08 October 2010
No I don’t have a decent excuse.
However, on the up side, the passage of time has allowed the greatest social experiment of the GFC to develop. Iceland and Ireland have generously lent their entire economies to answering the question: Can a bank be too big to fail?
You will recall when we left the story back in March the two countries had shattered banking systems, crushed economies and severe downturns in their property markets. Both had massive private sector banks either on the verge of falling over or already collapsed. The issue was whether the governments of those nations would step in to guarantee the banks' liabilities?
The Irish chose to nationalise their banks and all the toxic assets that they contained, while the Icers rejected paying for the excesses of Icesave and others despite threats from creditors.
When the British and Dutch investors demanded the Iceland government guarantee the banks’ debts, the Iceland government put the question to the people. Asked whether the government should pay €3.8 billion to cover British and Dutch investor losses following the collapse of their Icesave accounts, 93% of Iceland said “just as soon as Satan rides to work in a snow plow” and the debt remained stubbornly private (at least in Iceland, in the UK and the Netherlands their own governments covered the losses).
The world is finally getting to see a side by side comparison of the two strategies. Would the pain of saving the banks be worth the price to the citizens of Ireland, or would it have been better to let them fail and pick up the pieces Iceland style?
The cost of the Irish bailout was staggering. In 2009 the Irish government injected €54 billion into its largest banks to protect them from collapse. The only way to pay for this was to smashed its local population.
Public sector wages were slashed by 1 billion euros and welfare reduced by €760 million (about 20% and 4% respectively in real terms).
The removal of that much public spending increased the contraction pressue in the economy and helped send unemployment to its current 13.7%.
This month, the other shoe dropped: Anglo Irish Bank just hit the wall with massive unserviceable debts.
The Irish government has agreed to save the bank at a cost of up to an additional €35 billion (if you’re doing the maths, that’s about 20 times the savings from wage restraint and welfare cuts).
Even after this, the bank's bonds are rated as junk.
Once again, the Irish taxpayers have been advised that they will be paying the bill to protect investor confidence and save the Irish economy.
The net effect? Ireland’s current account deficit is projected to increase from 14% to 32% of GDP as a direct result of swallowing all that toxic debt. That will put government debt up from the current 77% to 115% of GDP in the next years.
The only way to pay for this will be further cuts to services and wages from a people already on their knees. If you’re of a keynesian school, you know this will lead to further contractions in the economy, more unemployment and still further reductions in public services.
On the other side of the experiment, the Iceland government is still talking with the Brits and the Dutch about someday looking at the real possibility of considering kicking the can for some of the bad loans. So far they haven’t paid a single euro towards those debts.
While they are at it, the Icers declared a moratorium on house repossession to give households a bit of breathing space without forgiving debt.
They also defiantly refused to strip what has become the hallmark of Nordic countries, a strong social safety net.
People predicted it was the end of Iceland, it would be frozen out of the world economy, their children would starve, the country would come to resemble an arctic version of Mad Max II.
So how are the Icers doing beyond Thunderdome? Well, not good, to be sure, but not Irish bad.
Contrary to threats made, the IMF has continued to provide a “Stand by Arrangement” to provide $2.1 billion in loans. The third tranche was paid on 29 September.
While their public debt is currently 115% of GDP, Iceland's 2010 budget will actually produce a surplus. The IMF itself believes Iceland will get back to a national debt of 80% GDP by 2015. This is more or less the exact reverse of the Irish trajectory.
Unemployment is at 7.3% which sucks if you’re in that group, but better than the 13.7% in Ireland.
Real wages, which were put to the sword in 2008, remain depressed but have been growing in the last three months.
It’s a tough long road for the Icers, but they seem to be climbing back.
On the flipside, the Irish are crushed and look like getting more crushed as their deficit continues to spiral, their economy shrinks and those that can leave, get on a plane out of there.
Its still too early to decide if the Irish were fools to listen to the "too big to fail" mantra; this experiment still has quite a way to run. Iceland has not resolved its dispute over the Icesave accounts, nor does a projection of reigning in nation debt by 2015 automatically mean that it will happen.
However at this stage it looks like Iceland has its nose in front.
27 June 2010
However, events in Canberra this week inspired me to post.
I woke up on Thursday morning intending to watch the last roar of the defiant Soccerroos as they fought for a desperate and ultimately pointless victory against Serbia.
There is something sublime about fighting for a lost cause, but I’ll leave that for another day to dissect.
Instead I woke to a leadership spill in the Australian Federal Government that was executed with brutal speed and efficiency and which left a former loyal deputy standing over the political corpse of her former leader. Indeed the numbers so lopsided, the move so irresistible Rudd didn’t even contest the ballot.
Looking back, Rudd might reflect on the fact that his downfall was caused in part by the backlash against his proposed Resources Super Profits Tax.
He was so confident about this being popular, he was prepared to take it to an election.
He must have viewed this as a way that the government could collect more revenue without increasing tax on the ordinary people of Australia, thinking “Surely voters will see that a tax on very rich miners will benefit them”?
Instead of being viewed positively, the proposal sent his popularity plummeting to the point where his own team dumped him.
In my view, this reaction is a predictable outcome if you think in terms of Public Choice Theory.
Public Choice Theory is one of my personal favourite tools for explaining democratic politics. It posits that political decisions are marketable commodities that can be bought and sold with money, influence and lobbying.
In such an environment small well funded groups competing for concentrated gains will triumph over large disparate groups where the gains to any member are relatively small.
RSPT pitted a very small, very powerful group of mining magnates defending a huge amount of personal wealth against the entire nation fighting for at best a very small amount of personal gain should the tax go ahead. Whether in practice the tax would have benefitted the majority of Australians or not, I’ll leave for others to debate, however, the one thing it was certain do was reduce the profits of the big miners like BHP Billiton, Rio Tinto and Fortescue Metals Group
Their reaction was predictable: They fought it with all the power and strength their considerable resources and influence could bring.
If Rudd predicted this, he might have comforted himself with the notion that voters vote with their hip pockets and would reward his policy because, it would not involve a tax on the ordinary person. However, his timing was lousy. You don’t pick a fight with powerful interest groups in the run up to an election. It means you have to defend a policy rather than a detailed plan.
A policy lacks detail, which allows your enemies to create hypothetical detail and then attack it. In the US they saw this with their recent health care debates, with Republicans predicting that the legislation would create death panels and that people would be allocated doctors rather than seeing their own GPs.
What US President Obama understood (and Rudd didn't) was that if you are going to face entrenched opposition from powerful groups, you need to have time to get out a structured plan. Even then, his health reform bill went right down to the wire.
RSPT suffered from the same problem. Without a clearly detailed explanation of the tax, those opposed were free to predict disastrous consequences to whip up pubic fear.
So we saw little old men on television saying “you know, I’m just an ordinary street sweeper, but this mining tax will kill my superannuation and wreck my life”. A little fear goes a long way in the public’s mind.
The miners' relentless ad campaign successfully reframed the debate from a discussion as to where the tax burden should fall in Australia, to whether the RSPT would destroy the prosperity of Australia.
With the public offside, the polls falling and the Prime Minister unsupported, it was a quick and easy hatchet job for the power brokers in the party.
I don’t think in their wildest dreams that Twiggy Forrest and Marius Kloppers thought they would bring down the Prime Minister in their campaign or even wanted to, however, the response from the miners to the RSPT was a key factor in pushing the ALP down in the polls to the point where an internal coup was possible.
23 May 2010
While I don’t deny my prediction was incorrect, I’m trying to understand the shift in the battle that permitted this end game.
The government’s actions on 19 May don’t seem to be any more ruthless than their efforts of 10 April. So why did the Red Shirts send the troops packing a month ago, but were flushed out with only six causalities this time?
Obviously there are lots of things happening with the power structures in Bangkok that your humble blogger isn’t privy to. However, from the known facts, its possible to speculate a little.
Back in April, when the army went in for round one, it was far from clear that the Thai army was a united force. There was plenty of speculation that the loyalty of certain key units was with the Red Shirts.
The informal leader of the Red Shirts defences was Major General Khattiya Sawasdipol, formerly part of Thai Internal Security Operations Command, but demoted and suspended for pro Red Shirt statements.
A hard man by any definition with experience in counter insurgency operations, he had the personal loyalty of troops within elite units such as the Rangers and enjoyed celebrity status. I expect he maintained close ties with fellow officers still serving who provided intelligence on the government’s plans and orders even after he was kicked out.
We can be pretty sure that one or more senior officers were feeding intelligence to General Khattiya, as its really the only way to explain how the Red Shirt leaders could have escaped the raid on their hotel back on 16 April.
It seems logical to me that General Khattiya would have been making deals with old buddies advising them that he would be generous to those who sabotaged the efforts of the government once the Red Shirts came to power and would punish those who stood against them
With real prospects of the Red Shirts forcing the government out, field officers would be forgiven for hedging their bets so that, whichever side won, they wouldn’t be purged.
This would explain the disconnect between the Prime Minister’s order on 10 April to clear the street by any means necessary and the army’s inability to push out unarmed civilians.
However, everything changed on 13 May 2010, when a sniper took out General Khattiya with a single shot to the head. It had three immediate and significant consequences:
1. It ended the relationship between the Red Shirts command and the army making informal communication between them impossible;
2. It made any deals between General Khattiya and army commanders in a post election world null and void; and
3. It served notice on commanders that the government was prepared to liquidate its enemies.
The change in the government, Red Shirts and army was immediate and profound. On 19 May the government was so confident the army would clear the streets, it could afford to ignore any further calls for negotiation or discussion from the Red Shirts. The army seemed more determined, moving confidently to clear the protest site with troops and APCs. The Red Shirts seemed sure the army would use all the force necessary to clear the streets and the protesters melted away rather than face the troops.
Perhaps with a single bullet the government undermined a popular protest movement that had held the centre of Bangkok for two months and, at least for now, has succeeded in holding power.
09 May 2010
Hang on...hear me out:
In 1870 the French and the Prussians went to war over the trivial matter of the succession of the Spanish throne.
Indeed it was such a trivial matter that the French doubted there would be a war.
The Germans didn't.
In 18 days the Prussian army mobilised 380,000 soldiers into effective combat units and marched west. The French mobilisation on the other hand was tentative, poorly planned and poorly executed. The result was decided before the first shot had been fired. The German armies, concentrated, supplied and supported swept away their brave, well trained but disorganised opposition in every battle, besieging Paris within two months. The legend of Teutonic efficiency and martial skill was born.
The war brought home to every European power the lesson that planning, aggression and rapid mobilisation and execution were the new keys to success. Delay was fatal.
44 years later, the French and Germans went to war over an equally trivial assassination of the Arch Duke of Austria-Hungry by a nobody from Bosnia.
It was hardly a cause to plunge Europe and eventually the rest of the world into a war that would last more than four years and consume nearly 40 million in dead, wounded and missing. However, the premium on rapid mobilisation with the hope of attacking an unready enemy was too high for any power to wait around while cooler heads prevailed. Within a month the Germans had unleashed their Schlieffen Plan looking to repeat their previous rapid campaign. However, the allies and France in particular had learned from the past and had mobilised as instantly and effectively as the Germans, halting the axis push at the first battle of Marne. The First World War had begun.
The crash in August 2008 was a bit like the 1870 war. Companies and investors were slow to react to the growing threat of the crash and before anyone had really taken any action Lehman Bros, Northern Rock, Bear Sterns and dozens of other banks had collapsed and the rest of the market were squealing like stuck pigs for a government bailout.
For all the talk about financial reforms since then, there have been no substantial changes to the practices on Wall Street, in the city of London or any of the other world financial markets, with perhaps one exception.
Bot trading programs now, more than ever before, handle buys and sells for many of the big players, allowing them to make decisions and execute trades faster than humanly possible. And it appears they are programmed for a dump and run scenario.
Like the French in 1914, it seems the big investors are not about to wait around for all information, or even for a coherent picture to develop in the face of a crisis. At the first sign of trouble they have standing plans to ditch stock and flee to safe harbours like dollars and gold. I kind of think that’s what happened on 6 May.
When the market got the jitters on that day, even though there seemed no reason for it, the bots executed their pre-programmed missions....get the investors the hell out. The Dow Jones plunged nearly 1000 points (that’s about a trillion dollars in share value) in less than half an hour. It then recovered in an equally inexplicable manner.
The event is of itself not significant, but what it may tell us about the state of mind of the big players is. Perhaps it indicates that the big players know what I suspect: the stock markets are massively over priced. They know that the despite the talk about the resurgent US economy, there has been no real increase in jobs or economic activity.
They know that the US deficient has grown about 30% since 2008 to stand at nearly $13 trillion and is now so high the US Federal Reserve doesn't have the capacity for another bailout.
I’ve discussed how the Chinese economic miracle seems to be built on exports to the US and a massive property bubble; both seem unsustainable. Without China’s growth the World economy is in deep crisis.
The system is buckling. The markets are waiting for a signal to dump and run. When it comes, I believe it will trigger a second and greater crisis than the GFC. 6 May was something like a dress rehearsal.
04 May 2010
Now I’m all in favour of citizens protesting austerity measures for the poor and middle class, while the fat bastards sit on top contributing less than their share, but for Greeks to be squealing at the Germans and the rest of the EU is a bit over the top.
The EU and the IMF just pledged $145 billion to help the Greeks out. That’s about €150 per person in every EU nation.
Countries like the Slovak Republic and Portugal are expected to contribute their share despite the fact that Greeks enjoy a higher standard of living than either the Slovaks or Portuguese.
Hell, the Greeks currently get better pensions than the Germans who are footing the majority of the bail out!
And the Greeks lift their mid digit by way of thanks.
It would a different matter if the Greek problem was one of ill luck or bad timing, but its a problem of their own creation.
1. tax evasion is virtually a national pastime. On the best estimates of the Federation of Greek Industries, it may be as much as $30 billion USD a year. Not bad for a country of only 11 million.
2. bribery for basic government services is the rule not the exception, with the average Greek paying €1,355 ($1,830) in bribes last year for public services. And that’s just the small stuff.
3. the Greek government thinks nothing of hiring Goldman Sachs to create complicated financial instruments with the sole aim of misleading the rest of their EU partners into thinking they are financially sound, when they are a basket case.
So, while I support the Greek riots, I despise their infantile rage at the rest of Europe that is desperately trying to assist them. With this record, I would have thought a bit of bowing and scraping to the EU was a little more appropriate.
They can chuck rocks and burn down government buildings in Athens with my blessing. I’d even support them getting out some piano wire and stringing up Greek bankers and politicians. But they can’t vomit up bile on the rest of Europe.
I'm not without suggestions as to how to solve their crisis. So, here’s my blueprint for a Greek recovery:
1. clear the black economy with effective enforcement against tax evasion;
2. hammer the top income brackets with luxury taxes on high end cars, yachts, etc and actually enforce it; and
3. take a few lessons from the Chinese and start executing those guilty of corruption. It focuses the minds of those thinking about it.
In my humble opinion, the Greeks should focus on class war not spitting at their neighbours.
28 April 2010
I’m kind of amazed that the Japanese, Icelanders and Norwegians haven’t just told him to shut up or invade, but they are probably more diplomatic than me.
I guess they understand his foot stamping is for domestic consumption by the kind of folks who buy free range eggs, don’t wear fur and think whales and dolphins are people who live in the sea. The delicate kind who watched The Cove and say: “Those nasty Japanese, they are so cruel and heartless to be killing our whalie brothers and dolphinie sisters. We really should do something to civilise them”.
If you are one of these folks, I salute your humanity and despise your hypocrisy.
You see, our Japanese friends are just like us. They simply love exotic animals. They happen to think our kangaroos are just the sweetest folks and their little baby joeys are like pure sunshine in marsupial form. They are genuinely horrified by what we euphemistically call “culling”.
“Culling” is a word specifically designed to sanitize a practice too nasty to be spoken of directly - exterminating other animals that we feel are “in our way” so to speak. Its not a final solution, but it tides us over from year to year.
In friend kanga’s case, we don’t really want to eat him, we just don’t like the idea he might dare to eat the same grass as our sheep and cows
And don’t get me started on the sheep and cows. At least the noble kanga lives free, even if he dies with his brains scattered with a .303.
Mrs Cow is born a slave, raised in a feed lot, executed with a pneumatically inserted steel bolt to the head and then chopped up into little bite sized pieces. And we don’t kill kanga to protect her. We kill him so she gets fatter faster and we can kill her earlier.
On body counts there is no comparison between the few hundred whales and dolphins the Japanese and Nordics take a year and the wholesale slaughter of millions of animals both wild and domestic we commit every day.
And you know what? I’m not even sorry. I eat meat. I accept the only way I can is if, in places I don’t visit there are people who do things I don’t like to produce the quantities of chicken, lamb, pork and beef that sustains my life.
So, if you are a hard core vegan who only eats native plants and lives in a tent in the bush, pull up a chair. You’ve earned the right to lecture on these matters.
But if you eat meat, wear leather or wool, live on land that was once a part of the bush or a forest or eat grains grown on pasture land carved from the native habitat, then you are an end user of the slaughter. Make whatever kind of peace you like with your lifestyle, but leave the whalers to make peace with theirs.
What’s for tea?
18 April 2010
However, the current government seems determined to go down swinging, covering itself in humiliation along the way.
Far be it from me to tell the Thai government how to put down a popular uprising, but here are a few tips:
1. If you send in commandos to capture the leaders of the Red Shirts, better make sure your guys are up to the job.
2. If you’re going to hold a live press conference telling the world about the raid, its probably better if you’re sure your guys aren't being detained by the people they were sent to capture as you go to air;
3. If the major general and colonel leading your elite special forces get captured by the unarmed protesters, you’re probably doing it wrong; and
4. Its not really a good sign when the other side holds your commandos in such contempt that they release said major general and colonel without even a few face saving demands in exchange.
Last post I said that the Yellow shirts had lost but now its getting embarrassing.
If there were a club of dictators and unelected leaders, it would be currently drawing up papers to expel the Thai government for bringing the whole group into disrepute.
13 April 2010
In any struggle, cultural, economic or military, there is a critical point when all the talking is set aside and you either can or cannot back the talk with action.
In the arena of strong man governments versus street protesters, there is one eternal moment of truth: if the government unleashes the troops and can’t clear the streets immediately, its power is broken.
This rule has been proved time and again for at least the last 60 years.
It was true in the Philippines in 1986 when CIA pinup boy and all round tough guy Ferdinand Marcos told the marines to step to with protestors led by hilariously named Cardinal Sin who was calling for peace, love and a bit less political assassination.
As soon as you saw a bunch of nuns send the marines scurrying back to base with extra homework and promises to say ten Hail Mary’s before bed time, you could tell old Ferdie would be “the former President” before you could say “Bloodless coup”.
What was true in Manilla in ’86 was true in Russia in '91. Few even remember the pathetic coup d’etat the old hardliners tried to pull in the dying days of the Soviet Union. Long story short, the head of the KGB,Vladimir Kryuchkov, and seven other supposed soviet heavy hitters managed to seize power from Mikhail Gorbachev.
However, when push came to shove on the streets of Moscow, their armour columns were stared down by Boris Yelsin (presumably in a rare moment of sobriety) and his unarmed crowd.
Wasn’t long before the plotters were in gaol and the Soviet Union was an historical footnote. Uncle Joseph must have turned in his grave that day.
You can fast forward through the Orange, Rose and every other colour revolution of the 90s for more proof.
Interestingly, the contra rule is also largely true: if the government tells the army to fire on civilians and the troops comply, it’s the end of the protest.
The Czechs and Slovaks were allowed to mess around for most of Spring and Summer of 1968, thumbing their noses at the Soviets. But when the hammer came down on 21 August, the 200,000 Russian troops executed their orders and cleared Prague in a single night.
Same same 20 years later in Tian'anmen Square. The Chinese Communist Party didn’t flinch in June 1989 and neither did the soldiers of the 27th Army. 21 years later, the CCP still rules the roost in Beijing.
And so it went in Iran last year. Turned out live fire and mass arrests trump Twitter and Facebook.
It's the last act of a desperate government to order troops to blast their opposition into submission. You fail to do that, and its all over red rover.
By sending in the troops, the government of Thailand's Prime Minister Abhisit Vejjajiva rolled for the whole game. Tonight the troops are back at base and the Red shirts are still on the streets.
The Yellow shirts just came up craps.
30 March 2010
You could think a lot about why Google closed down its chinese search engine.
Was it the cyber attacks on Google suspected to be orchestrated by Beijing
Your humble writer doesn’t know. However, its hard to get away from the fact that Google spat the dummy over ‘net censorship and the CCP were happy to show them the door if they weren’t going to play ball.
The CCP is obsessed with controlling the ‘net and, as Colonel Klink would say “they have ways of making you talk” (or not talk). There are currently more than 30,000 civil servants dedicated to censorship activities and an unknown number of secret police and other personnel devoted to intimidating dissidents and enforcing the party’s ‘net edicts.
I can’t help wondering if the CCP is a victim of Maslow’s hammer, trying to use traditional strong arm tactics to control something as fluid as the ‘net. Could the CCP stand to learn a thing or two from the US Republicans?
On paper the Republicans platforms are unelectable.
They favour tax cuts for the wealthiest 10% of the population, are against health insurance for 32 million citizens and went to war on a mistake (at best).
If US citizens voted their interests, there wouldn’t be a Republican party.
However, far from disappearing, the Republicans are surging back and may well be at least competitive in the November mid terms. And they are surging back in the poorest states in the
How? In my view, an important factor is their appeal to emotion rather than reasons.
For instance, they don’t argue that a well funded public healthcare system is more expensive, they instead say its goddamned communism.
They don’t argue that tax cuts disproportionally favour the rich, they argue its about freedom of the working class.
The keys are: clear and emotive lines; party discipline to stay on message; and maybe a little help from a friendly media empire. All things the CCP should have in abundance.
If the Republicans can do it in the US with all the freedoms the Democrats and other opponents enjoy, surely the CCP can do it in China without the heavy stick of censorship?
I’m not a citizen of
However, the CCP is fairly comfortable with the use of force to quell dissent, it would take a conceptual leap to rely exclusively on more subtle methods. As Mr Maslow said “If you have a hammer, everything begins to look like a nail”.
24 March 2010
Australians generally refer to the Great Financial Crisis as “that thing that’s happening to other countries”.
Much of our smugness is based on our tidy relationship with
What’s that worth to us? Exports to China in iron ore and coal alone were worth more than $25 billion last year. Our next biggest export – wool, was worth a lousy billion.
In addition, our other two biggest buyers, Japan and South Korea, buy over $40 billion in minerals, but sell a hell of a lot of their finished goods to China. You start to see how much we depend on the Chinese.
So, how far can we ride the dragon?
To predict that, you have to answer two underlying questions: What is
The second question is easy: The Chinese have the world’s largest reserves of
As to where its all going, they seem to be building real estate and making exports for the
And that’s where I started getting scared.
On its face this sort of growth seems unsustainable and fueled by pure speculation, but people keep piling in.
Their other big and continuing push is exports to the
I suspect the answer is yet more debt for a country that already has $13.5 trillion in household debt.
So the question that should be keeping every Aussie up at night: What happens if the Chinese real estate bubble bursts or the
Pull up a chair….I suspect we’re going to find out soon.
19 March 2010
Public choice theory in small stressed economies... or: Iceland to Britain "Get a frozen cod up ya!"
Drifting west again, three European economies have grabbed the headlines for the same bad reason – they are broke. Each enjoyed massive booms during the heady days of the last decade and each economy came crashing down in the wake of the GFC. However the different ways they are responding to the issue of private banks racking up huge bad debt is instructive of the level of capture of their respective governments by the banking sector.
The responses of Ireland, Latvia and Iceland are interesting case studies in public choice theory.
Case one: The Irish. Long time cannon fodder of the British Empire, the Irish can be expected to take one for the team pretty much on demand. True to form, they have nationalised private bank debt, firstly by guaranteeing those debts and now with the issue of government bonds for near worthless toxic assets.
To pay for this, they have crushed their public sector salaries, raised taxes and slashed benefits including €760 million from social-welfare programs. The plan is destroying the average Irish citizen, however its winning praise from the financial world for its prudence.
Case two: Latvia. The Latvian government, perhaps just so grateful to be out from under the Soviet thumb, implemented harsh austerity measures following the collapse of the Latvian property bubble. Teachers’ pay was cut by a third, taxes raised and public services cut so drastically that they couldn’t even clear snow from the streets in Riga in the middle of winter. These measures sent 26% of the population into poverty.
But the good news is that Lativa might pay off its foreign creditors 100 cents on the dollar, so happy days...right?
However, just maybe, the Latvians are not as captured as the Irish. Yesterday a major partner of the ruling coalition walked out over the next round of tax increases, at least delaying if not preventing further austerity measures.
The sudden development of a spine in some members of the Latvian parliament might have something to do with the work a group of naughty techies who hacked the tax records of some of the most wealthy in the country and released them on Twitter.
Seems that the average worker finds it hard to understand why they take a cut when the bosses get bonuses.
Case three: Iceland. The Icelanders have a long and proud tradition of telling major countries like the UK where they can shove it. Back in the 70s they sent their tiny navy out to defend their fishing zones from the British and successfully stared down the Royal Navy. So it really came as no surprise that Nordics have shown the least interest in destroying their economy to save foreign creditors of private banks.
A polite enquiry from the UK and Dutch governments as to whether the good people of Iceland would cough up €3.8 billion to cover investor losses in those countries following the collapse of their Icesave accounts was met with and equally polite rejection by 93.5 per cent of voters in a referendum last Saturday.
Now I’m not saying that the Icelanders will get away with thumbing their noses at the Brits and Dutch; the IMF is holding a gun to the Icelanders’ heads by threatening to exclude them from global credit markets if a deal can’t be done. However, the very fact that they haven’t just rolled over like a beaten dog, shows some courage on the part of the Icers.
Its my contention that Ireland’s government has been effectively captured by the banking sector to the point where the ordinary citizens must pay for the excesses of the banks. Latvia’s government was well on the way to capture until an intervening hacker revealed the inequity of the bail out. The Icelanders, on the other hand, put it to the people and the people said “No thanks, generally we get chocolates and flowers before we let people do that to us”.
Lets hope the people of Iceland can hold out, at least for a nice meal and a movie...
15 March 2010
Ok, so Greeks seem to get fairness, but everyone knows the leaders of "old Europe" are soft. You want to see the fight ramped up, you need to go to Asia baby.
The boys and girls in Thailand are leading the way with a little street protest.
The leaders of the Bangkok street party have also given a name to the public outrage at the fat bastards on top taking all the pie – class warfare.
People tell me class warfare, like the rest of Marx, is so ancient history. But, in my view, its the comeback kid of economic theories for the second decade of the 21st century.
Whether or not you think Thaksin Shinawatra is a corrupt bastard with a bit of a thing in respect of public telephone companies, you have to concede:
1. He was the author of massive land and social welfare reforms which put more Thai Bhats in the back pocket of the poorest in the country; and
2.The ruling party is so concerned about wealth accidently flowing down to the poor, they want to abandon democracy, because the little bastards keep voting in the wrong guys.
I’m pleased that, at least in Thailand, the social/economic combatants can take off the masks and have an honest fight.
Its really the same fight they are having in the US between the “conservatives” and “liberals”. Only difference is that over in the US they insist on dressing it up in silly patriotic fantasies.
In the US, you can’t just say “screw the poor”, you have to talk about “Real American Values”.
You get to the same position - “I’m buggered if I’m helping anyone” - but the route is meandering and throws up some rather bizarre characters.
Frankly, I prefer the Thai approach.
14 March 2010
10 March 2010
On the flip side, our cousins in the US haven’t got their riot faces on at home since about the time four police offices helped a confused Mr King relax on the road in 1992.
Interestingly the divide between rich and poor is much wider in the US than Greece and getting worse.
I think the two issues are connected and it comes down to why we treat others fairly.
The concepts of equity and co-operation seem hard coded into our DNA. They were evolved so early on they are shared by apes and even monkeys.
Even a relatively primitive monkey like the capuchin understands that if its doing the same work (collecting rocks) it deserves the same payout in terms of food. If monkey A is getting nothing but cucumber slices for his rock collecting while monkey B is getting juicy grapes, A feels entitled to throw a tantrum.
More evolved apes like the bonobo can take the game to another level. Not only does the ape getting shafted feel resentment, the ape getting the sweet deal becomes agitated about the inequity and demands justice for all.
In my view, what the guys conducting the study might have overlooked is that fairness only works where the screwed over party gets a shot at retaliation.
I’m pretty sure the other apes were looking at the one getting the food and muttering “So Mrs Bonobo, I see you are getting all the milk and raisins. Well wait until the research scientists are gone. Then we’ll have a group meeting to air our grievances about the fairness issues. My representative, Mr Fists, will be attending”.
Clever Mrs Bonobo knew to play fair and avoid the discussion that would surely follow.
However, if the screwed over party doesn’t have the power to retaliate, fairness goes out the window.
Same same with modern transactions:
09 March 2010
On the numbers, the Senator’s argument is water tight. There is no denying insulation killed more Australians than terrorism in the last 12 months.
In fact the last terrorist in Australia only managed to blow himself to hell. Before that you have to go back to the Hilton bombing in ’78.
So why does the PM get to launch into Birmingham like he just called cricket boring?
Why should we want to believe terrorism is more of a threat than dodgy pink batts?
It got me to reading the article on the Availability Heuristic referred to Stumbling and Mumbling.
The concepts are intuitively obvious - You believe something is more probably if you’ve personally experienced it. However, even if you have never experienced it yourself, if you hear about something happening all the time, you believe it is likely and common.
It seems likely, at least to me, that we evolved this way of thinking as primitive people where our news arrived from our own five senses and whatever we heard from our immediate family and neighbours.
So, sure, if you had personally been wandering in the valley to the north and got attacked by wolves, you damn well knew it was dangerous.
But, if three people told you that they each knew a bloke who got eaten by wolves in the valley just north of you, you tended to accept that that place was dangerous despite your lack of first hand evidence.
Those who just had to go see for themselves tended to have an abridged chance to pass on that non-survivor trait (but at least the wolves got a meal).
However, it seems this response is gamed in a world where we receive our news from around the world and where that news is highly refined to seek out the most macabre and sensational.
Any news story on terrorism is covered extensively, and when there is not enough actual terrorism to fill up the day we can always turn to Jack Bauer or the team from NCIS to remind us of the ever present threat.
As we see terrorism reported all the time, I think we end up thinking such an event is common (and more importantly imminent) against the weight of evidence.
Our evolution allows the brain to bypass facts to reach the conclusion that we are under threat from terrorism. The fear is real, even if the reason for it is an illusion.
On the other hand, who had even heard of the risks of insulation installation before February?
Our brains are not saturated with reports of imminent electrocution.
Hence: “Fear of pink batts? What are you a poofter?”
So the PM can ignore the facts and call Birmingham an idiot relying on the voters to do the same.
Of course he’s not the first PM to play the terrorist card
Heuristic wins, facts lose and back to the TV.
I highly recommend three of his lastest articles.
Cutting spending: the BBC warning
Tony Pulis: capitalist lackey; and
Media bullying and cognitive biases.
Each looks at an important issue of game theory and economics.
Media bullying, in particular, raises an issue close to my heart – the fallacy of initative.
I'm a war nerd (though not The War Nerd of Exiled fame (again see link)), with a tendancy to go for the bad guys.
I thought the Empire a lot cooler than the rebels and my favourite tank is the Panzer Mk V. In a breath taking leap of logic, I thought the Red Army a lot cooler than those pussies in NATO.
So I hate how the bad guys are always portrayed in popular culture. Marching stoically into the good guys well placed trap and getting slaughtered. I think it appeals to a generation that grew up playing Galaga.
In my view that’s not war, that’s war porn. Like beating up the fat kid at school and then bragging about what a big man you are.
It seems to me, this is a projection of the fallacy of initative, the mistaken idea that only one side (your side) comes up with clever ideas and the other side is merely reactive.
In real life it never works. Just go ask:
The Germans in 1942 “the Reds could never mount a mobile double encirclement at Stalingrad";
The IDF in 1973 “Egyptians pull off a combined arms operation across the Suez Canal? I don’t think that’s likely”;
The US in 2008 “Sure we’ll out source production to China, what’s the harm? Russians? Who cares what they think?
We’re the only super power now baby."
As a good friend once reminded me “we are measured by the enemies we fight”.
So are our enemies.