Around the Traps 1/3/13

Here we are again. So these are the highlights as I see them.

Aussie Aussie Aussie Oy Oy Oy

• John Quiggin says ppps-take-a-long-time-to-die and that the-ipa-less-scruples-than-billy-hughes
• The Kouk looks at Mr Abbott's possible-little-blue-book and finds the myth-of-coalition-govts-howard-the-biggest-spender-of-all
• Harry Clarke is happy
• Via Peter Martin tony-abbott-you-need-to-balance-books and what-reserve-really-thinks-aussie-is
• Mumble on why  labor_always_gets_it_wrong and voters_dont_send_messages and hypothesising_kevin, late  but a beauty year_of_the_back_scratch1
• Kevin Bonham on 2001-final-frontier
• Ricardian Ambivalence looks at this-thing-called-confidence , how-much-capital expenditure 1 and how- much- capital- expenditure 2 and finally how- much-capital- expenditure 3. RA you are on fire!
• Nick Gruen  (the Australian David Glasner) talks about values based management

General

• Via Mark Thoma Republicans wasting money using the CBO
• Noah Smith on why-liberals-shouldnt-turn-against-immigration and  why-finance-has-always-been-more-profitable
• Calculated risk likes new home sales
• Richard Green  asks why-is-luxury-housing-market-recovering
• David Glasner writes a wonderful note on armen-alchian-the-economists-economist
• Macroblog on nature-abhors-an-output-gap
• Simon Wren-Lewis on monetary-union
• Nick Rowe on what-is-an-excess-demand-for-money
• Lord Keynes on uk-unemployment-18701999 and us-unemployment-graph-18691899. He is a goldmine on historical data
• Peter Dorman on fiscal-space-cadets
• Pro-growth liberal on is-us-fiscal-policy-near-tipping-point
• Barkely Rosser on only-6%-of-public-knows-deficit-is- declining  Hey ,only 30% of Aussies know that interest rates are lower now that when the Government took office. We are better at maths?
• Mark Thoma says austerity-is-already-here
• Brad de Long tells us of Ezra Klein  in 1)why-oh-why-cant-we-have-a-better-press-corps-bob-woodward-of-the-washington-post-writes-fishwrap-edition.html and then 2)bob-woodward-says-gene-sperling-threatened-me. Should insert Beverly Mann's take as well. Kruggers also writes ( I am old enough to remember when bob Woodward was a reporter!). I have to say Katesy has missed all of this but he always does.
• Jonathan Portes looks at immigration-and-uk-labour-market
• Frances Woolley on men-natures-second-sex  !!!!!!
• Late but nevermind. Barkely Rosser on will-wants-innumerate-gold-buggery 
• Vert very late but Aussie Ricardian ambivalence looks at the-us-non-inflation-problem yes he is good

Austerity in Europe

• via Mark Thoma we have Francesco Saraceno on its-the-denominator-stupid
• via Mark Thoma we have Antonio Fatas on the-euro-depression
• Paul Krugman on death-by-davos and euro-delusions and austerity-europe-2 and paul-de-grauwe-and-the-rehn-of-terror  ( Does Kruggers read around the traps as well?)
• Simon Wren-Lewis on the-final-verdict-on-george-osborne-as-chancellor
• Kevin O'Rourke on the-good-news-confidence-is-just-around-the-corner (irony button needed)
• John Fitzgerald on economic-assessment-of-the-euro-area
• Just in Kevin O'Rourke leads us tomark-mazower-on-the-eurozone-crisis
• Very late but worth every minute Simon Wren-Lewis where-austerity-really-rules

Sequestration in the US

• Via Calculated Risk e bernanke-sequester-could-lead-to-less-deficit reduction
• Econbrowser on approximate_geographical- impacts- of- sequestration and macroeconomic - impact
• not exactly here but Tim Duy know-your-fed-chairs
• Jared Bernstein with 1) austerity-that-would-make-a-european-policy-maker-proud 2)sequester-politics-hard-to-believe-but-theyre-getting-worse and 3)i-just-solved-the-sequester

Statistics (Well mostly actually all  Andrew Gelman)

• evaluating-the-impacts-of-welfare-reform
• life-in-the-c-suite-an-ugly-graph-and-an-unrelated-story
• f-f-f-fake-data
• correlation-of-1-too-good-to-be-true
• what-is-explanation
• thin-scientists-say-its-unhealthy-to-be-fat
• Just in different-modes-of-discourse/#more

Wonkish

• via Mark Thoma Owen Zidar on  fiscal-policy-and-mpc-heterogeneity
• via Mark Thoma the FRB of St Louis on Banks too big to fail
• Angry Bear on more-on-adaptive-inflation-expectations
• Lord Keynes on the-natural-rate-of-interest-in-abct  ( David Glasner what do YOU think?)
• Frances Woolley on labour supply
• well sort of, the wonderful Nicholas Gruen tell us election-against-appellate-double-jeopardy
• David Glasner on that-oh-so-elusive-natural-rate-of-interest 
• Simon Wren-Lewis on bean-on-nominal-gdp-targets

Vox Wonk

• helicopter-money
• imf-lending-and-banking-crises
• mutualisation-and-constitutionalisation
• another-look-ricardian-equivalence-case-european-union
• welfare-cost-lawlessness-evidence-somali-piracy
• wine-tasting-terroir-joke-and-or-are-wine-experts-incompetent  now this is important

Diet(?)

• This turned up in my referring sites 35-tips-for-great-and-healthy-living. It does look an interesting blog.

Unbelievable

I missed this and had to be told of it.


Stagflation Davidson said something about global warming.

I now hand over to this column.
John Quiggin says this
"his is just a demonstration that Davidson’s idiot readers don’t understand the concept of statistical significance, and that Davidson (who knows the score) doesn’t care to enlighten them. The question at issue is “how much data do you need to be 95 per cent confident that the observed warming couldn’t have arisen by chance”. With annual data and a simple linear regression, the answer (given by Phil Jones) is that the data from 1995 to 2009 (when he was first asked) wasn’t enough, but the data from 1995 to 2012 is sufficient.

Davidson’s trick is that, if you allow for autocorrelation in the monthly data, you need a longer time period to get 95 per cent confidence. With the data since 1995, there’s a 20 per cent chance that the observed warming could have arisen by chance. Since we have satellite data going back to 1979, and surface data going back 100 years, that fact is irrelevant except to the morons who comment at Catallaxy, but Davidson is happy to play on the ignorance of his readers.

Of course, the real shame here goes to Richard Lindzen who originated this utterly dishonest line of argument. Lindzen has trashed a record of achievement that would have had him remembered as a significant contributor to science. Davidson has nothing to lose, and the applause of his idiot followers to gain."

then NickR says this

"I’d argue that Davidson’s work is far worse than that. He effectively imposes a structural break in 1995 but does so with reference to the data. Endogeneously placing a structural break makes the inference he performs with regular t statistics incorrect.

His argument here is that Phil Jones did it, so if you disagree explain why he is wrong. Incredible chutzpah really as Jones did it and drew the *correct* conclusion while Davidson is doing it to support the *incorrect* conclusion.

He also corrects for autocorrelation in two ways. Firstly with his AR(1) error (which is not necessary for the hypothesis he wishes to test and therefore a violation of Occam’s Razor) and secondly with Newy West standard errors. He is right to be concerned about the effect of autocorrelation on his inference, but to correct for it twice is to deliberately waste information. He then builds his case on their being insufficient information to establish a trend."

and then john Quiggin says this

"Obviously, there’s no reason to think anything changed in 1995, and a test of the full data set would, I’m sure, reject the hypothesis of a structural break. This is just a piece of trickery, playing on the gullibility and wishful thinking of the delusionist audience.

On yoour other point, I haven’t kept up with the latest in time-series econometrics, but I think you’re right. If you are going to use Newey-West standard errors to correct for autocorrelation, you shouldn’t also impose an AR(1) error structure."

The only thing I will say is that it is strange ( highly euphemistic) to state bit it is a Phil Jones test when it was Lindzen

say no more.

Sinclair, Goebbels started out as a super smart propagandist but ended up by 1938 believing his own bulldust!

There must be a reason why Katesy is as mad as a hatter. Be afraid be very afraid.  

Beware of the dark side!!!

Fiscal policy in the future

In Australia we have the budget delivered in May. This is the Government of the day's fiscal statement for the fiscal year ( July to June).

As we have discussed in recent days fiscal policy is a means to an end. At present it is contractionary or the government is pursuing austerity.

As we have seen pursuing austerity in a boom as Keynes pointed out in 1937 makes perfect sense but it doesn't make sense when nominal GDP is below trend and continuing to fall.

Does this mean the Government should start spending again?  No. Even though things are not normal yet ( the revenue figures tell us that) we can for the moment rely on automatic stabilisers and  looser monetary policy.
The only thing policymakers can't control is the continuing high level of the $A.

As things get back to 'normal' then the budget will get back into balance.

The politics of such a policy is different but that is because
1) The Government can't explain its fiscal policy
2) The Opposition doesn't understand its policy position. ( This assumes they are telling us their actual policy position.) I will write about this closer to the election.

Fiscal Policy now

We have talked before about how if nominal GDP growth remains below trend then the budget will not get into the black. ( see this for example).

One of the more savvy operators believes the final budget outcome could be $16b deficit.

As it is this is no bad thing. The budget bottom line is NOT an end in itself , it is a means to an end. That end is stronger GDP growth.

It is highly ironic that most critics of the government not achieving a balanced budget advocate solutions which would make the deficit higher. They wish the government make greater spending cuts. This is what Wayne Swan was originally trying to do. However he was obviously advised to change his mind. ( Martin Parkinson and Glenn Stevens have recently made comments to Parliamentary comments to this effect.)
( see this for example.)

Why is this?
To understand this you need to comprehend two things.
1) The structural part of the budget has a much greater effect on the economy.
2) The cyclical part of the budget has a much greater effect on the budget bottom line.

Thus if the government tried to cut further to achieve a balanced budget they would in fact achieve the opposite. They would further slowdown the economy. ( Remembering of course the present budget is already contractionary and thus detracting from GDP growth.)
A contracting economy means increased expenditures and reduced tax revenues. In other words the European disease.

Before nominal GDP growth slowed to go below trend fiscal policy was quite appropriate ( and keynesian).
contractionary fiscal policy is what is needed when the private sector 'powers up'. however once nominal GDP growth went below trend fiscal policy was contributing to a slowing economy.

When nominal GDP growth comes back to trend the budget will be in balance. Whilst it isn't then leave the automatic stabilisers to do their job and hope monetary policy eventually turns things around.
It is also highly ironic that the other reason to impose a contractionary effect on the economy is the $A. It is ironic because overseas investors just want to buy our bonds. If they didn't nominal GDP would not be hit as hard and of course nor would the budget bottom line.

The GFC, A Counter-Factual

We know now if not for the Government's actions Australia would have experienced a recession following the GFC.
It must be said this only occurred after Ken Henry and Glen Stevens literally pounded the need for government action into Wayne Swan's head.

However what if the coalition had won in 2007. What would have they done?

I think we can assume they might have done one of three things.

1) They could have done nothing. Insisting they had a tight budget and the need to maintain a budget surplus.
However we could assume the structural deficit would have been larger and then  made artificially larger once the GFC hit revenues. Automatic stabilisers would have also hit the bottom line evaporating the surplus before our eyes. On this scenario unemployment would have rocketed up past 8% perhaps even hitting 10% before levelling out.
I rate this only a 20% probability

2) They could have reacted to the GFC like New Zealand , Canada or Sweden. However this would have occurred after the event so even on this scenario unemployment would have risen to around  at least 8%.
If tax cuts would have been the major area of policy then this would have made the deficit worse than under the stimulus. The reason of course tax cuts have a constant effect on revenues whereas a stimulus has only a short effect on spending patterns as we have seen.
I rate this a 80% probability

3) They could have attempted to maintain a budget surplus. Cutting spending and raising taxation.
This of course would have probably made a depression (a fall in GDP of over 10%) inevitable.
Unemployment would have risen to at least 15% and the deficit and debt ratios would have blown out enormously like Ireland or Estonia. ( see this for example) I rate this a nil % probability.

Over the next couple of days we will examine what fiscal policy is at present and what it should be over the next couple of years.

Midnight Oil

When I was young I travelled to the Royal Antler hotel at North Narrabeen to watch a young band called Midnight Oil.

They had energy!

The funniest time was when we went there after playing cricket. Four blokes in cricket whites! I drove and therefore didn't drink.

A shout of 3 schooners of beer and one of orchy came to around  $1!!

This is their best song

Around the Traps 22/2/13

Okay it is Friday and it is time to see what people have been writing about in the blogosphere.

Aussie Aussie Aussie Oy oy Oy!

• Peter Martin tells us no-wonder-budgets-bleeding
• and costings-swan-throws-hockey-time-bomb
• Matt Cowgill asks  why-have-a-flat-tax-on-super
• Ricardian Ambivalence looks at : taylors-daemon-and-the-feb-rba-minutes, australian-2012-13-budget-headed-for-16bn-deficit (no bad thing),fed-eyeing-exit. If you live in Australia and you are not reading this blog then you are a FOOL!
• Mumble on honey_im_still_shrinking_the_vote and newspoll_gst_and_carbon_price
• Richard Green at Troppo  on the-banality-of-bullshit
• Harry Clarke looks mining-tax and gets annoyed
• Piping Shrike on the ALP leadership
• John Quiggin as well

General

• Noah Smith  examines whether business cycles are cycles. Late ( Bad Noah!) but capitalism and end
• Simon Wren-Lewis looks at ricardian equivalence and political uncertainty
• the always excellent David Glasner gives a serve to Robert Waldeman ( Aussie expression) , deservedly so and then has a paper on on hayek and sraffa which is how I first got to know about his fantastic blog.
• calculated risk gives us the latest US inflation measures. ( Good of the Cleveland Fed to 'catch up' with our own RBA!!
• Mark Thoma tells us about this interesting paper on medicare costs in the US. They are coming down folks!
• Brad De Long has fun with Robert Murphy's forecasts
• Menzies Chin on multipliers and ZLB 
• Colm McCarthy examines toxic-debt-scare  in Europe. WARNING. Irony button needed.
• Jonathan Portes on no debate please we're Europeans
• Nick Rowe on monetary policy 1) hot-potatoes-and-hot-yams 2)a-monetary-policy-target-can-only-be-defeated-by-a-better-monetary-policy-target
• Macroblog on Job creation, start-ups and 'older companies'

Minimum wages in the US

• Richard Green
• James Hamilton
• Peter Dorman
• Lord Keynes

Wonkish

• Mark Thoma sends us to this on data mining and economics
• Again via Mark Thoma we get a paper on monetary policy and rational asset price bubbles

Vox Wonk ( Love that!) Bookmark the site.

• panic driven austerity eurozone and its implications
• ageing and productivity economists and others
• exchange rate disconnect and international supply chains firm level evidence
• persecuting protective state jewish expulsions and weather shocks-1100-1800 ( really interesting)

Statistics well mainly Andrew Gelman

• what-to-read-to-catch-up-on-multivariate-statistics
• about lotteries and addicts
• my-beef-with-brooks-the-alternative-to-good-statistics-is-not-no-statistics-its-bad-statistics
• Kaiser Fong's  take on big data
• Sam Wang's review-of-the-signal-and-the-noise ( Nate Silver's book)

Pink Batts

I had a conversation about the 'pink batts' scheme which was put into place by the Government to combat the GFC with a good friend of mine.

(Before I go on a bit of required reading:)

In no particular order

• Possum's investigation This has links to the Hawke report, Audit commission  et al as well.
• Possum on CSIRO report  )

One thing I didn't understand was how pink batts could cause problems with potential fires. In fact they didn't!
The problem was where contractors actually poured installation stuff ( highly technical term) into the roof and it got ,as one might expect, very very close to downlights ( which get quite hot if left on for a reasonable time.)  When the downlights were left on for a considerable period then fires eventuated.

I thought I might just make a point no-one else has now.

If you look at the number of fires before the program. there were ABOUT 85 fires from ABOUT 65,000 installations of insulation. ( I love that!)

Now if that ratio carries through to 1.5 million installations then you get over 1960 fires.  What actually happened is that we got almost ten times less.

You do not have to do a z-test to see there is a large difference here although it will tell you they are significantly different!

Now I am not saying there were no problems with this program. There were as the Audit office points out but two things stand out like the proverbial shag on a rock.

1. A lot of houses are using less energy then they were before the program
2. Safety in the industry improved enormously. Indeed if installation was actually physically installed alah pink batts and were not allowed to be poured in the roof then the number of fires would have been minimal.

Stockmarkets and Bond markets can be wood-ducks sometimes

When I was at business school we looked at heaps and heaps of studies which showed that when companies announced plans to reduce costs, usually by sacking workers, their share price rose on the announcement. ( For the uninitiated cutting costs and becoming more efficient are not the same thing). A year later when costs had risen and profitability had fallen wella the share price had fallen as well.

( Update. For those who are slow on the update when companies announce a plan to cut costs what usually happens is that over time costs usually rise!)

It was almost deja vu when Oliver Blanchard showed us last year that when countries announced austerity plans their bond spread to German bunds narrowed. However as the results of austerity permeated the economy and we saw both the Budget deficit/GDP and Debt/GDP ratios blow out, usually quite badly, then what happened? The bond spreads widened! Fancy that.
Postscript
See also this confirming Blanchard. Classical economics gives us another epic fail!

Misogynist, the Language debate

Way back last year Julia Gillard said she wouldn't be lectured on misogyny by Tony Abbott.

Some people then claimed , falsely, she had used the word wrongly.

For over a decade I sat on the board of Robert Menzies College. Apart from learning I was the only person who was a theological conservative I was fortunate to befriend David Blair, an academic, from Macquarie university, in this area.
I remember asking him why people used woman as an adjective when it was clearly a noun.
He told me it was both as that is what the population had made it.

Dictionaries are always catching up with how the population uses a word.

The word bludger originally was a term for a prostitute's pimp. it is now used to describe some-one who is lazy. ( Thanks to Kel Richards on this!)
A Dictionary should carry all meanings of the word i.e. its meanings from its original meaning to its current.
thus we get this from the Oxford dictionary

Definition of bludger

noun

Australian/NZ informal

• a scrounger: just look at that bludger, can’t get his thieving hands on the cash fast enough
• an idle or lazy person: I suspect there are far more bludgers in jobs than on the dole

Origin:

mid 19th century (originally British slang denoting a pimp, specifically one who robbed his prostitute's clients): abbreviation of bludgeoner, from bludgeon

Thus when the head of the Macquarie dictionary said the dictionary would have to carry the present understanding of the word misogynist we can see what she was alluding to.

update.
This is somewhat related.

I have only just read the SMH and see a debate about cheese and the word philistine being used.
This is interesting. In historical context the philistines were a highly cultural and worldly people. In fact it was the Israelites who were the uncultured boors at that time. indeed they attempted to copy many of the neighbouring nation's cultural practices which of course got them into trouble.
Thus we have a word to describe something that is completely opposite to what happened in practice!


Sometimes people can't even read dictionaries when trying to understand what a word means!

Austerity under Obama

In the last around-the-traps I had a small section on austerity in the USA.
I thought I might elaborate on it as it is the reason why the recovery over there is so weak.

Mark Thoma shows us that when examining annualised real per per capita spending from Nixon to Obama it is ONLY under Obama where it is negative.

Ezra Klein shows us that under Obama the total public sector DETRACTED from growth in 10 of the 16 quarters (of the first term). Under both the sainted Reagan and Bush it boosted growth in 13 of the 16 quarters.
Ezra has calculated that if Obama had spent as much as the sainted Reagan average growth during his first term would have risen from 2.4% to 3.2%

Janet Yellen speech shows a similar story. Whereas under Obama the public sector added to growth in the first year of the recovery. It detracted from growth thereafter.

As we have talked about previously, this is because state and local government have drastically cut back on their spending this time as opposed to previous recoveries. We have also noted previously if they had adopted the same employment policies as they did in the Reagan recovery unemployment would be approaching 5% and the Fed would be raising rates.

I might end by simply observing if a person alleges spending is the problem but cash rates are not rising and the public sector is detracting from growth then the person has NO idea of what they are talking about.

Best classical music piece ever

Rachmaninoff's on a theme of Paganini is quite simply superb.

Enjoy

Around the Traps 15/2/13

It is Friday in Sydney so it is time to do Around the traps.

I have made a few changes to make it easier to focus on articles people like.

US

• Bill McBride gives us most of Tanta's post. MUST READ if you are interested in sub-prime, US housing etc 
• Via Mark Thoma financial intermediaries and asset quality
• Via Mark Thoma the 1935 version of who built that
• Menzies Chin looks at fiscal policy and ZLB and then Quantitative_easing and currency wars
• Brad De Long on steve-paikin on rethinking keynes and the long run
• David Glasner say no more. There is only one this week!
• well Canada but Nick Rowe looks atA monetary policy target can only be defeated by a better monetary policy target
•  Lord Keynes looks at 19th-century-deflation-and-recession-in the USA
• Paul Krugman is disappointed  because marco-rubio-has-learned-nothing. He also points out the same suspects who said there was no housing bubble are now saying it was all CRA/Fannie-Freddie Mae's fault now.
• Late but interesting from who else Mark Thoma about trolls-win-rude-blog-comments-dim-the-allure-of-science-online

Austerity in the USA

• Thomas Palley re Janet Yellen
• Mark Thoma gives us Per capita government spending by president
• Mark gives us another related article of Holtz-Eakin
• Jarrod Bernstaein on Janet Yellen
• I forgot this. sorry Ezra. the- government-is-hurting-the-economy-by-spending-too-little/ and this is essential reading as well. Reagan a bigger spender than Obama. ( don't tell Katesy!)

Noah Smith

• defends EMH
• The koizumi years macroeconomic puzzle
• The corporate cash puzzle see also this
• David Graeber debt is bad or something

UK

• Simon Wren-johnson on what is attraction of helicopter money
• Jonathan Portes on reflections on green budget don't know what the green budget is? IFS!
• okay Irish but John McHale looks at optimal-debt-policy-for-ireland-warning-wonkish

Australian stuff

•  Peter Martin finds   Liberal voters are less wood-ducks than usual
• Just in a short but valuable piece on budgetary woes. Will catallaxy admit they have been wrong? 
• Matt Cowgill looks at australian-minimum-wages/ and why-is-the-participation-rate-falling

Statistics

• Kaiser Fong has recommended this guy. Try looking at global warming and a random walk and State of the Union fact checker
• Andrew Gelman stories to read. a must read paper, why waste time philosophizing/, Psychology can be improved by adding some economics ?, P values and statistical practice ( my favourite) 

VOX  ( Small but great research articles)

• technical-competence-economic-policymakers
• root-causes-currency-wars
• World-economy-cliffs-avoided-mountains-ahead
• influence-taylor-rule-us-monetary-policy
• misplaced-concerns-about-central-bank-independence

My wife wonders why I am on the computer at night!!!

POSTSCRIPT

Around the traps is popular judging by the statistics I have. thus I have made it very easy to search for them. just type in around the traps and they all come up.

Great duets in Opera

here are my two of my favourite duets in opera.

First a classic. who are the males singing.  yes that is why it is a classic.

Next possibly my favourite.

From Puccini's La Boehme

What makes a great song?

In the movie Eddie and the Cruisers Michael Pare' says to Tom Berrenger words and music man, words and music.

That is true but arrangement is more important.

I will give three examples.

First Van the Man

This is his best song. Listen to the different instruments. They are all in harmony. the lead guitar, the bass, the wonderful piano, the drums simple beat and the horns playing Smokey Robinson style.

Next Carol King

From her album Tapestry. A very simple drum beat, light bass, James Taylor playing tasty but brief steel guitar and the piano. Add to that the much slower playing. The song is transformed into the sad song it is.
Joni Mitchell and James Taylor help with backing vocals.

Lastly from the first album I ever bought.

To my mind it is Neil's best song. The acoustic guitar is slight but basic as are the drums and bass but the song is made by the banjo mainly however the slide guitar also helps.


One interesting thing about great arrangments in the studio is they just cannot be replicated live.

Superannuation

It appears that the Government will change the taxing arrangements of superannuation in Australia.

So they should but not in the way the article suggests.

First let us go back into history. Paul Keating saw that the only people who had superannuation in Australia ,when he became treasurer, were essentially public servants and some white collar workers.
He wanted every worker to have a retirement income.
He recommended every worker get an Super Guarantee Charge ( SGC) that would get to 9%.

He also wanted to only tax the benefit stage at the same level as ordinary income.
This came undone when the then secretary of the ACTU ( Bill Kelty) would not have a bar of this. Blue collar workers deserved to get all their superannuation when they retired and after that went go on the pension.
Bob Hawke fell for this malarkey. We then got each stage getting taxed at 15%. Contributions, Earnings and Benefits.This naturally meant a lot of complexity.
He also late in his term as PM wanted to boost the SGC to 12% by way of a tax cut.

The Incoming Government did two silly things
They reneged on boosting the SGC to 12%. They got rid of the tax on benefits.

The Present Government is thinking about changing the tax on either contributions and/or earnings.

NONO NO!

Go back to the basics. The best way to get people to have a decent retirement income ( a 60-70% replacement income in industry jargon.) would mean this:

• The SGC should be boosted to 15%. This would mean a person in retirement would need little assistance from the government. you know be an actual independent retiree. It would cover everything including the most important HEALTH COVER.

• The government should over time  get rid of all taxes on superannuation. They then should align superannuation with income tax.

Hence over time complexity goes away and equity is restored and taxation reflects the ageing population.

Homosexuality and Christianity

One of the more coloured topics in Christianity today is about homosexuality.
Is it allowed in Christianity and can a person be homosexual and be a christian.

First of all let us go to the expurgated of the expurgated version of Christianity.

There are only two types of people on Earth. Forgiven sinners and unforgiven sinners.
Anyone who sins must be punished. however when Jesus died on the cross he took the punishment for anyone's sin that believes in him. He proved he was able to be the right sacrifice because he rose from the dead. Therefore he was without sin. He was without sin because he was both God and man.

A forgiven sinner recognises their sinful behaviour and asks for forgiveness. They are given that by Christ's death.  An unforgiven sinner does not ask for forgiveness because they do not believe they have sinned.

A homosexual is in the same place as a heterosexual. They cannot engage in sex unless one is either a husband or a wife. Sex outside of marriage is sinful behaviour.

It is not sinful to be attracted to anyone. It is sinful to engage in sex or even fantasise about sex ( in other words lust) about someone they are not married to.

Therefore a person who is attracted to the same sex is in the same boat as a person who is attracted to the opposite sex. Just stop at attraction and leave it there. If you go further and cannot marry then it is clearly sinful behaviour.

The Bible is quite consistent in this. The act of sex outside of marriage is condemned in both the Old and New Testaments. Also relevant here is that marriage is only between a man and a woman.

What a lot of 'christians' get wrong is to condemn homosexuals who do not indulge in sex. This is wrong.
There appears to be a fear homosexuality will spread throughout the population.
The evidence proves otherwise. It has been consistently between 2-3 % in almost all surveys of the Australian population.
Also there appears to be a contradiction here as well. A lot of sermons are preached about the evils of the homosexual act but few are preached about the evils of the heterosexual act outside of marriage. Fornication and adultery are far more harmful to society than the act of homosexuality.
By all means condemn the act of homosexuality but equally condemn heterosexuals who engage in sex outside of marriage. According to Jesus quite a lot of married folk who are divorced should not be married at all and so regularly engage in adultery!!!


Why is this? Well if people in Australia think anything like they do in the USA then it isn't hard to understand.

Can a person who is homosexual in orientation but not practice become a minister/pastor/bishop/overseer?
No. the ONLY person who can fill such a position is one who has ruled his family wisely. We know this has occurred because the wife is reverent and children obedient. note neither has to be believers.
God is interested in men who can put their beliefs into practice. He isn't interested in people who merely have a good understanding of the subject!


I have been asked if there is any way to Heaven apart through Jesus Christ.
NO!
A person who does not believe in Jesus has no way to have his sins punished therefore he will be punished!

A Consumer's guide to Blogs

There have been a few people giving advice to people who start blogs.

Here is one. It is aimed at academics however it is from the producers point of view.

It maybe the MBA coming out in me but I want to look at blogs from the consumers point of view.

First the obvious. Go to a blog that is relevant to your particular interest.

Let us go through a few examples.

If you want to know about the US housing market then Bill McBrides Calculated Risk blog is sensational. He is always up to date and has odd statistics like Architectural billings, Miles driven as all.

Paul Krugman is required reading for macro-economic issues.
David Glasner is sensational for anything to do with  monetary economics.
Ricardian Ambivalence is very good for anything to do with the Australian economy.

There are blogs which look at the Irish economy, UK economy, European economy. OZ economy, Post-Keynesian theory, Austrian theory, etc

Second is you must know the blog well. Why do I say this? A great blog has incisive comments. Indeed a lot of the time you gain a better understanding of the topic because of the people who comment.
The best example here is David Glasner's Uneasy Money  or  Ricardian Ambivalance.

Third and related to the second is know blogs which are the opposite. Paul Krugman is wonderful for his articles but I am afraid the comments are next to useless in gaining any better understanding of the topic at hand.

Fourth look at the blogroll on blogs you rate.  Every blog has them and it is a terrific way to find out about topics you never thought you would ever read about.

Fifth, do not be afraid of getting stuff through sheer luck. It was only last week I got a really interesting paper by Thomas Palley  (on Market Monetarism) from a link from a link from a link.

Sixth, one should always beware of who is criticising whom.  Take Paul Krugman. There are people who criticise Kruggers because of his politics. however there are others who will criticise strictly on policy lines.
David Glasner comes to my mind here. Be aware of the difference particularly of this from blogs that are USA based.

The Great but unhappy Miles Davis

There never was a better trumpeter than Miles Davis.

Just listen to this magic he and Coltrane  play.

Around the Traps 8/2/13

It is Friday so again we look at some of the more interesting items at various blogs.

• Kevin Bonham looks firstly at essential-polls and then at polling overall in the leadup to an election.As I said last week Kevin is a must read now we know an election will be held on September14. Well done Big Kev!
• Mumble and John Quiggin disagree about NSW and the 'Obeid' effect. I favour Mumble. The Quiggler has a Ken Parish record when it comes to election forecasting.
• A little late on this but the Piping Shrike looks at the resignation of two ministers
• Andrew Gelman looks at the philosophy and the practice of Bayesian statistics. Ladies and Gentlemen if you love your statistics as I do then this is a must read blog. Well done Andy!
• Alex Tabarrok looks at why on-line education works. Watch it take off here once the NBN is in place. ( Yes I do know something)
• Corey Robin  shows Brad De Long believes, as I do to, that Allen Dershowitz would not allow Hannah Arendt to speak at Brooklyn College.  ( This reminds me of a silly episode some time ago here. Gerry Henderson wanted David Irving banned because he denied the Holocaust but he would not do the same to people who deny the Armenian holocaust. Why the Hypocrisy? Israel denied it!)
• Barkely Rosser looks at government purchases and government spending and  the myth of money multiplier. He is on fire.David Glasner comments on this as well and he got it through me. (Me! My head is exploding. ) Seriously this is an interesting topic.
• Thomas Palley critiques MMT
• Mike Konzal tells us why Republicans are wrong about the CFPB
• Peter Diamond examines cyclical and structural unemployment. ( WARNING NBER paper)
• Joa Santos ( from NY Fed) looks at whether securitization lead to riskier lending.
• Menzies Chin looks at the evolving views on fiscal multipliers. He also looks at interesting ( cough) research from Heritage.
• Kruggers looks at Spending cuts and monetary policy as well as rate expectations
• Harry Clarke looks at Adam Smith and virtue ethics. The Cad doesn't like the hobbit!
• Simon Wren-Lewis looks at Labour Productivity in recessions  and Mark Carney's first testimony
• Lord Keynes looks at European countries during the Great Depression. Austria is worst because it adopted Austrian policies. ( Katesy will go mad again!)
• Ricardian Ambivalence looks at the RBA statement and sees a march rate cut well maybe. ( Another must read.)
• Noah Smith looks at post recession recoveries.
• David Altig disagrees with Robert Gordon
• David Glasner gives us two reviews. just read it. As always he is always interesting.
• Kaiser Fong looks at 'big' data and cancer
• I forgot this. Grogs Gamut absolutely demolishes Andrew Bolt. We knew Bolt was a dolt on statistics. He is just as bad at graphs. Why doesn't he talk to his brother on climate change?

Can I just say somewhat immodestly this is the best around ( only because Mark Thoma does it for each day. how does that bloke sleep?) BUT it is a lot of very good reading.
That's all folks

Only C&W song I like sorry one of the FEW C& W songs I like!

I hate two types of music.
Country and Western.

However this from Poco is the exception to the rule.
It's all about a gal who loves an outlaw in the Wild West.

It is called Rose of Cimarron

I remember hearing Rusty Young was related to Neil Young.
Looks are similar and so is the guitar style. hmm

Know your Subject

This is the last time for some time I write anything concerning Catallaxy, promise
.
In this piece Sinclair Davidson accuses Andrew Leigh and Craig Emerson of economic exaggeration. Unfortunately we get another example of him being completely unable to discern what is in national accounts or budget papers.
His first assertion is this "if the private economy was as strong now as it was during the Howard era the government would be collecting a lot more tax revenue. If the private economy was as weak then as it is now, the Howard government would’ve collected less tax revenue. But there’s the thing – it is not by accident that the private economy is weak now. It is almost entirely due the the mismanagement of the current government"

Err no. Firstly according to the last accounts Real GDP is at trend after being ABOVE trend for some time.
Nominal GDP has been below trend after the terms of trade took a hit. This a a recent development however. 
Nominal GDP for the quarter was lower than the Real GDP estimate because of deflation in the quarter. No sign of that stagflation as of yet!

The Government has had weak tax revenues ever since we got hit with the GFC. Let us be very generous with Mr Davidson and simply say he hasn't read what budget papers say about revenue.
Such events never occurred under the previous government hence Mr Davidson is talking through his hat about tax  revenues and the state of the economy.
He also attributes this to the Government. Well yes the budget is quite contractionary ( Mr Davidson doesn't quite understand that concept yet and get this he advocates much tighter fiscal policy) but the main reason why Nominal GDP is so weak is because of the large decline in the TOT. Wow, the Government  are to blame for that eh!.

He then goes on to the IMF paper which looked at fiscal profligacy and debt. I actually linked that paper when it came out.
He then quotes Henry Ergas
'Indeed, that test gives many bizarre results. For example, it not only finds Italian governments to be consistent models of fiscal rectitude, but also singles out 2002-05 as years of fiscal prudence in Britain, even though that was when the Labour government’s budget deficit blew out of control.'

Anyone who has actually read the paper knows it does NOT talk about fiscal rectitude so we can only surmise either Henry hasn't or he is making it up! As for the UK Henry appears to be wrong

He then quotes the Kouk.
"In the past year, electricity prices have risen 17.7 per cent of which about 10 per cent was due to carbon. This is a big rise. That said, the household expenditure weights used by the Australian Bureau of Statistics show that electricity accounts for just 2.5 per cent of the average household expenditure on the basket of goods and services that make up the CPI.

Electricity is, therefore, a small part of the average household budget.
In terms of some comparisons for where an average household spends its money, purchases of tobacco make up 2.5 per cent of average household consumption, the same as electricity. Spending on meals out and take away foods accounts for 5.5 per cent; alcohol 4.8 per cent; rent 6.9 per cent; petrol 3.5 per cent and holidays and accommodation 4.9 per cent.

So quit yer belly-aching. Just to make sure he doubles down: ( this is Davidson editorialising.)

Think about it. The average household spends as much on tobacco as electricity and spends more than twice that amount on takeaway food and restaurant meals."

Notice dear sole reader he doesn't criticise the analysis at all. That is because he cannot.

Finally we get this gem.
"
So the ALP (and their advisers) are not serious about the economy. They make dodgy claims, misrepresent IMF studies, and dismiss concerns about the cost of living and especially electricity as the grumblings of malcontents (who probably smoke too much)."

Well irony on irony. He has made dodgy claims indeed quite false claims. He clearly hasn't read the IMF study and it seems he cannot even comprehend what the Kouk has written.

Given Davidson keeps on comparing current price rises in electricity with Treasury forecasts which are based on constant prices  the last sentence is indeed a gem.

We can then confidently assert both of them make BALD assertions. ( This is pun is for JC).

Catallaxy, Lift your game

Catallaxy is one of the blogs which inhabit the blogosphere which is Australian based.

It used to have a libertarian base when it was run by Jason Soon but now it would be more accurately said to be right wing.

It needs to be said Australia (desperately) needs a quality right wing blog. A right wing version of John Quiggin so to speak.

Unfortunately Catallaxy has, to be euphemistic, poor quality controls.

If you excuse the intemperate language it is now  a blog for idiots, Articles are written for idiots with comments made principally by idiots. It seems the only reason for any article is to enlarge the ignorance of its readership.
This is what we talked about in a previous article on Obama, Austrians etc.

It seems the US system has infected this blog. Faux-facts are paraded, ignorance of readers is enhanced.

Why is this so?
Let us take Henry Ergas. He started out as a right wing spear thrower in the US tradition which was very strange given the company he headed at the time. I have already given an example of how misleading he is.

Judith Sloan, who like to slag other women, finds budget statistics too hard to get right. She also has no idea of what Bernie Fraser has done. She blasted him for being soft on both fiscal and monetary policy and heavily biased towards the ALP. She obviously doesn't know who the Treasury secretary was who helped Paul Keating and Peter Wash transform a budget deficit into a fair dinkum budget surplus ( even got a structural surplus as well). She doesn't know who was the RBA governor who put cash rates to 18%.
nor does she know who was the governor who could have reduced cash rates in 1995 thus assisting (?) the ALP but waited until after the 1996 election to do it!

We have had fun with  Samuel J and his lack of understanding of what affects budgets.

Poor old Rafe rabbits on about poor productivity in Australia when it clearly isn't the case and then asks where he can find evidence for his assertions!

Finally we have Sinclair Davidson.
On some topics such a fiscal policy he has no idea. Only he and Samuel J said the present budget is expansionary when it is clearly contractionary.
 He claimed Australia was about to enter an era of stagflation just when disinflation occurred. He thought the CPI showed Treasury had under-estimated the impact of the ETS when it was clearly the opposite as we have seen in the past. He confuses a rise in the current price of electricity with a Treasury forecast in constant prices.
With a record like that he should go away and hide!


Australia deserves a quality right wing blog for intelligent readers. It doesn't have one at present.

The solution seems obvious. Get rid of everyone there and bring back Jason Soon. Make it the beacon for intelligent libertarians not right wing ignorami. Leave that to Tim Blair.

The evidence of whether it succeeds or not is whether people such as Derrida derider, Labour Outsider, Peter Whiteford come back and regularly comment.

update

I have been asked to provide some examples of the 'best of catallaxy.
Of course it must involve Katesy. notice the quality of the comments.
I have highlighted this before because to quote John Quiggin it involves "bogus statistical claims from fools too ignorant to estimate a trend line and too lazy to learn how, silly IPCC and BOM conspiracy theories, absurd economic alarmism about the allegedly catastrophic effects of the carbon price, CO2 as plant food, and so on."

Further update
I have been asked if I would recommend articles on Catallaxy.I would love nothing more but to recommend an article on my Friday Around the Traps. I doubt if it will happen though. If you write to an unintelligent audience ,as I have outlined above, then it is very hard to write to an intelligent audience. You have to do research on a topic which is hard if you have adopted lazy habits. You need to address any questions rather than simply ignoring them ( See the Katesy link above).
By the way use the comments section please not my personal e-mails.

The election and a tip for Insiders

Election

The Prime Minister has announced she will be recommending to the Governor General in August that an election be held on September 14.

Please note caretaker mode for governments does not occur until Parliament is prorogued   dissolved   by the governor general. It is also usually at this time the opposition leader gets 'equal' status' with the PM on most media. It appears some people do not clearly do not understand this!
Knowing when the election will be held in advance is not new in NSW. We know here exactly when each State election will be held. We know when election campaigns start and when the government goes into caretaker mode. It is a pity more Journalists, bloggers and even opposition politicians took note of this.

There are pluses and minuses for both the Government and Opposition. I would state anyone who thinks most people would like to see a campaign of 6-7 months has rocks in their head.

It is not hard to cost any policy at present given the PBO is now with us. This can be updated when firstly the budget is delivered and then when PEFO comes out ( although MYEFO will probably be released just  before the campaign begins.)

Insiders

Insiders needs overhauling. They need more than just journalists or commentators  on the program.
This was painfully evident when poor old Gerry Henderson said no opposition had produced costed policies for Elections.

Fightback anybody where the Opposition utilised the services of Access Economics.  In 2001 They then helped the ALP. ( After this Peter Costello put so much pressure on Access Economics they never did costings again.) In 2004 the ALP used the Melbourne Institute.

It seems to me the blogosphere offers much better people to insiders.
Bazz, do yourself a favour and make people like John Quiggin, Nicholas Gruen, Ken Parish, Sinclair Davidson amongst others guests on your program.

Obama, Austrians and old Style communists

Ezra Klein  looks at the history of Obama, Reagan and Bush Jnr and finds the recovery would have been stronger if Obama had spent as much as the latter two.
Daniel Kuehn makes the obvious statement that Obama is simply not a Keynesian.

Why do people such as Steve Kates believe otherwise.

Jazzbumpa at Angry Bear is on the money of why. They have no idea of what Keynesianism is.
( UPDATE. Noah Smith also provides evidence of people preferring dogma to evidence.)

In essence they are just like old style communists.Never let the facts intrude on anything. Rabbit on about a subject you have never bothered to understand and never reflect on why you are constantly wrong.

So talk about rising unemployment being the fault of Keynesianism in Europe but avoid the reason that it is austerity that is causing it.
Constantly talk about Japan being mirrored in debt because of failed fiscal stimuli but never mention there were just as many fiscal contractions as fiscal expansions , never mention the fiscal contractions were stronger than the expansions and never ever talk about austerity ending the short lived recovery in the 90s.

'Red neck ' rock

Here is the Marshall tucker Band.

note the guitarist plays guitar with his finger