'Where To Invade Next'

Michael Moore's Timely Polemic

GS got me out to one of his free movie night courtesy of the ethics society. I think I'm on a good wicket here. It's for hard to convince one self to get to the cinema when your income drops - so a special shout out to GS who keeps asking me to go watch these films with him. As with 'Eye in the Sky' this film deserves a write up too.

It's been a long time since I last saw a Michael Moore film. The way I see it, I don't really need the heavy-handed propagandising that he carried out with 'Capitalism: A Love Story' because I'm pinko enough and I'm not an American so I can't vote to change America; so with me, Moore's preaching to the choir in the wrong church in the wrong suburb. All the same I got emboldened by the freebie I saw last time which was 'Eye in the Sky' and thought I may as well catch up with GS again and catch what Michael Moore had to say this time.



What's Good About It

As polemical tirades from Michael Moore go, this one's a lot gentler and perhaps more probing. The central idea is what is it that the European states got going so well that the USA doesn't but from which it could easily learn. The premise takes him to a series of countries where various policies are explored in context of the people they serve. Moore then throws the American political discourse at the locals to see if it sticks and in most part it doesn't seem to gain any traction at all.

In most parts, what Michael Moore is recommending is common sense through to a little bit extraordinary. That would be my own cultural spyglass distorting my view of what Moore uncovers in Europe. Surely no state - certainly not America - and probably not Australia could adopt all those things and keep a balanced budget. I'll get into it bit more in a moment but suffice to say the survey is optimistic about what can actually be done.

Also, the film gets out to Iceland where they jailed the bankers and makes its strong case for totally equal rights and access for women, where the Icelandic women have some choice words for America. When asked for 2 minutes to advise America, the female CEO of a company tells Moore that she would not like to move to America because they would make bad neighbours and they treat their fellow Americans badly. She says she can't understand how Americans live with themselves knowing how badly they treat one another. It's a corker of a moment when an ethos borne out of a deeply cohesive culture slams the rampant individualism of America.

What's Bad About It

Michael Moore is cherrypicking the good things from these countries without going into how those things are being costed. He talks a little about the history of how some of these admirable institutions came into being, but the potted history is so abbreviated it lacks a logical persuasiveness. He also basically meets people who want to show off their best and he accepts these things without much critical assessment.

The film is also a little long-winded. by the 5th country being introduced, we're sort of tiring of the ruse. They could have sharpened the film more in the editing suite. It's not a bad film by any stretch of the imagination, but it isn' as sharp as his more polemic films and maybe a little tired in parts.

What's Interesting About It

Some of these European countries Moore visits - Italy, France, Germany and Portugal - have serious economic problems. Part of the problem is that all of these countries have large deficits they cannot rein in. Italy and Portugal in particular, as part of the PIIGS, are in danger of sovereign default. France's Debt to GDP ratio is above 100%. Germany is sitting on Deutsche bank which might blow up with $60 trillion worth of bad derivatives has written - many on the back of Greek Government debt. Should Deutsche Bank blow up, Germany might embark on a massive bailout instead of letting the banks fail like the Icelanders did, and give rise to more massive government debts. These are things that were not being discussed at all in the film, and gets to the crux of the argument.

America by comparison runs a much smaller government if you exclude its extraordinary military spending. The argument can be boiled down to whether the states carrying out these wonderful programmes really can afford to keep carrying out these wonderful programmes. It is arguable that the Italian regime of holidays is costing the government and economy too much; or that the French lunch at schools programme is too expensive; or the work conditions in Germany are too lenient. The poster child for such arguments is actually Greece, where after the GFC, they became known to France, Italy and Germany for having too many perks.

Greece is of course paying a terrible price today, just to preserve the Euro. The countries that benefit the most from this arrangement also happen to be France, Italy and Germany, while Portugal is staring down the barrel at becoming like Greece. It is easily argued that France, Italy and Germany get to preserve their wonderful entitlements at the expense of the Greek poor. France, Italy and Germany also get to export their goods denominated in the Euro, which allows their produce to be more competitive thanks to the Euro depressing their prices. If they had to do it with their own currencies, they would be much less competitive. It's an arrangement that works doubly better than it does for Greece that has no benefits in trading on the Euro, has no significant export industries except tourism, and carries its massive government debt in Euros, all of this just to preserve the Euro.

For a more balanced argument, Moore needed to go to Greece and get their story.

What Windfalls Buy

Another interesting topic of note was Finland's education system, which has shot to the top of the world in the last 15years. As Moore notes, for much of the Twentieth Century, Finland's schools and students did no better than the Americans. Then, it reorganised its educational system, giving rise to the tremendous results it boasts today. The thing is, Finland did on the back of the economic windfall from mobile technology. The temporary but significant popularity of Nokia phones gave rise to a massive rise in revenues in Finland which could then afford to re-organise its schools.

The parallels there would be with Australia which had its once in a lifetime commodity super-cycle, giving rise to the revenues from the mining boom. Of course Kevin Rudd tried to harness those revenues with a Mining Tax which ended up getting him removed. Julia Gillard then went and instituted the NAPLAN based on the Gonski report. While it is horses for courses, the one recommendation the Fins give to Americans in this film is to not have a national standardised test.  And not to have private schools that reinforce class differences. They're great suggestions that will doubtless fall on deaf ears in Australia as well as America.

The status quo in this country at least says private education is here to stay, so within it we can see it is our State's commitment to preserving class stratification. They can say whatever they like about Gonski and NAPLAN and whatever it is they think they're doing - the government is building a patchwork quilt of bullshit to paper over the stark reality that they are willing to accept class stratification in our society, with all the ills it presents. It's disappointing, and more so when it comes from the ALP on the centre-left. If anything is for certain, this film convinced me to hate private education even more than I do already.

Legalising Drug Use

Portugal's contribution to Michael More's haul is about legalising drugs. This one stands in stark contrast to the other policies Moore brings back in that it would cut law enforcement costs significantly to stop criminalising drug use and medicalising it. The Portuguese police argue that it has to do with human dignity, but as with all things it is probably rooted in the economics of the drug trade.

A good portion of the drugs our societies worry about come from plants and farmed plants at that. Even LSD was originally extracted from a plant. Marijuana, Heroin, Cocaine are all grown in quantities by farmers under the control of warlords. They do so because together, they can produce a substance that returns multiples on investments. The nexus of drugs and arms is possible only because of the large margin in the drug trade - and what enables this large margin is the scarcity created by the states who try and block supply.

The criminalising of the demand is a complement to the blocking of supply which Moore's film argues is actually a racist ploy to decimate the Black leadership in America. All the same, the prices go up because the war on drugs makes the value of illegal substances higher, which benefits the drug lords and warlords in central America and Afghanistan much more than it benefits the citizens of the first world.

What the Portuguese example illustrates is what happens when the state refuses to cooperate with the marketing plans of the drug lords and reduces the margin. The flow of drugs falls to a level that matches the natural demand for them, which turns out to be much lower than when the state is policing the users, criminalising the demand. The crime rate goes down because it is less onerous to service the drug money. As with ending prohibition of alcohol, the violent crime relating to the drug trade goes down because it becomes less valuable. Illegal motorcycle gangs would fear the decriminalisation of drug use the most because it would decimate their margins.

You'd think after 40 years of Nixon-ian racist paranoia that our society could find the simple courage to do what Portugal did.

Movie Doubles - 'Bridge of Spies' & 'Pawn Sacrifice'

Cold War Nostalgia




Today's Movie Double is from two movies on Fetch TV, back-to-back, about how the Cold War was engaged. 'Bridge of Spies' is about how significant spies were exchanged, as all parties pretended there was no quid pro quo when it was all about a quid pro quo; and 'Pawn Sacrifice' is about Bobby Fischer's epic win over Boris Spassky in Reykjavik in 1972. Both films feature a tremendous amount of ambient paranoia about the communist Russians and weave their stories through the tacit embrace of the paranoia of that era.

Both are true stories - though the usual caveat is that they're true-stories-loosely-based-on-fact. The looseness of the 'loosely' hangs pretty loose with both films, but they make for good entertainment.

Steven Spielberg seems hell-bent on recreating the images of his youth through his film about the late 1950s and easy 1960s. Front and centre to the story is the threat of mutually assured destruction through nuclear war. To avoid the war, the participants must step back just a little bit from their ideological rhetoric, and as it turns out the main character played by Tom Hanks gets to walk that distance the longest because he's a man of American Principle. It's actually quite ra-ra about America, even though the CIA agents that help him seem to want to negotiate for part of that principle.

Edward Zwick's film by contrast seems to delve deeper into the paranoia infecting the mind of the protagonist Bobby Fischer, who plays off against the Russian cheese master in a surrogate confrontation in the Cold War.  If War is diplomacy through other means, then it stands to reason that under Mutually Assured Destruction scenarios, Chess is War through other means. In a very unnatural way, the paranoia of the US government becomes the paranoia of the intensely unhealthy mind. It's hard to say for sure whether Bobby Fischer would become the kind of paranoiac he became had he lived in another time. Perhaps it is the contention of the film that Bobby Fischer too was a figure rooted in his era when at least a little bit of paranoia was healthy trait.

America As Inept Underdogs

In both films, American engagement with the Russians seems to come from a position of relative innocence and amateurish engagement with the problem. In order to negotiate the exchange of spies, the Americans send in a civilian lawyer with plausible deniability of its own involvement. The Russians are happy to engage with James Donovan at the state level, accepting his negotiation with the tacit knowledge that they reindexed dealing with the US Government.

Similarly, there is a sense in 'Pawn Sacrifice' where the American chess fraternity is amateurish and disorganised compared to the state-sponsored prestige teams from Russia. Thus it falls to Bobby Fischer to try and beat these Russian chess masters, as an individual. It is evident that the US Government has tremendous interest in Fischer doing well, but it cloaks itself in the same plausible deniability it bestows upon James Donovan.

One imagines this positioning of America as a kind of naive underdog suits the narrative for both films where the seemingly ordinary guy manages to secure the right deal, or the ingenious individual triumphs over the collective that is the Soviet Republic. It's a bit cheesy because it understates the actual power America exercised during the Mid-Twentieth Century.

It is also questionable if Bobby Fischer's win over the world champion would have been such a seminal moment had the grand master at the time been from India or Africa. Without the context where the prestige of the state is on the line, the conflict in the story would have weighed less to the world. The drama was heightened exactly because the oppose number Boris Spassky came from Russia.Yet in an evenly matched contest of state power that was the Cold War who can reasonably claim America was the underdog?

Their Paranoia Is Our Paranoia And Vice Versa

The sense of pervasive paranoia of the 50s and 60s is essentially the backdrop to both films. Looking back on the era, it is easy to imagine that the Americans looking at how the Russians finished off the Germans in brutal fashion decided the Russians were truly frightening. Equally, had the Russians looked closely at how the Americans finished off the Japanese in the Pacific theatre, then they equally would have had cause fro alarm. That mutual suspicion would have played out equally through the post-World War II era as both sides developed their nuclear arsenal and had to ponder the Mutually Assured Destruction doctrine.

The public that surrounds James Donovan in 'Bridge of Spies' is palpably scared. The children are scared of nuclear war, the adults are scared of communism. Even being the lawyer to represent a Russian spy is enough to elicit the violent response of the mob. It's not that far from the terrain of Atticus Finch in 'To Kill A Mockingbird'. It is easily conceivable that somebody growing up in this climate of fear ends up with the paranoid thinking that sees conspiracy everywhere. It's natural to to be paranoid when the state exercises paranoia as default option - and so the Bobby Fischer we see in 'Pawn Sacrifice' is a prisoner of his own fears.

The real Fisher seems to have been a fan of Hitler and more of a self-loathing Jewish person. It's hard to come at how somebody turns into that as well as one of the greatest chess masters ever, but then there's nothing to say these things are mutually exclusive or that Fischer saw any problem with it. The film is, if anything, a little light on the questionable ideas that informed the personality of Bobby Fischer. In any case, "paranoid nutcase" seems to have been the best description of Fischer, and that part seems eminently the product of the era in which he came to maturity; The unintended consequence of the Cold War as propaganda management where a citizen was driven nuts by the ramifications of the Cold War.

The Better Self

The logic of the Cold War is pretty unforgiving, and the courting dance of spies negotiating for their respective states has something of a zero-sum game about them. Each and every escalation in threats of violence is reciprocated with an equivalent or higher threat of violence. The incremental shift upwards is like an endless game of poker with the chips forever being mounted up as the players 'raise", but never being able to "call" because of Mutually Assured Destruction. To "win" in this scenario means the same as losing, so the necessary enterprise is to prolong the game rather than rush to its conclusion.

In this context, Tom Hanks' James Donovan makes a point of appealing to people's better selves. Whether it be an anti-communist judge or the Supreme Court or the CIA or the Russian KGB counterparts, he is constantly appealing to people to make a better judgment, to behave in light of their better selves. He is persuasive, although it might be Spielberg's deft hand at manipulating the audience into thinking that Donovan is a deft hand. (Speaking from personal experience, you're unlikely to be able to appeal to your horrible boss that way). Nonetheless the story of 'Bridge of Spies' depends upon the fact that even the hardened negotiators of the KGB and East German Stasi are willing to be their better selves to make the deal stick.

Of course a similar moment appears in 'Pawn Sacrifice' where Bobby Fischer's lawyer friend Paul appeals to Bobby to be his better self. This being Bobby Fischer, his better self turns out to be a single-minded but singularly brilliant chess player and nothing else. It's a bit sad that that is the entirety of Bobby Fischer's better self, but it may also be an indictment of the Cold War that produced such a warped individual. As we're shown in glimpses, it's not as if Boris Spassky is any less crazy as a result of his chess career undertaken in the shadow of the Soviet state.

The Anti-Climactic Climax

The funny thing about both these films is that the climax is so subtle it's almost non-existent. The big moment in 'Bridge of Spies' consists of three people crossing a couple of bridges on foot. The big moment in 'Pawn Sacrifice' is a chess move that convinces Spassky he has lost the game, prompting him to get up and applaud Bobby Fischer. As cinematic moments go, it's a far cry from the world of comic book movies that dominates the box office these days, where you know the climax is going on because buildings explode and cars flip and the sound track roars with orchestral music at a crescendo. There's none of that in either of these films. I don't know if this subtlety is the new riposte to an American cinema mainstream where the content has gone completely juvenile and stunted - but it was certainly refreshing to see, in both these films.

In the olden days it used to be Spielberg making the kiddie content and earning himself critical scorn. Times have sure changed when Spielberg is the elder statesman serving up content for the adult table.

View From The Couch - 27/Mar/2016

Propaganda And Nothing But Propaganda

Some days you just don't know what to make of the government's views on the arts and entertainment industry. Other days, it's pretty damn clear what they want from its workers. And so today we find that the immigration department dropped $6million to make a Telemovie about what a bad idea it is to be an asylum seeker from Afghanistan or Pakistan, hoping to trek to Australia by water.

Government tender documents reveal the Department of Immigration and Border protection paid the Sydney-based Put It Out There Pictures $4.34 million to produce the movie. It paid a company called Lapis Communications a further $1.63 million for to promote and advertise it, bringing the total to $5.97 million. 

By contrast, Priscilla cost less than $2 million, Wolf Creek about $1 million and The Castle just $750,000. Even adjusted for inflation, the total budget of all three films works out at about $5.8 million in today's terms. 

Filmed across three countries, the ninety-minute drama tells the story of a small group of Afghan asylum seekers trying to get to Australia by boat. A trailer available on YouTube – which has about 1000 views – shows scenes of asylum seekers talking, arguing and crying in Afghanistan, Malaysia and Indonesia.

I guess the obvious thing about this is that this government views propaganda films as being more important than any film that gets made with government assistance through Screen Australia. When the government has a point to put across through film, it actually has a bit of financial wherewithal to make its point forcefully. 

I know it wasn't intended but there probably isn't a bigger insult to the film makers of this country than a production where the budget provided by the government is bigger than anything it would normally hand out to a local production; where the content is purely political; the funding came out of a department that has zero involvement with the arts and entertainment sector, and the production money went out to a foreign production entity. 

One would think - rather cheekily - that the department of Immigration should have been forced to go through the process every other producer has to go through to secure government funding, and tried to set up its own distribution deals overseas. 

The production also brings up some interesting issue like, who in Australia might have undertaken such a project. I'd imagine the vast majority of film makers are pinkos. Some are even heavily Regressive Left types. There would be a lot of people who would object to this project for being propaganda and for such nefarious intent. All you have to remind people is 'Leni Riefenstahl', and they would've run screaming. As such, the government would have had immense trouble getting any kind of creatives going on in Australia. It kind of illustrates just why it was made out in Afghanistan:

Put It Out There company director Trudi-Ann Tierney declined to be interviewed. However she has in the past had some interesting things to say about her own work, describing her films as "propaganda". 

The former Australian TV executive and actress moved to Kabul to manage a bar but fell into the local TV industry and found herself producing a highly popular soapie, which she wrote about in her book Making Soapies in Kabul. 

In the book she said she was ostensibly head of drama "but in truth I was nothing more than a propaganda merchant". She also says her work was part of the "psychological operations" NATO and its allies used to influence the values and behaviour of its Afghan audience in a way that supported the war effort.

It's all about the war effort boys and girls! There's always more money for that. 

Rejoice, It's Joyce Season

The interesting news is that the "vengeful micro parties" are going after Barnaby Joyce. 

The Deputy Prime Minister Barnaby Joyce is to be targeted by "far right wing" micro parties directing preferences against him in the seat of New England, according to the preference expert Glenn Druery. 

Mr Joyce holds the seat by 19.6 per cent but the micro parties revenge for being bundled out of the Senate is expected to greatly enhance independent Tony Windsor's campaign to retake New England. 

Mr Druery said on Friday the right wing micro party candidates would also direct preference against sitting Coalition members in at least 10 marginal seats.

The fun part of the news is that these are "far right wing" micro parties. These micro-parties are presumably for people to whom the current Coalition is not right wing enough. That's right, more right wing than the climate-change-denying', Coal-seam-gassin', asylum-seeker-hatin', gay-marriage-equality-resistin', Johnny-Depp-baitin', cockamamie Barnaby Joyce.

You wonder what the world has come to when a right ole rightwing nut like Barnaby can't rely on the far right wing nut vote.

A House For This Sinodinos

It's truly strange how political operators go about doing things and how money seems to swirl around the things they do.

Key Liberal fundraisers sounded out major donors to the party about chipping in to buy a house for Senator Arthur Sinodinos after the collapse of a potentially lucrative money-making venture. 

The audacious plan originated in early 2013 after Senator Sinodinos relinquished a 5 per cent stake in Australian Water Holdings, a company that later became the focus of a landmark corruption inquiry. 

Fairfax Media had earlier revealed Senator Sinodinos' shareholding in a company that employed Eddie Obeid jnr, the son of controversial Labor powerbroker Eddie Obeid.
At the time Senator Sinodonis said that although his shareholding was recorded on his parliamentary pecuniary interest declaration it was not publicly registered with the corporate regulator "because it was on a gentleman's agreement".

How does that even work? Could, say, Terri Butler the current ALP shadow cabinet secretary go to the unions and ask for them to find money to buy her a house? Wouldn't Malcolm Turnbull and his ABCC bill jump up and down and point to such shenanigans as exactly how the unions and the ALP were corrupt? Isn't that what Sinodinos is being accused at this moment? This is some really weird stuff - especially because you see names like Obeid thrown in there, and we know "Obeid" can only mean "corruption" in this part of the English speaking world.

At some point they have to just 'fess up and admit that corruption is corruption is corruption.
And then there's this:

How Deep Does This Rabbit Hole Go?

Here's a doozy. The same ICAC inquiry that dug up the dirt on Sinodinos has also dug up the name of Peta Credlin. Yes, they tried to suppress that name, but it's out in the open now.

The documents were suppressed last week by the head of the Independent Commission Against Corruption after lawyers acting for Liberal Senator Arthur Sinodinos raised concerns they could be subject to parliamentary privilege. 

But the suppression order was lifted on Monday after the speaker of the House of Representatives, Bronwyn Bishop, advised the commission that no claim for privilege would be made. 

The emails reveal that, in March 2011, while the Coalition was in opposition, Ms Credlin used a major donor to the Liberal Party, Brickworks, as part of Tony Abbott's campaign against the carbon tax.

Oh doesn't that look like a bucket of writhing corrupt worms right there? Turns out Lindsay Partridge of Brickworks - who classifies as a Developer - was donating "illicit money" (The Sydney Morning Herald's words not mine BTW) to the NSW Liberals and Federal Liberal Party through back channels. The emails leave a trail of totally awful illustration of how money buys you so much access you get to put words into the mouth of a Prime Minister. 

Frankly, it's ugly and despicable that this is politics in this country, and how we in the electorate simply have to take it. All we do get is to vote for some person who may or may not get into Parliament, and may or may not represent our interests in that Parliament.It's really vague what the vote gets the ordinary citizen. 

The rich on the other hand, clearly get to dictate terms on a daily basis. 

Economy As Conundrum

"Modern Money Theory"

Here's something that might surprise people. There's a new theory of modern money and it is going to piss off all the people wanting budget surpluses.

The MMTers claim that in the modern era of floating exchange rates and deregulated financial markets, governments can, and should, run deficits whenever they are needed. There is a strong moral case for this: in a modern economy, there's no good reason to have unemployed labour or capital. For the MMTers mass unemployment is a great evil and its daily, human cost dwarfs other economic challenges. 

They acknowledge there are limits to government spending. Resources in the real economy can be constrained and taxes are an essential tool to ensure demand for the currency and to cool the economy if it overheats. But there's plenty of scope for governments to print and spend money without causing inflation or triggering a financial crisis. MMTers say sophisticated modern economies like the US and Australia are in no danger of the hyper-inflation which plagued Zimbabwe last decade or Germany's Weimar Republic in the 1930s. 

Modern Monetary Theory has an intriguing link to Australia. The term was coined by veteran University of Newcastle economist, Professor Bill Mitchell, and he is a passionate advocate for the theory. 

Mitchell argues that outdated "gold standard-type thinking" – from a time when governments accepted effective constraints on how much currency they could print – is wrongly applied to the modern financial system with fiat currencies, floating exchange rates and deregulated financial markets. 

"The economics that apply now are nothing like the economics that applied under a fixed exchange rate, convertible system," he said. 

Mitchell says a fundamental problem is that most people, including politicians, wrongly equate government finances with managing their own household budget.
"The way mainstream economics is taught plays on that analogy all the time in the sense that the government has a financial constraint just like you and I," he said. 

If fact, says Mitchell, household budgets and government finances have nothing whatsoever in common. He doesn't even like to use the word "budget" to describe the government's finances because it implies they work like a household budget.
"A government that issues its own currency, like the Australian government, has no financial constraint. That's the starting point."

Which goes back to what Taro Aso was saying 5 years ago about the Japanese currency. Naturally, you can see a huge cadre of resistance to this notion of a government printing as much currency it needs. But in Japan, they've been doing this simply to stave off massive deflation that happens when the equivalent money simply sits in the banks. It remains true that printing money leads to inflation - but in the face of massive deflation, it might just be what is needed. After all, interest rates certainly have room to move up should inflation actually become a problem in Japan. 

In Australia, it might be a little trickier because there already is a Property Bubble that shows no signs of abating. If the government printed money, chance are it would get sucked into the property market and simply inflate prices there without ever heading out to where the capital is needed. In fact, it's not as if it's working great in Japan either because even with negative interest rates, the money tends to go from the Central Bank out to the banks and then doesn't get invested. It doesn't get invested because there's no demand. 

Which begs the question about helicopter money and just where this helicopter money is being dropped. For the last seven years, it is banks that have been getting the kid-glove treatment of low interest rates and Quantitative Easing programs to shore up their loan books and bottom line. Naturally the banks have bounced back strongly even as the actual economy has stayed stagnant in the G-20 world. When you think about it, the various QE programs and money printing programs on the whole have been showered upon banks. And there's no reason to think that banks would contribute to aggregate demand in the context where the banks are supposed to offer more credit to the already indebted private sector. Nobody wants more debt in this current context of record private sector debt. 

If the government really wants their helicopter money to work, you need to shove it straight into the pockets of the ordinary citizens to bolster their spending - not hand it banks in the hope the ordinary citizen decides to up their credit card limit when they're already n debut to their eyeballs. The obvious-as-daylight answer is that governments should spend more on welfare payments. Just ramp it up to a living wage and let the people decide how that money should be allocated in the economy. 

You can hear the howls of complaint that this is "rewarding" the 'dole-bludgers', but the point is, you're not going to get more aggregate demand out of a population that has little cashflow and maybe in hock to the eyeballs on credit. Debt relief from the bottom up is likelier to go along way. 

Two From Pleiades

If you want to know why banks aren't particularly helpful, well I've got just the pair of articles for you from Pleiades. 

The first is about how contemporary economic orthodoxy might be a big con job to enrich the 1%. 

The National Income and Product Accounts treat the interest, profits and other revenue that Wall Street extracts – along with that of the rentier sectors it backs (real estate landlordship, natural resource extraction and monopolies) – as if these activities add to Gross Domestic Product. The reality is that they are a subtrahend, a transfer payment from the “real” economy to the Finance, Insurance and Real Estate Sector. I therefore focus on this FIRE sector as the main form of economic overhead that financialized economies have to carry.  

What this means in the most general economic terms is that finance and property ownership claims are not “factors of production.” They are external to the production process. But they extract income from the “real” economy.

They also extract property ownership. In the sphere of public infrastructure – roads, bridges and so forth – finance is moving into the foreclosure phase. Creditors are trying to privatize what remains in the public domains of debtor economies. Buyers of these assets – usually on credit – build interest and high monopoly rents into the prices they charge.

In case you were wondering, the whole QE thing didn't really help people on Main Street; it basically fluffed the pillow for Wall Street so it could continue to exploit the real economy. That extract there also points out the folly of the Gillard Government when it wanted the post-mining-boom economy to be led by housing and construction. It was a dumb idea because houses aren't really capital investments in the sense that factories or even shop-fitting might be. A house is much moe like infrastructure. Once it is built, it does no provide production. Just like roads and public transports and utilities, it serves a vital function of providing shelter, but a house in of itself does not become a production centre in the economy. 

In fact, this great muddling of infrastructure and capital investment has become worse in the context of privatisation and Private Public Partnership projects whereby a project like WestConnex is deemed worth doing even though it will have zero positive effect, simply because it costs $18billion. The logic of the government is that if it pumps 18billion through the economy, something's bound to stick. It completely ignores the fact that if you spend $18billion and the outcome is zero effect, then you've wasted the time and money.

The reason the big end of town and especially banks like deals like WestConnex is because they profit first, and all the money that goes through their system somehow sticks into their profit structure through fees. But I digress.  

This brings me to the second article which posits that the global financial markets are a great big Ponzi scheme:

HUDSON: Here’s what happened. Marx traumatized classical economics by taking the concepts of Adam Smith and John Stuart Mill and others, and pushing them to their logical conclusion.

Progressive capitalist advocates – Ricardian socialists such as John Stuart Mill – wanted to tax away the land or nationalize it. Marx wanted governments to take over heavy industry and build infrastructure to provide low-cost and ultimately free basic services. This was traumatizing the landlord class and the One Percent. And they fought back. They wanted to make everything part of “the market,” which functioned on credit supplied by them and paid rent to them.

None of the classical economists imagined how the feudal interests – these great vested interests that had all the land and money – actually would fight back and succeed. They thought that the future was going to belong to capital and labor. But by the late 19th century, certainly in America, people like John Bates Clark came out with a completely different theory, rejecting the classical economics of Adam Smith, the Physiocrats and John Stuart Mill.

HEDGES: Physiocrats are, you’ve tried to explain, the enlightened French economists.

HUDSON: The common denominator among all these classical economists was the distinction between earned income and unearned income. Unearned income was rent and interest. Earned incomes were wages and profits. But John Bates Clark came and said that there’s no such thing as unearned income. He said that the landlord actually earns his rent by taking the effort to provide a house and land to renters, while banks provide credit to earn their interest. Every kind of income is thus “earned,” and everybody earns their income. So everybody who accumulates wealth, by definition, according to his formulas, get rich by adding to what is now called Gross Domestic Product (GDP).

And there, lies the trick. 

The dirty big secret is that banks are not a productive part of the real economy. They have never lent to business as stated in the current economic theory. When you think back to medieval banking, they sure didn't lend to businesses. The Medicis lent to governments and sovereigns - as did the Rothschild banks in the 18th and 19th century. Historically, and traditionally, banks simply don't lend to businesses if they can get away with not having to do so.  Thus we begin to understand why all the helicopter money thrown about from the successive Quantitative Easing regimens have done so little to add to aggregate demand. The banks simply used that money to shore up their bottom line and handed the profits to the rentier classes. All that money created in the USA and Japan, ended up in the vaults of banks with no intention of being actually utilised. But you be your bottom dollar it got counted towards GDP when they paid themselves. 

The rebound of the Big Four banks and Macquarie Bank in Australia tells a story where the historic low interest rates have  allowed the flow of money to the rentier class as well. House prices have stayed inflated, but everybody is up to their eyeballs in debt. Even if interest rates were cut to zero, it's not going to help the ordinary citizen, but it will add fuel to the rush of money heading to the 1% -  money which will stay unproductive and mostly locked into more rentier activity.

If you don't believe me, just today there's something on Macquarie Bank.

There are no flies on those Macbankers. No sooner had they tapped taxpayers for help during the global financial crisis than they raised $25 billion on global bond markets with a sovereign guarantee. It saved their bacon, then, with breathtaking flair, they doubled down. 

Until now, it was common knowledge that the bank merely lent out its cheap government-guaranteed money again at higher rates and pocketed the difference. 

What we didn't know is the quality and quantity of the loans. Revelations by the Australian Financial Review's this week however established the bank has since ploughed $33 billion into junk loans.

It is the biggest junk bond binge in the nation's history, a sub-prime tour de force.
Unlike other famous gamblers such as Wild Bill Hickok and Nick The Greek, who punted their own money, the Macbankers – newly monikered the Junk Yard Dogs – have gambled everybody else's, after blithely leveraging it 10 times.

The upshot is that the bank now has more junk debt than it has equity and its default rate is five times that of the major banks. 

It poses the question, should taxpayers be subsidising, not just Macquarie's garish executive bonuses, but standing behind what appears to be more of a leveraged hedge fund than a bank?

How the hell are those junk bonds going to help aggregate demand? Clearly the helicopter money went to the wrong part of town to shore up aggregate demand. The better thing to do would be to hand the welfare recipients more money and raise interest rates, and stop pretending going back to surplus is something noble (It's not - it shrinks the real economy). We might even get back the semblance of the real economy we once knew. Heck, it might even grow at 5%. All the same, you don't even see the ALP advocating this because they too have drunk the 'Budget Surplus Is Good' Kool-Aid as well. It's a real shame the lobbyists keep winning in Canberra as they do in Washington D.C. and Tokyo. 

Reality Is Cheaper Than Fiction

Continuity With (Chump) Change

How do we put this to the people who fund the arts in the hope that 'culture' will somehow spring out of the manure of government funding? If you don't understand the broad spectrum of the arts, you're obsolete; and by obsolete, you're the laughing stock of the world.

Over the past couple of days, Prime Minister Malcolm Turnbull has been channeling his predecessor and whipping out a bit of a three-word slogan. He first broke it in on 7.30 with Leigh Sales on Monday night. Then ABC Radio in the morning, before heading to 3AW and dropping it four times in less than two minutes. The phrase: “continuity and change”. 

In Turnbull’s eyes, this is an eloquent way of commenting on the ongoing drama between his current government and that of Tony Abbott. “The bottom line is there is continuity [many elements of old policy] and there is change [leadership, number of raw onions eaten, et al]” he said in that first radio interview. But, to the rest of the world it looks a bit like this:

“Continuity and change” is the official slogan of Veep‘s main character Selina Meyer (played by Julia Louis Dreyfus) as she runs for the US presidency in the show’s fourth season. It appears on her campaign bus, on her logo, and (as BuzzFeed‘s Mark DiStefano pointed out) is regularly whipped out in the same kind of interviews Turnbull has been facing this week.

And there in the nutshell is what is so out-of-touch about this Coalition Government - even with Malcolm Turnbull taking over from even-more-out-of-touch Tony Abbott - it is still hopelessly out of touch with popular culture. All of a sudden they are laughing at the Australian Prime Minister who adopted the most meaningless slogan screenwriters could think up, as his campaign slogan. It's like the Australian Prime Minister went and sucker punched his own face for absolutely no gainful purpose whatsoever. It's fucking hopeless, really.

Meanwhile In New South Wales (Where Common Sense Goes To Die)

The Creeping Authoritarianism In Australia Hits NSW

Say what you might about Greenies who chain themselves to trees or people who o marching for cause, outside of voting and lobbying, there aren't that many options to make  political point, short of violent revolution. You might - out of some class prejudice - dislike or disrespect dreadlocked tattooed grungy greenies marching to protest coal seam gas mining but you need the dreadlocked tattooed grungy greenies marching to protest coal seam gas mining to ensure governments get the message. The right to free assembly is an important component in our society because it's what allows political parties to exist.

Thus, the laws against protesters gathering actually strikes at the foundations of our rather fragile democracy.

NSW's harsh and unnecessary new anti-protest laws are the latest example of an alarming and unmistakeable trend. Governments across Australia are eroding some of the vital foundations of our democracy, from protest rights to press freedom, to entrench their own power and that of vested business interests. 

The NSW laws give police excessive new powers to stop, search and detain protesters and seize property as well as to shut down peaceful protests that obstruct traffic. They expand the offence of "interfering" with a mine, which carries a penalty of up to seven years' jail, to cover coal seam gas exploration and extraction sites. 

They also create a tenfold increase in the penalty applying to unlawful entry to enclosed land (basically any public or private land surrounded by a fence) if the person "interferes" or "intends to interfere" with a business there. At the same time as ratcheting up this penalty for individuals who protest, recent changes made by the NSW government mean that resource companies that illegally mine can receive a $5000 penalty notice instead of a potential $1.1 million fine. 

Disturbingly, these laws aren't isolated.

Tasmania last year targeted environmental protest with broad and vague new offences including "hindering" access to business premises or "obstructing" business operations, with penalties of up to $10,000 and four years' imprisonment. In Western Australia, proposed legislation contains extremely broad new offences of "physically preventing a lawful activity" and "possessing a thing for the purpose of preventing a lawful activity" with proposed penalties of up to two years in prison and fines of up to $24,000.
Common to these anti-protest laws are harsher penalties, excessive police powers and the prioritisation of business interests (particularly mining and forestry operations) over the rights of Australians to gather together and protest about issues they care deeply about.

We've been so distracted by how dastardly and woeful the Federal Government under the Coalition has been, it's allowed the State Government - also run by the same parties - to fly under the radar with their crappy authoritarian moves. These anti-protest laws are entirely the bidding of lobbies that pay into the coffers of the Liberal and National parties. These parties are brazenly shutting down democracy in order to appease their political donors. Just because the transaction can't be pinned down to individuals, it is no less corrupt than the Obeids who sought to influence matters of state to suit private interests (albeit their own).

Further to the point, the NSW police still have the APEC powers which are also anti-democratic. These came in at the time of the 2007 APEC meeting, and have not been rescinded. The current NSW government is essentially giving licence for the NSW police to brutalise those who would protest against mining or logging interests where the media is less likely to be there to offer coverage. In a year that the NSW police issued an apology for the brutal treatment it dished out to the Gay and Lesbian Mardi Gras of the late 1970s, it seems like they're setting themselves up for more future apologies to protest groups.

Governments across Australia are deliberately using a range of funding levers to suppress advocacy by NGOs including gag clauses, targeted funding cuts and threats to the ability of environmental organisations to receive tax deductible donations from supporters – a tax status which is often critical to financial sustainability. 

Secrecy laws and an increasingly aggressive attitude to whistleblowers mean that people who expose even the most serious human rights abuses face unprecedented risks of reprisals, including prosecution and jail. Press freedom is being eroded by new laws and policies jeopardising journalists' ability to maintain the confidentiality of sources and to report on matters of public interest. All the while, in critical areas governments are undermining or sidelining the courts and institutions that were created to keep them in check.

On that note, I thought I should bring this up about any and *all* governments, *everywhere*:

Speaking Of Corruption

The NSW Liberals are under a cloud over donations they can't explain. suspect.

More than $4 million in public funding is being withheld from the NSW Liberals by authorities until the party can prove hundreds of thousands of dollars in donations it received before the 2011 election that swept it into power were not illegal. 

The donations were made by the controversial Free Enterprise Foundation, which the Independent Commission Against Corruption heard had "washed" illegal contributions from property developers before donating them to the NSW Liberals.
More than $690,000 in donations remains unverified. 

The NSW Electoral Commission has said it will withhold reimbursement of expenditure from last year's state election and annual administrative funding totalling $4.3 million until the matter is resolved. 

Failure to secure the funding would potentially leave the NSW division in financial dire straits just months before a federal election.

Good. They deserve the grief.

But Wait There's More

There's also this doing the rounds today.

The New South Wales Government's Upper House whip Peter Phelps has quit the role and says he will cross the floor to vote against the Government's biofuels amendment bill. 

The goal of the bill is to force small retailers to meet the government's 6 per cent ethanol mandate by applying fines of up to $550,000 for business owners who do not comply with requirements to sell E-10 fuel. 

In a fiery speech to Parliament, Peter Phelps described the bill as a "fundamental attack on small businesses", "a joke" and "disgraceful". 

He said the bill went against the Liberal Party's principles.
"We believe in a series of pro-business, pro-individual ideals," Mr Phelps said. 

Mr Phelps said he had fought the bill every step of the way, raising it in the party room and with NSW Premier Mike Baird. 

He then said he could not vote for the legislation, so under Liberal Party rules was resigning as whip as well. 

"For five years now I have enjoyed the golden handcuffs of being the whip ... and as part of that for my extra $20,000 a year I have on occasion had to whore my principles," Mr Phelps said. 

"But this bill, this bill which criminalises people for the purchasing decisions of their customers, is such an egregious breach of the core values of the Liberal Party that I cannot support it. 

"As whip I am supposed to encourage people not to cross the floor, so on that basis, I resign as whip effective immediately."

I don't think Mr. Phelps is about to go Frank Underwood, but it is an interesting spectacle. The government is pandering to lobbyists and a party whip is objecting. The joke is that te bill is set to pass because even the ALP is supporting it. So the lobbyists got to them too. Talk about being disgraceful.

It Would Make Too Much Sense So They Won't Do It

Here's an article by Jessica Irvine on a Land Tax.it's a touchy subject because people who don't move and change houses would suddenly be paying for the privilege of owning a house, in exchange for no stamp duty. 

The McKell paper proposes a broad based land tax levied at 0.75 per cent.
On a median priced Sydney home, the land would be worth around $700,000, meaning an annual tax of $5250. 

Owners of expensive homes would pay more and taxes collected would rise over time with land values, providing a steady stream of income for state governments.
A land tax would also allow state governments to more easily fund new urban infrastructure projects, the paper argues. 

"One of the key factors that increase the value of land is its proximity to public transport and good roads." A new rail or road project, therefore, boosts the value of local homes, providing a windfall to existing landowners. 

"If land values are taxed, then the annual tax bill would increase slightly to reflect the increased value of the land. Therefore those who are receiving a significant windfall from public expenditure would make a small contribution towards the project."

Which is all very nice but you know this NSW government is going to balk at it because its constituents are the older demographic who own lots of property.

There's more on the actual study, penned by the guy who worked on the study here.

For a start, land tax is extremely fair. All landowners would pay the tax annually based on the value of their land, and not on what improvements they have made. This means renovations would not be punished. 

Land tax is also easy to understand and administer, while being nigh-on impossible to avoid. 

Land tax does not disincentivise home owners from moving freely, making it easier for workers to accept jobs where they crop up, providing a boost to the economy. 

Land tax would also encourage more infrastructure spending by making it possible for the government to tax some of the additional value it creates when it builds near homes. A rail line that boosts property prices in a given area, for example, could be partially funded by those whose homes had shot up in value as a result. 

Now this is the point where the hardheads nod sagely and say while all these advantages sound attractive the reality is that any attempt to introduce land tax would be susceptible to the mother of all scare campaigns.

Another argument in favour of putting in a Land Tax is that it likely will take the heat out of the property bubble because people would be disincentivised from speculating through house-flipping. It would also disincentives land banking where people buy property and simply mothball it, taking it out of regular usage. 

Of course it would be hard to convince this NSW Government of doing anything so bold as to abolish Stamp Duty and put in a Land Tax. It would cause enough of a furore to get themselves voted out.
As with all these things, the politics of implementing good policy is going to be difficult and you can see the Coalition government in NSW has no appetite for selling this policy.

Still, given the current problems to do with the Property Bubble are going to significantly impact on future growth, and therefore Stamp Duty revenue, one might think the NSW government might look at this sooner than later and before the Bubble pops.

"Vote Mal, Eat Pal" Pt. 2

You Have Got To Be Kidding Me

The government wants to claw back some money without raising taxes or closing loopholes for their own rich constituents, so the new idea is to collect HECS debts from the dead.

The Turnbull government is considering the controversial move of collecting student debts from the dead, as well as increasing university fees, as it seeks to find higher education savings in the May budget. 

Former education minister Christopher Pyne backed the idea of recovering HECS from deceased estates two years ago, but was quickly shut down by Tony Abbott to avoid a scare campaign on the sensitive issue. Labor slammed the idea as a "death tax" - even though most other loans, such as mortgages and credit card debt, must be repaid upon death. 

Ending the HECS write-off from deceased estates worth over $100,000 would save up to $800 million a year, according to leading higher education analyst Andrew Norton.

Sources in the higher education sector said the proposal had been raised in recent discussions with Education Minister Simon Birmingham, who is under pressure to find substantial savings in his portfolio. 

Asked if he was considering recovering HECS from deceased estates, Senator Birmingham said: "The costs to taxpayers of higher education over recent years have grown dramatically "Since 2009, taxpayer funding for Commonwealth supported places in higher education has increased by 59 per cent as compared to nominal growth of GDP that has risen by 29 per cent."

It's downright evil, is what it is. I get it that they have pressing needs to shore up revenue but increasing Tertiary Fees, sticking the student with the massive debt, and then chasing them beyond death and into the grave for that debt seems like a total breakdown in the social contract. The model of user-pays and education as vocational training model that successive Australian Governments have been pushing should mean that when a person is dead-but-in-debt, they are no long in their vocation (I can't believe I had to write that just then) and therefore are no longer beneficiaries of the said user-pay vocational training. 

It's bad enough that this government like its predecessors is downright anti-intellectual. Reducing education to vocational training happened under the Hawke-Keating government when they committed to the Dawkins reforms. Connecting up the earning potential of university graduates and then lining up a fee in correspondence to future earnings was a Howard Government decision. None of these decisions understand education at all. The point of education is to understand the world in broader terms - whether it be through science or the arts - so that when they are eventually employed, they can work with a wider perspective on what it means to be doing that work.  

The anti-intellectualism of this government is so deep, it views education strictly as a means of creating taxpayers. Tertiary education is clearly the means of extracting bigger tax money out of Tertiary graduates, and that's it. And should they die young, this government is saying the tax from the unearned money over the career of the dead person still belongs to the government. They don't understand that even talking about this makes for a great disincentive for people to get more educated, when in fact our democracy needs as many educated people it can get - and by educated, I'm not talking about vocationally trained people, I'm talking about people who can do critical thinking and analysis. 

Just when did our government get so stupid and so evil all in the one go? 

Steven Keen Says Recession By 2017

Here's the article. In a nutshell, for all this talk of 25years of constant growth, parts of it were accomplished by going deeper into debt for the private sector to goose demand through the rough patches. Now it has gotten to the point where Australia's private sector is the most indebted per capita in the world. The consequence of all this is that there can't be much debt that can piled on top, and any drop in debt will usher in a collapse in demand. There's nowhere to go with the debt upwards, and the only way for demand is down. 

This is the inevitable debt crunch coming Australia’s way, but conventional economists are oblivious to this danger because they’ve brainwashed themselves to ignore private debt as just a “pure redistribution”, to quote Ben Bernanke. This deluded textbook thinking is why Bernanke didn’t see the GFC coming. 

The day of reckoning can be delayed by encouraging yet more private borrowing, which the RBA can attempt to do by cutting interest rates, and the government can reduce the crunch by running a large budget deficit. But these are likely to happen after a crisis rather than before it, because our Reserve Bank and our politicians are as oblivious to the dangers of private debt today as Bernanke was back in 2007. 

The 2016 election could be a good one to lose.

Yes, it could be a real bugger. I sure wonder what the debt crunch is going to look like in Sydney. 

The RBA is taking a steady-as-she-goes view on the economy. This would lead one to suspect that Glenn Stevens isn't likely to see the next downturn coming over the horizon. Of course, there probably isn't much more he and the RBA can do at this point. They're not going to raise interest rates for a whole gaggle of reasons, and they're not going to cut them any more because the worst isn't here just yet, but chances are we're sill headed towards Zero Interest Rate Policy when this recession arrives. We're just suckers for punishment.

Shutting Out The Scientists

The true hallmark of this Coalition Government is its anti-intellectualism, which is exemplified by its constant shift to appease those who deny climate change is happening or that it is man made. As such, it tends to find itself on the wrong end of science and scientific fact quite a bit. Indeed, they are slashing the budget to actually study the climate at the CSIRO.

One of CSIRO's main climate science units planned to slash four out of five researchers, all but eliminating its monitoring and climate modelling research, a new document reveals. 

The cuts are contained in an analysis for the Oceans & Atmosphere division, dated January 25, 2016. CSIRO handed over the document to the Senate committee investigating plans to slash 350 staff overall, and it has been made public on the Senate's website.

Doubts over the rationale and planning of the cuts flared on Tuesday in another CSIRO section facing deep job losses, with many Land & Water staff walking out of a meeting with chief executive Larry Marshall.

"People got fed up of having their questions marginalised, trivialised, and with being lied to," one senior researcher told Fairfax media. He added the division's head, Paul Hardisty​, had led the walkout. 

"We understand CSIRO scientists are passionate about their science and also about some of the changes to the structure of their organisation," a CSIRO spokesman said, declining to elaborate on the meeting. "CSIRO is committed to continuing to have open and transparent dialogue with staff and hearing staff views and concerns." 

The new document, though, highlights the extent of the original cuts being considered by CSIRO before pressure – including from thousands of international scientists – prompted a scaling back of the job losses.

The rest of the article makes for depressing reading. 

Here's what I don't get. This government is pretty disdainful about the Arts. Here it is also having a go at Science, making stupendous cuts. It doesn't really put its money where its mouth is at when it comes to Engineering or manufacturing or any kind of secondary industry - it tells us outright we can't compete and is happy to ship those jobs abroad. They shut down the automotive industry. They won't build VFTs, sabotage their own NBN, but they'll build more unwanted motorways so they can collect more tolls. They won't build submarines, they'll opt to buy them instead. They'll allow agricultural land to be sold off to overseas interests. They tell us our economy is going to be built on construction and housing and service sector jobs. And let's not forget they want to squeeze HECS debt out of the dead. 

Just what kind of country do they think they're building here? On the evidence, you'd have to conclude even they have no idea whatsoever. 

"Vote Mal, Eat Pal"

Malcolm Turnbull, Stunt PM

Well, here we are. Malcolm Turnbull has put the nation on an election footing.

The Prime Minister used a snap press conference in Canberra to reveal he had visited the Governor-General Sir Peter Cosgrove and advised him to prorogue the Parliament - officially ending the current session - before also using the Governor General's powers to recall both houses to sit for three weeks from April 18, ahead of a re-scheduled May 3 budget.

The move, which relied on the little-used provisions set out in section 5 of the constitution, means the seven-week pre-budget parliamentary break leading up to the scheduled May 10 budget has been halved with the special sitting dedicated entirely to consideration of a once-defeated bill to re-establish the Howard-era Australian Building and Construction Commission and the already twice-defeated registered organisations bill. 

Both bills have come up against stiff Senate opposition from Labor, the Greens, and six of the eight cross benchers, almost all of whom were elected in 2013. 

Passing them - both articles of faith for the conservative pro-Abbott wing of the party - would be a major win for Mr Turnbull's internal prestige. But their rejection would be even more advantageous, allowing him to run a full-throated anti-union militancy campaign in which he would attempt to paint Labor's Bill Shorten as a fellow traveller. 

Mr Turnbull's action follows last week's successful passage of changes to Senate voting procedures which ended elaborate and opaque preference deals, and will almost certainly mean fewer independent and minor party senators will be elected in future.

So it turns out that not only the micro-parties wildly successful at stifling the Tony Abbott government's agenda, they've now become the victims of their own success. Yet that is only the passing story; the big story is how Malcolm Turnbull waited until this moment to spring the ABCC bill which is classic Liberal Party union-bashing. What we're now figuring out is that the ABCC bill was Turnbull's ace in the hole and he has been lying in the reeds waiting for the Senate voting changes to go through before he sprang this trap on the crossbench senators. 

Peter Hartcher seems to think it was a brilliant move. 

And while it's high stakes, for Turnbull it's actually low risk. Why?  

He has issued a challenge to Labor, the Greens and the independent senators to join the government in a Senate vote to impose law and order in the construction industry.
The strong-arm union in the industry, the CFMEU, has gone rogue and the government is intent on taming it.

The government has a bill before the Senate to reintroduce a specialised federal regulator, the Australian Building and Construction Commission. The ABCC was created by the Howard government and dismantled by Labor.

The Senate has already rejected the bill once. Labor and the Greens are intent on protecting the CFMEU, a major donor and client of both parties, and some of the Senate independents voted with them. 

By asking the Governor-General to prorogue the Parliament and then bring back the Senate to deal with this specifically, Turnbull has put maximum pressure and maximum scrutiny on the Senate. 

If the Senate refuses, Turnbull has promised to dissolve both houses of Parliament and take the country to an early election to get his way. 

If it buckles, he will let the Parliament run its normal three years and call a customary general election - for the House and half the Senate - in September or October. 

Turnbull figures he can't lose. If the Senate agrees, he gets his way and he is seen to be a strong, determined leader. The Senate crossbenchers will hesitate to frustrate him again.
If the Senate refuses, Turnbull calls a double dissolution election which, on the current outlook, he would win handily. He would then hold a joint sitting of both houses to legislate the bills. Again, he gets his way.

Win-win scenario for the incumbents right there. The Turnbull government has turned out to be an extension of the Abbott government simply because he can't persuade and wrangle the lunar right of his party. It's only improvement is how deft Turnbull has been to talk about a lot of things without committing to anything. The worst case might be all the talk about the necessity of tax reform and then curling away from all the important reforms on the agenda, only to turn around and run a scare campaign on what the ALP had to offer to the discussion. It's understandable that it's politics; it's less understandable that Turnbull thinks this is him being of better behaviour than Tony Abbott. If the base is so low, incremental improvements don't net you points.

Also, all of this Senate reform manoeuvre puts the Greens in an interesting light. The Greens colluded with the Coalition government to put through the changes to the Senate voting rules. To that end, they abandoned their own marriage equality proposal. They sold out the micro-parties so they can secure a monopoly on being the third party in the Senate. As the third force in the Senate, they're doing a much worse job than the Australian democrats did back in the 80s and early 90s. The question is, is this the moment that the Greens are shown to be no different from 'the bastards' and lose credibility with the electorate? Right now, they look like a party that's only init for the power and their own pay checks. 

As for the ALP, they're in a zone of irrelevance. It's hard to see them fight back to the middle with the policies they've got. Every time Climate Change becomes front and centre for the public, the votes seem to bleed to the Greens, and every time there's a pushback against doing anything, the votes bleed right to the Coalition. The same could be said for taxation - every time they talk about the tax system needing reform and how the multinational corporations need to pay tax the votes bleed left to the Greens, and every time they mention cutting negative gearing, the votes bleed out to the right.

 It's as if the ALP are in a no-man's land waving their policies around as if they're going to make a difference. There are already grumbles amongst ALP voters about wanting to replace Bill Shorten. When I ask them who they want, I get answers like Plibersek, Wong and Albo. It's as if the ALP voters don't understand just how destructive the Rudd-Gillard-Rudd swaps were to electoral confidence. I'm not much of a Bill Shorten supporter but as a long-time pinko, I think the ALP needs to make a proper fist of contesting the election with Shorten as leader and Plibersek as deputy, and not make noises about polls dictating a swap of leadership. They need to grow up and fight a good fight like adults instead of infighting and squabbling like student politicians. Turnbull is eminently beatable, given that his party won't let him be his best self.

Grumpy Again

But That Trick Never Works

That old rapscallion and former Howard Government chief of staff, Cabinet SecretaryArthur Sinodinos was on television today, pitching a corporate tax cut. He was saying yes, an income tax might stimulate the economy but a corporate tax cut would stimulate investment and that would stimulate the economy more. This seems to be the mantra of the big end of town which is thirsting for the corporate tax rate cut.

"At least 50 per cent of the impact of cutting company taxes goes in higher wages for workers and higher employment," Senator Sinodinos said. 

"Putting money into the hands of consumers obviously encourages more spending and disposable income and has good incentive effects. But cutting company taxes also has good effects.

"It can encourage investment, it can encourage higher productivity, it can encourage more investment from overseas."

Would that if it were so, Mr. Sinodinos. Earlier in the month there was a report about that sort of thinking which, in a nutshell claimed that it was tried in Canada already and had no such desired effect. 

The Canadian federal government implemented three successive federal corporate tax reductions over the last generation. (Provincial governments also levy their own corporate taxes, averaging around 10 per cent, added to federal levies.) The first stage occurred in the late 1980s: the statutory rate was reduced from 36 per cent to 28 per cent, but various loopholes and deductions were closed in the process. The second reform occurred early this century: the general rate fell to 21 per cent, and preferences for manufacturing and resources were eliminated. The latest cuts were implemented beginning in 2007 by former Conservative Prime Minister Stephen Harper (defeated in last year’s election): he cut the base rate to 15 per cent, and eliminated a 1.1 per cent CIT surtax. Those last reductions alone still cost the federal government over $15 billion (Canadian Dollars) in foregone revenue each year. 

Together, these successive cuts reduced combined Canadian corporate taxes (including provincial rates, which also fell in several provinces) from near 50 per cent of pre-tax income in the early 1980s, to 26 per cent today. In theory, the resulting boost to profits should have stimulated a strong response in business investment. Unfortunately, hopes for this “jobs and growth” dividend have been repeatedly dashed.

Hence, for all this talk about how cutting taxes for businesses would spur investment, I think we need to take that with a dump truck load of salt. The big end of town is simply going to pocket that difference and probably won't even pass it on as a dividend. In the absence of things to invest in, investments tend not to be made. Given that the Australian economy post-Commodity Supercycle is distinctly looking like a services-based economy, there really isn't a whole lot of places investments can be made. There's a great deal of non-incentive (as opposed to an active disincentive) for capital investment to take place. This is why the government ought to be pushing for infrastructure investment and not trying to run back to surplus by cutting budgets for everything. 

As for the claim that would make wages go higher, that's a bit fanciful too because the big end of town has spent the post-GFC years pocketing all the productivity gains and not let wages rise. It's hard to see how money saved on top by these companies would translate into a burst of higher wages, or for those imaginary higher wages to go into the economy as spending when the most likely scenario is for that money to be spent on paying down mortgages - and then the bank sits on that money not investing it in things. I understand the Coalition government wants to help the big end of town but really, this is not going to have any effect. Arthur Sinodinos is simply wrong, working off ideologically driven bad advice. 

Why The Government Fighting For A Surplus Now Is A Bad Idea

This one's a few weeks old, but worth dredging up because of Arthur Sinodinos above. 

Here’s a little thought experiment to check the familiar argument that Abbott gave for the need to get to surplus: “Governments, like households and businesses, have to live within their means.”

Imagine that there is an economy where the money supply consists of a single dollar, which is exchanged 100 times per year among this economy’s inhabitants — thus generating a GDP of $100 per year. Then imagine that the government in this economy sets itself the target of running a surplus equivalent to 1 per cent of GDP. If the government achieves its objective, what will GDP be the following year?
Zero. And, if the government debt ratio was more than 1 per cent beforehand, it will be infinite afterwards. 

Why? Because the economy had only one dollar of money in existence, and the government’s surplus took that $1 out of circulation, leaving the economy with precisely zero dollars for commerce the following year. The government budget affects GDP by changing the amount of money in circulation in the economy, and a government surplus effectively destroys money. 

This is utterly unlike a household. Household saving does not destroy money, nor does it materially affect the household’s own income, since a single household is such a small part of the national economy (even if we’re talking James Packer’s household).

Got it? 

If, - like Worst-Treasuerer-Ever Joe Hockey did, - you go around telling important people from around the globe at things like the Brisbane G-20 that what the world needs now is economic growth and lots of it, the last thing you should be doing is busily taking money out of the economy - i.e. don't go around cutting the budget in the hopes of getting back to a surplus. It's akin to saying you want your car to go farther because that's what is needed, and then busily syphoning out fuel from the tank. It's self-defeating and self-contradictory. 

I bring this up, just in case you were wondering why WTE Joe really was WTE, and why Tony Abbott really deserved the tag 'Stupidity' in every post I made about his government. You can lie your way into office, but you can't work out of the office without facing up to facts. And logic. 

You wonder about the education these men failed to get in their fancy-pants private school.

The Devil And Hillary Clinton

Here's something from Pleiades that you might find interesting. 

Donald Trump is as frightening as his opinions are poorly considered. His life has been lived around people whose livelihoods depend on not telling him to shut the fuck up. His nominal constituency by-and-large has no context for this— what to them appears as ‘speaking truth to power’ is in fact a privileged bully enamored with the sound of his own voice. Mr. Trump was born into the class that establishment Democrats and Republicans have spent the last four decades making so wealthy that it separates them from the consequences of their socially destructive actions. Donald Trump is an inheritance-baby insider who plays an outsider on television. It is hardly an accident then that Mr. Trump and Hillary Clinton have been friends for over twenty years.

The Democratic establishment is in the process of shoving Bernie Sanders out of the way to put Hillary Clinton forward as the candidate to beat Donald Trump. The term too-clever-by-half comes to mind. The ‘missed opportunities’ of the last seven years are in the process of asserting themselves. Mrs. Clinton is a war-monger, free-trade-agreement loving friend of Wall Street at a time when a fair portion of the conscious public would just as soon burn the whole mess to the ground with Mr. Trump. The question for those who would vote for Mrs. Clinton to ‘stop’ Donald trump is: who are you going to vote for to stop Hillary Clinton?

It's not like it's even a surprising call. 

As the years go by, the Bill Clinton presidency seems more and more like one big wasted opportunity. The number of things they botched up in the process has been a parade of negative consequences both intended and unintended. For all the popularity he had, Bill Clinton never really did the things for his constituents that made their lives better. He and his wife Hillary did things for their Wall Street friends first and foremost. The America we see today that puts Donald Trump as the Republican frontrunner is a result of the Clinton Presidency as much as both Bushes. It's hard to understand why the Black leadership really want to go around the block again with the Clinton election machine. After 24 years, you'd think it was obvious that they don't get out of it nearly as much as the Clintons do. 

View From The Couch- 20/Mar/2016

Unfairfax

The press is in die back. They even make movies about it so it must be true. Fairfax has been making cuts to so many parts of their newspapers for so long we've lost perspective on this, yet it's a process that still continues on.  There are no say answers as of yet, but meds companies, interchangeable with news outlets have gone into decline as their business model got eaten alive by the internet.

And so we come to this week's news that Fairfax is thinking of cutting 120 jobs, and the journalists are striking.

Striking Fairfax Media journalists have branded the company's proposed editorial cuts "aggressive" and "unnecessary". 

On Thursday, Fairfax announced it would seek cost reductions equivalent to 120 full-time jobs from its newsrooms in response to difficult market conditions. 

As well as job cuts, the company has flagged the potential to save money through tightening contributor budgets and reducing travel costs and expenses. 

The announcement sparked a wildcat strike at Fairfax's operations in Melbourne, Sydney, Canberra, Brisbane, Perth, Newcastle and Illawarra. 

On Friday there were protests outside the company's offices in Sydney and Melbourne.
"This came as a surprise. It was a fairly aggressive way of doing it in our opinion, and unnecessary," The Age journalist Simon Johanson said of the proposed cuts while at the Melbourne rally.

Fairfax CEO Greg Hywood said the cuts were necessary to sustain high-quality journalism, which is of course a bit like growth-through-cuts and may even be pursuing peace-through-war and ignorance-is-strength. You get the picture; in the absence of anything cogent to say the CEO falls back on a phrase that sounds more platitudinous than considered. It's even stranger because not so very long ago, a bunch of Fairfax editors were beating their chests to say how well they were transitioning to digital story-telling. 

The truth is, nobody wants to pay for anything that's 'content' now. It's been this way since the advent of the internet. It has gotten to the point that advertisers don't want to pay for advertising because of the internet, while subscribers represent a minority of people who want to consume. Whatever made commerce, commerce, has broken down when it comes to the business 'content'. At the end of the day it means fewer outlets, fewer journalists, fewer reports, less information to go on. 

As the pool of journalists shrinks, the diversity of ideas also diminishes. By diversity I don't mean, ethnic voices or more input from LGBTQ people, I mean the sheer ability to provide nuanced, mule-faceted understanding of complex social phenomena. With less analysis comes a less informed public which gives rise to ever more dumbed-down populists. The rise of Tony Abbott and Donald Trump  are symptomatic of the less informed public that has a very gross, unrefined understanding of issues; and all of this comes before whether journalists are fulfilling their obligation as the fourth estate. 

I mean, where else do bloggers get a reason to blog?

One Of Our Submarines

This business of procuring the next generation of submarines from somewhere has turned into a three way bid for the tender. The contestants are Japan, Germany and France. The French have boldly offered some political advice as well as technical advice.

Speaking to Australian journalists in Paris this week, the firm's chairman Herve Guillou​ and deputy chief executive Marie-Pierre de Bailliencourt​ said lithium ion battery technology was not yet sufficiently developed to use in submarines and doing so before it was perfected would be dangerous.

"We know that the technology today that is used is the same one used in cars and in cars they explode," Ms de Bailliencourt said. "The Australian people ask us for proven technologies and proven solutions … [that are] safe for the submariners, safe program-wise and safe cost-wise ... What I'm saying is there's no proven lithium ion technology today." 

The French bid leaders suggested the Japanese were being forced to use the more advanced lithium ion rather than conventional lead acid batteries because otherwise their boat would not be able to go far enough for the Australian navy's needs. 

But Ms de Bailliencourt and Mr Guillou said a partnership with France would also bring strategic benefits without the risk of becoming entangled in the historic enmities of north Asia. 

Choosing Japan for strategic reasons could mean Australia's being "dragged into a third country's own political affairs", for instance "if there's war between Japan and China because of the islands, because of commercial routes". 

Asked if she was suggesting Australia could be dragged into a war with China, she said: "I'm not suggesting anything. Make your own conclusions 

"We know about Japan and China. The history between the two countries is way from being done. We've absorbed the German-French wars. We've fought them ... We're lasting friends. But there's nothing that has been even started yet between China and Japan for reconciliation."

Talk about whacky and wild and totally self-serving. If it were true that Australia were at risk of being dragged into a conflict between Japan and China, it's not entirely clear how buying French submarine guarantees Australia gets to sit it out, given the current alliance arrangements.

I'm trying to remember the moment in history where the world feared the great French submarine fleet.

The role of the French submarine force in 1939 was to act in concert with the French fleet and with France's allies against the Axis powers, with particular responsibilities in the Mediterranean. It also operated in defence of France's overseas territories and colonial empire. This changed in 1940 with the fall of France and the signing of the armistice with Germany. 

One submarine had been sunk in action, and several others scuttled to prevent their capture; seven others, in British ports at the time of the armistice, became part of the Free French naval force (FNFL). The captured Aurore class boat Favorite was taken into German service as UF-2, a training ship. However the majority remained under the control of the Vichy government. 

Over the next two years 16 submarines were lost in Vichy service, mostly in clashes with British and Allied forces. 

In November 1942, with the invasion of Vichy territory by the Germans, many of the remaining vessels were scuttled, or captured by the Axis. Those that survived, or managed to escape, joined the FNFL; despite losses, and with replacement from allied navies, France ended the war with 20 submarines in service, having lost 50 boats from a variety of causes.[3]

That reads like the cheese-eating-surrender-monkeys really know what they're talking about when it comes to submarines. I'm sure the French are experts at underground warfare, but their cred on underwater is a lot lighter. 

Jokes aside... It's sort of odd that Australia has its own Australian Submarine Corporation, but Tony Abbott decided to go shopping overseas for a submarine fleet. It's worse than a vote of no-confidence, it is another nail in the coffin for killing off manufacturing in South Australia. It also reverses the many attempts to shore up high tech and heavy industry in South Australia.  You'd think the likes of Cory Bernardi would have something to say about this more than Safe Schools and Gay Marriage, but it's just another example of how Senators for the two major parties don't have to look after their constituents' interests. 

In the process Tony Abbott has insulted the current fleet of Collins class submarines and put South Australia's electorate squarely against the Coalition. The initial scuttlebutt of picking Japan as the source of the next submarines also flew right in the face of 'traditional Australian sensibilities' which is normally about hating on anything Japanese - which kind of reveals that Tony Abbott may not actually be so Australian to begin with. Then, backing down from the initial rush to go submarine shopping in Tokyo, the Coalition government under Malcolm Turnbull has embarked on this rather odd tendering process. 

Contrary to the amount of money it is all going to cost, the next generation of submarines for the RAN are not going to be world changers any more than the current Collins class submarines have changed any aspect of the balance power in the Pacific. As with the F-35, munitions manufacturers have a way of inflating the efficacy and benefit of arming up with expensive bits of gear. It's all a money sink. All of this discussion is symptomatic of a chaotic government.