Crikey! It’s that time of year again.

Image result for crikeyIf you’d like to be in this year’s submission to Crikey for a group submission, please email me on ngruen AT the domain formerly known as gmail (and still known as gmail).

And please spread the news far and wide using all the means – inane and otherwise – at your disposal.

 

 

Posted in Blegs | 1 Comment

Now is the time for complacency: RBA v Bank of England edition – Part Two

Image result for money and bankingCross-posted on The Mandarin: To quote Bank of England Governor, Melvin King in 2010 “of all the many ways of organising banking, the worst is the one we have today.” As I documented in part one, the Bank of England continues as a thoughtful critic to this day. And as we’ve seen there, but will see further below, that’s not so true of our central bank the Reserve Bank of Australia (RBA).

But first, let’s have a quick tour of the horror show to which King was referring.

The fatal flaw in banking is that, although the money in our economy is a classic public good, like the air we breathe or the radio spectrum, it’s privately created. Commercial banks like NAB or Westpac create money whenever they advance a loan. This private licence to print money produces four huge problems.

First the banking system – and with it the economy – seizes up if private banks take excessive risks and go bust. In bailouts governments typically socialise the losses long after shareholders and executives have privatised the profits in hefty dividends and bonuses. And when you hear people say Australia didn’t bail out the banks – don’t believe them. None went under because the banks lobbied for emergency guarantees for hundreds of millions of dollars and, with all hell breaking loose around the world, the government capitulated over a weekend.

Second, public officials manipulate the banks’ creation of money by influencing the appetite for bank lending (through the overnight cash rate). But borrowing and lending reflect ‘animal spirits’ which strongly reinforce the economic cycle. And manipulating animal spirits is notoriously tricky. We often watch repeated interest hikes or cuts fail to turn things around. This happened as rate rises failed to moderate the exuberance of the boom in the late 1980s – until they overdid it. It’s been happening ever since the financial crisis as we’ve been shown that, until confidence returns, interest rate cuts can ‘push on a string’ and are ineffective in increasing credit and investment.

Third, with surging surpluses from saving countries like China, Germany and the Middle East for decades now, other countries have been relieving themselves of the discomfort of sluggish growth by increasing debt at the risk of even greater trouble ahead. Are you feeling lucky?

Fourth: if private banks creating money sounds a bit dodgy, it is. Economic reform reins in these kinds of privilege in other areas. Thus where it was once allocated to the lucky few, much radio spectrum is now auctioned, generating billions in government revenue. But here’s the thing. If governments created the money supply it would bring in tens of billions, perhaps a hundred billion in revenue. Continue reading

Posted in Economics and public policy | 14 Comments

And now for some complete madness

If you’re a chess player who’s touched with the human weakness of impatience or just liked to be engaged and see things develop – as we almost all do on our smartphones, checking our emails over 100 times a day – it’s hard not to be drawn to speed chess or ‘blitz’ as I think it came to be called in NY. When I was younger I enjoyed blitz timed at 5 minutes a move – that was back in the days of mechanical chess clocks. Now digital chess clocks and internet chess have no difficulty allowing you additional seconds per move – which makes some sense – and the standard formats are 3 minutes plus 2 seconds per move (3:2) and a slower one which I prefer which is 5:5. Then there’s ‘rapid’ which comes in at 15 minutes for the game – often with 25 seconds per move thrown in.

At the other end there’s bullet which is typicall 1 minute for the game or 1:1. In that you more or less move on instinct. One of the best in the world is the Japanese American Hikaru Nakamura and one of his weapons is heavy use of ‘pre-moves’ which is to say that if you think you know your opponents next move you can move on your computer and it will play that move instantly the opponent moves their piece. One tends to do it only if one’s opponent’s move is forced or it’s a move that is only legal if your opponent moves in the way you expected – for instance a pawn taking a piece by moving one space forward diagonally as a pre-move will only be executed by the computer if it’s legal which might only be the case if your opponent makes a move you’re expecting.

Chess.com has started running tournaments which begin with 5:2 games, then graduate to 3:2 games and then end in a blizzard of bullet games of either the 1 or the 1:1 variety. They’re fun to watch if you like that kind of thing. If you want to watch Nakamura play Magnus Carlsen for over three hours doing this, for the world playoff recently, why not? Even if you don’t last the distance – even in lots of sittings like me – the commentary could help you ‘get it’. It certainly did me.

Continue reading

Posted in Chess | 1 Comment

How to tax the platform economy?

In the engine room of nation states, ie the tax departments, the coming battle with platform providers is taking shape. Uber, airbnb, facebook, linkedin, ebay, jobseek, and a myriad of specialised platform providers facilitate micro-trades that are largely untaxed by the authorities. In stead, the platform providers themselves take a cut, partially via advertising and partially via a direct fee for their services. They have taken over an activity that has mainly been provided by governments in the past: places to trade. The town square, the stock exchange, public infrastructure, and the unemployment office are relics of a past where governments were market providers that facilitated trades. Now, it is largely private companies with tax-avoidance structures that have taken on this role on the internet. That role is set to expand hugely.

This is a crucial battle that, so far, the tax authorities are losing because they have not yet grasped the magnitude of the shift. They lack the key new power that they must attain: the power to deny the operation of a platform provider in their country.

At the moment, tax authorities around the world, lead by the Scandinavians whose tax needs are high, are going the usual ‘reporting route’. They are trying to get Uber, Airbnb, and all the other ones to report the trades and the value of the trades that they have facilitated. Understandably, these companies are refusing to play ball because they of course are taxing the same trades themselves in a different way. They are competing with national tax authorities and hence their business model depends on tax evasion, so of course they refuse to help their competitors. Their lawyers make millions from refusing to play ball. The horror example for these companies is the 2015 data on Uber that had to be released to the Dutch tax authorities and that was subsequently shared with Denmark which promptly went after the drivers for added tax payments. This reflected the circumstance that the administration of Uber was in the Netherlands at that time, which allowed the Dutch to force Uber to hand over some of their data, a mistake Uber wont make again. The others too will have learned a salutary lesson from that episode.

Frustrated, the tax authorities are turning to pretty hopeless measures, such as new international treaties on the reporting of micro-trades by private entities. In a race to the bottom between countries trying to attract large companies, that is just a hopeless avenue where the authorities will always be many steps behind the tax-advisers of the big trading platforms.

What are the next moves we might then see when the tax authorities get up to speed? I think two developments are likely: full internet observation by national agencies and government-lead internet firms.

Full internet observation follows the model of China, which now has the capacity to track most of the internet activity of most of the population. That allows it to observe the trades facilitated on internet platforms, which in turn can be used for tax purposes. Those observations can be used to directly go after individual traders or can be used to go after the platform providers, simply by making their activities illegal if the platforms do not assist in tax observations. Adopting the China route would spell the end of internet privacy, but it probably works. And tax is such a key part of the nation state that it in the end trumps privacy concerns.

The second possibility is for the government to re-enter the market for platforms and set up its own internet firms for micro-trades and social media. It can simply copy the best examples on the internet for how to set these things up. Again, China shows the way with Alibaba competing with Amazon for trading platform business. In a settled market, the transition to new government platforms will come with losses, but authorities can appeal to national pride to get support from their populations and companies cannot compete with that. For micro-trades within a country or tax region (the US and, in the future, the EU) that should work. For international trades, one should expect more difficulties because government-backed firms from different countries might then directly compete with each other, which in turn might lead to competency battles and new dispute resolution mechanisms.

Posted in Death and taxes, Economics and public policy, Employment, Information, Innovation, Intellectual Monopoly Privileges, Intellectual Property, IT and Internet, Law, Political theory, Politics - international, Politics - national, Public and Private Goods, regulation, Social | 16 Comments

Changing the game – By John Burnheim

Most contemporary discussions of how to improve politics focus on problems of representation and power. When I come along and want to thrust getting better decisions into the forefront and claiming that a certain sort of untried forum could get improved results even without changing present forms of power or representation, the natural reaction is to conclude that I just don’t understand the political and social realities.

My key point in reply is that people can only realistically choose to do what they know how to do. Otherwise they fail or, worse still, deceive themselves into thinking they have succeeded, or would have succeeded if evil or stupid people hadn’t wrecked it. Authorities can only order people to do what they know how to do. Otherwise those people pretend to do what is required, or, perhaps unwittingly, wreck it.

One of the basic problems in democratic practice is that we are programmed to see dealing with social and political problems in terms of a few simple means: forbid it if it’s bad, encourage it if it’s good. In both cases what happens are attempts to change the behaviour of certain types of individuals or organisations. In some matters those approaches work, but in many they don’t, especially when the problem is caused by systemic factors, not the behaviour of individuals, or groups, or by the cumulative effects of activities that are negligible on the small scale, but fatal on a large scale. This last is now the case with almost all our serious problems. Our complex, rapidly changing activities generate such problems wholesale and in unpredictable varieties.

The last century suffered horribly from attempts to deal with its problems in terms of sweeping policies ranging from totalitarian to libertarian oversimplifications of wrongly identified and diagnosed problems. Those ideologies all concentrated on finding a form of social organisation that could cure all their ills. These ideologies evoked a religious enthusiasm, but they had to fail because understanding and dealing with their problems was a much more complex and diverse reality than they allowed or imagined.

I think people are ready to look at our important problems in terms of specific causes, not capitalism, but a specific kind of transactions, not war, but solving specific conflicts that lead to war, and so on. Continue reading

Posted in Democracy | 6 Comments

Anglo-Saxon histories (US, UK, AUS)

Anglo-Saxon countries are often heaped together as having a single culture. When it comes to migration, attitudes to sex, teenage-pregnancy, inequality, language, and bellicosity, that seems about right. At least, the UK, the US, and Australia are pretty close on those scores.

But how about their relation to history? My experience of these three countries is wildly different in terms of how the population relates to their national history. See if you agree with my observations, which are admittedly loose.

The Americans seem to invent a new history every few years, and each group has a wholly different take on history that has a different story of who the arch-enemy is. 9/11 and #MeToo are beautiful examples of what I mean: in both cases it has been a matter of mere months for US history to be re-written by those championing a cause. After 9/11 you saw new research institutes on terrorism arise like mushrooms, complete with stories going back to before the bible about the defining struggle against all sort of terrorism. Similarly, nowadays, the eternal patriarchy is rapidly being uncovered to stretch from time-immemorial to now. With every new wave of thinking, it seems the Americans want to feel they are at the pointy edge of some long historical struggle, with a looming final show-down with the enemy that has been there ‘all along’. When some new fad reaches their group consciousness, the cycle starts anew, complete with a new history and an apparent quick fading of the previous history stories. Fascinating stuff from an anthropological perspective!

The Brits are totally different. History here is not re-written every 10 years by every new group coming along but is only slowly changing and quite stable. The ‘struggle against terrorism’ was treated as a mere variant of opposing ‘those who oppose us this time’, not very different from how the influence of the EU was opposed in some quarters. #MeToo is certainly having an effect, but much more on the notion of what is ‘proper’ than on the reading of history. Maybe I missed them, but books reinterpreting the whole of history in a very particular light that belongs to some proselytising group are rare here. The Brits seem to think that some form of struggle is normal and that people disagree. New norms are quickly absorbed into a fluid notion of what is ‘proper’ rather than necessitating any wholesale re-imagining of national history. History is presented as a slow-changing wave, not a struggle that has its defining moment in the here and now. American-style re-interpretations of history that would necessitate the abandoning of old heroes like Cecil Rhodes are resisted.

The Australians are totally different again in their treatment of history. It currently seems like open warfare between quite virulent and aggressive streams of thought. I am no expert on the matter, but the deafening roar of the guilt-shouters on the left is overshadowed only by the canon-ball salutes of the new militarism that defines the historical reading by the current two major parties. It’s a regular culture war that is not directly related to current political topics at all, but seems to come from opposing economic interests and forms of mysticism, not all that obviously related to new political issues. Yet, unlike the US versions of re-writing history, the new Australian histories are not about setting up a narrative of who the enemy has been all along, but are about accentuating the character of who Australians have been all along. The main character narratives on offer are the universal sinner and the obedient soldier. To me, it’s a quite bizarre spectacle.

I have many explanations for these differences, none of which I am convinced of yet, but in a way, the explanations are less interesting than the observations. So let me know in the comment boxes if you see the same differences I see.

Posted in bubble, Bullshit, Cultural Critique, Ethics, Geeky Musings, History, Humour, Indigenous, Libertarian Musings, Politics - international, Politics - national | 30 Comments

An argument for celebrating Australian Independence Day on 9 October

“Arrival” by Brett Whiteley, painted for the Bicentennial celebrations of the arrival of the First Fleet on 26 January 1788

We’re a weird mob, we Australians, even weirder than we were in 1957 when John O’Grady wrote his book of (roughly) that name. We celebrate Australia Day on each anniversary of the establishment by Britain of an offshore detention prison in a sh**hole on the far side of the world on 26 January 1788.  Neither the convicts nor their guards wanted to be here at all. They certainly didn’t arrive with the hope of building a new nation (although later free settlers did). But that date also marked the beginning of a shameful period when our forefathers butchered tens of thousands of Aboriginal people to deter them from objecting to having their lands stolen, while inadvertently killing hundreds of thousands more by introducing exotic diseases to which they had no resistance.

Nevertheless, according to no less an authority than former prime minister Tony Abbott, you can make a good case for the proposition that Governor Arthur Phillip was Australia’s George Washington.  He was certainly more enlightened and thoughtful than most of the Governors who followed him, but the Washington comparison is a tad hyperbolic, not to mention the fact that Washington fought for America’s freedom from Britain whereas Phillip was Britain’s prison warden.

Our other important national holiday commemorates a huge and bloody military defeat where our young soldiers pointlessly stormed the cliffs of Gallipoli at the behest of pompous English politicians and buffoonishly inept military commanders, were slaughtered in their thousands and then withdrew again.

Arguably our single most popular national hero is Ned Kelly, who many thought was quite a nice chap for a cop-killing bank robber; while our most popular national song is about a sheep-stealing swagman who committed suicide by drowning himself in a billabong rather than be captured by the cops.

Then there’s our most legendary local event, involving a rebellion at Eureka Stockade at Ballarat by a biggish group of tax-evading gold miners, who have more recently become heroic figures for modern-day white supremacists and neo-nazis.

Nevertheless, there’s something strangely attractive about the laconic affection of us Aussies for people and events that the citizens of many other nations would regard as the very antithesis of heroic. Better, for example, than the habitual jingoistic hubris and boastful triumphalism currently epitomised by President Trump. The mythical self-image of the Aussie is embodied by a seemingly happy-go-lucky bloke who only reveals his inner steel when needed, like Hoges’ “That’s not a knife, THIS is a knife”.

In the best of all worlds we wouldn’t need to foster nationalist sentiment at all, whether of the laconic or loudly boastful variety. In one sense Samuel Johnson was right. Patriotism really is the last refuge of the scoundrel (think Peter Dutton, Pauline Hanson or Tony Abbott drawing spurious “battlelines” for momentary political advantage). Mind you, our reactionary leaders’ inflammatory dog-whistling reliably finds a significant minority audience. Old Sam Johnson didn’t mention the legions of drunken bogan bone-heads driving around in flag-bedecked utes festooned with stickers reading ‘Aussie! Aussie! Aussie! Oi! Oi! Oi!’, ‘Australia, Love It or Leave It’ and ‘Fuck Off We’re Full’.

Continue reading

Posted in History, Law, Politics - national | 43 Comments