Fog of the aged

Have you ever wondered why MacroBusiness exists? Why it is necessary for a dozen thirty and (just) forty-somethings to get together and write their buns off about the Australian economy?

The first and most vital clue in answering the question is the ages of the MB team. At MB we are seasoned enough to have studied deeply and to have had the opportunity to compare that theory with the reality around us through good times and bad. That comparison has yielded an insight: that a yawning chasm exists between the world we were taught existed and the one that smashes us in the face every day.

The ages of the MB team is important for another reason too. How many post-baby boomer business and economics commentators can you think of in Australian business media? I can think of four: Jessica Irvine, Rob Burgess, Adele Ferguson and John Garnaut. Anyone else?

There aren’t any more for two reasons. The first is that the Australian Financial Review spent the last decade or so eliminating them. The AFR used to be the training ground for local business journalism.  Under pressure from the internet, the paper’s baby boomer management sought to protect its margins though cost cutting (as opposed to forming a strategy). The biggest casualty of this was journalism itself, as the management assassinated its senior talent and plonked cheap and hapless juniors into the void to generate “churnalism”, a rehashing of press releases devoid of context and ideas. Not surprisingly, such a culture has left behind it a commentary and features crater. When the AFR stopped producing talent, there was none for anyone else to poach.

The next reason is related. Equally threatened by the internet, the surviving coterie of baby boomer commentators set about retarding competition in the ranks. The culture of Australian journalism is not about identifying and nurturing talent. It’s about recognising it and running it out the door. I’ll bet a penny to the pound that one of  the primary talents of each of the four young commentators I mentioned above is managing up.

In the regular run of sleepy Australian life, none of this really matters. We can read the same old dross, from the same old writers, and go back to sleep in the sound knowledge that she’ll be right.

But when crisis arrives, suddenly, it matters a lot. Crisis brings change and if that change is going to be for the better, you need ideas, analysis, hard data, imagination and judgement.

And boy, was there a lack of it on display over the weekend as the Wall St crash quivered through the lazy jelly of baby boomer responses. Boomer commentators queued up to pronounce two things: Australia is different and you should buy shares.

What a steaming pile.

Let’s begin our assessment with the doyen of baby boomer clap trap, MB’s arch nemesis: Gittins!

Is it possible for a country that is the envy of the developed world to talk itself into recession? I don’t know. But it seems we’re about to find out. It won’t be easy, of course. It’s a question of whether our increasingly negative perceptions can overwhelm the reality that our economy has a mighty lot going for it. Let’s start with reality, then move to perceptions.

Note the sophistry at work here. Rather than open the question of the economy and people’s perceptions of it up to examination, Gittins immediately frames the question as one of pessimists versus reality. In his first paragraph Gittins! has shut down the inquiry and presupposed his own conclusion. This is some form of idle middle class demagoguery, not an argument. Back:

The Europeans, and now the Americans, are rightly worried about their yawning budget deficits and huge levels of government debt. Their problem is, the more they do to reduce deficits the more they weaken their economies, at a time when they’re already pretty weak. By contrast, our budget deficit isn’t particularly big and our level of government debt is laughably small.

Part of their problem is the money they spent bailing out their banks – many of which still aren’t back in full working order. By contrast, we’ve had no problem with our banks.

Despite their weak economies, the Europeans and Americans have been worried about the rising cost of rural and mineral raw materials. But what’s a problem for them is income for us. The prices we’re getting for our exports have rarely been higher.

As a consequence of this boom, the mining companies are spending mind-boggling amounts building mines and natural gas facilities. Were we in our right minds we’d have no trouble accepting that, since you and I live in the same economy as the miners, a lot of this income and spending rubs off on us. Instead, the incessant talk about the alleged ”two-speed economy” has allowed us to imagine that, while the miners are doing well, the rest of us are stuffed. Retail sales are flat? See, I told you I was doing it tough.

This is all fine, but my question for Gittins! is, who gives a pile? The entire framing of the issue is a ridiculously limiting construct that encourages you to draw only one emotive and predjudiced conclusion: that those on the receiving end of the economic adjustment are whining bludgers. Gittins! then uses this rhetorical trick to draw a vast conclusion about capitalism itself:

Alternating waves of optimism and pessimism – ”animal spirits” – do much more to explain the swings in the business cycle than it suits most economists to admit. And because we’re such herd animals, we tend to contract these moods from one another – even from our cousins on the other side of the globe.

Give me a break. There’s no history. No evidence. No examination of how contemporary capitalism might have evolved from earlier versions. We, apparently, have no stock market. No connection to the global economy, over half of which has dissolved into crisis. There’s no debt here to sensibly pay down. There’s no price paid in our institutional structures for that debt. There’s no questions around China and, apparently, it isn’t connected to Western markets either. There’s no Chinese dependence here.

I don’t care if Gittins! agrees with me on any of the questions surrounding these issues. However, I do care that perhaps Australia’s most senior economic commentator would rather engage in myth-making drivel about ‘battlers versus bludgers’ than do some research and contribute to the greater understanding.

But there other ways of shutting down thought that are both less and more subtle. Let’s look at less first. From Michael Pascoe:

One more time for the dummies: we are not part of the US economy. Every day, the US matters less and Asia matters more. The American-centric mindset that a recession in the US means a recession in Australia is hopelessly out of date. It hasn’t for the past two and shouldn’t for the next.

The arch folly of American politics is compressing into a few years a historic sea change that should have taken decades. The downgrading of Washington’s credit rating merely reflects that reality – and just helps make us look even better.

Leaving aside the disruptive impact on financial markets and concentrating on the real economy, America’s impact on Australia is filtered through Asia – a buffer that grows stronger every year.

Nearly 40 per cent of China’s exports went to the US in 2001. Now that figure is down about 20 per cent and falling as a matter of policy. The China Daily runs stories about exporters diversifying, targeting markets in Brazil, India, Egypt, anywhere other than the US. It’s an entirely obvious strategy as two-thirds of the world’s growth already comes from outside the G-7, the ”old world” major industrialised nations.

What’s more, Beijing knows it has to flick the switch from exports to domestic consumption to maintain the strong economic growth it needs for social stability. That’s officially spelt out in the latest five-year plan. And, unlike the US, China is actively pursuing the required economic reform instead of just talking about it.

I’ve noted before that Pascoe has a single commentary technique that he deploys willy nilly. No matter what the business or economic anxiety du jour, Pascoe takes the opposite angle. If the papers declared the Easter Bunny a fiction, Pascoe would lambast them and fiercely defend its existence.

That’s all fair enough. It’s often entertaining. But, again, when it comes to real crisis, readers surely deserve more than kneejerk contrarianism. The lack of evidence or even considered thought in the above piece is spectacular.

But more sophisticated and subtle commentary can also lead astray. Peter Hartcher of the SMH wrote a forensic assessment of the crisis with some excellent material but it also ventured up the garden path:

What is the new theme? In effect, the private debts of the failing banks became the public debts of governments. The crisis proved that there is no such thing as private debt. Risky transactions are not just a danger to the people and companies borrowing too much money. They turn out to be a danger to us all. “In financial crises, private debt becomes eventually public debt,” as US economists Carmen Reinhart and Ken Rogoff have observed. And then on top of this, governments spent more to stimulate their economies and prevent a new Great Depression.

The extra debt that these crisis-era decisions have loaded onto the taxpayers of the world’s developed economies is about $US18 trillion ($16.9 trillion), or it will be by 2015 on the current trajectory, according to an estimate by the International Monetary Fund. For perspective, this is bigger than the entire annual output of the US economy, which is about $15 trillion.

On average across the developed countries, the new debt mountain is the equivalent of 37 per cent of their annual economic output, or gross domestic product. When all that is finished piling up in four years from now, it will mean that the developed nations will owe an average amount equivalent to 110 per cent of their national economies’ GDP.

“It would be naive to expect that all these debts will be repaid,” the international economist Ken Courtis said last year.

Much better and quite right. Not too many assumptions and opening up the vital question about the role of private debt, “there is no such thing as private debt” is a fine and provocative line.

Hartcher goes on with a quality piece about the converging forces that are driving the crash and produces material I have not see elsewhere. But then we move to implications for Australia:

Where does this leave Australia? Hastening to reassure the public yesterday, the Treasurer, Wayne Swan, said: “Australians should never forget that our economic credentials are among the strongest in the developed world.”

Is he right? One telltale sign was that, instead of the traditional international reflex to dump Australian assets in a crisis, this time the world reacted differently:

“When the problems with Greece and the US debt ceiling intensified in the last couple of weeks, the general response was to move money into something else less risky, and Australian government bonds looked pretty good with a AAA credit rating,” says HSBC economist Paul Bloxham.

“So there were some flows into Australian bonds, and that pushed the Australian dollar up to its recent record high. We were a safe haven. When the US increased its debt ceiling, investors decided they didn’t need us as much,” and the price of bonds and currencies moved accordingly.

This is something of a revolution – the words “safe haven” and “Australia” appearing together in public.

Is it just the China effect? In part, yes. A currency strategist for the bank UBS, Mansoor Mohi-uddin, said last month that the Australian dollar had actually emerged as one of three currencies being regarded as a better bet than the major global benchmark currencies of the US dollar, the euro and the yen.

These three, the so called G-3 or group of three major currencies, were losing favour, he said, to the S-3, or the three “shadow currencies” that allowed investors exposure to the big economies, but more safely.

The S-3 are the Swiss franc as a safe proxy for investing in Europe, the Canadian dollar as a low-risk route into the US economy, and the Australian dollar as a secure way of investing in China. By investing in the Aussie, you could benefit from China’s growth, but without the risks of China’s problems of governance, growing local government debt worries and its fixed currency.

As Deus Forex Machina has illustrated, the Australia, ‘safe haven’ meme is seriously overblown. For instance, during the recent safe haven rally that Bloxham discusses, the Australian currency badly lagged the yen, gold, Swiss franc, even the Canadian loonie and NZ dollar.

Moreover, Hartcher and his sources are confused. A safe haven currency and a growth currency are very different beasts. One goes up when growth wavers, the other goes down when growth wavers. Guess which one the Aussie is?

The evidence that Australia is a “safe haven” is thin at best and certainly insufficiently strong to hang an ‘Australia is different’ argument upon it.

But that’s speculative stuff and it’s a good discussion to have, even if underdeveloped. What comes next from Hartcher is worse:

So Australia represents China without the risks, in this view. Yes, the Aussie took a hit in the past few days, but a senior official said privately yesterday that it was much smaller than anyone in officialdom had expected. And here’s a key reason, apart from China or the mining boom, that Australia is seen in a relatively positive light.

At its worst point, Australia’s cumulative federal net debt is blowing out to a projected $107 billion, or 7 per cent of GDP, in 2011-12.

This is remarkably modest by international comparison. The US economist David Hale observed: “Most other G-20 governments are deeply envious of Australia’s fiscal situation.”

I can only ask, what happened to the interesting and provocative “there is no such thing as private debt” statement? Australia has private debt at 154% of GDP. Yet somehow, in the space of several paragraphs, it’s ceased to exist.

I don’t know why, but the absence then leads Hartcher’s analysis into the bushes:

And Australia’s banks are sound and profitable. None of this happened by accident. Australia’s politics worked in creating the good policy that has made Australia a standout economy in the world. The Hawke-Keating and Howard-Costello governments collectively spent 23 years reforming the economy, a bipartisan project of opening it to the world, making it more competitive, improving its systems and institutions. Why didn’t any Australian banks collapse? Two central reasons are that Keating imposed the Four Pillars policy, and Costello created the new prudential regulator, APRA.

If the current financial fears turn into GFC mark II, Australia has tremendous firepower to bring to bear on any slump. With official interest rates at 4.75 per cent, the Reserve Bank has lots of scope to cut rates to stimulate growth. And with the federal government in healthy fiscal shape, the government can use its spending power to do the same. Why? Because the central bank and the government have been repairing their policy armoury in the past couple of years.

Now, I agree with Hartcher’s conclusion, that Australia is better placed than other Western nations in the event of another crisis. But it is very important that we understand why that is the case. The low public debt that Hartcher cites is important for the simple reason that our banks remain deeply unsound. Australian ADIs still carry half a trillion in offshore wholesale debts. Any extended freeze, like that during the GFC, will make it impossible to roll over that debt, despite the fact that they’ve extended their maturity profiles. That is unless the government guarantees them again. So, we effectively have a private banking system with the taxpayer carrying the risk.

To me, that sounds like a difference in degree from our northern hemisphere cousins, not a difference in kind.

The final voice in the weekend’s chorus of baby-boomer denial is John Durie of The Australian who embarks on the strangely mainstream ‘contrarian’ approach to share investment, buy whenever the market dips:

There are reasons why stock prices should fall but they are overdone as far as Australia is concerned.

But that is not unusual when fear sets in.

The fact is Australia is in fundamentally better shape than the US or Europe and has the justifiable hope that the Chinese government can maintain growth.

That GFC rout sent most stocks to their all-time lows, which makes you wonder what carnage will happen at these levels.

BlueScope yesterday closed at 96c a share compared to its GFC low of $1.70 and its 52-week high of $2.55 a share.

Billabong closed at $5.28 compared to $5.81 in the GFC and its 52-week high of $9.10.

Meanwhile, reports that Greg Wooley, Geoff Dixon, Mark Carnegie and Peter Gregg having cashed in on Global Aviation and are about to roll the dice again on a fleet of planes leased by RBS are a touch premature.

But that hasn’t stopped some dreams about maybe having another run at Qantas.

After all, Qantas closed at $1.69 yesterday compared to the management buyout price in 2007 of $5.45 a share.

Other stocks to break their GFC lows included Fairfax (82c) OneSteel ($1.50), Perpetual ($22.04) and Toll at $4.16.

A cashed-up raider could make merry at these levels.

Bell Potter lamented the market is totally indiscriminate, given Australia leads the OECD in terms of GDP growth, unemployment levels, interest rates and terms of trade, yet its bourse has fallen more than most.

Go figure.

Then get out the chequebook and chase some bargains.

But what to buy?

This column spoke to the aforementioned strategists and Evans and Partners’ Mike Hawkins and received the following advice:

Buy quality, big-capitalisation resources, avoid domestic cyclicals, buy mortgage-based banks such as Commonwealth Bank and Westpac, defensives like Transurban, Woolies and Wesfarmers and structural leaders such as CSL and Brambles.

Most of all, don’t sell unless you need to and hang in for the ride.

No acknowledgement of the greater bear market structure the Western world is caught in. No analysis of why it’s in it. No assessment of alternative returns versus risk. No understanding that the volatility we are seeing is the new normal, nor that, as such, the stock market is now a no go zone for anyone but active traders. Just the same dated rubbish of buy and hold when the market dips.

That may make sense some time in the next decade or so, but believe me, we aren’t there yet.

So, that’s why MB exists. We are not so old as to have been institutionalised, nor have we spent so long in a job that all passion for it is gone. We aren’t so jaded that we dedicate much of our energy to keeping down competition rather than flourishing from its challenge. Nor have we become so bored that we endlessly repeat platitudes rather than unleashing intellectual curiosity upon unanswered questions. We are not bloody baby-boomers.

Houses and Holes
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  1. Nice one H&H. I was looking forward to the Monday MB commentary after the usual claptrap from the usual suspects over the weekend.

    Your demographic observations of the MB crew are very interesting. I don’t doubt your comments on the quality of journalism and snuffing out talent in the MSM. It sounds like a government bureaucracy.

    • There’s a famous quote from Einstein:

      “We can’t solve problems by using the same kind of thinking we used when we created them.”

      The generation that created the problems of today are trying to use those same brains to fix them.

      Fortunately we have one thing on our side – time. (Although things might be well and truly stuffed by then).

  2. OTOH, the most rabid of the bullhawks, Carr, Bloxham and Joye are relatively young (well, CJ looks baby-faced anyway).

    Stupidity can happen to you at any age.

    IMO Pascoe is the worst of them by a country mile. Hartcher is pretty good.

    • Carr and Joye are blow ins.
      Bloxham is not a commentator.
      Hartcher is a clear cut above the rest. Probably because he’s only just a baby boomer.

      But point taken.

      • Sure, but there’s fine line between journalists who write about economics, and economists who publicly express their opinion about everything. e.g. Carr, Joye, and increasingly Bloxham.

        I’ve read some dross from Jessica Irvine as well, especially when she was filling in for Gittins! Its was almost like there was bullsh*t hole she felt obliged to fill.

  3. Yet another anti-boomer rant. What do you hope to achieve with an ageist agenda which denigrates commentators on the basis that they are older (>46) than you?

    I disagree with much written by the left-leaning Gittins myself but not because of his age. Bragging that you are somehow superior because you are under 47 years old is ageism patterned on sexism and racism.

    • Funny thing about stereotypes – they exist because there is usually some substance to them.

      Obviously there are exceptions to generalisations, but we can see a clear pattern here.

      All the ‘Boomers’ I’ve spoken to who rode through the 90’s recession and then onto boom times think that booms always follow dips, so buy buy buy.

      That’s because they were born after WWII and don’t know what a Depression is like.

  4. Hey Suz,

    Good to see you. Got anything to add on the substance of the piece? That the journalistic system has stopped produced talent and relies instead on the views of external vested interests?

    • Au contraire.

      The substance of the piece is clearly that ones take on the current economic situation is determined by ones age.

      Suzi has therefore scored a direct hit on the content.

      This piece smacks of playing the man and not the ball.

      • My take is that the substance of the piece is about trends in economic commentary, that by virtue of MSM business practices in recent times have become generational. Unfortunately for those obsessed with political correctness, generational trends do exist.

        Don’t mind the fogies H&H.

    • There is no substance in your blog to respond to. Even the title is simple offensive ageism.

      • Ok then. See if you can point out any government policy or media commentary over the last decade or so that doesn’t benefit or attempt to influence on behalf of the Baby Boomer generation?

        The bias is obvious for anyone to see, and if you bothered to talk to a few Boomers, you would see that many are uncomfortable with the level of pandering that goes on for their benefit. Fluffing the pillows of a declining and increasingly burdensome and unproductive generation to the detriment of their younger, more productive (and soon to be the carrier of the BB retirement can) offspring is not only extremely short sighted, but morally reprehensible.

        I can guarantee that were they not such a powerful voting bloc, this would not be happening

      • I think there’s a big difference between being anti-baby boomer and anti-boomerism.

        This is not about attacking the man and not playing the ball – its calling out that the ball players have decided they do not want to recognise own goals (i.e failed economic theory) and the limits of their analysis as they ignore the cliffs that exist on the other side of the sidelines.

        Or should there be no blame and no responsibility? A new age of maternalism?

        • I am not so sure about the whole thing. I find the BB MSM commentators always bullish as noted. But you also have the young economists like Joye , Carr with similar outlooks. Steve Keen and Bill Mitchell seems to fit the permabear kind. Gotti is pro business and is willing to change his tune to anything that promotes business interests.

          So there is just so much variety , it probably is that within MSM commentators are homogeneous in outlook.

    • HnH,

      You say that this piece is about:

      “That the journalistic system has stopped produced (sic) talent and relies instead on the views of external vested interests”?

      Yet, in a slightly later item, entitled “Crisis in the West”, you refer to this article in the following way:

      “Finally, I have a piece despairing at the absolute failure of the baby boomer controlled Australian media to understand what is going on.”

      Which is it then?

          • No, it isn’t. She has simply cast my crtiique of the baby boomer generation that is influencing the operations of Australian media as predjudice.

            So far I know, she isn’t in the media and has no knowledge of its inner workings.

            So why would you simply accept her reductive aspersion over my assessment of what has transpired in business media from actual experience?

            It is she that is playing the man.

            The arugment is that a generation of baby boomers has gutted Australian business media.

            Please respond to that.

  5. Excellent view H&H and as I am having lunch with an AFR editor tomorow I will quote this.

    I recall in January reading an article in the AFR as to why 2011 was going to be fantastic and it was all derived from investment bank reports. Just cut, pasted and trimmed by a senior writer at AFR. Why would anyone pay for that material? BUt AFR like the ivestmten banks lieks confience because confidence, even misguided, leads to buying, and looking at the nice adverts.

    The real test for me now is that my contacts say to me ‘you were right about the trends in the economy’ and its because I read MB and other blogs, and do not read the MSM.

  6. How many times throughout history has one generation declared that all the world’s problems are caused by the previous generations ? Don’t forget to look in the mirror.

        • How does making a general statement about the foibles of generations in any way respond to my article?

          It’s not responding to the detail of my media assessment its simply marginalising it with a platitude.

          • Ok maybe a bit of a trite remark, what I think this blog needs is what would amount to a “statement of faith” from each contributor as to their basic understating of economics, so we (the readers) can gain a better understanding of where your coming from, what’s your foundation.

          • Why does someone’s foundation matter? If a contributor doesnt have a sound understanding of something it will be torn apart in comments replying to the article (i assume that there isnt much censorship, certainly all of my economic rants have been allowed!).

            trying to play the man using their ‘qualifications’ or lack thereof is simply unnecessary given the contributors and commentators here.

  7. I will slightly alter the Upton Sinclair quote to cover this situation:
    “It is difficult to get a baby boomer to understand something, when his/her ponzi retirement scheme* depends upon his/her not understanding it”
    * They want the Gen X/Y to be optimistic just until the point where they have financed the baby boomer retirements by taking on massive debt and buying the IPs off the baby boomers.

  8. Back in my teens, the MSM and society in Australia and the wider world was controlled by something we called the ‘Establishment’. It was elitist, religious, deeply conservative in opinion, committed to interventionist wars in Asia, sexist, overtly racist. Censorship was rife, books and films were banned, actors were arrested for appearing nude on stage. You could not even buy a beer after 6pm for Christ’s sake.
    All of that was dismantled by people like me who demanded, and won, a more liberal society.
    There is no doubt many of the commentators and journalists in the MSM are shallow and lazy, but that has more to do with corporate policy AND a general lack of interest among the wider public much more than it has to do with those commentators and journalists being baby boomers.

    Potential conflict of interest: I have been a baby boomer since 1952.

  9. ceteris paribus

    This boomer, x, y and z generations argument leaves me cold.

    It is ageist and pretty stupid.

    Yes, there are lots of boring, lazy, economic farts in the press, whose offerings lack research,evidence and analysis. -whose egotistical stories are all about their own insight, judgment and omniscience, despite minimal use of the pronoun “I”. -whose regurgitated pap excludes brighter minds from the sunlight.

    But what has this to do with age? Protection of tenure and privilege perhaps- but nothing to do with biological age. Attack journos on their performance and their entrenched privilege, not their age.

    • I do agree it is not a question of age, but of talent and investigative skills preferably combined with a certain maverick quality.

      • They’re nearly all baby-boomers, that’s what it’s got to do with it.

        And it is relevent. It is not a matter of “talent and investigative skills preferably combined with a certain maverick quality”.

        Those skills can’t even develop. There is no structure or culture to teach or nurture them.

        The story I tell of the AFR is simple fact. The story I tell of baby-boomer media culture is born of long experience.

        How about someone mounts a counter argument or provides an anecdote of a counter experience instead of simply asserting that it isn’t true.

        • OK perhaps age does have an impact – there is a dearth of capable young journalists out there.

          I have said here at MB previously that a big responsibility also lies with the universities and their claim to produce journalists. They don’t. In conjunction with cost cutting at major papers I wonder if it was viewed that the new round of uni-degree journalists were deemed ‘already trained’ and left to their own devices. Many old-school journos were on the job trained and it was not uncommon for some to have no tertiary education at all (back in the days when ability counted more than paper). Combine the two (a large number of inferior boomer journos jostling for positions with young ‘journalist degree’ holders, inexperienced and as you said, not always that smart) and little wonder we have the sort of MSM we do.

          A uni degree does not maketh the journo!

          But how to fix?

          • maybe thye could bring back the apprenticeship…….
            (in nursing ,teaching, auto mechanics,welding,office management,AND journalism)

            – baby boomer since 1951

        • ceteris paribus

          You oughta do a bit of wider reading HnH.

          Then you might realize that the world is full of razor-sharp boomers in a whole range of fields, just like it is full of razor-sharp thirty-somethings; and EVEN razor-sharp adolescents and twenty-somethings.

          But I know exactly what you mean- there are certain people that should never be let near a typewriter- people of certain religions, and races and with certain disabilities and certain unamed preferences- and then there are those with diseases etc. etc. etc.

          I am not being smart-arse but you have turned down a very unprofitable lane of “otherness”, the sad history of which I am sure you need no reminding.

          Just point out to the farts where they are wrong and ignore out their biological profile.

          • Well…maybe you’re right. But maybe you’re not. I’m not talking about all baby boomers.

            But I know an awful lot who think that everythinhg always goes up. That if you even think it might be otherwise, then you get shouted down.

            The baby boomer commentary menace seems a part of this more general delusion…

  10. Interestingly, I actually find great value in the “simplistic” approaches taken by the MSM commentators. I have never studied economics. I was interested in the topic of housing affordability from the perspective of someone who was brought up to think that was “the thing to do”. A comment I made was challenged in the comments section so I inquired for more information. I was pointed in the direction of UE and soon became a regular reader which has later made me a regular reader of MB.

    What the MSM approach provided to me was accessibility. Gittins in particular writes in a manner to allow economic concepts to be understood by a layman without any specific knowledge of economics. I think one of the other main functions that he tries to perform is to defend some of the disappearing elements of collectivism in our culture. Economics is just the framework through which he tries to do this. I guess I am sympathetic to his objectives.

    So while I am completely jaded with the quality of reporting in the MSM in general, on economics or anything else, I don’t think the problems are to do with the individual commentators. They are writing in a particular way for a particular audience. If they went down the MB route of providing lots of graphs and technical detail people wouldn’t care. If they don’t tie every comment to a specific opinion or political position then people wouldn’t argue in the comments section and thus increase ad revenue.

    What you are really lamenting is the lack of quality technical economics journalism and having a go at those that you think should be providing it. Unfortunately, they are just giving the people what they want. The average person is unable and unwilling to understand the sort of stuff discussed at MB. Expecting it to be otherwise is the Dunning-Kruger effect in action.

    • Damn, now there’s a hgih falutin insult. I had to look it up!

      I will only note that your arugment is circular. Are the people dumb or does the media make them so?

      Moreover, I contend that the people have a FAR better grasp of what’s going on than the commentators do. Which is why they so wholeheartedly ignore them and save their money right now.

      • Its not an insult as much as a natural human phenomenon that all but the superhuman are guilty of. As one from the top end of the science and engineering field I know I certainly am, both in overestimating my own abilities and those of others.

        You are perfectly correct. The argument is circular in nature. The system of interaction between the media, the “experts”, art, culture, history and values make this far more complex than simple cause and effect. It is the aggregation of millions of tiny influences into the attitudes of a cohesive mass that is a society.

        I would really challenge your assessment that people pay all that much attention to what the commentators say. It is emotion not rational thought that underpins the behaviour of a populace. Even those who have the capacity to act rationally or who actively exercise rational thought will still often make their decisions with cultural or emotional bias.

        People are saving their money and you see this as a sensible course of action for them. It doesn’t necessarily follow that they know what they are doing. I would suggest that in this instance it is just that the conclusions of sentiment happen to align with the conclusion of reason. Is this a coincidence?

        The question is, if you consider the media as it is and consider the people as they are how do you get them from where they are to where you want them to be?

      • “Moreover, I contend that the people have a FAR better grasp of what’s going on than the commentators do.”

        So how come they all piled into the property market, up to their gills in debt, based largely on what many commentators have said over the last X years?

        If people had a FAR better grasp of what’s going on, I doubt that we’d be in the place we find outselves today.

    • A refreshing outlook, Nogen.

      As for the circular argument about who dumbs who, raised by HnH, I suppose one has only to look to something like “Big Brother” on TV.

      Did the viewers watch such visual puke because they were dumb, or did watching “Big Brother” make them dumb?

      I guess the Boomers probably had a hand in that too. Oh, but hang on, they weren’t Boomers in the house, were they?

    • Nogen, what you have highlighted is, IMO, why someone like Gittens is particularly dangerous.

      His ability to write in a manner that is understandable to the masses means that his preaching of what many here would call false economics is extremely effective, and the last thing we need is people believing that the Gittens version of economics is actually correct or useful in reality. Most of arguments are pseudo-economics wrapped up in enough terminology to make them sound informed.

      Many other economics commentators are similar. SMH seems to have the worst of them, with Pascoe in the mix as well as Gittens. One of the few decent ones that sometimes contributes is Hofman but he isnt really for mass consumption.

      The education system fails to provide people with a base level of financial literacy to dig deeper for themselves and to understand more technical blogs unfortunately.

      • “The education system fails to provide people with a base level of financial literacy to dig deeper for themselves and to understand more technical blogs unfortunately.”

        Everybody is an expert in whatever it is they have spent the majority of their time doing. What if it were the case that the majority of people were not capable of obtaining a “base level of financial literacy”? What if they were capable but had many other competing priorities for their time and mental energy?

        I for one don’t understand the technical details of much of what is written here. Its my background to study systems, how they work, how to measure them and finally how to control them so I don’t doubt my ability. However, I don’t have the time or inclination to go into detail studying financial systems at this stage. Therefore as factual as the material presented on MB might be, my lack of understanding the fundamental principles means I have to view it as opinion. The same way I view work done by “dangerous” mainstream commentators.

        Because of the manner in which the information is presented here, however, I attach a stronger weight to these opinions. This, however, is an emotional decision. In the event I have to take action, I am more likely to choose a position based on this bias. I think its important to note that it is not the content that is affecting my decision making, but the methodology and style.

        I would suggest that it is not lack of education in finance that is the problem, but a lack of ability to critically assess information (what are they saying, who is saying it, why are they saying it). Is it reasonable to expect the average person to be capable of doing this?

        If the “dangerous” commentators were not writing their pieces, where would people be getting information and ideas from? What alternatives are available to fill the hole? How would you go about presenting the information in a manner that is accessible, interesting and factual?

        • It all comes back to the average person in the street treating something they heard on msm as BIBLE!!!!
          Nogen, you have the common sense to treat much of what you read on MB as opinion due to a more limited knowledge of financial systems. But the problem lies with the average person who does not see it as opinion but as FACT. That is what can make mainstream commentators “dangerous”.
          I am not saying that they are all dangerous, it is just that they have a strong influence over people’s opinions and have a responsibility to give a balanced picture. Lucky we have MB to give another opinion and debate such issues.
          I believe there is a lack of education of finance and economics. In my experience as a FP, the average person has the financial knowledge of an 12 year old. Lets face it, for mr and mrs average, economics is not the most stimulating subject in the World. We that enjoy MB are not normal !!!!For this reason they don’t care and don’t want to know. A sad thing as it impacts their lives in so many ways. Maybe ignorance is bliss, if we all had a good grasp of economic principles there would be a revolution. !!!!

          • Romish,

            I think we are on a slippery slope when we start categorising people who express an opinion as “dangerous”.

            Whilst you may not agree with their opinion, I fail to see how that makes their opinion “dangerous” and, by definition, your opinion “safe”.

            I generally don’t disagree with the comments in this article regarding the quality of mainstream economic journalism insofar as its tendency to view the future through the prism of the past.

            I strongly disagree, however, with the practice of wrapping the argument up in a hateful package of intergenerational rancour.

            As regards educating the masses – at the moment there is around $18.8 billion worth of unclaimed superannuation, despite repeated publicity about its existence, and how individuals can recover their entitlement. If this amount of money can be left lying around, by individuals who would most likely tell you how tough they are doing it, what chance education?

          • Come now, Julius: “a hateful package of intergenerational rancour.”

            I’m paasionate about this subject and a little pissed off too. But it’s not that bad.

            Moreover, you seem to have completely dimissed the possibility that I may be right! That the baby boomers of Australian media are exactly as I have described. And if so, they’re letting you down every bit as much as me.

            You should be pissed too.

        • @Romish

          Is the willingness to accept opinion as fact specifically the problem of the media and mainstream commentators? Or does it extend to our teachers, our friends, our family, the bloke down at the pub?

          Trust is more important than truth in information exchange. We will never have the capacity to fully understand the majority of things we accept as fact but we will all make decisions to accept opinion as fact depending on who it is giving the opinion. It is a necessary function for society – its hard enough being an expert in one specific area let alone everything – because we all need to make decisions in lots of areas in which we lack expertise.

          So to reframe the issue, does the media receive more trust than it deserves (a problem of the people)? Or does it have a responsibility to act differently because of the amount of trust it receives (a problem of the media)?

          If a paper would go broke in pursuit of ideological perfection, would you still want them to do it? If good journalism costs a lot of money and sells less than bad journalism, is the 4th pillar of power compatible with capitalism?

  11. I’m so, so, SOOOOO pleased I found you guys!! Finally, some economics commentary that attempts to apply sound scientific analysis to issues, as much as “science” can be applied to economics, but more importantly asks the important questions and cuts across the parochial and provincial dribble that passes for business journalism today.

    I almost choked on my Weeties when I read Pascoe’s piece over the weekend, ie., on not being part of the US. Surely we can’t have it both ways, so we’re either part of the Global Economy or we’re not…???

    Once again, thank-you MB, and keep up the fabulous work!

  12. Lte me get this right. You guys exist because you can’t get a job at AFR, Baby Boomers are conspiring against you & You know all the answers but no one will listen to you.
    You claim to be late 30 somethings early 40 somethings. You actually sound like my kids when they were teenagers.

  13. Agree with the thrust of your argument.

    Of course the poor analysis of events by the media is not confined to the economy. In general, the quality of media analysis, whether social, religious or political has been pathetic for a long time and has appalled many. Including baby boomers.

  14. Although I agree with what you say re the content, I dont follow the line of prejudice re so called ‘boomers’ Its not a special breed with a collective thought pattern you know. Believe me, one day it will be people your age that are fucking up the economy, their are lots of junior economists and politicians out there now who are lining them selves up for this privilage right now. You know there have always been people in any age/generation group that correctly find fault in the system they are lumbered with, this is not a generation thing. The only thing differnt today is the internet which has allowed all of us that care to find out more than ever before in history.
    On another web site that most of here have seen the theme over the last few years was that when the Tories get back into power, they will sort it out, however after 12 months of a decidedly GenX government we find that nothing has changed and the status quo remains, little has changed and thus the faith has been disolved (however BB’ers are still simplisticaly blamed) Please drop this nonsense, cause there are masses of GENx and Y that are full of nonsense crap out there, whom of which you are not comunicating with at all. After all, it is they now who are up to their necks in todays style of economy and are now in some way the ‘vested interests’ that dont want to break the current system.
    ps, Older incumbents have always protected their arses and always will.
    Second, they are talking down to the masses who always perfer simple and positive when it comes to this sort of stuff. And if you get your coveted job writing for the mainstream then you will in all probabliy get a remit from which you will deviate at your peril.
    Note Steve Keen has never been seen as apropriate to be aired in the mainstream, except to be perhaps rediculed ocasionaly.

    • I partly agree with you Steve – other generations will make the same mistakes.

      But I think they only do that because they are using the same methodology as the current boomers.

      For example, if we swapped Wayne Swan with a Gen Y politician right now, what would he be saying/doing? He’d be doing what his advisors recommend to do.

      My point is that you cannot expect change to be quick, particularly if the previous generations framework and culture is still in place. In fact this might be a defence of the boomers, as it took time and they had to fight to change the previous generation. But they had something significant on their side – vastly superior numbers (votes).

      I believe that things will not change – until there is a crisis that FORCES us to reconsider the way we do things – be it managing the economy or listening to the media. Why else would politicians or journalists change, if the current model appears to serve their needs?

      So the boomers may have invented the current model, but lack of boomers won’t stop it from continuing. It is only the point when existing patterns of behaviour are questioned that things can change. Another example would be if we hit a Depression. Will Keynsian economics survive such a thing? Or will we break down that framework and adopt something more suitable to our time?

      I suspect that as much as we blame the boomers for exaggerated market confidence and overspending now, we’ll probably blame a subsequent generation for precisely the opposite (should it come to pass). “Why won’t the Government pay welfare? Why won’t our Government supply foreign aid? Why won’t our Government be positive about the economy? Why did our Government add housing to the CPI to bring it down after years of leaving it out to ignore the increases?”

      Still, I think that generational behaviours are a tricky topic, not least because we change as people over our lifetime and value things differently. It is hard to keep track of what is really going on, particularly because everything is relative to our own perspective at the time.

  15. It should come as no surprise that many of the MSM commentators fall in the 47-65 year age group. It would be odd if they did not.
    There is no need to explain this by believing that “the surviving coterie of baby boomer commentators set about retarding competition in the ranks”. That’s tin-foil hatism – quite a common trait among the “thirty and (just) forty-somethings”.

  16. Baron Von Cool

    Reader of about 8 months, first time commenter. MB is absolutely fantastic. Im a geologist who recently went back to uni to do a diploma in sustainability, and who loves economics but finds too many non sequiturs in the field of study and MSM commentary, being that I have an analytical, scientifically trained mindset.. I recently got a credit in my economics course, and have over the year been able to convince my baby boomer parents to stop hassling me to put my substantial savings from 5 years in the mining industry into housing. They are even starting to wise up to broader economic trends.

    This article is particularly apt, it is not ageism, it is a demographic observation combined with economic evaluation of self interest within a particular, highly influential industry. It is true, unfortunate, and no railing against it will change that. The debt will be deflated, a depression will occur, many lives will be improved.

    Thankyou immensely for this fantastic blog. Therapy for the sane.

  17. How many investment properties you reckon pascoe has?
    How much of gittins’ superannuation is tied up in nab shares?

    The important thing these boomers have in common is that they will all be retiring soon, and need to make sure that the generations after them pick up the ponzi torch, and furnish them with a lavish retirement.

    All just talking their own book(s)

  18. I used to like a good Boomer Bashing article or thread but I’ve long since mollified my position as I came to the conclusion that the vast majority of Baby Boomers are going to see their assumed wealth vanish just as they approach retirement. Housing will not be safe either as I’ve long held the opinion that the family home will be fair game once the chips are down.

  19. I say we kill the Baby Boomers now.

    Lets face it, they’ve had it too easy. Cheap housing, cheap oil, free tertiary education (thanks Gough) and no major wars or depressions during their prime. (ok there was Vietnam and the 1970s was a bit rough). But all in all a pretty cruisy run.

    Anyone under 50 knows there will be no pension for us because the nation will be bankrupted paying for Boomers’ retirement and healthcare. We all know what little they have left in super they’re busily blowing on biannual trips to Europe to take advantage of the rampant Aussie.

    So lets save ourselves the trouble, and kill the lot of them. Starting with Gittins! then Pascoe.

    Yours, The Lorax. Gen X (by two years!)


  20. I think the smugness in the media which you blam on baby boomers is a particularly Australian thing. I’m British and the media there is different. I’d always attributed the general complacency ‘we are different, we’re ok, we’re not affected by the rest of the world’ thing down to being Australian (and a bit isolated), not because the commentators may be baby boomers.

    • I am so glad the younger generation of Australians (represented by MB) is different. Some sanity and thought provoking articles in a world of mediocrity.