News That's Fit To Punt - 27/Feb/2016

The Rich Avoiding Taxes

I missed getting around to this earlier but this came in from Pleiades about how the globalised super wealthy avoid paying tax. It's from behind the pay wall at the Australian Financial Review so I can't go and post the entire thing, but it is a really interesting read.

Gabriel Zucman, who teaches at the University of California at Berkeley, has two goals in his new book, The Hidden Wealth of Nations: to specify the costs of tax havens, and to figure out how to reduce those costs. While much of his analysis is technical, he writes with moral passion, even outrage; he sees tax havens as a "scourge". His figures are arresting. About 8 per cent of the world's wealth, or $7.6 trillion, is held in tax havens. In 2015, Switzerland alone held $2.3 trillion in foreign wealth. As a result of fraud from unreported foreign accounts, governments around the world lose about $200 billion in tax revenue each year. Most of this amount comes from the evasion of taxes on investment income, but a significant chunk comes from fraud on inheritances. In the United States, the annual tax loss is $35 billion; in Europe, it is $78 billion. In African nations, it is $14 billion. 

The fractions of wealth held abroad are highly variable. In Europe, it is about 10 per cent. In African and Latin countries, it is much higher, between 20 per cent and 30 percent. In Russia, it is a whopping 52 percent. It follows that while tax havens hit wealthy nations hardest in absolute terms, they can have especially destructive effects on poorer or developing countries, because such a high percentage of their money is offshore. Zucman does not explain why this is so, but it is possible to speculate that one reason is rampant corruption within both the public and private sectors. The extraordinarily high figure for Russia might be best understood as involving money corruptly acquired or invested, which suggests an important point: All uses of tax havens are not the same. Sometimes government officials are the ones who are evading taxes, and they do not want to stop that evasion. 

In the aftermath of the financial crisis, you might expect that there would be an international crackdown on the use of tax havens, and, as we shall see, international attention is indeed growing. But the numbers demonstrate that no crackdown has occurred. In Luxembourg, offshore wealth actually increased from 2008 to 2012 (by 20 per cent). In Switzerland, the increase has been comparable; foreign holdings are now close to an all-time high. Disturbingly, the new wealth is coming mostly from developing countries, which poses a serious problem in light of the severe strains on their limited budgets. 

Zucman is the first economist to produce specific numbers of this kind, and, to do so, he had to undertake some creative detective work. In order to identify hidden wealth, he focuses on "anomalies" – situations in which international balance sheets show, in aggregate, more liabilities than assets. To see the importance of that inquiry, Zucman asks readers to imagine that a citizen of the United Kingdom holds an American security – say, stock in Google – in a bank account in Switzerland. In the United States, statisticians estimating U.S. wealth overall will record a liability, because a foreigner owns U.S. equities. But in Switzerland, statisticians will see nothing, and for a good reason: Google stock held in Switzerland by a U.K. resident will be, for Switzerland, neither an asset nor a liability. In the U.K. too, nothing will be registered, but for a bad reason: The UK has no way of knowing that one of its citizens owns Google stock in Switzerland. From this example, we can see the anomaly: On the global level, liabilities will be recorded as exceeding assets. 

Zucman puts it this way: "As far back as statistics go, there is a 'hole'; if we look at the world balance sheet, more financial assets are recorded as liabilities than as assets, as if planet Earth were in part held by Mars." For the purpose of producing an accounting of hidden wealth, that is actually helpful, because "money doesn't evaporate randomly into the ether, but instead follows a precise pattern of tax evasion". In 2015, for example, the nations of the world reported $2 trillion as mutual fund holdings in Luxembourg; this is the total of recorded liabilities. But Luxembourg's own statisticians calculated that worldwide, $3.5 trillion in mutual fund holdings were kept in Luxembourg; that is the total of recorded assets. What happened to the missing $1.5 trillion? In global statistics, that amount had no owners. For Zucman's purposes, the anomaly is a revealing one: The amount by which assets exceed liabilities is a measure of wealth hidden in offshore accounts

That is a lot of money leaking out of the system, avoiding tax.  The article goes on to discuss how these rich people might get taxed, but the overarching information is just how much money escapes taxation.

It's galling to think that the government of the wealthy by the wealthy for the wealthy - a.k.a.the Coalition government, wants to re-jig taxation in a way that increases the tax burden on the poor while giving more tax breaks to the rich.

A Different View On The Property Bubble

It would be unfair of me if I didn't put up an article arguing against the Property Bubble being an immediate problem. Here it is in a nutshell:

But the report also caused howls of outrage from local experts, who variously described Tepper's claims as "fanciful" (Australian Bankers' Association CEO Steven Munchenberg) and "as insightful as another work of fiction, Hunter S. Thompson's Fear and Loathing in Las Vegas" (Mortgage Choice chief executive John Flavell). Sure, there may be some vested interests there, but economists point out several reasons why they think Tepper's claims are over the top. The main one is that for a slide of that magnitude to occur, Australia would need to experience a sharp downturn in the economy, causing a spike in unemployment. That's currently not expected. But there are other signs the housing market isn't about to hit reverse, for example credit growth - seen as a key ingredient of a bubble. While housing credit has picked up, it is still a long way from previous highs.

Hmmm. If you go to the linked article, you'll find that average home loan payments look manageable; mortgage buffers are up;  Credit growth is not extreme; mortgage arrears are low; Low-Doc loans have fallen by proportion; and the Sydney marketing particular was merely playing catch up.

Now here's the thing: none of those charts address the fact that Australia's got the highest private sector debt per capita in the world. Just because on average we're managing this debt and not falling into arrears does not mean there isn't a whole bunch of debt money loaded into the system. As with all dynamic systems, the apparent equilibrium being maintained for now does not indicate the equilibrium is going to hold indefinitely into the future. It's hard to imagine what is going to rock the boat, but should something come along that rocks this boat, it is going to be very susceptible to capsizing.

But then one imagines the government will bail out the banks in order bail out the Mum & Dad investors who put their investment money into housing.

Gerry Harvey Thought It Was Nuts Too

More on the Dick Smith stores closing... Gerry Harvey also thought the AnchorageCapital's float of Dick Smith in 2013 was a bit of a joke.

Retail billionaire Gerry Harvey said he thought the "world had gone mad" when investors paid up in the $520 million float of the now-defunct Dick Smith business.
Dick Smith's receiver, Ferrier Hodgson, announced on Thursday that it was closing the electronics retailer's doors, putting about 3000 staff out of work. 

Mr Harvey said Dick Smith's profits evaporated years ago, prompting then-owner Woolworths to sell the business on the cheap to private equity firm Anchorage Capital in 2012. 

"Then five minutes later this bloke [Anchorage Capital] dresses it up and sells it for $500 million [in 2013], and I'm looking at this and saying 'I don't believe this, this business is stuffed'... I'm thinking I wouldn't buy these shares for 10¢, let alone $2," he said.
"I'm looking at all this and thinking to myself: the world has gone mad."

You would, wouldn't you? 

View From The Couch - 26/Feb/2016

This Isn't Working

There are days where I think Malcolm Turnbull might be smart, lucky and rich, but maybe - just maybe - he's not very good at this politics thing. It's a weird thing to say about a guy who is immensely popular and managed to become Prime Minister of this country but... there are moments where it looks a lot less certain, a lot less solid. For instance, he now has a coterie of backbenchers who are holding his policy platform to ransom.

It comes as Mr Turnbull and his Finance Minister, Mathias Cormann, continue to discuss the unorthodox move of bringing forward appropriation bills in Parliament to before the May budget in order to keep a double-dissolution election option open without risk of the government running out of money to pay public servants.

Fairfax Media reported earlier that informal discussions had been held about bringing forward budget day, but the latest thinking is believed to favour the early introduction of the appropriations - also called supply bills - which would clear the way for a snap poll to be called either before the budget or immediately after. 

Proponents say there is no legal problem with appropriating funds prior to the budget but admit the move would be tantamount to admitting an early election call was imminent.
The $15 billion figure is a similar amount of money that would have been available to spend after a GST rise to 15 per cent, which would raise about $35 billion, and the payment of compensation to low-income earners. 

The group of Liberal economic dries are, in particular, determined to kill any change by the Coalition - such as a dollar limit on the amount that can be deducted - to negative gearing because in the words of one MP, "why would we attack Mum and Dad investors?"

Which is all very weird. We appear to have a Prime Minister with very little authority over his own party in spite of his high personal polls.

The quick answer to the rhetorical question why the Liberal Party might attack the Mum and Dad investor might be because they're way in over their heads and need to back out before the shit hits the fan. In fact, not doing so is a kind of moral hazard situation that the conservatives and economic dry types hate so much. Making matters worse, negative gearing as it stands is kind of the wrong economic incentive that encourages the very same moral hazard that conservatives hate so much. 

Put more bluntly, the very same Mum and Dad investors are now the most indebted people on the face of this earth. Yes, Australia has the highest per capita private sector debt and the majority of it is locked up in mortgages. The whole point of winding back negative gearing is to take the wrong incentives out of the system, so the same Mum and Dad investors can make a more rational decision, based on a more rational economic policy. 

I'm pretty sure this is not lost on Malcolm Turnbull. It's just that he seems incapable of explaining this to his own side and making them shut the hell up. You'd think a conservative PM could explain traditional conservative economic policy to his own side. Of course, it might be that these backbenchers aren't conservatives at all but simply just "greedy cunts" as Paul Keating would have characterised them. Turnbull is letting these people hold his office to ransom too much. He should be playing hard ball with his side if he wants to get anything serious done. A leader is only good as his willingness to whack his own side to make the deal stick. Even I know that - why doesn't the prime Minister? 

I Hate It When Things Close

Some years ago at the height of the GFC, Starbucks closed a slew of their stores in Australia. They had picked the wrong moment to expand with their stores when all of a sudden, carrying debt became a dirty word. I was walking through Martin Place on the day they announced the mass closures, and I could see they were having a staff meeting about it in their store. It just looked terrible, witnessing all these people losing their jobs in a very public place. I didn't particularly like their offerings, but it was just terrible to see them in that situation. 

Anyway, Dick Smith stores are closing and 3000 people are about to lose their jobs. 

Dick Smith's debts total about $400 million including $140 million to its banks, National Australia Bank and HSBC. 

Dick Smith staff will now have to liquidate the remaining stock, which is understood to have a book value of about $200 million. 

It's the second fire sale in three months for the chain, which launched a desperate pre-Christmas clearance in a bid to prop up sagging sales.

One Dick Smith worker said the sale was likely to kick off as early as Friday.
The store manager said it was an anxious time for staff even though they knew the end was nigh. 

"There was a false sense of community for a while with everyone trying to look on the bright side and then there was the news about a potential buyer from China," he said.
"But we have an update this morning, saying no more customer orders and we thought uh oh!" 

"Then when we got told about a national conference call . . . and we knew that this was probably going to be bad news, not good."

It has to be said, Dick Smith stores were terrible. They didn't offer up a big range of stuff, they didn't offer up a good range of stuff, they weren't price competitive and they never really had up to date stuff. It was kind of the electrical doodad shop you went to when you couldn't get to any other electrical doodad shop. You couldn't decipher what the selling proposition was, when compared to its competitors, let alone if it even had a unique selling proposition at all. You just couldn't understand how it was supposed to operate, let alone compete with JB HiFi. As it turns out, neither could they.

A long time ago, this kind of something-nothing shop sort of blundered on in the market place. Grace Brothers which turned into Myers, was for years operating like this where you could get second tier goods for second tier prices guaranteed to leave you somewhat dissatisfied. Not surprisingly, Myers has been on the ropes for the last decade because it simply has no edge whatsoever in the modern retail marketplace (and never really had anyway). In many ways it's not surprising at all that Dick Smith stores hit the wall. 

Nonetheless I really do feel for the employees in the stores. It's terrible watching a long time going concern close down. Working through the process is even worse. Some of these private equity people that brought about the debt-laden IPO need to be investigated. 

The Meaning Of Bernie In The US Presidential Elections

It's 56 years since John F. Kennedy was elected President. There have been equal years with Republicans and Democrats in the White House since 1960: Nixon with 6; Ford with 2; Reagan with 8, George Bush Snr. with 4; and Dubya with 8 making 28. Kennedy with 3; Johnson with 5; Carter with 4; Clinton with 8 and Obama with 8 including this year also makes 28. It's surprising because it feels like there have been more years under Republicans and crazy ones at that: Nixon, Reagan and Dubya make you want to reach for the American Psychiatric Association's DSM. It was also a long time between Kennedy who was a Northern Democrat and Obama who is from Chicago. 

The years since Kennedy's assassination have been quite depressing from a progressive point of view, up until Barack Obama. If we cast our minds back to the 2008 election, Obama's campaign essentially ambushed and derailed Hillary Clinton's campaign, largely on building from the grassroots, and this in turn delivered the first Northern democrat President since JFK. Which goes to show it hasn't been easy for a Northern Democrat to get up. Just think of Walter Mondale and Michael Dukakis and their terrible campaigns in 1984 and 1988 respectively. And while Bill Clinton's two terms gave some respite, he was decidedly a Southern Democrat who wooed back the Southern vote. Thus the rise of Obama in 2008 signals a new direction for American politics. All of a sudden, the Northern Democrats are a big force, thanks to a progressive grassroots. 

It's enough to make one sort of wonder if Hillary Clinton's problem is that next to Bernie Sanders, she's not Northern Democrat enough. She may even not be Southern Democrat enough. Bernie Sanders is of course, espousing a lot more progressive politics. There was at one time great expectation for Elizabeth Warren running, because she too is more progressive than the Clinton camp. There are strong indications that the younger demographic is radically slanted towards the progressive end of the spectrum. 

The more historic view I take on the Sanders campaign is that it is the first time since Robert F. Kennedy was gunned down in 1968 that a Democrat is running with a very progressive platform. It's the first time in 48 years we're seeing the kind of galvanising force assembling a strong youth vote turn out, in favour of the Progressive cause. Sanders' platform - much more than Obama's platform - inherits the legacy of the1960s activism and builds upon it until it finally reaches the middle of American politics. It's the moment the protest songs and the hippies and the activists and the New Left finally arrive, decades late - but better late than never. 

It's funny because back in 1992, Bill Clinton fooled us all into thinking *he* was that guy. The fact that he wasn't is demonstrated by his presidency, by the things he was not able to achieve in office. It's actually the kind of baggage that really weighs down Hillary Clinton's campaign. 2016 is 24 years beyond 1992. There's a whole generation of kids who grew into adults, not believing in the Clinton name, and they'll be out there not voting for her. Should Sanders get up over Clinton, there are going to be a lot of 'Regressive Left' types who are going to be upset. But then they were upset when Obama got up over Hillary in 2008 and that didn't exactly change anything for them. The Clinton supporters are essentially Baby Boomers who are still fooled by the Clinton name. 

As for Bernie Sanders, in a certain way, the most impressive thing about him is how long he's been fighting for equality. He has been 'on message' since before Generation X was even born. The photos that have emerged from his activism in the early 1960s are heartening. They give us great strength and let us understand that it is possible to fight the power for a lifetime and make it count. If the defining characteristic of leadership is to inspire people into being their best, then certainly Bernie Sanders has that quality in spades.

That's him right there during some sit in in 1962. It could have been you, it could have been me in another time and place; but as it turned out, it was him all along. If people really think the 1960s activism meant something more than just what people did to kill boredom, they really ought to look into Bernie Sanders. 

News That's Fit To Punt - 25/Feb/2016

The Property Bubble From The Outside

Walk-Off HBP alerted me to this article in the SMH.

Jonathan Tepper, a UK based economist and founder of research house Variant Perception, is convinced Australia is in the midst of "one of the biggest housing bubbles in history".

The Australian Financial Review reports about how he and local hedge fund manager John Hempton scoped out the apparent epicenter of this bubble, Sydney's western suburbs, and walked away thinking it was even worse than they'd originally thought. It's a fascinating story.

In a subsequent report to clients, obtained by Fairfax Media, Tepper uses the following charts to support his thesis.
"The Australian housing bubble could not have become as ridiculous as it is without the help of easy financing," he writes.

"Over the past few years, over 40 per cent of all new mortgages originated have been interest-only mortgages. 

"This is truly Ponzi financing, where home buyers only make money if their houses keep rising in value," he writes, later describing interest only loans as a "disaster waiting to happen."

There it is, the Ponzi word. If you go to the article linked at the top, you'll see some interesting charts that tell us just how much risk people have taken on to secure their homes. The funny thing is that it's only foreign analysts who voice these kinds of concerns and somehow commentators in Australia downplay these voices claiming that somehow the Australian experience is going to be different to all the other times a Bubble popped. The RBA occasionally mentions they're concerned about the residential market heating up, but they have interest rates at record low rates. The bias is still towards easing and probably right down to zero interest rate policy in the not too distant future. 

It's a far cry from the times I remember where Reserve Banks would jack interest rates up to get on top of inflation. Now the RBA is dead scared of a drop in asset prices, whether they be shares, property or bonds. That has led to the easy money in the wake of the GFC, and in a roundabout way, the extended run of the property bubble that was already running up a head of steam, right up to the GFC. Even Kevin Rudd giving out money at the height of the GFC amounted to shoring up confidence and at the core of that decision is the desire to preserve asset prices, even if they are inflated. We basically had the luxury of not having our property bubble blow up during the GFC. 

For a while during the heat of the GFC we heard the phrase 'moral hazard', but we're only beginning to see the ramifications of the policies that bailed out banks and by extension people who were speculating heavily in the property market. All the low interest easy money went straight back into re-inflating the prices and prices simply went up, forming its own positive feedback loop to assist with the Ponzi scheme nature of our property market.

Of course none of this is stuff you haven't read before. We just don't know what the shock factor is going to be to pop the bubble. Until then those who deny its existence will continue to deny its existence and rationalise the prices we see.

No Substantial Tax Reform 

All these governments we've had this decade have come to power, announced tax reform packages, cherry-pickedwhatthey wanted and run into flack. As such it surprises me none that Malcolm Turnbull is backing right away from tax reform. Too many vested interests are clamouring away wanting to protect their little bit of interest. They tried a discussion on raising the GST only to find it wouldn't do nearly enough unless they properly widened the base, and then they refused to do that because it would mean taxing education and thus expensive private schools getting even more expensive, so they wanted to raise it by 50% instead, but realised there was no way of compensating the low income households so that went by the wayside.

So in most part, the things they've tried to float have resulted in backdowns. Now they're going to only do minimal changes.

The minimalist reform approach would raise sufficient funds to offer marginal tax relief to middle-income earners while also freeing the government to prosecute a massive scare campaign against Labor, claiming its negative gearing policies would smash the economy, wiping $278 billion off the national balance sheet through a 5 per cent plunge in housing values.

The government's final package, due to be presented within weeks, will not restrict negative gearing to new houses, as Labor has proposed, but merely impose caps on the dollar amount of losses claimable, while also reducing the amount able to be directed into superannuation contributions. 

The proceeds, perhaps just a few billion per year, will be available to fund an upward adjustment of the $80,000 tax threshold, providing relief to only the top 25 per cent of earners.

And even that might be a bit too courageous for Sir Humphry.

If the Coalition thought bringing in Malcolm Turnbull as Prime Minister was going to fix things, they certainly haven't allowed him to fix things. There seems to be a significant gap in the understanding of the Coalition party room whereby they fail to grasp that the reason Turnbull is personally popular with the electorate is because the electorate believe in the personally held politics of Malcolm Turnbull. The fact that they constrain him from enacting and exercising those personally held politics locks the Coalition out of what people want them to do. It's not brain surgery; it's just having to grow up and understand the hardline right discourse is never going to win the middle, even if you send out the most popular man on your side to front for it.

Be that as it may, the degree to which tax reform is necessary is most likely proportional to how much you believe there are problems stemming from the current tax system. If one does not think there is a property bubble caused by negative gearing, then one probably sees no urgency in fixing things. This is in line with the Coalition thinking on Climate Change where, again, the less they believe in the science, the less they think they have to do. Conservatism as highly touted by these munchkins simply seems to mean do-nothing-and-she'll-be-right-mate. 

Never more has Australian politics resembled a line of ostriches, all with their heads in the sand. 

If You Thought We Were Bad

There's one thing worse than Australian politics right now and that's US politics. Donald Trump is trouncing the Republican field of contenders. Perhaps not shockingly, Trump has won the primary in Nevada, thus putting himself into the driver's seat. 

The thrice-married real estate mogul won among Republican Evangelicals. Having vowed to round up and deport 11 million mainly Hispanic undocumented immigrants, he won among Republican Hispanics. 

Famous for lambasting perceived female critics as being fat, or ugly, or menstruating, he won among Republican women. 

He smashed Marco Rubio, the man the party hopes might rally enough support to defeat him, and Ted Cruz, who still appears to be determined to take down Mr Rubio before tackling Mr Trump.

Mr Trump's hostile takeover of the Republican Party now seems to be almost unstoppable. 

In the words of a Fox News political editor, "bladder-voiding panic has come to official Washington". 

The Republican establishment loathes Mr Trump not only because so many see him as unfit for office, and not just because they don't believe he could win a presidential election, but because they do not consider him to be a true conservative, let alone a true Republican.

Everybody in the establishment would be alarmed at this development while ignoring its causes. It's quite funny if it weren't so troubling, but for years the US Republican party has been taking on a harder edge beyond simply being crypto-fascists. Now that they have a full-blown fascist demagogue running roughshod over their own candidates, they can't put a handle on him. Their dalliance with fascism has turned to burn their house down. Donald Trump and his supporters are the Frankenstein monster created by the Republican Party. If nothing else, it is terrifying. 

If it turns out that Trump gets the nomination and faces off against Bernie Sanders, it would be a historic defeat for the Washington establishment. Trump versus Sanders would actually be a deep echo of the 1968 elections when Robert F. Kennedy was gunned down, and Nixon took in the racist white vote into the Republican Party. It would be the showdown that the political establishment has been avoiding for 48years. 

Quick Shots - 22/Feb/2016

'The Intern'

Ugh. A chick flick that doesn't know what it wants to do. Is it about the IT world? Is it about the difficulty of being old and getting back in to the workplace? Is it about the difficulty of a woman heading up an IT company and keeping her family? Is it about an affair that's not an affair? Is it about friendship transcending the workplace or is it about how friendships grow selectively in the work place? 

It seems to be all these things, but badly explored, and then comes the end. Such a waste of money and talent at hand. 

'The Flash' - Season 1

I ran out of Supergirl episodes so I gave in and started watching these. Barry Allen is not as interesting or attractive a figure as Kara Zor-El, though I imagine he might appeal to girls. Comic book fare with more action and less engagement. DC seem really big on interracial romance for some reason. It's welcome, but it really sticks it in your face as the centrepiece concern. Maybe America is evolving. Maybe the white people in charge are evolving.

There are some good performances by the supporting cast, especially Jesse L. Martin who plays Joe West. It's a funny turn for him because he continues to play a detective somewhat like his Ed Green character from Law & Order. Wentworth Miller and Dominic Purcell team up as recurring characters, sort of reprising their partnership in 'Prison Break', which I suppose is a sort of casting-as-gag. You don't see that too often. 

'Legend'

British gangster historic drama mess. Spends a lot of screen time going into Reggie Kray's romance and marriage. Tom Hardy is very good in this. Unfortunately it doesn't really go anywhere interesting and then they go to jail. I was kind of expecting something a bit more interesting than this film. Touches on an interesting story about the other twin Ron being paranoid schizophrenic. The mental illness dimension of the character is shown without much exploration of its inner workings, but a beautiful mind, this is not. So it's bloodshed and mayhem all the way.

'Diary Of A Teenage Girl'

This film was highly acclaimed at Sundance and has good ratings from both critics and Rotten Tomatoes alike. I got halfway through it and gave up. The San Francisco 1976 in this film is tedious and boring. I wasn't San Francisco in 1976 - I was in NYC - and there seems to be something fundamentally wrong about how it goes about capturing the times it attempts to depict.
I'm probably the wrong audience for it. It's not like it doesn't have redeeming features but I just couldn't get into it and for the 1 hour I watched, it didn't really offer me something good to make me want to watch the rest. That's pretty rare. 

View From The Couch - 20/Feb/2016

The End Of CDs

I ordered 'Dark Star' from JB Hi-Fi. Something went wrong with the order - which seems to be the waylay luck goes these days, - and the PayPal transaction never went through.I didn't realise this until month went by and my order didn't arrive. I only found out after I queried the order, and so I trekked in to a JB HiFi store to buy my copy. On the way to the counter I picked up the last Frank Zappa album on the shelf, which just so happened to be 'Guitar', an album Walk-Off HBP was hoping to encode lossless into his iTunes.

It turns out that CDs don't last forever after all. Somehow some rogue bit of moisture gets in and compromises the data storage. Walk-Off HBP had been moving his vast CD collection on to a hard disk only to find some of his older CDs had died on the shelf. I don't think any of my CDs have died just yet, but the indication is, it's very possible; I'd have to go through them all one by one to find out It's quite the drag. I don't think I could face such a task.

The oldest CDs I own are 'Aliens Ate My Buick' by Thomas Dolby and '90125' by Yes. I remember buying those thinking, this is the first day of my CD collection. They both still function so clearly it's not just age which affects these things. You can't get too wedded to formats. Videotapes were great when there was nothing else around;  DVDs were an excellent improvement until the Blu-Ray came along in HD 1080p; LPs were great when that was all there is; cassettes were fine until a better alternative came along. And while the future of CDs looks greatly diminished, the format of 16bit 44.12KHz will live on a bit longer.

Each time any technology gets updated, you have to bite the bullet and move on to the next thing. The funny thing is even if you know this to be abundantly true, it's hard to let go of the old tech. It's not as if the practical advantages of the CD has disappeared. The future is likely digital files streamed from some place and we pay subscriptions for this pleasure, and ownership of blocks of units goes into the past, proper listening will demand you control aspects the physical medium itself. It's a strange world in any case because Led Zeppelin have a LP box set out with CDs included for each of their albums. I wondered just what kind of person dropped $199.99 for that package of 'In Through The Out Door'. A lot of this tech has a long tail.

Walk Off HBO said that once he is done transferring all his discs on to a hard drive, he'll be able to pack up all his CDs into boxes. It would be the end of the CD era for him. It's such a weird thought. Yet I can recall way back in the mid-80s, Walk-Off HBP had crystallised that idea. He had created a fictional character who lives in the future who carried around a huge library of 20th century recorded music on a tiny data storage unit. Little did he know he was really talking about himself.

View From The Couch - 16/Feb/2016

It's Only Breakfast Television

One of the more bizarre spectacles this week is the saga of Sam Armytage of Sunrise who is beset by some serious sledging from a serious TV journalist (which of course might be an oxymoron but we'll fly by that for now) Virginia Haussegger. It started when Kristin Davis of 'Sex and the City' fame came to speak on behalf of the UNHCR (noble cause that it is ) and somehow ended up in a frivolous skit with Armytage. Which, of crows was so awful it turned into a media thing, and Armytage was canned from her hosting job for the actual lunch where Davis was going to say her serious piece. And out of nowhere came a stinging critique of Armytage's skit, courtesy of Virginia Haussegger whereby she dressed down the breakfast morning host for not being a serious enough human being.

Since then it's been twitter barbs at six paces. I don't get the media fascination with this thing.
The only reason I know it happened is because I read the Haussegger column, which did seem like a reasonable protestation. from the headlines, I've also noted that Armytage thought it was bullying. I wouldn't have put it that way - it is more hectoring than bullying. But then I do wonder just how much you can expect out of a show like Sunrise?

The most depressing thing of all might just be how obsessed the media is about itself. There's a whole world of stuff going out there and we count on the media to be covering it, and what we get instead is this really quite trivial brouhaha that won't come anywhere near solving anything to do with refugees or protecting human rights. It's just this morass of dross, the Sargasso Sea of Stupid.

A Bush In The Hand Is Worse Than Two Stones

Just ask the Iraqis. They just don't want another Bush in the White House.

Hashim al-Bayati, a 62-year-old civil engineer who frequents the cafe most weeks, is relieved it looks unlikely to be another Bush, with Jeb Bush finishing fourth in New Hampshire.

"We are fed up with the Bush family, come on. No more Bushes, please," he said. He recalled George H.W. Bush's "betrayal" when he urged Iraqis to rise up against Saddam Hussein after the Gulf War in 1991 but then did not support them. The death toll reached the tens of thousands. 

"Unfortunately they cheated us," Mr Bayati said, adding George W. Bush was even more damaging in his handling of the fallout from the 2003 invasion. He says he has little faith that any president will improve things for Iraq.

They're probably right. Iraq remains the one big goat that is not going to get un-fucked. What's curious are the voices that do want another Bush:

Mr Ashir feels the biggest mistake of US policy was not the 2003 invasion, but what came after, including the 2011 withdrawal of troops. 

"Obama left Iraq to destruction under the pretext that he doesn't want to be involved in wars, but it's a mission that should be finished," he said. "The Democratic Party didn't do anything for Iraq, at least the Republicans have an obvious policy." 

Hillary Clinton, given her tenure as secretary of state, would be "disastrous" for Iraq, Mr Ashir said. 

But Saad Mohammed Ikabi, 43, sitting a few feet away, disagrees. "She has the experience, she was a minister," he said. "We need someone with experience, and she also has a husband who is an expert." 

In a corner near the windows Mohamed Jobouri Mahdi, with cropped grey hair, wearing a faded brown leather jacket, described her as a "classy lady". 

"But most Iraqis prefer the Republicans rather than the Democrats," said the 51-year-old policeman. "We like the powerful, not the smooth."

I think that's called incorrigible.

Quick Shots - 15/Feb2016

'Black Mass' - a.k.a. The Depp-arted

The Whitey Bolger story starring Johnny Depp as the eponymous criminal, is a pretty tedious movie. Especially after 'The Departed'. 'The Departed' might have been a little silly in parts but it was  more entertaining, thanks to its source material also being the Hong Kong hit movie 'Infernal Affairs'.
As it is, this one goes through the motions with not much energy, and you do get the feeling as to why this story turned into 'The Departed' but the truthiness story of this one is nowhere near as exciting, gripping or intriguing as the outright lie that was 'The Departed'.

It's going to be debated for a long time whether the Academy fucked up in not giving Martin Scorsese any Oscars for his classics and then sheepishly handing him is director Oscar for 'The Departed; but this one, is simply tedious and unimaginative and makes the Scorsese movie look like a masterpiece. And they managed to do the 70s wrong - this might be its worst sin. It's generally a crappy movie, even with the amazing talent assembled to be in it.

'Inherent Vice'

A Paul Thomas Anderson film set in the West Coast of the USA during the early 1970s, starring Joaquin Phoenix as the down and out private eye. Should have been much more interesting than this turned out to be. It's not funny, it's not well put together as a private eye movie, even with echoes of Elliot Gould's turn in 'The Long Goodbye'; it hardly makes any bloody sense. The hair's nice and the cars are cool but as 70s movies goes, this too is a fail.

I wanted it to be. There are some promising moments, but it never really builds towards anything. It abdicates from its responsibility to tell a meaningful story. Instead it loses itself in the stage flow it creates for itself. When it ends, I drew a sigh of relief because I certainly couldn't take it any more.

'Show Me A Hero'

Oscar Isaac as the mayor of Yonkers, fighting for desegregation an public housing. That description doesn't exactly set the imagination alight, but it turns out to be a very interesting series about the nature of public housing and prejudice. Some of it is a bit didactic and there are stretches where it's hard to care about everybody, but eventually the mosaic of stories comes together and builds a bigger picture of the significance of the housing. The 80s and 90s look like the distant past in this series. I guess they now are, but it's really quite acutely nostalgic watching this series.

Bob Balaban and Winona Ryder are in it, which is an interesting bonus.

'Fargo' Season 2

This is how you do the 70s well. In fact, the whole damn thing is amazing. The soundtrack is pumping and it has some beautiful performances from the whole cast. Great writing, great directing, great editing, not much you can fault about this season of 'Fargo'. Very witty, very stylish.
If you have not seen this, go watch it.  Don't waste time on 'Black Mass' or 'Inherent Vice', this is where your 70s fix can be found.

Gang warfare on the screen hasn't been quite this visceral in a long time, and the mixed vernacular of the narrative makes for a heady cocktail of black humoured fun and wanton gun violence. It is simply breathtaking how the show goes from quiet and macabre to head-spinningly violent and bizarre. Unlike the stilted feel of the first season, this season has a fluidity and easiness of narrative that just keeps dragging you along.

I want to come back and do a proper entry on this one. It's really good.

'Supergirl'

This is also really good. The pre-season trailers were already looking good, but this series sure has the goods. As DC comic universe items go, this is much more fun than 'Gotham'. Melissa Benoist as the main character Kara/Supergirl is a standout. The rest of the cast is a bit shaky except for Calista Flockhart who shows the way. Who would have thought Allie McBeal would have amounted  to much, but no, Flockhart makes a great foil for Benoist's dorky straight female-Clarke-Kent routine.

Dean Cain and Helen Slater make appearances as the foster parents of Kara, which is kind of cute, but also in the tradition of previous Superman cast members that make an appearance in the new iterations. I know this will get howls of sexism thrown at me but... Benoist punches "like a girl"; but that's probably the point, seeing that she's Supergirl and not Superwoman.

Dr. Z's Insight Into the Meaning Of Architecture

Architecture Starts As Decoration

I was having a conversation with Dr. Z for whom I am doing some work for the next couple of months. The conversation took an interesting turn so I thought I'd write down what I remember of it.

A long time ago, Dr. Z was an architecture student at the University of Sydney - that's where we met.  I was skiving off from lectures at the Med faculty to hang with my old school friend GraGra, and Dr. Z happened to be one of his class mates. At the time, she was struggling mightily with the course because in her own words, the principles of design being preached and the practical application were far from complementary. Thus, as a student, she "struggled mightily" to reconcile the theory, the critiques and the taught practice. Eventually she found herself moving further upstream to understanding the concept of why we even plan cities, and what urban spaces are and how they work; and that's where she ended up with her doctorate, but in the beginning was the Faculty of Architecture at the University of Sydney.

Clearly, the early experience left their scars as well as lasting problematics that she has been pondering about over the years. After years of working in the urban dynamics area and still doing her thinking and reading on architecture, she has hit upon an answer to the age old question that has been bugging her since her days as an undergraduate, "what is the point of architecture?"

And really, she says architecture is the claiming of the right to decorate structures.
So what follows below is a quick retelling of what she told me; but I'm writing it down because it offers some interesting ideas.

In its most primitive instances, decoration, is how architecture begins. In fact, judging from the caves of Lascaux, decoration seems to pre-date our ability to plan, erect and decorate buildings. Every public building built in the ancient world is a representation of that society's ideological framework. If it is the ancient Egyptians, it is built around death and religion. In ancient Greece this was their Pantheon of Gods. The Romans equally built temples, but also public buildings for government, which were adorned with symbols of Roman power.

The point is, in most instances, the powers-that-be got to choose what symbols adorned the building, and the architects made a point of working in those decorations in support of these states. The ability to decide what decorations on the building was the expression of power itself.

Indeed, much of the history of architecture through the ages can be found as the expression of state power, or religious power.  We're interested in common dwellings of the ordinary people from an archaeological or anthropological viewpoint, but architecture is focused on these buildings built by state and religious powers. In turn, most architects in history were faceless servants of the state or religious bodies that sought to build these buildings. This is why we do not know much biographical data about architects of the ancient world. It was much more important that those buildings were built, and that they represented the right values, than who designed them.

All this hit a snag in the late Nineteenth Century with the advent of Art Nouveau. Art Nouveau emphasises ornamentation for its own sake and independent of state power or religious power. People in the burgeoning capitalist world could design their own decorations. Often, we refer to such decorations as kitsch. 'Kitsch' is an important concept here because, what the term does does is it disqualifies the decorations done by people that do not work for the state or for a religious body. The democratisation of artistic expression brings about Art Nouveau - and in turn, this brings about the democratisation of decoration.

Faced with this situation, the rise of Modernism banishes decoration from buildings. This goes hand in hand with modern abstract art, where people and things are no longer depicted with any semblance to reality. Instead the abstraction and abstract art pushes away the decorations giving rise to flat spaces, blank walls, and these spaces become expressly impersonal. The state invests a good deal into Modernism because through Modernism, the state can re-establish its power over the arts. It's a complicated topic at a glance but if you boil things down, the architect, as a hired artist on behalf of the state or the church and more recently the wealthy, can only exercise their skills at the behest of those entities. It is a rare architect who can buck this flow of money. Otherwise, their work is to do the bidding of the money.

This also means that in essence the vast majority of architecture is decorating of sheds, with modernism as an attempt to not decorate at all. The exception to this is Expressionism, whereby large parts of the decoration are given over to the denizens to do for themselves - but this kind of thinking remains largely obscured by the monoliths of Modernism and Classicism.

Dr. Z's great consternation is that because at its core, architecture is merely an extension of the state or the church or the wealthy to play elitist games through choosing the manner of decoration, architects have to be cultural elitists. The bone of contention for Dr. Z back in her architecture student days comes back to the simple fact that all of the course was tacitly supporting a culturally elitist position, denigrating the masses and what people might choose for themselves.

More pointedly, architecture really can be reduced to "decorated sheds" and "ducks". The vast majority of office buildings you see in any city are "decorated sheds", boxes containing functions but with different facades and presentation. Alternatively there are the less functional buildings that advertise their social importance through their appearance, which are "ducks". The Sydney Opera House is a prime example of a duck, where its form - for all its talk - is really not that conducive to it being an actual opera house, but carries with it great social import. In most part, the Modernist architectural dictum of "Form Follows Function" is a utilitarian wet dream, unfounded in the reality of the vast majority of buildings.
So why all the -isms?

All the -isms and the need to know them and to handle them as vernacular of aesthetics itself is actually cultural elitism in action. Thus Dr. Z surmises, architects trained by such institutions are doomed to be cultural elitists with a strong slant towards fascism. In turn, the great intellectual pretension of the Faculty of Architecture at the University of Sydney, is that it is somehow culturally important, but it can't hide its role as purveyors of ugly cultural prejudices. No wonder what they preached and what they taught as practice could not be reconciled, according to Dr. Z.

The flip side of this is giving over the power to decorate, back to the people. The denunciation of 'kitsch' is always done by those who resist the democratisation of taste and aesthetics. The true underlying contempt for 'kitsch' reveals a cultural prejudice that, should people opt to decorate things for themselves, it couldn't possibly be as valid as the decorations and ornamentations chosen by the state/church/wealthy. It totally ignores what the individual wants because the state/church/wealthy seek authority over people. It is by its very nature, imperative that the powerful discredit the democratised aesthetic found in small things.

The real reason why everybody's decorations gets dismissed is because the state (or church or the wealthy) didn't sanction it. To the vested powers, it's just a wildcat attempt at decoration. Such contempt directed at decorations done by people is everywhere. A woman in America decorates her house with medieval trappings imported from Europe. The photos draw comments from the self-appointed taste elite saying she has no taste, even though she exercised every bit of discernment in collecting the medieval fittings. It's deemed bad taste because she is no royalty to be appointing her abode with the trappings of European aristocracy from the middle ages, no matter how accurate and studied her attempts. The very quibbles we might have about taste, is actually a power play to control the extent of decorations. The people who criticise, implicitly understand that decorating one's house like a European castle is an appropriation of decorative authority that used to belong to kings and queens. This is why taste, contains the kind of fascism we see in 'The Devil Wears Prada'. It turns out that Fashion and Fascism really were conjoined twins.

And so Dr. Z sides with Expressionism, where at least the people immediately have a say in the decoration. The participation and contribution made by the people living in a space builds a narrative and thus meaning that is independent of the state, yet fully democratised. It also eliminates the commercial imperatives and lays open the expression of people's genuine aesthetic that is not imposed by the State or the Church or the wealthy.

At her work, Dr. Z has taken to the Expressionist idea of letting the inhabitants of the space decide. A certain wall is painted red, another purple, and another orange and so on. People bring in ornaments and objects with colours to match, and slowly but surely a wall section builds up with a narrative of people participating in the decoration. It is quite the project. Dr. Z laughs and says there is an architecture graduate at the same workplace, who puts it down to Dr. Z's nesting instinct gone awry, but in fact would have all the walls painted white. As a product of the same faculty Dr. Z understands all too well, the architecture graduate is voicing her opinion in support of an imaginary Modernist State, sanctioning her own aesthetics of blank, white walls without any decorations whatsoever.

So the next time you're at a party and an architect goes on about taste, and 'kitsch' and how terrible things are with one building or another, be sure to tell them their tastes built from education at some architecture faculty, is a Statist bit of fascism.

View From The Couch - 11/Feb/2016

Barnaby Joyce, Deputy Prime Minister

The world is a cold, hard, cruel place. Then it reveals it has a wicked sadistic sense of humour by presenting us with the spectre of Barnaby Joyce as the next leader of the National Party, and as such will be our next Deputy Prime Minister. I'm sure he's over the moon, but watching this feels more like the lunatic-in-chief has been handed the keys to the asylum. Make no mistake, Barnaby is a 'close friend' of Gina Rinehart and shares her trenchant fascist views. He's a climate change denier and we won't even go into what he thinks about the gay marriage issue.

So it is that you get rid of one Dark Ages throwback Tony Abbott, and somehow the conservatives manage to thrust forward another devotee of Dark Age politics. It's enough to make you lose faith in Australian politics altogether.  It's the one arena where being regressive is rewarded.

Toll Rise, And Opal Hike

The NSW government really has so little control over private roads and public transport.  It's a shame because ostensibly they are in charge, but something strong seems to happen between the high offices of government and the lobbyists who come lobbying them on behalf of businesses looking for a big tender.

Transurban is hitting motorists with a 15% rise in tolls. They're cheering because tollroad operation is the easiest wicket to fleece citizens. Sydney tollroads are the centrepiece of the revenue stream, and transurban ants to build more of these things. It really is the pits.

Meanwhile the government wants to hike the Opal card, hitting up people who use public transport. So if you're lucky enough to have public transport, the government slugs you; but should you live far from public transport and you're committed to driving, the government abandons you to tollroads and tollroad operators.

Sydney is the worst-planned city of its kind in the world.

Work For The Dole Doesn't Work

In other (un-)surprising news, it turns out 'Work for the Dole' doesn't really work.
It's not that surprising really, given that its main purpose is to torture the unemployed and send them to do just anything that resembles paid labour, to justify the welfare being spent. It reflects a very idiotic view of what work is, and what employment truly is.

Now that they know it doesn't work, the government is committed to keep on doing it - which tells you quite a bit about how they think. It's not really all that important for the unemployed to find actual work, it's more important that they be made to do menial things for the satisfaction of people who imagine there is wholesale welfare fraud going on everywhere. I know a few welfare bums, but really, 'Work for the Dole' is just make-work-for-punishment. it doesn't address the underlying issue of why they're welfare bums.

On a more broader note, in the future there will be more unemployment. This is because machines will eat more and more jobs. The robots are coming, AI algorithms are already here. Increasingly, humans will price themselves out of work. There is no plan on how to deal with this phenomenon. You sort of wonder how that is all going to go.

Bernie Sanders Wins New Hampshire

The View From Outside America

To an Australian, the American aversion to such terms as 'small-'l'-liberal' and 'socialist', strike us as more of a paranoid American mindset than cogent political analysis. After all, if it is Godwin's Law that it's only a matter of time before somebody eventually trots out Hitler in an internet argument, it seems equally true that in any discussion about socialism, it isn't long before an American trots out Stalin. They both make excellent arguments in a reductio ad absurdum of fascism and communism but it's not necessarily meaningful.

American elections are a difficult thing to watch. So much of the world depends on how America votes, and in many ways the most depressing thing is to see America vote in conservatives who push the discourse so far to the right that it hardly makes any sense to those who are outside America. Now, there is no reason why we should have influence on American politics, after all it a separate sovereign nation - except for the problem that what America does, impacts so much on us. If it were possible, interested parties outside America should be allowed to vote for American governments exactly because of the degree they impact on the world.

As such, a candidate like Bernie Sanders actually gets a lot of support outside of America, where socialism is not a dirty word but a sensible middle-of-the-road policy framework. There are many aspects to this gap, but mostly because both the Republicans and Democrats function as two wings of the same right wing party, it is hard to get any kind of centrist voice heard in American politics without the opprobrium heaped upon such a position. Much to his credit, Bernie Sanders has remained true to the centre of the spectrum of ideas for as long as we can remember.

Just so you can understand how skewed American politics is, here is Political Compass' take on the candidates this year:

The cluster up in the right corner is where the Republican candidates dwell. Deep to the right, High on the Authoritarian scale, there's really no distinguishing these positions between Trump, Bush,Cruz and Rubio. It's like fifty shades of the same old fascist dogshit, but there you have it. It's a wonder that Republican voters can tease apart nuanced differences on what amounts to a clusterfuck of fascist ideation. Interestingly, Hillary Clinton is about a third way up on the Authoritarian scale but also two thirds across on the way to the extreme Right. If the endorsement of the Democratic Party establishment is for Hillary Clinton, we can surmise that the Democratic Party establishment is a cloud of opinions and sentiment that centres around Hillary Clinton, and so we can also surmise that the realistic difference between Hillary Clinton and the GOP Clusterfuck Candidates is a degree of Authoritarianism and not policy Left-Right ideology.

Then there's Bernie Sanders, who is no only a little bit left of Centre, but dead bang on the line between Authoritarian and Libertarian impulses. Most importantly, he's the only candidate who is reasonably close to the middle of the board. Yes, by world standards, Bernie Sanders is a reasonable man who is at the middle of the discourse for both Left and Right as well as Authority of the State and Liberty of the Individual Citizen.

And this is why people outside of America pin so much hope on a Bernie Sanders Presidency. For once, just once in living memory, the President of the United States might be somebody who has a very balanced view of the world.
Just so you know, here's a quick comparison of where he might stand in relation to other famous politicians:

In that chart, Bernie has shifted somewhat to the south towards Libertarian-hood, but he's mostly close to the middle.The point remains, he maybe the closest to the middle, even in this historic context. Certainly, the world could do with an American President who better reflected the middle of the world's ideation on politics than the continued parade of rightwing authoritarians. It's worth bearing in mind that no matter how awful the mudslinging gets, politics is the battle for the middle ground. If the middle ground of the American electorate has shifted significantly towards the middle of the Political Compass board, then it is entirely possible Bernie Sanders is going to go all the way.

A Quick Note On The Clinton Candidacy

Back in 2008, Hillary Clinton was the candidate of destiny. Her problem was the she ran into a greater candidate of destiny. Since then Hillary Clinton has been preparing for this very run to win back the ground but there are mitigating factors against her candidacy.

One major problem for Hillary Clinton is that she carries with her the legacy of Bill Clinton's presidency. Now, Bill Clinton's presidency was marked by a huge transition to a Baby Boomer President in 1992. If there ever was a Presidency mired in the lost opportunity for the Baby Boomer
generation to deliver on its promise, then it was the Clinton Presidency. And there is no reason whatsoever to believe that a Hillary Clinton Presidency would in any way be less disappointing than the Bill Clinton presidency; and this picture has not changed since 2008.
And there are many people who resent the dynastic whiff of the Clinton run.

Then there are the demographics. Since Bill Clinton, through George W. Bush and now Barrack Obama, we've seen 24years of Baby Boomer leadership in US politics. Given the field of candidates this year, it is unlikely that there will be a generation change - that is to say, I don't see Marco Rubio or Ted Cruz getting up. If any one of Sanders, Clinton and Trump wins, it will be at least another 4 years of Baby Boomer leadership.

Yet, the problem with this demographic is that its retreat is already beginning to show. If you add Gen-X and Gen-Y voters, they outnumber the Baby Boomers and older set. If a majority of them are turning on to Bernie Sanders, it is going to be awfully difficult for Hillary Clinton to wrest the Democratic nomination from Sanders. In fact, it's going to beard for any of the Republicans to beat a candidate that appeals so strongly to both Gen-X and Gen-Y. If anything, the results in Iowa and New Hampshire signals a major shifting the American electorate itself, and there is a good chance that even more so than with the 2008 election, the 2016 Presidential election is going to smash the old demographic models.

The worst problem of all might be that she doesn't really stand for anything other than a dynastic run at the Presidency, and it's not exactly something she has addressed or can address. Bill Clinton keeps telling us she's a great candidate. She may well be if she had a framework or ideological context to her candidacy that was as vibrantly memorable as Sanders' position. If there is a unique selling proposition to Hillary Clinton, it might be that she's a woman. But I doubt the electorate is going to buy that.

Quick Shots - 09/Feb/2016

Hard Landing In China - "We Crash, You Die!"

Pleiades sent me an article in the AFR today outlining the retreat of bank shares this year. it's not exactly joyous reading. Pleiades thinks this is the shit hitting the fan. He is probably right.

So far this year, European bank stocks have dropped more than 20 per cent, and this pattern continued overnight, with both Deutsche Bank and Commerzbank shedding more than 7.4 per cent. The shares in three big Greek banks all slumped more than 27 per cent on Monday night. 

At the same time, worries about tighter financial conditions weighed on US bank stocks, with Morgan Stanley dropping 6.4 per cent, while Goldman Sachs falling 4.8 per cent.
At the weekend, China said its foreign exchange reserves dropped nearly $US$100 billion ($141 billion) last month to the lowest level in more than three years as Beijing further sells dollars to prop up the yuan. 

China's foreign exchange reserves now stand at $US3.23 trillion, about 20 per cent below the peak of nearly $US4 trillion reached in mid-2014.

Capital flight out of China is accelerating not slowing down.  There's really no sugarcoating the fact that China is slowing down towards a hard landing. Nobody really manages 'soft landings' but on the scale of measuring just how hard a landing this is going to be, it looks like it's gong to be solidly hard.

Abenomics Is Reaching The End in Japan

The latest news out of Japan with its NIRP (yes, negative interest rates policy) is that Abenomimcs has failed. Stocks, USD/JPY trade and Bond yields have collapsed. Naturally, banks are taking a hammering over in Japan as well. The markets are indicating Abenomics simply is not working.

The market's reaction is getting duller day by day. The negative interest rates boosted the market only for two days," said Norihiro Fujito, senior investment analyst at Mitsubishi UFJ Morgan Stanley Securities, and trading data shows even that was down to short-term "gamblers", he added. 

A week later, even those gains are gone, as foreign investors withdrew a net 207 billion yen from the market, taking their total for 2016 to more than 1 trillion yen. U.S.-based Japanese stock funds also saw an outflow in the week ended Feb 3.

Curiously, the Yen rose against the US dollar, even as foreign investors pulled out of Japanese markets.

So, even if the US is doing much better now, with interest rates going up, two out of three of Australia's trading partners are going through what can only really be described as bad times.

Deutsche Bank is now issuing statements defending its liquidity, which is like a throwback right to the GFC. At this point the scuttlebutt is that DB might be the new Lehmann. This is not surprising because Deutsche Bank is neck deep in derivatives that have gone sour, and for a long time it was speculated that any movement of US interest rates would blow up positions taken by those derivatives and adversely affect Deutsche Bank.

Judging from the headlines, it's clear we've entered a new phase in the repercussions from the GFC. It may just be the point at which all the Quantitative Easing and money printing is now coming back with consequences to roost. The Central Banks can't very well spend even more in an attempt to spend their way out of the woods.

Quick Shots - 03/Feb/2016

If They Stop Talking About The GST

It doesn't look like this government has the balls to really try and raise the GST.
It would be good if this Federal Government stopped making noises about raising the GST.
Paul Keating for one thinks it is a crap idea. More importantly, there are better things to reform in the tax code than simply raising the GST.

The biggest economic boost would come not from a switch from income tax to GST but from a switch from stamp duty to land tax. To get it the Commonwealth would have to knock together the heads of a few state premiers, but according to the the discussion paper that kicked off the tax reform process, it's where the big gains lie. 

Capital gains are taxed at only half the rate of income earned from interest in bank accounts. The discussion paper asks whether that's appropriate and talks about taxing all income from saving at the same (discounted) rate. 

Fringe benefits tax, employee deductions, business deductions, dividend imputation and the role of the family home all come under the microscope in the discussion paper. Getting the GST off the table would allow the government to focus on fixing what's really broken.

That sounds about right. 

Asylum Seeker Politics Is Toxic?

Tanya Plibersek says that asylum seeker politics is toxic since 2011. You get the point that it is nothing but unrelenting ugliness when it comes to news about Nauru or Manus Island with their detention centres. We find - in subjective terms - what happens and is happening on those islands to be morally wanting, but the High Court has ruled that it is all legal. This is actually a lot more delicate than personal moral reasoning. The political class of this nation has taken a mostly bipartisan approach in saying that the people smuggling business is culpable for the boats, and the casualties that come with. As such, the current policy seeks to shutdown the product the people smugglers are peddling, which is arrival in Australia. 

That's the line the political classes holding to, because if they break there, the boat arrivals will be on for young and old. The boats are spectacular as an image - so much so the words 'refugee' and 'asylum seeker' have become largely interchangeable. The problem for both sides of politics is that the boat arrivals upend not one, but two parts of sovereign borders. First is the notion of immigration policy, and the other is actual physical transgression of our borders. There's a certain level of commitment to these things that if the government were to simply forego these things, they may as well pack up shop and go home. 

So the problem isn't that the politics is toxic; it is that all discussion of the policy is burdened with the raison d'être of the state itself. The reductio ad absurdum of this 'argument' expresses itself with the detention centres on Nauru and Manus Island. It's unpleasant, but business of the state is always tinged with this unpleasantness on one level or another. It's not surprising the High Court threw out the case it did. Inadvertently, our whole political system is hitched to the 'Stop The Boats' slogan. 

It's not like Tanya Plibersek has a workable alternative. 

Junichiro Koizumi Goes For Zero Nuclear

The Interview Is Out On Bungei Shunjuu

The most riveting read for me in the last 24hours was the interview with former Prime Minister Junichiro Koizumi and his current anti-nuclear power station stance. I was vaguely aware that he had started talking aloud against nuclear power after his time in political office. The most significant Japanese Prime Minister this century was in office for five and a half years and did nothing about nuclear power. All of a sudden he's become a vocal critic of the entire nuclear industry in Japan, so much so it has become his single issue.

Amazingly, he is retracting everything he ever said in favour of the nuclear industry in plain language. He says all the claims made by the nuclear industry in favour of nuclear power are lies. It is not cheap, it is not safe, and it is not sustainable. He goes through it in great detail as to why all those claims are lies, and forcefully makes the point that the electrical companies, the nuclear industry and the unions for the electrical companies, and therefore the politicians who receive political donations are too close to see it.

Mr. Koizumi says it is possible for Japan to completely abandon nuclear power. It can be done, it should be done, and all it would take would be for a Prime Minister to decide it is his cause. After Fukushima, Japan in fact did it without any nuclear power for four and a half years before they started up one of the plants. Germany by contrast has declared it is down to zero, but is still using eight nuclear plants as they wind them down.

When asked about his historic involvement with nuclear power back to the 1970s, he says he deeply regrets believing what the industry representatives presented to government. He was given genuine assurances from all the presenters dating back to the 1970s that it would be "cheap, safe and clean" - a claim he says is so deceitfully wrong, he simply has to speak up now. It's frustrating to read that because I remember those discussions in the 1970s when I was still a kid, and thinking how in the name of all that is good can these politicians believe nuclear power is safe after Three Mile Island?  Reading the change in position by Mr. Koizumi today is devastating because it was known back in the late 1970s that nuclear power was not cheap, safe or clean. Really, I was a kid and I knew it.

I guess it's a case of better late than never. It's truly frustrating.
There is a generation of people in Japan that became apolitical and stayed apolitical in the late 70s through to the moment of Fukushima. As if a great political and scientific amnesia covered Japan, and they simply forgot the risks until it all went pear-shaped. The stupid thing is that had they thought about it before, they would have known the risks that emerge out of catastrophic failure are catastrophe itself. Even Mr. Koizumi and his LDP cohorts must have known on some level back in the 1970s.

In his rationalisation, Mr. Koizumi offers the context of the oil shock of the 1970s as giving great impetus to move nuclear energy as quickly as possible. While it is true that nuclear power freed Japan from dependence on oil, it put it right on course for Fukushima. Even so, you sort of wonder why these heads could not balance up the risks against those benefits. It's humiliating to read Mr. Koizumi wants 100% renewables in Japan, and that he is arguing his case to the LDP hard. In many ways, it's too fucking late. I appreciate he saw the light, but he could have done it as Prime Minister, had he known back then; and he could have known back then. It's not like the information to do with the risks were hidden out of sight.

It's an amazing interview. I believe he's seen the light. It's still much too late.

Still Living In The Shadow Of Kakuei Tanaka's World

The LDP rule in Japan between 1955 and 1993 had many strange effects. One of them was how government bureaucrats stopped distinguishing between government business and LDP party politics. This was because they were in power so long, and so dominantly that there simply was no point in talking to the opposition parties. This has led to some strange outcomes in Japanese politics, namely, when the opposition has managed to claw its way into power, the bureaucrats have been hostile to the Socialists or the Democrats that formed government from the merger of opposition parties. This has meant factional politics of the LDP were much more important than the actual business of the Japanese Diet.

The leading kingpin of the kind of factional politics led by graft and bribery was Kakuei Tanaka, who essentially railroaded the nuclear industry into Japan. He did so because the nuclear industry has ancillary costs, all of which could be diverted to constituents. By building expensive nuclear power plants, and paying off the local residents to host these plants in their neighbourhoods, the LDP were able to retain the rural votes. If you add in all the favours and tenders that involved bribes, too many people benefited to question the risks.

The other problem of factional politics is that the people in safe seats wielded far more power than politicians in marginal seats. Kakuei Tanaka made sure he bribed the politicians in marginal seats regardless of party affiliation, so that he could wield extra-party influence. When you combine all this together, you have a structure where the politicians in marginal seats and the bureaucrats of particular ministries with rural offices become intimately entwined in an exchange of favours and bribes.

If we are to be fair to Junichiro Koizumi's time as Prime Minister, he used up all his capital in dismantling this structure by privatising out the postal services of Japan. Asking him to dismantle nuclear power plants would have been next to impossible given the priority of privatising the postal services. In the interview, Junichiro Koizumi describes the privatisation as dismantling Kakuei's legacy. It sounds easy, but there were a lot of vested interests that got sent packing. The interesting thing is that it never got explained to the public that was what was happening. It's only after the fact that we can now understand the full meaning of that privatisation.