Bad language is just part of it

Poor Salesmanship is one of the reasons given for the bailout failure, and at this stage I’ll stick with the term bailout over rescue. But the whole area of economics and the markets suffers from poor explanations and language use. I was made aware of that today from the uniformed comments, the non-specific fear being generated over the issues.

I was interested to see, following the 7% +/- hit on the North American exchanges how we would fare. The initial hit was around 4% but that halved by afternoon trading. What really stirred up the locals were comments like “a $60 billion loss”.

My reaction was to advise that we see the day out and that it was, in reality, a paper loss not real money. Sure, anyone who opted to sell down made a money loss, but presumably buyers are looking to make money gains. To that extent, the market figures are illusory. [Ok, I know some of you are far more acquainted with market mechanics than I am, but the claim is broadly correct.]

But then I was asked; if it wasn’t real money why were the banks collapsing? Hang on! Surely that is another issue again, a different market issue. But the punters can only see this vaguely understood thing which bandies around sums like billion and trillion. At the top end the numbers are going cosmic, at the bottom they haven’t really moved for over a decade.

This is the issue I have the growing confusion between economies and markets, made worse by the US dabbling in ‘market economics’. Even when an economy allows something close to corporate anarchy, giving corporations and financial institutions free reign, there must still be a distinguishing point between the markets and an economy.

When McCain and others bleat about the ‘sound fundamentals’ what the hell are they talking about? Do they know? In the model the Bush administration has developed they only see the markets as the economy and the markets certainly aren’t sound.

Aussie and Canadian fundamentals are sound, but then we’ve stuck with a mixed economy model, despite attempts to follow the US. But it is hard to berate the ordinary punter for confusing the what and why when the economic and financial leaders barely have a clue.

System way beyond the point of diminishing returns

Election time is probably not the best time to raise the issue, but the US federal electoral system is not only failing America but it has negative impacts the rest of the world too. The problem, in the 21st century, is that the presidential/congressional system is simply too cumbersome in a fast paced world.

This is becomes patently obvious when the US election cycle and economic crisis have collided, bringing the US economy, among others, to the brink. Washington has been unable to address the rapidly unfolding events in a timely manner and voters have only a semblance of democracy to respond with.

Fair enough we non-US democracies have had some scary moments from our own various elected leader, particularly attempts to hand the lot over to the corporations, but there have been sufficient restraints to save us.

In part those restraints include reactive parliamentary systems, where given the right triggers even party discipline will break down to curb a governments excesses. Given sufficient impetus that extends as far as forcing a government and a parliament back to the people. It doesn’t happen often, but it is an ever present option.

But then I expect the problem goes deeper than a cumbersome electoral system, designed to dampen reaction. Roosevelt’s ‘New Deal’ was probably as close as the US has ever come to a welfare system, and FDR is still remarked on as some kind of communist. The US have long been under the influence of a pure market driven economy.

Even when the Bush admin had their greatest influence on Australia, under the unremarkable John Howard’s governments, there was only ever going to be a limited diminution of this countries mixed economic approach, and the worst excesses of the period are now being modified or simply withering on the vine.

Despite accusations over the years, I don’t consider myself particularly leftish, and I know those on the left don’t consider me a fellow traveler. I do detest outright conservatism, traditional and modern. Our economic and social responses should be ‘pragmatic’, that is addressing the current issues to ensure the very best outcomes.

Ok, there is no corporate profit, not political trade off in that kind of approach; which makes it, to my mind, desperately urgent to adopt it. I believe we non-US democracies are streets ahead in this game, but I wouldn’t be on my own in believing we are far from the ideal situation.

The US electoral system is failing to deliver for the people, it is now way beyond the point of diminishing returns. Patches aren’t going to do the job now, it needs major surgery. I wonder if the innovative nation is really up to thechallenge.

Election prediction simplified

My Aussie cobber lindsaylobe has made some interesting points when he commented on the previous post - Blogger block. Some snippets:

There is currently history in the making on the NY bourse as none of the big 5 Investment Banks remain!!! Maybe there is one [left] but that will be unrecognizable very soon.

“I think it will make fascinating reading for future generations of MBA students who will discover in amazement that such foolishness could ever be perpetuated.”

I fully agree with Lindsay, but my excitement comes from another potential result of these momentous events. I have long held the belief that many election outcomes can be predicted on the basis of economic factors. Essentially the theory focuses on 3 quarters of household economic indices.

Now this works well in national elections in Australia and the UK, and to a degree in Canada. The US has been the difficult one to crack as the dynamic of the US system and electorate, particularly with the presidential component added in, is extremely complex.

Still, I proved the theory worked, in 2006 congressional elections, on an electoral district and regional breakdown.

But for reasons I don’t really understand a presidential year tends to muddy the economic message, or perhaps the signals American voters respond to. A recent article suggested that the response is more to voter optimism/pessimism or perhaps just good old fashioned consumer confidence.

The trouble is, that is a subjective measure – depending largely on consumer/voter responses to polls, though a better measure can certainly be derived from actual consumer activity. But like many other indices we have relied on in the past, governments are making such reports increasingly difficult to access.

Big swing to Democrats

But now, based on my revised theory, for the US electorate, I can confidently predict a Democrat win, presidential and congressional. You see, when consumer confidence is up Americans tend to return a conservative government; when confidence is down they return a progressive result.

This time the US administration have given us the most unambiguous report on consumer confidence we have had for years. The proposed $700-billion bank bailout is designed specifically to head off a feared run on the banks. That is, bank customers (consumer/voters) are nervous about the stability of the markets.

So it is not what the administration is reporting so much as their enormously public actions. In other countries voters tend to punish incumbent governments for economic failures. I expect the US reaction is more one of fear in the first instance and seeking insurance of an administration more inclined to socially equitable remedies.

In a country which excites incredibly unrealistic dreams of wealth on its citizens the current situation must hit heavily as a personal as well as national failure. But in the end voters will be hoping for a safety net, at the very least. Let’s hope Obama can deliver.

Blogger block

There was a time I was hard pressed to limit output on this blog to less than three or four posts a day. Finally it came down to a more reasonable post every day or two. Just lately even that output has slipped. Even worse is an increasing failure to even visit, never mind comment, on the other blogs I’ve enjoyed so much.

Now this is not intended as a piece of self-absorbed reflection, but is consistent with my tendency to over analyse. Sure I have come to the ‘do or die’ end of a project I’ve been working on, but that never interfered before. There is a mild depression bought on by the ills of season change and a less than satisfactory domestic situation, but I’ve worked through all that before.

I’m thinking, given a penchant for predictive models and half understood economics, watching events unfold around the world, it is almost like (along with others like Lindsay) I’ve already said it. Now it seems like the time for observation, to watch as predictions unfold.

As the insanity unfolds its almost like the critter caught in the glare of oncoming headlights, frozen in fascination. Like the season change, which invariably stresses my poor, long suffering sinuses, the long predicted political/economic pendulum swing brings its own stresses.

Of course it is always darkest before the dawn and coldest with the first rays of a new day. So it is, it seems, with a shift in these longer cycles. For me, a progressive I hope, we are leaving a long period of conservative darkness and the egress carries its own cost. There is far too much to comment on, far to much idiocy, and there is no real satisfaction in being a Jeremiah.

Some of the key idiocy assailing me today:

• Senator McCain claiming a mantle of change and enshrining Bush policy. Even worse that same presidential aspirant confusing Spain as a South American country.
• Australia’s discredited conservative establishment arguing their imagined impoverished backgrounds. I will blog on this one in the next few days.
• Canada’s Conservative government going into election arguing a full entry into the free market world, just at a time when that edifice is collapsing all around them.

I suppose it is a matter of personal perspectives, but when these are people who aspire to lead, surely we should expect some sort of realistic world view from them.

 

A tale of two Liberal parties

In Canada

Stéphane Dion's Liberals are becoming frustrated over their lacklustre start in the election campaign, a lack of coherent message and theme and confusion as to who is in charge. G&M

 

In Australia

Brendan Nelson was a monkey on the back of the Liberal Party. The party has now shrugged the monkey off. Malcolm Turnbull won the [leadership] ballot.

 

Canada is in election mode and the Liberal’s are not happy with their leader. Australia isn’t and the Liberal’s unceremoniously dumped their leader. In Canada the leadership selection process is long and laborious, canvassing the party membership across the country, In Australia MPs hold a leaders fate in their hands.

 

Neither process particularly reflects the will of the people, or delivers satisfactory results. Often, in opposition as both these parties are, leaders are a compromise, filling a gap while stronger leaders jockey for future success. It is about timing.

 

Just how Dion was foisted onto the party is curious. He is a decent enough character but has all the charisma of a sock full of cold porridge. It is doubtful he was intended as a compromise, when the country has been teetering on an election since their last disastrous showing.

 

But satisfied or not, Canada’s Liberal’s have to get behind their man now. He is all they have. Unlike other countries, like Australia, Canada resisted the hard swing to conservative economics. A swing from which the world is now reeling as markets allowed their freedom collapse from their excesses.

 

As the rest of the world swings back to greater regulation Canada’s Conservative government is aching you dismantle the countries surviving regulatory regime. But then the Conservative leader, Harper, is a big fan of former Aussie Liberal PM, John Howard – conservative economics personified.

 

The Aussie Liberals had selected a relative lightweight, Brendan Nelson, to the leadership, but it couldn’t last. The choice was a compromise and an effort to keep Malcolm Turnbull at bay. Turnbull – John Howard on steroids – would have done well to bide his time and play his market, but he is not a patient man.

 

Well, thankfully for the country he is not patient. With several years to last before an election Turnbull should well and truly burn himself out. So I guess Malcolm will give some other, still unknown, aspirant a chance to develop

 

I’m sure, if they ever contemplate Liberal parties, American’s would find the dynamics confounding. For a start, while warm fuzzy is not anathema to liberalism either is hard line conservatism. They tend to be ‘broad church’ or ‘big tent’ groupings.

 

Howard’s, and now Turnbull’s Australian Liberals is akin to Canada’s Conservatives. Dion’s Canadian Liberals are currently an undefined rabble The major problem for both stems from years of ‘strong’ leadership – the kind that emasculates leadership contenders, leaving the untalented or unacceptable to sort the mess.

You Can Inform ‘em, But You Can’t Make ‘em Think

Australian news media are among the most informative in the world, eager to delve into issues regardless of  preconceived notions or alliances. Well, ok, where one media outlet or journalist can’t bear to dump on their ideas another will do the dirty work.

Political machinations are constantly dissected, often to embarrassing depths. We know, almost intimately, the sleazy predilections – morally and ethically – of our elected representatives. 

As effective government rapidly becomes a sentimental dream here in NSW we have watched the progress of:

· A Liberal Party organisation steadily taken over by the Christian Right, with candidates forced on the people solely for their adherence to a dubious ethic.

· The once effective rural party, the curiously named the Nationals, become increasingly lost and irrelevant.

· The governing Labor Party, whose membership is seen to be increasingly wallowing in blatant and individual self-interest.

In fact it is all about self-interest over public interest. We are fed all this in graphic, sleazy detail. Last weeks political bloodletting, the internal destruction of the Iemma government; the sacking within days of his appointment of the new Police Minister – not for dancing in a g-string and simulated ‘titty f**king’ a colleague at a drunken office party, but for denying it in the face of undeniable evidence. 

The list of imminent state by-elections is currently growing by two a week. The latest being former Health Minister Reba Meagher. We’ll never know if she was a total administrative failure, given the appalling government she was called to serve in. No doubt we will soon watch the graphic detail new Premier Nathan Reese being dispatched in a suitable gruesome method.

So what do the people think? The ex Police Minister’s antics make for great jokes and anyone who talks favourably of any foreign sports star is unpatriotic. With full knowledge, chapter a verse, the shortcomings of  our elected representative; knowing that we are heading for desperate territory economically and socially, we are turning to parties, laughter and football. 

Well it is the end of season for three of our football codes. Just don’t mention New Zealand’s All Blacks! That, I’m told, is unpatriotic.

A note on health policy

The steady decline of out hospital and health delivery system has been depressingly steady now for some years. Just how bad it is was bought home this week when a neighbour was carted off to hospital hovering on the edge of coma.

He had been there the week before, diagnosed with a range of blood and other infections, and pulled the various intravenous needles and walked out. Despite noting his problems as a result of substance abuse the hospital was willing to treat him for the several months estimated to clear his system.

When we went back a second time doctors stabilized him with a few adrenalin hits and sent him home. Ok, I made a subjective judgment and refused to call an ambulance, but others his did that part. That out hospitals are making subjective judgments on who they treat is more of a concern.

The simple fact is, working with limited resources, patients intent on self-harm and non-compliance are now cast aside. I can understand why, but I’m sure we all hope the system is far more sympathetic than people like me. Oh well, there is still the football.

Destroying faith in the system

This blog began by discussing political scandal and corruption, and just occasionally harks back to that original concept; very occasionally. Well what can you really say? How far and how often can you go down the same repetitive track?

The end of lat week witnessed the part collapse of the NSW state government. Before entrenched corruption at worst and total incompetence at best were really revealed the old guard stepped down. By Friday w had a ‘clean-skin’ premier (read virtually unknown; and by Sunday a brand new ministry.

Some articles:

Morris Iemma forced to resign as New South Wales Premier

Iemma dodges his own $42 billion debt bomb

Oh, the good old NSW Labor Party. By Thursday our brand new, sparking shiny police minister is gone – subject of yet another political scandal. Minister quits over pants prank

Matt Brown resigned from state cabinet last night just three days after being sworn in as police minister. Premier Nathan Rees said he gave Brown at least two chances last night to tell him the truth about his actions at a party in his parliamentary office in June this year.

I had considered throwing my hat into the ring in the upcoming by-election for the state seat of Port Macquarie. The decision depended on a few factors; chiefly some semblance of key support and a general interest in another election and its outcome.

Increasingly, another factor has crept into the equation – the actual survival of the current parliament. I have already been considering the wisdom of challenging in an election now, then fronting up in a few months for a second go.

The basic factors are still not in place, to my satisfaction, and the potential of a full election soon after a by-election is not encouraging. Even more worrying is the erosion of public confidence in the whole electoral/government system. We are obviously not being served well, but selling a positive message in the current climate is no easy ask. 

Canada Catches Election Bug

After months of polling sneezes and sniffles Canada has finally succumbed to a dose of elections. PM Harper, of fixed term elections, has ignored his own reforms and opted for an early election day - October 14. The positive for Harper is that the US campaign will easily distract and override the Canadian event.

With the bulk of the population hugging the border region at least electronic media will swamp the local campaign. Print media have already relegated their US coverage, but print is shrinking when it comes to market influence. Let’s hope we see some creative campaigning to break through the noise.

Predictions

I’m still playing with viable election prediction models. My favourite, the household economic model, has proved a good indicator. That is, if any two of employment, rates and inflation move into negative numbers over three quarters a government will be dumped at the following election. However it depends on unambiguous reporting of stats on issues like employment and inflation.

Governments have taken any real precision out of most of the key indicators, in the belief that if they misreport no one will notice the reality. Given most people wouldn’t know an economy it they fell over it this is a dumb approach. But it does require a leap in subjective observations rather than relying on objective data.

 

Just lately I’ve been seeing some potential refinements to the household economic model, centered on income and social inequalities. But even there we find ambiguities, particularly when the notionally wealthy are increasingly cash poor. Even a low wage two income family can often have a greater disposable income than a high earning family.

Still, there is an indication that support will swing between conservative and progressive based on perceptions of inequality. I’m suitably convinced that economic factors are generally the key to influencing vote outcomes. I’m not convinced that inequality metrics are the right indicator. In fact I’m starting to think it is an element of that inequality – the confidence metric.

So rather than predicting outcomes of any of the current outbreak of elections I intend to try and tease out some of these hypotheses. Sadly I’m not an economist, but I will keep digging. I am convinced there is a prediction model that will take all the fun out of elections.

Where we weigh the votes

The seat of Lyne has been held by the Country/National Party for the 59 years of its existence. The grip was so strong that psephologists quipped that votes weren’t counted, but weighed. In yesterday’s by-election Independent Rob Oakeshott took this conservative stronghold in traditional style, claiming a probable 75% of the preference adjusted vote.

The Nationals opted for a dirty negative campaign, an approach Oakeshott simply ignored. In fact, the whole thing was so low key it was difficult to be sure there was an historic election campaign underway. The truth is, there was nothing to campaign about. Voters apparently had mad their choice at the outset and held firm.

From the earliest results from smaller polling stations the trend held, with Oakeshott clearly holding a range around 64% of the primary vote. Rob says the result vindicates his decision to avoid any negative campaign, but I expect he could just as well gone on an ocean cruise for the duration.

One of the stats I’m looking forward to are the spending declarations. In our windy spring weather National’s flyers have been rattling around the streets for weeks, generally ignored by all. They spent a fortune on TV advertising, generally attacks on Oakeshott, who in return rented a bus and took the show on the road. The Nationals probably threw $500,000 at the campaign for a paltry 23%.

So congratulations are due to Rob Oakeshott, not just for winning a landslide but for being brave enough to recognise and reflect the wishes of most of the voters. Rob really does represent the sort of change voters everywhere are looking for.

Hypocrisy, immorality and the conservative way

I doubt I’m the first to reflect on the hypocrisy of many conservatives. While always ready to mouth off about moral issues they seem to fail miserably in broad ethical thought and behaviour.

Two fresh examples assail me this week; first, to be dispatched with appropriate brevity, is the whole conservative backwash around the pro-life moose hunter. The sounds of salivating conservatives is sickening.

The other issue has broader social implications and was triggered by a .25% cut in interest rates. Even after 10 consecutive interest rate rises under the former Howard government the coalition, now in opposition, had the hide to attack the cut and Rudd government policies that allowed it.

The Opposition argues that rates have dropped because of a slowing economy, rather than because inflation is under control. Rudd took action to slow the economy after the conservatives had spent so many years giving their business buddies free reign. Their disregard for the needs of the wider community downright immoral, attempts to cover their tracks now total hypocrisy.

Liberal (conservative) ‘Leader in Waiting’, Malcolm Turnbull, blames the Rudd government for a rate cut that comes at the expense of jobs, accusing Treasurer Wayne Swan of being reckless for talking up the threat of rising inflation in an attempt to discredit the previous Howard government.

For many of us Rudd and Swan have been far too lenient on the legacy of the Howard government. Communities have been milked dry of essential funding for essential infrastructure under Howard. While job grew, notionally, hours and incomes in fact dropped. Business was encouraged to rape and pillage and now we pay the cost.

The immorality in the conservative economic approach manifest in so many ways, beyond the havoc of dubious policy. The part I find most distressing is that within their need to rewrite economic reality they also make this basic social necessity confounding to most people. But they can never cover up the damage they do to household finances.

Powerless, clueless politicians

Last week’s recall of the NSW parliament, in an abortive bid to sell off the state’s power assets, cost an estimated $500 million. The failure of the sale is blamed for a predicted cut in the state's credit rating by one notch from AAA would cost $500 million in higher interest payments.

The government still plans to sell the retail arms of the energy corporations, something they claim they can do without parliamentary approval. It’s also something the majority of the population is strongly opposed too.

Either way we were bound to be an extra billion dollars down the tubes with the parliamentary recall factored in. Perhaps that is just one more billion examples of the by the Iemma government’s mismanagement of the state's economy.

But it’s not fair to simply blame the hapless premier, tempting as that is. Machinations within the parties has served to ensure survival of the most inept. Even the most ferociously self-serving MPs seem to be bumbling dolts when it comes to ripping the system off to their own gain.

There is a creeping trend toward electing independents, and its easy to see why. While the old doctrinaire, left/right politics is becoming increasingly irrelevant the parties in NSW play stronger and harder; rifts, factions and splits, destructive as they are, are seen as the only game in town by the party hacks.

Without that game to divert them independents are far more pragmatic and constituency focused. I’m sure there is still some excellent value within the party MPs, but t is up to them to unleash themselves from the rotting carcass of politics past. The left/right divide is more and more jus ‘Dumb and Dumber’.