Turnbull Stumbles On Free Market Philosophy

I may be wrong, but quite frankly I think Malcolm will have some real problems explaining his real views about financial and economic reform.

Lets face it, Malcolm Turnbull, a former investment banker and highflyer with Goldman Sachs is undeniably market fundamentalist.  Although both sides are yet to grasp the complexity of the problems we face and how to address the challenges,  Big Mal can’t hide his spots.

Turnbull: let market decide

MALCOLM Turnbull wants Kevin Rudd to allow the market to “run its course” on commercial property values despite government fears the global financial crisis could drive a collapse that would threaten 50,000 Australian jobs.

And the Opposition Leader has accused the Prime Minister of padding bank profits instead of helping small and medium-sized employers struggling to keep afloat in the face of the worsening credit squeeze.

As the global financial crisis continued to dominate politics yesterday, Mr Rudd savaged Mr Turnbull, saying he was “a market fundamentalist” unwilling to act to protect families.

The US problem in a nutshell, and the same one that exists here:

“The current crisis just as convincingly represents a failure of the Big Government/Neoconservative (or, outside the United States, what is called“neoliberal”) model that promotes deregulation, reduced supervision and oversight, privatization, and consolidation of market power in the hands of money manager capitalists.

In the United States, there has been a long-run trend that favors relatively unregulated “markets” over regulated banks that has also played into the hands of neoconservatives. The current financial crisis is a prime example of the damage that can be done by what has been called the “post-regulatory environment” (Thomas 2008).

“The swing toward markets and away from regulated banking greatly increased risk, while at the same time it necessarily extended government assurance to the unregulated institutions for the simple reason that the government cannot allow a financial crisis to threaten the economy.What Bernanke called “The Great Moderation” is also known as the “Greenspan put”—the belief that no activity is too risky because the Fed will intervene if things go bad. Unfortunately, it is Chairman Bernanke who is left to clean up the mess left by years of lax oversight and deregulation that operated to the advantage of Wall Street.”

I also find it interesting that a man who has been at the forefront of financial innovation for 30 years, Richard Bookstaber, would win praise for his forthrightness, honesty and insights about the perils that market fundamentalism (with its love of banking deregulation) has wrought on the global financial system and global economy, by a group of CEOs no less .  Great read by the way.

800 CEO Read.com – Demon of Our Own Design By Richard Bookstaber

Markets, Hedge Funds, and the Perils of Financial Innovation

By: Richard Bookstaber

We chose A Demon of Our Own Design as the best finance & economics book of the year in our first annual 800-CEO-READ Business Book Awards. To see the other winners and finalists, go to our awards website or pick up a copy of In The Books, a magazine devoted to the most notable books of 2007.

Book Description
Inside markets, innovation, and risk.

Why do markets keep crashing and why are financial crises greater than ever before? As the risk manager to some of the leading firms on Wall Street-from Morgan Stanley to Salomon and Citigroup-and a member of some of the world’s largest hedge funds, from Moore Capital to Ziff Brothers and FrontPoint Partners, Rick Bookstaber has seen the ghost inside the machine and vividly shows us a world that is even riskier than we think. The very things done to make markets safer, have, in fact, created a world that is far more dangerous. From the 1987 crash to Citigroup closing the Salomon Arb unit, from staggering losses at UBS to the demise of Long-Term Capital Management, Bookstaber gives readers a front row seat to the management decisions made by some of the most powerful financial figures in the world that led to catastrophe, and describes the impact of his own activities on markets and market crashes. Much of the innovation of the last 30 years has wreaked havoc on the markets and cost trillions of dollars. “A Demon of Our Own Design” tells the story of man’s attempt to manage market risk and what it has wrought. In the process of showing what we have done, Bookstaber shines a light on what the future holds for a world where capital and power have moved from Wall Street institutions to elite and highly leveraged hedge funds.

Over To You

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70 Responses

  1. Just for the record, I’m not claiming to have all the answers nor do I think the experts can make this claim. One thing is for sure however, allowing market fundamentalism to dominate economic and financial thinking (since the 1980s) has caused untold damage both in financial markets and real economies.

    Shat a f#^king mess!

  2. What should really piss people off is that ‘the horse bolted long ago’ now it’s a matter of clawing our way back from the murky depths. Moral of the story? The Titanic wasn’t unsinkable.

    Obama to tighten financial regulations
    http://news.smh.com.au/breaking-news-business/obama-to-tighten-financial-regulations-20090125-7pdy.html
    US President Barack Obama plans to tighten the US financial regulatory system, introducing stricter rules for hedge funds, credit rating agencies and mortgage brokers, The New York Times reported Sunday.

    Citing administration officials, the newspaper said the new Democratic administration wants to eliminate conflicts of interest at credit rating agencies that gave top investment grades to new and unproven financial instruments that have been a source of market turmoil.

  3. Just read your link John.

    It appears that churnbull is practicing his opposition points and just opposing anything the government does.

    I note he wants them to do something for small business, but has no answer himself.

    In my opinion, stricter regulation on lending to small business (well, to EVERYONE) is needed, and this is the pain we are going to have to have.

    Also note that this is how the MARKET apparently lets itself decide.

  4. Yet the Republicans are starting to make noises against the Obama stimulus package and planned regulations. Just like Turnbull here they are saying large permanent tax cuts across the board are the way to go, and they say they can still bring the budget back to surplus whilst dramatically cutting the revenue.

    Sound familiar, it should because this is also Turnbull’s exact position. As I’ve said previously, just think of who overwhelmingly benefits the most from tax cuts and you know why the conservatives continue to demand we go down this road. No matter how many times you prove the trickle down economic model is an abject failure and leads to disasters like the one we are now having, they always want to go back to that model. No need to guess why, you only have to think of who benefits the most from that model and who those who benefit support.

  5. Spot on Tom, AND EXCELLENT EXAMPLE BY THE WAY

    “ABC Learning founder Eddy Groves is claiming $3.3 million in unpaid wages, holiday pay and long-service leave from the receiver of his collapsed childcare corporation.

    The former ABC boss, who was sacked as chief executive last September, is lining up asacreditor alongside 16,000 low-paid childcare workers – many of whom earn the minimum wage, The Australian reports. “

  6. Adrian

    It’s a bit like the crew telling passengers on the Titanic to go to their rooms and remain there no matter what (wink).

  7. Personally, I think Dr Morgan has a valid point.

    DEPOSITS: Call to pull bank guarantee
    http://www.theaustralian.news.com.au/business/story/0,28124,24961868-643,00.html
    FORMER Westpac chief David Morgan says it is time for the Government to wind back its guarantee on bank deposits of up to $1 million.

    Dr Morgan, the former Treasury official who stepped down from the bank at the start of last year, said the Government was right to introduce the guarantee during the peak of the financial crisis in October and November.

    But he told The Australian representations were now being made to the Government for the guarantee to be cut back and it was “time to look at some sensible modification” of the scheme. ”

    I think the government needs to send banks a very clear message. I would hope that strict conditions would go with these guarantees, otherwise we may end up getting some nasty surprises. I just don’t trust banks to tell it like it is, nor do I think they’re capable of constraint if opportunities for risky profits arise. They’re driven by bottom line results and always will be. Galbraith nailed the problem when he said “The sense of responsibility in the financial community for the community as a whole is not small. It is nearly nil. Perhaps this is inherent. In a community where the primary concern is making money, one of the necessary rules is to live and let live.”

  8. As I’ve said previously, just think of who overwhelmingly benefits the most from tax cuts and you know why the conservatives continue to demand we go down this road.

    Those who overwhelmingly benefit from tax cuts would be those who pay taxes; otherwise known as taxpayers. And you think that’s a bad thing?

  9. (First paragraph above is an Adrian quote.)

  10. ToSY – fixed.

  11. ToSY.

    Low paid, walk down to the milk bar for one milk shake.

    Average wage, drive to the nearest McDonald’s for one meal.

    High paid, one week Australian holiday for good pub meals or the local Chinese.

    Wealthy, two week overseas holiday at five star resort for a five course top class meal.

  12. You’re making me hungry Adrian, but does that mean tax cuts benefit – who – McDonalds? Please explain.

  13. You certainly are having a comprehension problem today ToSY. Maybe you should concentrate less on calling people liars and more on the subject at hand.

    The answer is fish & chip shops of course.

  14. OK, thanks.

  15. Bullturn has no answers to the problem. He’s part of the problem. He and his banking “industry” ilk, the Liberal economic fundamentalists, and their soulmates the American Republicans.

    Dark days ahead for fundamentalists, as they see every tenet to which they are welded crumble before their eyes in time-lapse speed.

  16. Possum makes a very good point on the $2 billion funds loaned to business with an equal $2 billion being supplied under the same conditions by the banks. Seems like the Rudd government could be looking at making a bit of money out of this.

    I’d imagine that the government’s component of the funds loaned would become government assets (unless there’s some other way the government budgeting system treats such a thing?) – now, assuming that there will be no defaults on the loans and that the interest rate charged would be the standard going market rate for these things, would the government end up improving their budget position by virtue of contributing to such a fund? How does this actually play out as far as the government’s balance sheet is concerned?

  17. Caney

    October 23, 2008 was the day the music really died for the champion of free-markets the Alan ‘The Maestro’ Greenspan.

    Greenspan Concedes Error on Regulation
    http://www.nytimes.com/2008/10/24/business/economy/24panel.html
    WASHINGTON — For years, a Congressional hearing with Alan Greenspan was a marquee event. Lawmakers doted on him as an economic sage. Markets jumped up or down depending on what he said. Politicians in both parties wanted the maestro on their side.

    But on Thursday, almost three years after stepping down as chairman of the Federal Reserve, a humbled Mr. Greenspan admitted that he had put too much faith in the self-correcting power of free markets and had failed to anticipate the self-destructive power of wanton mortgage lending.

    “Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself included, are in a state of shocked disbelief,” he told the House Committee on Oversight and Government Reform.

    Now 82, Mr. Greenspan came in for one of the harshest grillings of his life, as Democratic lawmakers asked him time and again whether he had been wrong, why he had been wrong and whether he was sorry.

    Critics, including many economists, now blame the former Fed chairman for the financial crisis that is tipping the economy into a potentially deep recession. Mr. Greenspan’s critics say that he encouraged the bubble in housing prices by keeping interest rates too low for too long and that he failed to rein in the explosive growth of risky and often fraudulent mortgage lending.

    “You had the authority to prevent irresponsible lending practices that led to the subprime mortgage crisis. You were advised to do so by many others,” said Representative Henry A. Waxman of California, chairman of the committee. “Do you feel that your ideology pushed you to make decisions that you wish you had not made?”

    Mr. Greenspan conceded: “Yes, I’ve found a flaw. I don’t know how significant or permanent it is. But I’ve been very distressed by that fact.”

    On a day that brought more bad news about rising home foreclosures and slumping employment, Mr. Greenspan refused to accept blame for the crisis but acknowledged that his belief in deregulation had been shaken.

  18. Dan Denning from The Daily Reckoning in Melbourne, has a way of putting things:

    –Fire up the barbecue, but make sure you don’t burn the commercial property market! No matter what you call it-Australia Day to some, Invasion Day to others — today commemorates the landing of the First Fleet in Australia in 1788. Maybe that’s the same day that Australia’s love affair with property began.

    –The hot subject today is commercial property. With the lines of global credit available to Australia being cut one at a time, asset values in sectors that have taken that credit for granted over the last twenty years are under pressure. In to this inevitability of falling asset values during a credit deflation steps Australia’s intrepid Prime Minister.

    –The Rudd government announced on Saturday plans for a fund that would make loans available to commercial property owners unable to roll over-loans in the international lending market. The Australian reports that, “Mr. Rudd said he would pump $2 billion of public money into a credit fund accessible by owners of commercial property such as shopping centres and office buildings if they lost access to foreign loans.”

    –“With up to $75 billion in offshore loans due to be rolled over in the next two years,” the article continues, “Mr. Rudd said a third of the 150,000 jobs in the commercial property sector would be at risk if he failed to act to preserve stability and maintain property values.”

    –Hmm.

    –It’s not really fair to hold a man accountable for what he hasn’t said. We don’t know exactly what the PM said. But if he’s acting to “maintain property values” he may be acting in vain. Not that it won’t be popular!

    –“ACCI acting chief executive Greg Evans backed Mr. Rudd’s move to deliver stability and confidence to the commercial property sector by moving to maintain property values. A reduction in property values would hammer confidence and have implications for the entire economy, not just the finance and property sectors, he said.”

    –Yes. All of that is true. When asset values fall (property or shares) it does cause everyone to lose confidence. But you wonder why it doesn’t also cause everyone to reexamine some basic assumptions. One of those assumptions, for example, is that households and businesses will always have access to a cheap line of credit to subsidise their balance sheet.

    –But in a Credit Depression you have to rely more on cash-flow and less on borrowing. This means reigning in your spending habits, living beneath your means, and doing a different kind of calculation for the return on your investments. That is, if you need to roll a big pile of loans over every few years to keep your projects going, well then maybe your projects aren’t going to survive long in this new financial world.

    –That could be bad news for more than just commercial property owners in Australia. According to a Merrill Lynch study cited by Bloomberg, “Overseas banks accounted for more than half the A$285 billion in syndicated loans issued to Australian businesses since 2006.” If the government and the big four banks go in halfsies to replace that total, it would be a $142 billion in new government loans or government guarantees.

    –Now we’re starting to talk real money. But is it just throwing good money after bad borrowing and lending?

    –Credit makes a lot of things possible. In fact, if you look around at the world we have, you start to wonder how much of it we’d have without the huge increase in credit of the last thirty years. This is not to say that the quality of life would go down in a world with less credit. But easy credit has clearly made an expansion in commercial real estate and residential housing possible.

    –The contraction in credit is going to take some of that expansion with it, not least in the form of falling asset values. What can any government realistically do to try and prop up unsustainable economic activity?

  19. Ouch!

    “This may be the first Davos where capitalism is widely viewed as a failure, rather than something to be admired,” says Ethan Kapstein, professor of economics and political science at French business school Insead, who has been going to Davos since 1994.

    Davos summit clouds over in gloom
    http://www.theaustralian.news.com.au/business/story/0,28124,24963754-643,00.html

    IN the 38 years that business and political leaders have been trekking to the Swiss ski resort of Davos to talk about the world economy, the outlook hasn’t been bleaker or global capitalism more racked with self-doubt.

  20. Some of the key players and their contributions.

    http://www.guardian.co.uk/business/2009/jan/26/road-ruin-recession-individuals-economy

    A good summary.

  21. Nature5

    I almost put my dukes up expecting a confrontation and what I got was a surprise to say the least and a very good reference.

    Cheers

  22. I personally think it unlikely that falling interest rates and the first-home buyer’s grant will help keep prices steady.

    Housing ‘severely unaffordable’
    http://www.smh.com.au/news/national/housing-bubble-yet-to-burst/2009/01/25/1232818248039.html
    AUSTRALIA is home to three of the most “severely unaffordable housing markets” studied by an international group that predicts the housing bubble here is yet to burst.

    A comparison of median house prices with median household incomes in Australia, Canada, Ireland, New Zealand, Britain and the United States found that Australia had the most cities in the “severely unaffordable” category – where house prices are more than five times the median income.

    The Sunshine Coast in Queensland was the least affordable. The Gold Coast came third, behind Honolulu, and Sydney was fifth, behind Vancouver. Melbourne and Adelaide were equal 12th and were still less affordable than New York (14th), London (16th) and Dublin (32nd).

    The public policy group Demographia, which conducted the study, said affordability in Australia was worsening relative to Britain, Ireland and New Zealand, where prices had recently collapsed.

    Australia would be next, it said. “Sooner or later, the inherent instability that characterises virtually all bubbles will lead to house price declines in Australia.”

    But an economist for CommSec, Savanth Sebastian, said falling interest rates and the first-home buyer’s grant would help keep prices steady.

    “We are not going to see dramatic falls this year,” he said.

    “In November we had more home buyers signing on the dotted line for mortgages than in the past year … It really suggests that if employment holds up, the housing sector is set to see some strong growth over the next couple of years.”

    Alan Moran, director of the deregulation unit at the Institute of Public Affairs, said house prices may have collapsed in Australia over the past few months.

    But affordability was a problem, he said. “Adjusted for inflation, the average house price in Australia is now more than twice what it was 20 years ago.”

    Like Demographia, Mr Moran favours reducing the regulations that govern building in Australia.

    “The reason Australia is so expensive is because of the regulatory-induced supply shortage that has pushed up the price of land permitted to be used for housing.”

  23. JohnMcP re: “The reason Australia is so expensive is because of the regulatory-induced supply shortage that has pushed up the price of land permitted to be used for housing.”

    My question is where should the next multi housing estate be placed? Which farm land and which remant bushland should we be tearing up..maybe Dandenong Ranges with landslip or maybe Northern NSW with flooding and acid sulphate soils.

    Or do you mean the developers sitting on their bottoms refusing to release land for development for which they already have DAs approved until the price is right.

    My opinion is that the solution is decentralisation, as in helping the major regional centers get back on their feet.

  24. Min

    ‘My opinion is that the solution is decentralisation, as in helping the major regional centers get back on their feet.”

    Just some thoughts, we have an abundance of land don’t we, we should also consider a renewed emphasise as farming and agriculture becoming a major way of life again, perhaps.

    We may even have to reconsider our attitude to manufacturing given we sent most of these jobs over to China.

    Essentially we have to return to producing more than we consume.

  25. How can anyone find an appropriate way to describe this type of shit!

    UBS bonus plan ‘perverted’, says Swiss President
    http://www.theaustralian.news.com.au/business/story/0,28124,24964815-643,00.html
    A PACKCAGE of more than $2.7 billion in bonuses for staff at Swiss bank UBS is expected next month and it threatens to reignite the debate over the ethics of exceptional rewards for bankers during the present worldwide banking crisis.
    Swiss bank UBS

    Bonus brouhaha: Swiss bank UBS plans to dole out billions in bonuses, after having received a taxpayer bailout last year. Picture: Reuters

    UBS is to pay out around 2 billion Swiss francs (£1.3 billion) in bonuses next month, despite heading for a SFr8 billion fourth-quarter loss, the biggest quarterly deficit ever sustained by a Swiss company.

  26. We may even have to reconsider our attitude to manufacturing given we sent most of these jobs over to China.

    We didn’t exactly send them, JMc – except to the extent that we consumers purchase Chinese goods – it’s that we are at a competitive disadvantage.

    We couldn’t – and shouldn’t – ask workers to accept the low wages paid to Chinese workers. That, combined with the fact that China won’t float their currency – it is kept artificially low – means their exports will always be cheaper than anything we can make here.

  27. Just one paragraph in on Greenspan from the great N5 link and you get this gem.

    He backed sub-prime lending and urged homebuyers to swap fixed-rate mortgages for variable rate deals, which left borrowers unable to pay when interest rates rose.

    So much for individual responsibility being the blame. When the most powerful money man in the world, one who at the time was being lauded as a genius and the greatest financier the world had seen says to swap mortgages which ordinary mug with absolutely no idea of the complexities of the finance market going to do, just ignore that urging from this most powerful man who advised the US government?

    Then it just gets worse, and I’m not even past the second paragraph on the first of the 25 when this gem of a monumental stuff up is revealed;

    For many years, Greenspan also defended the booming derivatives business, which barely existed when he took over the Fed, but which mushroomed from $100tn in 2002 to more than $500tn five years later.

    I hardly want to go on reading that article as I’ll be posting here for weeks.

  28. “We didn’t exactly send them, JMc – except to the extent that we consumers purchase Chinese goods – it’s that we are at a competitive disadvantage.”

    Okay Tony I stand corrected

  29. Adrian

    “He backed sub-prime lending and urged homebuyers to swap fixed-rate mortgages for variable rate deals, which left borrowers unable to pay when interest rates rose.”

    And his advice was given just prior to his Fed raising interest rates 17 times! Slap in the face or what?

  30. Our problem is water. Heaps of it up north but with a less than hospitable climate and infertile soils. Perhaps we should go where the water is and be considering crops suitable for where we live.

  31. Scaps..nah as in..?? No, not go where the water is. If not, why not?

  32. That article goes on to put US mortgagees as one of the 25 at fault and the the UK mortgagees along with them, but I honestly believe that is a bit unfair.

    Easy to say they should have just said “no”, but how could they say no when firstly the most powerful financier in the world urges them to change their borrowings, which must have them worried to death about what will happen if they say no and go against this giant of economics, and secondly they are told to use financial products so complicated that not even the economic experts understand them (but keep that mum at the time) so they have to take the advice of financiers at face value.

    The were sold odourless yellow coloured cow dung as gold yet had never seen yellow cow dung before so believed the experts and government when they were told it was not cow dung, but gold convoluted into a complex shape like cow dung.

  33. Min, best to bring the water to the head of the Warrego…I always believed that we have to develop the land available now on that river route and adjoining areas in a sustainable manner first.

  34. Too right scaper. The effort should be on remediating what we have stuffed up instead of going out and stuffing up more.

  35. Adrian, imagine the boost to the economy just on the agricultural production alone?

    Got to get the bickies in the bank before going out and spending up on future big ticket items.

  36. “The were sold odourless yellow coloured cow dung as gold yet had never seen yellow cow dung before so believed the experts and government when they were told it was not cow dung, but gold convoluted into a complex shape like cow dung.”

    Maybe there’d be a way to recycle some of this stuff (lol). I forgot, you cant’ recycle twice without destroying its value (wink)

  37. Apparently, China’s floating of the renminbi was the ‘tsunami‘ that Costello was talking about all the way back in ’07…maybe, it might have had some impact on inflation which was being exported by all the majors at the time (some nations’ domestic politics even touting it as a virtue), and secondary impacts on Australian exports of commodities, while everyone formed cosy joint ventures with the biggest impending consumer market the world has ever seen come online in modern capitalism.

    Nevertheless, here is where I see the tsunami which Costello failed to spot…

    Credit makes a lot of things possible. In fact, if you look around at the world we have, you start to wonder how much of it we’d have without the huge increase in credit of the last thirty years. This is not to say that the quality of life would go down in a world with less credit. But easy credit has clearly made an expansion in commercial real estate and residential housing possible.

    –The contraction in credit is going to take some of that expansion with it, not least in the form of falling asset values. What can any government realistically do to try and prop up unsustainable economic activity?

    I think that the credit was doing quite a bit more actual work than some like to acknowledge, and across a much broader ambit of activities, and its contraction will suck quite a bit as more and more otherwise sustainable activities suddenly find themselves ‘unsustainable’ in the reflexive over-correction.

  38. Legion

    Agreed

    The superboom was enabled by increasing deregulation of the banking and financial sector which led to increasing financial innovation none of which would have been possible without unlimited access to credit, as Soros would say.

    As Minsky observed, capitalism is inherently unstable.  As each crisis is successfully contained, it encourages greater speculation and risk taking in borrowing and lending.  Financial innovation makes it easier to finance various schemes.  To a large extent, borrowers and lenders operate on the basis of trial and error.  If a behavior is rewarded, it will be repeated.  Thus stable periods naturally lead to optimism, to booms, and to increasing fragility. 

    A financial crisis can lead to asset price deflation and repudiation of debt.  A debt deflation, once started, is very difficult to stop.  It may not end until balance sheets are largely purged of bad debts, at great loss in financial wealth to the creditors as well as the economy at large.

    Minsky defines three financial positions of increasing fragility: 

    Hedge finance:  income flows are expected to meet financial obligations in every period. 

    Speculative finance:  the firm/or individual must roll over debt because income flows are expected to only cover interest costs. 

    Ponzi finance:  income flows won’t even cover interest cost, so the firm/individual must borrow more or sell off assets simply to service its debt. 

    Over a protracted period of good times, economies tend to move from a financial structure dominated by hedge financing to a structure with increasing speculative and Ponzi financing.  The shift toward speculative positions occurs intentionally and more or less inevitably because of the way in which success in a boom enhances expectations.  However the shift from speculative toward Ponzi finance is usually unintentional. 

    The shift to Ponzi has happened in epic proportions.

  39. Legion

    “its contraction will suck quite a bit as more and more otherwise sustainable activities suddenly find themselves ‘unsustainable’ in the reflexive over-correction.”

    Excellent point, I think

  40. The home services industry will take a hit…they’re not exactly highly paid but will be one of the first on the list as people tighten their budgets.

  41. Tony of South Yarra,

    “means their exports will always be cheaper than anything we can make here.

    Not sure about that. If ‘labour’ is measured in terms of ‘units’ without reference to ‘skills’ and ‘attitudes’ then certainly that’s the truth of the matter. But skills combined with better technology can make unit labour costs somewhat irrelevant. A thousand ‘coolies’ with buckets and shovels are still no match for an operator with a bulldozer.

    Chinese workers (generally speaking) are not ‘good workers’ like the Japanese workers (I know that’s one hell of a generalisation). But for the point of discussion I will continue.

    Japanese workers have great skills and one hell of a positive work attitude. They take pride in their output and as a result require minimum supervision. Management costs are therefore less. Chinese workers on the other hand lack those attributes as any importer will attest. And the powers that be in China know it and are moving to remedy same.

    If Australia is to compete at the higher end of ‘production’ (and that’s the only realistic option) we need to be conscious that unit ‘labour costs’ taken at face value can mask a complex reality. Simply we need to put more in Research and Development (Howard’s stewardship was appalling) and we need to invest in skills development, broadly defined. At a minimum we need better technology, better skills, and better attitudes.

    No point in bemoaning our fate. No point in wringing our hands. Now more than ever we need to be positive.

  42. Turdball doesn’t get again, I suppose he never will. The reason for the Crisis in the first place is that Market Forces were let run their course. Market forces left to thier own devices gave us the unfetted greed, deceit, and just downright legal thieving in the name of creating wealth (for the few bblest by the LNP at the expense of the many). So in effect he is saying just do nothing and lets see what happens…..well thought out you idiot.
    Lets see what a grab bag of wisdon we have had from the slimy opposition, with Tony Rabbit almost exchanging bodily with the Rodent articulating his hero worship of him, now this. Come on fellas, we don’t expect much, but please give us something that resembles sensible policy statements.

  43. Just more long cut and pastes from YODA sitting at home on ya ass.

    It is pathetic
    !
    As Nature 5 said a few days ago

    WHEN WILL “YOU” TAKE A STAND.

  44. Holy Shit me and Nature are on at the same time !

    Nature,

    I’m in Sydney where are you ?

  45. Give it a rest Squared. If I wanted to, I could pretend to be on in Melbourne and Brisbane at the same time too. It could be from the same computer and show up as different IP addresses as well.

  46. My reasoning and conclusions are similar to N5’s, I think. A not unimportant bit of the puzzle to consider is the function of three-sector hypothesis applied globally. To wit, early capitalist economies migrated from primary to secondary to tertiary production as they became increasingly uncompetitive in ‘lower’ sectors when later economies came online and forced them out and/or they chose to upgrade. In mature form, those early economies were actively transitioning from industrial to post-industrial, services-based economies and societies as their last and best available (un)competitive niche; and later economies were performing the primary and secondary sector functions which had withered under competition or otherwise been allowed to atrophy in early economies. And things start to get funky when those later economies leap-frog the development timeline, benefiting from not having to pioneer developments and from ready access to the tools of advanced capitalism, and begin performing tertiary sector work alongside primary and secondary sector activities, sometimes treating that tertiary work as if it were like a secondary sector activity; which leaves early economies, having embraced the post-industrial mode first as their last, competitive refuge, with very little left to sell that is especially competitive in a global marketplace, and becoming less so each day.

    (‘Mature’ banks and their ‘mature market’ innovations, each more exotic than the last, perhaps being an example of a brainfart by a tertiary sector segment backed into a whole-economy competitive overdrive, as they went through the motions of being hyper-competitive to maintain an illusion that there was something, anything, left to re-package and sell of value that wasn’t out-competed, or about to be out-competed, by product from overseas; and by the rapidly developing overseas producer-consumer base which at least matches, if not exceeds by a margin, early economies’ potentials, and which now spans all three sectors. Effectively, while later economies were digging in the dirt and manufacturing widgets to sell for money still, earlier economies just gave themselves permission to skip that tangible productive step and began manufacturing money near ex nihilo, to disguise shortfalls in competitive capacity and the inability to pay for an economic lifestyle of services and intangibles increasingly lived beyond actual means.)

    Implications? Re-tool domestically to (re-)create protected primary and secondary sectors? Doing so immediately costs an economy; and given there is no obvious advantage in doing so, may cost an economy a whole lot more directly in maintaining those uncompetitive activities vis-à-vis alternatives available globally, and indirectly in foregone opportunities. Continue to hope there are niches into which segments of a post-industrial economy can transition and expand? About the only viable course of action; but, either way, there are no guarantees about who gets what in the brave new world.

  47. I recently alluded to Malcolm’s speech pattern on another recent thread. On all the occasions I’ve been unfortunate enough to see Malcolm Turnbull the talking head, ego seems to be his main personality trait.
    Australians deserve a better opposition in the Federal Parliament.
    On current form, this could take some time.

  48. bacchus, on January 26th, 2009 at 10:39 pm

    Well Bully for you bacchus ar’nt you the smart one NOT THEN.

    You dont even know how it works so stop commenting !

    But you are very typ of the bog itselff

  49. *recently recent. Sorry folks.

  50. You’re a happy lil camper, tonight, M1. Are you using the schwartz for good, or do you need Master Yogurt to help you attain mitichlorian balance before the dyspepsia becomes permanent?

  51. Yes I know, I know – don’t feed the trolls, but try again when you’re sober, Square.

  52. M1+M2+M3=M3 Squared,

    In theory, I am supposed to be now talking to myself. The Inspector Clouseaus of this world have ‘proved’ we are one and the same. Very amusing.

    For what’s it’s worth, I am not M1+M2+M3=M3 Squared or related in any way and I am sure that person doesn’t want to be me. At least I hope that’s the case. Nevertheless I suspect my denials will be in vain. Such is life.

    As for Legion, on January 26th, 2009 at 10:42 pm Said:

    “Continue to hope there are niches into which segments of a post-industrial economy can transition and expand? About the only viable course of action;”

    I agree. Seems to me there will be ‘niches’. To suggest otherwise is to assert that the world, its economy and its technology are not dynamic. Indeed ‘history’ (however conceptualised) clearly indicates the opposite.

  53. Mr Brown on consensus politics, globalisms, choices, breech birth, and incremental v. rational-comprehensive change…

    British Prime Minister Gordon Brown sees ‘new world order’ after economic crisis

    “We face a choice. We could allow this crisis to start a retreat from globalisation,” Mr Brown said in his speech.

    “As some want, we could close our markets – for capital, financial services, trade and for labour – and reduce the risks of globalisation, but that would reduce global growth, deny us the benefits of global trade, and confine millions to global poverty.

    “Or we could view the threats and challenges we face today as the difficult birth pangs of a new global order, and our task now as nothing less than making the transition through a new internationalism to the benefits of an expanding global economy, not muddling through as pessimists but making the necessary adjustment to a better future and setting new rules for this new global order.”

  54. Economic stimulus package priorities have to be infrastructure improvement eg –

    1. Install a rainwater tank in very home. Use Australian produced steel tanks. This has an employment, conservation and economic benefit.
    2. Invest in the development of Australian ports. We should never see 70 ships lined up outside Newcastle again. Get them ready for economic improvement. 5 billion on this will yield better returns than extending the home buyers grant.
    3. Invest in a water recycling plant in every capital city.
    4. Put plenty into public transport improvement in Melbourne and Sydney. Other states would complain, but these 2 cities drive the economy for the rest of the nation.

  55. Tom – spot on. Use the crisis as an opportunity.

  56. Tom of Melbourne,

    “Install a rainwater tank in very home’

    Has a health downside particularly in the longer term as the tanks age. Dengue fever for a start.

    http://www.health.qld.gov.au/dengue/outbreak_update/default.asp

    “but these 2 cities drive the economy for the rest of the nation.”

    Not sure about that.

    Agree completely with water recycling plants. As we know, all water is recycled and has been for ever.

  57. Yes N5, I’ve heard about dengue fever. It is an illness that I’ve avoided thus far.

    This concern is apparently due to poor maintenance and removal of filters in water tanks. It would be most unfortunate if this stopped people form capturing rainwater that would otherwise go to waste.

    Much as I think Sydney is full of tossers, and Melbourne is full of ditherers, these cities have almost half the population between them.

    And given that we are unlikely to have sufficient misfits and criminals to populate a city at the junction of transport lines in the middle of a dust bowl (where the only relief from the heat is thinking about the flies) we do need to fix up our biggest existing cites.

  58. Legion, on January 27th, 2009 at 3:37 am

    Code for deregulate. There really is a big push going on from the very people who were instrumental in aiding the failure, Brown being one, to use this opportunity to further deregulate. His new world order it to have the system put back into the hands of the greedy who stuffed it whilst giving them massive chunks of public money “to make it right”.

  59. Dengue is the 2nd most important mosquito carried disease following malaria. Mosquitoes breed in still water, hence the concern about water tanks. However, simple preventions such as filters have been used on water tanks for decades. The biggest culprits are things such as flower pots, broken bottles and old tyres.

  60. Gates is pretty close to the mark in my opinion.

    Rudd considers tax cuts as Bill Gates warns of 10 grim years
    http://www.news.com.au/dailytelegraph/story/0,22049,24968668-5001021,00.html
    THE Rudd Government is considering bringing forward tax cuts for workers as Microsoft co-founder Bill Gates warns the world economy is so dire it’ll take 10 years to repair the pain and hardship.

    Mr Gates’ grim warning, in a personal letter, comes as the world economy’s strife becomes frightening: Economic reports indicate 85,000 jobs were lost yesterday as businesses slash desperately while their revenues plunge.”

  61. Gillard’s not so subtle dig at JWH?

    Gillard alarmed at mortgage stress evictions
    http://www.smh.com.au/news/national/gillard-alarmed-at-mortgage-stress-evictions/2009/01/27/1232818399573.html
    Australia’s banks have a role to play in limiting the impact of mortgage stress on Australian families, the Acting Prime Minister, Julia Gillard, said today.

    Speaking in Sydney, Ms Gillard said that families being evicted from their homes was clearly an issue for the banks, along with governments and the welfare sector.

    “All Australians will be concerned about families being chucked out of their homes due to a lack of financial resources,” Ms Gillard said in Sydney.

    “Clearly it is an issue for our banks.”

    Mr Gillard said she would meet representatives from the welfare sector and not-for-profit organisations today to discuss possible government assistance in the face of the economic downturn.

    “These organisations have a critical role in assisting with issues such as unemployment, people with disabilities and secure housing,” Ms Gillard said.

    “The not for profit organisations were locked out by the Howard government. I very much want to hear … what they’re experiencing now, and what they think will happen during 2009.”

    “The discussion today will be part of that, how do we best keep people in work, how do we best assist them if they lose their job,” she said.

    The meeting will cover unemployment, the plight of carers, people with disabilities and housing

  62. Here’s something of interest, but what happens when housing has been overpriced and unemployment and job insecurity run counter to the market:

    “Both Treasury and the Reserve Bank have been counting on the lack of housing supply in Australia to stop prices from plunging as they have in the US and Britain.”

    Layoffs loom in building industry
    http://www.theaustralian.news.com.au/story/0,25197,24889988-601,00.html

    MASS lay-offs are looming in the home building and building supplies industries as orders for new homes evaporate in the face of the financial crisis.

    There was a shock 12.8 per cent fall in the number of plans for new dwellings approved by local councils in November.
    The number of new apartment developments on the drawing boards fell 21.9 per cent in the month and is only half the level of a year ago.

    The severity of the fall, which followed three months of big interest rate cuts and the tripling of the grant for first-home buyers purchasing newly built homes, has raised concern about a much sharper downturn in the housing market and sparked calls for the Reserve Bank board to cut interest rates further when it meets next month.

    The slump in building approvals came as new Organisation for Economic Co-operation and Development research showed Australians had more of their wealth tied up in housing than people in other major developed nations.

    Non-financial assets, principally housing, represent 75.8 per cent of Australian household wealth compared with 64.8 per cent in Britain and 43.1 per cent in the US.

  63. THE Rudd Government is considering bringing forward tax cuts for workers…

    Workers? I don’t think that workers will benefit most from tax cuts.
    Why is the solution that business and the wealthy like best, tax cuts, the first option? Even Obama is going the infrastructure route, which creates jobs and helps to build the country.

  64. “Even Obama is going the infrastructure route, which creates jobs and helps to build the country.”

    Kitty, he is also going the tax cut route to the tune of about $300 billion. And here’s one argument why it’s thought necessary.

    http://www.businessweek.com/the_thread/economicsunbound/archives/2009/01/why_big_tax_cut.html?chan=top+news_top+news+index+-+temp_top+story

    “Let’s get this straight right away. I’m not a dogmatic supply-sider, who believes that tax cuts are the solution to all economic ills.

    But I believe that Obama’s $300 billion tax cut is essential to ‘recapitalize’ the American consumer, just like the banks are being recapitalized. “

  65. Yeah N5 I’ve read of the $550 billion in government spending and $275 billion in tax cuts.

    To me tax cuts just keep the same old cycle going – making and buying stuff that people really don’t need, and lining the pockets of the wealthy, the people who most benefit from tax cuts. Why would doing the same thing as they’ve been doing for the last eight years, without success, become successful now?

    Progressive Infrastructure Investment Creates Six Times As Many Jobs As Conservative Proposals»

    <blockquote"…Every $10 billion in taxpayer money that goes towards extending the Bush tax cuts would create or save just 10,000 jobs versus nearly 60,000 jobs which could be created or saved by extending unemployment benefits and food stamps (stimulating demand for goods and services) or investing directly in energy, transportation and education infrastructure…"

  66. And If it was me, I’d save the tax cut, not spend it.

  67. Adrian of Nowra, on January 27th, 2009 at 12:04 pm

    Maybe, but more likely it means what it means literally…re-tilting the pinball table through re-regulation when giving it a bit of a bash didn’t make the balls drop in the ways wanted, because it had become more pachinko that pinball.

  68. Nature 5, on January 26th, 2009 at 11:59 pm

    I think I could continue developing that hypothetical model/conceptualisation of history just for fun. I’d suggest, at a descriptive-predictive level, that the 3rd sector will seek to spawn a 4th, hi-tech sector which endeavours to embed itself throughout the previous 3 sectors. It will do this to provide an artificial comparative advantage and products to sell, and will operate via regulatory compliance costs and artificial barriers to entry to markets, somewhat akin to exporting tariffs and yielding marketised knowledge-based advantages for those with an R&D lead and/or close-regulation such that compliance requirements match developed R&D capacities or exceed developing competitors capacities to compete in such activities. Of course, to export that regulation and go beyond merely protecting domestic markets and entrenching rent-seeking in the form of exporting licensed technologies to jump back over import compliance hurdles, and hence to create export markets back in the other three sectors and directly redress imbalances in trading accounts, will require political consensus building.

    Perhaps, a facially neutral, but not actually neutral, place to start would be in identifying hitherto ignored or merely perceived externalities arising along the development continuum which now will require being priced back into the system as a matter of compliance, particularly where the the externality of originating those externalities has now been exported to territories lower down the development pathway; and promoting 4th sector, hi-tech solutions as the answer to continued full participation in domestic AND global markets.

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