Quick Shots - 07/Feb/2017

More On the Liberal Party Split Thing

As it turns out, there's more about Cory Bernardi that's worth knowing. We could have guessed it, but it bears pointing out:

Bernardi first sensed a problem in 2009, when during a heated and divisive partyroom debate on whether the Coalition should support Kevin Rudd's emissions trading scheme, one of his colleagues, the now deceased West Australian MP Don Randall, rose to his feet and said: "I don't give a stuff about the national interest, I want to get re-elected and this needs to go away." 

Bernardi went back to his Senate office and wrote down the quote. He never forgot it. It was the beginning of the end.

I don't know how else to put it but that right there is the mocking gun that these Liberal Party politicians are nothing but hacks sucking on the pubic teat. As if Bronwyn Bishop and Sussan Ley weren't enough proof, here in the segment above is the distilled essence of how these bastards think. 

The late WA MP Don Randall said he doesn't give a stuff about the national interest, he just wants to get re-elected. It begs the question why the hell we need to re-elect such a person; as it turned out, he died shortly before the recent election and truth be told, judging from the quote, it was probably a good thing too, because he certainly had no intention of serving the national interest. It's easily arguable that the most he served the national interest was when he died, thus depriving himself of more opportunities to suck at the public teat. 

That Cory Bernardi thought the quip was worth writing down as quote to which he is going to make his political credo, tells us well enough that he too doesn't think much about the national interest - he too is all about getting re-elected. It's strange that he thinks he has a better chance not as the Liberal Party's No. 2 on the SouthAustralian Senate ticket but as an independent. Maybe there's more money in being a leader of a party of one. It's hard to figure how the dollars an cents work out, but it would be remiss of the media if it didn't investigate this strictly pecuniary angle. After all, the man's motto amounts to, stuff the national interest, he's only in it for himself.

If I may offer a bit of gratuitous advice to Corgi BurntNazi, it is that the ALP have found "Disunity Is Death". Leaving a major party that would put you in as a senator is likely the dumbest move he's made in politics. 

Grexit Again?

If there's one thing that really puts the fear in the markets the world all over, it's the notion that Greece will default on its debts. That being said, the narrative to date has been, the Euro Zone won't let that happen, and the Greeks have to eat a lot of humiliation not to be allowed to default or leave the Euro. This has resulted in the ECB cycling through a lot of money that pays off the debt for Greece in exchange for Greece making immense cuts to its expenditure - some of which might have been reasonable but others that have resulted in terrible cuts to services. There doesn't even seem to be any coherent link between the cuts demanded by the Euro Troika and how the money is spent seeing that most of the money goes to paying off the bonds. And as the Greek economy shrinks and shrivels, it loses any chance paying off the debt.

With that in mind, here's something from Yanis Varoufakis, the ex-finance minister of Greece.

“This two-pronged preparation is the only way to prevent another excruciating retreat by the prime minister in the short term and [German Finance Minister Wolfgang] Schaeuble’s plan in the long term,” Varoufakis wrote. 

In his article, Varoufakis suggested that Schaeuble’s strategy is to lead Greeks to the point of exhaustion so they ask to leave the euro themselves. 

Noting that the “parallel payment system was already designed in 2014”, Varoufakis stresses that Tsipras had “two delusions” that led the government to the current impasse:

• a. that on the night of the referendum, the dilemma was between Schaeuble’s Grexit Plan and the 3. bailout
• b. that the obedience to the 3.bailout could be political manageable through a parallel, society-friendly program.

Both of these “working assumptions” were based only on autosuggestion, the ex finance minister stresses adding that he tried to explained this to the Prime Minister on the night of the referendum 

“In reality there was never a basis for hope that the toxic 3 bailout would be gradually rationalized, in terms that the European Commission would support Athens so that the austerity and anti-social IMF measures would relax, the IMF would force Berlin to accept debt restructuring and lower primary surpluses, the ECB would include Greece in the bond purchase program (QE),” Varoufakis wrote 

He accused leading European negotiators of lying. 

“That Moscovici [EU Monetary Affairs Commissioner], Coerer [ECB] and Sapen [French finance minister] might have given such promises was not an excuse.
Since May 2015 we were fully aware that these gentlemen know how to lie and fail to deliver on their promises when they do not lie.”

Greece remains the thin end of the wedge. If Greece goes, then, the dominoes are in play for the rest of the PIIGS, and will lead to the destruction of the Euro. While it stays in the Euro Zone, the world can live with the fiction that everything is okay, except there is the glaring issue of Brexit, whereby cozy assumptions about the health of the Euro Zone can't be ignored. If the UK can leave, then it offers a practical blueprint for Greece to leave.

The weird thing is that the UK need not ought to have voted to leave, while Greece needs to leave if it wants any semblance of control over its finances. The horror show of bluff and intimidation made by the Troika to keep Greece in the fold and to keep taking the austerity medicine in a sense informed the UK public as to the failings of not having control. Even more ironic may be the case that the UK already had kept its pound sterling as opposed to adopting the Euro, so in a sense it was the state with the least problems of losing control to the Euro Zone. thus if the UK still seems it fit to leave the Euro Zone, then it follows that perhaps Greece needs to reconsider its desire to stay.

If all things are equal, the next time the Grexit show hits the road and world markets panic over the possibility of Greece leaving the Euro Zone, it might be better to put your money on the likelihood that it does leave, and that it's a good thing.

More Thoughts On The Brexit Vote

David Cameron Opened The Door For The Far Right

It's been a couple of days since Brexit happened and I'm still trying to digest it's meaning. Some people are blaming ignorance and fear but I don't believe that covers the surge of votes that took it to the majority. Issues like the NHS have been raised but by the same token UKIP leader Nigel Farage was quick to backpedal from his £350m pledge towards shoring up the NHS.

The Tories really can't claim the vote a victory because it cost them their leader and Prime Minister. Indeed, in the tussle between rightists, the culturally inclined rightists seem to have beat out the economically minded rightists. David Cameron should go down as the worst Prime Minister in British history since Neville Chamberlain when he came home waving a piece of paper with Adolf Hitler's name on it.

And there it is, the rather uncomfortable reminder of the time the far right got centre stage in politics. Adolf Hitler of course snuck into the Weimar Republic government by dressing up his politics as a kind of conservatism - just enough to get Hindemburg to make him a partner in government. I know some of you will jump up and down and say "Ah! Godwin's Law. You brought up Nazis so this blog entry is without merit!" - but that is the very problem: The Far Right have clenched a legitimacy they need out to have been given, and they got it through David Cameron essentially kicking an own goal.

Is Farage Hitler? No. Maybe I should say No, not yet. Yet the stench of fascism and intolerance reeks in the outcome of the referendum, so much so you have to pinch your nose and pretend it is not there just to talk about the outcome in economic terms. My own view is, if it smells like shit, it probably is shit - no need to go tasting it. David Cameron is going to go down as the Prime Minister who let the Far Right into the middle of government, out of his own sheer desperation to stay in power. It's not a good thing.

Everybody Struggles For Relevance, Some More Than Others

The British Labour Party are obviously feeling like the referendum was a loss.   The worse aspect of this might be just how irrelevant they've become in Thatcherite England. Consider for a moment just how much of a sell-out Tony Blair's government was for a leftist concern. Add in the years of Thatcher herself and John Major, as well as David Cameron's stint, and you get the picture of the UK essentially living out the Neo-liberal economic programme for over a generation - 37 years if you count back to Thatcher's first win.

It's been a long time since the Labour Party sounded like the Labour Party.  Of course it doesn't hide the fact that they are very short on experience. The left utterly failed to shore up its base because the truth is that Blair-ite Labour sold those people down the river in order to win a government resembling the Tories. There's a credibility gap in going back to the very same demographic and asking them to support even more of the globalisation and free trade that has decimated those communities.

Arguably, there's a lesson right there for the left in Australia. The Rudd-Ian move to the social right carried within it the seeds of future disconnect with the ALP base.  There's a limit to what kind of political solutions can be achieved if you meet the Tories half way. Especially if the Tories insist on going far out to the right. This problem is also present in the current US elections where the Clinotnian compromises of the 1990s are not sufficient for the Democrat base because they amounted to selling out the base. The base is angry enough it would like to vote Sanders, but is willing to withdraw its support for Clinton, even in the face of Donald Trump. It is a pattern repeating around the world, whether it be the rise of both Syriza and Golden Dawn in Greece, or Podemos in Spain.

It's unclear whether the ALP under Bill Shorten can reconnect with its base. Certainly the Rudd-Gillard ALP government made a hash of it, and justifiably earned the scorned it received. The lesson in all of this is that the left struggles for relevance the more it has sold out its base in the last 40years. The credibility gap is simply too big.

What's Wrong With The Euro Zone?

In all of this I decided I'd have a quick think for myself what bothers me about the Euro Zone as it is constructed. The obvious problem is how the GFC revealed the structural problem of how the Euro currency itself is set up, and particularly how it pertains to Greece. Greece is in dire straits because it has large debts, but also because it cannot devalue its currency to balance out its relative weakness of its economy in comparison to the economy of Germany and France.

While this problem was not a problem for the UK who insisted on keeping the pound in the 90s, the fact that the Euro Zone as a whole is pushing globalisation in a way that would beggar the poorer economies is a problem. It's interesting to see if Scotland really think their welfare state would fare any better under Germany's auspices than George Osbourne. Judging from the way Greece has been handled, the last thing you might want to have is Germans in charge of your welfare state.

In general, the Euro Zone has demonstrated that some states are more equal than others. Young Greeks would do well to abandon Greece and head for Paris, Berlin and London for opportunities. Yet this reveals a structure whereby the UK contributes to the Euro but cannot directly assist Greece, all the while having to take on board economic migrants that are created largely out of the austerity that Germany insists upon. And while Germany's insistence on Greek austerity has varying degrees of legitimacy attached to it, one would think such claims would not be accepted in many parts of England suffering under the Cameron-Osbourne austerity policies of its own.

If you add in the fact that Eastern European nations have entered the Euro  exporting massive deflationary forces with their cheap labour, and with Turkey under Erdogan wanting to join, it's very much a good question as to whether it is a club within which the UK would want to stay. If that seems 'xenophobic' to some, it ought to be asked who benefits more from 'xenophilia' and blind acceptance of this cheap labour that is destroying labour value in the UK. Why should the working class continue to cop to the waves of globalisation that seemingly does not care about regional UK? It's simply not as clear cut as saying the rejection of the European Union is ergo xenophobia.

Imagine if you will, that there was a Pacific equivalent of the EU, but without the US. It might look like Australia, NZ, Canada, with the North Eastern Asian countries Japan, Taiwan South Korea. Add in the ASEAN nations, and you would have a pretty big trade bloc. The problem is labour prices across this region would be depressed because labour is very inexpensive in ASEAN. If there is free movement of people in this bloc, it's hard not to imagine there would be a flood of people heading for Sydney, Tokyo, Taipei, Vancouver, Auckland.  And if that cheap labour was depressing the wages of people in Australia, Japan, Taiwan, Canada and New Zealand, it wouldn't be very difficult to imagine a movement built upon getting out of such an arrangement.

The fact that there isn't such a bloc tells you a lot already, but it would have to be extremely obtuse to pretend the European Union which mainly featured France, Germany, Holland Denmark Spain and Italy at its start, is a very different proposition today when it also includes much of the old Eastern bloc, Greece and soon Turkey.

The Future The Young Did Not Want

Something like 70% and more of the younger voters voted to remain. It is the kind of number that reminds us of the support for Bernie Sanders among the younger voters. And just as Sanders didn't get their candidate, the younger voters of the U.K. Got the outcome they didn't want but have to live with, for much longer than older voters.

It is a stark demographic picture where Gen-X and Gen-Y combined could not beat the Baby Boomers and older generations. It's hard to tell what the fallout from this aspect of the referendum will be. One thing I can say is that we're not shooting each other in the streets in some civil war, because that's where the Spanish ended up in the years during the Great Depression. With any luck we won't be glomming into a World War.

Whatever else that can be said about it, on a demographic level, the Brexit vote is not a step towards the future, it's a blind shuffle back towards an imagined past that is not there. It's doubtful it existed and it's doubtful it will come to be as Nigel Farage seems to think. Now that David Cameron has had to resign, there will likely be an election in the UK by the end of the year. One wonders how the next vote will work out for the Tories. I can't imagine this is going to be good.

The World Of The Elite Consensus Is Ending

It's been pointed out elsewhere that the 1% who have all the money and power see borders very differently to ordinary people. The 1% move freely across borders with their capital. Compared to that, people who hang their hats on the sad identity politic of nationalism seem very quaint. This might be because in the past the 1% had their wars where they sent the people to fight and bleed for them on the basis that borders were important. It strikes me that it is somewhat silly of the elites to then be confronted by a popular vote - a revolt even - where they vote is ostensibly in favour of borders.

The promises of Free Trade are quite enticing. The problem however is that in many parts of the developed world, it means that in exchange for cheaper products, you lose your jobs to people in poorer countries. And the Elites, the 1%, the Tories and the big end of town dress up this exchange as a matter of productivity and competitiveness, but in reality it is an exchange the Elites have made, to sell down the future of their own people back home.

If the problem of the idiotic, uneducated, atavistic identity politics of such movements headlined by Farage and Boris Johnson and Donald Trump (and we should add Pauline Hanson to this pile) seems pernicious, it may very well be because the 1% have overly downplayed the importance of borders and identity, having sold it to the very same people as something of inherent value. What the Brexit vote shows is that the people won't be railroaded forever. If the benefits of "hands-across-the-waters" friendship is that everybody's living standards go down to a lower level, a lower common denominator, then you can't fault the people who say "bugger that, I'm keeping what's mine."
It's not quite as idiotic as it looks.

More tellingly, the Brexit vote reveals the middle is broken in British politics. If enough of the people in the middle are willing to throw their lot in with the likes of Farage, if enough of the working people who would have traditionally been Labour Party supporters vote with Boris Johnson, then whatever consensus that might have been in place may as well be pronounced dead. Of course in Australia, we've seen the broken middle consensus with the election of Tony Abbott in 2013, so it's not as if we don't know what this looks like. It's going to be a Carnivale of bad political judgment until such time the public gets another vote. Fortunately for us, Australia goes to the polls next weekend. Let us hope we can restore a sense of consensus by voting out this truly moronic Coalition Government.

Holy Smokes It's A Brexit

More Surprising Than The GFC Itself

What do you make of this result? If a month ago the notion of the United Kingdom leaving the European Union seemed like a non-issue, it all of a sudden heated up today as the polls closed an lo and behold the UK had voted to exit the EU. It's a staggering result that flies in the face oft only the rhetoric or accepted wisdom or common sense. Nigel Farage went from being a joke and a potential footnote in history to being the face of the man who rallied petty nationalism and jingoism to reverse the historic decision for the UK to join the EC in the first place.

Pollsters are looking really bad out of all this. Not only did they screw up the last election, they totally misread the public mood for this referendum. Also looking bad is David Cameron who called on the referendum and pitched for the 'remain' camp. In fact the majority of the British Parliament would support remaining in the EU so it will be curious to see how that respond to the outcome.

The vote result has caused chaos across global markets including the ASX where $50billion was wiped off the bourse today. That's like a regular day during the GFC for losses but still, you get the feeling that people are taking money out of markets just to feel like they're doing something. Also in the news today was the collapse of the Pound Sterling which has sunk to levels not seen since 1985.

All that being said, I did get a more nuanced whiff of just what was ailing the common voter in England, who were keen to tell me on Facebook just how much the rule of Brussels rankled with them, as well as just how much of a strain Europeans were putting on the NHS. If the British were going to protect the NHS, they had to - they argued - quit on the EU. There were other issues as well, such as just who these people in Brussels were to be making such sweeping laws ("un-eleced filth!") that supersede national sovereign laws of a land, and how such laws were handing over fishing right in waters around the UK to landlocked countries like Hungary.

Really, it wasn't really to do with the xenophobic impulses as claimed by the campaigners to remain. It had a lot more to do with the fact that Westminster had been relegated to rubber-stamping laws created in Brussels, and that those laws were not working at all in the British context. Europe will rightly be smarting from this result. The ramifications are multiple and here are a few that I can think of just off the top of my head:

• Scotland will want to have a do-over of their secession referendum. Scotland wants to remain in the EU. 
• Presumably Norther Ireland wants to stay in the EU. Otherwise it has to organise borders with Ireland. If Scotland and Northern Ireland split, the Brexit would have brought about the end of the Unite Kingdom. Not sure how the Queen deals with this as she's still Queen unto the Scots but it brings those old hoary questions back into the limelight. 
• Can the City of London stay the financial hub of Europe when it no longer is in Europe and will presumably have trade barriers with Europe? Will the British economy recede from its current model of being built around finance, insurance and real estate banking? 
• Grexit is firmly back on the agenda. If the UK can exit the EU, then Greece will see that they can force the issue to get out. This would be sensible except... here come another round of Grexit-Fear market gyrations
• What trade deals now and how? When the UK is out, what kind of barriers to trade will there be with Europe? One imagines these will be high, just to punish the UK for leaving. In fact Brexit means the UK has opted to go with less leverage when it needs to negotiate more.
• David Cameron must be done as Prime Minister. I can't imagine he survives the week now that he's spent his political capital and it all went up in flames. Could the next PM be *gasp* Boris Johnson? What kind of world are we living in when ugly populists like the Johnsons and Farages of the world win and ... heck why not mention it, Donald Trump is a nominee to be a presidential candidate for the Republicans?

Apart from the bit where David Cameron loses his job, a lot of that is actually quite difficult to digest. In any case, it's an historic day indeed.

It's kind of funny to reflect back on the moment the UK joined the EEC way back in 1972. France made it conditional that the UK ditch its favourable trade arrangements with her former colonies, and so Australia and New Zealand were - for a better word - 'dumped' by the Mother Country. Australia's modern identity really emerges from that historic moment when the Mother Country jumped into a bed with the French and the Germans and abandoned her children to make their own way in the world. The massive shift towards Australia's engagement with Asia which started in the mid-70s directly follows on from that rather uneasy historic moment. For the most part Australia has done okay out of that change. It forced the country to grow up quite a bit, become more cosmopolitan and less parochial, and maybe even a little more sophisticated in its dealings with the old dart.

That being said, should the UK start renegotiating all its trade deals and come knocking in Australia, and should there be an ALP government around, the UK would best be reminded of this history, and perhaps even be asked whether they would like to revisit 'Terra Nullius' in their Parliament - perhaps even offer an apology to the indigenous peoples of Australia and New Zealand. There's a lot of unfinished business to be discussed.

UPDATE: "And he's gone! David Cameron, gone for a duck...as he trudges away from the crease. Took a big swiping shot and skied the ball. Not a very good captain's knock..."

Quick Shots - 05/Jul/2015

Communist Manifesto & Thomas Piketty

I've been re-reading this thing from Penguin Classics. The actual manifesto is relatively short. There are reams of writing in the introduction part of the book trying to contextualise the thinking and social forces that made the important points of the book so important to so many for decades.

Why am I reading this now? Partly because I like reading Penguin Classics, but also because I'm about to read Thomas Piketty' book' Capital in the 21st Century'. The Manifesto is a thunderously loud book as it pronounces so many things about testate of capital, the bourgeoisie and the proletariat. I'm getting the whiff of 1848. I'm also getting a mechanically-minded refresher on how Marx thought the Revolution was inevitable. When you read this as an older person, you tend not to be persuaded by the energy of the thing.

Speaking of which, I've actually got Piketty's book on Kindle - I'm trying something new. I'm trying to read big serious book electronically. My experience of trying to read books on phones has notion great. At the end of the day, no matter how big the phone screen gets, it's still not quite size of a proper book so you get tired all the squinting or flicking. I've read PT Barnum's book on the iPhone but I haven't had the patience to read Pete Townshend's autobiography - it's just too big.

So far the Kindle is proving to be a delight. It's a very different experience to reading a fat book, but that's probably the best thing about it. I'm slow on the uptake when it comes to gadget-gizmos so this might strike others as incredibly backwards but basically, I'm barely getting to understanding the upside of digital ownership of media.

Greek Referendum

It's the day of the vote as we speak. For a nation that could be the undoing of the European Union, the government has a weird sense of due diligence about it. The vote represents the government seeking a final mandate to tell the Troika to stick their non-deals where the sound doesn't shine. During the week it came out from IMF economists that indeed if Greece were ever to get out of its position of debt it would need more money for a bailout and its demands to have some debt reduced would ave to be taken aboard. One imagines the boffins in the ECB and by extension the German finance ministry thought this was a bit of friendly fire, while Tsipras and Varoufakis did a little fist pump in being validated.

That being the case, it would be a crazy Greek voter to vote 'yes'; they all ought to vote 'no' and get on with either getting a better deal out of the troika or doing the Grexit. In any case, the Germans are surprised that the home of democracy has a leftist government that actually went to its people for a mandate. They should've seen it coming, given that they gave no ground whatsoever in the five months they've been talking to this sam government.

I'm not a betting man on things like this, but my best guess is that the Greeks do vote 'no' and put the Grexit on the table for Tsipras. I imagine that around lunch time Sydney tomorrow, we'll be seeing the results.

UPDATE: And it's looking like a resounding 'No'. Markets are going to open to chaos today, they think. The view is the 'no' vote puts the entire country at risk, but then, a 'yes' vote with continued austerity was not going to make things better in Greece either. Caught between rock and a hard place, then' option allows the Greeks to have a sense control over their doom. The reports also say that the Euro negotiators have lost faith in the Greek leadership, but when you think about the logic of the bailouts, it was inevitable that Greece was going to walk away from an arrangement that does not actually help ordinary Greek citizens.

Insisting On Being Stupid

I don't know what more ca be said about all this 'Q&A' business, but Tony Abbott has ordered his front bench not to appear on the ABC's panel talk show. Yes, he ordered them, and by god they will obey their Fuhrer of Foolishness, the Sultan of Stupid, the Master Moron, the Id Yacht himself. Hooray for Australian politics.

"The Prime Minister has communicated that he does not want any frontbencher to appear on Q&A," the spokesman said.  

"Barnaby was told this tonight and apologised to Q&A that he would not be able to appear." 

Communications Minister Malcolm Turnbull - who has said he opposes a boycott of the program - is scheduled to appear on next week's episode of Q&A. The Prime Minister's stance leaves Mr Turnbull with a difficult decision: to defy his leader or to act contrary to his previously-stated position.   

Mr Abbott's parliamentary secretary Alan Tudge withdrew from last week's episode ofQ&A, saying it was inappropriate for him to appear while a government inquiry into Mr Mallah's appearance was underway. The Department of Communications inquiry has been finalised and a summary of its investigation was released on Friday. 

Fairfax Media understands the ABC will not seek to replace Mr Joyce with another government frontbencher. Host Tony Jones is expected to address the issue on air on Monday night. 

Good grief. The shame of it is more petulance rather the evasiveness and the desire to be unaccountable that is driving this boycott. But that's what you get when your politicians know no shame.

Meanwhile it appears Bill Shorten has nose-dived in his popularity in the polls. Mr. Shorten now has a negative approval rating, much like the fine PrimeMinister of the land. I don't know that Bill Shorten is doing such a bad job, given that his jobs to give the government as small a target as possible until the election is called, and then go and recite and reprise all the slip ups the government has made when the election comes. I'd imagine it was the fallout form 3 weeks of 'The Killing Season' bringing back memories of his role in the Rudd Removal and the Gillard Removal as well as how he lied to the media saying he was backing the Gillard as he quietly switched horses to Rudd in 2013. Yes, it was dastardly business for all involved, but you can't expect that one to stick.

News That's Fit To Punt - 22/Jun/2015

The Narrative Has Turned

The recent talk on property bubbles in our capital cities has been getting more intense. Housing affordability is becoming one of those bugbear stories in the news every week as politicians and vested interests try to talk it down. Of course when the Treasury Secretary and RBA boss say Sydney prices are crazy and there's definitely a bubble going on, it's the-Emperor-has-no-clothes moment of perspicacity for most of us. There is an elephant in the discussion room - and so now people are talking about it fairly openly.

"Contrary to the analyses of the vested interests, the data clearly establishes Australia is in the midst of the largest housing bubble on record. Policymakers are caught between a rock and a hard place, as implementing needed reforms will likely burst the bubble," Mr David and Mr Soos state in a submission on behalf of real estate and financial services research house LF Economics.

They believe the current bubble is worse than those in the 1880s, 1920s, mid-1970s and late 1980s.

"Australian economic history and recent international events illustrate collapsing housing bubbles can quickly increase the number of unsold properties [stale stock], shattering the pervasive myth of a deleterious dwelling shortage," they wrote.

"Falling housing and rental prices, including sales, would be a doomsday trifecta for investors as they suffer losses in both capital prices and net rental incomes.

"This calamitous outcome is especially likely in Melbourne where rents have not increased in real terms since 2010. Melbourne is primed to become the epicentre of a legendary housing market crash due to the combination of a staggering boom in real housing prices [178 per cent]. Perth is also in a serious predicament.

"Housing prices across all capital cities remain grossly inflated relative to rents, income, inflation and GDP. What event or set of events triggers the beginning of the end of the housing bubble is not yet known. A bloodbath in the housing market, however, appears a near certainty due to the magnitude of falls required for housing prices to again reflect economic fundamentals."

'Bloodbath' sounds a touch apocalyptic. These two gents think the officials have underestimated the coming collapse, and that there's so much speculative money in the property sector it's going to blow up with a bang. It's curious there is now such drastic talk. Back in the days shortly after the US subprime burst, there was much talk that Australia was somehow different, and that narrative has prevailed for years. The only person to point out that private sector debt was the problem indicator was Dr. Stephen Keen and he of course lost his bet. He of course lost his bet because the Rudd government guaranteed the banks and spent up big on the stimulus when it mattered; but what that did was merely kick the can down thread indefinitely. 

Since then the political landscape has changed around the bubble, and now we have an idiotic government that can't seem to distinguish between government/public sector debt and private sector debt. The Federal government under Tony Abbot is furiously (or languidly depending upon to whom you speak) trying to rein in the deficit in the hopes controlling Australia's debt levels, but of course that's not where the problem debts reside. The colossal ballooning of Australia's debt is in the private sector, and much of it is tied up in property. Yet that is all by the by.  

The way this government will go will be no different to other governments in history that faced down a bubble and lost. They won't do anything to remove the laws that are encouraging it - like negative gearing and capital gains tax breaks; and they will go lockstep with the vested interest groups who are denying it is there because it is better to keep ushering in the greater fool to keep buying their wares at inflated prices on money loaned by banks. This happens because all the vested parties want to keep their vested interests and bake it in to the pricing. And of course MPs are rarely renters or outside the  property market, so they're not exactly incentivised to do the right thing. 

I will share an anecdote from Tokyo just to give you a picture. For five years leading up to the Bubble bursting in Tokyo, housing affordability was the hot topic every day. The newspapers reported, statistical analyses were tabled, developers and real estate agents denied it, politicians acknowledged it, and yet no policies or laws were passed to ameliorate the factors causing the Bubble to inflate. Valuations went through the roof and people felt so threatened by the pace of the rise, they hocked themselves to the eyeballs to get into the market. Once it burst, everybody with an unrealistic mortgage was wiped right out - and naturally that was a significant portion of the market, who hadn't seen it coming. Prices collapsed to a fraction of peak valuations, and Tokyo housing has been at historic norms and trends for 25years since. 

Not many people want to hear about it, but there is life after the bubble bursts. It's better to admit it's a bubble and make plans rather than deny it's there and get wiped out. 

Grexit - The Revenge

Michael Pascoe thinks the potential Grexit is no big deal. He may even be right except the greatest creditor bank in all this is Deutsche Bank. And DB has 50trillion dollars worth of derivatives tied to the Greek Bonds. I don't know if people have been able to get out of those positions, but last I looked into it over at Zero Hedge, Deutsche Bank was the primary candidate to blow up when Greece defaults. So as the can keeps getting kicked down the road for Greece and its debt, it occurs to me that they - as in the IMF, ECB and EC - are going to have to invent a new narrative to keep giving the Greeks money to pay themselves back lest Deutsche Bank goes up in smoke. 

Greece and her leaders at this point probably don't care. They've put yet another final final final proposal to the Troika, but it's probably not going to go far enough in concessions. This austerity business not only doesn't work, it's creating a lot of unnecessary pain for the person on the street in Greece as well as shrinking their economy. So you sort of wonder why the Troika keep on insisting on the fiction that somehow cutting pensions and services in Greece is somehow going to grow the  Greek economy to be able to pay back the debt. At this point in time, everybody needs to come up with a better way to kick the can down the road.