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Sunday, 11 February


Brisbane bargain hunters move in Pete Wargent Daily Blog

Death throes

I was on ABC News last night discussing Brisbane's inner-city apartment overbuilding.

It's not the first time we've covered this story, of course.

In fact, believe it or not 2018 is now the sixth consecutive calendar year we've been talking about apartment oversupply, although in my opinion this will be the last. 

First there was the glut of approvals and the surge in Chinese off-the-plan buyers. 

Then came the cranes. 

And then came the middlemen, offloading the new apartments to anyone with a pulse and an interstate driving licence. 

And at one stage there were more than 32,000 attached dwellings under construction across the state - a record for the Sunshine State - but that figure has probably dropped by about a third now.

And with lending criteria seriously tightened and the Chinese bid fading, not so much is being kicked off now, particularly in the fully supplied markets.

Meanwhile, following a turnaround in jobs growth, population growth is picking up all the time.

In fact, if current trends persist, by about the end of this year the annual population growth in Queensland could be topping ~100,000, which would well & truly wipe out any apartment glut, so watch this space. 



Australian Dollar and Bitcoin "IndyWatch Feed Crypto"

1.00 AUD = 0.00010 BTC
0.00010 BTC = 1.05 AUD


Ethical failures: Where they come from and how to address them Core Economics


A review of

Gentilin, Dennis. The Origins of Ethical Failures. Lessons for Leaders. A Gower Book. Routledge (2016). ISBN: 978-1-138-69051-6

Ethical failures were in the press big-time in 2017. Prominently, creeps like Harvey Weinstein, James Toback, Bill Cosby, Larry Nassar, etc. were accused of sexual transgressions of various sorts (and in some cases admitted them to varying degrees). The sheer number of accusations leaves little doubt that in their substance they are correct. One thing that was truly shocking, on top of the specifics of many of the allegations, was that some of these transgressions went on for literally decades, that many people seem to have known about them for years (if not decades), and that the perpetrators did get away with them for an unconscionably long time. It is clear that organizational failures must have played a major role. This was implicitly acknowledged in the name of  The Royal Commision (RC) into Institutional Responses to Child Sexual Abuse, established under the Gillard government in 2013 and which reported its findings on December 15, 2017, all 17 volumes. The RC also laid out recommendations.

It did not really come as a surprise that once again massive organizational failure, in particular of the Catholic Church, was identified as a major finding. It did not come as a surprise because for years there had been a never-ending stream of trials, not just in Australia, suggesting just that, and providing plenty of evidence that the Catholic Church in its (continued) belief that it is a law and world unto itself had engaged for decades in what might generously be called economy with the truth.

Two weeks earlier, after another year of numerous reports of questionable practices, and record profits of the four major banks, the Turnbull government saw itself forced by its own backbenchers, no less to announce that it would establish a RC into misconduct in the banking industry. It was a step that Labor and the Greens had urged for more than a year. (The recent draft report of the Productivity Commission has made clear that some such RC is indeed overdue.) The Turnbull governments acceptance of something that it could not prevent, and its subsequent attempts to undermine the effectiveness of the RC by widening its scope and simultaneously to impose...

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Saturday, 10 February


The Weekend Quiz February 10-11, 2018 answers and discussion Bill Mitchell billy blog

Here are the answers with discussion for this Weekends Quiz. The information provided should help you work out why you missed a question or three! If you havent already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of modern monetary theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

Question 1:

In the endogenous money system that exists today, a central bank cannot simultaneously reduce bank lending and maintain a given positive target interest rate by increasing the rate that it provides reserves on demand to the commercial banks.

The answer is True.

The facts are as follows. First, central banks will always provided enough reserve balances to the commercial banks at a price it sets using a combination of overdraft/discounting facilities and open market operations.

Second, if the central bank didnt provide the reserves necessary to match the growth in deposits in the commercial banking system then the payments system would grind to a halt and there would be significant hikes in the interbank rate of interest and a wedge between it and the policy (target) rate meaning the central banks policy stance becomes compromised.

Third, any reserve requirements within this context while legally enforceable (via fines etc) do not constrain the commercial bank credit creation capacity. Central bank reserves (the accounts the commercial banks keep with the central bank) are not used to make loans. They only function to facilitate the payments system (apart from satisfying any reserve requirements).

Fourth, banks make loans to credit-worthy borrowers and these loans create deposits. If the commercial bank in question is unable to get the reserves necessary to meet the requirements from other sources (other banks) then the central bank has to provide them. But the process of gaining the necessary reserves is a separate and subsequent bank operation to the deposit creation (via the loan).

Fifth, if there were too many reserves in the system (relative to the banks desired levels to facilitate the payments system and the required reserves then competition in the interbank (overnight) market would drive the interest rate down. This competition would be driven by banks holding surplus reserves (to their requirements) trying to lend them overnight. The opposite would happen if there were too few reserves supplied by the central bank. Then the chase for overnight funds would drive rates up.

In both cases the central bank would lose control of its current policy rate as the divergence between it and the interbank rate widened. This divergence can snake between the rate that the central bank pays on excess reserves (this rate varie...


Confessions of a Newsletter Man Daily Reckoning Australia

PUBLISHERS NOTE: Two separate 1,000-point drops in the Dow. The most volatile fortnight in the cryptocurrencies in the last year, with 60%+ falls in bitcoin, ethereum and a host of alt-coins. Its been an unusual week to say the least. So todays DR will be an unusual reckoning. Here we make way for a few words from our founder, Bill Bonner. Below he reminds us why we write the way we writeexplore the ideas we exploreand think the way we think. After weeks like weve just had, its easy to slink back to the middle of bell curve, to the relative safety of the masses and conventional thinking. But as Bill remind us below, we do that at our peril 


Confessions of a Newsletter Man

 By Bill Bonner

We begin with a question: Was ever there a fairer metier than ours?

The poor carpenter risks cutting his fingers or banging his knee.

The used car salesmans hearing goes bad as soon as he takes up his job: No, I dont hear any rattle, says he.

The foot-soldier gets sent to a Godforsaken hole like Afghanistan, where the women are covered up and the liquor stashed away.

But in our trade as newsletter publishers, hardly a day passes without a good laugh. Our only occupational hazard is a rupture of the midriff.

Most people, after all, read the news pages for information. They lack the proper training and perspective to fully enjoy them. The consequence is that they are always in danger of taking the humbug seriously, or worse, finding the people who populate the headlines important.

If you really want to appreciate the media you have to get close enough to see how it works like a prairie dog peering into a hay bailer but not so close that you get caught up in it yourself. The investment newsletter business is perfect; it is part of the media, but it wouldnt be mistaken for a reputable part.

More than 30 years ago, we began our career publishing newsletters. Those were the days! They were even more fun than today. Years of television, heavy-handed regulation, and waiting in line for airport security have taken much of the lightheartedness out of American life.

In its place, a kind of earnest timidity has settled over the 50 states. Everything is forbidden, or else it is compulsory especially in the financial markets. You can barely talk about an honest investment without some ambitious prosecutor wanting to make a federal case out of it.

But back in the 1970s, the folks you met in the newsletter trade were even wilder and more disreputable than those who are in it today. At one investment conference, we remember an investment advisor from East Germany. He had escaped the Soviets grip by stealing a small plane and flying to the west. This alone made him a bit of a hero back in the 1970s. But his talk to investors endear...


Australian Dollar and Bitcoin "IndyWatch Feed Crypto"

1.00 AUD = 0.00009 BTC
0.00010 BTC = 1.05 AUD


Add my name: Save UNE habitat trees Sustainable Living Armidale

[ Friday, 16 Feb; 5:00 pm; ] This statement of concern was drafted by 30 members of the UNE community at a recent meeting to discuss habitat tree removal on the UNE campus. If you care about native wildlife and the beauty of the UNE campus, please add your name to this statement. This statement will be delivered to the Chief Operating [...] full article 


The Bubble That Could Break the World Daily Reckoning Australia

The key to bubble analysis is to look at whats causing the bubble. If you get the hidden dynamics right, your ability to collect huge profits or avoid losses is greatly improved.

Based on data going back to the 1929 crash, this current bubble looks like a particular kind that can produce large, sudden losses for investors.

As the past week has dramatically proved, the market has been especially susceptible to a sharp correction.

Now, Im not saying this is the bubble finally bursting it is still only a pullback right now but it is a major warning sign that bubble dynamics are in effect.

Before diving into the best way to play the current bubble dynamics to your advantage, lets look at the evidence for whether a bubble exists in the first place

This measure is at the same level as 1929

My preferred metric is the Shiller Cyclically Adjusted P/E Ratio, or CAPE. This particular P/E ratio was invented by Nobel Prize-winning economist Robert Shiller of Yale University.

CAPE has several design features that set it apart from the P/E ratios touted on Wall Street.

The first is that it uses a rolling 10-year earnings period. This smooths out fluctuations based on temporary psychological, geopolitical and commodity-linked factors, which should not bear on fundamental valuation.

The second feature is that it is backward-looking only. This eliminates the rosy scenario of forward-looking earnings projections favoured by Wall Street.

The third feature is that that relevant data is available back to 1870, which allows for robust historical comparisons.

The CAPE today is at the same level as in 1929, just before the crash that started the Great Depression. The second is that the CAPE is higher today than it was just before the panic of 2008.

Neither data point is definitive proof of a bubble. CAPE was much higher in 2000 when the dotcom bubble burst. Neither data point means that what were seeing now is the bubble finally bursting.

But todays CAPE ratio is about 185% of the median ratio of the past 137 years.

Given the mean-reverting nature of stock prices, the ratio is sending up storm warnings, even if we cannot be sure of exactly where and when the final hurricane will come ashore.

With the evidence of a bubble clear, we can now turn to bubble dynamics. The analysis begins with the fact that there are two distinct types of bubbles.

Two things drive all bubbles

Some bubbles are driven by narrative, and others by cheap credit. Narrative bubbles and credit bubbles burst for different reasons at different times.

The difference is critical in knowing what to look for when you time bubbles, and for understanding who gets hurt when they burst.

A narrative-driven bubble is based on a story, or new paradigm, that justifies abandoning traditional valuation metrics.

The most fa...


Betrium, The First Partly-Decentralized Global Betting Exchange Platform Witnesses High Demand as Crowdsale Enters Final Stage "IndyWatch Feed Crypto"

The pre-sale ICO campaign of Betrium, the worlds first decentralized betting exchange platform, is live now, with 9,198,555 Betrium tokens (BTRM) already sold out. The pre-ICO started on January 30, 2018, will end on February 18, 2018. Hence, if you want to participate in the pre-ICO, its the high time to go for it.

About Betrium

Betrium is the platform developed by an intellectual group of entrepreneurs belonging to MIT and MIPT. It is the first partly-decentralized global betting service, including betting exchange and Sportsbook, with zero commission, acceptance of cryptocurrencies and offering a platform for developers, event organizers, franchisee and third-party betting service providers who can create and manage their custom events and earn income from betting.

Leveraging Upon the Industry-Growth Opportunity

Betrium holds the credit for developing the first global sports betting platform operating in the industry that is generating at least $0.5 trillion of revenue on an annual basis. By 2017, the worldwide regulated gambling market generated around $533 billion of revenue. The betting market accounts for $70 billion in total gross yield globally. In addition, the unregulated sector is way larger, with more than 100 million users regularly betting on sports every month.

How it Works?

The bets over Betrium platform take place off-chain and just added when the event takes place so that the outcome cannot be denied. Nevertheless, the bets are broadcasted all over the network immediately for the odds to be addressed. It implies that unlike other similar platforms, Betrium offers higher-speed betting service developed on a decentralized IT architecture.

In view of the volatility stabilization goals, the professional betting cannot be executed without fixed USD amounts. The company is in the process of preparing for Curacao online gambling license.

The Core Features

  • Profit Sharing

Betrium distributes 50% of the annual profits among BTRM token holders. Each token holder will get a 50% of the Betriums profit on a regular basis. The BTRM tokens are backed by Betrium financial success and its increasing worth.

  • No Volatility

The platform offers cryptocurrencies volatility stabilization for the token holders. The platform fixes the balances with virtual USD/EUR so as to protect users from losing in the regular dumps. It will be achieved by integration of exchange functionality and partnerships with local and global exchanges.

  • Leg...


Goldilocks & the 3pc growth Pete Wargent Daily Blog

Just right?

An interesting SOMP from the Reserve Bank, with GDP growth expected to rise to 3 per cent by 2018/19, and repeating the trick in 2019/20. 

Despite this rather optimistic outlook the unemployment rate is expected to meander only slowly towards 5  per cent over the next few years through to 2020.

That seems a pretty unusual combination of numbers, but anyway, here's the unemployment fan chart.  

As for inflation, well that's still nowhere to be seen.

In fact, it's not projected to get up to 2 until June 2020!

Presumably hay means the inflation target might be hit some time in the next decade. 

So much for imminent rate hikes - you can forget that.

Interestingly the monetary policy stance has been stimulatory for Sydney's economy, where the unemployment rate has already fallen to only 4.4 per cent.


Friday, 09 February


Bitcoin kills the efficient market hypothesis John Quiggin

I have a piece in the New York Times looking at the implications for the bitcoin bubble for economic theory and, in particular, for the (Strong) Efficient (Financial) Markets Hypothesis (EMH) which states that prices determined in financial markets reflect all the available information about the value of any asset. If thats true then governments cant improve on a policy of allocating investment to those assets with the highest market return, which can be achieved by letting private capital markets determine all investment decisions.

Bitcoins have no inherent usefulness, being a record of pointless calculations. They are useless as a currency (their putative purpose) and are now being promoted as a store of value on the basis of scarcity alone. This leaves supporters of the EMH with a dilemma.

If Bitcoins are indeed worthless, then financial markets should price them at zero. But the introduction of futures trading actually boosted the price in the short run. Even after recent declines, theres no sign that prices will reach zero any time soon.

On the other hand, if Bitcoins are valuable simply because people value them, then asset prices are entirely arbitrary. The same argument can be applied to any financial asset.

Dean Baker at CEPR has a nice followup, making the obvious but crucial point that, since financial services are an intermediate input to production, we want the financial sector to be as small as possible, consistent with doing its essential tasks. As the experience of the mid-20th century shows, a market economy can function perfectly well with a financial sector much smaller than the one we have today. As Bitcoin shows, the massive expansion since then is nothing but wasteful speculation. The financial sector should be cut down to (a small fraction of its present) size.


A hurricane is coming to transportation "IndyWatch Feed Economics"

A storm is set to blow through the transport industry, and vehicle manufacturers and mobility businesses alike had better be prepared, says SingularityU Australia Summit director Kaila Colbin.

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