Sgt Hulka Uncut

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Archive for June 11th, 2013

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.