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Tuesday, 17 July

21:06

Skyfall? Pete Wargent Daily Blog

Live on Sky News tonight discussing the housing market and what happens next.

If you miss it, catch the repeat on Saturday, or catch up with it all online at the Sky News Australia app.

20:34

The abdication of the Left redux Part 2 Bill Mitchell billy blog

This is the second and final part in my response to the Social Europe article by Stuart Holland (July 11, 2018) Not An Abdication By The Left where he attempts to eviscerate various writers who have dared to suggest that the social democratic Left in Europe has run out of ideas or that there has been an intellectual abdication by the Left. He uses his experience as an advisor to Harold Wilson in the 1960s and to Jacques Delors in the early 1990s as an authority for his rejection of the claims that the Left has abandoned its social democratic remit. He holds the likes of Delors and Antnio Guterres has shining Left lights. In Part 1, I showed that the view that Delors and Guterres are beacons of Left history and that the social democratic Left has not sold out to the neoliberal orthodoxy (particularly at the political level) is unsustainable. Holland distorts history to suit his argument and is in denial of the facts. In Part 2, I trace the argument further by examining the 1993 Delors White Paper, which was meant to be the European Commissions response to the mass unemployment that was bedevilling the Continent at the time (and remains, by the way) and later propositions that Holland was associated with in relation to Greece during the GFC. They further demonstrate that Stuart Holland is attempting to maintain an indefensible position.

The Delors White Paper

As part of his claim for progressive credentials but also more generally to claim that the likes of Jacques Delors and the privatising Antnio Guterres were part of the grand social democratic Left tradition throughout their working lives, Stuart Holland refers to the Delors White paper Growth, competitiveness, employment: The challenges and ways forward into the 21st century which was published on December 5, 1993 as the European Commissions response to mass unemployment.

The White Paper was published in the following context.

The graph shows unemployment rates in 1993 (red triangles) and 1994 (blue bars) for a selection of nations, mostly comprised on what would become the Eurozone.

The data is from the OECD and while the Euro area was not yet in operation the OECD provided estimates post Maastricht of that bloc in addition to the entire OECD membership.

I included Japan and the USA for comparative purposes.

The point is that mass unemployment was at very high levels in many European nations and was rising between 1993 and 1994 in most.

It coincided with a major recession in the early 1990s, which impacted on most nations. However, while, for example, the US began growth again in 1993 and Japan endured its massive...

14:59

When is a record not a record? John Quiggin

Its been  cold here in Brisbane for the last few days, at least by our subtropical standards, with overnight minimums of 6 degrees in the city, and negative temperatures in  towns like Stanthorpe in the nearby Granite Belt. That occasioned lots of news coverage, with the observation that this was the coldest temperature weve had since 2014 and one of the coldest since 2000. The same was true for much of Eastern Australia. Melbourne had its coldest morning in several years, and  a couple of towns in NSW had the lowest minimum for several decades.

All of these are records in the trivial sense that we record the temperature every day, but none of them are records in the commonly used sense of lowest (or highest) value in the relevant record. That didnt stop the usual denialist suspects claiming a RECORD (all caps in original) and evidence of global cooling. The Daily Mail  claimed Australias east coast shivers through its coldest EVER morning even though the sub-headlines made it clear this wasnt true.

Whats striking here is that the same people who are willing to claim that the Bureau of Meteorology is part of a world-wide warmist conspiracy to doctor climate records are eagerly credulous about any piece of data that suits their case. Next time we get record heat, the conspiracy theories will be wheeled out again, but for now the Bureau is an unquestionable source of scientific evidence.

To take this news a little more seriously, its important to remember that there are vast numbers of records that can potentially be broken on any given day highest and lowest maxima and minima, for a given month, in any location where weather is recorded. That means we need either to confine attention to a limited number of records most obviously mean global temperatures or look at statistical measures, such as the relative frequency of new records for cold and heat. Both of these measures give the answer that is by now obvious* from experience: the climate globally and Australia is getting warmer.

 

 

14:00

Australian Dollar and Bitcoin "IndyWatch Feed Crypto"

1.00 AUD = 0.00011 BTC
0.00010 BTC = 0.90 AUD
Converter

13:30

How China Could Cripple the US Dollar Daily Reckoning Australia

How does the US solve a problem like China?

More to the point, how does China solve a problem like the US?

Tensions between the two biggest economies in the world are high.

President Trump appears keen to tariff China into submission.

Chinese authorities, on the other hand, have taken a reactive approach to Trumps attacks.

Meanwhile, the media fixates on the misguided idea that Trump has the upper hand in the tit-for-tat trade war. Thats due to the trade imbalance that exists between the two trading partners.

The US buys a massive $631 billion from China. Thats three times the $155 billion of goods China imports from the US.

But what if Trump and the media at large has vastly underestimated what China can do to retaliate?

No, China may not be able to out-tax the US. But the Middle Kingdom can take seemingly small actions that could have catastrophic consequences for the US dollar.

The unofficial trade war became somewhat more official a fortnight ago when Trumps $45 billion in proposed tariffs on specific goods went into effect.

Within hours, China made good on its promise to fire back, implementing $45 billion in retaliatory tariffs.

But there could be more to come.

Bloomberg reports that Trump is reloading his tariff war bazooka and has another $291 billion in duties lined up.

While President Trump has denied that the spat is a trade war claiming it a matter of national security the application of one tariff followed by a retaliatory tariff is in fact the technical definition of a trade war.

With another $291 billion in tariffs on the cards, China doesnt have as much room to continue with retaliatory tariffs.

Or does it?

Sinking a currency to win a trade war

Early in Trumps election campaign, he was keen to label China a currency manipulator.

And hes not wrong.

The yuans value is fixed to the US dollar. But Chinas central bank, the Peoples Bank of China (PBoC), allows the yuan to rise or fall 2% from the previous trading days closing price. If the yuan looks like moving more than that in either direction, the PBoC has the power to step in and halt trading.

Thats currency manipulation, irrespective of how Chinese authorities choose to dress it up.

In August 2015, the PBoC reset the yuan to start the trading day 1.9% lower than the day before. This was the biggest one-day yuan reset in memory. That one instance of interference caused global markets to tumble for the rest of that month.

The next yuan devaluation came in January 2016. That was when Chinese authorities abandoned the 2% fall circuit breaker.

In other words, when the yuans value fell during trade by 2% or more to the US dollar, the PBoC didnt step in to fix things.

Given that China cant out-tariff the US, allowing the yuan to weaken agains...

11:59

Sydney vacancy rate jumps Pete Wargent Daily Blog

Sydney vacancies rising

The latest building activity figures confirmed that the record number of apartments under construction in Sydney is now morphing into a surge in completions.

June is always a seasonally soft month for rental markets, but the latest release from SQM Research recorded a vacancy rate jumping all the way to 2.8 per cent for Sydney.

That's well up from 2 per cent a year earlier.

Vacancies were very high in the Hills District at 4.9 per cent.

But the inner suburbs have by no means been immune as apartments complete across the city. 


There's a certain seasonal aspect to this.

Indeed, Australia's capitals are becoming more seasonal than ever with net overseas migration peaking in the warmer months, and hundreds of thousands of international students coming and going in recent years - but there's also high level of new supply for the city to deal with.

Around the traps

Melbourne's vacancy rate was just 1.6 per cent in the month of June 2018.

However, Melbourne now has more dwellings under construction than at any time in its history, as well as a range of transport, infrastructure, and commercial projects. 

Nationally, the vacancy rate declined from a year earlier from 2.5 per cent to 2.3 per cent, representing a decline from 78,314 to 75,757 vacancies. 

There were year-on-year declines in Perth, Adelaide, Canberra, and ev...

01:54

Investors Fret as Dutertes Popularity Slumps Pacific Money The Diplomat

Will Duterte's crass and unpredictable style impact the Philippine economy?

Monday, 16 July

21:11

Entrepreneurship, business, & building an empire Pete Wargent Daily Blog

A recent podcast interview I recorded in Sydney with the inspirational Angie Zimmerman, author of Addicted2Success

Listen on i-Tunes here

14:30

All hat and no cattle Pete Wargent Daily Blog

Stock and flow

A quick shout-out to SQM Research and its excellent range of data series! 

As the Royal Commission approaches its interim report, fewer vendors are listing their homes and investment properties for sale in Sydney. 

The number of new listings for this time of year is now tracking at the lowest level since 2013. 

However, those properties already on the market are taking longer to sell.


And so total number of listings is at the highest level in Sydney since 2012 (while acknowledging that the population of Greater Sydney has swelled by about  million since that time, depending upon where you draw the boundaries). 

It's bittersweet to read these statistics as a property buyer. 

In the suburbs where we normally buy houses such as Bondi Junction I take a sideways glance at the online listings to find that there are - wait for it - a grand total of three houses to choose from (including a tiny 2-bedroom cottage, and a house on the modern day car park that is Bondi Road). 

Family-appropriate houses: one. 

If you look with a magnifying glass, you might just be able to make out an increase in the number of eastern suburbs houses listed for sale.

Maybe.

14:23

People power Pete Wargent Daily Blog

Bridging the gap

While there's been much talk of 'cuts' to the annual rate of immigration, the number of people heading to Australia appears to be as strong as ever, with record high temporary and bridging visas helping to, erm, bridge the gap.

Annual permanent and long term arrivals hit a record 803,030 over the year to May 2018, which is considerably higher than the 708,910 of only three years earlier. 


There was, furthermore, a record number of seasonally adjusted short-term resident returns in May.


Asian tourism and education boom

Meanwhile, short-term arrivals hit a record seasonally adjusted high of 728,600 in the month of May 2018.

Over the year short-term arrivals now exceed 9 million, also a record.

Sydney retains its position as by far the biggest drawcard for overseas visitors. 

Most short-term visitors intend to stay in New South Wales (3.42 million), Victoria (2.27 million), and Queensland (1.95 million). 

The ABS notes that caution should be applied to the place of intended stay for the months of April and May, with an unusually high number opting for Canberra (shome mishtake, shurely!), so any blips relating to the past month or two should be interpreted accordingly. 

...

13:18

ISDS in the Canada-EU FTA (CETA) still an obstacle AFTINET

AFTINET has previously reported on decisions in 2017 and 2018 by the European Court of Justice which found that foreign investor rights to sue governments in international tribunals (ISDS) was incompatible with national sovereignty and EU law. This means the European Parliament cannot decided to ratify agreements containing ISDS, and that each national government has to vote on ratification of agreements if they contain ISDS. These decisions followed strong European public opposition to ISDS.

Since these decisions, fearing that national parliaments will oppose ISDS, the EU has decided not to include ISDS in its recently-begun negotiations with Australia and New Zealand.

The CETA between Canada and the EU was finalised in 2016, before the European Court decisions, and included ISDS, but had not been ratified. In order to attempt to prevent rejection of the whole agreement by national parliaments, the European Council took a decision to apply the non-ISDS parts of the agreement provisionally from September 21, 2017. Canada has also agreed to this arrangement. This means that tariff reductions and other chapters of the agreement have been applied from that date. However, all EU national parliaments must ratify the whole agreement, including ISDS, before CETA with can be formally concluded by the European Council.

According to the official EU website, as of 20 June 2018, only 10 of the 27 EU states had ratified CETA with ISDS, and the Italian government has recently announced that its majority in the Parliament will oppose ratification.

If any states fail to ratify, only the non-ISDS parts of the agreement will continue to apply on a provisional basis. This is yet another demonstration of the growing opposition to ISDS in trade agreements.

11:45

When Is the Market Wrong? Daily Reckoning Australia

The surprising thing about financial crises is that they come as a surprise.

Both the stock market and the bond market are supposed to be forecasting mechanisms. They discount the future meaning they figure out how much something is worth by estimating its future returns.

If this is the basis of value in the markets, then how do crashes happen?

Why dont the markets see them coming?

Or, more precisely, how do markets get things wrong enough for crashes to happen?

Nassim Nicholas Taleb has several excellent answers. In his book Skin in the Game, he explains one way incentives can deliver a crash in a rational, predictable way:

Whenever there is a mismatch between a bonus period (yearly) and the statistical occurrence of a blowup (every, say, ten years) the agent has an incentive to play the risk-transfer game. Given the number of people trying to get on the money-making bus, there is a progressive accumulation of Black Swan risks in such systems. Then, boom, the systemic blowup happens.

The technique to becoming rich quickly in financial markets is to transfer risk from today into the future and then leave before the future and its reckoning arrives. In its simplest form, this could be making a loan to someone who you know cant afford it but that probably wont default within the next five years.

Usually, the aim of the game is to leave for a different bank before the gig is up.

Or, sometimes, you go into government service. Then you can get lauded for your selfless public service, which consists of cleaning up the mess you created in the financial system. After all, you do have a credible claim on being an expert in the particular asset class that created the crisis.

Funnily enough, people wonder why there was such a lack of accountability after the crash of 2008. Barely anyone got arrested because those working in the public sector and doing the arresting were the ones who shouldve been arrested for their past activities in the finance sector.

The head of the European Central Bank (ECB) helped Greece hide its debts to get into the EU while working for a bank, and then cleaned up the mess with emergency lending from the ECB.

The former chief of Australias financial regulator ASIC securitised mortgages for a French bank that got into trouble in 2008 largely because it held those assets, which many Australian institutions invested in too.

The former head of Bear Stearns is running Donald Trumps trade war at the Treasury. And the US bailouts of 2008 and 2009 were run by former investment bank CEOs at the Treasury too.

The good news for those looking to create wealth in as quick a time as possible is that transferring risk far enough into the future to avoid the consequences is not so hard to do.

Selling your soul is the most difficult challenge where I failed miserably in my attempt worki...

11:38

The abdication of the Left redux Part 1 Bill Mitchell billy blog

Former Austrian Chancellor Bruno Kreisky was quoted as saying during the 1979 Austrian election campaign that: I am less worried about the budget deficits than by the need for the state to create jobs where private industry fails. That is the statement of a social democrat. That is a progressive Left view. In June 1982, with French unemployment at 7.2 per cent (having risen from 2.4 per cent in 1974 after a near decade of austerity under the right-wing Prime Minister Raymond Barre), the French Minister of Economy and Finance cut 30 billion francs from government spending so that the fiscal deficit would remain below 3 per cent. In March 1983, the same Minister pressured his colleagues including President Franois Mitterrand, into imposing a further bout of austerity, cutting another 24 billion francs and increasing taxes by 40 billion francs. These were very deep cuts. The austerity under the so-called Barre Plan had failed to reduce inflation. When the turn to austerity was repeated under Mitterands so-called Socialist government, France was already in a deep recession. Under the Socialist austerity period unemployment rose sharply to further to 9.3 per cent by 1987. By then the architect of that austerity, one Jacques Delors, was European Commission President and starting work on his next exercise in neoliberal carnage the Eurozone. None of his behaviour during that period remotely signals a position we could call progressive or Left. Like his austerity turn (tournant de la rigeur), Delors had turned into just another neoliberal obsessed with fiscal surpluses, free markets (he oversaw the 1987 Single European Act), and privatisation (which he claimed was necessary to attract foreign direct investment) (Source). This is Part 1 of a two-part series on the abdication of the Left, which some still choose to deny.

Sometimes one reads a piece of writing that stands out for its insightfulness, learnedness, and inspiration. In other cases, its denial, self-promotion and sheer stupidity that comes across.

I am writing today about an article in the second category and it is no surprise that it comes from a self-proclaimed Europhile progressive who has a novel interpretation of history and of what constitutes Left thinking.

I am referring to the recent article in Social Europe (July 11, 2018) by Stuart Holland Not An Abdication By The Left which is really an attack on other progressive thinkers who have advanced the conjecture that there has been an intellectual abdication by the Left.

Holland says this is entirely wrong.

The conjecture that is.

...

06:25

Australian Firms Partner to Provide Crypto Custody Services "IndyWatch Feed Crypto"

Australian Firms Partner to Provide Crypto Custody Services

Decentralised Capital, an Australian advisory firm specializing in blockchain assets and asset management services, has announced a partnership with Custodian Vaults, an Australian private vaulting company, to offer insured cryptocurrency custody services to the Australasian market.

Also Read: Have You Tried Blockchain 5.0 Yet? Nobody Else Has Either

Decentralised Capital and Custodian Vaults Partner to Provide Cryptocurrency Custody Services

Australian Firms Partner to Provide Crypto Custody ServicesIt has been announced that Decentralised Capital and Custodian Vaults are teaming up to provide insured cryptocurrency custody services in the form of what the companies are describing as Australias first insured cryptocurrency vault

According to According to Australian Fina...

05:51

Monday Message Board John Quiggin

Another Monday Message Board. Post comments on any topic. Civil discussion and no coarse language please. Side discussions and idees fixes to the sandpits, please.

02:47

The best World Cup in decades "IndyWatch Feed Economics"

The Russians can be proud of hosting one of the most crucial World Cup tournaments in recent memory.

The official World Cup Russia 2018 ball handed over to Qatar

 

This one is for the record books having seen a number of firsts title holders Germany ousted from the first round for the first time in 80 years; the introduction of the Video Assistant Referee (VAR), through which many penalties were awarded including in the France-Croatia final; the first own goal in a final game; the fewest red cards since 1970 the list goes on.

And what an exhilarating final France takes the trophy for the second time in 20 years.

In the decades I have avidly watched the World Cup from the time Mario Kempes dazzled on the pitch and helped Argentina win its first trophy in 1978 to Germanys ouster in 2018 the tournament in Russia 2018 has been the most exciting.

And the most revolutionary.

Every thing we knew about international football has been turned upside down.

Germany is no longer the Teutonic terror it once was, striking fear in other teams just by taking to the field. The title holder was ousted in the preliminary stage thanks to some brilliant football from South Korea.

Brazil no longer sambas with brilliant footwork and team precision. In this tournament, Belgium and France did more of that than the now deposed Latin American giants.

And despite all of Maradonas praying for Argentina, that team resembled more a broken and spent race horse in need of retiring to less competitive pastures.

Instead, teams like Morocco, Senegal and Nigeria captured our attention for going up against more experienced teams and holding their own.

Lowest-ranked Russia showed us what spirit against the odds could do. Black horse Belgium sent people back to the drawing board as its neat football had us readjusting our bets. Japan proved there was a new powerhouse in Asia, despite Australias lackluster performance in the early stage.

And, of course, cracking Croatia. With utmost nationalistic pride this team proved why it was the wild card of the tournament reaching all the way to the final game.

VAR catches it

This tournament is revolutionary also because of its application of the video assistant referee (VAR), which depended on 35 field cameras picking up even the slightest infraction betwee...

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