|IndyWatch Australian Economic News Feed Archiver|
IndyWatch Australian Economic News Feed was generated at Australian News IndyWatch.
In the final week of the Queensland election campaign, Ive been busy trying to do what I can to influence the result. Ive put out a couple of opinion pieces about the choice between coal and renewable energy. This one, in The Guardian, focuses on the central role of the culture war in motivating rightwing opposition to renewable energy. In The Conversation, I look at the economics and business aspects and debunk the idea that ultrasupercritical technology makes coal-fired power a high efficiency, low emissions technology
Also, in New Matilda, Im collaborating with Morgan Brigg and Kristen Lyons of the Global Change Institute to produce a five-part series on Adani and the resistance to the project by the Wangan and Jagalingou people.
The head of the Australian Prudential Regulation Authority
(APRA), which was created in 1998 as part of the sham to separate
regulation from policy and pretend the Reserve Bank of Australia
was independent, gave a speech in Sydney yesterday (November 21,
Housing The importance of solid foundations. The reason the
speech is important is because it demonstrates the disconnect in
policy making and the failure of key policy makers and regulators
to connect macroeconomic dots. Australia like the rest of the world
needs politicians and officials who understand how the
macroeconomic aggregates are connected. One cannot have a
conversation about household debt without recognising that it is,
in part, directly related to the fiscal position of the government
and the nations external position. While the APRA boss is correct
to highlight the precarious nature of household balance sheets
given the record and increasing debt levels being borne by
households who are experiencing a wages squeeze and a government
intent on austerity cuts, he should be educating the public on the
broader context. Then there would be more acceptance of expanding
discretionary fiscal deficits and a wages policy designed to bring
real wages growth back into line with productivity growth. If that
was the case, much of the idiotic conversations some masquerading
as research results would disappear.
The Speech was delivered to the so-called Australian Securitisation Forum 2017, which in itself is a problem. Banks should be prevented from securitising its housing loans and taking them off their balance sheets.
A progressive reform process would certainly see banks being required by the regulators to hold all their assets and liabilities on their balance sheets so that the owners bore full responsibility for the decisions made by the organisation.
A more progressive reform would just nationalise banking and be done with it.
The message in the Speech was that the housing sector in Australia is now in a risky position due to the record levels of debt being carried by Australian households.
He talked about heightened risk arising from an erosion in lending quality just at a time when standards should be going in the other direction.
Just last week we learned that one of the big 4 banks in Australia:
has sacked 20 bankers and disciplined another 32 over the selling of mortgages without accurate customer information and documentation about 2,300 home loans sold since 2013 that were likely to contain inaccurate information.
For more details on that, see the ABC News story (November 16, 2017) ....
Markets are holding their collective breath.
Not much is happening.
But the potential for huge moves has not been greater since late 2015.
The euro is meandering between $1.16 and $1.17
Gold is going sideways between $1,270 and $1,295 per ounce
The yen is trading around 113 to the dollar
The yield to maturity on a 10-year Treasury note is stuck around 2.35% with just small moves on a daily basis.
If you had positions in these global macro markets two weeks ago and spent those two weeks in a submarine without surface communications, you would have emerged from undersea to find nothing had changed. Its as if you were never away.
Of course, the mother of all complacency metrics is volatility in the stock market.
Its near all-time lows and has been stuck there for an unprecedented period of time.
No worries here its all good.
Why are markets moving sideways in a complacent, almost zombie-like state?
The reason is that the world is waiting for the Fed
The Feds FOMC meets 13 December to make a decision on interest rate policy.
This is the second key date I talked about with James Woodburn in our exclusive interview.
Near to no one is watching this. Or they are looking the wrong way.
And thats too bad
Its too bad that so many so-called free markets are in thrall to the Fed. That means theyre not really free at all.
Markets are creatures of manipulation by Fed policy changes, statements, forward guidance and the other prestidigitation of modern central banks.
Thats what you get after 10 years of ZIRP, QE, tapering, QT, forward guidance, currency wars and musings about NIRP.
The Fed has painted itself into a corner and theres no way to escape the room.
Get ready for a shock on 13 December
The market is in an asymmetric unstable equilibrium.
Right now markets are giving odds of a Fed rate hike in December at close to 100%.
This is what I mean when I say people are looking at this in the wrong way.
This means that markets have priced in 100% of the impact of that policy choice.
It also means that if the Fed does not hike rates, markets are in for a shock and will have to re-price violently.
My estimate of the odds of a Fed rate hike in December is about 35%.
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An article has been doing the rounds House of Cards by Matt Burnie and Craig Tindale, that we highly commend. Rarely do articles array so much data in devastating order. There must be over 100 links highlighting the risky nature of our economic miracle from one industry after the other. Whilst the authors 
[ Thursday, 7 Dec; 6:30 pm; ] Lets celebrate members and volunteers for a great year of events and forums continuing our vision for Armidale to be a lovely sustainable town to live in. Its simple: bring a picnic blanket, some finger food and drink to share. The festivities will happen at the new time of 6.30pm Thursday 7th December at the Armidale Community Garden [...] full article
One hundred and fifty years ago on Tuesday The Sydney Morning Herald broke news that these days would be considered shocking.
The first 'life table' prepared for the British colony put the expected lifespan of a newborn non-Aboriginal Australian at just 45.6 years.
The Bureau of Statistics now gives newborns a lifespan of 82.5 years; 80.4 for boys, and 84.6 for girls.
And that's almost certain to be an underestimate. Improvements in medical technologies throughout 80 years of life are likely to add an extra four years to those totals.
On November 7, 1867, the life table was good news. We were better off than England where newborns got only 40.9 years, and better off than Belgium where they got 32.2.
And things were even better than the raw figure of 45.6 years suggested. An extraordinary 10.6 per cent of newborns (10.6 per cent of boys, 9.8 per cent of girls) died before they reached the age of one. If you survived to the age of one, you were likely to make it to 51.
From today's vantage point it looks as if life expectancy has always increased, but it hasn't, for decades at a time. The 1960s were what Melbourne University demographer Alan Lopez refers to as the "tobacco years". Life expectancy increased not at all.
For older Australians life expectancy scarcely increased for 50 years, between 1920 and 1970. It was only after 1972 when the tobacco use was brought under control (it didn't finally peak until 1978 - 1980) and progress was made against heart attacks that it began to grow again.
In recent years, newborns have been gaining an extra year of life every two and a half years. Australian National University demographer Liz Allen can't see an upper limit, although she concedes it will be more difficult. Controlling tobacco, preventing heart disease and making driving safer were easier to do than it would be to extend the lifespan of the parts of our bodies with built in obsolescence. Our bodies weren't designed to last too many years beyond childbirth, she says.
Alan Lopez says we've already harvested most of the low-hanging fruit. "The gains in lung cancer, chronic heart disease and the tobacco causes will continue, but at a much slower rate," he says. The gains from road accidents will depend on whether we adopt strict road rules of the kind Sweden has where there is a zero tolerance for alcohol.
At a public lecture to be presented at Melbourne University next week, he will suggest that life expectancy will continue to climb for the next 25 years, but at half the rate of the previous 25 years.
The biggest ob...
Why do people feel so rotten?
It's because they don't believe the federal Treasurer when he says there are "better days ahead".
He's said it 25 times, roughly once a week since April.
If things were really looking up, retailers wouldn't need to cut prices to maintain sales. During the June and September quarters, retail prices fell 0.2 and 0.4 per cent. Fell. It's rare for prices to fall across the entire retail sector for an entire quarter. It's even rarer for them to fall for two consecutive quarters, and rarer still for them to fall that much. It's the biggest wave of discounting this century.
What did the price dive deliver? An increase in spending of 1 per cent. In department stores, where prices slipped 0.3 per cent, spending slid 2.2 per cent.
ShopperTrak monitors retail traffic in real time. Store owners and shopping centre managers feed it video, Wi-Fi and the output of heat sensors to enable it to work out how many people are in participating stores at any given time and how long they stay. In September, foot traffic was down 6 per cent on the same period the previous year. In the first three weeks of October, it was down 7.5 per cent.
It's partly because we're switching to shopping online, where, for big items, we can get lower prices, often from overseas. But it's also because, even with low and sliding prices, we are less keen to shop.
Ask us whether we expect better or worse conditions in the year ahead, as the Melbourne Institute does every month, and only 21 per cent say "better". That's the average for the past 12 months. Back in the final year of the Gillard government and the last months of the mining boom, 30 per cent said better. Back further in the last year of the Howard government, 33 per cent picked better.
It's the same when you ask about the next five years: only 21 per cent of us expect better times; 26 per cent expect worse. Back in the final year of the Howard government 44 per cent of us expected better times, and only 22 per cent expected worse.
Like businesses reluctant to invest whatever the interest rate, households that are wary will be reluctant to spend whatever the price. Officially, inflation is just 1.8 per cent, keeping pace with record low private sector wage growth of 1.8 per cent. But 1.8 per cent is an overestimate.
The Bureau of Statistics conceded as much on Monday when it revamped the consumer price index to take into account changed buying patterns. The index measures the price of the basket of goods that is said to represent the purchases of a typical consumer. But what's typical changes over time.
Here is a summary of another interesting study I read last week
(published March 30, 2017) Happiness at Work from
academic researchers JanEmmanuel De Neve and George Ward. It
explores the relationship between happiness and labour force
status, including whether an individual is employed or not and the
types of jobs they are doing. The results reinforce a long
literature, which emphatically concludes that people are devastated
when they lose their jobs and do not adapt to unemployment as its
duration increases. The unemployed are miserable and remain so even
as they become entrenched in long-term unemployment. Further, they
do not seem to sense (or exploit) a freedom to release some inner
sense of creativity and purpose. The overwhelming proportion
continually seek work and relate their social status and life
happiness to gaining a job, rather than living without a job on
income support. The overwhelming conclusion is that work makes up
such an important part of our lives and that result is robust
across different countries and cultures. Being employed leads to
much higher evaluations of the quality of life relative to being
unemployed. And, nothing much has changed in this regard over the
last 80 or so years. These results were well-known in the 1930s,
for example. They have a strong bearing on the debate between
income guarantees versus employment guarantees. The UBI proponents
have produced no robust literature to refute these long-held
While the Happiness Study notes that the relationship between happiness and employment is a complex and dynamic interaction that runs in both directions the authors are unequivocal:
The overwhelming importance of having a job for happiness is evident throughout the analysis, and holds across all of the worlds regions. When considering the worlds population as a whole, people with a job evaluate the quality of their lives much more favorably than those who are unemployed. The importance of having a job extends far beyond the salary attached to it, with non-pecuniary aspects of employment such as social status, social relations, daily structure, and goals all exerting a strong influence on peoples happiness.
And, the inverse:
The importance of employment for peoples subjective wellbeing shines a spotlight on the misery and unhappiness associated with being unemployed.
There is a burgeoning literature on happiness, which the authors aim to contribute to.
They define happiness as subjective well-being, which is measured along multiple dimensions:
life evaluation (by way of the Cantril ladder of life), positive and negative a...
[ Sunday, 26 Nov; 11:00 am; ] Hi Armidale folk, there will be a crew catching the train, attending the rally (which was moved back so you would make it on time) and then having lunch together :) Hear from experts about the effects of climate change on agriculture, the potential for renewable energy and candidates for the seat of New England. Train: Depart [...] full article
[ Friday, 4 May to Sunday, 6 May. ] "Gathering of the Geeks" Electric Vehicles Expo Where: National Transport Museum Inverell NSW 2360 When: 4th to 6th May 2018 [embed width="520"]https://www.youtube.com/watch?v=pY65V5uDEM8[/embed] Visit the New England in Autumn for the first Electric Vehicle Expo and Motor Show held over 3 days and 3 Shires. The National Transport Museum is the largest in New England (4000m2 under one [...] full article
[ Thursday, 23 Nov; 6:30 pm; ] Making renewable energy projects work for the whole community. A free information forum for landholders and neighbours living near large scale renewable energy projects, with lessons from projects around Australia. Understand contracts you may be offered and how financial benefits are shared throughout the broader community Hear lessons from the National Wind Farm Commissioner, Andrew Dyer, [...] full article
The British Empire, which at the end of the 19th century ruled one quarter of the earths land surface, is long gone. But its robust successor and heir, the United States, has set about enlarging it.
As I sought to explain in my last book American Raj How the US Rules the Muslim World, the US imperium exerts its power by controlling tame, compliant regimes around the world and their economies. They are called allies but, in fact, should be more accurately termed satrapies or vassal states. Many states are happy to be prosperous US vassals, others less so.
The US power system has successfully dominated much of the world, except of course for great powers China, Russia and India. Germany and much of Western Europe remains in thrall to post WWII US power. The same applies to Canada, Latin America, Australia, and parts of SE Asia....
Cambodias Supreme Court has dissolved the countrys main opposition party, denying millions of Cambodians the opportunity to vote for their elected representatives in elections next year.
The verdict follows a sweeping crackdown on democracy and political freedoms in the country where Australia has an agreement to send refugees from Nauru and Manus Island.
More than half of the leaders of the National Rescue Party (CNRP), which Prime Minister Hun Sens government asked the court to dissolve, are already in jail or have fled the country.
The court also ordered a five-year ban on political activity for 118 members of the party, which had emerged as a threat to Mr Hun Sens three decade-rule.
The government has accused the party of plotting to overthrow the government with help from the United States, which strongly Washington denies.
Party leader Kem Sokha was jailed in a raid on his home by more than 200 police on September 3.
Human rights group slammed the verdict in the country, where they say the courts ar...
The physical fundamentals are stronger than ever for gold. Russia and China continue to be huge buyers. China bans export of its 450 tons per year of physical production.
Gold refiners are working around the clock and cannot meet demand. Gold refiners are also having difficulty finding gold to refine as mining output, official bullion sales and scrap inflows all remain weak.
Private bullion continues to migrate from bank vaults at UBS and Credit Suisse into nonbank vaults at Brinks and Loomis, thus reducing the floating supply available for bank unallocated gold sales.
In other words, the physical supply situation has been tight as a drum
The countdown to war is on
The problem, of course, is unlimited selling in paper gold markets such as the Comex gold futures and similar instruments.
One of the flash crashes this year was precipitated by the instantaneous sale of gold futures contracts equal in underlying amount to 60 tons of physical gold. The largest bullion banks in the world could not source 60 tons of physical gold if they had months to do it.
Theres just not that much gold available. But in the paper gold market, theres no limit on size, so anything goes.
Theres no sense complaining about this situation. It is what it is, and it wont be broken up anytime soon.
The main source of comfort is knowing that fundamentals always win in the long run even if there are temporary reversals. What you need to do is be patient, stay the course and buy strategically when the drawdowns emerge.
Where do we go from here?
There are many compelling reasons why gold should outperform over the coming months.
Deteriorating relations between the U.S. and Russia will only accelerate Russias efforts to diversify its reserves away from dollar assets (which can be frozen by the U.S. on a moments notice) to gold assets, which are immune to asset freezes and seizures.
The countdown to war with North Korea is underway, as Ive explained repeatedly in these pages. A U.S. attack on the North Korean nuclear and missile weapons programs is likely by mid-2018.
Finally, we have to deal with our friends at the Fed.
Good jobs numbers have given life to the view that the Fed will raise interest rates next month. The standard answer is that rate hikes make the dollar stronger and are a head wind for the dollar price of gold.
But I remain sceptical about a December hike. As I explained above, the market is looking in the wrong places for clues to Fed policy. Jobs reports are irrelevant; that was mission accomplished for the Fed years ago.
The key data are dis...
Youve read about the War on Cash here the Daily Reckoning for years now. The idea has sprouted all sorts of variations and books around the world. Today Ill show you why its a false lead.
I think the world is in for a War for Cash, not a War on Cash. Well see a cash grab, not the abolition of paper money. Itll be a mad rush for cold hard currency the physical kind.
In the age of digitalisation, electronic payments using only someones phone number, and cryptocurrencies, this sounds a little odd. The thing is, we live in a real, tangible world. For now, anyway. And that means theres a gap between your life and the digital payments system. One that can widen into a chasm without any warning. Except the one youre reading now.
Many years ago, I moved to Melbourne for my first real job. (Flying trapeze gigs are more of a hobby.) To secure a flat, I had to come up with a bank cheque to pay the deposit. But my bank refused to give me one because my bank account was with their stockbroker division. The stockbroker account had all the benefits of a bank account for free and with higher interest. All the benefits except allowing bank cheques, that is.
If it hadnt been for a large wad of cash from an unexpected source, whom many of you know as a former editor of The Daily Reckoning, I wouldve missed out on the flat. Cash saved me when the digital banking system failed me.
Then came the great Australian bank failures. You might remember them. One after the other over a course of months, Australian banks had tech glitches that led to their ATM cash machines going down. People couldnt get money for a few hours each time. It caused quite a mess, especially for elderly people without updated payment cards.
This happened in a country thats very advanced when it comes to digital banking. And that was precisely the problem. Our overreliance on digital payment systems working.
Speaking of which, in India, the turmoil caused by going cashless was all over the newspapers. Vox summarised the mess:
One study, from the All India Manufacturers Organization, found that micro and small-scale industries showed a whopping 35 percent job loss and a 50 percent decline in revenue in just the first 34 days since the policy went into effect, and that those numbers are likely to continue to increase in coming months. Earlier this month, the International Monetary Fund said that Modis policy had caused India to lose its title as the worlds fastest-growing economy, after shaving a percentage point off its projection for Indias growth in 2016. Many of Indias small businesses that handle all their transactions in cash have facing crippling blows to their business.
The New York Times loo...
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