I've been reading the Treasury modelling on the
impact of the government's carbon trading scheme - or Carbon Pollution Reduction Scheme, as they like to call it - because that's what I do.
I was about halfway through it before I spotted the appalling piece of slight-of-hand that has been used. I'll try to explain as clearly as I can, but stick with me, as it is a little complex:
The IPCC has said that the world has to stabilise its atmospheric carbon levels at around 450 parts per million to avoid potentially catastrophic consequences. I won't go into all the consequences of stabilising at higher levels - you've heard them all before. Read the IPCC report if you're interested. Just understand that anything higher than that is really, really scary.
So, the treasury has modelled four scenarios, two based on the government's proposed CPRS, and two based on Ross Garnaut's scenarios. The four models are, in the report, known as CPRS-5, CPRS-15, Garnaut-10, and Garnaut-25. Respectively, they look at stabilising carbon levels at 550ppm, 510ppm, 500ppm, and 450ppm.
So you will hear - you are already hearing - a lot from Rudd, Swan et al about how we can achieve our carbon reduction goals at little cost. And the report shows that all four scenarios are quite cheap in terms of GDP.
HERE'S THE CATCH - the CPRS scenarios use a realistic assumption, that Australia as a first world country, in accordance with the commonly understood principle of differentiated responsibility, will take on a greater role in immediately reducing its carbon emissions, allowing the developing world time to catch up.
The Garnaut model, on the other hand, assumes unified world action in 2013 to reduce emissions, with worldwide emissions eventually being assigned equally on a per capita basis. The big advantage to this model, from Australia's point of view, is that as Australia's population is likely to grow significantly in future years, our carbon reductions
as a country need not be so stringent. Unfortunately, only Garnaut is proceeding on this assumption - the rest of the world isn't. The rest of the world thinks that the developed world needs to act first to reduce emissions, and that the developing world will continue to increase its emissions in the near future as it industrializes.
Here's the point - and it's really, really significant. The unlikely Garnaut scenario is the
only model in this treasury analysis that allows for a stabilisation at 450ppm. The CPRS scenarios - the realistic scenarios - don't consider the possibility of stabilisation at 450ppm. They examine stabilisation at 510ppm and 550ppm. Presumably, it would cost too much, and the Rudd government doesn't want to deal with questions about how much it would
really cost Australia to play its part in stabilising atmospheric carbon levels at a point that is not catastrophic.
To put it as simply as I possibly can: the Rudd government has not bothered to model a realistic scenario for reducing carbon emissions in order to stabilise atmospheric carbon at an acceptable level. If they did, it would presumably show that it might actually
cost a little bit to achieve that. And they're worried the public might not like that. They don't want to get caught having to answer the question "Do you want to fuck up the planet, or would you rather have Working Families have to pay significantly more for their electricity bills?"
They didn't even model it. They didn't ask the question. They don't want to know the answer.
But you probably won't hear this anywhere else other than on this blog - the Labor party won't tell you, the Liberals won't suggest a more stringent target than Labor is advocating, and the Greens are too stupid to understand economic modelling and will just say that all the proposals are inadequate. Go read it for yourself: Section 2.2, The Scenarios and Assumptions.
ADDED: I was probably (certainly?) a little presumptuous in assuming nobody else would notice this particular deception. Marian Wilkinson in the Herald today makes
much the same points I did, and Tony Jones, god bless him, gave
Penny Wong a pretty hard going-over on Lateline last night, making the problem clear by focussing on how the proposed emissions scenarios would mean the death of the Great Barrier Reef, and trying to ask Penny if she was comfortable with that? (She evaded, naturally.) In contrast,
Kerry O'Brien's interview of Rudd last night was so dewey-eyed that even Angela Bishop would have thought it a soft interview. Instead of asking Rudd any difficult questions, he took the time to ask Rudd how he was going, handling so many tough problems - surely no human could manage it? Even Rudd seemed a little surprised, and had to scramble in his bag of cliches for a response, eventually settling on "Well, I don't know what you are recommending - a cup of tea, a bex, and a quick lie down."
A couple of days ago I had a visitor to this blog from Australian Parliament House in Canberra, searching for information on "Kevin Rudd cliches". Yes! I can't express how encouraging this is to me. This is what I love about the flat world, World 2.0, whatever you wish to call it - my little blog has the potential to reach right to where decisions are being made about this country. Even though Google shows me no love anymore at my new site. Isn't it wonderful that a rant on a tiny blog like this can be read by important decision makers? Now admittedly I had nothing particularly interesting to say on the subject other than to note my irritation at Kevin Rudd's abuses of the language, but still - I might have done. And if I had, it might have influenced somebody, somewhere.
The question immediately follows - who at Parliament House was researching this topic? I like to imagine it was Rudd himself, puzzled at the scorn heaped upon him, thinking "Why do they say I speak in cliches? I am a wonderful speaker, a wonderful writer, and let's be honest - a pretty wonderful person." Unfortunately I assume that the PM logs on through pm.gov.au. Similarly I presume that all the ministers log on through their respective departments.
Thus my attention is turned to the opposition. Malcolm is a possibility. Last week, in moving his motion censuring Rudd and Swan for their mishandling of the GFC, their stupid decision to offer an unlimited guarantee on bank deposits, their failure to consult the Reserve Bank, trying to run the economy on the basis of the 24-hour news cycle, and generally being the sort of people who probably beat their dogs in private, he took a moment to go on this detour:
The Prime Minister loves to talk about leaving no stone unturned. It might be better to say, in his case, he leaves no cliche unuttered. One of his favourite cliches today is ‘letting loose the dogs of war’.
(Hansard
here, if you can be bothered.)
However, perhaps a more likely candidate is nitwit Julie Bishop, looking for something new to plagiarise. OK, I admit it - I've developed a sneaking, guilty admiration for Turnbull. I get the impression he's trying to run to the left of Rudd, which wouldn't be difficult as there is a lot of room to the left of Rudd. And I firmly believe that if you got them alone at a dinner party, you'd find that in truth small "l" liberal Malcolm Turnbull actually
is to the left of Christian, socially conservative Rudd (consider their respective responses to the Bill Henson affair, for instance.) However the chances of him succeeding in taking the Liberal Party to the left of Rudd's government is probably pretty slim, with creeps like Abott and dimwits like Julie Bishop on his front bench.
To get back to Julie Bishop for a moment. I have to hand it to her for the most
unusual defence of plagiarism I have heard. "I didn't plagiarise it because I didn't really write it - my staff did, I just put my name on it." How is this any better? Isn't this more-or-less just saying "I plagiarised the whole thing"?
But apparently it's OK, because it no other federal Liberal politician - other than Abbott -
bothered to write their contributions themselves, either. They say there's no such thing as bad publicity, but I'd think in the case of this dreadful-seeming book, it's clear that there is.
I thought Turnbull was being hyperbolic yesterday when he accused Rudd et. al of operating out of Chairman Mao's
Little Red Book. Apparently not:
Senator Conroy has since last year's election victory remained tight-lipped on the specifics of his $44.2 million policy but, grilled by a Senate Estimates committee this week, he said the Government was looking at forcing ISPs to implement a two-tiered filtering system.
The first tier, which internet users would not be able to opt out of, would block all "illegal material". Senator Conroy has previously said Australians would be able to opt out of any filters to obtain "uncensored access to the internet".
(My emphasis). From the SMH,
here.
I don't know what to say.
When I was a kid I went through a period of building non-metaphorical houses of cards. It is one of those tasks that are appealing precisely because they are frustrating; collapse was inevitable.
This puts me in a position to note something about houses of cards: contrary to the stereotype, they don't usually collapse all at once. Instead, they collapse in sections; you try to rebuild on a weakened structure, but it, too, collapses, and eventually you become frustrated and knock it over yourself.
That's about all I want to say on the GFC for the moment. The drama seems to have receded. The possibility of a Depression is exciting to me; ironically, recessions are merely depressing. I don't have much faith in the "solution" that has been arrived at; it defies belief to me that you can solve problems associated with bubbles caused by excessively low interest rates and borrowed money by lowering interest rates and injecting further liquidity into the system. That's how we got here in the first place, isn't it? I'm not sure how clever all these government guarantees will look if more banks fail. But the immediate danger seems to have passed, and now, in Australia at least, the big debate is over whether the government should have provide an unlimited guarantee on bank deposits, or a capped one. I was going to write about this, and the mystery of whether or not the Reserve Bank had reservations on the government's proposed policy, but I got bored just thinking about it.
And I feel I need to rethink what I'm doing on this blog. So far, it hasn't gone how I had hoped it would. Writing an exclusively political blog doesn't seem to sit well with me. I find that my ideas, which in my head seem to cut penetratingly through to the core of issues, become when written down something far more mundane: just another person's opinion, not neccessarily ill-informed or wrong, but not particularly worthy or important, either. To the extent that my ideas are interesting, I think it is only because they are my own ideas. The personal, again: it seems unavoidable, and in trying to avoid it I just end up writing a very dull blog. So I'm going to try to rethink this and see what else I can come up with. I do want to do this blog again. At least I think I do, but I don't think I want to do it like this.
More when I have a better conception of what I want this to be.
In my previous post I documented Kevin Rudd's overuse of cliches. One I mentioned was "global financial crisis", which
Dan defended as a useful formulation.
Well, when he's not commiting travesties upon the language through his overuse of cliches, Rudd likes to do it via bureaucratic jargon and acronyms. Thus it is with a mixture of glee and horror that I link to this article from the Australian, which reports that, behind the scenes, Rudd has
taken to referring to it as the GFC.
The article also points out the more serious problems with Rudd's response: his refusal to release key information justifying his actions, his attempts to portray the Opposition's reasonable requests for this information as somehow traitorous, and his desperate need to one-up all of Turnbull's suggestions. I really hope Gillard rolls this buffoon before too much longer.
I can't take it anymore! Please, Kevin, hire a speechwriter! You think you can write. Lots of people have this delusion about themselves.
Your writing is terrible.Here is the goddawful cliche-ridden conclusion to last night's address to the nation. I've italicised what I think are cliches. Just the cliches; not the drab bureaucratic language, nor the mixed metaphors, like his interesting image of people's fears being fed by a stream. Or sentences that are just terrible, like: "And we’ll build on it soon with the Government’s nation building agenda, to build the infrastructure Australia needs for the future." Whoa! Can you fit
build in there one more time, Kevin?
Nonetheless, as Prime Minister, I was not prepared to stand idly by while people’s fears here were being fed by the stream of bad economic news from abroad.
That’s why the Government took decisive action on Sunday to guarantee all depositors and all deposits in all Australian banks, building societies and credit unions, for the next three years.
My first responsibility as Prime Minister is to take whatever action is necessary to maintain the stability of Australia’s financial system.
And I will continue to exercise that responsibility.
In the last few weeks, the global financial crisis has moved into a new and dangerous stage.
And that is its effect on the real economy, on growth and jobs, around the world and here in Australia.
Growth will slow, and unemployment will rise. That’s why the Government today announced this $10.4 billion Economic Security Strategy to support continued positive growth in the national economy, and to provide practical help to households as well.
This strategy is designed to help pensioners, carers and families, and first home buyers.
The Government believes in long term planning. That’s why we set aside a $22 billion surplus earlier this year in the Budget, as a buffer against tough times.
Those tough times have now arrived.
And that’s why we’ve decided to take decisive action today with this Economic Security Strategy. And we’ll build on it soon with the Government’s nation building agenda, to build the infrastructure Australia needs for the future.
History tells us that when the economy slows, responsible governments step in to strengthen growth. And that is what we have done by using the surplus.
As Prime Minister, it is my job to level with the Australian people. I don’t intend to gild the lily. There will be tough times ahead.
But the Government remains determined to take whatever action is necessary in the future to steer the economy through this global financial crisis.
And I have absolute confidence that as a nation, we will get through these tough times together.
If Kevin Rudd
really wanted to
get the economy moving by handing out free money in time for Christmas, he probably shouldn't have given it to the sainted "working families". They're just going to pay down their credit cards. He should have given it to students and the unemployed.
They would spend it. They would spend it straightaway! On really kickass parties!
Instead, what he is doing is what John Howard loved to do - back when the working families were known as "battlers" - buying the votes of those ring suburb know-nothings who perennially make up the swing vote in our nation of compulsory voting. And being typically sanctimonious about it. There is an infinite number of ways to stimulate an economy, if you've got the money to spend. There's no reason he
had to give it to the fucking working families, yet again.
As usual, there is nothing for low-income singles like your humble narrator. Why can't I - just once - get free money from the government? I hope all those working families and pensioners spend their Christmas bonuses on used books, because my orders have tanked, and so has the Aussie dollar, and I'm supposed to be going overseas next year... maybe I should adopt?
Sorry to anybody who is bored by my relentless economics-themed posts, but this is the most batshit-crazy world event I can remember in my lifetime, and I'm sticking with it for the moment.
It's Sunday afternoon here and who knows what craziness will happen in the next week? Tomorrow, Australian and Asian markets will be the first to react to the weekend's main event, which is basically the developed world agreeing to bail out its entire banking system. Who would have thought Gordon Brown would be the man of the hour? Will it work, or will we walk off a cliff? What happens when the next BIG SHOCK COLLAPSE happens? And what will be the next shock collapse - more banks, insurance companies? More countries, like Iceland? The Guardian is talking about
utilities going broke. That's a scary thought.
For me, the Guardian has had the best coverage, particularly during this last few days when Britain has been at the centre of developments. I really enjoyed this article about
how the coming recession will affect Gen Y. Ah, Gen Y. Little shits.
For the past couple of months, whenever I've heard some financial pundit asked about the possibilities of another depression, they have tended to give a chuckle and say words to the effect, "No, no, no - I think that very unlikely. We know so much more now about how economies work. They made such mistakes in the depression - we know better now."
But there's a reason why they call economics "the dismal science". It's worth remembering that in the Depression, too, they believed they had capitalism pretty much worked out. They were wrong. They always turn out to be wrong, eventually. In the seventies, they were sure that you couldn't have recession and inflation at the same time... whoops. World, meet stagflation.
Since then the consensus has been that Reserve Banks should smooth out economic cycles with the tool of interest rates - increase them to cool things off when the economy is overheating, decrease them to stimulate the economy. And that governments should increase their spending in downturns, by borrowing and deficit spending if neccessary, and curtail its spending in upswings. And that - so goes the theory - is why we don't have depressions anymore. The cycle can be smoothed out with interest rates. We can stimulate when it starts to look bad.
But... I can't help but wonder if the goal of "continuous economic growth" is really achievable. Over the past ten years, the United States has faced increased competition from the likes of China and India, and while this grows the global economy, I can't help but wonder if the US economy, when separated from the artificial growth of low interest rates, has truly been increasing very much over that time period.
What we've seen in the US is very, very low interest rates - constant stimulation to the economy - ever since Greenspan's time. Whenever anything has gone wrong - the economy tanking under Bush Snr, the dot com bubble bursting, September 11, and in the current crisis - they just cut interest rates, squeezing a bit more bubble and boom out of an economy that in truth was going nowhere.
The problem is that you can't keep cutting interest rates forever. Eventually, you run up against the ultimate wall of 0% rates. You can't keep stimulating forever, and particularly not with borrowed money, although the US seems prepared to try.
What has been forgotten, I think, is that a loan is in essence a bet, at very short odds. You are betting that you will be paid back. When the interest rate is very low, you are saying "it is very, very likely that I will be paid back." If the true risk is greater than what you are making from the interest, then you are going to lose your money, eventually, as surely as a gambler will eventually go broke trying to beat the house in the casino.
The US has been pumping out cheap money to banks, at interest rates that didn't represent the real chance of default. The banks have thus been able to pass that money out into the wider financial sector, again at rates that didn't reflect the real risk. The result? A long period of artificial "growth" that ultimately fails to reflect the underlying economic capabilities of the US - and possibly the rest of the developed world. The world's money flowing to sovereign wealth funds in China and the Middle-East, as Western countries borrowed to finance their booms (thankfully Australia is an exception to this, having genuinely done well out of the truly booming, developing economies through mining exports.)
Eventually, though, real world returns can't support the loans. It starts collapsing and defaulting back through the system, arriving inevitably at the Reserve Banks that shouldn't have lent money at those prices in the first place. In truth what they were doing was simply making bad bets with taxpayers' money.
My conclusions from this?
1. Everybody piling into US Treasuries is madness. Given the amount of debt the US has, and the pathetically low interest rates offered by US Treasuries, the risk to return ratio surely makes this a bad bet. The US is going to have to print money to pay off its debt - or increase taxes - or steal some other country's natural resources. I don't see how the US economy can grow its way out of this problem.
2. Following from this, I think a collapse in the value of the US dollar could happen very soon. Days or weeks. (You heard it here first).
3. The idea of governments giving boosts to their economies through the cutting of interest rates is going to come in for some scrutiny and re-evaluation soon. My feeling is that it creates unsustainable, false growth, if it becomes divorced from the true risk inherent in the loans. Central banks will have to start assessing whether the risks involved in such loans justify low interest rates, or if it is in fact better to let the economy slow, or even recede, than make potentially bad loans that lead to bubble economies.
4. Expect the world's power-centre to shift in the next few years increasingly towards China, Russia and India, in that order.
5. A really, really wild prediction: the Dow peaked for all time one year ago
at 14,168. It will never again get so high. (Today, it's 9,258.)
The $700 billion bailout was forgotten almost immediately. Banks are falling over on a daily basis. European leaders are saying, "Fuck you, mate. I'm worrying about my own problems." There's now an almost daily stimulus-shock being administered somewhere, which gives a tiny bounce, then it all starts tumbling again. The RBA slashes rates by 1%, and the whole world takes notice and gets excited. You know it's crazy when the world gives a crap about what is happening in the Australian economy.
Iceland is basically bankrupt - its banking system was so overgrown compared to its population that when the time for bailouts came, Iceland didn't have the money. This makes me wonder what is happening in those tax-shelter countries like Lichtenstein - surely some of those dodgy banks are in trouble? Who is going to bail them out?
Japan's stockmarket has tanked. They are talking about "long and hard" recessions in Britain and Ireland. Analysts on the news are mentioning the word depression - and acknowledging it as a possibility.
That's without even mentioning the US. I wrote this in a comment on
Dan's blog:This is America's unexpected result of globalisation. If you no longer have the best resources, workforce, and political system in the world, you can't continue to occupy that position of world dominance on credit. In this way the US is no different to a consumer who buys big screen TVs on 12-month interest free terms, then has difficulty paying for them.
America's best hope would be to use its military might while it still can and go liberate some oil fields around the world, and maybe some gold mines as well, and dare the world to do something about it. Not that I'm calling for that, but it will be interesting the see what the US does when its back is against the wall and it faces its fall from global pre-eminence.
This ludicrous idea that America can continue to fund its world domination on credit is bound for a reckoning sooner or later. There's just something fundamentally wrong with the idea of the US government buying credit at no-risk rates, then using that money to invest in dodgy financial institutions and instruments. Not to mention all the other US funding obligations such as the Iraq war and Soocial Security, which they don't know how to pay for. Where is the money going to come from, in the end?
I know some people think this is all just stuff in the Business section, but it's not. It's looking increasingly like something close to a World War in terms of its consequence for the world.
And I've moved from "how exciting it is to be learning about economics at such an interesting time! And fun to watch America get its comeuppance!" to "woah, this is fucking scary."
Meanwhile the Australian dollar has dropped from .98 to .68 in a couple of months, so I've spent much of yesterday and today fiddling with the prices of my books, which are now all out of whack. And my overseas trip next year is looking a lot more expensive - hopefully this hoarding of the greenback will be over by then. (On the plus side, I'm cashing out the US dollar balance of my PayPal account, at some pretty sweet conversion rates.) So I don't know about Main Street, but it's definitely having an effect on Missenden.
Worker Poster is now available again. I love how this font, which I knocked together really quickly about five years ago to make a heading for this blog, gets used by people. Check out this
excellent use of it in a vodka ad:
The ad makes more sense when seen in a mirror:
Images from
here, where the ad is discussed.
As usual, people complain that it's not "real" Cyrillic. It's not meant to be! It's a post-modern pastiche, which is another way of saying I don't read Cyrillic.
This article from the Wall Street Journal explains how, since the phase-out of cigarettes in prisons,
pouches of mackerel have become the de facto currency.
I see a few problems with mackerel as a unit of currency. The most obvious, as discussed in the article, is that mackerel bulks a lot. It seems prisoners' lockers are starting to overflow with mackerel.
Another problem, I would think, would be inflation. According to the article, one of the reasons that prisoners like the mackerel as currency is that a pouch costs approximately one US dollar. Thus the currency is pegged against the greenback. But, as the article also mentions, nobody likes mackerel: "few - other than weightlifters craving protein - want to eat it." The result of this would be that over time, the supply of mackerel in a prison would increase, causing inflation. The Mack would come to be valued at a discount to the greenback.
However, this inflation would not continue indefinitely, and prisoners would not end up hauling around mackerel by wheelbarrows. Eventually, Macks would fall to a point where it would be more rational for an inmate to eat his mackerel than to store it for future use as currency. Also, whatever the real value of the Mack, its nominal value would remain $1. That is the price at which prisoners would still have to purchase new Macks from the prison canteen. The subsequent disincentive to buy new Macks would thus help to control the money supply.
The next logical step would be a move to the Mackerel Standard. An enterprising prisoner - presumably one who already has power and prestige within the prison system - could set himself up as a bank. He could take deposits, and issue scrip to the effect that this piece of paper was equivalent to X Macks. He could then put his mackerel to work, probably in some sort of loan-sharking business.
There are some problems with this. One is that the bank would then start to accumulate mackerel pouches. Even with re-lending the money, the profits - in the form of bulky mackerel - would be difficult to handle. The banker, after all, cannot deposit his massive amounts of mackerel in an underground vault, and is constantly at risk of having his mackerel confiscated. No doubt some of the profits would be put back into the economy - as payment for thugs, etc - and some would be re-lent. However the banker would then be vulnerable to runs on his bank, as he would be unable to keep a sufficient supply of mackerels available to cover a run.
The solution here would be for the banker to make an arrangement with the prison canteen. The banker could exchange his mackerels for cash at a discount, and the canteen officer could then re-sell the pouches back to the inmates, thus making a profit. In return, the canteen officer would guarantee to supply the banker with mackerel in the event of a run.
Thus the canteen officer would become a Reserve Bank, the problem of bulky piles of mackerel would disappear, and scrip in the form of paper Macks would supplant actual mackerel pouches as the prison's currency.
That's my thinking, anyway. Of course the article says that due to an increase in the cost of mackerel, the value of the Mack is surging against the dollar. So what would I know?
(Written before the overwhelming weight of media opinion distorts my perceptions)
1. Palin has a watchable quality; Biden doesn't.
2. Palin is like Reagan: charming, folksy in delivery, charismatic, at their best when delivering the words of others.
3. You can almost hear a click when Palin switches from pre-prepared answers to spontaneous formulations, which tend to the incoherent. In this mode she also has a reluctance to put a full-stop on a sentence, which is responsible for some of their rambling quality.
4. Her manner of speaking suggests to me that she doesn't have a very good ability to mentally work through the arguments of an issue.
5. The qualities that make Palin watchable don't qualify her for the presidency. However, like Reagan, she would be a good mouthpiece for idealogues. One senses that advisors could bring her to any position they wanted. George W, while a puppet, never had Palin and Reagan's abilities to sell a message.
5. If McCain wins and drops dead after one year, could we then have a further two full terms from Palin in addition to her finishing McCain's term? Dan?
6. I imagine that a narrow win will be given to Palin, mostly on the grounds of personal style.
