The Australian politics thread

[Burgey]

Advocate nails it again:

https://www.betootaadvocate.com/ent...ing-a-2nd-wave-seem-better-than-the-liberals/

 

[Burgey]

You would think the Party of business would realise that business wants certainty over virtually everything else and would release the review into the jobkeeper program which they’ve now been sitting on for a fortnight.

You just know they’re more interested in holding onto it, then at the last minute extending it to look like heroes instead of telling people up front wtf is going on

 

[Starfighter]

Morrison claiming that the housing bubble is driven by undersupply when there's a huge amount of housing approved but uncommenced and the developers are sitting on billions of dollars of land which they release at a trickle, and will happily sit on developments to try value capture zoning changes, even though they would still make big profits otherwise. And some evidence from water usage etc. that the number of vacant properties far exceeds the official vacant rate, due to people negative gearing away their losses while waiting to get a capital gain without renting out.

Also claiming there has been no speculative bubble when price change exactly follows mortgage credit growth, there was a huge increase in interest-only loans for investors and 15 or so% foreign investment when the bubble was at its height, and loan-to-income values blew out as lending standards basically ceased to exist. It's in fact been driven largely by easy credit, hence why the RBA - who also claim that cheap credit and low rates aren't the problem, even though their own statistics show otherwise - are so afraid of any significant price falls, as it would put all our banks under water.

He's either incredibly deluded or lying through his teeth. Anyone blaming anything other than excessive mortgage credit growth and speculation, caused by friendly tax rules and lending standards as the primary cause is.

 

[Starfighter]

If the lending was sustainable then not so many people (including investors) would need mortgage holidays, and need them extended again and again. A lot of people couldn't come up with a grand in an emergency, yet the banks and govt. seem to interpret sustainable lending as 'repayments aren't so large that you starve to death'.

 

[Redbacks]

I've been hearing more and more economists talk about how the dip and recovery might mimic the end of the WW2. We could see these subdued conditions for 1-5 years for all we know (vaccine may or may not come). After that, if too many private companies collapse there's going to be a need for some form of government sustained mid to long term (3-10 years?) large deficit spending to power growth again. Aus debt to GDP might peak at 150%+ for all we know.

 

[Shady Slim]

Morrison claiming that the housing bubble is driven by undersupply when there's a huge amount of housing approved but uncommenced and the developers are sitting on billions of dollars of land which they release at a trickle, and will happily sit on developments to try value capture zoning changes, even though they would still make big profits otherwise. And some evidence from water usage etc. that the number of vacant properties far exceeds the official vacant rate, due to people negative gearing away their losses while waiting to get a capital gain without renting out.

Also claiming there has been no speculative bubble when price change exactly follows mortgage credit growth, there was a huge increase in interest-only loans for investors and 15 or so% foreign investment when the bubble was at its height, and loan-to-income values blew out as lending standards basically ceased to exist. It's in fact been driven largely by easy credit, hence why the RBA - who also claim that cheap credit and low rates aren't the problem, even though their own statistics show otherwise - are so afraid of any significant price falls, as it would put all our banks under water.

He's either incredibly deluded or lying through his teeth. Anyone blaming anything other than excessive mortgage credit growth and speculation, caused by friendly tax rules and lending standards as the primary cause is.

you are a smart man, the fact that the libs want housing prices to be absurdly blown out and pumped up by a bubble they're all in on and we're not so their property developer mates can get richer and richer shouldn't come as much of a shock - all of the coalition's recent policy around housing affordability doesn't make houses more affordable it just makes it easier to go into debt. because that's what their property developer mates want from them lol

 

[Shady Slim]

morrison in the presser right before it wraps up: "oh by the way guys it's school holidays, jenny and the kids are going on vacation to the outskirts of sydney* but i am not, i'm staying here"

jeez, thanks for doing the bare ****in minimum expected of a leader mate care to fellate yourself any further? please expect your participation trophy in the mail, ffs.

*just as an aside, to him, i'm expecting that "the outskirts of sydney" means narrabean or some ****

 

[Burgey]

People will be surprised he didn't taken off for a break as he did during the bush fires. Fact he had t say what he did suggests it's still a sore point with him.

 

[GotSpin]

You would think the Party of business would realise that business wants certainty over virtually everything else and would release the review into the jobkeeper program which they’ve now been sitting on for a fortnight.

You just know they’re more interested in holding onto it, then at the last minute extending it to look like heroes instead of telling people up front wtf is going on

100% this

 

[Starfighter]

you are a smart man, the fact that the libs want housing prices to be absurdly blown out and pumped up by a bubble they're all in on and we're not so their property developer mates can get richer and richer shouldn't come as much of a shock - all of the coalition's recent policy around housing affordability doesn't make houses more affordable it just makes it easier to go into debt. because that's what their property developer mates want from them lol

We'll leave aside the fact that Labor will think twice about concrete action to lower prices if it means revealing how bloated our construction industry is (and how little value it's adding), as it would upset the unions (though I suppose there's always overpaid jobs building loss-making infrastructure). Plus enough Labor MPs own investment properties.

This is something that goes well beyond the Liberals. It's the regulatory and political capture of our entire financial system, here and worldwide, by people seeking to keep the system that allows them to unproductively enrich themselves going. That's why I made that comment about monetary policy. The 'trickle down' enrichment of businesses from government handouts pales into comparison from that which they've received from central banks and 'independent' regulators. It's them that allowed the flood of credit that has driven house prices up (here) and driven stocks up worldwide. They can claim they're helping employment, but the more you distort markets, the more you prevent them from resetting, the worse you make the problem in the future. It does however let them enrich themselves (thanks to the Cantillon effect).

Our banks need to, indeed, have to lend more, get more people in more debt, or the whole thing could collapse like it did in Ireland (of course, this either pushes the denouement back and makes it nastier, or condemns us to stagnation and future generations to what is effectively debt slavery). It's a classic house of cards as they're leveraged to their eyeballs and a crash could sink them all. I bet if prices threaten to drop much you will see some extreme action from the RBA and APRA, and from the banks themselves. The whole thing is to stop people paying the consequences of putting short term gains over long term ones and stopping the hollowed out, rotten tree of the financial system from toppling over. And that goes for everywhere really..

 

[Burgey]

I agree the system here is far too intrinsically linked to property over pretty much all else. But tbf Labor literally took a policy to the last election limiting negative gearing which would have had an effect on investors buying up property after property. They also wanted to stop giving Boomers cash handout refunds on tax they had not paid, which would have also had an effect. Those policies literally cost them the election.

 

[Starfighter]

I think Labor would have won were it not for the franking credits. That affected way too many people to ever get off the ground. Problem is they'll give up on negative gearing and the CGT discount, if they haven't already. They'd do better if they made a clear non-retrospective policy. Not perfect, but it would arrest further upwards momentum.

Plus I was talking more about the financial system generally. House prices here are a 'small' symptom of a huge problem.

 

[Spark]

Ultimately a massive growth in credit and the de facto expansion of the amount of cash floating around isn't in itself a bad thing so long as that cash is being used to facilitate growth in the truly productive sectors of the economy; i.e. not endless financial speculation on housing, but actual expansion in the productive capacity of the economy to make stuff and do useful things.

That would, however, require a much broader and more holistic view of what the economy and its growth should look like beyond "dig up stuff and sell it to China and India".

 

[Starfighter]

Ultimately a massive growth in credit and the de facto expansion of the amount of cash floating around isn't in itself a bad thing so long as that cash is being used to facilitate growth in the truly productive sectors of the economy; i.e. not endless financial speculation on housing, but actual expansion in the productive capacity of the economy to make stuff and do useful things.

Might be worth mentioning what was originally meant by 'quantitive easing'. This was term coined by German economist (and mild conspiratorial nutcase) Richard Werner as a translation of terms he used in an article in Japanese.

He bases this on his quantity theory of credit (related to the q.t. of money). This takes that markets are not equilibrium (think the classic Marshall supply-demand cross), as the requirements are provably untrue. Therefore quantities are more important than prices and transactions have a 'short' and 'long' side. The short side is the one with the power to choose, and the bigger the gap the greater the power (think like the original Philips curve, as related to wages and unemployment, not inflation. The fewer people there are available for a job, the greater the wage they can demand, and vice versa. (Which goes back to something we've already argued about, though I haven't replied to your latest post)). In this case the bank, who has the power to create credit, is always the short side, and can choose who to allocate credit to. The quantity (how much credit) it more important than the price (the interest rate).

He claims that expansions are associated with direction of credit. When banks expand mortgage credit, house prices rise. When banks lend to big business, stocks rise. When banks lend in ways that increase money spent on consumer products (certain types of business lending and personal loans), you end up with CPI inflation. And most importantly, when credit is extended to businesses (particularly small-medium enterprises, which employ the majority of most private workforces) for productive endeavours, whose value increase exceeds the original loan (i.e. paid back, not rolled over), you end up with economic (GDP etc) growth - which is the only sustainable kind, as it is based in value adding use of real resources.

He believes in a phenomena called 'window guidance', where central banks effectively signal where to lend, with results as in the previous paragraph. He believes that the IMF-lead (neo-)liberalisation of the Asian economies resulted in slower growth and dangerous bubbles even though they should theoretically have improved Japan's cartelised economy. This goes more generally. With neoliberalism banks became more concentrated and started lending less to SMEs and more to big business, for mortgages, and speculation. Hence inflation, asset inflation, dangerous bubbles and lower growth. In his native Germany loans were traditionally made by small banks (about 7000 community banks accounted for 70% of lending, in comparison to Britain where five big banks did). These banks used the 3-and-6 rule (pay deposits 3%, lend at 6%, use margin for expenses and capitalisation) and were very stable, with few or no failures even through several crises. Because they were small they were well connected with the community and serviced them, rather than getting involved with nasty things like derivatives (that the whole current system is being continued to support). Germany did not suffer a housing bubble in 2000s because of this. He claims the ECB is now rapidly chipping away at this system, with negative insert rates destroying their business model and reporting regulations being the cherry on top. Hence there are lots of mergers and moves into more dangers speculation to top negative rates being charged on deposits, and bubbles are appearing in some hosing markets.

Enough background.

The original idea of 'Quantitative Easing' was to use the money creating powers of the banks (in the modern system loans are extended, creating deposits equivalent with the debt, then the central bank provides the reserves afterwards) to increase productive activity. This is hard to model, as not only do modern economic or econometric models rely on equilibrium, but they do not account for bank money creation, treating banks only as intermediaries. Hence their incredible lack of predictive ability despite the faith put in them (economics seems to be one of the fields of study where data is discarded if it doesn't fit the models). The economy is far too complex for these models to be accurate as well.

Werner believes that traditional interest rate cuts, open market operations, balance sheet expansion etc. are ineffective and merely result in dangerous bubbles where credit structures are distorted towards speculation. Interest rate cuts below 2-3% are actually dangerous as they squeeze banks ability to cover costs, encouraging them to lend speculatively on assets and weird instruments (derivates etc) in search of yield. Negative interest rates are horrendous as central bank reserves become a cost, thus meaning lending costs money (leading to less lending. When Sweden dropped -ve rates lending actually increased). He notes that a huge number of rate cuts in Japan failed to lift the economy (same goes with the rest of the world now) as it did not increase lending (he doesn't believe in the 'cuts stimulate' thing, as quantities are what matters, and actually has a paper showing that there is no inverse relationship between nominal growth and rates as might be assumed by a Keynesian theory, and rates are a trailing indicator of economic activity).
In a crisis banks don't want to lend, starving the economy of money. Furthermore, when they do, they will are reluctant to lend to higher-risk, unsecured borrowers rather than say mortgages. This kind of structure is actually formalised by the Basel Accord, which has squeezed productive lending and inflated lending to 'safe' borrowers (i.e. asset backed), hence our current pickle as the credit ratings are actually complete bullshit and don't reflect risk very well at all.

Instead the key is to increase the quality of credit extended to SMEs - this is the quantitative easing. He has various ideas. One is that central banks (who can create money without debt) should fully back loans to SMEs, to get over bank's fear of lending. Another is that the government (being a safe debtor, especially with proper central bank coordination) should borrow directly from banks and grant the money. This is not as far fetched as it sounds, supposedly two-thirds of German govt. borrowing used to be loans and only the other third bonds. The central bank expansion should be new money without asset purchases or anything, and speculative lending restricted. There are more complex ideas too, but I must say I didn't understand then.
He also suggests establishing small community banks and breaking up the big ones, as big banks only lend to other big enterprises. And another is establishing a central bank development bank, where they make loans for societally desirable projects. Canada used to have such a bank.

He believes that central bank independence has actually meant they are more destructive. He notes that when the Bundesbank was most effective it only required a parliamentary vote to direct it, there were representatives from each state in its upper administration, and the policy groups were full of industry and union representation. Now central banks are dominated by high-finance and academics, and are much less accountable and controllable. They have blown several destructive bubbles since the mid-nineties. The ECB is the most dangerous, it is only accountable to the very pro-Euro activist Court of Justice. The only more independent central bank was the twenties Reichsbank, and we know how that turned out. Furthermore, the supposed success of more independent banks as measured by lower inflation is an illusion. The money supply is simply now directed outside the increasingly narrow, distorted measurement that is the CPI (all the recent bubbles have been associated with low CPI inflation which was used to justify loose monetary policy).

He also has an adjunct, The current lack of inflation is due to lack of money going into the prices the CPI measures. (This is important, prior to 1998 the RBA included mortgages in the CPI. Now they do not. The divergence between the CPI and house prices begins in 1998. Offical inflation would be nearly double otherwise). Therefore this kind of QE will encourage a gentle CPI inflation as a side effect of increasing economic activity. In order to not distort the credit market, rates must remain above 2-3% when QE is implemented (this could actually go with current actions. Rates should be raised before central banks sell down their balance sheets).
To reduce distortion and encourage inflation central banks need to adopt a neo-Fisherian policy and raise rates while maintain the flow of credit. To create expectations of further inflation they should be selling more longer term bonds at higher yields (normalising the curve by raising the long rate, rather than flattening the short one, like central banks are doing with their current bond purchases). Hence current actions are actually deflationary and will lock in low inflation (but low borrowing costs,hence their attractiveness).

Put simply 'Quantitative Easing' was originally meant to be used instead of rate cuts and asset purchases to increase the amount of lending towards productive endeavours without distorting the interest rate structure and causing speculative bubbles. What Japan did when they tried what they called QE was what they were told not to do, a traditional balance sheet expansion. Since then central banks have appropriated the term to rebadge older, failed policies. What central banks now have been doing is not quantitative easing as originally defined and will not work (and will be harmful) according the the theory on which quantitive easing, as originally defined, is based.

 

[Flem274*]

nothing will change until the people who benefit die off. they had less kids than their parents, so there will be less kids to inherit the empire.

 

[Gnske]

Might be worth mentioning what was originally meant by 'quantitive easing'. This was term coined by German economist (and mild conspiratorial nutcase) Richard Werner as a translation of terms he used in an article in Japanese.

He bases this on his quantity theory of credit (related to the q.t. of money). This takes that markets are not equilibrium (think the classic Marshall supply-demand cross), as the requirements are provably untrue. Therefore quantities are more important than prices and transactions have a 'short' and 'long' side. The short side is the one with the power to choose, and the bigger the gap the greater the power (think like the original Philips curve, as related to wages and unemployment, not inflation. The fewer people there are available for a job, the greater the wage they can demand, and vice versa. (Which goes back to something we've already argued about, though I haven't replied to your latest post)). In this case the bank, who has the power to create credit, is always the short side, and can choose who to allocate credit to. The quantity (how much credit) it more important than the price (the interest rate).

He claims that expansions are associated with direction of credit. When banks expand mortgage credit, house prices rise. When banks lend to big business, stocks rise. When banks lend in ways that increase money spent on consumer products (certain types of business lending and personal loans), you end up with CPI inflation. And most importantly, when credit is extended to businesses (particularly small-medium enterprises, which employ the majority of most private workforces) for productive endeavours, whose value increase exceeds the original loan (i.e. paid back, not rolled over), you end up with economic (GDP etc) growth - which is the only sustainable kind, as it is based in value adding use of real resources.

He believes in a phenomena called 'window guidance', where central banks effectively signal where to lend, with results as in the previous paragraph. He believes that the IMF-lead (neo-)liberalisation of the Asian economies resulted in slower growth and dangerous bubbles even though they should theoretically have improved Japan's cartelised economy. This goes more generally. With neoliberalism banks became more concentrated and started lending less to SMEs and more to big business, for mortgages, and speculation. Hence inflation, asset inflation, dangerous bubbles and lower growth. In his native Germany loans were traditionally made by small banks (about 7000 community banks accounted for 70% of lending, in comparison to Britain where five big banks did). These banks used the 3-and-6 rule (pay deposits 3%, lend at 6%, use margin for expenses and capitalisation) and were very stable, with few or no failures even through several crises. Because they were small they were well connected with the community and serviced them, rather than getting involved with nasty things like derivatives (that the whole current system is being continued to support). Germany did not suffer a housing bubble in 2000s because of this. He claims the ECB is now rapidly chipping away at this system, with negative insert rates destroying their business model and reporting regulations being the cherry on top. Hence there are lots of mergers and moves into more dangers speculation to top negative rates being charged on deposits, and bubbles are appearing in some hosing markets.

Enough background.

The original idea of 'Quantitative Easing' was to use the money creating powers of the banks (in the modern system loans are extended, creating deposits equivalent with the debt, then the central bank provides the reserves afterwards) to increase productive activity. This is hard to model, as not only do modern economic or econometric models rely on equilibrium, but they do not account for bank money creation, treating banks only as intermediaries. Hence their incredible lack of predictive ability despite the faith put in them (economics seems to be one of the fields of study where data is discarded if it doesn't fit the models). The economy is far too complex for these models to be accurate as well.

Werner believes that traditional interest rate cuts, open market operations, balance sheet expansion etc. are ineffective and merely result in dangerous bubbles where credit structures are distorted towards speculation. Interest rate cuts below 2-3% are actually dangerous as they squeeze banks ability to cover costs, encouraging them to lend speculatively on assets and weird instruments (derivates etc) in search of yield. Negative interest rates are horrendous as central bank reserves become a cost, thus meaning lending costs money (leading to less lending. When Sweden dropped -ve rates lending actually increased). He notes that a huge number of rate cuts in Japan failed to lift the economy (same goes with the rest of the world now) as it did not increase lending (he doesn't believe in the 'cuts stimulate' thing, as quantities are what matters, and actually has a paper showing that there is no inverse relationship between nominal growth and rates as might be assumed by a Keynesian theory, and rates are a trailing indicator of economic activity).
In a crisis banks don't want to lend, starving the economy of money. Furthermore, when they do, they will are reluctant to lend to higher-risk, unsecured borrowers rather than say mortgages. This kind of structure is actually formalised by the Basel Accord, which has squeezed productive lending and inflated lending to 'safe' borrowers (i.e. asset backed), hence our current pickle as the credit ratings are actually complete bullshit and don't reflect risk very well at all.

Instead the key is to increase the quality of credit extended to SMEs - this is the quantitative easing. He has various ideas. One is that central banks (who can create money without debt) should fully back loans to SMEs, to get over bank's fear of lending. Another is that the government (being a safe debtor, especially with proper central bank coordination) should borrow directly from banks and grant the money. This is not as far fetched as it sounds, supposedly two-thirds of German govt. borrowing used to be loans and only the other third bonds. The central bank expansion should be new money without asset purchases or anything, and speculative lending restricted. There are more complex ideas too, but I must say I didn't understand then.
He also suggests establishing small community banks and breaking up the big ones, as big banks only lend to other big enterprises. And another is establishing a central bank development bank, where they make loans for societally desirable projects. Canada used to have such a bank.

He believes that central bank independence has actually meant they are more destructive. He notes that when the Bundesbank was most effective it only required a parliamentary vote to direct it, there were representatives from each state in its upper administration, and the policy groups were full of industry and union representation. Now central banks are dominated by high-finance and academics, and are much less accountable and controllable. They have blown several destructive bubbles since the mid-nineties. The ECB is the most dangerous, it is only accountable to the very pro-Euro activist Court of Justice. The only more independent central bank was the twenties Reichsbank, and we know how that turned out. Furthermore, the supposed success of more independent banks as measured by lower inflation is an illusion. The money supply is simply now directed outside the increasingly narrow, distorted measurement that is the CPI (all the recent bubbles have been associated with low CPI inflation which was used to justify loose monetary policy).

He also has an adjunct, The current lack of inflation is due to lack of money going into the prices the CPI measures. (This is important, prior to 1998 the RBA included mortgages in the CPI. Now they do not. The divergence between the CPI and house prices begins in 1998. Offical inflation would be nearly double otherwise). Therefore this kind of QE will encourage a gentle CPI inflation as a side effect of increasing economic activity. In order to not distort the credit market, rates must remain above 2-3% when QE is implemented (this could actually go with current actions. Rates should be raised before central banks sell down their balance sheets).
To reduce distortion and encourage inflation central banks need to adopt a neo-Fisherian policy and raise rates while maintain the flow of credit. To create expectations of further inflation they should be selling more longer term bonds at higher yields (normalising the curve by raising the long rate, rather than flattening the short one, like central banks are doing with their current bond purchases). Hence current actions are actually deflationary and will lock in low inflation (but low borrowing costs,hence their attractiveness).

Put simply 'Quantitative Easing' was originally meant to be used instead of rate cuts and asset purchases to increase the amount of lending towards productive endeavours without distorting the interest rate structure and causing speculative bubbles. What Japan did when they tried what they called QE was what they were told not to do, a traditional balance sheet expansion. Since then central banks have appropriated the term to rebadge older, failed policies. What central banks now have been doing is not quantitative easing as originally defined and will not work (and will be harmful) according the the theory on which quantitive easing, as originally defined, is based.

Does anyone know if I take a piss in the Coles undercover carpark why it drains towards the middle?

 

[Flem274*]

Does anyone know if I take a piss in the Coles undercover carpark why it drains towards the middle?

gravity man

 

[Flem274*]

Might be worth mentioning what was originally meant by 'quantitive easing'. This was term coined by German economist (and mild conspiratorial nutcase) Richard Werner as a translation of terms he used in an article in Japanese.

He bases this on his quantity theory of credit (related to the q.t. of money). This takes that markets are not equilibrium (think the classic Marshall supply-demand cross), as the requirements are provably untrue. Therefore quantities are more important than prices and transactions have a 'short' and 'long' side. The short side is the one with the power to choose, and the bigger the gap the greater the power (think like the original Philips curve, as related to wages and unemployment, not inflation. The fewer people there are available for a job, the greater the wage they can demand, and vice versa. (Which goes back to something we've already argued about, though I haven't replied to your latest post)). In this case the bank, who has the power to create credit, is always the short side, and can choose who to allocate credit to. The quantity (how much credit) it more important than the price (the interest rate).

He claims that expansions are associated with direction of credit. When banks expand mortgage credit, house prices rise. When banks lend to big business, stocks rise. When banks lend in ways that increase money spent on consumer products (certain types of business lending and personal loans), you end up with CPI inflation. And most importantly, when credit is extended to businesses (particularly small-medium enterprises, which employ the majority of most private workforces) for productive endeavours, whose value increase exceeds the original loan (i.e. paid back, not rolled over), you end up with economic (GDP etc) growth - which is the only sustainable kind, as it is based in value adding use of real resources.

He believes in a phenomena called 'window guidance', where central banks effectively signal where to lend, with results as in the previous paragraph. He believes that the IMF-lead (neo-)liberalisation of the Asian economies resulted in slower growth and dangerous bubbles even though they should theoretically have improved Japan's cartelised economy. This goes more generally. With neoliberalism banks became more concentrated and started lending less to SMEs and more to big business, for mortgages, and speculation. Hence inflation, asset inflation, dangerous bubbles and lower growth. In his native Germany loans were traditionally made by small banks (about 7000 community banks accounted for 70% of lending, in comparison to Britain where five big banks did). These banks used the 3-and-6 rule (pay deposits 3%, lend at 6%, use margin for expenses and capitalisation) and were very stable, with few or no failures even through several crises. Because they were small they were well connected with the community and serviced them, rather than getting involved with nasty things like derivatives (that the whole current system is being continued to support). Germany did not suffer a housing bubble in 2000s because of this. He claims the ECB is now rapidly chipping away at this system, with negative insert rates destroying their business model and reporting regulations being the cherry on top. Hence there are lots of mergers and moves into more dangers speculation to top negative rates being charged on deposits, and bubbles are appearing in some hosing markets.

Enough background.

The original idea of 'Quantitative Easing' was to use the money creating powers of the banks (in the modern system loans are extended, creating deposits equivalent with the debt, then the central bank provides the reserves afterwards) to increase productive activity. This is hard to model, as not only do modern economic or econometric models rely on equilibrium, but they do not account for bank money creation, treating banks only as intermediaries. Hence their incredible lack of predictive ability despite the faith put in them (economics seems to be one of the fields of study where data is discarded if it doesn't fit the models). The economy is far too complex for these models to be accurate as well.

Werner believes that traditional interest rate cuts, open market operations, balance sheet expansion etc. are ineffective and merely result in dangerous bubbles where credit structures are distorted towards speculation. Interest rate cuts below 2-3% are actually dangerous as they squeeze banks ability to cover costs, encouraging them to lend speculatively on assets and weird instruments (derivates etc) in search of yield. Negative interest rates are horrendous as central bank reserves become a cost, thus meaning lending costs money (leading to less lending. When Sweden dropped -ve rates lending actually increased). He notes that a huge number of rate cuts in Japan failed to lift the economy (same goes with the rest of the world now) as it did not increase lending (he doesn't believe in the 'cuts stimulate' thing, as quantities are what matters, and actually has a paper showing that there is no inverse relationship between nominal growth and rates as might be assumed by a Keynesian theory, and rates are a trailing indicator of economic activity).
In a crisis banks don't want to lend, starving the economy of money. Furthermore, when they do, they will are reluctant to lend to higher-risk, unsecured borrowers rather than say mortgages. This kind of structure is actually formalised by the Basel Accord, which has squeezed productive lending and inflated lending to 'safe' borrowers (i.e. asset backed), hence our current pickle as the credit ratings are actually complete bullshit and don't reflect risk very well at all.

Instead the key is to increase the quality of credit extended to SMEs - this is the quantitative easing. He has various ideas. One is that central banks (who can create money without debt) should fully back loans to SMEs, to get over bank's fear of lending. Another is that the government (being a safe debtor, especially with proper central bank coordination) should borrow directly from banks and grant the money. This is not as far fetched as it sounds, supposedly two-thirds of German govt. borrowing used to be loans and only the other third bonds. The central bank expansion should be new money without asset purchases or anything, and speculative lending restricted. There are more complex ideas too, but I must say I didn't understand then.
He also suggests establishing small community banks and breaking up the big ones, as big banks only lend to other big enterprises. And another is establishing a central bank development bank, where they make loans for societally desirable projects. Canada used to have such a bank.

He believes that central bank independence has actually meant they are more destructive. He notes that when the Bundesbank was most effective it only required a parliamentary vote to direct it, there were representatives from each state in its upper administration, and the policy groups were full of industry and union representation. Now central banks are dominated by high-finance and academics, and are much less accountable and controllable. They have blown several destructive bubbles since the mid-nineties. The ECB is the most dangerous, it is only accountable to the very pro-Euro activist Court of Justice. The only more independent central bank was the twenties Reichsbank, and we know how that turned out. Furthermore, the supposed success of more independent banks as measured by lower inflation is an illusion. The money supply is simply now directed outside the increasingly narrow, distorted measurement that is the CPI (all the recent bubbles have been associated with low CPI inflation which was used to justify loose monetary policy).

He also has an adjunct, The current lack of inflation is due to lack of money going into the prices the CPI measures. (This is important, prior to 1998 the RBA included mortgages in the CPI. Now they do not. The divergence between the CPI and house prices begins in 1998. Offical inflation would be nearly double otherwise). Therefore this kind of QE will encourage a gentle CPI inflation as a side effect of increasing economic activity. In order to not distort the credit market, rates must remain above 2-3% when QE is implemented (this could actually go with current actions. Rates should be raised before central banks sell down their balance sheets).
To reduce distortion and encourage inflation central banks need to adopt a neo-Fisherian policy and raise rates while maintain the flow of credit. To create expectations of further inflation they should be selling more longer term bonds at higher yields (normalising the curve by raising the long rate, rather than flattening the short one, like central banks are doing with their current bond purchases). Hence current actions are actually deflationary and will lock in low inflation (but low borrowing costs,hence their attractiveness).

Put simply 'Quantitative Easing' was originally meant to be used instead of rate cuts and asset purchases to increase the amount of lending towards productive endeavours without distorting the interest rate structure and causing speculative bubbles. What Japan did when they tried what they called QE was what they were told not to do, a traditional balance sheet expansion. Since then central banks have appropriated the term to rebadge older, failed policies. What central banks now have been doing is not quantitative easing as originally defined and will not work (and will be harmful) according the the theory on which quantitive easing, as originally defined, is based.

did you have this pre-prepared or have you clocked pornhub?

 

[Starfighter]

I have a great talent for stuffing information in my head.

Except if it's useful. I can never, ever remember that.

 

[Starfighter]

Turns out Albanese owns a couple of investment properties himself. So will he actually do anything that will drive down prices generally, or just things will stuff more money into builders pockets? Sure you can talk about building 'x' amount of social housing, but driving prices down more generally is the only thing that will solve housing affordability. Also this talk of using superannuation to do it. Ah, how about super is invested in a way that produces the best return, and that's it. Seems like both parties are eying it off as a pot of money for either 'nation building' or filling favoured pockets without spending more taxes.