulation. Perhaps most important from a legal liability standpoint, Delaware funnels most corporate disputes into the state’s Court of Chancery, where, though the judges are very able, no jury trials are allowed.

    “The laws governing the affairs of large corporations have thus primarily become the laws of Delaware.

    Rethinking Securities Law
    by Marc I. Steinberg

    Awarded Winner-Best Law Book of 2021 by American Book Fest

    “- Identifies important problematic aspects of the securities laws, focusing principally on the Securities Act of 1933 and the Securities Exchange Act of 1934
    – First source in over four decades comprehensively to analyze this subject matter – rethinking the securities laws
    – Features clear analysis of statutory, regulatory, and judicial actions”

  22. Bees.

    Traded biota are saved from extinction. Is that a feature or a bug (punny) of markets?

    “So if you want to help the bees, don’t buy a bee hive. The honeybees are not at risk exactly because you can buy them.”

    “Whatever happened to the Bee Apocalypse?

    Sabine Hossenfelder, aka Bee

    [Links, interesting facts and studies ]

    “What we do know is that we’ve been changing the ecosystems around us a lot. That has reduced and continues to reduce biodiversity significantly. And the decrease in biodiversity decreases the resilience of the ecosystems, which means that sooner or later parts of them will break down.

    “It’s really just a matter of time until there’ll be too few bees to pollinate some of the flowers or too few insects to support some of the birds, or too few birds to spread seeds and so on. And we may be able to fix a few of these problems with technology, but not all of them. So, while it is important to talk to your kids about the birds and the bees, it really is important to talk to your kids about the birds and the bees.

    “We simply don’t know what’s going to happen in response to what we do, and I’m afraid we’re not paying attention which is why I’m standing here recording this video. Because if we don’t pay attention, one day we’ll be surprised to be remembered that in the end we, too, are just part of the ecosystem.

    “So if you want to help the bees, don’t buy a bee hive. The honeybees are not at risk exactly because you can buy them. What’s at risk are natural resources that we exploit but that we haven’t put a price on. Like clean air, rain, or wild bees. If you have a garden, you can help the wild bees by preserving the variety of native flowers. Quite literally, let a thousand flowers bloom.”

  23. Communist Capitalists command & control us – “by sending actual information about what they’d need and when. It’s a linear descendant of cybernetic projects like Salvador Allende’s Cybersyn, but controlled by unelected billionaire commissars instead of democratically accountable regulators and legislators” says Cory Doctorow.

    The bullwhip effect, supply chains & rates. Plus The Beer Game.

    Why, when democratically accountable regulators and legislators or workers or consumers try to exert some control, they are accused of socialism or command and control, yet when Amazon [insert monoloply, monsopony] does it, they are good capitalists, and are rewarded with both wealth and partial control of democratically accountable regulators and legislators or workers, able to command production and market towards their own survival and profit, not public interest, let alone the Commons?

         “This is a late-stage supply chain correction.”

    “Fuller says that this bullwhip cycle was exacerbated by shutdowns in China, and there is obvious truth to this, but I think it’s worth looking further back up the causal chain to understand inflation.

    “Recall that the capitalist planned economies of The People’s Republic of Walmart depend on monopolies – the reason Amazon and Walmart can reach into P&G and Unilever’s production systems is that they are all giant, industry-dominating firms who face little direct competition.

    “This is the same dynamic – monopolism – that allows big companies to exploit our fear of looming inflation to hike prices, something their CEOs actually boast about on their shareholder calls:”


    Cory Doctrow:
    …”This is a disgusting ripoff, and the airlines could be handling it better, but they probably can’t lure all those employees out of retirement. The total American aviation capacity has been reduced, and it will take years to increase it.

    “In People’s Republic,” Phillips and Rozworski describe how large capitalist firms operate a secret, behind-the-scenes planned economy. Monopolistic retailers like Walmart and Amazon don’t just place orders with large consumer packaged goods monopolists like Procter and Gamble and Unilever. These gigaretailers *actually reach into the production schedules of their primary suppliers and schedule extra shifts of workers, increase the orders of material inputs, and so on. This is the only way to avoid the bullwhip effect and meet demand with supply without wild, capacity-destroying cycles of overshots and undershots.

    “This is basically a digital/cybernetic version of the Soviet planned economies, where different links in the supply chain explicitly coordinated with one another, not by making a series of bids and puts that transmitted supply and demand information, but by sending actual information about what they’d need and when. It’s a linear descendant of cybernetic projects like Salvador Allende’s Cybersyn, but controlled by unelected billionaire commissars instead of democratically accountable regulators and legislators:

    As the aviation example shows, we are living through the bullwhip effect today. Writing in Freightwaves, Craig Fuller makes a compelling case that the inflation crisis could rapidly swing the other way, as slow-moving logistical chains and slow-circulating demand information leads to an over supply:

    “The Beer Game was invented by Jay Wright Forrester at the MIT Sloan School of Management in 1960. The beer game was a result of his work on system dynamics.[2]”

    ” Therefore, each group has only significant control over their own part of the supply chain. Each group can highly influence the entire supply chain by ordering too much or too little which can lead to a bullwhip effect. Therefore, the order taking of a group also highly depends on decisions of the other groups.[2]”

    “The bullwhip effect is a distribution channel phenomenon in which demand forecasts yield supply chain inefficiencies. It refers to increasing swings in inventory in response to shifts in consumer demand as one moves further up the supply chain. The concept first appeared in Jay Forrester’s Industrial Dynamics (1961)[1] and thus it is also known as the Forrester effect.”…

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