I finally caught up with the Four Corners program about the juvenile detention in Northern Territory. It was as bad as the media has been carrying on about. The footage of youths in 'restraining chairs' looked like something straight out of Abu Ghraib. The images that have been leaked clearly show the full effects of Dr. Phil Zimbardo's experiment prison guards in real life. The Scottish born lawyer in the Four Corners presentation likens the handling to Guantanamo Bay - a kind of torturer's wonderland without much legal oversight. It certainly looks that way from the images we're shown.
What's really surprising is that people think that it would have gone any other way. Even after everything we know in this day and age, you have from our Prime Minister down, human rights people and children's welfare people, all holding public office wondering how on earth this could be happening in our very own 'civilised' country. Yet, lately I've been wondering if the kind prison system we have is anything remotely civilised. Let's not forget this nation was founded as a penal colony. The whole premise of this civilisation was founded on incarceration.
This must be the year for this discussion because I keep watching programs about incarceration one way or another. There's 'Orange Is The New Black' which anatomises the experience of US inmates in minimum security correctional; there's The Stanford Prison Experiment' which shows how guards come to behave the way they do because it is what they imagine the job means; 'Suits' Season 6 where Mike is in a white collar criminal prison and he is still vulnerable to corruption of guards; 'The Boss' where Melissa McCarthy's titular character goes to prison; all of them feature the prison experience well enough. In all of them, it is clear that guards behave badly but have the full backing of the state to do so, and so in a positive feedback of compounding moral hazard, they continue to find ways of behaving badly. And while that is all American content, there is nothing fundamentally different in the working structure of those prisons to ours. Our prisons are mostly doing the same stuff. Ours are equally brutal and overly focused on punishment.
Now, I'm not going to go and become some advocate for prison reform, but it has to be said there's something deeply wrong about the structure of the prison system whereby juvenile detention ends up looking like the Abu Ghraib - and we all know there was nothing right about what went on at Abu Ghraib. It was beyond the pail that Abu Ghraib happened in Iraq under our watch. For the exact same thing to be going on in peacetime Australia, directed at indigenous youths? We're rightfully scandalised, but where is the rational analysis? Why can't our politicians put two and two together?
The Royal Commission that has been announced appears to have very limited terms of reference. It is getting soundly rebuked by the Aboriginal community for its choice of commissioner, and it looks like it won't really do much that might be politically damaging. This suggests that Malcolm Turnbull knows that this isn't an isolated problem - after all, why would he limit the scope to the degree that he has, if he didn't want other things dug up. The obvious answer to that rhetorical question is that the Federal Government itself has children in custody, incarcerated in Nauru and Manus. And anybody with half a brain and education would be well familiar with the ramification of Dr. Philip Zimbardo's findings that more likely than not, the Federal Government has rogue 'prison guards' fully possessed by the jobs they have, bullying and torturing people in the name of the Australian people.
Yet our political ranks fear no hypocrisy when it comes to wagging its fingers at other nations on the planet when it comes to how they run their prisons, whether be Indonesia or Lebanon.
We're the civilised people, we love to claim. You can just tell the Royal Commission is going to do sweet fuck-all to curtail the institutional racism that layers itself over the Northern Territory prison system, nor will it have single suggestion on how to abate the 'prison guard' effect that turns otherwise normal people into institutional sadists. It's not like this is rocket science - it's just practical psychology - but because the Coalition government is socially conservative to the core it won't countenance any notion as to rethink the entire prison system from the top down. What will happen is that there will be a lot of crying testimonies and media carry-on but in a quarter of a century's time be all forgotten.
Brace yourselves for malarkey is coming.
The Bubble That Won't Pop
A couple items popped up this week about the property bubble. The first was over at the ABC where they interviewed Prof. Steve Keen.
"We have borrowed ourselves so much to the hilt that we are now dependent on that continuing to rise over time and it simply won't," he told the ABC's The Business.
Many believe the Reserve Bank has been a steady guiding hand to the Australian economy in the years since the GFC, but Professor Keen believes it has guided the economy "straight toward the shoals" by encouraging households to borrow with low rates which has led to asset bubbles.
"They don't know what they're doing," he said.
"Our debt level according to the Bank of International Settlements, private debt level, has gone from 150 per cent of GDP to 210 per cent of GDP."
He argued that means a large part of the growth that Australia has enjoyed since the GFC, while many other countries plunged into recession, has been fuelled by a 60 per cent rise in household debt.
"Ireland did the same thing when they called themselves the Celtic Tiger and they don't call themselves that anymore," he said.
"Spain was doing the same thing during its housing bubble and we've replicated the same mistakes.I like the bit where he flat out says the RBA doesn't know what it's doing. He may even be right. If the Private sector debt has blown out to the level as described, it could only have happened under the watch of the RBA which has bee cutting interest rates steadily. And because the RBA is doing so on a mistaken logical principle they will end up at ZIRP, just like other central banks have done in the developed world.
There's an interesting phenomenon about banking that we're seeing whereby in pursuit of yield banks have devised the casino capitalism we see today. In a sense the banks became casinos, betting on houses as it issued mortgage bonds. When the subprime crisis hit American banks, it effectively meant the "bank" was wiped out, in the same ways some people bust casinos. So the US government of the day bailed out the banks using tax payers' money but has pretended that the bank never went bust ever since. In order keep up this facade so thereon't be a run on the banks, the US Fed has printed money by buying up all the bad debt and putting them into a kind of moratorium limbo - an in so doing kit asset prices up.
And that is how Australia's property bubble never quite popped, even during the GFC. The kind of stimulus spending and quantitative easing has nickname in Japan where these methods have been tied for two decades: PKO as in 'Price-Keeping Operation'. The central purpose of a PKO is not to let asset prices drop because that leads to a market rout right across the economy and that way lies the great depression.
And so the RBA, like all the other central banks keeps lining out money for very little interest and most people can't think of anything better to do than to stick it into the real estate market, which brings us to the Crikey article about the property bubble.
The main driver of housing prices remains the taxpayer-backed big four banks, whose balance sheets are so overloaded with housing debt that they have no choice but to keep the charade going as long as possible. Bank executives are paid based on profitability and shareholder return — short-term profitability, that is. The fact that a chunk of the loans being made are based on prices that bear no real semblance to a discounted cash flow valuation is seemingly unimportant. Eventually the music will stop, but by then, bank CEOs will have been paid $50 million and the clueless directors who allowed it all will be frantically checking the terms of the indemnity insurance.
House prices are no longer a function of value but rather of how much people are prepared to pay. That in turn is determined by how much banks are willing to lend. And that amount continues to rise. Before the current boom started in 1997, the ratio of household debt to GDP was around 40% — it’s now more than 100 percent (it’s the same story for household income to household debt). In short, the banks are lending Australians a whole load of cash, and we’re using that cash to bid up the price of an unproductive asset (established housing).It's really strange how anybody who looks at the structure of our economy can spot this, but Domain's still printing stories about houses being bought at high prices.
Yet there are people still out there busily buying into the Australian property market as an investment. It's not even making sense as an investment according to the article:
CoreLogic found that Australian dwellings increased in price by 10 percent in the past year. In Sydney and Melbourne the price rises were even more significant, with Sydney increasing by 13% and Melbourne by 13.9%. If the market had any degree of rationality, given the market is already expensive, rentals would have needed to rise by around 20% during the year to justify those price increases. However, CoreLogic also reported that Sydney rents were up a mere 0.4% and Melbourne up by 1.7% (both well below the inflation rate).
That means if the market was insane a year ago, it’s even worse now. Already overprice property is increasing, in Sydney’s case, 20 times as fast as underlying income.In a way, this massive property bubble is the price of keeping our asset prices up in things like our Superannuation accounts which, by rights should have been wiped out into oblivion in 2008. We all have some assets of some worth, some more than others, all held by banks. The RBA is doing its best to make sure we get to keep our winnings, big and small in the casino of world banking. But it would be crazy to think that the current LIRP environment on the road to ZIRP is anything but kicking the can down the road. One of these days the reckoning is going to come, probably from China having its day of reckoning. We don't even know how the Australian property market would respond in light of a recession because we haven't had one in like 25years. One of these days we'll find out. As Warren Buffett says, when the tide goes out, you get to find out who is not wearing any garments.
The problem is no one seems to care what the banks do (least of all the government, even though taxpayers are on the hook if any of the big banks fall over, which if the history of banking is anything to go by is a virtual certainty at some point). Moreover, successive governments’ taxation policies (negative gearing, no capital gains tax, minimal land tax) serve to exacerbate the insanity.
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