House prices
indo-dreaming wrote:donweather wrote:indo-dreaming wrote:donweather wrote:gsco wrote:corporate profits vs wages:
people are really jumping on that latest rise in profits, but inflation has been strong the whole time, particularly during that recent dip.
It's not corporate profits driving the current inflation. But people will believe whatever they want I guess. We're in a post-truth world.
I'm not suggesting profits are DRIVING inflation. I am questioning whether the increase in costs for fuel and electricity are justified given the significant drop in oil and coal/gas costs from the peak of spring last year. If fuel and electricity costs were to come down AND corporate profits went up because of this then I'd be questioning the profits. But I believe the hike in fuel and electricity is playing a huge part in our inflationary pressures....and for that I'm questioning why these fuel and electricity costs haven't come down!!!! Why isn't the Gov investigating these? ACCC even? Same goes for airlines and flights. Fuel costs are back to pre-covid levels but do you think we'll ever see pre-covid level airfares again.............NOPE!!! Did someone say Qantas just made a record profit!!!
To be fair, airlines got screwed over more than anyone during Covid with huge losess, we are lucky most of them are still operating , you would expect they would have to have record profits for a few years just to make up for the losses or break even.
Still seen some good deals to Indo of late though.
hang on. Didn’t Qantas etc get massive handouts from the gov during Covid? Are they gonna pay them back with their massive record profits?
Yeah okay i remember talk of it all, but didn't know it happened for airlines,
o.
Wasn’t just the handouts for JobKeeper etc
Mate of mine (ex Bain MC, now solo operator) was telling me that the Govt basically paid above market rate for QANTAS (don’t know about Virgin) to become a freight company. Makes sense at one level, but a lot of that ‘welfare’ is forgotten. None of it comes back to the taxpayer.
etarip wrote:indo-dreaming wrote:donweather wrote:indo-dreaming wrote:donweather wrote:gsco wrote:corporate profits vs wages:
people are really jumping on that latest rise in profits, but inflation has been strong the whole time, particularly during that recent dip.
It's not corporate profits driving the current inflation. But people will believe whatever they want I guess. We're in a post-truth world.
I'm not suggesting profits are DRIVING inflation. I am questioning whether the increase in costs for fuel and electricity are justified given the significant drop in oil and coal/gas costs from the peak of spring last year. If fuel and electricity costs were to come down AND corporate profits went up because of this then I'd be questioning the profits. But I believe the hike in fuel and electricity is playing a huge part in our inflationary pressures....and for that I'm questioning why these fuel and electricity costs haven't come down!!!! Why isn't the Gov investigating these? ACCC even? Same goes for airlines and flights. Fuel costs are back to pre-covid levels but do you think we'll ever see pre-covid level airfares again.............NOPE!!! Did someone say Qantas just made a record profit!!!
To be fair, airlines got screwed over more than anyone during Covid with huge losess, we are lucky most of them are still operating , you would expect they would have to have record profits for a few years just to make up for the losses or break even.
Still seen some good deals to Indo of late though.
hang on. Didn’t Qantas etc get massive handouts from the gov during Covid? Are they gonna pay them back with their massive record profits?
Yeah okay i remember talk of it all, but didn't know it happened for airlines,
o.Wasn’t just the handouts for JobKeeper etc
Mate of mine (ex Bain MC, now solo operator) was telling me that the Govt basically paid above market rate for QANTAS (don’t know about Virgin) to become a freight company. Makes sense at one level, but a lot of that ‘welfare’ is forgotten. None of it comes back to the taxpayer.
These companies have already paid shit loads of tax and contributed hugely to the economy and will continue too, so they do pay their way really.
And yes there is years they might run at a loss or pay too much tax the year before and not pay company tax, but overall long term they still pay shit loads of tax in company tax, GST possibly other taxes etc and generated payroll tax.
Generally speaking im a let the market decide type of guy, but business like this are worth supporting to ensure consumers have the service and there is competition and just a variety of choice, Covid was also a very unique circumstance it had an end, so its not like supporting an non viable business like car industry with government hand outs where its just an endless handout keeping afloat a non viable business model.
gsco wrote:My point is it doesn’t make sense to say something like “let’s just ignore the major covid stimulus and resource/energy price shock events, and just blame inflation on something else like corporate profits simply because it aligns with my political ideology…”
Reckon your wrong on wages being inflationary and dismissive of corporate profits as a significant cause.
https://www.epi.org/blog/corporate-profits-have-contributed-disproportio...
Gas prices racketeering in Australia east coast another good example. Ukraine was used as an excuse but the real reason was the industry was selling gas domestically based on global markets spot prices for stupid prices at exorbitant profit.. steep energy prices impacts flow on to manufacturing and retail and everything else in between. The article linked above in the thread showed of freight costs to industry trending back to pre pandemic expenses or business costs yet the industry is still charging late pandemic prices is another strong inflationary factor linked to corporate profit. another good example.
Besides the covid stimulus packages is an inflationary link which has benefitted corporations and asset owners only. Not sure how you can disconnect the two dismissively as an ideological naivety.
Market still seems pretty good where i live i just saw a house on FB sold at auction for $117K over the reserve price with 49 bids
The Australian inflation (and covid property prices) event in two graphs:
Australian money supply (and equivalently, the other side of the same coin: central bank balance sheet):
Global coal and natural gas prices:
Australia undertook a literally unprecedented and completely unbelievable, irresponsible, astronomical pump of money into the economy during covid via quantitative easing, on a scale that is literally unfathomable.
And we just lived through a spectacular supply side shock in the form of an unbelievable global resource prices spike.
Everything else is just footnotes and political squabbling.
Agreee. The more you ctrl_p the more the currency loses it's value as it's supply has increased; result being the more units of currency are required to buy physical items or services which may not have increased in their number by similar amounts - the more their prices seem to 'go up'. Inflation. What we have just witnessed was extremely naughty.
It's a little more than just naughty.
That 1st graph of the RBA's balance sheet exposes another alarming situation:
Why has the RBA not yet done any quantitative tightening (QT) to substantially reduce the size of its balance sheet?
The RBA actually needs get its balance sheet back down to the pre-covid long-term linear trend. QT should be happening in full force to fight inflation, for which it's arguably as equally an effective tool as raising interest rates. It's highly likely that interest rates would not have needed to go up anywhere near as much if the RBA was dong QT.
Well the main answer is that the RBA is still insolvent on paper, by about $14b. QT would "mark to market" this insolvency, resulting in the RBA voluntarily wiping itself out and requiring a bailout...
Btw the RBA was only playing its part (i.e. taking orders) in all this: "The Reserve Bank is working closely with the Australian Government, the Australian Treasury and Australia's financial regulators on the coordinated response to COVID-19.". Both sides of politics are equally complicit here.
Seriously, you couldn't make this stuff up.
MMT writ large…
Yeah I reckon thats bullshit gsco. You talk like those decisions behind the economic rationale are exclusive. they are not.
Political decisions were made on the pandemic stimulus much like they were re QE since last financial crisis - that implemented economic decisions that was favourable to corporations. There is no hard scientific rigour in economics. It’s a step below qualitative social sciences. Economists may think of their field in scientific terms but its just poli /corpo behavioural observations dressed up as quasi science methodology. Economic modelling foundation like it or not is based on ideological (e.g. what is and isn’t included in GDP and thus what constitutes real inflation) principles.
economics is politics, is corporate profit. only the naive would disconnect the three.
It's definitely an interesting nihilistic, fake left perspective Bonza and I'm glad you wrote it since I think it's representative of the trend of our times in broader society and politics. This trend largely started with the GFC failures.
It's pretty clear that very few people on this planet have ever actually studied economics and consequently don't know what it is and think it's not a science. It's clear that many people think economics is itself just another political ideology created by the wealthy elite, or that economics = capitalism/neoliberalism, or economics = corporate profits, inequality and oppression, etc.
I think this trend is the central part of a broader wholesale rejection, dismantling and white-anting of the core institutions and values that made western civilisation what it is today, namely the greatest and most prosperous civilisation on the planet, which every other civilisation and peoples is trying to catch up to and largely replicate, in their own unique cultural ways. This dismantling and white-anting is mostly being done by the fake woke cultural left as part of their fake social justice and fake communist ideological, nihilistic gender and culture wars. The roots of this movement are I think most clearly written down in Zinn's classic popular work of history The People's History of the United States.
I also think the trend is reflective of the fact that people don't actually even know where to look in order to learn economic science. I see people in these forums insist on routinely posting political ideology and pseudoscience articles as though these articles are actually economics commentary. When I google search for say "the top 10 economics textbooks" I get a lists of non-technical popular works targeted at the masses, books that are infected and infiltrated with, and indeed are usually solely about, sensationalism, political ideology, pseudoscience, conspiracy theory, communism, etc. The actual standard university textbooks on economic science never actually show up.
And I also think that a major problem is that economics has indeed been badly infiltrated by political and cultural ideology. Economic science has been completely smothered, drowned out and obscured by both (i) fake cultural left communist pseudoscience and conspiracy theory trash and junk and (ii) far right fascism. Politics, corporations and the wealthy elite do indeed routinely just use (I should say abuse) economics as another tool to advance their ideological, financial and commercial causes and interests.
I think the broader population can be forgiven for thinking that economics is just another ideology and not a science, since they know nothing about economics, don't even know where to look, and economics has been obscured by both extreme left and right ideology along with political and other corporate etc interests.
Economics is a science that progresses via the same scientific process of theory and experimentation like any other branch of science, and draws particularly heavily on statistics, which in the context of economics science is called econometrics. To think otherwise just means that you don't actually know what economics is and you're lost in the culture and ideology wars.
gsco wrote:It's definitely an interesting nihilistic, fake left perspective Bonza and I'm glad you wrote it since I think it's representative of the trend of our times in broader society and politics. This trend largely started with the GFC failures.
It's pretty clear that very few people on this planet have ever actually studied economics and consequently don't know what it is and think it's not a science. It's clear that many people think economics is itself just another political ideology created by the wealthy elite, or that economics = capitalism/neoliberalism, or economics = corporate profits, inequality and oppression, etc.
I think this trend is the central part of a broader wholesale rejection, dismantling and white-anting of the core institutions and values that made western civilisation what it is today, namely the greatest and most prosperous civilisation on the planet, which every other civilisation and peoples is trying to catch up to and largely replicate, in their own unique cultural ways. This dismantling and white-anting is mostly being done by the fake woke cultural left as part of their fake social justice and fake communist ideological, nihilistic gender and culture wars. The roots of this movement are I think most clearly written down in Zinn's classic popular work of history The People's History of the United States.
I also think the trend is reflective of the fact that people don't actually even know where to look in order to learn economic science. I see people in these forums insist on routinely posting political ideology and pseudoscience articles as though these articles are actually economics commentary. When I google search for say "the top 10 economics textbooks" I get a lists of non-technical popular works targeted at the masses, books that are infected and infiltrated with, and indeed are usually solely about, sensationalism, political ideology, pseudoscience, conspiracy theory, communism, etc. The actual standard university textbooks on economic science never actually show up.
And I also think that a major problem is that economics has indeed been badly infiltrated by political and cultural ideology. Economic science has been completely smothered, drowned out and obscured by both (i) fake cultural left communist pseudoscience and conspiracy theory trash and junk and (ii) far right fascism. Politics, corporations and the wealthy elite do indeed routinely just use (I should say abuse) economics as another tool to advance their ideological, financial and commercial causes and interests.
I think the broader population can be forgiven for thinking that economics is just another ideology and not a science, since they know nothing about economics, don't even know where to look, and economics has been obscured by both extreme left and right ideology along with political and other corporate etc interests.
Economics is a science that progresses via the same scientific process of theory and experimentation like any other branch of science, and draws particularly heavily on statistics, which in the context of economics science is called econometrics. To think otherwise just means that you don't actually know what economics is and you're lost in the culture and ideology wars.
But which science do you believe?
Only studied economics at undergraduate level so commenting from not an extremely knowledgeable position, but it seems that if it was pure science there would be a more of a consensus how it would be best to run an economy. Surely 30 plus years of neo liberal free market mentality has helped us get to the massive disparity of wealth today which is causing social unrest, looking at you USA. Then add a bit of Covid Keynesian policy and previously GFC (which was necessary at the time in my view as the social unrest if not having these policies implemented would have been unacceptable) to add to the inflation woes we have now.
My thoughts are combination of both depending on the cycle of the economy. Easy to say that interest rates need to go up to stop inflation, but if you are having trouble feeding your family due to rates rising, you do not give a flying fuck about economic theory. That's when governments do have a responsibility to step in and look after their citizens, in a perfect world anyway.
https://bajricsanel.com/keynesian-economics-vs-chicago-school-a-comprehe...
""" This dismantling and white-anting is mostly being done by the fake woke cultural left as part of their fake social justice and fake communist ideological, nihilistic gender and culture wars. """
Say what???
"Say what???"
andy-mac do you think this stuff that's currently happening in the US is ok, what would you describe it as, do you want it in Australian schools...?:
It’s the movie they really don’t want you to see: #WhatIsAWoman?
— Daily Wire (@realDailyWire) June 2, 2023
Watch the explosive documentary starring @MattWalshBlog FREE on Twitter for 24 hrs. https://t.co/qDi7thCNid
gsco wrote:"Say what???"
andy-mac do you think this stuff that's currently happening in the US is ok, what would you describe it as, do you want it in Australian schools...?:
https://twitter.com/realDailyWire/status/1664424891372941312
Will watch later....
Dunno what is happening in USA, but Australian schools are still extremely conservative in this space, regardless of how the media portray it.
Just looking at some of the comments though, Satan etc bit over the top, just let people be people, do no harm etc....
Research (in case commonsense is not enough) that inflation stemmed largely from central bank actions - in conjunction with the crazy extended lockdown policies and self infected need for massive covid stimulus and support.
https://www.bis.org/publ/bisbull67.htm
And a broader discussion:
https://www.zerohedge.com/economics/commodity-prices-debunk-blame-ukrain...
Will the Central Banks do everything in their considerable power to dodge the blame? Of course.
A license to print money must be protected at ALL costs.
governments and other public institutions are also doing everything in their power to dodge blame due to their complicity in the massive covid stimulus and more generally the post-GFC policies. The obvious scapegoats are corporate profits and Putin.
gsco wrote:"Say what???"
andy-mac do you think this stuff that's currently happening in the US is ok, what would you describe it as, do you want it in Australian schools...?:
https://twitter.com/realDailyWire/status/1664424891372941312
Haha quote 'some women have penises and some men have vaginas.'
Crikey.....
Hey gsco. If commoditise and transport costs increased due to the Ukraine war shouldn’t corporate profits be down or near regular levels of yearly profits.
We’ve had corporate super profits, not steady numbers or a slight decrease that most small businesses may experience.
The general consumers have experienced a steady increase in the cost of living. We’ve been gouged.
For a simpleton like myself, how is this not a key driver of inflation.
High corporate profits across the board are generally a temporary phenomenon when the planets align.
Although, some semi monopolistic business, can sustain them for a long time.
For the majority, reversion to the mean or worse dominates their history. Sustained super profits are rare.
Where I work, inflationary shifts in our key contracts just keep marching on. Capital works are 20, 30 to and even 50% over pre covid levels. Maintenance contracts being retendered are the same. The word "unprecedented" has appeared in supplier letters justifying price increases for goods with zero connection to Ukraine conflict. a number of times. Suppliers previously comfortable with set price escalation clauses over 5 years now baulk at the risk.
All this is still in the process of feeding into the cost base and squeezing margins. It sustains the inflation mindset pervading business decisions. This is the experience of the many. On a micro scale numerous restaurants have just closed in the face of rising costs. In the UK the boutique brewers are closing left right and center as customers can't afford their beers. That is not price gouging or super profifts.
Some mining companies I have followed have had their business models close to destroyed by such cost increases. Most commodity price spikes always seem to promise endless nirvana for miners but not sustain these levels.
Corporate profits statistics and arguments on blame are skewed by the few outliers (BHP, Qantas post bailout, Apple etc.) and these examples are latched on to by the blame avoiders in government and Central Banks.
Well soggydog I'd say two things to that:
1. Corporate profits are currently very volatile (see above graph) and we're not experiencing super profits. This is a media beat-up by carefully selecting companies that currently happen to be experiencing high profits, and ignoring those that aren't.
2. What is a major thing that causes a company to earn high profits? The answer is strong demand for their products and services. The massive covid stimulus money that got pumped into the economy, and that is still in the economy, has gone into strong demand for lots of things from products and services, rents, to also assets like property.
The point is: strong demand causes increased profits.
None of it would have happened if all that money wasn't pumped into the economy. This was the underlying cause of it all: the covid stimulus caused strong spending and demand, companies sold more products...
Of course, this was the whole point of the stimulus.
Thanks gentlemen. I really do wish I understood the nuances of global economics.
It's inflation on non-discretionary items that seems the biggest problem to me, as far as entrenched inflation expectations are concerned at the household/consumer level.
frog wrote:High corporate profits across the board are generally a temporary phenomenon when the planets align.
Although, some semi monopolistic business, can sustain them for a long time.For the majority, reversion to the mean or worse dominates their history. Sustained super profits are rare.
Where I work, inflationary shifts in our key contracts just keep marching on. Capital works are 20, 30 to and even 50% over pre covid levels. Maintenance contracts being retendered are the same. The word "unprecedented" has appeared in supplier letters justifying price increases for goods with zero connection to Ukraine conflict. a number of times. Suppliers previously comfortable with set price escalation clauses over 5 years now baulk at the risk.
All this is still in the process of feeding into the cost base and squeezing margins. It sustains the inflation mindset pervading business decisions. This is the experience of the many. On a micro scale numerous restaurants have just closed in the face of rising costs. In the UK the boutique brewers are closing left right and center as customers can't afford their beers. That is not price gouging or super profifts.
Some mining companies I have followed have had their business models close to destroyed by such cost increases. Most commodity price spikes always seem to promise endless nirvana for miners but not sustain these levels.
Corporate profits statistics and arguments on blame are skewed by the few outliers (BHP, Qantas post bailout, Apple etc.) and these examples are latched on to by the blame avoiders in government and Central Banks.
What are the commodity price spikes that you're referring too? Most commodity prices that feed into our daily workings such as oil (fuel), coal/gas (electricity) are back down to pre-covid levels, so why are things like fuel and electricity costs at all time highs still?
Someone is making a killing from fuel and electricity. And it's not the small/middle man. So of course small business is doing it tough and they have to pass on these price increases to the purchaser, hence inflation is rampant. But why aren't our governments asking more as to why fuel and electricity costs aren't dropping back to pre-covid levels? The moment these two key ingredients that EVERY business uses drop in price our inflation will also drop.....assuming the current levels (as of right now) of demand for most products and services don't jump again, because as we've seen from the discussion above, demand also fuels inflation.
freeride76 wrote:It's inflation on non-discretionary items that seems the biggest problem to me, as far as entrenched inflation expectations are concerned at the household/consumer level.
non-discretionary as in every day needs and requirements like fuel, electricity, food etc?
Don, you said
"Most commodity prices that feed into our daily workings such as oil (fuel), coal/gas (electricity) are back down to pre-covid levels, so why are things like fuel and electricity costs at all time highs still?"
It's not that simple. You're talking about spot prices here.
For instance, regarding electricity, most of the coal and gas etc pricing that wholesale electricity generators pay, and hence generate their electricity from, are fixed in advance, into the future, using futures contracts.
So what we're seeing right now is generators paying coal and gas etc prices close to what they were at their peaks last year due to these fixed price contracts. So their electricity pricing in the national electricity market is based on these high coal and gas etc prices from when they entered into the fixed price futures contracts.
This is touched upon in this recent ABC article. It is also fairly well detailed in the various national electricity market and regulator websites, and the Quarterly Energy Dynamics reports.
Plus, energy retailers, which is who we as retail consumers buy electricity off, also enter into fixed price contracts with the wholesale generators, so retail electricity pricing also reflects older prices and market dynamics at the time the fixed price futures contract were entered into.
Hence it is natural for there to be a lag in retail electricity prices like this due to the use of these fixed price contracts by both wholesale generators and retailers. Electricity prices often reflect market dynamics many months and even a year or so in the past.
Btw these futures contracts are very vital to the operation of the national electricity market since they give wholesale electricity generators and retailers price and volume certainty, which they can use in an obvious way in their production, business, retail, etc, planning.
But definitely, if spot coal and gas etc prices stay low, one would expect electricity prices to fall as these older fixed price futures contracts expire. And if electricity prices didn't fall in that case then it should be investigated by say the ACCC.
Remarks:
- The issue of Australian electricity generators paying global resource prices is a completely different thing altogether. I've argued in the past that our electricity generation should be renationalised and government provided so we are not at the mercy of global resource prices.
- I also think that not only should our electricity generation should be nationalised, but in doing so it should be made 100% renewables and clean electricity generation, simply because the government can just decide to do that.
- The issue of the effectiveness and efficiency etc of the national electricity market in creating a market based electricity generation solution is also a completely different issue and debate. There are definitely ways in which the national electricity market is not working or serving Australia very well.
Appreciate your response gsco and whilst I agree with what you're saying why was it that electricity prices jumped immediately the moment coal and gas prices soared through the roof? If the futures contracts are just that then we should be paying the higher prices now on the downside of the peak, but that would also mean we shouldn't have paid the higher prices for sometime until AFTER the commodity prices popped.....but I don't believe this was the case.
And doesn't the "future's contract" way of pricing mean that someone is making a shitload of $$$ right now in the electricity market? Selling electricity at a premium rate when their commodity prices are at very low levels.
And why is it the electricity market have just increased their prices further (within the last month) in most states....some states rose 40%? What's their rationale behind that?
gsco wrote:This is touched upon in this recent ABC article.
"There's an increase in the costs of building or recovering the cost of our transmission and distribution systems … and there's also inflation that's applied to the costs that retailers face," she said.
Sorry you don't just apply "inflation" to a cost of your business. Inflation is not an automatic increase to your goods and services. What inflationary costs does the Australian Energy Regulator incur? THis is where I truly believe we're all being taken for a ride. Industries that just say of well inflation is up so we can up the costs of our goods and services. That's not how inflation works, nor how business cost increases work.
"What we're seeing is the sort of contracts that retailers buy for the coming financial year have fallen quite a bit since intervention in the coal and gas markets in October last year.
They are about 40 per cent lower than they were in October last year."
Ok, so again I ask the question....why are our electricity prices rising still if the contracts are 40% lower than October last year?
1. Don I think you'll find that our retail electricity price rises did lag global spot coal, gas etc prices.
2. "And doesn't the "future's contract" way of pricing mean that someone is making a shitload of $$$ right now in the electricity market?
No. Consider an electricity generator. Say 6 months ago they entered into a futures contract (with mining companies) to buy coal or gas at a fixed price, based on coal and gas prices 6 months ago, where they pay that price and receive the coal or gas today. So this is the high "input costs" into their electricity generation today.
Now consider the electricity retailer. Say 6 months ago they entered into a futures contract to buy electricity off the above generator for a fixed price, based on those high electricity generation prices 6 months ago of the electricity generator, where they pay that price and receive the generated electricity today (which they then supply to us).
It is these high retail prices that we are now experiencing, that were contracted say 6 months ago.
The people who made all the shitloads of money out of this overall scenario is the mining companies who sold the coal and gas at huge prices say 6 months ago to the electricity generators: RIO, BHP, Fortesque, etc. But now of course mining company profits are taking a huge hit due to lower prices. Mining is a boom-bust game and the share prices of miners tend to strongly correlate with the prices of the resources they mine (and since Australia as a nation is a one trick exporting pony, the AUD is strongly correlated with resource prices...!).
You'll find that electricity generator and retailer profits are pretty average, as I think is also touched upon in the ABC article.
EDIT:
"Ok, so again I ask the question....why are our electricity prices rising still if the contracts are 40% lower than October last year?
These are contracts entered into now that will begin to come into force now and later into the year. Also, just because generators and retails can start to enter into cheaper contracts now, it doesn't mean that prices should also immediately fall since they will still be bound by previous, older and more expensive contracts that my come due even in 6 months or a years time. The idea behind the operation of the NEM is that electricity prices should in theory start to fall into the future, as the old and more expensive contracts that are still in force come due and expire, and these new cheaper ones come into force and replace the older ones, if all is working well.
But like I said, there is a lot of debate about the effectiveness of the NEM and how well it is "working".
frog wrote:In the UK the boutique brewers are closing left right and center as customers can't afford their beers. That is not price gouging or super profifts.
So this interest rate rising cycle has killed craft beer? So that infers the craft beer bubble was a creation of 5000 year low interest rates and the abnormality of QE? Very interesting.
Inflation + interest rate increases reduce margins for producers and consumers' willingness to spend.
https://www.theguardian.com/business/2023/jun/05/rise-in-uk-breweries-go...
Supply shock inflation is generally short-lived but massive monetary expansion underpins all sustained inflationary periods.
Interest rate increases follow and their impact on business and the consumer is as much about the speed of change and surprise shock to prevailing expectations as the actual headline number reached.
My first home loan was 15.5% in the 80s.
A know it all friend back then was stoked to announce he had locked in a fixed rate loan at 15 5% from his banker mate !!!!! It was going to 17.5 % he reckoned!!!
He quietly paid the exit penalty a year later to go back to variable.
Such are expectations set by the times. Recently it was low rate expectations underpinning a myriad of decisions - including beer.
Well lets wait and see if electricity prices fall 40% before or by the end of FY24.
As if millions of hops suddenly cried out in terror and were suddenly silenced.
No seriously I don't mind some the crafty stuff and reckon the extras in the original IPAs were a great way to preserve and drink ale in hot climates... Agree on the monetary - or rather, currency - expansion.
gsco wrote:It's pretty clear that very few people on this planet have ever actually studied economics and consequently don't know what it is and think it's not a science. It's clear that many people think economics is itself just another political ideology created by the wealthy elite, or that economics = capitalism/neoliberalism, or economics = corporate profits, inequality and oppression, etc.
.
I reckon thats a good point and agree that i would count myself in that cohort. What’s more interesting to me though is those that have actually studied it, still don’t know actually what it is, or at least how to explain it and apply it to solve real world problems. Economics can enquire on modelling problematic human behaviour, but its generally, based on outdated historical observations.
Applying statistics to your enquiry doesn’t make your study scientificlly robust. No matter how good you are at mathematical and statistical observations.
The best economists can do is study data after the fact. when trying to model predictions their data is compromised humanistic unknowns and historical changes e.g culture and technology standards that no longer apply to this world. economists can’t apply repeatable experiments in a controlled setting to test their hypothesis when it comes to their theory, and therein lies a key weakness and red flag when you hear economic practitioners try to claim scientific robustness to their claims.
I think Jospeh Stiglitz demonstrated that point very well when he visited last year with his critique of inflationary targets.
But of course some may view my observation and “my truth” different to “their truth”. They see my truth as, based on woke left ideology? whatever that is. The things i read, are based on lies. That i and others who don’t agree with “their” truth, don’t posses the critical thinking insight to understand that “their truth” is the true “truth”.
Thats a classic narcissistic characteristic. It’s amusing to see Noam Chomsky’s “manufacturing dissent” principles being applied to attack and support anyone who doesn’t support their “truth”. How that important thesis, is so often corrupted in these times, and thrown around on both sides of the political divide (more often than not by the alt right these days) in an attempt to dismiss the other side.
it’s also curious, how you, gsco, so defensive of the economic field which lacks the rigour of the scientific method, yet which field, beholden and coupled intrinsicly to political decision making, benefits corporate profit to the detriment of the commons. Yet so critical, you are of the true scientific fields (e.g. shout out to climate science - check the thread yo) that applies gold standard scientific methodology which will benefit humankind. why is that?
Good piece by Ross Gittins that supports your contentions in a round about way Bonza.
https://www.theage.com.au/business/the-economy/wish-you-had-more-days-of...
I think this is a really good and pertinent debate, and very representative of the social and cultural milieu, as the article Blackers contributed reflects, but of course as we see in every corner of the media and government when it comes to the war on economics and on particularly the arguably peak industry body that represents the economic profession and science: the RBA. But it's more than just economics that's on the receiving end of the new Western zeitgeist: it's on the receiving end of itself.
I admit, for the decade from about 2009/10 until early covid, I was completely switched off and detached from Western society and media. I was hard at work in my profession and job. I've never had any social media, hardly followed the news, never had a tv, and I spent parts of that decade overseas. My job was always completely remote, I hadn't set in an office that whole time until recently.
I'm fascinated and shocked at what I've woken up to in Western society.
It's like a wholesale loss of confidence in and rejection of itself. It's a turning in on and going to war with itself. It's a polarisation and division of itself into ideologically driven mob-like tribal groups who don't agree on even basic facts or truth and who live in siloed online and offline alternative realities, even when sitting next to each other in an office cubicle. Communism is making significant inroads, particularly culturally and ideologically. Many of the disillusioned are turning to extreme right fascism. There is no common ground of agreement, no starting point. Governments have abandoned their peoples and are in it solely for their own personal wealth and post-politics careers. Wholesale corruption, cronyism and rorting is the order of the day. Western society has been consumed by corporate interests capturing the media and political process (and economics). Not only internally, the West is dividing the planet into sides and going to war externally.
Anyway, none of the above is new or my own original thoughts. Actually I'm just plagiarising the writings of Ray Dalio and quite a few others. Their central thesis is that all these symptoms and many others appear in hegemonic civilisations as they start to decay and lose their grip on power, when this grip is replaced by a new civilisation. But even one's own superficial reading of history accords with their thesis, and that this cycle of the rise and fall of civilisations repeats itself eternally.
I used to take all this stuff with a grain of salt and never really believed it. But I'm starting to worry that it might be accurate.
I guess they never thought Rome would fall.
Carry on Western society into your nihilistic wasteland.
gsco wrote:I think this is a really good and pertinent debate, and very representative of the social and cultural milieu, as the article Blackers contributed reflects, but of course as we see in every corner of the media and government when it comes to the war on economics and on particularly the arguably peak industry body that represents the economic profession and science: the RBA. But it's more than just economics that's on the receiving end of the new Western zeitgeist: it's on the receiving end of itself.
I admit, for the decade from about 2009/10 until early covid, I was completely switched off and detached from Western society and media. I was hard at work in my profession and job. I've never had any social media, hardly followed the news, never had a tv, and I spent parts of that decade overseas. My job was always completely remote, I hadn't set in an office that whole time until recently.
I'm fascinated and shocked at what I've woken up to in Western society.
It's like a wholesale loss of confidence in and rejection of itself. It's a turning in on and going to war with itself. It's a polarisation and division of itself into ideologically driven mob-like tribal groups who don't agree on even basic facts or truth and who live in siloed online and offline alternative realities, even when sitting next to each other in an office cubicle. Communism is making significant inroads, particularly culturally and ideologically. Many of the disillusioned are turning to extreme right fascism. There is no common ground of agreement, no starting point. Governments have abandoned their peoples and are in it solely for their own personal wealth and post-politics careers. Wholesale corruption, cronyism and rorting is the order of the day. Western society has been consumed by corporate interests capturing the media and political process (and economics). Not only internally, the West is dividing the planet into sides and going to war externally.
Anyway, none of the above is new or my own original thoughts. Actually I'm just plagiarising the writings of Ray Dalio and quite a few others. Their central thesis is that all these symptoms and many others appear in hegemonic civilisations as they start to decay and lose their grip on power, when this grip is replaced by a new civilisation. But even one's own superficial reading of history accords with their thesis, and that this cycle of the rise and fall of civilisations repeats itself eternally.
I used to take all this stuff with a grain of salt and never really believed it. But I'm starting to worry that it might be accurate.
I guess they never thought Rome would fall.
Carry on Western society into your nihilistic wasteland.
@gsco
I appreciate your views and knowledge especially on China and the economic situation.
But you definitely lose me with the whole woke, creepy communism fake left thing. It seems like you have maybe gone done a rabbit hole?? I am critical of many things but really think most of the extreme stuff whether from the left or right is really a social media beat up with people on both sides pilling on.
Not saying you are wrong, as you may be correct, but it definitely has not been my experience.
Anyway I will agree that we are living in interesting times.
I think you'll find that the Australian experience is lagging the US, which is what I'm often referring to. We're as usual 10-15yrs behind the US on a lot of this stuff. But don't worry, we're trying our hardest to catch up.
gsco wrote:I think this is a really good and pertinent debate, and very representative of the social and cultural milieu, as the article Blackers contributed reflects, but of course as we see in every corner of the media and government when it comes to the war on economics and on particularly the arguably peak industry body that represents the economic profession and science: the RBA. But it's more than just economics that's on the receiving end of the new Western zeitgeist: it's on the receiving end of itself.
I admit, for the decade from about 2009/10 until early covid, I was completely switched off and detached from Western society and media. I was hard at work in my profession and job. I've never had any social media, hardly followed the news, never had a tv, and I spent parts of that decade overseas. My job was always completely remote, I hadn't set in an office that whole time until recently.
I'm fascinated and shocked at what I've woken up to in Western society.
It's like a wholesale loss of confidence in and rejection of itself. It's a turning in on and going to war with itself. It's a polarisation and division of itself into ideologically driven mob-like tribal groups who don't agree on even basic facts or truth and who live in siloed online and offline alternative realities, even when sitting next to each other in an office cubicle. Communism is making significant inroads, particularly culturally and ideologically. Many of the disillusioned are turning to extreme right fascism. There is no common ground of agreement, no starting point. Governments have abandoned their peoples and are in it solely for their own personal wealth and post-politics careers. Wholesale corruption, cronyism and rorting is the order of the day. Western society has been consumed by corporate interests capturing the media and political process (and economics). Not only internally, the West is dividing the planet into sides and going to war externally.
Anyway, none of the above is new or my own original thoughts. Actually I'm just plagiarising the writings of Ray Dalio and quite a few others. Their central thesis is that all these symptoms and many others appear in hegemonic civilisations as they start to decay and lose their grip on power, when this grip is replaced by a new civilisation. But even one's own superficial reading of history accords with their thesis, and that this cycle of the rise and fall of civilisations repeats itself eternally.
I used to take all this stuff with a grain of salt and never really believed it. But I'm starting to worry that it might be accurate.
I guess they never thought Rome would fall.
Carry on Western society into your nihilistic wasteland.
I agree the West is like a big grand house built to withstand all kinds of weather even the worst storms but is riddled with termites weaking it from the inside out and one day will eventually collapse.
The biggest sign of this is just the growing attitude of people in the West who hate everything about their country, which is the exact opposite of most people in other countries even somewhere like Indonesia despite all its problems its people are proud and patriotic. (even this word now has negative connotations)
I guess all through history civilisations and powers come and go though, i think its more a question of when rather than if the West will fall, and will we be around to witness it?
Probably not but maybe our kids might.
gsco wrote:I think you'll find that the Australian experience is lagging the US, which is what I'm often referring to. We're as usual 10-15yrs behind the US on a lot of this stuff. But don't worry, we're trying our hardest to catch up.
From my experience and what pops up on my Instagram etc. most of the division and conspiracy come from the right in both USA and here.
If Tone's and the war criminal are giving advice on the meaning of life, then yep, we farked. :)
https://www.theguardian.com/books/2023/jun/13/tony-abbott-and-john-howar...
yes andy-mac I'm not down some rabbit hole. There is a significant amount of debate going on about all this stuff, and there is significant division and polarisation in US society, which we in Australia are starting to import.
"Our civilisation has forgotten the foundations upon which it was built."
— The Alliance for Responsible Citizenship (@arc_forum) April 5, 2023
@prcmarshall is co-founder and chairman of Marshall Wace LLP, founder of @unherd, and member of ARC's Organising Committee 👇 pic.twitter.com/q4QC3Eyjt6
At a time of increasing competition with China, the West needs to remember what its strengths are and to draw on them, those values and institutions upon which we are built (including economic science), instead of wholesale rejecting them and white anting itself, which is exactly what China wants us to do.
Actually plenty of foreign policy and other think tanks believe that this rise of the left communist ideology in Western society is actually being driven by Chinese foreign interference.
RBA bought masses of bonds at the top of the market and made themselves technically insolvent (bust if they were a commercial bank) - all for a 1% reduction of interest rates (their research estimate)
RBA ignored the inflationary impact of huge increases in the supply of money into the economy.
Supply, demand, bond prices, cost benefit - the core of elements of economics and they got it very wrong or caved to political pressure. They may have the brain power to power a small town but got the basics wrong. Blame shifting is occurring but they left themselves wide open.
""At a time of increasing competition with China, the West needs to remember what its strengths are and to draw on them, those values and institutions upon which we are built (including economic science), instead of wholesale rejecting them and white anting itself, which is exactly what China wants us to do.""
Agree 100%, but by defending these values we don't want to fall into trap of some neo fascist state.
Polarisation is USA seems extreme but understandable given their history) Civil war etc), and no compulsory voting. I would hope Australia can avoid this extreme polarisation.
Anyway I better get to work..
Have a good day. :)
You can carry on like a pork chop sometimes gsco.
It is funny watching you argue with yourself all the time.
Here you are all end of days, but when really all I was doing was a) questioning your position that corporate profit is not responsible for driving inflation. I appreciate your argument in trying to separate the stimulus, QE and cash rate targets (tool) from the operators (rba & gov). I just don’t buy it. No biggie.
Carrying on like I want to burn down the west and all its economic democratic capitalist structures. Sheessh
Yet mention CCP, climate change and covid and It's you doom bombing the very same institutions - science, democracy and western institutions with howls of the state is controlling what we the people think. "Everything we know is wrong". Blah blah blah. Haha.
Not to say I don’t agree with some of your opinions given the right context..
Just because I comment that economics lacks the rigour of science methodology doesn't mean I don't value the field or appreciate the necessity, contribution and technical complexity that it and the highly intelligent people who practice it offer our society. That would be moronic.
Always room for improvement right?
good response, I like it. A balanced mix of paying me out and reasonable replies to the debate. What forums are all about. All good.
Back to the RBA, Frog you and pretty well everyone else blames them. I'd more blame political pressure combined with everyone getting blinded by the covid hysteria.
I could write an essay about the wise and balanced economic choices Australia, particularly the RBA, has made over the past say 50 years that helped the nation weather unscathed many global storms like the GFC, tech/dotcom bubble, Asian banking crisis, Russian defaults, Euro sovereign debt, etc.
But based on the daily ABC website, the order of the day is promoting gender diversity and bringing down the economics profession.
Sign of the times I guess.
Some nice waves out the front just now.
I reckon the West is more like it was in the 1930's rather than the fall of Rome. The divisions of the New Deal in the US, the moribund economy after the 1929-32 crash and resultant programs to intervene; the divisions, the veterans riots put down by the military in 1932, Imperial Japan helping the WA successionist movement (lol) - you've seen it all before... the liberal west in Europe seemingly asleep to the rise of authoritarianism on the continent while a few voices screamed the danger... all same diff.
By about 1936 the West was alarmed and awake to the challenge, and by 1939-41 was fighting a war to prevail; most visual representation of the change was the Pearl Harbour attack on the US and waking of the sleeping, self-divided giant. When the US became angry, it was like waking a very pissed off and capable giant, too. I recall reading somewhere that when the Western democracies confronted authoritarianism last time, they took on some of those traits themselves (think conscription, war bonds) - to fight monsters you have to become one yourself. These were relaxed over some years, after victory.
When it comes to foreign interference, yep, totally. There is an argument that the 'long march through the institutions' has been completed and that our university system is baring fruit of this. For example, I've been following the Falklands war wrap-up 41 years later, linked in the interesting stuff thread. I note in the diplomacy language that communist China and the USSR frame the UK in 'colonialist' terms in 1982 - you will find EXACTLY the same verbiage from western universities today. They are using communist phrases and attack points; and indeed, describing almost every social and economic issue in terms of 'struggle' and 'oppressed' and 'oppressor' is straight out of Marxism. When one struggle is won, another is begun cos gotta keep activists employed. When even more struggles are won, it gets esoteric and they eat their own: eg the recent protests with trans/feminists/that senator.
A lot of damage has been done and Western institutions periodically go through destruction and renewal. It's the eternal battle between Aristotle and Plato writ large, been going on for over 2000 years... How they will be renewed is the question. Hopefully renewed so generating GDP by other means than stuffing people into an economic system until your target is met.
I struggle to excuse QE.
There was over a decade of underwhelming results in the US that were understood to be so and it was known to be progressively declining in impact over time as the pyschological impact of the billions being spent to stimulate weakened. QE in Japan has been a long running joke as a policy.
Measures of impact were almost unmeasurable but analysed (guessed) to be in the order of 1% on interest rates (yawn).
The RBA itself often commented over the years that they were sceptical about QE and had not chosen that path. But at the same time, one got the sense that they wanted to join the QE big boys club.
The big boys (the Fed) in senior school were busy building impressive QE sandcastles over the fence (that just got washed away by the tide to leave little trace - but no matter though, it is only money out of thin air) and the financial markets and media seemed bluffed and excited by the "liquidity" and aura of QE.
The RBA were the little Aussie boys in short pants wanting to be able to go to meetings and talk to the big senior boys in their long pants about their QE sand castle. In serious voices "Yes, when we did QE, blah blah billions blah blah billions, net effect blah blah.....
I may seem to joke but I bet such psychology was at work.
Covid gave them the excuse to put on some big boy pants. And they had to do something that sounded big to impress the politian's, the media and the markets.
The holders of the bonds rejoiced because the RBA bought them at the inflated price with no care as to price shifts at the time and very likely price fall coming up post the money printing binge. Bag holders I think it is called.
Now if they had announced the reality as below rather than the impressive sound financial stimulus, accommodation, liquidity mumbo jumbo QE words:
The RBA is going to spend $100,000,000,000 to buy bonds priced at multi decade highs (bubble territory) risking insolvency in order to reduce long-term yields by 0.3 per cent (source on estimate RBA later) they would have been laughed out of town.
That number 0.3% !!!! is but a blip, a rounding error - inconsequential in the scheme of things. To sort of quote Winston Churchill
"Never, in the history of mankind has so much been spent on behalf of so many for so little"
The credibility built from, as gsco describes: "wise and balanced economic choices Australia, particularly the RBA, has made over the past say 50 years that helped the nation weather unscathed many global storms like the GFC, tech/dotcom bubble, Asian banking crisis, Russian defaults, Euro sovereign debt, etc."
... thrown out in an afternoon of panic without even the prospect of any meaningful impact as proven from existing research beyond a short term pysops hit.
Their balance sheet is shot along with their credibility. Surely just cutting interest rates and talking big about support, do what it takes etc. would have been enough.
But oddly they are not really being criticised for the QE debacle cause no one understands it.
Interest rates were destined to rise no matter what - not their real mistake even though that is what is in the headlines.
"But based on the daily ABC website, the order of the day is promoting gender diversity and bringing down the economics profession."
...it wouldn't seem so dire if the revolutionaries screaming redistribution didn't literally look like cartoon characters from a dalio video...
I just want to know what they (CBs govs) were thinking when rates were almost zero and they just kept going more and more despite things not really being that bad?
where did they think that would head?
seems just insane to not have changed tack sooner
Overall one of the more lucid forums in swellnet, with only the occasional howler mixed in. Keep it coming.
For some not even historical context, economics was only ever taught as political economy. Economics is always political, it is about choices. We can’t have everything, so we have to choose. Economics attempts to build a framework around the effects of those choices, via theory.
Economics is not a science.
The issue that economics is confronting is that it has been wrong, for so long, on so many issues/theories. Its underlying theories which have been accepted largely without demur are houses of cards, and they are coming down. There is a struggle going on to find better theories to replace the existing ones which no longer reflect our modern economy. Not surprising really. The world economy of 1980’s is like an alien civilisation compared to today, and economics is still holding on to theories from the 60’s, 70’s, 80’s and sometimes even more ancient times.
It is slow, resistant to change, and dominated by people who learnt all those theories from 40 and 50 years ago. The only economists worth reading are the heterodox academics, and journalists with economics backgrounds who can see that economics is only a small part of the picture.
Ross Gittins and Alan Kohler are the current standouts, but there are a few around. Read widely.
House prices - going to go up , down or sideways ?
Opinions and anecdotal stories if you could.
Cheers