Monthly Archives: September 2015

A lesson in central bank policy

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This is a reply to a query at the History of Economics website by Tom Humphrey on the form and aims of central bank policy as undertaken by the Fed in 2009:

You asked if the Fed, early in the crisis, wasn’t engaged in credit, not monetary, policy when it bought and/or loaned against questionable commercial bank assets while simultaneously paying interest on excess reserves.

The answer, of course, is that you are right. The Fed indeed was engaged in credit, not monetary, policy. It sought to help banks by changing the composition not the size of their balance sheets. To this end it did two things.

First, it bought and/or discounted at the discount window non-liquid, potentially questionable assets from the banks, paying for those assets by crediting banks’ reserve accounts. At the same time, the Fed paid positive interest to the banks if they would hold those new (excess) reserves idle. In so doing the Fed enhanced the liquidity and safety of bank balance sheets while inducing the banks to hold their reserves idle rather than using those reserves to expand loans and deposits.

Here was credit policy par excellence. The swap of reserves in exchange for questionable non-monetary assets altered the composition of bank balance sheets. But because banks had a powerful incentive not to expand their loans and deposits, the size of bank balance sheets remained unchanged.

In sum, monetary policy aims at altering the size of bank balance sheets. It does so by inducing banks to raise or lower their volume of loans and deposit. By contrast, credit policy aims at improving bank safety and liquidity. It does so by changing the composition, not the size, of bank balance sheets. Early in the financial crisis the Fed primarily was pursuing credit policy rather than monetary policy.

Ann Coulter is as good a friend as Israel has ever had

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I know she’s not everyone’s cup of tea, but there is no one commenting on politics I like better than her. The ill will that she attracts from the left is directly proportional to her ability to get under their skin, which she is so well able to do because the left is so lacking in irony and sense. If you can’t see what she’s saying here, it’s only because you don’t want to:

“The GOP wastes half these debates on issues on which there is already 100 percent agreement,” she told THR. “The GOP is pro-Israel. I’m pro-Israel. … How, exactly, do these Republicans propose to defend Israel, when no Republican can get elected president anymore because of immigration? How is an endless series of President Obamas going to protect Israel?”

Coulter told THR that the charge that she is anti-Semitic is “laughable.”

“Anyone with a pulse knows I am pro-Israel and against the enemies of the Jewish people. I have a whole chapter in my current book praising Israel and Prime Minister Benjamin Netanyahu. It’s the people attacking me who couldn’t care less about Israel or Jews,” she said.

“The hypocrites who are mad at me are the ones who support anti-Israel college professors, who refuse to condemn Islamic barbarism, who supported the overthrow of Mubarak for the Muslim Brotherhood, who spread the deadly libel that Jews in America are only successful because of ‘white privilege.'”

You can disagree with her point if you like, but to even begin to think she is anti-Semitic only shows how dense some people are.

UPDATE: Wow! Someone else agrees with me about Ann Coulter. This is Susan L.M. Goldberg discussing The Lessons Lost in the Aftermath of Ann Coulter’s F-Bomb. Here’s her crucial point:

The problem isn’t Ann, it’s us. Instead of using jabs to make an argument, we’ve traded in arguments for jabs. Ann is not made for those who’ve pandered down the Twitter hole. Nor is she designed for those seeking to worship idols instead of cultivate their own opinions. Conservatives who aren’t afraid to think critically can still pull the meat from the fat of Ann’s arguments. Did Republican candidates pander to the same old tropes in that debate? Yes. Are they ignoring the realities of immigration policies, in particular the impact they have had and will have on American political attitudes towards Israel? Yes. So, what’s your f-ing problem, again?

Despite what my PJ colleague Rick Moran thinks, Ann is far from over. She not only took advantage of the Right’s seedy underbelly of anti-Semitism, she called attention to their faux anti-Israelism to boot, and all while addressing the issue of illegal immigration. And in the world of social media, we would have missed all of that if she hadn’t Tweeted about the “f-ing Jews.” That’s sad commentary, indeed. For the rest of us that is, not for Ann.

If she doesn’t know this, how can you trust a thing she says?

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This is Gerard Henderson asking a question that needs to be asked: With Tony Abbott gone, what will ABC ‘comedians’ laugh at now?. They might think of starting with the ABC’s Fran Kelly, ace reporter.

The truly stunning performance by Ms Kelly this week occurred towards the end of her interview with Barnaby Joyce — the Minister for Agriculture and deputy leader of the National Party. Let’s go to the transcript:

Fran Kelly: Barnaby Joyce, as deputy National Party leader, as Agriculture Minister, did you vote for Tony Abbott or Malcolm Turnbull?
Barnaby Joyce: I’m in the National Party, I tell you what we —
Fran Kelly: Oh, you don’t get to vote?
Barnaby Joyce: That’s right —
Fran Kelly: Oh, I beg your pardon —
Barnaby Joyce: But what we get to do is do Coalition agreements after they’ve finished [the leadership vote] — that’s how we bargain.

This is no verbal “typo”. One of the leading ABC presenters did not know as of Wednesday morning that the Liberal Party — and the Liberal Party alone — elects the leader of the Liberal Party. Can you bear it?

This should actually be on the front page, that the ABC’s most senior political reporter did not know how the vote for PM was conducted. Beyond incredible.

Eric Abetz and labour relations

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The dog that didn’t bark in the night over the past two years has been industrial relations. Labour relations has been an ongoing sore, relentlessly undermining our prospects and ruining opportunities to raise living standards at every turn. Yet these past two years, conservative government though it may have been, other than a brief wrangle at Qantas, which could have been a massive disaster but in fact wasn’t, I don’t think I can recall a single IR dispute of any consequence.

I have to tell you that I think much of the credit goes to our Minister for Employment, Senator Eric Abetz. In what is the most fractious part of our economic structure, he understood the necessity of working with the grain and not against it. His quiet approach allowed a downwards real wage adjustment to go on behind the scenes, with the most amazing, but largely unnoticed improvement in our labour market having gone on, even with the flat rate of growth in GDP.

Today we find this in The AFR: Abetz accused of restacking Fair Work.

Employment Minister Eric Abetz has made a series of conservative appointments to the Fair Work Commission, using his expected last days in federal cabinet to counter-balance union appointments to the tribunal made by the former Gillard government.

Industrial relations lawyer Tanya Cirkovic, a former legal partner of Liberal Party identity Michael Kroger, and Christopher Platt, who worked at the Australian Mines and Metals Association were appointed commissioners.

Both Mr Platt, currently employee relations manager at BHP Billiton’s Olympic Dam project, and Ms Cirkovic have addressed the conservative HR Nicholls Society.

The last bit does make me laugh since I have also addressed the HR Nicholls Society whose main aim in life has been to rid us of the IR Commission which, in spite of the all too regular criticisms from the HRN and others, has been the main obstacle to union power in this country. If Senator Abetz is removed from the Ministry, just keep the following in mind:

The appointments came as Labor and the Greens denied Senator Abetz a rare legislative victory on industrial relations by stalling the passage of proposed changes to the federal workplace laws changes.

Senator Abetz has reached agreement with six senate crossbenchers to support changes to the Fair Work Act, including new limits on union bargaining power on new projects.

But Labor and the Greens organised a long list of speakers on the bill, ensuring the vote on the changes was delayed until at least the next sitting of federal parliament in three weeks.

[Opposition workplace relations spokesman Brendan] O’Connor said he would spend the parliamentary break seeking to convince the crossbench to reverse their in-principle position and not support the changes proposed by the government.

If it is jobs you are interested in and a reduction in union power, that is the way to have done it. It will be a sorry day for us all if Eric is removed from cabinet and IR is parcelled out to someone less skilled than he is.

To some decency is merely a weakness to exploit

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By Simon Benson via Andrew Bolt whose post is titled, A fine man and good Prime Minister destroyed.

(I)t is my view that, just like Kim Beazley was perhaps the best prime minister we never had, Tony Abbott was potentially the best prime minister we had but never knew it…

Above all else, the bloke I know is one of immense personal decency, integrity and goodwill. He espouses a set of values, principles and personal ethics that speak to community values that many of us could probably only aspire to. And on these values, he is uncompromising. He is loyal to a fault and conducts himself with a personal humility rare in politics.

His mistake was that he, perhaps naively, believed the principles he adopted in life would work in politics, and that the loyalty would be returned. To the shame of many on his own side — those who sat in the parliament on Tuesday like lemmings with their heads bowed after having thrown one of their own off a cliff rather than themselves — it took Labor leader Bill Shorten to recognise the character of Abbott…

The unrecognised fact is Abbott achieved more in just 24 months of government than perhaps any modern leader. He got credit from the nation for none of it, including even the most fundamental task of restoring stability to the administration of government after the near institutional destruction inflicted by Labor.

Howard himself said he did not believe that Abbott — and Scott Morrison — would be able to stop the boats. Under Abbott the country will be allowed a plebiscite on gay marriage. Who would have thought it?…

Despite the predictions he would be a national embarrassment on the world stage, it was on this stage that he became a statesman. His response to the twin tragedies of MH17 and MH370 assuaged the grief and anger of a nation. He elevated Australia’s response to global terrorism to one of leading rather than following, as recognised by the US President Barack Obama.

And he signed three free trade agreements that Labor seemed incapable of progressing…

In toppling Tony Abbott, Turnbull and his cohorts have not only legitimised the scandalous behaviour of the previous Labor government, they have endorsed it, using similar justifications for their actions.

Ultimately, it was when The Australian went over to the Dark Side that made the final difference. Other than Greg Sheridan, Henry Ergas and Nick Cater, reading The Oz became like reading The Age.

US economy going nowhere, but some parts are doing better than others

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The title, for Powerline, is Census: Economy is Going Nowhere. But what may be true for the economy in general is not true for various parts in particular:

The Asian-American population is now approaching 20 million, and their household incomes are now 23% higher than whites’, on the average. This is a rather stunning statistic. Why is so little attention paid to this income “gap”? Is it the result of discrimination against whites? If not, what could the cause possibly be?

I think the reason for the media’s silence on these numbers is that there is no good way to fit them into the narrative.

So just imagine what the stats would be like for the non-Asian parts of the population on their own.

It’s not leadership, it’s followership

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The most singular part about Malcolm Turnbull leadership is that he has no desire to lead anywhere except where others also on the left already want to go. On not a single issue that I can think of does he have a view in any way different from the ones held by Mark Scott, say, or the usual leftist loons at the “national broadcaster”. He is as personally empty of any deeper thoughts than the usual socialist maunderings of the mental midgets who populate our ABC. If he really does make Martin Parkinson his Chief of Staff, it will only be because he wants to rub salt in our wounds.

The first poll since the change in leader has the Coalition up at 51-49, an inconsequential improvement on the 48-52 when last taken under Abbott. This is with all of the one-sided pro-Turnbull coverage by The Australian-ABC media axis. If that part of the Parliamentary donkey vote for Turnbull were reading the comments on this blog, rather than those unrepresentative columnists in The Oz, never mind listening to the dyed-in-the-wool left media on the ABC, they might have had a better understanding of what the actual views of their own constituency are. To find that half the Parliamentary Liberal Party are Labor voters at heart is a dismal revelation that won’t be soon forgotten. If their stomachs did not turn at the very idea of voting for Turnbull, they are sitting on the wrong side of the House.

MT for PM

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Every political leader comes with added features that are not to my liking, even the ones I like the best. With Tony Abbott, his lack of genuine mongrel, an unwillingness to deal with enemies within the party in as hard a way as possible, was unfortunate. His willingness to let others take care of, and maintain responsibility for, their own portfolios without intervention was perhaps a fault, but it was only a fault because of the incompetence and ill-will which surrounded him. Brandis’s “even bigots have rights” sunk the ability to defeat 18C, but I knew Brandis was an incompetent and perhaps Tony did not. Malcolm at the ABC was another, and Joe in Treasury is yet one more. Yet these are genuine power brokers within the party. Tony did what he could with the material he had, but they let him down, along with the rest of us.

On the issues that got him into hot water on our side, it was Paid Parental Leave that was possibly the worst so far as public relations went, but was not a bad idea in more normal times. As I read it, he was trying to strengthen the family and open the opportunity for women to have children, an aim I fully support. Constitutional recognition of Aboriginals I still think is a judicial nightmare we do not need and would long regret. But this, too, came with a charitable heart, and I naturally support his wish to improve the lives of aboriginal people.

I knew, however, just how up hill the battle would be when I came back in July to find Bronwyn Bishop’s helicopter ride a daily front-page story across the Murdoch press. This is a one-day non-issue unless there is another agenda running besides selling papers. The speed with which Tony Burke’s genuine example of rorting disappeared within days, and never had traction, is what any political leader would have expected. What he was dealing with, however, was an Australian-ABC axis that in the end was too powerful to resist. This piece of disgusting hypocrisy from The Australian yesterday was typical:

Turnbull’s critics should pull their heads in and focus on the real battle: it’s against Shorten and the Labor Party, not between opposing factions in the Liberal Party.

Really? Is this so? Where was this advice a week ago when Abbott was leader and Turnbull was doing everything he could to unsettle the Government. Disgusting sanctimonious cant, disguised as independent, above-the-fray objective advice. But it was what I had become used to.

Even with it all, Tony ended up with 44 against 54. I am, of course, in the 44. Tony has the safest pair of hands of anyone on all of the issues that matter to me. This is from Jo Nova who says about climate change what I feel about much else:

Despite the resounding win a mere two years ago, and achieving his main promises, Abbott has been ousted in his first term. Politics is dirtier than ever.

He was elected with a big win, but lasted just two years in office. Gillard barely made a government, needing help from two turncoats, and her legacy legislation burnt her solemn promise – yet she held office even longer than Abbott did.

The anti Abbott, Abbott, Abbott campaign in the media has been relentless and successful.

Turnbull has said he will stick with Australia’s carbon emissions cuts (26% by 2030) but this means nothing. Firstly, the target is obscenely high, and secondly, there are so many possible ways to waste more money and give up more sovereign rights in Paris. He can sell us out to the financial houses that want carbon trading, and waste additional billions on renewable energy.

All that and more. The Liberal Party is filled with others like Malcolm and it is a problem. But here is where we are. There are the 44 who are still in the party room, and there are the Coalition National Party also in the government. And Labor is a disaster in the making of such massive proportion, of the Bernie Sanders and Jeremy Corbyn variety, that not voting Coalition at the next election is unthinkable. Malcolm has now got this to add to his CV, everyone in the party room knows the extent to which he is an empty vessel, but the stakes are too high even to think about Bill Shorten, never mind Tanya as PM.

The sad state of economic theory

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us household income

The title of the article is The sad state of the American worker but what it really underscores is the sad state of economic theory and the economists who come with it. Read the article if you must, but the author has no idea what went wrong. Let us therefore start with the statistical facts he raises:

Start with the jobless rate. Yes, unemployment is down to 5.1 percent officially. Raise your hand if you believe that number is even close to accurate. The real unemployment rate counting labor force quitters and those forced into part-time jobs is, according to Mr. Obama’s own Labor Department: 10.5 percent. That number is actually down from more than 15 percent recently, but these still feel like recession rates. Nearly 90 million Americans over the age of 16 are out of the full-time workforce, and many millions of them are plopped in front of the TV watching “Seinfeld” reruns and living off food stamps or their parents because they have given up looking for a good job.

There is then the fall in household incomes which has occurred in spite of the fact that so many of our children are still living at home with their parents:

The Census Bureau has released the latest data on family income, and it has been analyzed by the statisticians at Sentier Research. Through this past June, the median income family has lost $1,700 in real income since Team Obama took the reins (see chart).

All that is true, and more, but you will look through this article for any suggestion on what went wrong, other than the anti-business environment that businesses have to contend with or the rises in the minimum wage which did not cause the problem and are peripheral at best. Frankly, he sees there is a problem but if you ask me, he has no idea what ought to be done. And the reason for that, in my view, is that economic theory is itself so misguided that economists in general might even be willing to endorse everything Obama has done to try to put the economy back on the rails.

The gravedigger’s picnic

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Some people have no shame. Read this and marvel.

It is sad that with humanity facing catastrophic climate disruption as part of an existential threat that there are still people willing to attack Mike Mann, one of the real heroes of climate science, outrageous lies. But one must admire the well-funded denier campaign, carried forward by the likes of Rupert Murdoch and his “False News” network, for the campaign’s persistence in the face of massive evidence, its success in confusing much of the public, and creating a propioganda [sic] triumph equivalent to that of creationism in keeping Medieval nonsense embedded in the brains of many Americans. Unhappily the “triumph” may prove doom for many of our descendents [sic]. Mike Mann is admired by all real climate scientists, even those who may have same disagreements with him (there is no certainty in science, unlike in the world of denial propogandists [sic]) — and I know many of the leading players and follow the field closely. The best one can say of this silly collection of comments from hacks and has-beens, mixed with quotes-out-of-context, is that it is NOT a disgrace to the profession of its perpetrators, nor to their pimps.

Let Mark Steyn tell you who wrote it:

We have our first celebrity thumb’s down, from “P Ehrlich” – and yes, it’s that Paul Ehrlich, author of The Population Bomb. . . .

It’s not clear from P Ehrlich’s flaccid generalities whether he actually read the book, but, if he did bother to pick it up, I do hope he got as far as page 240, where he and his hero “Mike Mann” make a joint appearance:

Mann, Ehrlich, and Rahmstorf: What a scurrilous bunch. My sympathy to you and anyone else who has to deal with them. They’re gravediggers of science.

Or maybe he did get that far and this is one of those “quotes out of context” he’s complaining about.

Still, always nice to hear from one of the gravediggers. Keep digging, Professor.

Not evidence, not fact, not theory, not anything seems to deter these people. And why? Because there are idiots everywhere who lap it all up.