News That's Fit To Punt - 14/Mar/2016

Taro Aso's Lecture Revisited

I'm a bit amazed to read this in the SMH today.

"There's an acknowledgment, even in the investor community, that monetary policy is kind of running out of ammo," said Thomas Costerg, economist at Standard Chartered Bank in New York. "The focus is now shifting to fiscal policy." 

 That's where it should have been all along, according to Modern Money Theory. The 20-something-year-old doctrine, on the fringes of economic thought, is getting a hearing with an unconventional take on government spending in nations with their own currency.
Such countries, the MMTers argue, face no risk of fiscal crisis. They may owe debts in, say, dollars or yen - but they're also the monopoly creators of dollars or yen, so can always meet their obligations. For the same reason, they don't need to finance spending by collecting taxes, or even selling bonds. 

The long-run implication of that approach has many economists worried.
"I have no problem with deficit spending," said Aneta Markowska, chief US economist at Societe Generale in New York. "But this idea of the government printing money - unlimited amounts of money - and running unlimited, infinite deficits, that could become unhinged pretty quickly." 

To which MMT replies: No one's saying there are no limits. Real resources can be a constraint - how much labor is available to build that road? Taxes are an essential tool, to ensure demand for the currency and cool the economy if it overheats. But the MMTers argue there's plenty of room to spend without triggering inflation. 

The US did dramatically loosen the purse strings after the 2008 crisis, posting a deficit of more than 10 percent of gross domestic product the next year. That's since been trimmed to 2.6 per cent of GDP, or $US439 billion, last year. 

The Congressional Budget Office expects the gap to widen in the coming decade, as retiring baby-boomers saddle the government with higher social security and health-care costs. That's the risk often cited by fiscal hawks. 

Mainstream doves accept the long-term caveat. But they point to record-low bond yields and say investors aren't worried about deficits right now, so why not spend?

Pretty amazing how that is seen as 'radical' economics but that's the same argument Taro Aso was mounting. The Sydney Morning Herald is way behind the curve on this notion - heck they're even behind this blog.

The article also makes the point that conflating household debt and government debt leads to much confusion - like it did with Tony Abbott's garbled wagon government debt when the real debt problem in Australia lies with the private sector debt.

Temperature Spike 

This is not good news.

Global temperatures leapt in February, lifting warming from pre-industrial levels to beyond 1.5 degrees, and stoking concerns about a "climate emergency".
Unusual warmth in waters off northern Australia also prompted an alert by the Great Barrier Reef Marine Authority about the risk of widespread coral bleaching. 

According to NASA analysis, average temperatures last month were 1.35 degrees above the norm for the 1951-1980 period.

They smashed the previous biggest departure from the average - set only in the previous month - by 0.21 degrees. 

"This is really quite stunning ... it's completely unprecedented," said Stefan Rahmstorf, from Germany's Potsdam Institute of Climate Impact Research and a visiting professorial fellow at the University of NSW, noting the NASA data as reported by the Wunderground blog.

So it appears we've run out of headroom for the denial. The rest of the article doesn't offer much good news either.

Nobody's Talking About North Korea

Philip K. Dick said reality is that which won't go away when you close your eyes. When you think about that, most things reality that would qualify would be not-so-nice things. Like North Korea. The rogue nation has basically announced it can build nukes the size small enough to mount on a missile - and seeing that their Rodong missies can get out to the Pacific, it puts South Korea and Japan well within its range. This has resulted in Japan and South Korea calling in anti-missile armaments from the USA, but it has also ratcheted up the tension with North Korea.

So... there's that reality that gets under-reported here in Australia. In that light, here's a bit of interesting analysis here.

Now, after repeated and renewed provocations by the North, the gig is up for Abe and his two-track approach with the North. Last month, Japan imposed retaliatory sanctions on the North following its missile test - staged as "satellite launch".

Pyongyang responded by terminating the inquiry on the abductions, effectively cutting the lifeline Abe had worked so hard to establish. The hostility between the two sides has increased even more after the subsequent imposition of new UNSC sanctions and the attention-seeking news release by the North highlighting their advances on miniaturisation.

In retrospect, it was not too hard to see this end - as both tracks of Japan's policy on North Korea consistently overlapped despite Tokyo's attempts to decouple them.
In fact, Tokyo previously pushed for this intersection as evidenced by the inclusion of abduction discussions on the sidelines of the now moribund Six Party Talks.

With denuclearisation talks effectively dead, the Abe government gambled with a more risky two-track approach to North Korea, by hedging between a hawkish line on Pyongyang's missile and weapons of mass destruction programmes and a more dove-ish approach on the abductions.

This gamble has failed. As tensions continue to increase on the Korean peninsula, it is time now for Abe to cut his losses - at least for the time being - and maintain a united front alongside the US and South Korea in deterring the Kim Jong-un regime.

It looks like it was a complete and utter waste of time talking to North Korea about anything. The Six Party talks through the 2000s and now the independent lines of diplomacy out of Tokyo and Seoul has ended up with the worst case scenario. The North Koreans have got the nukes they can put on missiles, and neither Japan nor South Korea got their kidnapped people back. The UN Security Council is pushing for harder sanctions, but of course China won't be completely cornering North Korea.

Oh and meanwhile some idiot has gone and blown up the toilets at there Yasukuni Shrine. The man wanted for the bombing is a South Korean national. That's going to be another bone of contention between Tokyo and Seoul, making it harder to coordinate policy against North Korea. It's a mess. It's a worse mess than the usual mess too.

View From The Couch - 24/Dec/2015

Kim Jong-Un And His Hydrogen Bomb

As these things go, maybe it's not as hysterical as it sounds, but Kim Jong-Un recently said North Korea has a hydrogen bomb, and is able to stick it on the tip of a Rodong rocket and fire it into Washington DC. Amazingly, this didn't make the news in Australia because it's the kind of thing I tend to notice in the headlines.  It might have been missed because Reuters' headline was already tinged with scepticism. Experts think it is unlikely:

In Washington, the White House said it was doubtful that North Korea had developed a hydrogen bomb, but said Pyongyang remained a threat. 

"At this point, the information that we have access to calls into serious question those claims, but we take very seriously the risk and the threat that is posed by the North Korean regime in their ambitions to develop a nuclear weapon," White House spokesman Josh Earnest told a regular briefing.

The U.S. State Department repeated a call on North Korea to comply with its international obligations and abandon all nuclear weapons.

One sort of wonders what the dictator is up to, but it's all kind of kooky how he wants to get the wrong kind of attention at this juncture. In response to this claim, Xi Jinping shut off oil supplies to North Korea, which is unheard of when you think about what it might mean. It tacitly indicates China is ready to disown its old communist bulwark ally; or it may mean nothing especially because oil has collapsed down to US$35 a barrel, and seems to be the ubiquitous commodity - North Korea can buy it cheaply elsewhere. It's really hard to figure out how much this would even corner North Korea. When all the European banks closed off business with North Korea because of sanctions, they simply moved on to using African banks for international settlements. Much like ISIL, it is proving hard to completely shut off the supply of cash to the rogue state. Too many entities seem to be able to profit from dealing with the North Koreans.

Anyway, it's a nice thought on Christmas Eve that Kim Jong-Un has his nation working busily with a plan to blow up the world. He really is like some Bond villain.

Turkey, Russia, Oil

The business of that downed Russian jet by the Turks is turning into a drama of sorts. It goes back to the ISIL thing where the Islamist insurgents are selling oil on the black market. Buying this oil at next-to-nix is none other than Turkey, which then on-sells it for a tidy profit, even with prices crashing to US$35/barrel. As it turns out, the man running this operation out of Turkey is none other than President Recep Erdogan's son.

Sometime back at the the G-20, Putin pressed Erdogan about this issue. Erdogan denied all of it. Apparently Vladimir Putin pressed pretty hard, asking to make sure Recep Erdogan's family weren't in on the ISIL oil deal, and Erdogan still denied it.  So Putin ordered his airmen to go bomb all the lorries carrying oil out of ISIL held territory which resulted in hundreds of these oil trucks getting blown up in Syria. As it turns out, these trucks were mostly Turkish trucks. So Erdogan got upset and green-lit that attack on the Sukhoi. Basically, there was no invasion of Turkish airspace.

Since then Russia has closed off all trade with Turkey, which basically amounts to about half of Turkey's exports.Turkey for it's part is staggering towards more armed conflict with Russia, which is kind of insane because Turkey's nuclear deterrent is NATO. What's worrying about this is that the relationship between the two nations is pretty much naked power politics in the style of the 15th century, just with modern equipment. All this leads me to think that west will likely rue the day they let Turkey into NATO. A war could start on the eastern end of Turkey, and NATO might be drawn into this stupidity by dint of the alliance.

It would be especially galling if it happened as Turkey kept dealing and cash-funding ISIL.

On The Low Low Oil Prices

Jeez, the ACCC must be pretty dumb. If you ever needed evidence that petrol prices at the pump are fixed through collusion, you only have to look at the prices at the bowser and the oil prices by the barrel. Crude oil prices have gone from US$120/barrel down to US$35/barrel. That's roughly a third to a quarter. If the petrol stations and suppliers were genuinely competing, the prices at the bowser should proportionately go down to about 40-50cents per litre. The fact that it hasn't tells you all you need to know. It doesn't go down because they're not really competing, and if they're not competing, the only answer is that they're colluding. In short, these companies are pocketing the difference and not passing it on to the consumer. What a joke.

Anyway.
I saw this interesting account of fossil fuels and their future today.

Why and how coal (and oil) is and will be produced at a loss has been neatly explained by the Australia Institute's Richard Denniss: 

"Imagine you owned an ice cream van parked by the beach and your refrigerator broke. No matter what you paid for the ice cream, you should sell it for anything you can before it melts. Some money is better than no money. 

"Now imagine that you owned billions of tonnes of coal and you thought that in 20 years time new technology or new global restrictions meant you might not be able to sell it. We have heard for decades how Australia had 'hundreds of years' worth of coal, but now we are trying to sell it in a few decades. The green paradox says that talk of future emission reductions can cause an increase in current coal production. Indeed, global coal production has risen 50 percent since the world first agreed to reduce emissions in 1992." 

Dumping coal (and oil) on the market keeps renewables expensive, but it also provides the incentive to make renewables cheaper. There are very good arguments for governments to invest more in renewables research than just subsidising the existing quality of solar and wind projects.

And that explains why the Coalition Government is going to make sure the Adani mine goes ahead in Queensland. It's anti-democratic and breaks a whole bunch of environmental protections, but the promise of 10,000 jobs in North Queensland has essentially convinced this government that this is somehow going to be okay.

Yet if you look at it from the ice-cream truck simile, you can see why there's such a rush. If Australia doesn't sell off as much of its fossil fuels before it becomes totally unviable, we would be leaving too much money on the table. Greg Hunt isn't really a Minister for the Environment - he's kind of a spokesperson for the Government that addresses the environment as an issue, but doesn't do anything that might remotely be perceived to be standing in the way of corporate profits. He's somebody who is not terribly serious about his job or its title or what it means. He's a careerist pulling down a ministerial pay-packet, pretending to be doing something. He's about as effective as Tony Abbott was as the Minster for Women, and more's the pity. 

This reminds me... Way back a long time ago, I was a young person working at the parcel pickup service of Grace Brothers. The groceries would come up in numbered tubs and we'd hand them out to the customers with the tickets. On certain times of the week, like Thursday night and Saturday morning, they would come in droves, and leave their car engines idling in the driveway. The fumes would be terrible. Just terrible. At this time of the year, the car queues would be 20 cars deep all idling away, and the air was unbreathable. I would dry retch all night long after working some of those shifts. 

Eventually we complained to management asking them to install a powered vent or fan. They demurred. So we called the union, who then organised somebody from the EPA to take measurements. The EPA dude turned up on a Monday morning when there was hardly a vehicle in the whole shopping complex car park - and declared the air was safe. We told him he was there at the wrong time, and that he should come back to when it was peak fumes. He said no, because that would be a biased reading. We were ropable, apoplectic with rage. What was the point of the exercise? He shrugged and said they were the rules, and went back and reported everything was fine. So, management weren't protecting us; the union wasn't really protecting us; and the government wan't protecting us. It was pretty sobering. If you ever wonder why I have occasional bouts of political anarchism, it's from experiences like these. 

I relate this, just to share with you the sense of hopelessness in expecting the government to do the right thing when everybody working for the government, whether elected offical or employed, is against doing any such thing. Folks, they really don't give a shit. Oh, and there's no question that  the ACCC are idiots. 

Hiroshima Day

70 Years And Counting (Towards What, I don't Know)

This time of year always gets a little hairy with Hiroshima Day and Nagasaki Day and VJ day all coming within days of another. It gives you a sense how hurried the end of WWII was, back in 1945. Still, I try to shut out the commentary on what it means today because frankly, it's been 70years. I don't know how to break it to people, but 70years is history. It should be awarded some more objectivity than rehashed propaganda, but of course that's not what we get.

I was driving over to my parents place and on Drive with Richard Glover was Geraldine Doogue and Lisa Wilkinson. Richard Glover - a witty bastard any day of the week, respect - asked with a serious tone, whether dropping the bomb was worth it. Geraldine Doogue's answer gave me the shits. Essentially, she quoted some historian who wanted to know why we talk about the dead of Hiroshima more than the 25million victims of the Japanese military aggression; and the fact the Japanese were willing to fight to the death justified dropping the bomb, so doing so saved lives; and this makes it justifiable. Lisa Wilkinson thought that the point of wars was being a bigger bastard than the other guy, and so America was willing to be the biggest baddest bastard and that explained the bomb.

Central to this construction is this ongoing myth that the two bombs brought about the Unconditional Surrender of Japan. I say myth because I've read a fair deal of the meetings held by the Five Ministers in front of the Emperor. The Imperial Conferences were an abbreviated briefing of the Emperor to short circuit the need to have cabinet meetings followed by reports to the Imperial Palace. Obviously it evolved out of the necessity because the war situation changed so quickly and so often it was easier to have the Emperor in the room to rubber stamp decisions. It also meant the Emperor had to sit and listen to the ministers ague.

The five Ministers at the Imperial Conferences were the Prime Minister, the Army Minister, the Navy Minister, the Finance Minister and the Foreign Minister. By early August 1945, these meetings were fairly desultory. Kantaro Suzuki was the Prime Minister, a retired Admiral, who was charged by the Emperor Hirohito to bring the war to an "honourable end". Those thing are pretty hard to get when you're getting spanked, but nonetheless, that was his job.

There are transcripts and reports of these meetings. The Navy Minister was Mitsumasa Yonai, an admiral who was later exonerated at the Tokyo Trials; and the Army minister was Korechika Anami, who argued the line that the people of Japan were willing to die to the man, and so the only honourable end to the war was where everybody died for the Emperor. You can imagine how the Emperor might have felt about that, waiting to rubber stamp that horrible decision.

On the morning of the 6th of August 1945, they were having yet another one of these meetings. There is an interruption where it is reported that a new bomb has been dropped on Hiroshima and devastated the city with one blast. And it barely registers with the Five Ministers. I've read that passage at least four or five times and it is indiscernible that this new - earth shattering even - information affected the discussion. The sticking point in all of these meetings in August was what "subject to" meant in the Potsdam Declaration that demanded the unconditional surrender.

If the Allies meant "subject to" in general, then sure, that is what a surrender is; but if they meant "subject to"  as in the Emperor was going to be turned into a personal slave of Douglas MacArthur, then every Japanese person ought to die fighting to prevent such an outcome. Yes, it's weird, but this is what happens when things get lost in translation. So these grown men argued in front of the Emperor interminably while the cities were burnt by carpet bombings. And they kept arguing right on for another 4days like this, past not only the Hiroshima bombing but the Nagasaki bombing as well.

They were holding out hope that either Sweden or the USSR would step in as neutrals to broker a peace. Unbelievable as it sounds, that was the project being pursued by the Foreign Ministry in the first part of 1945. This scenario fell apart when the USSR advanced troops into Manchuria, breaking its Non-Aggression Pact with Japan on the 10th August. This was the news that changed the meetings.

There's a lot that could be said about Stalin, the USSR and its role in World War II, but I'll leave that for the serious historians writing about it. If there is one thing that is irrevocably clear is that Stalin's betrayal closed the books on Japan's war. by the 11th, the Japanese leaders made the executive decision to surrender to the Americans in the hope that Japan won't be overrun by communism (this too is a very big topic which I won't go into). Hirohito rubber-stamped that one quickly according to the Kido Diaries.

The point of all this is that it most definitely wasn't the two Atomic blasts in Hiroshima and Nagasaki respectively that prompted the surrender of Japan. And without that bit of justification, it is impossible to argue that dropping the two atomic bombs "saved lives". Yet the myth lives on because it is harder to live with the awful likelihood that the two atomic bombs were dropped on civilian population centres for nothing but absolutely gratuitous effect. I'm sure this is why Geraldine Doogue wants to hold tightly to the myth that the two atomic bombs were meaningful in history, that they saved lives by stopping the war. Uh, sorry, but no. It just ain't true.

In a perfect world, I would want the two bombs to be meaningful in a positive way. That they are not meaningful in the way that people want it to assuage their moral egos, does not take anything away significance from the event in history.  What I will say is this; it's been 70years since. I'm willing to let it slide into history. I ask not for tears to be shed for the civilians who copped it sweet, nor for revenge or retaining the grievances. I just want us to move past the bullshit propaganda that seeks to cast the bombings in a positive light. If you really want to come to terms with the events, that's the price.

No Nuance, No Peace

All of which is to say it really got my goat. What was said by Geraldine Doogue, was deeply offensive. If you can justify civilian casualties to end the war because that saves lives, you may as well make no distinctions as to who gets killed in a war and why. It's so Orwellian it's not funny.

Let's say for the moment you can justify bombing civilians because it ends wars (Doogue's argument, not mine). That would mean we would be free to bomb as many people as long as what came after the bombing was peaceful. We wouldn't have a leg to stand on in arguing against the Hanoi bombings by Richard Nixon, which of course was as unjust as they come, but all Nixon wanted to do was end the war once and for all. The Nazis bombed London, and that would be justifiable because they too were trying to end the war (by winning the Battle of Britain). We wouldn't be able to complain about collateral damage and civilian deaths resulting from Drone strikes, or the carpet bombing of Iraq using B-52s during 'Shock & Awe'.

And if you're allowed to bomb civilians to death - because it would end the war sooner to do so - then surely killing them en masse on the ground should be fine as well. Things like the 1995 Srebrenica massacre would not be war crimes, they would just attempts to bring the end of the war closer.

It's war. There is no "alright" kind of position to take on the state-sponsored violence that is war. If Geraldine Doogue wants to justify the state-sponsored violence carried out in her favour, then she's going to have to deal with arguments that justify state-sponsored violence carried out against her side. That means she has to support the case that the Nazis were right in wiping out civilian populations the Eastern Front, or that Russian pogroms were good; or that the Killing Fields of Cambodia were somehow good because they brought about peace in Cambodia.
Clearly it's an unenlightened position to hold.

The joke of course is that Doogue probably believes some of these examples are War Crimes. In which case she's essentially arguing War Crimes are justifiable if they take place in her favour, but not at any other time. It's this kind of exceptionalism that makes me sick to the gut talking about Word War II.

Not How You Do It

Elections, Iranian Style

The country that offered up in no particular order, Ayatollah Khomeini; Mahmoud Ahmadinejad; Theocracy in the 21st Century;  the worst cuisine in the world; is undergoing elections. Of course, this being Iran, the news coming out is hilariously disjointed.

TEHRAN, Iran – Iran's interior ministry said President Mahmoud Ahmadinejad took nearly 70 percent of the early votes counted, but his pro-reform rival countered that he was the clear victor and warned of possible fraud in the election.

The dispute rose up even before polls closed early Saturday, heightening tensions across the capital where emotions have been running at a fever pitch. Mir Hossein Mousavi, the reformist candidate, suggested he might challenge the results.

The messy and tense outcome capped a long day of voting — extended for six hours to accommodate a huge turnout. It raised worries that Iran's Islamic establishment could use its vast powers to pressure backers of Mousavi.
During the voting, text messages were blocked — a key campaign tool for reformers — as well as some pro-Mousavi Web sites. Security officials warned they would not tolerate political gatherings or rallies before the final results were known.

Even before the first vote counts were released, Mousavi held a news conference to declare himself "definitely the winner" based on "all indications from all over Iran." But he gave nothing more to back up his claim and alleged widespread voting irregularities without giving specifics — suggesting he was ready to challenge the final results.

Moments after Mousavi spoke, however, Iran's state news agency reported that Ahmadinejad was the victor. The report by the Islamic Republic News Agency also gave no details.
With more than 15 million votes counted, Ahmadinejad had 67.7 percent and Mousavi had 30.3 percent, said Kamran Daneshjoo, a senior officials with the Interior Ministry, which oversees the voting.

It was not reported whether the results were from locations considered Ahmadinejad strongholds or where Mousavi hoped to make headway.

The turnout was not immediately known, but election officials had predicted a possible record among the 46.2 million eligible voters.

That's a lot of voters. It's always a bad sign when 2 candidates go to the polls and both claim victory. Reminds you of Al Gore and GWBush? Of course, this being Iran, the theocracy gets to have the final say and they will pick the Holocaust-denying Nuke-building demagogue that is Mr. Ahmadinejad.

I guess Iranian elections are much like their western counterparts, a kind of punch and judy show fronting for the industrial interests of their country.

Succession North Korean Style

Here's an interesting column about the North Korean transfer of leadership from Kim Jong-Il to his 26year old son.

On June 2, it was reported that 26-year-old Kim Jong-un, Kim Jong-il's youngest son, would succeed his father as North Korean leader, probably this fall at the end of a 150-day "struggle" period. Shortly before the "struggle" began, Pyongyang engaged in a series of provocative acts. On April 5, North Korea illegally launched a long range missile under the guise of a satellite test. On April 16, Pyongyang expelled United Nations nuclear inspectors before taking steps to begin processing uranium at the Yongbyon nuclear facility. On May 25, as the struggle period reportedly began, the North tested a nuclear weapon and test-fired three short-range, ground-to-air and ground-to-ship ballistic missiles.

This reminds us of the 70-day campaign Kim Jong-il directed in 1974 as part of his transition to senior leadership. The struggle then was economic, and it resulted in Kim Jong-il being awarded the title of Hero of the Democratic People's Republic of Korea, a glory that is likely to be seen in the younger Mr. Kim's future. The recent provocative acts are no doubt tied to the transition as a means of solidifying support for the regime among the party apparatus and giving the young Mr. Kim some needed bona fides for assuming the top post.

I think they're ripe for another parody by the South Park boys. The Axis of evil is more like the Axis of bad governments.

Here's an interesting interview with one of Kim's sons.  If you watch the video, it's amazing how much of regular dude this son of Kim appears. Very disconcerting in that he at least has probably watched 'Team America' and understood it very well.