From Authority, With Love

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–First off, yesterday’s DR finished with the promise that today’s would be about the Reserve Bank of Australia…its history…its mandate…and its similarities and differences to the U.S. Federal Reserve. It will have to wait until next week.

–The more we read yesterday, the more we realised it would take more than the usual superficial treatment we give such subjects in the Daily Reckoning. And with today’s announcement that the Board will have two new directors, there is more grist for the mill. But don’t worry! It’s too important a story not to be told, so we’ll keep working on it.

–It’s worth working on because the story contains the answers to some key investment questions…like what happens to the Aussie dollar in a U.S. dollar crash…what happens to Aussie interest rates next…and whether the RBA can or would print money like the Fed if (when) Australia has its next financial crisis.

–In the meantime, we’re going to ignore all the price action in the market and focus on two other stories; the banking sector’s denial of financial reality and Ross Garnaut’s academic understanding of innovation and knowledge. We’ll begin with the banks.

–The global banking sector—Australia included—is generally in a state of denial about the future. Major banking reforms (Basel III) came out of the last crisis to prevent the same problem from happening again. The main problem was too much leverage. Banks built huge pyramids of assets on a tiny little base of liquid capital. When asset values fell quickly, capital was wiped out and had to be replaced (either by private investors or mostly by the government and central banks).

–What compounded the problem is that bank’s financed long-term lending (expansion of assets on the balance sheet) with short-term borrowing (expansion of liabilities). But while the assets and the liabilities might be matched in terms of size, they weren’t matched in terms of duration.

–Without getting too technical, the “duration gap” is a measure of the risk associated with having mismatched liabilities and assets. That risk is mostly from interest rates. For example, if you’ve borrowed short and lent long and interest rates rise, it means your borrowing costs go up right away while the value of your long-term assets goes down (interest rates tending to rise with inflation).

–Double plus un-good.

–Of course the main problem is that in the last 30 years banking has become an incredibly profitable business, especially for the men who run the banks. Expanding the balance sheet (more loans) is the way to grow earnings. And most bank managers seemed happy to do this in the credit boom, especially since the global cost of capital was absurdly (and artifically) cheap and all asset markets everywhere were going up.

–No one (except Dr. Kurt Richebacher) seemed to recognise it as a worldwide credit-fuelled asset bubble. And when banks finally realised what had really happened (what they in part created), they were caught with falling assets and an urgent need to raise new capital. Which brings us to today.

–Europe’s banks alone will have to raise as much as $3.2 trillion in order to meet the new liquidity requirements of the Basel III bank regulations. “Basel III, due to be implemented in 2019, proposes requiring banks to hold enough cash or liquid assets to meet liabilities for a year,” Bloomberg reports. “The aim is to wean banks off the short-term funding from other lenders that dried up during the crisis and sent Lehman Brothers Holding Inc. into bankruptcy.”

–You wouldn’t expect banks to like any kind of rule that limits their profitability. But that’s where all this, if left unchanged, is headed. Another set of regulations—the European Union’s Solvency II regulations (which are due to come into effect in two years)—would make it more difficult for insurance companies to buy long-term bank debt. Banks would be unable t match long-term loans with long-term bonds.

–Simon Willis from Daniel Stewart Securities Plc. in London says if banks can’t sell corporate bonds to insurers, they will have to borrow more from other banks, increase their deposit base to use as a source of funding, or, horror of horrors, lend less. An increased cost of funds eats into profits. And lower lending levels definitely eat into profits. It is hard to build your art collection with lower profits.

–It’s no wonder Australian banks (and the Treasury) are resisting the G-20’s push to label Australia’s big four banks as “too big to fail.” This would require them to hold even more capital than already proposed. The Aussie banks assure us they are well-regulated and not at risk of causing a systemic crisis because they have lent prudently and have plenty of liquid capital. Got that?

–There are two forces at work here, then. One is the banks, who really want to go back to the good old days when they could borrow freely and loan liberally and not be constrained by capital and liquidity requirements. The other force is regulatory, which sees unlimited bank balance sheet growth (and low interest rates) as the sort of thing that can blow up a global economy (not desirable).

–What does any of this have to do with covered bonds? Funny you ask! That question came up yesterday over a beer with a friend. The conversation went something like this…

–“Come on, Dan. You’re not seriously arguing that an Australian bank is going to fail if the housing market crashes…and that the RBA is going to have to print money so the government can bail out depositors…are you? I mean, covered bonds wouldn’t cause all that, would they?”

–“No, that wasn’t my point.”

–“Well you should make your point, because it wasn’t very clear.”

–“Okay. My point was that Australia’s financial system looks a lot like all the other ones that got into trouble. Introducing loan guarantees…buying up residential mortgage-backed securities…allowing for covered bonds…and introducing the Financial Claims Scheme…all of it manages to accomplish one major result.”

–“Which is?”

–“Australian banks offload all of the risk from bad lending decisions to the taxpayer, via the government. The banks have every incentive to maximise profit because all the losses are going to be backstopped by the government. This isn’t capitalism at all. It’s what I called it yesterday, The Great Australian Bank Robbery, only the banks are robbing the people by forcing a set of regulatory changes that shift the risks on to the public.”

–“Oh. Well, you act like it’s a bad thing that banks are trying to find a way to funnel more money to the housing market. A lot of Australians own houses. The government and the banks should support the housing market or else a lot of people might lose a lot of money.”

–“That’s not capitalism either. That’s organised asset price inflation. And it’s just inflation. It’s not real wealth. Increasing a nation’s productive capacity (its capital stock) through investment produces real wealth. Trading houses between one another at higher and higher prices using more and more borrowed money is not wealth creation. It’s gambling. And it’s going to blow up.”

–“You’re such a buzz kill.”

–Apparently we are also a hatchet man, at least according to one reader:

Dan Denning

Your little hatchet job on Garnaut was truly disgusting.  A funny little lit wonk writing an investment blog has the arrogance to make fun of all reputable scientific advice and its mouthpiece, in this case, Garnaut.  The American believer in you is capable of believing anything that comes to mind, and in this blog you don’t even have to justify yourself.  I suppose you think the banning of CFCs to reverse the man made destruction of ozone in the atmosphere was also a plot by the ratbag scientists.  Where will all this lead?  Your article was a good example of pithy American believer nutterism.  You are now on my ignore list.

Ross Flutter

–Well Ross, at least you got one thing right. Garnaut, as the government’s climate adviser, is little more than a mouthpiece for a predetermined position, and is probably being compensated for his efforts. His job is to produce a credible sounding and authoritative looking report that supports the government’s position, preferably filled with a lot of impressive jargon, bullet points, charts, and footnotes.

–But if you’re still reading, you should go back and read what we said again. Our criticism of Garnaut was that being an economist doesn’t make one a climate change expert. This is nothing more than an argument from authority, which is a tried-and-true logical fallacy. As an American nutter, our view is that authority can stick it in its ear.

–Being a doctor doesn’t make Garnaut right. Being in the majority doesn’t make him right. What would make him right is if he had a winning argument. If he wants to win the argument about climate change, he should stop treating the Australian public like a bunch of ignorant children who need to be told what to do.

–Yet this is what he said recently, according to the ABC:

There’s no doubt that there is a battle, an awful battle between ignorance and knowledge going on. It’s a great contest between the academies of sciences of Australia … the academies of science of all of the countries of scientific achievement on the one side, and the shock jocks of Australia on the other. We’ve had these battles before in the history of our civilisation. This battle will have quite a lot to do with the future prosperity of Australia, the future quality of our civilisation.

–Can’t you just smell the condescension in that statement? This is an indirect way of saying, “Don’t argue with me because I’m smart,” or its corollary, “You should shut up because you’re stupid.”

–But have a look at the key points in Garnaut’s latest update (number 8!) to his 2008 climate change report. This update is about nothing less than “Transforming the electricity sector.” In this report, Garnaut concludes that, “the introduction of a carbon price is highly unlikely to threaten physical energy security.” In other words, he’s saying it won’t put coal companies out of business. That’s disputable (although many would find it desirable), but he adds this bit:

Nevertheless, it may be prudent to implement cost effective policy measures to assuage concerns about energy security and to improve the regulatory functions of the energy market. These measures include

    • The introduction of an Energy Security Council to implement measures to counter energy market instability regardless of the source; and
    • The judicious provision of loan guarantees to high-emissions generators through the transition to carbon pricing.

–Did you get that? He doesn’t think his reforms will put the power industry out of business. Why? Because he’s going to form a committee with new powers to, you know, do things…and then have the government back-stop loans to keep newly unprofitable power companies from going out of business, if necessarry.

–Hmm. It seems like it would be easier to not introduce ‘reforms’ that could put Australia’s power companies out of business. But that would not be transformative. And the ultimate goal of the central planner and bureaucrat is to transform the nature of free markets so that everything flows through an elite bureaucracy of technocrats, of which Garnaut happens to be a high priest.

–But you have to give him credit. He does have faith. And strangely, he seems to have a lot of faith in the private sector to spontaneously generate technological improvements in response to a new carbon price introduced by the public sector. He says, “We need a lot of technological change, fast,” as if it’s like ordering, saying, a lot of fried chicken when you’re hungry.

–This seems like a fairly academic (and unrealistic) understanding of innovation; a kind of “just in time” technology change which eliminates all the negative effects of your policy change. What’s worse, Garnaut thinks that spending more money will magically produce the innovation required. Of course it’s government money (your money). He writes that:

One potential driver of accelerated technological development in low-emissions technology is the recent increase in public investment in innovation following the Great Crash of 2008. The injection of substantial ‘green’ stimulus spending by governments within stimulus packages following the Great Crash reversed the 35-year decline in real terms in low-emissions energy research, development and demonstration (IEA 2010) and raises the prospect of significant breakthroughs. This may extend beyond breakthroughs in learning by doing to shifts in technological processes or shifts in the production function.

–Translation, “Garble garble blah blah blah. Spend more public money on innovation and you’ll get the breakthroughs you need to make your policy workable or mitigate its wealth-destroying effects.  Garble garble blah blah blah.”

–It’s important to point out that we’re not making an ad hominem attack on Garnaut the man. We’re merely raising two important points about how bad his ideas are. First, Garnaut has been selected as the point man on climate change to give credibility and authority to a report on a policy the government has already selected. There’s nothing objective about his ‘expert’ opinion.

–You might think of this as an argument, “From authority, with love.” He seems likable enough. And he is a doctor. He’s just the sort of guy to give covering fire to a government eager for more revenue and power over private and public life.  But likable or not, the argument is from authority and for authority. And that should not be the basis of changing the cost of energy and the whole structure of production in the Australian economy.

–Our second important point is that Garnaut doesn’t know as much as he thinks he does. Neither do we. Neither do you. He’s only human in this regard. But perhaps he doesn’t recognise it. A bit of self-knowledge (and modesty) wouldn’t go amiss (yes , we aspire to this modesty as well).

–Specifically, he’s making the text-book economic mistake made by central planners and government bureaucrats. Like most people with a great faith in planning, he’s confident that his knowledge is complete and superior. But total knowledge in a complex and dynamic system is never possible. Friederich Hayek makes this point in his essay, The Use of Knowledge in Society (emphasis added is ours):

The peculiar character of the problem of a rational economic order is determined precisely by the fact that the knowledge of the circumstances of which we must make use never exists in concentrated or integrated form but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess. The economic problem of society is thus not merely a problem of how to allocate “given” resources—if “given” is taken to mean given to a single mind which deliberately solves the problem set by these “data.” It is rather a problem of how to secure the best use of resources known to any of the members of society, for ends whose relative importance only these individuals know. Or, to put it briefly, it is a problem of the utilization of knowledge which is not given to anyone in its totality.

–Hayek’s point, admittedly, is about planning in general, and prices. But the point remains: Garnaut is bulldozing through the climate change debate with pages and pages of predictions and prescriptions without complete knowledge of a) whether carbon dioxide is a pollutant, b) whether human beings are causing global warming, c) how the climate even changes over the long term.

–That is a lot of known unknowns. And it’s a lot of ambiguity to sweep under the rug as you make even more sweeping changes to Australia’s economy. But maybe we should just take his word for it and hope for the best. After all, with the government and a bunch of economists and academics in charge of the economy, what could possibly go wrong? You should shut up and do what you’re told.

Dan Denning
For Daily Reckoning Australia

Dan Denning
Dan Denning examines the geopolitical and economic events that can affect your investments domestically. He raises the questions you need to answer, in order to survive financially in these turbulent times.
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43 Comments on "From Authority, With Love"

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Walter Starck
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J Green
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Hi Dan i liked the article, I would be interested to hear your point of view on the case that has been made on climate change initiaitives that the financial risk of acting to cut emissions when it is not necessary is less than the financial risk of not acting when it is (and facing significant climate problems). By extension the carbon tax (or any serious sounding Australian initiaitive) whilst effectively meaningless in the context of global emissions might contribute to sway internatioal convention towards meaningful abatement and hence risk reduction.

brc
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It’s worse than this: “he’s confident that his knowledge is complete and superior” He, and his fellow propagandist Tim Flannery, readily admit there are a lot of unknowns. When asked how much the tax will cost, Garnaut says he can’t answer. When asked how many degrees of warming will be averted, he shrugs and says it’s impossible to calculate (which is patently false, given all the projections are based on computer models taking atmospheric co2 as an input). They freely say they don’t know how much it will cost, and by how many degrees or warming (or co2 parts per… Read more »
trested
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Great article Dan

and a very good commentary by brc.

where are you Joe? This is going to cost the community big time .. it seems to me that all it is doing is shuffling the chairs on the Titanic. Take from the power companies who charge the consumer some of whom get reimbursed by a tax cut from some of the revenue from the tax on the power companies. AND Gamaut and Flannery ($180,000 for a part time chairmans role) will become R I C H !!

Good Government
Good God!!

SailDog
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There is overwhelming consensus in scientific circles that the climate is changing and that the cause is anthropogenic. Having studied climate science as part of a Masters degree I agree and am on the side of science. There are a great many people who do not agree though; and as the article points out, the main difference is knowledge. I would suggest that politics is as important and if ones view of the world is that a laissez-faire free market approach is best (as I do) then one is far more likely to oppose the science of climate change. The… Read more »
Joe
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Great article. Except that it (like of all Dans articles) fails to remedy one issue, both major Australian parties are going to “act” on climate change. So, the real question is not “whether human beings are causing global warming”, but given both parties are going to act, which form of action is most beneficial. Beneficial in this sense relates to both the reduction of CO2 and to my hip pocket. The Liberals direct action approach fails in that “it is a problem of the utilization of knowledge which is not given to anyone in its totality”. Taking money (taxes) from… Read more »
brc
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@Joe “It’ll actually work.” Please tell us by how many PPM of CO2 in the atmosphere this tax will change. You can assume no major emitters changing their current policies and a carbon price of $30/tonne, and a target of 5% cuts by 2020. The only place it will work is in the minds of policy dreamers and undergraduates newly familiar with economic theory. You admit this yourself by saying it is a beautiful plan, but flawed because it will be implemented by humans. In your mind a HAL supercomputer would be the best way to implement a plan –… Read more »
MartyNZ
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I have to take SailDog to task over his comments. There is absolutely NO CONSENSUS among scientists about climate change. In fact, they cannot even agree on how to measure ‘Greenhouse Gas’. Exhibit a: “” There is no dispute at all about the fact that even if punctiliously observed, (the Kyoto Protocol) would have an imperceptible effect on future temperatures — one-twentieth of a degree by 2050. ” Dr. S. Fred Singer, atmospheric physicist Professor Emeritus of Environmental Sciences at the University of Virginia, and former director of the US Weather Satellite Service; in a Sept. 10, 2001 Letter to… Read more »
joe
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@brc You’re right the only true free market response would be to do nothing, and then “if” global warming were true and sea levels rose, etc, then entrepreneurs would spring up and take advantage of that some how. Agreed. So, I don’t scoff at the ‘hope for the best’ plan. But you can’t disagree that a carbon tax is more market “based” than the Liberal policy. Especially, if all the revenue raised were used to reduce income taxes, personal and corporate. We don’t have a free market in this country anyway, and if the carbon tax were revenue neutral then… Read more »
brc
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No, my question is not difficult to answer. That is a complete cop-out. The desire of the tax is to cut emissions by 5% by 2020. Therefore, if the tax works, emissions will be cut by 2020. If Australias emissions are cut by 2020, and all other countries currently stay on the course they are on, then the calculations are quite possible. The fact is the answers reveal the truth about the tax – it is a useless ‘feelgood’ policy designed to do nothing. If you are genuinely concerned about global warming then you should reject the tax. If you… Read more »
joe
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Your real argument is not that it won’t reach its stated aims but, “why bother stopping at a 5% reduction”? We need to go for 70 or 80% you reckon? Or is it, “we’re such a small country, we don’t matter”? There’s some sort of circular defeatest logic in there, why bother having a military? Why bother doing anything? Who knows something to do with the human psyche I presume. There’s probably lot’s of reasons on both sides of that, but again both parties ARE going to ACT, so which one, a. works best and b. is most cost effective?… Read more »
Pete
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Joe your carbon tax worst case scenario is far too rosy.

How about taxing the economy so much it is brought to its knees, and the whole country suffers a debt-laden recession/depression as foreign investors leave and our dollar plummets?

This is at least the third tax we’ve been introduced to in the last 12 months. Not a good thing.

Pete
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And if you like simple, try this. CO2 is ommitted from productivity. From energy use. Taxing productivity even more, and giving money to people as a tax break, only empowers the workers themselves, not the companies that they work for. Tax the companies, give the money to the workers (and bludgers). It’s not a recipe for ‘economic’ success. But, if you don’t give a crap about the economy at all, then yes, this regulated, semi-communist approach of taxing CO2 emmissions will encourage alternate energy use. So you are right there. It just seems that you have no idea about the… Read more »
Ned S
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An apology to Biker for calling him and me a pair of poofs might be in order Pete? Given all the crap he’s copped from so many parties over the years. Though no need to apologise to me as I’m a bit indifferent to copping a bit of crap now.

Stillgotshoeson
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Comment by Ned S on 31 March 2011:

An apology to Biker……….Given all the crap he’s copped from so many parties over the years.

All of it deserved…

Ned S
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“All of it deserved…”

I disagree on that Shoes.

Stillgotshoeson
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Comment by Ned S on 1 April 2011:

“All of it deserved…”

I disagree on that Shoes.

As is your right,,,,,,,,

Maybe “All” is a bit harsh, however “most” is definitely warranted…

Stillgotshoeson
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Biker Pete
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Ahh, Shoes, Shoes.. . Harsh?!~ :D Surely not the fella who cursed me with: 1.) A slow painful death through Liver Cancer; 2.) Prostate Cancer, pissing blood; 3.) Broken neck through motorcycle accident; 4.) Total incapacitation, spoon-fed and arse-wiped by missus…? And we both recall _exactly_ why you cursed me, don’t we?!* ;) I expect no apologies from _anyone_, Ned. Everyone here is hoping to learn something to his and her advantage; to fly a theory or two in a forum in which little quarter is taken or given. It would be extremely foolish to think that we won’t come… Read more »
Ned S
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I’ve got a bit more history on it than a lot I suspect Shoes? Having seen Biker and a couple of other parties who’ll know I mean them if they read this, chat about house prices elsewhere (with me throwing in my threepence worth as a bit of a johnny come lately regardless). Then also seeing some really strange stuff pan out on this site immediately prior/around the time of you first appearing. (Where in at least one instance I felt to back Biker on purely moral grounds but didn’t as I thought his protagonist might have had a lot… Read more »
Ned S
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“I expect no apologies from _anyone_, Ned.” – Never crossed my mind for a moment that you would Biker. But certainly thought it was appropriate to point out that such might be ‘good form’ – In this particular case.

Cheers mate! :)

Biker Pete
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It’s all academic, Ned. One can never be sure ‘The Plan’ will work as well as one hoped. We’ve exceeded our hopes, indeed our dreams. I’m retired, healthy, fit and financially ‘comfortable’ (and comfortable with that euphemism! ;) ) I’ve never been influenced by a pessimistic critic or an Irish Mobsta, but I’ve learned a great deal from a number of kind contributors whose views differed from mine, but offered constructive advice opposed to my views; yourself included. Much of my time will now be spent writing the family history and travelling. At the gym a lot these daze, so… Read more »
Ned S
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“Much of my time will now be spent writing the family history and travelling” – Struggle a bit to see you ‘riding off’ into the sunset of your ‘dotage’ never feeling inclined to contribute further Biker? :D

But either way it’s good to see a worker break himself (and in your case herself/tamarra ;) )and theirs, out of the grind. So Congrats again – April 4 looms close now!

If nothing else, people MUST remember your advice to get a plan. And to ensure it’s got some flexibility built in. IM(H?)O.

Stillgotshoeson
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Comment by Ned S on 1 April 2011: I’ve got a bit more history on it than a lot I suspect Shoes? Can only comment on what I have seen Ned.. From what I have seen.. the crap he has had thrown at him is self inflicted. Have been on the site for 2 years now. Common theme on any thread full of tirades is Biker Pete. 2 years ago his position was you can’t go wrong with property.. Then it was property might stagnate, now onto it might correct a bit but the impending mining boom in WA will… Read more »
Biker Pete
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You’ll have to wait three more quarters for _your_ Report Card, son. ;)

Ned S
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All I can say to that Shoes, is that even though I remain bearish on property, I can see why Biker (being 12 years older than me and living in a different state) could very well be way less bearish than me. And at the risk of starting any other bunfights (which I have NO desire to do) simply have to admit that I’ve learned from him.

Biker
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Hey, it’s 11:13 pm over here, fellas. Time for bed!~
Cheers… .

Stillgotshoeson
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Comment by Ned S on 1 April 2011:

And at the risk of starting any other bunfights

I have found it easier to ignore him all together….

Ned S
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“I have found it easier to ignore him all together….” – Each to their own maybe Shoes?

“Time for bed” – Yep, time to call it quits here as well – I’ve still got half a bottle of Wolf Blass left; And am far more practiced at removing corks from bottles than putting them back in. But as it’s 1:32 AM here and I need to make like a plumber on the morrow, I guess I’ll just have to make that ultimate sacrifice on this occasion! :( Til tomorrow nite anyway! :D :D :D

Stillgotshoeson
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House prices in metropolitan Melbourne dropped two per cent in the September quarter, from $500,000 to $490,000.

Well I can count a tick on my scorecard for Melbourne going under 500K then ;)

Comment by Ned S on 1 April 2011:

Til tomorrow nite anyway! :D :D :D

2:36 in the am here…… not working today, working security tonight (as in Friday night not present night)

Stillgotshoeson
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Hawthorn, Toorak retreat Hawthorn’s median price also dropped dramatically by 24.6 per cent from $1,602,500 to $1,208,000, the Valuer-General said. Toorak, which had the highest median price of $2,335,000, also suffered an 11.9 per cent decrease from the previous quarter and a 15.1 per cent decrease from the same period the year before. “It can generally be observed that with a few exceptions, the September 2010 quarter produced general decreases in the eastern suburbs and a mix of increases and decreases in the western suburbs,” the Valuer-General’s report said. House prices in metropolitan Melbourne dropped two per cent in the… Read more »
Ross
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Plot the points on the AUD-USD chart :

http://www.economist.com/node/18486183?story_id=18486183&fsrc=nlw|hig|31-03-2011|editors_highlights

1. When securitisation and derivatives blew up
2. QE I started
3. QE I petered out
4. QE II started

What happens next?

Ross
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Stress tests hit Irish and Portuguese banks but Euro rises against the USD, Pound drops against the Euro. No run to USD safety, inverse to Euro crisis round one

joe
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@Pete, Two points on your posts: 1. If no “extra” tax is introduced (carbon tax == reduction in income taxes) then there is no nett extra expense on the economy. No increased risk of recession. 2. I’ve purposefully used income taxES PLURAL. Companies must be compensated! Use the revenue from a carbon tax to reduce the corporate profits tax rate. A carbon tax does not to shift wealth from the rich to the poor but shifts wealth from high emitters to low emitters. Please explain how a carbon tax is a semi-communist approcach? Direct action takes income tax revenue and… Read more »
Stillgotshoeson
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Comment by joe on 1 April 2011:

A carbon tax does not to shift wealth from the rich to the poor but shifts wealth from high emitters to low emitters.

Please explain how a carbon tax is a semi-communist approcach?

First up.. no changes for a thousand years to global temp.

Government has stated that the lower classes and middle classes will be no worse off under a Carbon Price/ETS system and in fact most will be better off financially… that is wealth re distribution.

Ross
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@joe, you mean it shifts wealth from producers to non producers. we can all join the public service and dot com companies and be rich!

Pete
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@Joe “A carbon tax does not to shift wealth from the rich to the poor but shifts wealth from high emitters to low emitters. ” Ross basically said what I was going to say, but with better humour. Think about it. What caused the rapid advancement and industrialisation of the world? Oil. Carbon based fuels. Coal power plants. CO2 emitters. We rely on electricity for practically everything. So, a big tax on everything. Taking money from one place and giving tax breaks to another? Like taxing the hell out of term deposits and giving tax breaks to property investors? We… Read more »
Pete
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Sorry I misquoted you… it was Stillgotshoeson that said that last thing, but it was in response to you so the gist is fairly right.

But yes, I agree with Stillgotshoeson – it is wealth redistribution. And where you take wealth from one, and give to another, there is always one party that will be upset. Bye bye foreign investment dollars?

joe
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@Pete, Shoes.
I’m not advocating that a carbon tax should be some sort of social welfare scheme. Labor may, but that is there want.

My original point, which remains unrefuted is this: A carbon tax thats revenue is (100%) used to offset income (personal AND corporate) taxes is the cheapest (it’s revenue neutral) and effective way of reducing CO2 emissions.

You assume that direct action is both a) free or b) not wealth redistribution. When the Liberals spend money on “green” projects for their mates, that’s wealth redistribution, it’s your money that they’re intending to spend.

Ned S
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For those who buy Kev Rudd’s line about this being the “Greatest moral challenge of our time”, then tell the blokes who want to mine coal and build factories that they’ve also got to plant some forests.

As to governments that want to tax me more because of it and then say “But we’ll give you even more back in return”, I just say “Yep; And the other one STILL plays Jingle Bells!”

Don
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The Australian economy is not a magic pudding Joe. The carbon tax will lead to higher energy prices in Australia which will drive industry elsewhere and consequently raise unemployment or lower living standards or both. That will of course lead to that wonderful housing correction that quite a few people on this site are looking forward to so I guess take the good with the bad.

joe
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@Don, you’re absoloutely right. I don’t see how they can introduce a tax on industry without a reciprocal tax on imports. Labor’s whole carbon-tax proposal falls down if they don’t address this obvious issue.

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