I always wondered (well, ever since I have wondered about these things) why we had to get inflation down to 3%. What are the advantages of an inherently low inflation rate, over say one at 4 or 5%? Sure, when inflation is higher, you have wages and prices playing catch up, but so what? That's only a bit of mild disruption to the economy, surely. As long as inflation doesn't spiral out of control - is that the only real fear?
Or is it simply as you say, lower interest rates are good because they bolster the RBA's reputation - for keeping interest rates low?
The US election suggests that inflation around 3% does impose significant psychic costs on citizens, especially when accompanied by volatility in the prices of frequently purchased staples like eggs and gasoline. It's unclear why.
The privatisation of airports made small aircraft companies more difficult to sustain. With major airlines dominating the best airport facilities, smaller regional airlines are pushed out. They will never prosper until they are given a fair go at airports.
The vast majority of Australia's mineral wealth should be nationalised and the profits used to fund public services. Multi-billionaire mining magnates should not exist.
[1] Since Reagan, the rich and the corporations have had their tax burden dramatically reduced and will fight tooth and nail to keep it that way, so govt revenue has been kneecapped.
[2] Revenue raising assets were sold to the private sector and there will be legal difficulties for the govt to re-aquire them except at great cost (and the govt hasn't got the revenue base from which to buy them back.
....
The buccaneer capitalists set this up as a perfect way to destroy what they saw as "socialism". More accurately, they created a massive corporate welfare scheme. Undoing this will be nigh on impossible. This is the Ponzi Scheme Australia has bought shares in. Good luck.
It seems that while most economists favour central banks raising the inflation target they fear that this will threaten the credibility of the central bank thereby destabilising the private sector.
I am not surprised or saddened by the fact that Australian companies continue to extract coal and gas (largely without paying royalties) in order to flog it overseas. I am red-hot ropable. Our current government was elected largely on the basis of its promises to address climate change and environmental degradation. Since then, it has done nothing but walk away from these commitments, with Minister Plibersek, as you note, hiding behind behind excuses that 'the law doesn't allow her to consider the impact of climate change on the environment'. I will be part of Rising Tide's 'People's Blockade' in Newcastle (and Canberra) 22-28 November, and encourage others to get along when they can to show how furious we are. https://www.facebook.com/events/325493453581433/
Your link to comments on Conservative Professors led me here John.
Medieval Religious Universties were undoubtedly conservative but changed as their knowledge was challenged by science in particular.
Correlation between income & Republicans not unexpected but it’s interesting in Australia that Greens supporters have the highest education & income & aren’t exactly conservative 😉
An important technical question apart of the unit of randomisation is the statistical issue as to whether to assess using a superiority vs a non-inferiority hypothesis. In general, in health care, we woiuld use a non-inferority hypothesis as the standard for assessing an alternative treatment wihich is preferable for some reason (e.g., cheaper, less invasive).
"Although no well-developed alternative has emerged, hardly anyone takes the [efficient markets] hypothesis seriously any more. The booming market of cryptocurrencies – assets with few practical uses – is the clearest illustration of this point."
it took me a while to parse "this point". The missing link is the observation that in spite of their relative success in speculative financial markets, and even as means of payment in Argentina, crypto lacks significant intellectual backing from established economists of left and right.
I'd be interested in JQ's views on central bank virtual currencies like Brazil's Drex. These would be run by central banks, I think using fashionable blockchain tools for validation. I don't myself see what value is added by this complexity. Old-fashioned tools like central market counterparties, indeed good old double-entry accounting, have done the job perfectly well up to now. The success of the existing Brazilian retail payments system Pix, also run by the central bank, does suggest significant savings from socializing the payment system and cutting out the bloated fees of the credit card duopoly. Note that Pix does not cut out the commercial banks, as users need to hold current bank accounts, and the banks can charge regulated service fees to retailers.
I hadn't heard about Argentina, but it appears that crypto used mostly for money laundering, resulting in a recent crackdown. This survey of electronic retail payments doesn't even mention crypto
We don't need to consider the views of economists, established or otherwise. Crypto was designed as a currency and failed miserably. Offshoots (NFTs, Defi, blockchain apps) have gone nowhere. Anyone can see this. Economists are needed only to explain that fiat currencies work because they can be used to pay taxes, unlike crypto.
Blockchain has the modest technical advantage of automatic reconciliation of accounts. Otherwise, a permissioned blockchain is functionally identical to the registry-based systems used by financial intermediaries today. It is technologically quite different, but technology is best left to real technologists. (Hint: Elon Musk is not a real technologist. He just plays one on teevee.). Nobody else cares if bank computers use stressed silicon, or even what stressed silicon may be. Same with blockchain.
Central bank digital currency is not the same thing as central bank intermediation in the payment system. The former cuts the banks out of the money-creation business. They can still lend money, but would have to obtain it from others--likely enough the central bank itself. This would indirectly involve the central bank in credit allocation, which--depending on your version of political economy--is either heaven or hell.
I did Labour Economics in my university degree. I must say I enjoyed it enormously as an academic subject. But, on reflection, what I read at university had little to do with what was happening n Australia. I went to school in the 1960s. Back then boys studied at school until they were 14 years and nine months of age. Then they had two options. They could leave school and take up an apprenticeship or cadetship; about 40 per cent did this. Alternatively, they could stay on for their HSC. This was seen as a path to tertiary studies. Apart from two experiments with TransEd programmes, this was aimed at tertiary education. About twenty percent sought entry into university.
The apprenticeships back then were harsh. But young boys out of school had few alternatives before the days of professional sport.
The tech Colleges were used to train up men for trades. The pay was low until the tradie got their own business up and running.
Today there are government subsidies, trade education tax concessions and apprenticeship support programs. Their effectiveness is rarely investigated properly. New programs are introduced as sone fantastic improvement but there is little or no back-end analysis.
As for university training there is little accountability. The same could be said for the provision of degrees. In the past, a degree was a guaranteed pathway to employment. Today many undergraduates give up as they fail to see any clear pathways to paid employment.
What is the answer?
Depends on the question.
A detailed analysis of the effectiveness of all post school education opportunities needs to be urgently undertaken. Merely bringing in trained migrants is not the answer.
The probabilities assigned to what you have look reasonable to me. I'm not sure whether you conceive of "popular resistance" as including strong resistance (i.e., suspending acknowledgment of federal authority) by blue state governments. Trump redux is likely to be sufficiently horrible that that probability might be relatively high. (I think that the probability of outright secession by any blue states is close to zero.) Then one would need additional alternative branches into (1) Lebanon-style civil war, and (2) paralysis of the US federation, and thus also its paralysis as an international actor.
This is one of the most difficult areas for government intervention. It is no less difficult in terms of taxation issues. This mix makes for a less than efficient allocation of available housing resources and for the provision of new homes. In every proposal the Prateo Optimum must be considered. If new buyers are to be helped in any way then it must be first established that this will not disadvantage renters. Giving first home buyer subsidies may reduce the stick of rental properties. Alternatively any rental assistance must not cause the loss of supply of new homes. athena two areas are linked. Correlations must be addressed. endure unintended consequences destabilise either, the housing market, or, the rental market.
My one suggestion is to put a time frame on Air b&b concessions. By restriction this type of very short term rental to agreed holiday periods, you may find that less rental properties lay idle at certain times of the year.
We forget our history to our peril. The equivalent treaty to AUKUS back in 1942 was the one with the British government and the governments of Australia and New Zealand. It stated that if attacked the British navy would defend both firmer colonies. Bur when Darwin was bombed, and later Townsville, there was not a British Naval ship anywhere to be seen. For the next three years the British Navy confined its ships to home waters. Australia was left to fend for itself. Luckily our PM insisted that all Australian fighting men return home to defend our shores. Churchill wanted to keep the ANZACS where they were fighting the Germans.
Treaties are just words on paper. I don’t think Hitler was the first politician to work that one out. The AUKUS treaty is no guarantee of safety in times of war. Australia is foolish to rely solely on such a treaty.
I always wondered (well, ever since I have wondered about these things) why we had to get inflation down to 3%. What are the advantages of an inherently low inflation rate, over say one at 4 or 5%? Sure, when inflation is higher, you have wages and prices playing catch up, but so what? That's only a bit of mild disruption to the economy, surely. As long as inflation doesn't spiral out of control - is that the only real fear?
Or is it simply as you say, lower interest rates are good because they bolster the RBA's reputation - for keeping interest rates low?
Inflation reduces the value of any "store of value" that is denominated in currency. https://www.investopedia.com/terms/s/storeofvalue.asp
The US election suggests that inflation around 3% does impose significant psychic costs on citizens, especially when accompanied by volatility in the prices of frequently purchased staples like eggs and gasoline. It's unclear why.
CSL another tragic example.
The privatisation of airports made small aircraft companies more difficult to sustain. With major airlines dominating the best airport facilities, smaller regional airlines are pushed out. They will never prosper until they are given a fair go at airports.
The vast majority of Australia's mineral wealth should be nationalised and the profits used to fund public services. Multi-billionaire mining magnates should not exist.
Look what happened to Norway. 79% tax on oil and gas. And the have well over a trillion $$ USD sovereign wealth fund for country of 5 million.
What do gas corporations pay in Australian tax ? Zero
Two problems:
[1] Since Reagan, the rich and the corporations have had their tax burden dramatically reduced and will fight tooth and nail to keep it that way, so govt revenue has been kneecapped.
[2] Revenue raising assets were sold to the private sector and there will be legal difficulties for the govt to re-aquire them except at great cost (and the govt hasn't got the revenue base from which to buy them back.
....
The buccaneer capitalists set this up as a perfect way to destroy what they saw as "socialism". More accurately, they created a massive corporate welfare scheme. Undoing this will be nigh on impossible. This is the Ponzi Scheme Australia has bought shares in. Good luck.
It seems that while most economists favour central banks raising the inflation target they fear that this will threaten the credibility of the central bank thereby destabilising the private sector.
I am not surprised or saddened by the fact that Australian companies continue to extract coal and gas (largely without paying royalties) in order to flog it overseas. I am red-hot ropable. Our current government was elected largely on the basis of its promises to address climate change and environmental degradation. Since then, it has done nothing but walk away from these commitments, with Minister Plibersek, as you note, hiding behind behind excuses that 'the law doesn't allow her to consider the impact of climate change on the environment'. I will be part of Rising Tide's 'People's Blockade' in Newcastle (and Canberra) 22-28 November, and encourage others to get along when they can to show how furious we are. https://www.facebook.com/events/325493453581433/
Your link to comments on Conservative Professors led me here John.
Medieval Religious Universties were undoubtedly conservative but changed as their knowledge was challenged by science in particular.
Correlation between income & Republicans not unexpected but it’s interesting in Australia that Greens supporters have the highest education & income & aren’t exactly conservative 😉
What is neoliberalism? Matt Yglesias argues that most of its critics aren't clear what they mean by it: https://www.slowboring.com/p/what-was-neoliberalism?utm_source=post-email-title&publication_id=159185&post_id=146408444&utm_campaign=email-post-title&isFreemail=false&r=15fd0l&triedRedirect=true&utm_medium=email
An important technical question apart of the unit of randomisation is the statistical issue as to whether to assess using a superiority vs a non-inferiority hypothesis. In general, in health care, we woiuld use a non-inferority hypothesis as the standard for assessing an alternative treatment wihich is preferable for some reason (e.g., cheaper, less invasive).
"Although no well-developed alternative has emerged, hardly anyone takes the [efficient markets] hypothesis seriously any more. The booming market of cryptocurrencies – assets with few practical uses – is the clearest illustration of this point."
it took me a while to parse "this point". The missing link is the observation that in spite of their relative success in speculative financial markets, and even as means of payment in Argentina, crypto lacks significant intellectual backing from established economists of left and right.
I'd be interested in JQ's views on central bank virtual currencies like Brazil's Drex. These would be run by central banks, I think using fashionable blockchain tools for validation. I don't myself see what value is added by this complexity. Old-fashioned tools like central market counterparties, indeed good old double-entry accounting, have done the job perfectly well up to now. The success of the existing Brazilian retail payments system Pix, also run by the central bank, does suggest significant savings from socializing the payment system and cutting out the bloated fees of the credit card duopoly. Note that Pix does not cut out the commercial banks, as users need to hold current bank accounts, and the banks can charge regulated service fees to retailers.
Bank of England research paper: https://www.bankofengland.co.uk/-/media/boe/files/paper/2020/central-bank-digital-currency-opportunities-challenges-and-design.pdf
I hadn't heard about Argentina, but it appears that crypto used mostly for money laundering, resulting in a recent crackdown. This survey of electronic retail payments doesn't even mention crypto
https://thepaypers.com/expert-opinion/argentina-2024-analysis-of-payments-and-ecommerce-trends--1270616
We don't need to consider the views of economists, established or otherwise. Crypto was designed as a currency and failed miserably. Offshoots (NFTs, Defi, blockchain apps) have gone nowhere. Anyone can see this. Economists are needed only to explain that fiat currencies work because they can be used to pay taxes, unlike crypto.
A CBDC wouldn't need blockchain. This is a corollary of. Cerf's Rule: Nothing needs a blockchain
https://www.linkedin.com/posts/ecsquizor_do-you-need-a-blockchain-this-architectural-activity-6757986014620332032-5DAU?trk=public_profile_like_view
A CBDC would be more like a savings bank counterpart to Pix. I'll try to post more sometime
Blockchain has the modest technical advantage of automatic reconciliation of accounts. Otherwise, a permissioned blockchain is functionally identical to the registry-based systems used by financial intermediaries today. It is technologically quite different, but technology is best left to real technologists. (Hint: Elon Musk is not a real technologist. He just plays one on teevee.). Nobody else cares if bank computers use stressed silicon, or even what stressed silicon may be. Same with blockchain.
Central bank digital currency is not the same thing as central bank intermediation in the payment system. The former cuts the banks out of the money-creation business. They can still lend money, but would have to obtain it from others--likely enough the central bank itself. This would indirectly involve the central bank in credit allocation, which--depending on your version of political economy--is either heaven or hell.
Yes, the only real interest in blockchain is the idea of permissionless blockchains, yand the only use case for permissionless blockchains is crypto.
Well that reflects the inherent tendency to exploitation of labour especially those in a vulnerable position .
I did Labour Economics in my university degree. I must say I enjoyed it enormously as an academic subject. But, on reflection, what I read at university had little to do with what was happening n Australia. I went to school in the 1960s. Back then boys studied at school until they were 14 years and nine months of age. Then they had two options. They could leave school and take up an apprenticeship or cadetship; about 40 per cent did this. Alternatively, they could stay on for their HSC. This was seen as a path to tertiary studies. Apart from two experiments with TransEd programmes, this was aimed at tertiary education. About twenty percent sought entry into university.
The apprenticeships back then were harsh. But young boys out of school had few alternatives before the days of professional sport.
The tech Colleges were used to train up men for trades. The pay was low until the tradie got their own business up and running.
Today there are government subsidies, trade education tax concessions and apprenticeship support programs. Their effectiveness is rarely investigated properly. New programs are introduced as sone fantastic improvement but there is little or no back-end analysis.
As for university training there is little accountability. The same could be said for the provision of degrees. In the past, a degree was a guaranteed pathway to employment. Today many undergraduates give up as they fail to see any clear pathways to paid employment.
What is the answer?
Depends on the question.
A detailed analysis of the effectiveness of all post school education opportunities needs to be urgently undertaken. Merely bringing in trained migrants is not the answer.
The probabilities assigned to what you have look reasonable to me. I'm not sure whether you conceive of "popular resistance" as including strong resistance (i.e., suspending acknowledgment of federal authority) by blue state governments. Trump redux is likely to be sufficiently horrible that that probability might be relatively high. (I think that the probability of outright secession by any blue states is close to zero.) Then one would need additional alternative branches into (1) Lebanon-style civil war, and (2) paralysis of the US federation, and thus also its paralysis as an international actor.
This is one of the most difficult areas for government intervention. It is no less difficult in terms of taxation issues. This mix makes for a less than efficient allocation of available housing resources and for the provision of new homes. In every proposal the Prateo Optimum must be considered. If new buyers are to be helped in any way then it must be first established that this will not disadvantage renters. Giving first home buyer subsidies may reduce the stick of rental properties. Alternatively any rental assistance must not cause the loss of supply of new homes. athena two areas are linked. Correlations must be addressed. endure unintended consequences destabilise either, the housing market, or, the rental market.
My one suggestion is to put a time frame on Air b&b concessions. By restriction this type of very short term rental to agreed holiday periods, you may find that less rental properties lay idle at certain times of the year.
We forget our history to our peril. The equivalent treaty to AUKUS back in 1942 was the one with the British government and the governments of Australia and New Zealand. It stated that if attacked the British navy would defend both firmer colonies. Bur when Darwin was bombed, and later Townsville, there was not a British Naval ship anywhere to be seen. For the next three years the British Navy confined its ships to home waters. Australia was left to fend for itself. Luckily our PM insisted that all Australian fighting men return home to defend our shores. Churchill wanted to keep the ANZACS where they were fighting the Germans.
Treaties are just words on paper. I don’t think Hitler was the first politician to work that one out. The AUKUS treaty is no guarantee of safety in times of war. Australia is foolish to rely solely on such a treaty.