Links: October 2

Global Macro

United States





  • Assad gave French intelligence on Gaddafi, say sources. The Telegraph
  • Meanwhile, Aleppo’s world heritage souk continues to burn. Wall Street Journal
  • Bangladeshi rampage over Koran Facebook image. BBC


    • Garnaut was pretty good on Lateline last night. Perhaps this interview should be the subject of a separate post at MB today?

      EMMA ALBERICI: …how is Australia placed to take advantage of those non-mining opportunities in China?

      ROSS GARNAUT: Well there will be a lot of other opportunities. Growth in demand will continue, but more of it will be focused on high-value services, high-value manufactured goods.

      Now Australia has some strengths in these areas. We had tremendous growth in high-value manufactures and high-value services from the mid-’80s until about eight years ago, eight or nine years ago, roughly coinciding with the beginning of the resources boom. Now that’s all been choked off by a number of factors, the most important of which is the rise in the exchange rate and increase to the cost level that is associated with the resources boom itself.

      Now in a sense that will be self-correcting. The easing of the resources boom will lower the nominal exchange rate, the exchange rate you see on the TV every night. And, so long as we don’t let incomes blow out, we will become more competitive in those high-value manufacturing and service industries.

      There’ll be a lot of opportunities in Asia, first of all in China, for these industries. But we’ve got to be ready to put resources back into those sectors and the worry is that they’ve taken a pretty big hit during the period of the high exchange rate during the resource boom and so it’ll take a time to get momentum back into them. But there’s a chance there if we’re clever enough and fast enough.

      The bolded section seems to directly contradict the MineBot’s oft-repeated claim that the decline in Australian manufacturing was not accelerated by the resources boom. But hey, what would Garnaut know?

      • Lorax, the key word: “coinciding”. I am intriguing to learn of these high-value manufactures, their volumes and export income? Services to some extent, yes, but these always were to be overtaken by some other supplier, eventually.

        Fact is a ABS doc I linked to recently detailing trade over the past ten years failed to show any really susbtantial change in either manufactures or services traded. But resources – woo hoo 🙂

        • And how many people did that industry employ, all i remember of that period was endless farewells and Mckinsey studies on how to “rightsize” the organisation.

  1. Garnaut, at his meetings to supposedly ‘discuss’ the climate change issue with the community, was guilty of the same intolerance and thuggery he accuses others of. Garnaut means intolerance and thuggery is OK as long as it is his.

  2. From Greg

    Ben Bernanke Just Gave A Dazzling Speech About Monetary Policy — Everybody Needs To Grasp The Key Points

    Read more:

    Sorry I didn’t see Bernanke explode any myths. In fact I read his self-justification for his disastrous policies. I realise that with a profligate government a Central Bank seems to have limited options.
    An example, he reckons he is looking after ‘savers’ by putting the bubble back into housing. What he is helping there is those who are in debt not the savers! Similarly he says low interest rates aren’t screwing savers because they are low all over the western world. Frankly wtf has that got to do with it?
    The whole speech is pretty much total garbage. How modern economists swallow this illogical, simply wrong and inadequate, baloney is beyond me.

    • First and foremost Bernanke looks after his bosses, the owners fo the NY Fed.

      The rest is just coincidental.

      And how anyone can keep buying the Fed spiel and sham facade is beyond me. There was a time in the US when the Fed owners fortunes were linked and as one with the prosperity of all Americans. Now, the prosperity of Americans is irrelevant to the fortunes of the big Bank owners.

      300 odd million people and their Govt hostage to a cartel of Bankers.

    • A dreadful speech – although an excellent illumination of the delusions at the core of modern central banking.

      The article demonstrates the absence of genuine critical engagement with alternatives to the current yanking of discredited levers of economic policy.

      But then we have seen the same sort of stuff locally as the debt industry and their supplicants crank up their usual easy money memes for the RBA meeting.

    • Unless the savers revolt by withdrawing their savings en mass from the banks, nothing is going to happen and The Bernanke will keep making these stupid assertions.

    • Guys I can’t follow your arguements,30 year bond rates in the US in the last 5 years have rallied in price terms almost 40% savers have been well looked after. Now, savers need to take risks and buy stocks i.e. do something!
      Bernanke has a mandate to produce full employment and keep prices low. Currently the threat is disinflation with high unemployment and further deflationary threats from a fiscal cliff.
      With interest rates at zero, and further deleverage to come what choice does he have but to keep stimulating.
      I think you are all angry at government fiscal policy over the years, and probably easy policies of past central bankers, leading to leverage of the private sector, and so am I.
      However, we are in an era of massive change, and what might have been a remedy in the past is not for now. To go down the austerity road that was briefly chosen by Germany dominated Europe would be catastrophic. Unemployment would likely be 30% and the US government would default, the people would starve.
      But you can’t keep all the people happy all the time. Go Ben Go!

      • What evidence is there to suggest that Ben’s ultra easy monetary policy has propped up employment (other than those of zombie banksters)?

        Now, savers need to take risks and buy stocks i.e. do something!

        You cannot be serious. Do you want the savers left holding the basket when QE ends?

          • PS evidence is spain greece italy.

            …if you ignore the fact that ECB is engaged in its own QE (SMP, LTRO, OMT) that didn’t help employment one bit?

        • Do you want the savers left holding the basket when QE ends?

          Don’t you mean, the remaining few savers left with nothing when the banksters conspire (again) to (“inexplicably”, the historians will say) sacrifice one of their own, Lehman-style, triggering another huge equities crash?

          Most recent rumour I’ve heard is Morgan Stanley set for the altar.

      • BobT,

        What choice does he have but to keep stimulating?

        He has a simple choice. Leave the responsibility for managing the economy to those who have been elected to do so and concentrate on currency and financial system stability.

        The employment mandate should only be a reminder that the Fed should give employment some consideration when they engage in inflation crunching activities.

        The idea that it is the job of some unelected head of a private bank cartel to manipulate the cost of debt to engineer economic activity is the central delusion.

        Congress and the President are responsible even if they currently choose to duck it.

        As for an overabundance of savers! Certainly not in the US.

        The US and Oz are dependent on the saving habits of the developing world. Doesn’t it strike you as odd that the developing world is directing its capital to the first world – largely for consumption and asset speculation.

        • Pfh007,

          I can see your point that Bernanke might have too much power as an unelected official, but he is less likely to pander to the electorate. I remember Paul Keating cutting rates in a budget presentation in the 80s.This is the reason we seperated the power of monetary policy from the political process.
          But the debate must be had and the mandate should be made clear.

          • I always find these statements about “pandering to the electorate”, accusations of “populism” etc, rather curious. They strike me as representing evidence of arrogance and paternalism (not you, BobT, just speaking generally).

            Surely if we are going to [email protected] on about “democracy”, then “what the people want” should be the very basis of our political principles.

            But of course, the paternalists argue, the “people” generally are “stupid and greedy” (except when they vote our side into power, then it’s “we have faith in the wisdom of the Australian people, the public NEVER gets it wrong”). Because the people are stupid and greedy, we need “courageous”, “principled” leaders who “do what is right”, and do not “pander to populism”, don’t we?

            Hark! Look at them all!! A parliament full of principled politicians who’d NEVER pander to the whims of the sheeple.


        • PF007

          On the redirecting of savings into OZ and US it is as expected because of the first worlds massive propensity to save in its current stage of developement. The US was very similar in the 20s as ford etc made big advances in manufacturing.
          I dont think China/oilsters are quite playing fair either by collecting trillions in foreign reserves instead of importing stuff. It is meant to be trade, not some hire purchase scheme. It is in Bens mandate to remind them that making claims on future generations isnt as clear cut as they think particularly in US dollars.

          • Bob t you have to be kidding right?

            “there is a massive oversupply of savers!”

            If there was a massive over-suplly of savers the whole western world would be running Current Account Surpluses.

            What we have is a massive over-supply of Central bankers printing worthless paper trying to restore the old economy that is already proven to be unsustainable.

          • flawse, the fed is buying debt, the developing world is saving, the western world wants to deleverage,and as the sun sets on the baby boomers everyone wants to save and are prepared to take 1% rates, massive oversupply.

    • In late 2010, we posted detailed information on our public website about more than 21,000 individual credit and other transactions conducted to stabilize markets during the financial crisis.

      Wow, this Ben dude has form, taking credit for an involuntary action that was a result of a lawsuit filed by Bloomberg and opposed by the Fed, all the way to the US Supreme Court, where they eventually lost !!

      Timeline of Bloomberg’s lawsuit against the Fed

      – May 21, 2008: Bloomberg files a Freedom of Information Act request. The Fed denies this request
      – Nov. 7, 2008: Bloomberg files suit to require disclosure [Bloomberg LP v. Federal Reserve, U.S. District Court, Southern District of New York (Manhattan)].
      – Aug. 24, 2009: Judge Loretta Preska rules that the Fed must disclose this information
      – Sept. 30, 2009: Fed appeals decision
      – Jan. 12, 2010: U.S. Court of Appeals hears oral arguments
      – March 19, 2010: Appeals court upholds Preska decision
      – May 4, 2010: Fed and Clearing House ask full U.S. Court of Appeals to overturn Preska ruling
      – Aug. 23, 2010: Full appeals panel refuses to overturn Preska ruling
      – Aug. 27, 2010: Court of Appeals gives Federal Reserve 60 days to decide on taking the case to the Supreme Court
      – Oct. 26, 2010: Federal Reserve decides not to join the Clearing House Association in asking the Supreme Court to consider an appeal.
      – Feb. 19, 2011: U.S. Solicitor General recommends the Supreme Court reject the Clearing House’s appeal.
      – March 21, 2011: Supreme Court rejects appeal and orders release of bank loan data

      • It is another matter on how the so-called “journalists” failed to notice this obvious lie. I guess they are shills for the Fed and the administrations, carefully selected to propagandise the “debunking” that never happened.

    • What Bernanke says is spot on. When people talk about “savers” what do they really mean? They sure as hell don’t mean a small entrepreneur who postpones consumption to risk their own savings starting a business.

      What they really mean is bondholders. Which is ironic, because since 1981 bondholders have been gifted the longest bull market in modern history.

      But they still aren’t happy. Now, allegedly, the Feds low rates policy threatens to unleash inflation at any minute and confiscate their wealth. But since late 2008, US inflation as barely been above 1% p/y.

      Considering the amount of wealth lost over the same period by people who have actually taken risks, grown the economy and employed people, this seems like a bloody good deal to me.

      • Who are the biggest holders of bonds, Sweeper?

        I don’t know, but to hazard a guess, I’d suggest it is those fortunate first recipients of Trillions in ZIRP “money”.

  3. The anger grows: ( as if it wasn’t apparent enough,already!)..from the comments section of Bus.Insider “Let’s just take the effect on savers. If savers are losing money relative to inflation isn’t this unfair relative to non-savers and debtors…no matter how much it hypothetically may benefit the economy. Imagine if this were accomplished through tax policy instead of through currency manipulation. Savers would be charged a higher rate of taxes than debtors and this would stimulate the economy. The question would be obvious…why should the ‘supposed’ improvement of the economy be put on the backs of people who worked hard, lived within their means and put away money for retirement and/or a rainy day? The rules of the game have been changed midstream and people who, by historical standards, should now be reaping the benefits of delayed gratification and thrift are now seeing the people who threw caution to the wind and bought things they couldn’t afford be bailed out by government and Fed policy. The fact that this is demonstrably unfair is one thing but it is also unwise and impractical because of the moral hazard it creates among the populace. These policies are teaching generations of people that they can’t trust in the just consequences of their decisions. This is fine if you want more profligate spending and misallocation of capital for generations to come but these lessons won’t be easily unlearned and I seriously doubt the Fed has the “tools” to teach people that this ‘new economy’ of entitlements and easy money was a transitory thing and shouldn’t be taken to heart. Once people become addicted to the something for nothing of deficit spending, stimulus and borrowing rates below the rate of inflation they are going to need some serious rehab!”

    • The FED and in particular Ben is forcing anyone with capital into the markets to achieve his aims. he’s not worried about the banks he’s bailed out with excess reserves sitting in the FED however, and that capital not flowing to the real economy.

      I’m yet to see a policy justification for this extreme bias. IMO all those 401K and pension funds with a high bias to US equities will do well for a while, but if the FED get’s it wrong, which I believe they have, then a few generations won’t see much of a pension.

      part of the new norm is that you work until death, and you must keep the velocity of money up or you’re no use to governments.

      here in Oz the pollies want to change the rules on our super, but not their own; what’s that saying?

  4. The great Garnaut. One of those esteemed PS wonks who dreams up ways to tax us so that his lot can live off our sweat.

    This summary belies what he really means, Garnaut cant miss a chance to pilfer more of real working people’s money;

    “Prominent Labor government adviser and noted economist Ross Garnaut has warned of a long and tough China-induced downturn in Australia that will require restraint in government spending and wages growth for the rest of the decade”

    But cannot stop himself from promoting more BS about how good Govt is at managing finances. What a farce.;

    “Professor Garnaut suggested that while the Gillard government had not received much credit, it had been doing the tough work of expenditure restraint in recent budgets.”

    Garnaut is just another Canberra parasite looking for ways to Socialise the wealth of the country. Go away!

    • Garnaut is just another Canberra parasite looking for ways to Socialise the wealth of the country. Go away!

      You do know that Garnaut held various positions in the private sector, including chairmanship of Lihir Gold, a mining company for crying out loud?

      Yet another uninformed rant from CDMA.

        • I doubt even you know what you are on about and are just filling your quota of astroturfing comments. So I won’t bother asking.

          • 3d1k, thanks for reminding us of the disastrous environmental impact of mining/resources industry and how the lack of the so-called “Green tape” regulations in PNG led to such disasters.

            oh wait.. that wasn’t your intention? LOL

          • Mav I have written before of the sometimes unsatisfactory practices of mining companies, particularly in developing economies.

            The irony is this and other Lihir Gold activities occurred on Garnaut’s watch – the same Garnaut, champion of all things environmental we have now. Redemptive spirit perhaps?

    • “Professor Garnaut suggested that while the Gillard government had not received much credit, it had been doing the tough work of expenditure restraint in recent budgets.”

      Garnaut should be put in stocks in the public square, pelted with rotten produce, then run out of town to the jeers and mockery of all, for that risibly dishonest statement alone.

      Black is white. White is black. Un-f***ing-believable.

    • GSM in a very broad stroke way I agree with you. Garnaut is too closely aligned with Labor to be considered independent, not that that necessarily detracts from his message. And yes, what a farce – the Government good at managing finances! And with a straight face. Hard to take too seriously an individual that has championed the foisting of a complex and costly to high energy use sectors tax with no proven benefits apart from the redistributive. That and recent apparent renewed support for RET. He is probably now doing a bit of a ‘softening-up’ for on Swan’s behalf, more ‘gravitas’ than the entire front bench. At least in the eyes of some…

    • The deterioration in public discourse

      Exhibit “A”

      “Garnaut is just another Canberra parasite looking for ways to Socialise the wealth of the country. Go away!”

    • “Garnaut is just another Canberra parasite looking for ways to Socialise the wealth of the country.”

      Huh? Doesn’t the wealth of the country belong to the country?

      • All these guy in public office work to a different set of rules, and are compensated differently to the average citizen. Some may even have good intentions, but that is only a kind notion mostly. 99.9% of these people never see the real life struggle.

        and on your question, the wealth does not belong to us, it’s a resource for the government to spend and usually to stay in power or align themselves to power.

  5. Talking about Government spin, not sure if this one has been covered;

    Australian Government ‘Finds’ Extra $338bn Assets (But No Unicorns Yet)

    “Australian Bureau of Statistics (and Lies) revised household wealth up by AUD14,380 for every one of the country’s 22.6 million people – as new estimates of unlisted shares and other equity pushed the nation’s total financial assets to AUD3.1tn (compared to an originally reported AUD2.77tn. As the miners from down-under continue to struggle against a fading China, this miraculous ‘find’ has dropped the ratio of debt to liquid assets from a worrisome 170.1% to a meager 129.1%”