Australian Economics

[Giardiasis]

I think you will find that Schumpeter is not of the Austrian school. He was an economist from Austria.

 

[AngryAnt]

I think you will find that Schumpeter is not of the Austrian school. He was an economist from Austria.

Good catch

 

[Giardiasis]

So I guess the austrian school doesn't have merit now ;D

 

[This Is Anfield]

Gotta say I've been perusing this thread & it's so far over my head it's a tiny speck in the sky.

I'm living the "pay goes in, mortgage, petrol, food, kids stuff (so very much of this), entertainment & the many unforseen drains on our income come out" school of economics!

Luckily Aldi has cheap beer at a reasonable price - I'm sure that you can get reasonably priced beer in Austria as well!

 

[pahoffm]

Must say that the last few years haven't surprised me in the least, relating to Australian and global economics.

Back in 2007, I was "poo-pooed" on PRE for saying that we were sitting on an economic bubble.
Nearly everyone thought we'd be riding high forever.
Fortunately, I did manage to persuade my then employer NOT to buy an investment property, and merely lease extra office space on a 12 months contract, if he felt he had to spend money. It saved his family's life savings, ie, their family home.

Also, I posted that bank deregulation was the reason for the bubble, and that it would be the reason for the bubble popping. Further that the deregulation of the $AUS, back in the 1980s, would eventually destroy our Australian manufacturing base.
It was nice to see the re-introduction of banking regulations "post" the disaster of 2008. However, I see that the new Federal Government is now seeking to remove these regulations and, consequently, allow for "bubble" conditions and all the "evils" of the early 2Ks to occur again. (I'm sure Tony has plenty of banking "mates".)

Also, I stressed that we were wasting money subsidising a car industry that did not provide Australia with any "comparative" advantage.
Basic Economics 101 tells you that manufacturing and trade only occurs where there is a comparative advantage. It doesn't help Australia to subsidise any industry that does not build products that Australia, nor the world, wants.
We can subsidise mining, because the world wants our minerals, so we can trade them. And, there is a future.
We can subsidise farming, because the world wants our farming products, so we can trade them. And, there is a future.
The damage was done when subsidies were handed out for building out-dated cars, or cars that the rest of the world were building.
And don't get me started on subsidising unionised workers who don't show up to work every second day with western & northern suburbs cultured medical certificates.
We could and should've given money, years ago, to subsidise the development of a new breed of futuristic car, say a hydrogen car, that would have given Australia that comparative advantage that the world desired.
Unfortunately, that opportunity has passed, as has that of the petroleum car.

What is the next oipportunity?
Robots!
Robotic research is a futuristic industry.
It is on the margins, with a potentially high yield.
We should consider subsidising Honda, or some other, to set up a robot development centre in Australia.
We could lead the world in this futuristic industry.
But we won't. Not until everyone else is doing it.

My final bugbear is that of allowing foreigners to own Australian property.
I don't mind anyone of any race, religion, or company owning Australian property, as long as it is or they are Australian citizens.
An Australian company is one that is not only set up in Australia, but can also prove a majority Australian shareholding, and not an Australian company that has an overseas holding company.
Regardless of what the banks tell us, this and banking deregulation, together, have a profound effect on housing prices in Australia.
The major problem that I posted years ago, which is coming home to "roost" now, is that our new generation of Australians are being pushed out of land and home ownership. The trend indicates this problem getting worse as time gos on.
Over history, over the world, this is the very catalyst of major civil discontent.
It will be interesting to see in the future how Australian governments cope with major portions of future Australians being "shut out" of home and land ownership.
Excuse my Xenophobia, but it does point towards a violent and fractured future.

Happy 2014 everyone!

 

[Giardiasis]

Must say that the last few years haven't surprised me in the least, relating to Australian and global economics.

Back in 2007, I was "poo-pooed" on PRE for saying that we were sitting on an economic bubble.
Nearly everyone thought we'd be riding high forever.
Fortunately, I did manage to persuade my then employer NOT to buy an investment property, and merely lease extra office space on a 12 months contract, if he felt he had to spend money. It saved his family's life savings, ie, their family home.

Also, I posted that bank deregulation was the reason for the bubble, and that it would be the reason for the bubble popping. Further that the deregulation of the $AUS, back in the 1980s, would eventually destroy our Australian manufacturing base.
It was nice to see the re-introduction of banking regulations "post" the disaster of 2008. However, I see that the new Federal Government is now seeking to remove these regulations and, consequently, allow for "bubble" conditions and all the "evils" of the early 2Ks to occur again. (I'm sure Tony has plenty of banking "mates".)

Perhaps you can refer to specific examples of bank deregulation that led to the GFC? I find it hard to believe that anyone could consider the US banking system as deregulated, when there are 115 agencies regulating the US financial sector. It is pretty much the most regulated industry in the US.

Also, I stressed that we were wasting money subsidising a car industry that did not provide Australia with any "comparative" advantage.
Basic Economics 101 tells you that manufacturing and trade only occurs where there is a comparative advantage. It doesn't help Australia to subsidise any industry that does not build products that Australia, nor the world, wants.
We can subsidise mining, because the world wants our minerals, so we can trade them. And, there is a future.
We can subsidise farming, because the world wants our farming products, so we can trade them. And, there is a future.
The damage was done when subsidies were handed out for building out-dated cars, or cars that the rest of the world were building.
And don't get me started on subsidising unionised workers who don't show up to work every second day with western & northern suburbs cultured medical certificates.
We could and should've given money, years ago, to subsidise the development of a new breed of futuristic car, say a hydrogen car, that would have given Australia that comparative advantage that the world desired.
Unfortunately, that opportunity has passed, as has that of the petroleum car.


What is the next oipportunity?
Robots!
Robotic research is a futuristic industry.
It is on the margins, with a potentially high yield.
We should consider subsidising Honda, or some other, to set up a robot development centre in Australia.
We could lead the world in this futuristic industry.
But we won't. Not until everyone else is doing it.

This is great that you have such knowledge of the world economy to be able to know what people want. Australian entrepreneurs must be complete dudder heads! “It doesn't help Australia to subsidise any industry that does not build products that Australia, nor the world, wants.” This statement is very true, what needs to be added to it is that, “Only entrepreneurs working within a free market, unburdened by government interference, can properly perform economic calculation.” What sort of analysis have you performed to possibly know what the world wants? No offense, but it seems like armchair speculation.

My final bugbear is that of allowing foreigners to own Australian property.
I don't mind anyone of any race, religion, or company owning Australian property, as long as it is or they are Australian citizens.
An Australian company is one that is not only set up in Australia, but can also prove a majority Australian shareholding, and not an Australian company that has an overseas holding company.
Regardless of what the banks tell us, this and banking deregulation, together, have a profound effect on housing prices in Australia.

This would effectively result in the impoverishment of thousands of Australian workers. Without foreign investment, the pool of capital available to develop business’ in Australia would be pitifully small.

The major problem that I posted years ago, which is coming home to "roost" now, is that our new generation of Australians are being pushed out of land and home ownership. The trend indicates this problem getting worse as time gos on.
Over history, over the world, this is the very catalyst of major civil discontent.
It will be interesting to see in the future how Australian governments cope with major portions of future Australians being "shut out" of home and land ownership.
Excuse my Xenophobia, but it does point towards a violent and fractured future.

Yes, it is a big problem; however I disagree with your assessment of the causes of it.

 

[AngryAnt]

The biggest problem with Phantom's robotics idea is that we don't have any special competency in it, we don't have a manufacturing industry that needs it, and therefore we have no local market to sell it to.

All the studies of innovation show you need local markets, customers and economic churn for a new innovative industry to viable.

 

[spook]

The obvious and simple industry would have been solar, but we let that go through to the keeper.

 

[bullus_hit]

The obvious and simple industry would have been solar, but we let that go through to the keeper.

Yes, and we were once the world leaders in the field. Our reluctance to increase the MRET at a time when the industry was booming saw many companies relocate to China, the same goes for wind. It will still become the golden goose for someone, unfortunately the Australian government will stop at nothing to prop up the coal sector. Even the money spent on clean coal technology would have been better spent on renewables, the whole geosequestration experiment has been a prime example of waste and mismanagement. Why did the Howard government commit the cardinal sin of putting all the eggs into one basket? I think the answer lies in ideology, Howard's never been one to beat around the bush when it comes to his distaste of anything linked to climate change.

 

[pahoffm]

Perhaps you can refer to specific examples of bank deregulation that led to the GFC? I find it hard to believe that anyone could consider the US banking system as deregulated, when there are 115 agencies regulating the US financial sector. It is pretty much the most regulated industry in the US.

It may seem to be regulated, but if you consider that the US allow the reselling of mortgages and junk bonds, it's not that well regulated, eg, the Madoff Schemes and other like them.
In Australia, the floating of the Australian dollar, although initially helping by driving it down to US$0.50, hurt us when it went up eventually past the $US.
Keating should have merely devalued the $A. Further, Keating's reforms allowed many of the US malpractices to occur in Australia.

This is great that you have such knowledge of the world economy to be able to know what people want.

It helps to have gained a Monash University Economics degree, majoring in Accounting & Finance, also with a life-long interest in Economics & History. And, 15 years experience in the fast-moving consumer goods industry, dealing at a head office level with Coles & Woolworths too, I suppose.

Also, as you may have guessed, I am a strong believer in Jane McGonigal's '10,000 hour' rule.

Australian entrepreneurs must be complete dudder heads!

Some may argue that Alan Bond was a dudder head. (And 'Wocka' Fairfax too.)
Personally, I believe that he/they merely connived to take advantage of the reforms nicely 'slotted' in by his/their great mates, Hawke & Keating.

“It doesn't help Australia to subsidise any industry that does not build products that Australia, nor the world, wants.” This statement is very true, what needs to be added to it is that, “Only entrepreneurs working within a free market, unburdened by government interference, can properly perform economic calculation.”

The first part that I wrote, I agree with.
I don't believe that unrestricted entrepreneurship works in the national interest. It may work for growth and self-interest, but growth for growth's sake in history has nearly always resulted in bubbles then crashes.

What sort of analysis have you performed to possibly know what the world wants? No offense, but it seems like armchair speculation.

No, no.
I didn't need to do the modelling. It was already done by the likes of Adam Smith, Keynes, Galbraith & others.
I don't need to personally prove the theory of the universe to know that the world is round.

This would effectively result in the impoverishment of thousands of Australian workers. Without foreign investment, the pool of capital available to develop business’ in Australia would be pitifully small.

There are many countries in the world that import capital without selling off their country.
China is an excellent example.

Yes, it is a big problem; however I disagree with your assessment of the causes of it.

That's fine, that's your opinion.

 

[AngryAnt]

Also, as you may have guessed, I am a strong believer in Jane McGonigal's '10,000 hour' rule.

You mean Malcolm Gladwell, McGonigal applied the rule to computer gaming and gambling - they should have taught you better scholarship at Monash.

The 10,000 hours of practice to make an expert theory is pretty much disproved and suffered from terrible selection bias in any case.

 

[This Is Anfield]

The 10,000 hours of practice to make an expert theory is pretty much disproved and suffered from terrible selection bias in any case.

PRE proves that all you need to be an expert is a computer & a keyboard!

 

[spook]

PRE proves that all you need to be an expert is a computer & a keyboard!

Well played, Scouse. :clap

 

[Giardiasis]

It may seem to be regulated, but if you consider that the US allow the reselling of mortgages and junk bonds, it's not that well regulated, eg, the Madoff Schemes and other like them.
In Australia, the floating of the Australian dollar, although initially helping by driving it down to US$0.50, hurt us when it went up eventually past the $US.
Keating should have merely devalued the $A. Further, Keating's reforms allowed many of the US malpractices to occur in Australia.

So what specific example of deregulation does that apply to?
I’m not sure how Australia is relevant to the causes of the GFC? In any case, what Keating should have actually done is ended the RBA (thereby ending their monopoly on money printing), cut our currency from the US currency, restored the gold standard to our banking system, and made fractional reserve banking illegal.

It helps to have gained a Monash University Economics degree, majoring in Accounting & Finance, also with a life-long interest in Economics & History. And, 15 years experience in the fast-moving consumer goods industry, dealing at a head office level with Coles & Woolworths too, I suppose.

Also, as you may have guessed, I am a strong believer in Jane McGonigal's '10,000 hour' rule.

It doesn’t seem to have helped that much. For starters, it appears your knowledge of what money is, how our banking system works, and the harmful effects of monetary policy and government interventionalism into the economy needs a bit of fine tuning.

I am slightly doubtful that your experience listed above could bestow upon you the clairvoyance to know that subsidising Honda to build robots is the path to profit! Alas such talent is denied to us mere mortals without majors in Accounting & Finance from a Monash University’s Economics degree.

The first part that I wrote, I agree with.
I don't believe that unrestricted entrepreneurship works in the national interest. It may work for growth and self-interest, but growth for growth's sake in history has nearly always resulted in bubbles then crashes.

Well you wrote it, it would be strange indeed if you didn’t agree with it! I am afraid that without an understanding of the Austrian business cycle theory, your understanding of what bubbles are and what causes them is slightly lacking.

No, no.
I didn't need to do the modelling. It was already done by the likes of Adam Smith, Keynes, Galbraith & others.
I don't need to personally prove the theory of the universe to know that the world is round.

Can you please point to me where Adam Smith, Keynes and Galbraith & others said anything regarding the robotics industry, and how subsidising Honda to build robots would be a profitable enterprise?

There are many countries in the world that import capital without selling off their country.
China is an excellent example.

China is also an excellent example of impoverishment.

That's fine, that's your opinion.

Thank-you.

 

[AngryAnt]

PRE proves that all you need to be an expert is a computer & a keyboard!

ouch :clap

 

[pahoffm]

So what specific example of deregulation does that apply to?
I’m not sure how Australia is relevant to the causes of the GFC?

Not that Australia is the cause of the GFC, that's your misunderstanding of Economics.
It is that banking deregulation gives rise to bubbles and crashes. The GFC is not the first of its type. Modern economics have similar examples of banking deregulation causing bubbles and crashes since Amsterdam in the 17th century.
Australia merely follows examples from other countries. Keating's deregulations caused the crash in Australia of 1987. He merely followed what had been done in banking deregulation in England and the USA prior.

It doesn’t seem to have helped that much. For starters, it appears your knowledge of what money is, how our banking system works, and the harmful effects of monetary policy and government interventionalism into the economy needs a bit of fine tuning.

Economic theory and history tells us that without monetary policy and government intervention, the bubbles and crashes, and the effects thereof, would be a lot worse.
An example such as Roosevelt's New Deal, based on Keynesian economic theory, serves as a precedent which others have followed almost a century later.
When the GFC occured, banking regulators around the world immediately moved to tighten regulation after the horse had bolted.

I am slightly doubtful that your experience listed above could bestow upon you the clairvoyance to know that subsidising Honda to build robots is the path to profit! Alas such talent is denied to us mere mortals without majors in Accounting & Finance from a Monash University’s Economics degree.

It is interesting here that you ask how the banking system works, yet further on you ask of the relevance Smith, Keynes & Galbraith to theories of comparative advantage, monetary policy and economics.
This misunderstanding on your part raises concerns about your knowledge of any economics.

Giardasis are you a junior high school student?
Your economic knowledge does not reflect that of an adult nor someone of economic knowledge.

What are your economic qualifications?
What professional training supports your misunderstandings?

Well you wrote it, it would be strange indeed if you didn’t agree with it! I am afraid that without an understanding of the Austrian business cycle theory, your understanding of what bubbles are and what causes them is slightly lacking.
Can you please point to me where Adam Smith, Keynes and Galbraith & others said anything regarding the robotics industry, and how subsidising Honda to build robots would be a profitable enterprise?

Again, your clear lack of understanding on Adam Smith's laws of comparative advantage. It was written near 500 years ago, and applies equally well now as it did then. Australia should invest in industries where it can have an advantage, eg, through innovation, and not investing public money into industries where we are a follower.
With Keynes, you have your theory of monetary policy, and how economies can be stimulated or deflated with government spending and monetary policy.

For you to question this point raises alarm bells about any understanding you may have of economics, if any.

China is also an excellent example of impoverishment.

Any amateur historian would have a clear understanding of China's impoverishment over centuries of imperial dynasties, and how it began to crawl out of its impoverishment with communist reform, and how it is making great strides under its regulated state capitalism.

This raises alarm bells about your knowledge of history.
Anyone with a reasonable education knows of China's long haul from centuries of impoverishment and the great strides being made now.

Thank-you.

Thank you.
I understand that there are those with greater qualifications than myself, with Masters and Doctorates in Economics, etc.
Again, what are your qualifications as to economics?
Are you an armchair expert?

 

[AngryAnt]

Again, your clear lack of understanding on Adam Smith's laws of comparative advantage. It was written near 500 years ago

The Wealth of Nations was published in 1776, an auspicious year. Now I don't have a degree in Economics and Accounting from Monash, plus 10000 hours doing whatever, but to me 238 years is not "nearly 500".

 

[pahoffm]

I am quite aware of when "An Inquiry into the Nature and Causes of the Wealth of Nations" was published.
I'm glad you've gone to look up the exact date.

All this has done is prove that I've referred to a noted document to support my point.
You, in turn, have reinforced and supported that my reference does exist, ergo supporting my argument.

Giardasis challenged me to put up my credentials for speaking on Australian economics. I have done so.

I challenge Giardasis to do the same to affirm his credentials.

 

[AngryAnt]

I am quite aware of when "An Inquiry into the Nature and Causes of the Wealth of Nations" was published.
I'm glad you've gone to look up the exact date.

Did they teach you to round 238 up to 500 at the Monash School of Accounting?

All this has done is prove that I've referred to a noted document to support my point.
You, in turn, have reinforced and supported that my reference does exist, ergo supporting my argument.

Dude, The Wealth of Nations is one of the most famous economic texts ever. Merely referring to it proves nothing.

 

[pahoffm]

As a rider, I would recommend the following references to those that wish to enhance their understanding of Economics.

For a descriptive version of comparative advantage,
An Inquiry into the Nature and Causes of the Wealth of Nations, Adam Smith, 1776
http://www.ifaarchive.com/pdf/smith_-_an_inquiry_into_the_nature_and_causes_of_the_wealth_of_nations[1].pdf

For a descriptive version of how modern banking systems work,
The General Theory of Employment, Interest and Money, John Maynard Keynes, 1936
http://ebooks.adelaide.edu.au/k/keynes/john_maynard/k44g/

I also recommend Galbraith for an understanding of economic history and the effect of globilization on national economies.
The Age of Uncertainty, John Kenneth Galbraith, 1977
http://www.amazon.com/The-Uncertainty-John-Kenneth-Galbraith/dp/0395249007

If there is a more specific area of economics that you wish to study, post it and I can assist you with a suitable reference.