Tag Archives: Credit Crunch

Same Shit, Different Day

More On Property Prices

As if on cue, there are two articles today in the SMH as if to soothe the mounting anxiety about property prices. Here’s Ian Verrender trying to say that it’s not going to crash dramatically, it’s just going to go down slowly.

Among the biggest surprises was that Brisbane, one of the beneficiaries of the resources boom, led the housing market price declines with a 6.7 per cent drop in the year to the end of December.
Adelaide and Melbourne were next in line. But the biggest surprise was the pullback in Perth residential real estate, shedding a whisker under 5 per cent.
Unlikely as it may seem, Sydney was the best performer of all with a decline of just 2.7 per cent over the year. (OK, Canberra outdid Sydney with a 2.6 per cent drop but no one ever pretended it was a normal city.)

He then goes on to argue that these incremental slides down does not amount to a crash.The property market is deflating in an orderly fashion (a bit like the Greek default). But if I were in Brisbane, say and property went down 6.7 % 3 years in a row, that would be close to a 20% drop and I think that would be a massive correction downward that I would feel was a crash. Not to mention these figures are not adjusted for inflation. So… I guess it depends on what people mean by *crash*.

Leith Van Onselen (The name sure sounds like On-Selling to me) has this article here explaining why there’s going to be a slow melt in the coming years.

Given that the NSW stamp duty concession expired on 31 December 2011, there is a high likelihood that demand from NSW first-home buyers will recede over the first quarter of 2012, creating headwinds for Sydney home prices and, by extension, national prices as well.

Tuesday’s release of the Reserve Bank of Australia’s (RBA) credit aggregates data also signaled more headwinds for the Australian housing market. Despite the recent 0.5 per cent cut in mortgage interest rates, Australian housing credit growth slumped to fresh 34-year lows, suggesting that households are becoming increasingly averse to mortgage debt

That sort of dovetails with the Professor Steven Keene analysis about credit deceleration. Even with lowered interest rates, it’s hard to imagine there will be more people trying to get in than get out. Plus, when the Greeks finally face reality and admit they’re defaulting and when China finally admits it is in financial trouble, one wonders how all this high pricing is going to stay afloat.

That being said, momentum in a market is an amazing thing. It can be very slow to respond to changing circumstances in reality. It’s a little like the Coyote in the Roadrunner cartoons that keeps leaping off the ledge, then looks down to find he has a long way to fall. Somehow momentum keeps carrying the coyote into gravity-defying moments.

Today’s Funny Quote

Following on from yesterday’s kerfuffle with Gina Rinehart trying to do to our democracy what private equity firms do to perfectly fine companies, here’s this remark by an unidentified Fairfax executive:

”Anyone that wanted WA to secede, thought [of] using a nuclear bomb to develop better harbour facilities, does not believe in the science of climate change, thinks the mining resources tax was unfair, wants to import cheap Asian labour to help her make even more money and, most importantly, has no time for any views other than her own is not the ideal person to influence media in this country.”

That just about sums it all up, doesn’t it?

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Dreaming Of Greek Island Villas

Different Spin

Just a weird, weird thought for today. Would you move to Greece?

I don’t know if you’ve ever looked, but today Mrs. Pleiades showed me a bunch of photos of Real Estate available in Greek Islands. Hey, I’m no millionaire or anything, but you can dream. What caught my eye was the price tags on some of these gorgeous places. Take this one here in Ithaca, home of Odysseus. Or this seaside villa for 850k Euros. How about this 270k Euro cottage in Corfu? They’re absolutely beautiful places. I know Greece is in a lot of turmoil but consider this for a moment. If you had a bit of money and you could own one of these sorts of places, and wouldn’t starve and had all the amenities of a good life available, would it really matter to you that the Greek government is insolvent?

Apparently wealthy Germans flock to the Greek Islands.  guess it’s their equivalent of the Gold Coast. You can see why. So it is hard not to imagine that the Germans get something out of Greece being a member of the European Union and by extension, a member of the Euro.

I’ve been pondering this tangle of facts all afternoon. People are busting a gut buying a 2 bedroom flat in Sydney. For the same money, you could theoretically buy an amazing piece on some Greek Island and just stare at the beauty all day and all night. Okay, I know you’d need some cashflow but the point is how good is a 2 bedroom flat in Chatswood or Pyrmont, let’s say, compared to a villa on a Greek Island? If you need evidence that the Greeks really are in trouble, this has to be it; and in turn if there’s any evidence that Australian property is way, way overpriced, then this must be it.

But it cuts in all sorts of different ways. Imagine being a poor Greek person. If all this was around you and you couldn’t buy in because foreigners came all the time to buy it out, why the hell would you stay? No wonder they like the European union where they can get to work anywhere. If they got kicked out of the Euro zone, they would still have their real estate bought up by foreigners, but they would lose that freedom to go work anywhere in the Eurozone. No wonder the polls in Greece say they don’t want to quit the Eurozone.

It would be a shame if the Euro were to implode as a result of all the debt woes and bad faith negotiations. The fall out from that is going to be awful. But maybe all those Island properties would become even more affordable – then what are you going to do? 🙂

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The Fall Of The Planet Of The Greedy Apes

They’re Fighting In The Streets

There’s a simple explanation for why the popular front of the 1960s gave way to a lethargic 1970s, and it is basically that the Baby Boomers who got motivated enough to go to the barricades got bought off. They got bought off with what turns out to be cheap credit, which, as it turns out has made a mountain of debt that we collectively cannot afford to repay. So, this time, it is Gen X and Gen Y taking to the streets because basically, not only can Gen X and Gen Y not pay for their debts, they feel they can’t be asked to pay for the debts of the Baby Boomers. And that, in a nutshell is how we got to the GFC and its aftermath.

When I paint this broadly, I don’t mean to say every Baby Boomer is equally to blame. It’s just that demographically speaking, this is how the financial crisis has shaken out. And the rich got richer and to add insult to injury, they got taxed less and all that went hand in hand with the buying out process. So demographically speaking, the Baby Boomers had a good ride of it, putting it all on the big demographic credit card, and the whole system was workable as long as they stayed working. However now that they’re retiring, they can’t all ride off into the sunset without paying it off. In turn, the battles they didn’t finish are now going to be fought in the streets by Gen X and Gen Y because they will say they’ll be damned if they’re going  to pay for Baby Boomer debts as well as their own.

I’ve had a brief e-conversation with a friend who is in the financial sector over in Hong Kong, and he doesn’t see a bright future. He says it’s going to be a bloodbath and that it’s going to be like ‘The Rise Of The Planet Of The Apes’ except without the hairy apes. When I asked him why, he basically said that the global economy is too linked together, and there’s really no stopping the knock on effect. He says there will be riots in the streets like the one in London, the world over. We should all enjoy our lives while we can because this is all going to end in a literal bloodbath, he reckons. It seems drastic, but lately I’ve been thinking that if indeed there is more debt issued than there is money going around and accounted for, then when everybody decides to call their debts in, in one big avalanche of debts being called in, people are going to go out backwards. Worse than that, whole chunks of the economy are going to cease to function because banks are going to be forced to repossess everything, and then fire everybody in a bid to survive. Everybody will run on the banks. Whole currencies will lose value over night.

Every business would be forced to pay up, or go to the wall or get repossessed. Everybody with a mortgage? Tough, the bank’s going to seize what you have. Everybody with a credit card? The banks going to cancel it, and seize money from your savings to cover the gap. If you have savings, they’ll tax it out of your pockets because the government won’t be able to pay its debts. If you have stocks, they’ll keep going down because all those companies have some form of debt. Property bubble? Watch what happens when the whole thing starts contracting. In other words, the endgame is going to provoke a lot of anger and rioting.

They’re going to riot harder in Greece because if all those austerity cuts go ahead, they’re not going to have a country left. The government will be force to privatise everything – electricity- rail, ports, you name it. And if the so-called contagion hits Portugal and Spain, well, they’ll have to do the same, and they’re already rallying in Portugal. In New York, they’ve just arrested 700 people over demonstrations against Wall Street. It would only take a Trotsky to organise a mob like that and you have the seeds of a 1905 style revolution. Make no mistake, there will be more rioting in the streets before all of this is said and done.

But back to what some people have been telling me is this: Not even all the austerity measures are going to be enough to pay for these sovereign debts. And this means there will be a default, and when the default happens, there will be banks failing. When that happens, it might be enough to trigger the rest of the avalanche of debts being called in at once. That pain is going to go all the way around the world, and everybody is going to feel it. I’m looking at 700 arrests in New York City, and I’m thinking out loud what happens when that turns in to 7,000 and 70,000? And what happens when New York City can no longer pay their police? Will the police still turn up to arrest these people? If you were a fat cat Wall Street type, you might want to think of an exit strategy. The problem is, there’s no where on the planet you can run to. Maybe they know this already. And my friend in Hong Kong would tell you, this is all on the cards, all on the table, right now.

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News That’s Fit To Punt – 06/Aug/2011

Turning Japanese As A Headline

Last week, the Economist ran with the headline ‘Turning Japanese‘. The gist of it is that the very model for the current behaviour of both the EU and US governments in propping up the economy with stimulus spending while racking up debt is essentially what Japan did after the property bubble.

In the early days of the economic crisis the West’s leaders did a reasonable job of clearing up a mess that was only partly of their making. Now the politicians have become the problem. In both America and Europe, they are exhibiting the sort of behaviour that could turn a downturn into stagnation. The West’s leaders are not willing to make tough choices; and everybody—the markets, the leaders of the emerging world, the banks, even the voters—knows it. It is a mark of how low expectations have sunk that the euro zone’s half-rescue of Greece on July 21st was greeted with relief. As The Economist went to press, it still was not clear on what terms America’s debt limit would be raised, and for how long. Even if the current crises abate or are averted, the real danger persists: that the West’s political system cannot take the difficult decisions needed to recover from a crisis and prosper in the years ahead.

The world has seen this before. Two decades ago, Japan’s economic bubble popped; since then its leaders have procrastinated and postured. The years of political paralysis have done Japan more harm than the economic excesses of the 1980s. Its economy has barely grown and its regional influence has withered. As a proportion of GDP, its gross public debt is the highest in the world, twice America’s and nearly twice Italy’s. If something similar were to happen to its fellow democracies in Europe and America, the consequences would be far larger. No wonder China’s autocrats, flush with cash and an (only partly deserved) reputation for getting things done, feel as if the future is on their side.

That just about sums up the observation and the rest of the article is a discursive chat about government debt and the inability of politicians to find a way to reduce debt.

Except right now might be the moment of truth for all these people who both hold debt and are indebted. To be honest it is a terrible time to be in debt or to be a lender because it all hinges on whether the mountain of debt can be repaid at all. If it can’t, then all bets are off.

Here’s yesterday’s SMH:

Broadly there seem to be two options on the policy menu. One is the deflation option: let market forces take over, let the defaults begin and provide a social safety net.

The other is the inflation option: keep splashing the cash to reduce the debts to zero. This is clearly the favoured Wall Street option. Wall Street’s proxies in Washington may duly deliver more stimulus: stimulus the public can ill afford – stimulus that could bring about another Weimar Republic – but stimulus that will diminish the size of the debt.

Which is of course what I’ve been seeing articles in  Japan about Japan’s debt. Now, the politicians can’t readily opt for the former option because this would mean everybody’s houses will have to lose value and lots of people will be kicked out of their houses and mortgages. There’s really no way either side of politics can bite the bullet and survive such an adjustment in the extreme. Neither side of politics could proscribe this as a solution and stay in office. But that might be the devil you know.

The politicians cannot openly opt for the latter because it means it’s going to burn down everybody’s retirement savings as well as term deposits and cash. People will rightfully leap toward gold and silver – and other precious metals but not commodities as a whole – in that post-apocalyptic kind of scenario where everybody would be running to the hills with their guns or joining the fascists or communists just to feel safety in numbers (which is what happened in the Weimar Republic. It would be like the fall of Rome if it happened across the USA and Europe. That’s the devil you don’t know; or maybe it’s the Deep Blue Sea.

In the twenty years since the Bubble burst in Japan, no politician has come close to proposing a way out of this situation. In fact Heizo Takenaka who was an economics professor before becoming Koizumi’s Finance Minister was looking to opt for the latter with the assumption that even if things get terrible in Japan, the people of Japan would still have a high governability. In other words he was willing to burn down savings in order to get out of debt through inflating the currency. I’m just trying to imagine Obama or Merkel or Gillard or Swan having that kind of gumption with their own people. Needless to say, he’s not in office now.

Anyway, I think we’re only beginning to see the unraveling of the highly distorted financial system that’s been built up over a century and a half.

Inflation Figures Not Adding Up For You?

Long time readers here would know that for some time I’ve been a big sceptic of the CPI. It turns out that the CPI might have been biased upwards in the last few years.

In a post-mortem of the previous cycle of CPI data, which ran from 2000 to 2005, the bureau found that its methodology over time created an ”upward bias” in the CPI figures. The methodology assumes that consumers keep buying the same basket of goods and services, regardless of their price. And over time, that increases the relative weighting of items whose prices are rising rapidly, and reduces the weighting of those whose prices are falling or relatively stable.

Over time, the basket of goods and services that comprises the CPI becomes increasingly unrepresentative of the real world of consumer purchasing, because it assumes that consumers pay no heed to price signals. Without correct weightings for each of the 90 categories in its basket, the CPI figures are inaccurate, and so are their derivatives, such as measures of underlying inflation.

This is serious. There is a flaw in the inflation data that we should have known about, but didn’t. And it almost cost us dearly.

The bureau’s post-mortem estimated that between 2000 and 2005, this upward bias had overstated the level of inflation by a cumulative 1.2 percentage points. In the year to June 2005 alone, inflation was overstated by 0.4 percentage points. That was the fifth and final year of the cycle. Inflation was reported as 2.5 per cent, but when the bureau surveyed what households were actually buying it found the true inflation rate was 2.1 per cent.

All f this is to say that one can’t be certain about inflation based on one’s own life circumstance. My own view is that regionally speaking, inflation has run higher in Sydney than elsewhere in NSW and if anything the raise in interest rates might be appropriate for Sydney but of course it can’t be done like that. Even that is by the by. The important message seems to be that the interest rates are actually too high given the CPI the RBA has been using has had an upward bias, and so interest rates should be lower.

I would like to add into the mix that unemployment figures are not what they used to be. In the old days they’d simply count up the people on the dole. These days they work hard to push and nudge and coax and intimidate and irritate people off the dole queue so there are quite a number of people who are part-time employed with 1-4 hours of work a week but are not considered unemployed. Yet if unemployment figures are to be believed, we’re close to maximum employment. So if the RBA is working off “garbage in” figures like that,  no wonder there are people who think the interest rates they are putting up are “garbage out”.

It is quite reasonable to argue the interest rates are in fact already too high for the RBA’s own stated purpose. Unless of course they want people to voluntarily de-leverage and are concocting an environment for that to happen.

 

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Did We Really Survive?

Or Did We Simply Get It Put Off?

Today is a triple barrel sort of entry about things to do with the GFC that have been bugging me. Well, Pleiades sent me a link that started me on a trail of reading that’s depressed me, so I’m going to start somewhere a bit else.

Here’s an opinion piece in the SMH about the RBA’s decision not to raise interest rates yesterday. Basically he argues that the RBA is caught between a rock and a hard place. The rock, is the inflationary forces of the mining boom to come, with capital investments going through the roof in the second half of this year. The Hard Place is the process of trying to deleverage the massive property bubble we’ve got ourselves into, and if it should mismanage the deleveraging process, you can count on there being a massive deflationary force.

As the ratings agencies have made abundantly clear, Australia can no longer prudently expand its offshore debt.

That means the banking system cannot grow except through internal funding, which also means the mortgage system will struggle to expand. This much is on the record.
There’s reason to go further. The RBA is engaged in a grand project of attempting to keep household debt from growing in the hope that through deleveraging (lowered credit growth rates) Australia can grow into its enormous debt and housing bubble.

This has a long way to run. Based on GDP to March and March credit aggregates, Australia’s debt to GDP is at 153 per cent, albeit down from 170 per cent in 07/08.
(See here for related posts on the ratings agency catching on, and how mortgage debt is on the slide.)
The RBA is also attempting to prevent household debt from growing for the other oft-stated reason, to make room for dramatically expanded resources investment.

In short, the RBA is managing two historic economic transformations simultaneously.

And there is your problem right there. Now, here’s the thing. All of the former pressure towards inflation is predicated on Chinese growth, and even that massive expansion of capital investment that’s coming through in the second half of the year is predicated on China growing as it has between 1998 and 2008. The catch is that it may not continue to happen, as China is in a bubble and it may be forced to readjust.

TCR: Talk a little about the renminbi. The Chinese government has been making noises about possibly allowing it to rise against the dollar, but from a practical standpoint, can they actually afford to let that happen?

VK: They could let it rise on a very gradual basis, but they absolutely cannot allow it to rise very rapidly because that would quickly diminish the value of the foreign reserves. But there is a conundrum. When the Chinese economy bursts, there is a very good chance the renminbi will actually depreciate, because you are going to have a flight of capital leaving China. So right now you may argue that China’s currency is too cheap, but during the crisis it’s probably going to get cheaper.

TCR: What’s your general sense about how much longer they can keep the game going before they collapse? And is collapse the right word?

VK: I really don’t know. In the case of Japan, their government basically ran out of chips. I think the Chinese government still has enough chips to keep the bubble going awhile longer. These bubbles usually last longer than the reputation of the person who predicts their demise.

TCR: Do you think it will occur within a decade?

VK: I think so, yes. GMO became famous for predicting the Japanese bubble collapse, but they started predicting it in 1986, so they were “wrong” for a while because it actually burst in 1989-1990. The point being, these bubbles typically last longer than you would expect, but it’s going to burst.

TCR: Let’s talk for a minute about some of the potential implications of a bursting Chinese bubble. There are some fairly obvious ones, like Chinese real estate, but there are a lot of somewhat less obvious consequences, for example the hit this would cause to the Australian economy because its export sector depends heavily on China.

VK: China has been responsible for a very large portion, if not all, of incremental demand for commodities in recent years. If you’re talking about copper, about oil, or pretty much all the industrial commodities, China was responsible for a very large portion of the demand. When the economy slows down and the bubble bursts, then the demand for those commodities will decline dramatically.

It’s going to impact economies that benefitted tremendously from China’s ascent, so Australia will be impacted, Russia will be impacted because oil prices will decline and Russia is basically a commodity-driven nation. Brazil will be impacted. Any economy you can think of that benefitted from China’s ascent will get hurt from its descent as well.

That’s probably all very abstract if you haven’t been following what’s been going on but the Chinese have built entire cities for people to live in but nobody’s moved into them because they can’t afford to. There are huge shopping malls that got built that have less than 2% occupancy. Basically all that building and constructing and manufacturing went into these white elephant projects by the truckloads. At some point it’s going to have be re-priced or written off and it’s not going to be a happy event.

That’s a big warning sign flashing right there. If you thought Australian properties are over-priced, they have nothing on the insane prices in Shanghai and Beijing; and because our economy’s recent success is implicitly tied into the so-called growth engine that is China, you can’t see a bubble-burst in China not affecting Australia in a significant way. So when will this happen? We don’t know.

Which brings me back to Pleiades’ first link about the GFC.

“There is definitely going to be another financial crisis around the corner,” says hedge fund legend Mark Mobius, “because we haven’t solved any of the things that caused the previous crisis.”

We’re raising our alert status for the next financial crisis. We already raised it last week after spreads on U.S. credit default swaps started blowing out.  We raised it again after seeing the remarks of Mr. Mobius, chief of the $50 billion emerging markets desk at Templeton Asset Management.

Speaking in Tokyo, he pointed to derivatives, the financial hairball of futures, options, and swaps in which nearly all the world’s major banks are tangled up.

Estimates on the amount of derivatives out there worldwide vary. An oft-heard estimate is $600 trillion. That squares with Mobius’ guess of 10 times the world’s annual GDP. “Are the derivatives regulated?” asks Mobius. “No. Are you still getting growth in derivatives? Yes.”

In other words, something along the lines of securitized mortgages is lurking out there, ready to trigger another crisis as in 2007-08.

So it could be any number of things including a re-run of the credit crisis, all of it revolving around the US$600 trillion in derivatives doing the rounds in the Globe, which happens to be about 10 times the size of the whole planet’s GDP. If that stuff seriously gets unstuck – and it seems inevitable that it will, seeing that nothing got fixed – then we’re going back to the point at which shares collapsed, housing bubbles burst, everybody’s savings got eaten up and all the other economic horrors that are now visiting upon Portugal, Ireland, Greece, and Spain.

If you add up the pieces, we’re not going to be lucky the second time through. If anything, the only reason we got through was because China over-spent its stimulus spending and ended up propping up Australia’s property bubble. You can see why the RBA might have changed its tune in light of this impending-doom scenario. Hold on to your hats.

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From The Mailbox

More Fodder For Thought On The ‘GFC’
There are some ancient names in this one sent in by Pleiades. It’s a pretty interesting read, seeing that it comes from somebody who has had a lot to say about all this for some time.

Greenspan presided over not one but two financial bubbles. After the high-tech bubble popped, in 2000–2001, he helped inflate the housing bubble. The first responsibility of a central bank should be to maintain the stability of the financial system. If banks lend on the basis of artificially high asset prices, the result can be a meltdown—as we are seeing now, and as Greenspan should have known. He had many of the tools he needed to cope with the situation. To deal with the high-tech bubble, he could have increased margin requirements (the amount of cash people need to put down to buy stock). To deflate the housing bubble, he could have curbed predatory lending to low-income households and prohibited other insidious practices (the no-documentation—or “liar”—loans, the interest-only loans, and so on). This would have gone a long way toward protecting us. If he didn’t have the tools, he could have gone to Congress and asked for them.

Of course, the current problems with our financial system are not solely the result of bad lending. The banks have made mega-bets with one another through complicated instruments such as derivatives, credit-default swaps, and so forth. With these, one party pays another if certain events happen—for instance, if Bear Stearns goes bankrupt, or if the dollar soars. These instruments were originally created to help manage risk—but they can also be used to gamble. Thus, if you felt confident that the dollar was going to fall, you could make a big bet accordingly, and if the dollar indeed fell, your profits would soar. The problem is that, with this complicated intertwining of bets of great magnitude, no one could be sure of the financial position of anyone else—or even of one’s own position. Not surprisingly, the credit markets froze.

Here too Greenspan played a role. When I was chairman of the Council of Economic Advisers, during the Clinton administration, I served on a committee of all the major federal financial regulators, a group that included Greenspan and Treasury Secretary Robert Rubin. Even then, it was clear that derivatives posed a danger. We didn’t put it as memorably as Warren Buffett—who saw derivatives as “financial weapons of mass destruction”—but we took his point. And yet, for all the risk, the deregulators in charge of the financial system—at the Fed, at the Securities and Exchange Commission, and elsewhere—decided to do nothing, worried that any action might interfere with “innovation” in the financial system. But innovation, like “change,” has no inherent value. It can be bad (the “liar” loans are a good example) as well as good.

The rest of it is pretty far-reaching too. I never understood the ‘Alan Greenspan as banking hero’ that played out during his tenure, partly because banking isn’t as exciting as making a film, but also because he always came across as a patriarchal bore. It’s sort of interesting to see him getting discredited in the throes of the GFC.

Poring Over Madoff’s Books?

This one also came in from Pleiades: Good Heavens, isn’t that a bit like reading a Science Fiction novel in search of the Unified Field Theory?

Harbeck, who has been with SIPC for 33 years, said this will most likely become the biggest fraud case that SIPC has handled. He has fielded dozens of calls since Madoff’s confessed the scam and was taken into custody, and projects is office will continue to be flooded with questions from investors.

“This is absolutely heartbreaking,” he said. “Their faith was abused, and investors who put virtually all of their financial assets with Madoff are near ruin. The simple fact of the matter is there is no precedent for this.”

A variety of investors have been identified as having lost money in the scam, including Spain’s Grupo Santander SA, Britain’s HSBC Holdings PLC and New York Mets owner Fred Wilpon. More victims emerged Tuesday, including Rye Investment Management, of Rye, New York, which lost $3.1 billion, almost all of its clients’ funds, and Austria’s Bank Medici, which had two funds with $2.1 billion (1.5 billion euros) invested with Madoff.

I’ve seen some critiques that suggested that those who placed money with Madoff were screwed because they were essentially ‘greedy’. It’s soothing to find that I didn’t get ripped off because I wasn’t greedy like the wealthy set, but that can’t be true, can it? It’s just that I didn’t have money to throw at him.

I’ve been trying to figure out our notions of greed and propriety and money and I’ve been thinking that perhaps we’re focused too much on the moral dimension of “greed is good/bad” thinking.

There’s a big difference between say, a bad player like Centro or Babcock and Brown, and a fundamentally criminal Bernie Madoff who deliberately went about deceiving with a Ponzi Scheme. So if you backed the cowboys like Centro and lost tonnes of money, well, that’s greed but it can’t be the same thing as being swindled out of your money.

It’s a bit harsh to judge the profit motive as being negative – after all, why would anybody get out of bed and go to work if it was not going to benefit them any?Clearly couching this in terms of greed being good or bad alone isn’t going to cut it.

Germaine Greer Savages Baz Luhrmann

First, there’s Germaine Greer Having a spray about ‘Australia’.

The scale of the disaster that is Baz Luhrmann’s Australia is gradually becoming apparent. When the film was released in Australia in November it found the odd champion, none more conspicuous than Marcia Langton, professor of Australian indigenous studies at Melbourne University, who frothed and foamed in the Age newspaper about this “fabulous, hyperbolic film”. Luhrmann has “given Australians a new past”, she gushed, “a myth of national origin that is disturbing, thrilling, heartbreaking, hilarious and touching”. Myths are by definition untrue. Langton knows the truth about the northern cattle industry but evidently sees as her duty to ignore it, and welcome a fraudulent and misleading fantasy in its place, possibly because the fantasy is designed to promote the current government policy of reconciliation, of which she is a chief proponent.

Reconciliation is the process by which Australians of all shades forgive and forget the outrages of the past and become one happy nation. State and federal governments have pumped money into reconciliation and created a new class of Aboriginal entrepreneurs who accept the values of the property-owning democracy and are doing very well out of it. Luhrmann’s fake epic, set in 1939, shows Aboriginal people as intimately involved in the development of the Lucky Country; the sequel would probably show Nullah, the Aborigine boy who narrates the film, setting up an Aboriginal corporation and using mining royalties to build a luxury resort on the shores of Faraway Bay.

Unfortunately for the reconciliation gravy-train and all aboard it, Luhrmann’s lack of faith in his own invention is obvious. The hero, played by Hugh Jackman, is a drover, whose job is to collect cattle from the stations and drive them wherever they have to go. For the film to work at all we are required to believe that he is ostracised by his peers, simply because, years before the film begins, before the 1914-18 war, he married an Aboriginal woman, who, obligingly, died childless. The most respected drover of central Australia in this era was Matt Savage, otherwise known as “Boss Drover”, a white man whose marriage to an Aboriginal woman lasted 40 years and produced many children who rode with their father. In case that should sound romantic, Savage was known to say, “I got her young, and treated her rough, and she thrived on it.” Savage would have been considered beyond the pale by some, but not by the drinkers in a bar on the Darwin waterfront, but then no amount of blandishment would have got Boss Drover into a white tuxedo to dance at Government House, as the drover does in this film.

Here’s the SMH article about her spray.

I tend to think Ms Greer is more upset at how critics have fallen over themselves to embrace a pretty ordinary film. Can’t really blame her. She’s usually even more venomous and harsh, but we’ll settle for this review.

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Car Bail-out Collapses

Rigor Mortis Sets In

The US car manfacturers hit a hurdle in their bid to get bailed out.

A $US14 billion ($20.8 billion) emergency bail-out for US car makers collapsed in the Senate Thursday night after the United Auto Workers refused to accede to Republican demands for swift wage cuts.

Senate Majority Leader Harry Reid said he was “terribly disappointed” about the demise of an emerging bipartisan deal to rescue Detroit’s Big Three automakers.

He spoke shortly after Republicans left a closed-door meeting where they balked at giving the automakers federal aid unless their powerful union agreed to slash wages next year to bring them into line with those of Japanese carmakers.

Republican Sen. George Voinovich of Ohio, a strong bail-out supporter, said the union was willing to make the cuts – but not until 2011.

Reid was working to set a swift test vote on the measure Thursday night, but it was just a formality.

The bill was virtually certain to fail to reach the 60-vote threshold it would need to clear to advance.

Reid called the bill’s collapse “a loss for the country,” adding “I dread looking at Wall Street tomorrow. It’s not going to be a pleasant sight.”

The implosion followed an unprecedented marathon set of talks in Washington among labor, the auto industry and lawmakers who bargained into the night in efforts to salvage the auto bailout at a time of soaring job losses and widespread economic turmoil.

“In the midst of already deep and troubling economic times, we are about to add to that by walking away,” said Democratic Sen. Chris Dodd, the Banking Committee chairman who led negotiations on the package.

Sen. Bob Corker of Tennessee, the Republican point man in the talks, said the two sides had been tantalisingly close to a deal, but the union’s refusal to agree wage concessions by a specific date in 2009 kept them apart.

The autoworkers’ contract doesn’t expire until 2011.

“We were about three words away from a deal,” said Corker. “We solved everything substantively and about three words keep us from reaching a conclusion.”

There you go. It doesn’t seem right any which way does it?

It’s one thing to be bailing out banks in order to shore up the financial sector; it’s another thing entirely to be spending public money on bailing out large, failed corporations.

Then, there’s the issue of the sort of corporations that are getting bailed out: These are manufacturers of cars that mostly did not heed the signs that petroleum prices might go up; they’re also the corporations that obstinately refused to countenance Global Warming and Climate Change in the face of mounting evidence. Instead, they ideologically produced a certain kind of large, gas-guzzling car that flew in the face of such concerns.

Naturally the market turned its back – much like how the Australian market has turned its back on Australia films, I might add – and now they’ve hit a rough patch and so they want government money to help them along.

These corporations also have a layered management system, with an astounding number of executives and managers and whatnot pulling down enormous salaries. In a time when companies have been getting leaner, these top execs for these companies have been pulling down huge salaries that are disproportionate to their own productivity.

And now, these companies want the Unions to give up the agreement they made that covers them until 2011, just so that the House Republicans can feel good about themselves. It’s a right schmozzle.

Then, the Union won’t negotiate; they’d rather see the company go down. There’s something incredibly bloody-minded about that too.

Add onto the list the Republicans who are insisting on the Unions taking a pay cut, or else they’ll just let the suckers all go down. I know that the Big 3 US Car  manufacturers are asking for an obscene bail out, but it’s sure as hell not the fault of the unions they are where they are.

Colour me unimpressed with all of it.

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