Tony Jones got stuck into Penny Wong on Thursday night. I get the impression he was a bit annoyed by selective government leaking and felt that the government should be telling us more about their own policies and the costings of those policies. Fair enough.
TONY JONES: … You must have Treasury modelling which tells you what a 10 per cent reduction would be, a 15 per cent reduction, a 20 per cent, or even a 25 per cent reduction in emissions would cost in terms of cost-of-living increases. Do you have that modelling?
PENNY WONG: Well, we have put out modelling in October, 2008, which laid out the various Treasury modellings and different scenarios, and, yes, it is true the carbon price will change. But can I say, Tony, we at the moment have made very clear we will not go beyond 5 per cent unless the rest of the world makes a range of commitments that we are seeking. Because we know climate change is a global problem, we’ve said, “Look, we will do no more and no less.”
There is a lot in just that passage. I understand that Wong wants to talk about the 5 percent – that is now bipartisan policy, but it seems to me that the government could increase that cap if the rest of the world inceases too. So Jones’ point is valid – where is the contingency planning for that event?
Wong then side-steps the question about the impact on the cost of living. As an aside, the term ‘cost of living’ is often used as short hand for the inflation rate – but I don’t think that is what Jones specifically has in mind. In theory the ETS will have a small inflationary impact because it is meant to generate a change is relative prices. So while prices might go up quite substantially that price increase would not be inflationary (money losing its value) but rather because one the inputs to production had increased in price (become more valuable). The Treasury modelling assumes that the RBA will be able to differentiate the two effects. I don’t know that they could so I’m not confident about that assumption.
Wong points us rather to the Treasury modelling released in October 2008. That modelling examines a number of scenarios and compares four scenarios to a reference case. These scenarios consist of a 5, 10, 15 and 25 percent cap. They also use three models to generate forecasts so there are three forecasts for each scenario. What I have done in the table below is show the range between the maximum and minimum forecast for each scenario for a number of economic variables. Treasury provide a forecast out to 2020 and 2050.
These costs are not trivial. This time last year the Rudd government announced that it would spend $42 billion – blow the budget surplus and take the Commonwealth into public debt – in order to avoid a 1 percent to 2 percent decline in GDP. Yet here we have a policy that deliberately generates an outcome of that magnitude out to 2020 and we’re being lead to believe that the costs of doing so are minimal. It looks worse out to 2050.
A massive problem with the modelling is that it cannot deal with unemployment. Rather the models reduce real wages in order to ensure that no long-term unemployment occurs. In the modelling short-term unemployment can last for up to ten years – a public policy disaster if that were to occur in reality. Then real wages fall and employment increases. But the current government is reducing labour market flexibility making it unlikely that real wages would be falling quickly or any time soon. So there is massive, unknown, unmodelled unemployment in the policy. But with investment falling, real wages falling, GDP per capita falling and consumption falling in most cases it is hard to see how living standards and quality of life won’t be falling too.
The other thing to remember is that these costs have more potential up-side in them than downside. The Treasury made some very strong assumptions in their modelling – specifically that an international market for carbon permits would be in operation. Australian firms were expected to be heavy users of that market (there would be a huge adverse balance of payments number associated with that). In the post-Kyoto failure world that market won’t be in operation for some time, if ever.
If you watched Lateline last night you would have seen Chris Bowen and Scott Morrison interviewed by Leigh Sales:
He dodges the question about costs. Later in the interview Bowen says:
He said the above with a smirk on his face.
dover_beach
6 Feb 10 at 9:23 am
well no the Government went into debt because of the GFC affecting both revenues and expenditure.
Consequently as the stimulus has boosted growth debt figures have been forecast to be lower.
They will undoubtedly be lower still if the RBA is correct.
Butterfield, Bloomfield & Bishop
6 Feb 10 at 11:26 am
iConsequently as the stimulus has boosted growth debt figures have been forecast to be lower.
That’s interesting. So if I go borrow a million bucks from the bank and blow it on say a bigger “toilet” an bathroom I will be richer.
No comment about the effects of monetary policy.
JC
6 Feb 10 at 12:16 pm
So she told a few white lies. Two whites don’t make a Wong.
The most hilarious thing about the “compensation” line is that
WhitlamRudd & Co. talk about it as though it’s free money – which they differeniate from costs to taxpayers. Essentially, this is a dual robbery scheme that entails stealing taxpayers’ money directly and then stealing and redistributing their money indirectly with “compensation.” All of this is for a scheme being sold as crucial to “stop” “climate change” – which, of course, it won’t do or even make any substantive contribution to doing. Quite literally, if Rudd was to take the equivalent amount of money out of the Commonwealth’s coffers and order it incinerated, the effect on the climate would be no different.C.L.
6 Feb 10 at 12:17 pm
The entire policy is based on cynicism. It’s a redistribution scheme as they have admitted. I hope they get taken to the cleaners on this for the lying and the general dishonesty that goes with it.
JC
6 Feb 10 at 12:31 pm
That’s interesting. So if I go borrow a million bucks from the bank and blow it on say a bigger “toilet” an bathroom I will be richer.
Let me speak for Homer: JC, you have to factor in the productivity improvements you will enjoy while taking a shit.
dover_beach
6 Feb 10 at 12:33 pm
Penny Wong is a master of double-speak and evasion. It’s really annoying to watch her in interviews. She seems to have a catalog of pre-programmed answers that often only have a superficial resemblance to the substance of the questions.
daddy dave
6 Feb 10 at 1:01 pm
Dad:
They don’t understanding the complexities of the policy. None of them do which is why they’re all bumbling around looking for the pre-programmed answer.
They have no idea what is going to happen with $120 billion swirling around the economy.
If you watch Wong and Rudd’s performance about the policy it doesn’t appear to me that they’re hiding anything. It looks like they really don’t know. It’s so freaking complex that the most senior people have no idea.
It’s dead. I hope Rudd continues to run with it because the more people learn just how fucked it all is and that even the government doesn’t understand it, it could mean they get rolled in the election just as Howard was almost rolled in 1998.
No kidding but it wouldn’t shock me if Rudd is gone even before the next election and Gillard is the PM. Rudd is despised in the party and when they think it’s time for him to go, he’ll get the proverbial bullet very quickly.
One more poll like the one we just saw and Abbott gets better polling could really put a blow torch on Rudd.
Abbott comes across as very genial and I’m starting to think people actually like him. The electorate is also warming to his authenticity and prepared to accept his mistakes , particularly when he says he’s sorry for screwing somehting up.
I’m not totally convinced the election is a done deal for the ALP with Rudd as PM.
JC
6 Feb 10 at 1:14 pm
Forrest, like the rest you never did understand how the debt figure was arrived at. the effect of the economy had a much greater effect on the figure.
The stimulus boosted growth and consequently the debt figures have been revised down.
Care to guess how much of the present US deficit is caused merely by the recession?
Butterfield, Bloomfield & Bishop
6 Feb 10 at 1:19 pm
It was the media adulation and soft treatment that caused the ETS to be conceived as it was. Rudd, drunk on hubris, believed he could simply invent a Do Something sham of a policy and be given a free ride. After the COP15 debacle and the advent of an Opposition Leader with testicles, it all started to go pear-shaped. Chris Bowen on Lateline last night was reduced to saying the ETS was crucial for the planet. They’re starting to come across as a bunch of cultish weirdos.
C.L.
6 Feb 10 at 1:24 pm
Care to guess how much of the present US deficit is caused merely by the recession?
The recession spent the money! It’s a person now.
C.L.
6 Feb 10 at 1:26 pm
Homer:
The thread is on the ETS. IF you must talk about the US deficit I suggest you take it over to the open thread, you loon.
JC
6 Feb 10 at 1:39 pm
These days, I think of our old friend Homer as Homer Cheney. Deficits don’t matter.
C.L.
6 Feb 10 at 1:40 pm
Chris Bowen on Lateline last night was reduced to saying the ETS was crucial for the planet. They’re starting to come across as a bunch of cultish weirdos.
Aren’t they?
I also noticed how Abbott really swiped gillard badly on the sunrise video.
Gillard refers to the “big polluters” and Abbott’s reply was that she’s a big polluter every time she turns on a light or uses an appliance.
There’s a fucking opposition leader now.
These trogs can be beaten. The next policy to go for is the NBN and the fact that it’s going to turn into a white elephant with $43 billion down the drain when a reasonably regulated Telstra could do it that wouldn’t cost the tax payer a cent.
Abbott should get the base ball bat out of this one.
They can be beaten.
JC
6 Feb 10 at 1:44 pm
Abbott’s defence of power companies also resounds: he says, hey, let’s not forget these are good people, working hard and keeping the lights on for all of us. When he says it, you can virtually hear a million television viewers saying, ‘good f—ing point.’ Then the story gets a reax from Kevin: ‘dirty dirty power companies, evil polluters, bad Abbott (Speedos – hee hee), save the planet, the reef’s dying, the Liberals hate your children’s children, no I can’t tell you how much it will cost, denialist!, bla bla bla-bla bla bla.’
C.L.
6 Feb 10 at 1:50 pm
Forrest you were the ignorant one on how debt increases and decreases Sinkers was merely inaccurate as he always is.
Butterfield, Bloomfield & Bishop
6 Feb 10 at 2:07 pm
Homer is there a chance you could put that in some coherent language we could all understand?
——————
Abbott attitude to the ETS best captured in the Gotti movie.
http://www.youtube.com/watch?v=CoE8v678zB4&feature=player_embedded
JC
6 Feb 10 at 2:09 pm
Homer, do you still think “Two Wongs don’t make a White” wasn’t a racist comment?
Michael Fisk
6 Feb 10 at 2:19 pm
of course it wasn’t only a complete moron would think so oh of course they wouldn’t have examined Calwell’s time as Immigration Minister as well.
Oh that really sums catallaxian crackpots
Butterfield, Bloomfield & Bishop
6 Feb 10 at 2:21 pm
Here’s Arthur Calwell, talking about a Chinese guy whose life was about to be destroyed (that’s right, ONE Chinese guy, not two):
The gentleman’s name is Wong. There are many Wongs in the Chinese community, but I have to say – and I am sure that the Honourable Member for Balaclava will not mind me doing so – that “two Wongs do not make a White.
This statement can only be understood as a racial jibe. Homer’s fine with that.
Michael Fisk
6 Feb 10 at 2:27 pm
let us have a look at Calwell’s time as Immigration Minister and forget about Fisky’s inability to understand the english language.
first Federal Minister, initiated and implemented the Post-World War Immigration Scheme that transformed Australia, 1945-1949 including free and assisted passages despite lack of shipping. #
Allowed Holocaust survivors to come to Australia when other countries uninterested, descendants and survivors proportionately greater than in any country outside Israel. In 1946, 100 trees planted in Israel by Melbourne Jewish Community
Nationality Act 1946 enabled Australian women to retain their nationality after marriage to a foreigner, 1946. #
Nationality Act (No.2) 1946 allowed foreigners in Australian territories to be naturalised provided they remained in Australia or its territories. #
Deportation Act 1946, deported a small group of internees, some of whom wanted to go home. #
Initiated action that led to decision that Federal Parliament be broadcast on ABC, 1946. #
Aliens Act 1947 removed War-time restrictions on un-naturalised residents. Calwell observed Australians have “something to learn in the way of tolerance and forbearance towards people from other lands.” #
He tried to grant naturalisation to Chinese residents but Cabinet only agreed to amend Act to remove some restrictions and ordered that it remain secret. Calwell protested about the treatment of aborigines and urged that Chinese and Lebanese residents should be naturalised in 1941. #
Changed immigration category of ‘Middle East’ from Asia to Europe for immigration purposes, 1947. #
taking into account he attitude towards Aboriginals then the racism charge is stupid.
fisky of course is unaware of all this!
Butterfield, Bloomfield & Bishop
6 Feb 10 at 2:38 pm
Hey, coal majorly rocks again!
Anna Bligh, Clive Palmer announce multi-billion coal to China deal.
But what about THE PLANET!
C.L.
6 Feb 10 at 2:48 pm
Homer, most of those laws (possibly all of them) applied to white non citizens. In the notorious O’Keefe case, Calwell tried to deport an Ambon woman (who came to Australia as a war-time refugee) and her seven ‘half-caste’ children. He stood like a shag on a rock opposing the abolition of White Australia as late as the mid 1960s.
C.L.
6 Feb 10 at 2:52 pm
Who can forget Calwell blocking Skank-ki Ho’s immigration to Australia. Disgraceful.
Infidel Tiger
6 Feb 10 at 3:04 pm
‘Time for an old-fashioned Ho-down,’ he joked.
C.L.
6 Feb 10 at 3:07 pm
Not only does the DCC modeling assume that there will be an international market in permits (the ability to trade offsets is a key reason the CPRS will not reduce emission in this country), but it also assumes that ALL of our competitor countries will also have a trading scheme that works exactly the same way. Imagine the likely impact on GDP the model would produce if some realistic assumptions were used (like other coal exporters will not have an ETS).
The DCC modeling is actually an edifice of steaming shit, and the econometricians working there should hang their heads in shame that they have been conned into producing output that they must know is meaningless. A true faustian bargain. Once someone actually gets to burrow into what they have done and publicises it, the buggers will be pretty hard put to get a job elsewhere.
entropy
6 Feb 10 at 3:30 pm
The DCC modeling is actually an edifice of steaming shit,
Well, that’s the best spin one can put on it. I was shocked when Sinc informed me that the modelling didn’t bother to measure the CPRS’s effect on unemployment. This suggests three possibilites: glaring incompetence; not wanting to know; or both.
dover_beach
6 Feb 10 at 4:06 pm
oh the O’keefe case . hmm let us see
“All absconding seamen and illegal migrants had to be deported unless there is danger in their own countries. In the O’Keefe case there the case of it being used by the Dutch Government to embarrass Australia because of its support for Indonesia or that the Indonesian representative in Australia, Dr. Usman, stated it was ‘part of a clever Dutch stunt to embarrass the Australian Government because of its attendance at the New Delhi Conference.’ (1947). Sir John Latham commented that America was much more ruthless in deporting people but their newspapers did not try to denigrate their own country.
The Nancy Prasad Case under [later immigration minister Sir Hubert] Opperman is ignored as are statements by [Liberal leader Sir Billy] Snedden and Forbes who defended the policy in 1972. ”
Gosh CL wrong Again and hold on who held the same views?
Butterfield, Bloomfield & Bishop
6 Feb 10 at 4:07 pm
Actually, there is fourth possibility: the figures are frightening and they don’t want us to know them.
dover_beach
6 Feb 10 at 4:08 pm
No Snoopy If Garnaut’s proposal, which was far more sensible, was not ‘frightening, how could this be when it won’t affect the economy as much
Butterfield, Bloomfield & Bishop
6 Feb 10 at 4:12 pm
DB, I think it has to be deliberate. The assumptions are so glaringly stupid they must have been deliberately set so to minimise the risk of scaring the horses (sorry, make that voters). After all nobody looks at how the black box was made.
entropy
6 Feb 10 at 4:15 pm
If the unemployment figures aren’t frightening, why don’t they release them; and if they haven’t been modelled, why not? I’m happy to be proved wrong but I’d like to see the numbers.
dover_beach
6 Feb 10 at 4:17 pm
I agree, entropy. This smells like a fish forgotten in the car during summer.
dover_beach
6 Feb 10 at 4:18 pm
Um, Homer, the fanatical Calwell took the O’Keefe case all the way to the High Court.
He lost.
Oops.
Wrong again.
Of course the Dutch government used Calwell’s racism against Australia. That’s a given.
And I note again that Homer has failed to provide a link to his quote. Google can’t find it but some digitised pages and PDFs don’t always come up easily, unless you search diligently and creatively.
But I found the source of Homer’s apologia for Arthur Calwell: Mary Elizabeth Calwell, Arthur’s daughter. PDF here.
Let’s go to the other woman in the story. From a 1972 article in the Sydney Morning Herald:
The Battle Calwell Lost. Mrs O’keefe Recalls How She Won Her Fight Against His Deportation Order.
C.L.
6 Feb 10 at 5:05 pm
That’s interesting:
Comment by Artie Calwell:
” you can have a white Australia or a black Australia, but a mongrel Australia is impossible”
According to Homer, Calwell wasn’t racist.
Then again Homer’s said Jews were well treated by the Nazis when forced in the labor camps.
JC
6 Feb 10 at 5:11 pm
I’m sorry CL Calwell was Minister what could the Minister do. Exactly what was the law?
you also are mute about the similar Prasad case and fellow liberals who supported the actual law.
Oh yeah Holt thought well of Calwell liberalising Immigration policy.
Oh dear history again shows up CL being WRONG.
Why do I have to provide a link to you
It occurs so often
Butterfield, Bloomfield & Bishop
6 Feb 10 at 5:11 pm
Homer:
Has David Irving got in touch with you yet?
JC
6 Feb 10 at 5:14 pm
Typical of Forrest and it shows he just can’t help himself.
Butterfield, Bloomfield & Bishop
6 Feb 10 at 5:21 pm
there was an ALPonference in 1965.
One D Dunstan moved the ALP in effect get rid of the WAP..the seconder was …?
Butterfield, Bloomfield & Bishop
6 Feb 10 at 5:27 pm
Homer you dolt
Calwell liberalised immigration policy by letting in Mediterraneans. It doesn’t exactly support your case that he wasn’t wedded to the WAP.
Jason Soon
6 Feb 10 at 6:21 pm
One D Dunstan moved the ALP in effect get rid of the WAP..the seconder was …?
Yea, who Homer. Herman Goering? Heindrick Himmler? Who exactly you dope?
JC
6 Feb 10 at 6:26 pm
Calwell liberalised immigration policy by letting in Mediterraneans. It doesn’t exactly support your case that he wasn’t wedded to the WAP.
Well to Homer it does seeing he doesn’t think they’re white in the Little England sense of the term.
JC
6 Feb 10 at 6:32 pm
JC, if you think that the electorate is “warming” to Abbott then you have another think coming.
Rudd is slowly setting Abbott up and Abbott is happily obliging.
By the time the election is held Abbott will prove himself to be a no policy no agenda unintelligent unrepresentative beach bum.
rog
7 Feb 10 at 8:06 am
When faced with a CPRS the inmates rush to the safety of the WAP
rog
7 Feb 10 at 8:08 am
You could be right about Rudd/Abbott rog but right now I would not bet.
My guess is that r will continue to lose interest in AGW – nothing is going to be done anywhere that will make a difference and the public is tiring of gestures. So we might have the strange phenomenon of the Libs wanting to talk about it and the government changing the subject.
Right now I don’t think the government has a clue how to deal with A.
Almost certainly the ALP will win the election but not so decisively as to destroy A.
The most interesting questions are: Will the ALP and the electorate get tired of R before the 2013 election?
Will the Libs find a leader who is electable, probably after A has done the hard work of getting them close?
ken nielsen
7 Feb 10 at 9:36 am
Rog:
Pound for pound I’d buy into Abbott- a Rhodes Scholar- being a lot smarter than the former piddly little bureaucrat.
And yea, the electorate seems to be warming to him judging by the most recent poll.
The strategy should be based on a few main topics.
1. big wasteful spending in the stimulus with examples
2. Bailing the labor state governments as some were going broke… NSW.
3. The ETS that even the government doesn’t understand due to its complexity
4. NBN is a white elephant costing more that $43 Billion and quite possibly being redundant by the time it is complete
5. Unions gaining more control of the labor markets. Although people were against Work-choices they never signed onto the back to the future strategy of the ALP with unions taking over.
JC
7 Feb 10 at 11:21 am
Blame homer for steering the thread in another direction other than the real topic, rog.
JC
7 Feb 10 at 11:24 am
Jc, I doubt any of those issues are capable of shifting votes. Maybe the Coalition could tarnish the Federal government by association with the states, but that’s about it.
THR
7 Feb 10 at 11:36 am
“So there is massive, unknown, unmodelled unemployment in the policy. But with investment falling, real wages falling, GDP per capita falling and consumption falling in most cases it is hard to see how living standards and quality of life won’t be falling too.”
The least you could do is make it clear that all of these effects are relative to a baseline that grows over time. So, none of those variables fall relative to 2010, they are just lower than they otherwise would be.
A few other points where your analysis is misleading. The fiscal stimulus was a response to a forecast large near-term decline in demand. In contrast, the 1 to 2% impact of the CPRS takes place over a ten year period, and so reduces growth below its baseline level by between 0.1% and 0.2% per annum. Moreover, the introduction of the CPRS should be thought of as a supply shock, not a demand shock. It is silly in the extreme to compare the GFC to a policy induced change in relative prices as they are very different shocks.
Also, you may have your doubts about whether the RBA will be able to differentiate the impact of the change in relative prices from any permanent second round effects on the rate of inflation, but that is not the view of the RBA. They included a box in one of their SMPs a year or so ago setting out the relatively minor implications they forsaw from the introduction of the CPRS. Central banks are continually having to differentiate between different types of shock and determine which shocks will have longer run effects on inflation and inflation expecations and which will be transitory. What makes you think it will be unduly difficult for them to do so in this instance?
You are of course correct to point out that the modelling has largely been done in comparative static terms and so does not incorporate unemployment effects. In this it is identical to all CGE exercises. But what makes you think this effect will be massive? If one were to model the impact of a shock that reduced growth by between 0.1 and 0.2% each year below baseline using Okun’s law, you would get a relatively small effect, even if you assumed no feedback into real wages. So, yes, there will be an unemployment effect, but I wouldn’t expect it to be massive.
As for the point about the cost of meeting higher targets, they will only be put in place if there is an effective international agreement in place that binds those countries to higher committments. If this happens, it is highly likely that relatively cheap permits/offsets will be able to be purchased through the international market. Heck, Australia would be able to cap the effective cost of meeting the targets simply by linking to the EU ETS and importing permits when the domestic cost of abatement rises above the world price.
Think of it this way, the 5% target is predicated not only on Copenhagen’s failure but on the failure not being overcome over the next few years. If the world makes no progress then the 5% target stays, with the likely costs of this target set out in the white paper. If there is progress and the target is increased it is hard to see why there wouldn’t also be an expanded market in international permits.
One final point. It would be nice to see you apply some analysis to the coalition’s dog of a policy. Now, you are a climate change sceptic. Fair enough. But the coalition have said that they support the same target as the ALP. Would you really prefer that targets, if they were going to be put in place, be met through command and control policies? Íf your concern is with bigger government, I still can’t see why you would prefer the coalition’s policy given that the subsidies they intend to hand out are not paid for by any revenue raised by the policy itself. A massive solar panel subsidisation scheme (the most expensive renewable technology available) doesn’t sound like small government to me.
Labor Outsider
9 Feb 10 at 12:36 am
Mmm. Sounds straight-forward.
How will it affect the price of a birthday cake?
C.L.
9 Feb 10 at 12:46 am
A massive solar panel subsidisation scheme (the most expensive renewable technology available) doesn’t sound like small government to me.
You’re on the other side of this: on the labor side I presume by your comments.
Labor currently subsidizes all renewable and has a predetermined of objective that renewable will carry 20% of our energy needs by 2020 with solar being one of the two major delivery technologies. Seeing that they have ruled out nuclear because they ran a scare campaign in the last election and are therefore wedded to this anti-science trog view please explain how that is any better than the Libs plan if not worse?
Furthermore our grid is a north/south one which by some experts’ estimations limits the amount of renewables that can be thrown on the grid without causing major destabilization. Their estimate suggests that the grid would not be able to absorb any more than 7% renewable due to the requirements of keeping the coal plants at high peak baseload as the transient nature of renewables makes firing down the plants next to impossible. Wong has essentially conceded this point, which means the first phase of the ALP plan is unworkable.
Tanner and now most recently Rudd has said that people on less incomes will end up receiving more than they pay so this shoddy mess of a policy is not in fact a mitigation policy but also includes elements of a redistribution objective for the ALP constituencies. So the plan begins with so much dishonesty that it is laughable in the extreme.
Please don’t even begin to bullshit people that the Libs plan is a command and control plan while the ALP’s is more market based. That’s just propagandist bullshit that you would get away with at LP, where the level of understanding of economics is below that of a sheep herder in Afghanistan, however it won’t work at all sites.
With nuke out of the picture the labor plan is essentially a tax and a redistribution scheme (see tanner and Rudd’s comments) as there are no other alternatives in the suite of options to provide carbon limited energy supplies. In addition to all the economic premises being bullshit your estimates etc. are not only suspect but also simply derived out of thin air.
Abbott’s program will cost around $3.2 billion in terms of a negative budget impact while the ALP’s will be around $3.6 billion over the same period. As far as big government spending goes, labor’s is therefore worse.
As regards to command and control, please don’t even try to suggest that the ALP’s is market derived when the element of the carbon price is essentially determined by the credits sold by the government as a form of indulgences.
Lastly the coal plants value is now so impaired by the political risk of the ALP’s plan that more than a few of them have been written down to almost zero and the owners have basically said they will walk away leaving the bank syndicates as the owners. Little to no maintenance is being done on them, which means we will be threatened by blackouts under the ALP plan compared to the Libs.
If you going to argue in future I suggest be more open about it and not insult our intelligence with nonsense.
The ETS is an unworkable calamity and no matter how Abbotts plan looks, it is miles better than the one you’re peddling.
JC
9 Feb 10 at 1:22 am
oH I forgot, since the Haj in Copenhagen was a disaster none of the big players are taking up an ETS, which therefore means we would be penalizing our industry in the extreme compared to the rest of the world.
The US is looking like it will take the nuclear option and China , India and Brazil told the world that they were more interested in economic growth than mitigation.
So you’re suggesting we go it alone?
JC
9 Feb 10 at 1:39 am
My god you write some rubbish JC.
The MRET (which I don’t support) does not predetermine the source of renewable energy and solar is very unlikely to form a large share of the 20% target. Moreover, where has Abbott said that the coalition will reject an expanded MRET? The original MRET was coalition policy!!
The compensation arrangments in the CPRS are primarly designed to ensure that households react to the change in relative prices (the substitution effect) but do not have to additionally absorb an income effect (though there will be small one due to the overall impact of the scheme on disposable income and real wages). So what if there is a small redistributive element in the compensation arrangements?
The coalition’s plan is of course more reliant on command and control mechanisms. It eschews pricing carbon for a start and instead relies on a very poorly detailed and likely hard to implement quasi baseline and credit mechanism (if that is what it is as the original policy paper was horribly unclear). Nearly every economist that has ever looked at this issue has concluded that either a carbon tax, a cap and trade ETS, or a hybrid scheme would be the most efficient way to achieve a given level amount of carbon abatement and send the clear, credible long-term price signals that are necessary to drive long-term investment in low-emission technologies. I’m yet to come across any economist with any credibility that thinks that implementing the coalition’s policy would be an efficient way to do this.
Besides, it has already been exposed that the policies the coalition have announced would be very unlikely to be enough to reach the 5% target, forcing them to add further costly half measures to meet the target they have identified. Most of their aggregate abatement comes from wildly optimist assumptions about the carbon storage capacity of soil and the readiness of that option to be implemented given the complexities of credibly measuring the related abatement.
But that is probably the point. The coalition merely want a poorly informed electorate to think that they have a credible GHG abatement strategy.
What is the source of that net budget figure?
That stuff about coal-fired power stations suggests that you believe everything that coal and generator lobbies put out into the public domain. No independent assessor of the energy market has concluded anything of the sort. I suggest you read the source material with a bit more scepticism.
There are many things I don’t like about the ALP’s approach to climate mitigation. For example, I’d rather that the MRET was abolished (or reduced in scope), I don’t like feed-in tariffs for solar, and think that businesses and households should have received tax cuts proportional to the revenue generated by auctioning permits.
That said, Abbott has turned his back on the recommendations of every substantive report written about GHG abatement in Australia. If he was a liberal worth his name he would at least have proposed a simple, transparent carbon tax with the revenue used to reduce corporate and income tax rates. Or gone in the direction of Mckibbin’s hybrid scheme.
Instead he has enunciated a policy that a socialist would be proud of. And you call yourself a libertarian. What a joke!!
Labor Outsider
9 Feb 10 at 2:03 am
“oH I forgot, since the Haj in Copenhagen was a disaster none of the big players are taking up an ETS, which therefore means we would be penalizing our industry in the extreme compared to the rest of the world.”
So the EU is not a big player?
The fact that we would be moving ahead of many other countries is: a) the reason for the small target; and b) why EITE industries will be largely protected from the impact of the scheme.
You seem to forget that assuming that both parties really want to reach the 5% target, the optimal policy will be one that achieves the target in the lowest cost way (and can be scaled up should larger targets become necessary). You can’t possibly believe the coalition’s policy meets this objective.
Labor Outsider
9 Feb 10 at 2:07 am
One more thing.
Obama is backing away from implementing an ETS. But he is not backing away from GHG mitigation. By backing away from pricing carbon, all he (and the congress) will just have to find more expensive ways of meeting the targets he has set (most likely regulatory). Those higher costs will be passed on to industry (uncompensated) regardless.
Australia’s 5% target is a prudent near-term target that helps prepare us for larger long term cuts (should an international agreement emerge within the next decade) while limiting the impact on domestic living standards.
If you genuinely believe that the rest of the world will never undertake credible GHG abatement, then sure it is pointless for Australia to undertake any itself. But I’m not sure that is where the balance of probabilities lies.
Labor Outsider
9 Feb 10 at 2:14 am
No I don’t write rubbish, Labor boy, you’re just ignorant or a peddler of mis-information.
The MRET (which I don’t support) does not predetermine the source of renewable energy and solar is very unlikely to form a large share of the 20% target.
Are not totally bonkers. Solar has to form a damn large share, as we can’t really solely of wind for the simple reason that that’s not always windy enough or it’s too windy. We can discount the rest of the rubbish about other renewables as they won’t work. Hot rocks are about likely to work as they are in a alternative medicine spa in Byron Bay.
Moreover, where has Abbott said that the coalition will reject an expanded MRET? The original MRET was coalition policy!!
Of course he’s rejecting it by virtue of the fact that it isn’t mentioned in his policy. He isn’t stupid and realizes it won’t work, Dumphy. It wasn’t coalition policy. It was Turnbull’s policy and he got rolled. Remember?
The compensation arrangments in the CPRS are primarly designed to ensure that households react to the change in relative prices (the substitution effect) but do not have to additionally absorb an income effect (though there will be small one due to the overall impact of the scheme on disposable income and real wages). So what if there is a small redistributive element in the compensation arrangements?
What the fuck do you means by “so what if there is a redistributive element” to this crappy plan? It wasn’t what we were sold on. We were being sold the idea that we needed this plan to save the world, not offer an alternative to centrelink. What gets me is not just the dishonesty that came with this crappy plan, but the fact that you’re so brazen about it’s redistributive elements, which is like throwing a collective pie in the face of the public who bought into this as a mitigation policy. But hey don’t let me stop you from selling it like that. Be my guest and keep advertising the lie.
The coalition’s plan is of course more reliant on command and control mechanisms. It eschews pricing carbon for a start and instead relies on a very poorly detailed and likely hard to implement quasi baseline and credit mechanism (if that is what it is as the original policy paper was horribly unclear).
You mean they are also keeping elements of a credit office, which is also designed into the ALP plan, which Wong indirectly alluded to today by threatening to kill the camel herd because they fart a lot and pick up the credits. You labor guys make me laugh.
Nearly every economist that has ever looked at this issue has concluded that either a carbon tax, a cap and trade ETS, or a hybrid scheme would be the most efficient way to achieve a given level amount of carbon abatement and send the clear, credible long-term price signals that are necessary to drive long-term investment in low-emission technologies.
Which economists? Most decent economists have suggested we go for a carbon tax and not an ETS. Even Garnaut has shitbagged this shit hole policy. The better economists like Humhpreys have suggested a carbon tax with direct income tax set offs.
Besides, it has already been exposed that the policies the coalition have announced would be very unlikely to be enough to reach the 5% target, forcing them to add further costly half measures to meet the target they have identified.
Wong has also admitted her shitty policy won’t work either because of the problems with renewables that I alluded to earlier.
Most of their aggregate abatement comes from wildly optimist assumptions about the carbon storage capacity of soil and the readiness of that option to be implemented given the complexities of credibly measuring the related abatement.
Which you neglected to mention is also worth trying, as it could prove far cheaper than this abortion of a plan. What’s wrong with creating carbon sinks through reforestation and other processes if it’s cheaper?
But that is probably the point. The coalition merely want a poorly informed electorate to think that they have a credible GHG abatement strategy.
Are you fucking nuts. The ALP from Rudd to Wong to Gillard have been basically unable to explain their policy and the three idiots (including Tanner) are unable to explain various elements of its costs, so don’t fucking dare try that shit with me.
That stuff about coal-fired power stations suggests that you believe everything that coal and generator lobbies put out into the public domain.
Oh yes, when all else fails blame the honesty of the messenger. You labor people never stop with the cheap ad homs, do you? Unable to mount an argument you now blame the source. Please fuck off.
No independent assessor of the energy market has concluded anything of the sort. I suggest you read the source material with a bit more scepticism.
Bullshit. Enough journalists have trashed the scheme but of course they wouldn’t count as they aren’t aligned with the ALP, knee-padding in front of Rudd.
There are many things I don’t like about the ALP’s approach to climate mitigation.
Just many? How about the entire thing?
If he was a liberal worth his name he would at least have proposed a simple, transparent carbon tax with the revenue used to reduce corporate and income tax rates. Or gone in the direction of Mckibbin’s hybrid scheme.
Why not propose that for the ALP then? If it’s a decent policy proposal and Mckibbin’s actually is why would you only consider it worthy for lib policy and not the ALP.
Instead he has enunciated a policy that a socialist would be proud of. And you call yourself a libertarian. What a joke
Both are socialist policies. However one is a dishonest, which is partially a redistribution scheme that you have also admitted to while the other one has less money swirling around but isn’t redistributive as a way of getting around Centerlink.
You still haven’t explained why Australia should go this alone while the rest of the world has turned its back on the Copenhagen Haj?
JC
9 Feb 10 at 2:44 am
One more thing to your one more thing.
Obama has next to no chance of putting in place a regulatory framework as it will be taken apart by the courts to the point where it is rendered useless. He knows that and his threats are basically empty.That’s why he’s appropriated $54 Billion towards nuclear.
The rest of the world is not going the ETS route. Period.
JC
9 Feb 10 at 2:47 am
So the EU is not a big player?
Nope. There so much padding in there with all the cheating going on that it’s basically a joke.
The fact that we would be moving ahead of many other countries is: a) the reason for the small target;
It’s not a small target. It’s a big fucking target as it back in time and it also constrains our highly competitive industries, which also happen to be energy intensive. Kid yourself with that crap but don’t try that with me.
You seem to forget that assuming that both parties really want to reach the 5% target, the optimal policy will be one that achieves the target in the lowest cost way (and can be scaled up should larger targets become necessary).
Except the Labor policy is a rent seekers paradise and seeing that Rudd& Wong can’t even work it out and tell us what happens at certain scenarios I am certainly not taking your word for it that you know.
You can’t possibly believe the coalition’s policy meets this objective.
The coalitions policy is far less damaging than Labor’s policy an in a situation where action is unilateral with the ETS I’d go for the cheaper policy.
JC
9 Feb 10 at 2:55 am
“Explain how spending has never ever gone so far off the radar since Whitlam and at this rate we will even surpass Greece and Portugal as deficit bums in a few years”
Btw JC, I found this little nugget on the Menzies House blog. I nearly choked!!
Both Greece and Portugal ran budget deficiets of over 9% of GDP in 2009, more than double Australia’s. Australia’s deficit is forecast to be under 3% of GDP in 2011. Australia’s ratio of net public debt to GDP is a fraction of both Greece and Portugal’s ratios.
The large increase in the growth rate of government spending in Australia was temporary, not permanent and so the “at this rate” line is misleading in the extreme.
This is what I don’t get about the comments on this blog. Fine you want a smaller government. Fine you think the response to the GFC was disproportionate.
But why undermine your credibility by drawing such misleading analogies?
You claim to be economics literate but then write something that no credible economist thinks is reasonable.
Perhaps if you toned the rhetoric down you might be a little more persuasive.
Labor Outsider
9 Feb 10 at 2:58 am
You do realise that the original MRET came in well before Malcolm became environment minister don’t you? It was written into law in 2000 you idiot!!
Labor Outsider
9 Feb 10 at 3:01 am
“What the fuck do you means by “so what if there is a redistributive element” to this crappy plan? It wasn’t what we were sold on.”
How is it dishonest when Labor have made clear from the get-go that their compensation program would focus on low income households?
You might not like it, but you can hardly call it dishonest when it has been part of ALP policy for three years.
Labor Outsider
9 Feb 10 at 3:03 am
“Which economists? Most decent economists have suggested we go for a carbon tax and not an ETS.”
What don’t you understand about the word “either”. I clearly stated that all economists that have looked at GHG abatement have concluded that EITHER an ETS, a carbon tax, or a hybrid scheme would be more efficient. The coalition have rejected ALL of these approaches.
If Tony is rejecting the CPRS because it is less efficient than it should be, then he should propose something more efficient, not less so.
I’m perfectly happy to agree with you that the CPRS is not as efficient as it could/should have been. The ALP should either have put in place a carbon tax with the features I outlined, or a more efficient ETS/hybrid scheme.
However, what the coalition is proposing is even less efficient than what the ALP is proposing and relies even less on price signals coming from a market.
I’d say I was surprised, but then Abbott put Joyce in the finance portfolio. He who makes Black Jack Mcewen sound like a credible economic thinker in comparison.
The party has become a disgrace to liberalism and you know it.
Labor Outsider
9 Feb 10 at 3:14 am
A couple of reasons, Labor Boy.
When looking at sovereign debt international banks and ratings agencies examine Australia’s total debt including the states and the states have some pretty damn large unfunded pension liabilities. There’s a good reason. The Federal government would simply not allow a state to declare default, which means the entire debt position, has to be looked at in a consolidated fashion.
Lenders also look at total country risk and examine private debt (consumer) and ours happens to be one of the highest in the world. International banks and large pension fund investors place country limits on smaller countries like Australia irrespective of whom is taking on the debt. This happens with good reason because in the event of a crisis international lenders can be prevented from claiming their money as the government intervenes.
Lastly at the rate we’re going, we won’t get near the projections set out by the politicized Treasury when if I’m not mistaken projected growth rates of 4% plus in the outer years. Bullshit.
We’re not Greece or Portugal, however add in the cost of the NBN which is $43 billion and the other points I mentioned we wouldn’t be that far from suggesting fiscal bum status. After all we have labor promising loads more spending.
JC
9 Feb 10 at 3:14 am
“Which you neglected to mention is also worth trying, as it could prove far cheaper than this abortion of a plan. What’s wrong with creating carbon sinks through reforestation and other processes if it’s cheaper?”
There is nothing wrong with it if it is indeed true. However, the coalition have assumed a best case scenario for the potential of soil and forests as sinks. You can’t build a credible policy on a hope.
Labor Outsider
9 Feb 10 at 3:18 am
“The Federal government would simply not allow a state to declare default, which means the entire debt position, has to be looked at in a consolidated fashion.”
Ahh, this does not help your argument much. Even when you consolidate federal government with the states the collective public liability to GDP ratio is small compared to most European countries. On top of that, Australia has a much smaller population aging problem and our unfunded pension liabilities are much less of a problem.
Last time I checked Australia was finding it pretty easy to fund its current account deficit and international monitors see few risks that concern them much.
Labor is not promising “loads more spending” above what it had previously committed to. Indeed, they have committed to slowing the rate of spending growth significantly.
Australia is far from a fiscal bum and you know it.
Labor Outsider
9 Feb 10 at 3:28 am
You do realise that the original MRET came in well before Malcolm became environment minister don’t you? It was written into law in 2000 you idiot!!
So fucking what? In 2000 they hadn’t thought about then as serious as now and the policy is fucked. If Howard or Costello were PM and realized the policy is fatally flawed they would have ditched it unlike Wong or Rudd who are aware now of the impossibility of the absurd combination but want to continue with it. You idiot.
How is it dishonest when Labor have made clear from the get-go that their compensation program would focus on low income households?
You mean that when they realized they were down the river without paddle they admit to wholesale redistribution in order to bribe their constituencies. By the way Tanner has admitted the ALP constituency will get more than they put in. That’s what you’re supporting, labor boy. Some mitigation policy.
You might not like it, but you can hardly call it dishonest when it has been part of ALP policy for three years.
Bullshit. When did they ever tell us certain income elements partial to Labor would end up getting more until now than they paid in, Dumphy? The only thing we were being sold was a merry go round of cash that was supposed to save the world. It was never a by-pass for Centre link.
“Which economists? Most decent economists have suggested we go for a carbon tax and not an ETS.”
Most decent economists have told us to go with a carbon tax, not an ETS. And most decent economists have suggested we don’t go unilaterally and most certainly not unilaterally with an ETS, so stop the incessant lying.
What don’t you understand about the word “either”. I clearly stated that all economists that have looked at GHG abatement have concluded that EITHER an ETS, a carbon tax, or a hybrid scheme would be more efficient. The coalition have rejected ALL of these approaches.
And the ALP has gone for a hybrid that incorporates a redistribution scheme. Some efficiency.
If Tony is rejecting the CPRS because it is less efficient than it should be, then he should propose something more efficient, not less so.
Nonsense: see above about redistribution and efficiency.
.
I’d say I was surprised, but then Abbott put Joyce in the finance portfolio. He who makes Black Jack Mcewen sound like a credible economic thinker in comparison.
Please, he’s only marginally worse than SwanDive and would certainly have more of a grasp of economics than Rudd.
The party has become a disgrace to liberalism and you know it.
Says the guy who supports this poor excuse of a party that went with Fuel watch, Grocery watch, NBN, school toilets, controlling the internet, handing out more to its constituencies through an abatement scheme pretending its going to help global emissions, banning cheaper books and reregulating the labor market back-to-the-future with the unions taking a chair at the top of the table.
You have the temerity to criticize the libs about liberalism? Get off your bike.
JC
9 Feb 10 at 3:38 am
Australia is far from a fiscal bum and you know it.
I never said it is. I said at the rate we’re going we will be. And we will.
Look Scooter the world doesn’t like sovereign debt at the present time which doesn’t look like it will change any time soon, so why tempt fate?
The commercial paper market essentially closed down. Why would you think the sovereign debt market can’t do the same?
JC
9 Feb 10 at 3:47 am
You missed my point.
The Liberal Party claims to be liberal, the ALP does not. I don’t think it is unreasonable for a Liberal Party to display some signs of that liberalism.
FFS the coalition didn’t even manage to properly dismantle the tariff regime during the 11 years they were in government. The stupid parallel import restrictions on books were maintained by the Liberal Party. You completely fucked up the liberalisation of the labour market by producing one of the most complex bills in history and failing to propose the complementary tax reforms (EITCs) that would have allowed you to claim you had a policy that was both more efficient and more equitable than what Labor was proposing. You also get to claim credit for that wonderful piece of housing policy – the FHOG. Heck, even the half decent record on fiscal policy is sullied by the rapid growth in government spending during the boom.
Compared to the reform record of the Hawke-Keating governments, the Howard-Costello reform legacy was piss-poor.
Labor Outsider
9 Feb 10 at 3:57 am
“The commercial paper market essentially closed down. Why would you think the sovereign debt market can’t do the same?”
If the sovereign debt market shuts down, we are all fucked mate. No economy will be spared. Assuming that disruptions in the sovereign market are relative though, I would not expect Australia to be among the worst affected. Contrary to your assertions the fiscal outlook here is considerably better than most other OECD countries, both in the short-term and long-term.
Labor Outsider
9 Feb 10 at 4:03 am
The Liberal Party claims to be liberal, the ALP does not. I don’t think it is unreasonable for a Liberal Party to display some signs of that liberalism.
They have. Abbott has been unapologetic about supporting freer labor markets and as far as I’m concerned that is the most important market in the country.
Spending $3.2 billion on an abatement scheme is frankly tiny and even less than the negative impact labor’s scheme has on the budget while avoiding the $120 billion unilateral churn.
FFS the coalition didn’t even manage to properly dismantle the tariff regime during the 11 years they were in government.
That’s true and neither are these trogs.
You completely fucked up the liberalisation of the labour market by producing one of the most complex bills in history and failing to propose the complementary tax reforms (EITCs) that would have allowed you to claim you had a policy that was both more efficient and more equitable than what Labor was proposing. You also get to claim credit for that wonderful piece of housing policy – the FHOG. Heck, even the half decent record on fiscal policy is sullied by the rapid growth in government spending during the boom.
Compared to the reform record of the Hawke-Keating governments, the Howard-Costello reform legacy was piss-poor.
I want to compare this government to the last. That’s far more relevant. And so much for giving me this song and dance:
The Liberal Party claims to be liberal, the ALP does not. I don’t think it is unreasonable for a Liberal Party to display some signs of that liberalism.
Nice to see that you selectively apply your dogma when it suits.
JC
9 Feb 10 at 4:10 am
FFS the coalition didn’t even manage to properly dismantle the tariff regime during the 11 years they were in government.
That’s true and neither are these trogs.
Compared to the reform record of the Hawke-Keating governments, the Howard-Costello reform legacy was piss-poor.
I want to compare this government to the last. That’s far more relevant. And so much for giving me this song and dance:
The Liberal Party claims to be liberal, the ALP does not. I don’t think it is unreasonable for a Liberal Party to display some signs of that liberalism.
Nice to see that you selectively apply your dogma when it suits.
JC
9 Feb 10 at 4:11 am
Unless it is not completely clear, I think both major parties suck right now. For anybody that regards themselves as economically liberal, I can’t see how you could be anything but depressed. Understand?
Labor Outsider
9 Feb 10 at 4:19 am
Why would you be depressed? You party is in power doing or trying to do everything you support. No?
JC
9 Feb 10 at 4:29 am
From the post above.
So I’ve actually done exactly that. Whether or not the unemployment rate is high or lower in the future is entirely unknown – there is no modelling. As to the argument that these variable are higher in the future than now, so we needn’t worry about it, I’m not convinced. That is akin to saying that we shouldn’t worry about re-occurences of economic crises in the future because, in any event, we’ll be richer then than we are now. Now I’m not opposed to having an optimistic outlook on life, but that seems to be somewhat irresponsible. I have anlysed the Coalition position here and here.
Sinclair Davidson
9 Feb 10 at 8:08 am
courtesy of Shane Oliver of AMP, he was doing his PHd whilst i was at Macquarie,
Australia’s budget deficit falls from 4% to 2.6% from 2009 to 2011. Its gross public debt is 15.9% of GDP.
Greece on the other hand falls from 12.9% to 10% and its debt is 114.9% of GDP.
Portugal is 9.3% and falls to 7.8% and its debt is 83.8% .
No comparison at all with Australia.
Butterfield, Bloomfield & Bishop
9 Feb 10 at 9:36 am
For anybody that regards themselves as economically liberal, I can’t see how you could be anything but depressed.
.
According to the rankings of economic freedom by the Heritage foundation, Australia is the third freest in the world behind only Singapore and Hong Kong. So that provides a bit of perspective maybe.
daddy dave
9 Feb 10 at 10:00 am
Hey Homes
I hope your stint was at Macquarie Uni and not Macquarie Bank otherwise the financial sector is in deep doo doo.
jtfsoon
9 Feb 10 at 10:54 am
Homer Cheney: (Labor/Democrat) deficits don’t matter.
C.L.
9 Feb 10 at 10:56 am
so says the former worker of Concept.
Butterfield, Bloomfield & Bishop
9 Feb 10 at 10:56 am
“If the sovereign debt market shuts down, we are all fucked mate. No economy will be spared.”
Why do you say so outsider? If we have people who know what they are doing, all the banks could go under, and the rest of us just throw a party. This is a rumour put about by the banks themselves. They say this sort of thing for obvious reasons. We funnel resources their way because of this misinformation.
Mill
9 Feb 10 at 11:55 am
Yes we know Australia doesn’t compare with Greece at the moment you egg brain. No one ever said we compare.
However on current trajectory it isn’t looking good for us if we remove the bullshit crap assumptions Ken and Ma Henry suggested…. that in later years we’ll be growing at 4.5%. That isn’t going to happen. Furthermore you don’t set assumptions up at the most top end of estimates, you nimbus.
We have the highest consumer debt levels in the western world and to pretend a major stuff up wouldn’t impact the entire country from that debt level as a result of bad policy is asking for trouble.
We have just seen the ramifications of large private debt on the financial health of countries like the UK which is now essentially a Zombie country. Prior to the crisis their debt at sovereign level, although in bad shape as labor still could only manage deficits in a boom, wasn’t all that bad. The crisis has basically put them in potential IMF triage.
that shit could happen to us.
Furthermore these trogs are talking about going out and borrowing more money to build huge infrastructure projects under the big Australia banner, so more debt gets piled on.
JC
9 Feb 10 at 12:50 pm
on current projections the budget deficit is getting smaller ( I think we can say it will be smaller still after the next projections are released.)
moreover Public debt is also falling and will continue to fall because Growth will be robust and debt will be falling not to mention financial assets of the Government will be worth more.
compere this to say Italy Forrest’s favourite country.
It’s budget deficit is 5.5% and will be 5.1% in 2011. Its public debt is 123.6% of GDP.
Never mind Italy is more favourably placed than Asutralia says our resident idiot
Butterfield, Bloomfield & Bishop
9 Feb 10 at 1:05 pm
I never said that of course, you lying moron. left with nothing Homer now resorts to lies.
JC
9 Feb 10 at 1:11 pm
Government will be worth more.
LOl. You actually really think like that, don’t? You really are a 70′s retread, homes.
I used to think you were trolling and pissing around, but your deadly serious. It’s frightening.
JC
9 Feb 10 at 1:13 pm
of course you said that you deadbeat.
Italy is fine because all Italians will finance the deficit showing your vast knowledge of the Euro.
The Government’s assets are worth more when the market rises. It has already happened except you didn’t even know about it indeed you said they had no assets.
Butterfield, Bloomfield & Bishop
9 Feb 10 at 1:33 pm
Homer:
You moron, that’s exactly the argument I used that at the time in that the higher Italians savings rate and the nature of the pension system requiring a large investment in government bonds makes them okay for now.. at least until when demographics take over and their welfare state forces them into default which isn’t too far away I might add.
But what exactly is your point?
Dopey, rating agencies, large banks and Sovereign wealth funds apply various metrics to their risk allocation and one of them is currency/national risk.
For instance banks simply don’t take more risk on board than the preset limit stipulates no matter if it’s private of government debt of a particular country.
For instance a bank I worked for had a country risk of around 2% of its balance sheet for Australia and simply couldn’t go beyond that without board approval. We couldn’t trade with Australian banks at times as we were full on the country name irrespective of how much risk we had with an individual bank.
The obvious ramifications of that are something that you seem both unable and unwilling to understand.
As for government net worth…
Governments don’t account like the private sector, you freaking clown. You been told that before but seem unable to understand it.
The government for instance doesn’t value and can’t value parliament house as an asset in the same way a firm values a building. It treats it as a sunk cost. It doesn’t value the national monument other than as a sunk cost. They can’t, as it doesn’t carry a value in the way a private asset does.
I’ve explained this to you numerous times and it never ever sinks in.
How the fuck do you ever get an economics degree, you muppet?
JC
9 Feb 10 at 2:00 pm