Archive for category Bad Ideas

The future looks stupid

Jun 11

Posted by Sgt Hulka in Bad Ideas, Climate Change, Economics, Politics, Snake Oil | Comments off

OK, a bumper crop of Hulka today, as here is another thought that has been brewing in my head for a couple weeks. See, periodically, I can see the future. But I am unfortunately a cynical futurist, and when I can see things well, I can basically only see bad things. Here is the first of my views on where we are going in Australia in the next few years.

We are almost certainly going to have a Coalition government in Australia following the next election. If that future Coalition government follows through on its promise to repeal the carbon tax AND also repeal the move to carbon trading, it will be a very retrograde and bloody-minded step that will cost us billions of A$.

The step back will take us back to before the Howard government started us down the path of legislating NGERs (estimating CO2e scientifically) and the CPRS (the trading instrument for the CO2 market), and essentially ignore (in a bureaucratic sense) the anthropogenic effects of CO2-e gases in the atmosphere. I believe it will also expose the government of Australia to significant legal claims with respect to liabilities created in the implementation of carbon pricing mechanism to this point by industries. As industry in Australia has already “tooled up” significantly to address its CO2-e emissions in its methods of accounting, capital planning and trading, it likely has a valid claim of loss if the government abandons the game, rather than just modifying the price, or moving more quickly to a floating price. One thing is for certain; the abandoning in full of the pricing of CO2e, and failing to internalise those costs is wrong scientifically, is known to be wrong scientifically by a large majority of the members of the Coalition, and is therefore simply bloody minded.

And here is some evidence as to why I am telling the truth: I don’t have an interest in advocating my position, and will actually likely do better financially if what I believe is bad policy goes through. For my company (which is carbon neutral and independently certified as such), it won’t make much difference. We don’t emit much now, we emit at a lower rate each year, and we have enough CO2-e in the bank to cover our needs in the short term, regardless of the effect on the market of the government abandoning carbon pricing. In fact, we can probably hedge our long-term expense very cheaply in the short term, if a new Coalition government carries through on its promise. Plus, I can also probably figure out a way to make some money on the bad change in policy.

But over time, the real important loss under proposed Coalition policy will be that of opportunity to Australia as a whole. This is because the adage that “the world is ruled by those that show up” is fundamentally true. Australia is now in a position where we participate and lead in addressing anthropogenic emissions of carbon internationally, and we can help define the markets that will deliver a means to address it. A future Coalition government has committed to abandoning participation, in a move that will rightly be viewed as embracing climate change denial. We will be left out of the “team” that makes up policy and infrastructure in the trading of CO2-e, and the yanks will likely end up owning the game again.

Add to this another really bad idea from the Coalition that I have gone through in detail before, direct action. See, direct action involves picking winners and losers in industry. Shit like giving large emitters large sums to stop emitting nasty shit rather than regulating them. Picking individual winners and losers by any government is virtually always (and I cant think of a single counterfactual) a bad idea. It’s assumes a way too effective means of prediction, is distorting of markets and invites corruption. I hate it when Labor does it, the Greens do it or the Coalition does it. That is not to say that incentivising markets is wrong. I have nothing wrong with the government providing incentives for innovation, just incentives for any specific innovation. Incentive for anyone that can improve the delivered efficiency of electricity to homes in all Australia = good. Direct subsidy to build more gas fired power plants to private companies because that is the currently available cheap fuel = bad. Now, you want to talk about doing a little bad in the short term to get a long term good, let’s discuss nuance, but it had better be part of a well thought out and comprehensive plan, and not just the next government’s rort for their buddies. I am not sure the Coalition does nuance.

I am happy to be proven wrong by evidence and alternate theories at this point, or by history, but that is my view about where we are going with respect to doing something bureaucratically about climate change. My next prediction of looming bad could be the NBN under the Coalition. But we shall see. I also take requests.

Even Paul Krugman misses the point

Jun 11

Posted by Sgt Hulka in Bad Ideas, Economics, Evil Motherfuckers, Good Ideas, International | Comments off

Memo to America, but with lessons for lots of people everywhere. How to kick start your way out of a liquidity trap, by focusing on a root cause. First a definition from Krugman from his very good article on Japan this morning: Liquidity Trap

“But all of this is totally irrelevant to our current situation, where inflation is running below target, the target is too low anyway, and the reason we have mass unemployment is that there just isn’t enough demand, and hence there just aren’t enough jobs, no matter how desperately people search for them.”

But he should finish the point and say why the economy could fail in the manner that it did, and stopped where it did to begin the great recession: the rich took all the fucking money! Or at least they took enough of it already that they caused the liquidity problem that the middle class has right now, which is why that 70% of the economy is not driving the production that keeps all the yanks (and plenty of others) in jobs with ever spiralling wage rises (hopefully based on productivity gains, but that is another story).

See, I’m not a Nobel prize winning economist, or even in the profession by training, but I can still see the whole system of an economy linked together in a synchronistic way. One man’s debt is another man’s credit and all that. Have a good read of Matt Taibbi and Michael Lewis on the con that was perpetrated, and still is going on, but here’s my take on the cause and effect. The rich (banks in particular) tricked the middle class in America into getting in over their head with debt in often a fraudulent manner (I’m look right at you Countrywide) and lot’s of common people did not have enough sense to realise the risk. And the rich took the middle class for their last dollar in debt because remember the context; this is after the slow fall since about 1979 in wage gains by people making a wage. Almost all productivity gains in those decades went to the suppliers of capital to the equation (and not labour or true innovation), and resulted in a significant increase in the concentration of wealth at the top. Look it up, that is published economic fact. So the middle class buying power has been falling for decades, and they supported the demand they were creating artificially with household debt. Then the trigger point and the house of cards all falls in, and even giants like AIG are proven to be fools and criminals (yet strangely enough, none go to jail).

Now the rich will make a show of how fraud was insignificant (or lie, in common language), and how there is just cause for the gains made in the 1%, but that is just maskirovka; the real gains were made in the 1% of the 1% (or 0.1%). And in that club, for every Steve Jobs, I will show you 10 Gina Reinhart’s, greedy opportunists that turned a whopping great big fortune into an immensely whopping great fortune through no real skill or innovation of their own. Parasites that then even turn on their children and deny them their probabilistic right to the spoils that they also did not earn.

But I don’t want to get off on a rant here, and back to my point. With the middle class in (now bad) debt up to their eyeballs, low and falling wages relative to their productivity input, and no one who will loan them any more money for a hand up to get something started even if they were entrepreneurial, where the fuck is aggregate demand going to come from to move the economy along? The 70% ain’t got it, and the 0.1% ain’t spending it. That’s your cause, and your trigger point for the GFC. But it also suggests the solution to get things moving again. Find a way to get some money back into the hands of the people who actually buy the vast amount of goods and services in the economy in the short term (and then we will get to countering over concentration of wealth in the mid term).

Wouldn’t you think that at times like these, when the US government can borrow any vast sum of money it wants without raising interest rates from basically 0%, that it might make a good plan for the government to do major maintenance on its infrastructure? Note here, I am not talking build a lot of pork barrel shit that doesn’t go anywhere, but why not fill some of the pot holes near the CBD of some major cities that you could drive a VW into, or I don’t know, upgrade your electricity transmission network and solve your greenhouse gas problem at the same time. Do some thinking on it, and you will come up with of a number of decent ideas for shovel ready projects to improve productivity, reliability and innovation of US infrastructure.

Otherwise, you can do the alternate plan: go beg those like Gina to buy more jewel encrusted golden backscratchers and hope that form of is demand enough to base a modern economy on.

Start the New Year Off Wrong

Jan 2

Posted by Sgt Hulka in Bad Ideas, Economics, International, Politics | Comments off

. . . with some politics on both sides of the pond.

So the US Senate passed a compromise and now the US House has to vote on it, and the fanatical Republicans (all the usual actors, Bachman, Goh, etc.) don’t like it and are having a spack.

Then fucking don’t vote for it and fer fucks sake get on with it. There isn’t a filibuster in the US House, so unless the speaker is too much of a girl to bring it to a vote, and then hopefully not get re-elected speaker on the 3rd, as could happen with the reduced numbers the Republicans got in the last election. Also remember that that election (for President) was also run on a tax hike for the rich, and a specific one that is a hell of a lot tougher on them than the one in the US Senate bill. The progressives get the tax hike and you get exactly nothing is my starting point. Take it or leave it and we slash defence by 20% and blame it on you for sure. Obama can figure out a way to take care of the poor within its programs, and take more of a fair amount from the rich, in the many welfare programs for companies and the middle class that end up benefitting the rich more anyway.

Now shall we talk about the debt ceiling. I am totally in to reducing the total amount owed by the US government, and also the current account deficit, where it suits given the macro economic conditions. However, if we really want to reduce overall debt, we have to start with defence and health care (not health insurance) and forget about trying to take it all out of the middle class and poor. Look at productivity gains and distribution of those gains over the last 30 years, and you should come to the conclusion that what is proposed is very fair on the rich, and that there is a lot more that we need to do to make sure that workers share from increased productivity they provide.

Here at home in Australia, we have what passes for a scandal these days, with Maclin reportedly saying she could live on the $35 a day new start allowance. Well I got some news for some whingers here too, harden the fuck up. I can and do live on less than $35 a day now, and although Jenni makes allegedly 25x what the new start allowance equates to in a salary, and I have no idea what I am on. But I live on that amount now, and I don’t think that new start is meant to be the full amount to maintain any “lifestyle” whatsoever. Its meant to be the money use use to get around and feed yourself while you look for work. The Labor party needs to look straight down the barrel of the camera on the next dozen occasions and talk about a few things that really matter, and not worry if someone tries to pick at them, from right or left over statements that don’t really mean anything in the overall scheme of things.

Otherwise, show me the data that Australia and the States are fucking over poor people on a regular basis, forcing them to live in inhumane conditions, or not providing them additional support if they have bigger problems like disability or drug dependency. $35 a day to look for a job sounds about right to me at present.

Fearing fear itself

Mar 27

Posted by Sgt Hulka in Bad Ideas, Climate Change, Economics | Comments off

I recently read an article ominously entitled:

“SMEs will be hit with carbon tax reporting requirements”

The article is based on a survey performed by the Australian Institute of Management, and provides the opinion that small business (SMEs) will have carbon tax requirements passed on to them by the major emitters that pay the tax, when they are in the supply chain of the large companies. I think this article, while presenting some very interesting information, gets its analysis wrong for a couple of reasons that I detailed in comments to it, but unfortunately they were not accepted so I will present them here.

While I do expect large companies to require information from their supply chain regarding their activities and energy use so that the large emitters may complete their mandatory filings and purchasing of carbon credits, any attempt to turn the supply chain on its head and pass down costs to the supply chain will not be the result.

Further, I believe that the conclusion that a significant number of large businesses that make up the 700 or so companies that are currently covered by the NGERs legislation from 3 years ago, and will start having to pay the carbon tax in July will pass on requirements to their supply chain in a manner that is going to be detrimental in time and money costs on that supply chain is overstated.

The truth is, most of the NGERs companies that will be required to acquit permits at $23/ton to the Australian Government will be acquiring and acquitting those CO2-e credits (and therefore paying their tax) on the basis of CO2-e emissions that come from burning fossil fuels and manufacturing process industries. It is clear that based on these increased tax payments, electrical utility suppliers will pass on costs to everyone, including small business. But that may be the end of it for many SME’s, based on the nature of their operations.

Where any large business wants to “pass on” requirements to reduce emissions to its supply chain, or require the supply chain to document their emissions of CO2-e , this will mostly be passing on requirements to establish energy use/efficiency information in most cases, since suppliers are not primary emitters of CO2-e. Primary emitters of CO2-e are typically large electrical power generators and some high carbon intensity industries, like cement manufacturing. These large primary emitters are the subjects of the regulations of carbon emissions to meet the country’s long-term goals to reduce emissions. However, all businesses can benefit from examining their activities on the same basis that large companies are required to do.

Basically, all companies should see the carbon tax as a heads up that they should start to “internalise” their emissions of combustion products from fossil fuel burning and energy use. Any business (large or small) that gets that change in their mindset can then begin the process of determining where they are at with respect to their competiveness related to these additional characteristics of their performance.

As the only HSE Consultancy in Australia to be Carbon Neutral certified, my company (An Meá) has direct evidence that the process of documenting CO2-e performance (and even voluntarily participating in the CO2-e neutral programmes) is not difficult or that costly. Anyone telling you otherwise should be required to demonstrate their case in the same manner we can.

The only of those companies that have anything to fear are those that do not have any interest in what their energy efficiency is, or think climate change is a hoax. If you are in that basket, you are going the way of the dinosaur. However, if your organisation does not have a philosophical issue of doing something about CO2-e, or simply wants to benefit from energy efficiency, primarily, then you might see more benefits (and opportunities) than detriments.

You ain’t no Darryl Kerrigan

Mar 15

Posted by Sgt Hulka in Bad Ideas, Climate Change, Politics, Snake Oil | Comments off

I reckon Clive Palmer might have gone burko, and is having delusions about having gone to law school instead of into real estate as a young fellow. But whatever the cause, he has moved off free speech as his focus last week on the constitutionality of taxation this week. Busy guy. Perhaps he reckons he can do it all: run his magic dirt and mineral enterprise, fight the FFA/FIFA, fight the mining tax and fight the carbon tax all at once. Or perhaps he is a full of shit, bluffing windbag.

I’m not a constitutional lawyer, but here is why I will go with option 2:

1. The Federal government has the right to impose taxes and duties. This has been tested a number of times, but is pretty solid, based on the amount that my company and I pay every quarter. I don’t reckon Clive is on a winner, if he wants to take on the constitutionality of taxation in general.

2. The Federal government has the right to identify air pollutants of concern and regulate the collection of data on them and their emissions into the receiving environment. We have about 40 years of precedent in this area generally. With respect to CO2, the basis upon which the carbon tax will be collected is the data generated under the National Greenhouse and Energy Reporting (NGER), and despite the huge shit fight over its introduction in industry, no industry lobbying group (and all the big ones were involved) ever suggested it was unconstitutional. It has also passed muster on the basis of sound scientific methodology, so there goes any arbitrary and capricious argument.

3. The Federal or State governments have the right to apply fees (or taxes) to companies that want to discharge pollutants to the common environment in their jurisdiction. Tipping fees, sewage charges and even air pollutant emissions are charged by State and Local governments now, and the extension of this to the Federal Government is not a huge reach in logic. He might be attempting the challenge in this area on the basis of an argument of Intergovernmental Immunity (thank you Wikipedia):

“… the Engineers’ Case held that there was no general immunity between State and Commonwealth governments from each other’s laws, the Commonwealth cannot enact taxation laws that discriminated between the States or parts of the States (Section 51(ii)), nor enact laws that discriminated against the States, or such as to prevent a State from continuing to exist and function as a state”

He may also want to make an argument based on an argument that the new law does not fall within a permissible head of power granted to the Commonwealth government by the Constitution.

While either of these is a possible route of attack, the case of the Carbon Tax being applied to the whole of the country is not likely to be found to be discriminatory against any state, and if this type of taxation of a pollutant is found to be a States’ right rather than the Commonwealth, there are one or more easy workarounds to deliver the intent.

4. But the most obvious reason this constitutional challenge isn’t going to hold water came from Clive himself. Clive was not willing to leak the details on the 730 Report of the precise basis of the means by which the carbon tax is unconstitutional. If he had anything, he’d come out with it. See, constitutional law isn’t like a regular tort. It isn’t like Clive would benefit by hiding his most excellent constitutional argument for a packed courtroom, spring it on the packed house and unsuspecting government barristers, get a judgement and penalty in his favour on the day and be carried off on the shoulders* of his supporters and then next day be much richer. If he had anything worth a damn, he would have won the argument last night with it.

Now, if there were some technicality that did allow the High Court to rule the carbon tax unconstitutional, the government would merely find another means by which to attach its revenue generating mechanism to existing sources to achieve the same effect**. For instance, it could use the NGER data collected to establish the amount owed by each business, then reduce the amount of GST or mining tax revenue returned to the individual states with the identification of the business that the reduction was due to, then suggest that the State recoup that revenue through rate-based licensing regulations that are already on the books by simply adding CO2-e to the pollutants of concern that they “tax” now.

But let’s hope Clive gets lots of lawyers in Sydney and Canberra involved, because that part of the country needs some stimulus. It would really nice if, like in a tort, the Federal government could recoup its costs from Clive when he is unsuccessful.

* if you could even picture that
** as it says right in the legislation, a similar case to many other precedents where a specific law was found unconstitutional, but that did not prevent the Commonwealth from delivering the intent of the law through other mechanisms.

Here’s what happened, and how it did

Mar 6

Posted by Sgt Hulka in Bad Ideas, Economics, Good Ideas | Comments off

There is no way I can summarise what happened during the GFC, and provide an analysis of how it played out the way it did better than the Professor Krugman, so I won’t try. Read for yourself his remarks in Portugal last week. Read them critically, for the facts and for where he clearly identifies what his opinion is on the matter. Because the facts are the facts, and whether you agree or not with the hypothesis of the failure to respond, it is a fantastic summary of the events.

And then have a think and see if you can come up with an alternative explanation on why so many “very serious people” got the response to the crisis very wrong, because its important. It’s important because Europe still has a vast amont of private debt that it has to de-leverage from, not to mention the sovereign debt, and the currently proposed all-austerity approaches all smells like failure.

To me, the big failure I define in terms of efficiency. You can have an argument over what the role of government is in relation to an economy, but the argument about whether it can have an effect is over. The loss by not doing effective stimulus (a large amount of tax cuts aren’t stimulus) in the US and Europe is incredible. Imagine if the US had done a 1.2 trillion dollars of real stimulus (as opposed to 300 billion of stimulus and 400 billion of tax cuts mostly to the rich that then did not trickle down). Now imagine if the US had borrowed most all of that at 1% (which it still can by the way, check the US long term bond rate). Imagine how effective that borrowing would have been had it been ploughed into the infrastructure repairs needed countrywide, the teachers that need not have been laid off or not hired in the first place, and the beginning work to transform the transmission grid in the US to set it up for the energy efficiency and micro-generation improvements that could solve the vast majority of its greenhouse problems without anyone having to modify their lifestyle. Now think about the generation of people who have left or are leaving university in various disciplines in the past 4 years and the next two that would be employed in their chosen field.

I call the efficiency loss and failure to capitalise on the possible gain monumental. Personally I would love to be able to borrow all the money I wanted for 1% for 10 or 30 years. I bet I could do some good things all on my own.

Couldn’t give a rusty. . .

Feb 15

Posted by Sgt Hulka in Bad Ideas, Politics | Comments off

Honestly, do we have so little actually going on here in Australia that we need to dissect even more completely than was done 3 years ago how Julia Gillard took over the leadership of the Labor Party from Kevin Rudd?

I mean, sure, a sitting leader of a party currently holding government had never before been replaced. But beyond that technical first, do we really need this much examination of the event. Who gives a shit if she asked her staff to prepare an acceptance speech beforehand, or what sort of polling she used and who she presented it to? To me the whole thing smacks of a beat up by the ABC and others in the press who aren’t interested in doing more real investigative journalism on something like (say) why we would want to spend $300 MM on a fairy tale like carbon capture and storage.

The truth is, Kevin Rudd backed out of several key commitments that were part of the platform he ran on, wasting the highest approval ratings of a government in a long time, and was so tone deaf to his colleagues that he lost their support. This was obvious due to his patently obvious shock and tears at the press conference after his removal. He was replaced as party head (and therefore as Prime Minister) by another through the open and well tested practice of a spill in caucus. All the rest is fairly irrelevant at this point.

Now, if we want to talk about the failings of Julia Gillard and the current government, let’s do that. But let’s stop wasting a lot of time examining a four year old leadership spill.

Something unexpected

Feb 8

Posted by Sgt Hulka in Bad Ideas, Economics | Comments off

What I’d like to do today is something you would likely never expect if you are familiar with my views on things. I’d like to quote David Frum from his review of a new book called “Coming Apart” by Charles Murray:

You are a white man aged 30 without a college degree. Your grandfather returned from World War II, got a cheap mortgage courtesy of the GI bill, married his sweetheart and went to work in a factory job that paid him something like $50,000 in today’s money plus health benefits and pension. Your father started at that same factory in 1972. He was laid off in 1981, and has never had anything like as good a job ever since. He’s working now at a big-box store, making $40,000 a year, and waiting for his Medicare to kick in.

Now look at you. Yes, unemployment is high right now. But if you keep pounding the pavements, you’ll eventually find a job that pays $28,000 a year. That’s not poverty! Yet you seem to waste a lot of time playing video games, watching porn, and sleeping in. You aren’t married, and you don’t go to church. I blame Frances Fox Piven.

What David is doing here is providing the basis for an alternative reason to why white people in America would be experiencing more social ills presently, as opposed to the degradation in morality proposed by the author. David goes on to identify the ties to economics and disparity in wealth with societal social problems. I agree with him, and would go further. In my study of history, I see a lot of parallels between the US today and Victorian England. Back then Thomas Malthus tried to tie all the socials ills to the morals of people (particularly the poor). They also had a record number of people in prisons, and tried to address their social problems by toughening penalties and making more things a crime. They were facing fundamental changes to their economy through industrialisation.

But after the fact, what proved to be true then remains – most all crime has an economic basis, and the similar can be said for most social problems. Peoples morality and ethical makeup don’t change much after they reach adulthood, or thereabouts, in my experience. But when the economic conditions of someone who is basically honest get bad enough, they can at some point begin to rationalise their ethics and perhaps result in lawbreaking to get by. Certainly they will seek escape from reality and choose to make higher use of alcohol or drugs. But they rarely turn into violent criminals.

The circumstances of the record populations of the prisons in the US, support this thesis. Prisons have been swollen in the last thirty years with non-violent drug offenders and the economically underprivileged. The US does not have a morality problem, but instead a bog standard economic problem just like they had 1900 in England. It would be nice to see leaders world wide (I’m looking at you Europe) spend more time trying to address the micro and macro economic problems that affect peoples lives universally rather than trying to paint everything as a morality play.