2014 01
In January 2010, The Australian named then Prime Minister Kevin Rudd as ‘Australian of the Year’ ‘because of the way he dealt with the global financial crisis’. From affiliate EWI’s 2014 State of the Global Markets Report:
We correctly called the award a sell signal for Australian stocks - the All Ords would make no net progress for the next three-and-a-half years.
posted on 31 January 2014 by skirchner in Financial Markets
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Nina Munk’s summation in her Econtalk interview is not at all surprising, but no less devastating for that:
they were now really living in a kind of squalor that I hadn’t seen on my first visit. Their huts were jammed together; they were patched with those horrible polyurethane bags that one sees all over Africa, covered in sort of burlap bags and sort of plastic tarps from the UN refugee service. There were streams of slop that were going down between these tightly packed huts. And the latrines had overflowed or were clogged. And no one was able to agree on whose job it was to maintain them. And there were ditches piled high with garbage. And it was just—it made my heart just sink. And I thought to myself: You know what, Jeffrey Sachs? You came to this village once. That’s not true. I think he came a second time in a helicopter the second time. He’s been to that village twice. And on both times he was received like a welcoming monarchy. All the people come out to greet him, and the local officials come out in their best Sunday suit. And everyone’s out there giving grand speeches on a microphone, and they sing songs and they dance for him and they thank him and they praise him and they pray for him. But you know, when you leave and you go back home to your townhouse on the upper west side of Manhattan and you return back to your comforts, you know, these people are left really with nothing. With nothing. And arguably they are left with something that is more dismal and worse than it was before he tried to impose his ideas of progress on them.
posted on 30 January 2014 by skirchner in Economics
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I have an op-ed in today’s Australian beating the housing supply drum at the expense of the anti-negative gearing brigade. In particular, I address the argument that demand for investment property is largely met through existing rather than newly built dwellings:
This reflects the fact that the flow of new houses is small relative to the existing dwelling stock. But it is about as relevant as noting that investors in the stockmarket mostly buy already held rather than newly issued shares. It is only supply-side constraints that prevent demand for existing dwellings from inducing new construction.
Negative gearing is first and foremost a tax policy issue and should be addressed as such as part of a broader tax reform effort. I could live with the Henry review’s proposed discount for income derived from saving, although ideally it would be much larger than his suggested 40%.
posted on 23 January 2014 by skirchner in Economics, House Prices
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I had an op-ed in the AFR over the break on the federal government’s injection of funds into the RBA’s Reserve Fund. The article notes that the public policy issue is not the subtraction from the budget bottom line from the injection, but whether the benefits of holding foreign exchange reserves are worth the risk of potential valuation losses and forgone income on higher yielding domestic assets. Foreign exchange reserves are not necessary for the effective conduct of monetary and exchange rate policy in Australia. An alternative policy approach is to hold smaller reserves. Full text below the fold (may differ slightly from published AFR text).
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posted on 13 January 2014 by skirchner in Economics, Financial Markets, Monetary Policy
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