Wednesday, 23 July 2014

Sinclair Davidson will never change

Sinclair Davidson having gotten badly bruised and battered by the Kouk in the tobacco wars returns to his absurd stagflation prediction today.
First THIS is reasonably okay on the definition and history of stagflation.

Please note there is nothing at present that remotely looks  like the 1970s at present. Also note that one key ingredient of stagflation is the level of wage increases. This both leads to the price and unemployment levels being much higher than  would otherwise be the case.
I let us examine the figures as the RBA views terms of inflation.
In six monthly annualised terms, the path for underlying inflation over the past two years has been: 
H1 2014: 2.5% H2 2013: 3.1% H1 2013: 2.1% H2 2012: 2.7%  ( courtesy of the Kouk).
According to the RBA a rise is rates in unlikely.They said this about the labour market
"Labour market conditions had improved a little since late in the preceding year. The level of employment was around 0.9 per cent higher since then. The unemployment rate had been steady at 5.8 per cent for the third consecutive month, although the participation rate had declined over that period. Employment growth in household services continued to be strong over the past six months, while employment in business services had also picked up. Members observed, however, that total hours worked had not increased for a considerable time. Forward-looking indicators of employment had recently been mixed and while these indicators were higher than at the low points of the previous year, they remained at levels consistent with only moderate growth in employment in the months ahead.
The recent national accounts data indicated that unit labour costs were little changed over the past year, reflecting low growth of wages and above-average growth of productivity. Members noted that while labour productivity had been boosted by a sharp improvement in the mining sector, productivity growth had improved across a wide range of industries in recent years. Business surveys and liaison suggested that wage growth was likely to remain subdued for some time, consistent with the modest improvement in the labour market to date."
how we can have both falling real wages and stagflation is something Davidson talks about!
The market is expecting a rate decrease not an increase. 
So according to Davidson inflation near 3% and unemployment around 6% is stagflation. wow that is some re-writing of the definition.
It is amusing to see Davidson asserting growth in Government spending is the main reason for Stagflation.
If this was the case then how come there wasn't a boom in Wayne Swan's last budget where NOMINAL spending fell not Real spending. This was easily the tightest budget we have ever seen. It decreased GDP whereas for example Hockey's budget was adding to GDP! Remember also Davidson absurdly argued this budget ( Swan's) was expansionary!
On a final note this would be easy to point out on Catallaxy but unfortunately Davidson does not believe in free speech. You rarely if ever get different points of view over there.
So add hypocrite to being ignorant on Budgets, National accounts, CPI figures etal

Tuesday, 22 July 2014

What is Sub-Prime

Calculated Risk has this classic post by the late Doris Dungey better known as Tanta on what was sub-prime loans.

It is a classic.
In 2007 when I was at a very large Funds Manager the man involved with credit research was most impressed with my knowledge of the US housing market.
I soon put him onto this blog and it became a must read. Consequently they never had any dud CDOs on their books.

Monday, 21 July 2014

You know you are old when...

A long time ago I was a member of the Sydney Anglican diocese social issues committee.

Two people who were also on the committee were Margaret Rodgers and John McIntyre.

Margaret was a very easy person to know and to talk to. I was very sad to hear she had dies of a heart attack.  She actually interviewed me for the Anglican magazine. I was in the midst of co-writing a paper on Unemployment and was suddenly made redundant so I gained practical experience on the subject!

John and I were very unlikely friends. We never agreed on anything be it theology , economics or even the 'stolen generations'. However we enjoyed each other's company enormously. when he has made Bishop of Gippsland he told me I must visit him. Unfortunately something always cropped up and I never did.  
He dies recently of respiratory failure. he was only 62!
He found it strange that I was much more conservative than anyone in the Sydney Anglican hierarchy but I would always share a beer with him yet others wouldn't!

I will miss John.

Sunday, 20 July 2014

The Carbon Price

The price on carbon ( note please it wasn't a tax although quite similar) is now gone.
Here are a few articles from Friday's Around the Traps.

Firstly the Kouk writes about the economics of the carbon price.

Next we have Hugh Saddler examining energy-markets/looking-back-two-years-price-emissions. Note that rising prices have changed consumption ( The ETS was only a small part of that.) Renewable energy has risen considerably.
Then we have Anna Skarbek and Franz Josko telling us we should be keeping-our-eyes-on-the-ball-is-the-only-way-to-hit-our-climate-target.
 In essence if you believe in clomate change you have either a carbon tax or an ETS. If you do not you have neither. 

Finally we find Peter Martin saying carbon-tax-going-but-dont-expect-big-savings. Tony Abbott is going to have MORE problems.

Bill Shorten has promised to have an ETS as part of his policy platform for the nest election. Some people think this is a vote loser.
I disagree for two reasons.
1) you can only mount a scare campaign before it is implemented. once the fixed price ETS was implemented it became a big yawn. it was unheard of in the last election.

2) A floating price ETS will probably be lower than the fixed price introduced after the 2010 election so it will have even less effect than minor effect the fixed price ETS had.

I might add when El Nino impacts Australia then climate change will again rise as a major issue in the public's mind.

Thursday, 17 July 2014

Around the Traps 18/7/14

It is time again for Around the Traps.
Catch up round for postponed wet weather games this weekend ( not a lot of games therefore) so updates will be on Saturday and Sunday.

Aussie, Aussie,Aussie,Oy,Oy,Oy
Northern America

Andrew Gelman (Mainly Stats)
Dave Giles (Econometrics)

Dianne Coyle (Quirky + Book Reviews)
Vox Wonk

Wednesday, 16 July 2014

Hit and Myth in the Middle East

I was reading Chris Bertram's piece on the current state in Gaza when it occurred to me both Hamas ( wholly created by Israeli intelligence) and Israel both campaign on myths which simply do not make sense.

Hamas sends rockets into Israel. the 'Iron dome' system appears to be working well as the said rockets have not killed anyone as yet. Israel blows any rockets up that appear may hit areas of Israel that could hurt or kill people and let other rockets go if they simply blow up in the country side.
One might think Israel is lucky Hamas does not sophisticated weapons that Russian guerrillas use in the Ukraine.One might also ask why?

Israel claim they have to clamp down on these rockets to prevent any people getting killed.
Thus both parties are sending out and reacting to myths.

It is like when Israel says Hamas is committed the destruction of Israel. Yes they might have that aim but they do not have the means and never will.

As long as both sides argue about myths and not what actually happens nothing will ever change.

One thing is for certain neither 1948 nor 1967 can be excised from history.
Part of the solution would have been when Hamas won Government to encourage them to change like the IRA in northern Ireland. Israel went the other way.
That worked well!

Here's Peter Beinart

Tuesday, 15 July 2014

Judith Sloan demolished again

I outsource this to STEVE from BRISBANE.

I find it interesting that a person who gets things so badly wrong time and time again doesn't seem to care.
Perhaps she uses too much peroxide.

I think one of the reasons why people from Catallaxy not only get things wrong on a consistent basis but also fail to acknowledge their mistakes is because they rarely venture outside of that blog. Hence they never have to defend their absurd positions.
They keep on making columns most of which you would think they are living on another planet. Few contrary positions are allowed there.
Anyone who does usually gets banned for made up reasons.

It is all very sad