Wednesday, 31 July 2019

Central Banks and Inflation

Since the GFC we have seen Central Banks essentially powerless in attempting to 'rev up' the economy and thus boost inflation.

Indeed I think we have the confirmation of former RBA Governor Glenn Stevens proposition that reducing interest rates beyond a certain figure is pointless.

monetary policy is increasingly looking impotent with Central Banks increasingly looking to quick to either put up rates or say the next thing for rates is for them to go up. the Fed last night embarrassingly cut rates as their forecasts have proved wrong. the RBA here has also proved to be way too optimistic of economic growth and rising inflation.

This leads to the obvious question of what Central Banks can do?

At some point , let us call it 3% in Australia the Central Bank should say to the government of the day you need to increase infrastructure spending to kick start the economy. In our case the RBA Governor should sat those projects should be only from the 34 o projects ready to go that are on Infrastructure Australia's list. The present government has only @ projects that they are presently spending money on from that list.

The other thing that appears to be needing to be done is to actually re-regulate the industrial relations system so unions can get wages to rise again.

Wages need to rise for inflation to rise.

Let us add in a caveat .Central Banks should wait until they are quite sure that inflation is on the rise. Maybe wait until inflation on an underlying basis reaches 4% before raising interest rates. No need to  be premature about inflation until it occurs me thinks.

I should add reducing interest rates when they are low merely boosts assets prices rather economic activity

Austan Goolsbee  why rate cuts are not helpful

Tuesday, 30 July 2019

Poll Roundup

We have Kevin Bonham on the ball with Newspoll's first pol since its inglorious polling failure of the last federal election.
He again goes into the polling failures which Newspoll fails to address.

Monday, 29 July 2019

Why are some Ex MPs so greedy?

I find it amazing that most but not all MPs whom retire get their super right away  unlike us ordinary mortals. This is of course tax free. for Tony Abbott for example no tax means he is earning more he is not an MP than when he was!

Let us assume they retire on $150 k tax free.

Can you tell me why they then have to go out make a make truckloads of money such as Bishop and Pyne will do.

How about doing some voluntary work for your local community or even the national community. Why are they ( and let us make if very clear this is a bipartisan stance here) so keen to make as much money as possible utilising the skills they used in politics. Why are they sooo greedy?

A simply policy change can change all this. Only allow them to super payments once they pass the required age like all of us. They are double dipping in the worst fashion at present.
This criticism does not apply to MPs who have become MPs since 2004 and are on a super scheme just like most of us!

Sunday, 28 July 2019

Can a Christian support smaller government

Let us just take a step back firstly on this issue.

We know God judges governments on how they treat the poor and needy under their jurisdiction.
We also know from Jesus the poor and needy will always be with us.

Can smaller government cope with the poor and needy?  Well if you believe in smaller government then you believe more money should be left with taxpayers thus indirectly it would be the private sector who assists the poor and needy.

We know this doesn't work as it was this exact rationale why an expanded government sector was needed and hence the rise of social welfare in every developed nations budgets.

We can actually put some meat on the bones of this topic in Australia. in the last election the ALP somewhat ironically and their supporters even more ironically had a platform their christian forebears would have heartily supported.
In one specific instance they would have ended the tax rort of ranking credits and enabled pensioners to gain free dental treatment.

So in Australia we have the ultimate   irony of a party that is now very secular having a very christian platform and another party who allegedly is christian having a very secular platform

Thus no a Christian cannot support smaller government!!

Thursday, 25 July 2019

Around the Traps 27/6/19

It is time after a break to resume Around the Traps

Northern America
Andrew Gelman ( mainly stats)
Genial Dave Giles ( econometrics)
Dianne Coyle   (quirky + book reviews)
Vox wonk

Wednesday, 24 July 2019

Yield Curve Madness

Francess Coppolla has written about this recently.

I confess I am an old yield curve junkie and I would add something she has not.
In only one example she gives ( the USA) has the Central Bank actually raised short term interest rates. Indeed even in this case I would not be surprised that most of the inversions has occurred  because of bond yield falling not because ob central banks raising short term interest rates ( because of rising inflation).

This Menzie Chinn at Econbrowser has quite a few times examined the yield curve in the USA.

Thus I am only worried about the inverted yield curve causing a slowdown/ recession  in the USA. You will see Australia is part of this pattern. We will not have a recession/slowdown here because of this for the reason I have stated.

Tuesday, 23 July 2019

Should Newstart be raised.

Newstart or the dole as it used to be called should be raised as it is very hard to live on whilst looking for work.
Peter Whiteford gives his typical thoughtful and well researched approach in finding out whether people are on it for a short or long time.
Ross Gittins tells us increasing the dole ( Ross it aint  called that anymore) will help people getting a job.

Since I have been either been made redundant or retrenched  I do know what is involved in finding a job.
It is a very involved job in fact. I was lucky because both times I was given professional help in finding a job.
In essence you use your network to find out jobs which are never advertised. This involves a lot of phonecalls and coffees.

In my instance I was not eligible for newstart. My wife worked and the money owed me ensured this.
In both cases I thought the process was getting me nowhere when suddenly a job appeared.

So I agree with Ross. Increasing newstart certainly helps you in attempting to find a job.
People can see straight away work for the dole is perhaps the worst strategy for people looking for a job.
Very late:
Greg Jericho

Monday, 22 July 2019

I have had it with John Quiggin

John Quiggin and his ilk have increasingly become intolerant on social issues however yesterday he went a bridge too far.

He wrote an desultorily article on racism. I didn't think much of it until some one brought up the traditional left wing red herring of Adam Goodes being booed because he was black in other words the booing was racist.
I have previously commented on this issue.

I made the comment at John's site it was absurd to call the booing racist.

Why was ONLY Goodes booed? how come his fellow aboriginal teammates at the swans in the same match not booed if the booing was racist? How come aboriginals in the opposing team were not booed? Only Goodes amongst some 70 aboriginals who played AFL was booed.

This was not good enough  for John. He didn't allow debate at all. indeed he accused me of promoting racism.

Well  John I was born in Bowraville NSW.. People who exhibited racist attitudes towards aborigines did not hold back and it was NEVER against only one aborigine it was against all aborigines.
There is no such thing as the selective racist

I therefore have taken off John's blog from my sidebar. His blog is as intolerant and bad as Catallaxy

I shall continue to have any articles John writes on economics on my Around the Traps when warranted.

Sunday, 21 July 2019

I'm Baack

The family decided to have a week off and so I decided to have a whole week off from current affairs and blogging . I did not go near a computer or TV during the time.
I watched a lot of shows and read a lot.
Observations from my journey to Melbourne and thence to Blayney.

  • From Goulburn and then until we almost reached Blayney the grass was quite green. I was surprised by this. The drought has not affected these areas. Even in Blayney/ Orange the grass was more darkish brown than the dreadful light brown It is amazing how much better a road trip is when you view green grass.
  • Goulburn was much colder than Blayney given it wind ( gale!). I also felt Melbourne was not as cold as Sydney but has more showers and wind.
  • I finally watched the first two seasons of Line of Duty. The series is a corker and I can see how it all comes together.
  • Blayney has the best fish and chips in the World and their best shop was not even open mysteriously.
  • I loved the luxury of sleeping in in Blayney ( very easy when it is cold) and then getting a coffee with required blueberry muffin for breakfast.

Thursday, 11 July 2019

Around the Traps 12/7/19

It is time again for Around the Traps.

out a bit early and do not know whether I can update or not

Northern America
Andrew Gelman ( mainly stats)
Genial Dave Giles ( econometrics)
Diane Coyle (quirky + book reviews)
  • nuttin
Vox wonk

Wednesday, 10 July 2019

Kates wrong again

I am going to take a blog break.
My second last article is showing hoe Kates is wrong again.
HERE he alleges stimulus spending is no good..
Please note he alleges there was a slowdown at the time. at other times he has actually used the word recession.
Let us start at March 1995 and go through to December 1996. What occurred to GDP.
2.0, 2.1, 3.6, 2.7,4.4, 4.3, 3.3,4.1

That some slowdown. How about the slashing of spending. It was reduced by a mere 0.5% of GDP. Swan cut spending in NOMINAL terms
A shame about the facts and naturally no-one picked him up about it.
Whoopsy I forgot two important things here.
First Costello actually gave back most of his cuts in the next few budgets.
Secondly the budget coming back into balance came about exactly when the last Willis budget projected it to be so.
Perhaps I should also add debt was cut not by surpluses but be asset sales Telstra being the main one of course.

I could even say the only countries that adopted Kates madness in terms of fiscal policy got themselves a depression ) a reduction in output of 10% or more).
Katesy has himself a great record.

Meanwhile the Kouk helps us out in terms  of stimulus.

Tuesday, 9 July 2019

The Murray-Darling problem

The Murray-Darling rivers are an absolute mess.

Two recent articles sheds light on the problem

Well worth reading

Monday, 8 July 2019

The Phillips Curve revisited

We have had three articles on the Phillips curve.
This is especially important as most central banks live by the theory however it appears to be dying?

I have to admit it is very interesting to speculate on why wages do not rise much in a recovery these days anywhere

Sunday, 7 July 2019

Kevin Bonham again on our polling woes

More from the imitable Kevin Bonham on the polling disaster that was the last election.

He is thin king maybe it was Morrison that was the reason. Read it and fiind out

Thursday, 4 July 2019

Around the Traps 5/7/18

It is time for Around the Traps again.

Northern America
Andrew Gelman (mainly stats)
Genial Dave Giles (econometrics)
Dianne Coyle ( quirky + book reviews)
Vox wonk

Wednesday, 3 July 2019

Three great shows end on the ABC

My television viewing will not be the same.
The ABC had/ three wonderful so hows on over the weekend that end/ending up.

I think could very well be the best TV series i have ever watched. It is a british crime series and all the characters are terrific. and they change and thus are developed well.
both Shaun Evans as Morse and the writers have benefited from Inspector Morse.That was an average series  and john Thaw was an equally average actor. Whereas the entire cast is first class and each episode is simply wonderfully entertaining. I do hope there is another season coming. The final episode was so good I have watched it twice.

Second is SHETLAND
No need to guess where it is set and it is always set in summer so wearing of warm clothes is essential!  The scenery is fantastic and those glorious scottish accents but it is up there as a police drama. I am looking forward to the next season.

Lastly there is our very own HARROW
I thought the first season was average  and I only watch because I am a huge Ion Gruffud fan however the second season was amazing. The writing, acting etc all stepped up a notch. The last episode occurs on sunday and I am looking forward to it.

Just what am I going to watch now

Tuesday, 2 July 2019

Another interest rate cut.

The RBA is definitely worried.They cut rates well before the next CPI release.
As usual others have got in before me
Firstly Ricardo Ambivalence has his say and his article has links to Lowe's speech.

and also The Kouk has his.

I am now of the mind the RBA should not cut below 1% for any amount of reasons:

  • effect on retail rates
  • little in the locker if things deteriorate
  • Cutting raters below 1% won't have a great effect anyway
  • Having two apartment towers with building problems must have an effect on the housing market
The way to go is fiscal policy infrastructure spending in particular.
Infrastructure Australia. has a list of priorities which both the Government and Opposition ignore when trotting out what they with to spend on. The priorities show which projects have the biggest bang for the buck and so will grease the wheels of the economy better.

Do it and do it now

Monday, 1 July 2019

Split the tax bill

The Government will put its tax bill which involves three tranches, today in Parliament.

 The Grattan Institute has a great article on why the bill should be split. I totally agree with it.
My mate Ricardo Ambivalence on the other supports the bills for different reasons mind you.

Now he has sound points on his side however I feel , as Grattan point out, there are valid criticisms to be made of Treasury's projections that allows the tax cuts and also gets a small surplus. As I have said previously I suspect these projections will have to be revised and if so the tax cuts then become a noose around Morrison's neck.
I have a simple method to determine whether tax cuts lead to structural deterioration. If not accompanied by spending cuts then of course they will. These tax cuts have no accompanied spending cuts. They always rely on rising tax income just like Howard and Costello did before the GFC.

We shall see what occurs.