qed’s blog

In today’s opinion piece, Kenneth Davison suggests that the domestic housing market is heading for crash, that real estate prices may actually go down!

The Ponzi analogy seems appropriate, certainly the current prices seem more based on speculation than regular supply and demand forces. And the banks have been more than happy to participate in the orgy of debt that has driven house prices to their current record levels. Certainly house prices today are considerably more expensive today as measured by average weekly income than they have been historically. Whilst some of these increases might be due to genuine demand pressures it seems belied by the huge increase in domestic debt that we now have.

This amazing amount of national debt rarely makes the news headlines, in much the same way as news about ecological disasters seems not to be on the news agenda. The figures from Kenneth’s article are impressive 600 billion in overseas debt and total domestic debt of 1.7 trillion dollars!

That governments seem unconcerned about both high house prices and burgeoning national debt is hardly surprising. One suspects that high house prices have inflated the personal balance sheets of many upwardly mobile middle class voters who are a significant constituency for the politicians. Poor people who cant afford to be in the real estate game are probably less outspoken that those whose have benefited from the real estate bubble so on balance government policy will tend to favour the voters who have mortgages over those that don’t. When you add the various stamp duties and other taxes to the mix it is easy to see that government also has a vested interest in this real estate game.

The cost to the nation is significant. It is also yet another example of the growing inequity in this country. As things stand it is not yet an example of market collapse or failure yet the machinations taking place to keep the ship afloat must be taxing the ingenuity of a few people. Unfortunately there is a considerable danger that should a recession and real estate price collapse coincide then our collective “common” wealth will be called on to fix the problems. At this stage the only substantial common wealth asset is the future fund and the superannuation reserves, which we have already seen used to prop up near term bank shortfalls.

What a decidedly tricky situation! No wonder the right wingers wanted to lose the last election, their neo conservative extravaganzas have created more than a few headaches. At least this way they don’t get to be the ones with egg on their faces when it all goes pear shape.

China (shock horror) has kept its Great Firewall in place for the Olympics. Oh they did promise to relax it but now that the Games are almost here its seems the deluge of sports news is the only thing the mass media is ready to report on.

The US banks are still paying the price for their questionable loans, taking a few casualties along the way but it seems like the crash has yet to happen. The price of oil is probably helping the stock market regain its confidence in the future, but it is unlikely that the general public will ever really know what is going on.

However the really outstanding bit of news is that the Arctic is likely to free of ice in the northern summer within 5 years.

Roughly speaking, the national publicly funded broadcaster devoted exactly zero minutes to the environment in tonight’s news. Clearly the directors of news feel that reporting on the environment is not something of interest to the general public. By contrast sport and Olympic reporting managed several major stories. Manufacturing consent…

Little Bill’s baby continue to deliver the goods. On the bare facts it seems that somehow enough people are convinced of the merits of paying for something they could otherwise get for free (more later) to rake in almost $16 billion in sales for Micro$oft. Could people not find a better way to spend their money? What is going on here? I mean Vista sux for the average user who is pretty happy with their XP yet 190 million vista licences have walked out the door for Redmond. Everyone must be aware by now that the microsoft model is pay now and suffer pain then pay more in a few more years and suffer more pain. I mean $200 (close) for a computer operating system! You have to be kidding. Add another couple of hundred bucks for office software and you have enough money to sponsor a child for a year!

Take the $16 billion in revenue for Micro$oft and you could build something like 7 million wells in Africa! I guess you get the general drift. But wait there is more! You can still have your cake. There is a very good operating system for your computer that doesn’t cost you a penny and it comes with a free office suite. It’s safe secure and you could surely use that money for something better.

The devil you know is still the devil. Take away the d and what do have have? Definitely not Ubuntu!

Not that anyone seriously expected Kev to be radical. He is a pretty conservative lefty anyway, worth millions and a regular church goer, the one thing that you could bet the farm on is that our latest PM is not going to rock any boats. So his government’s policy paper on carbon abatement is true to expectations, it looks like something but in fact is nothing more than window dressing.

Free carbon permits for big emitters! That will bring down carbon emissions overnite for sure. Cross subsidising motorists for increases in fuel costs is bound to have the roads clear in no time. Not counting agriculture in any carbon emission scheme until the cows come home, brilliant thinking! But rest assured there will be a carbon cap although what it is remains unsure and how will it be measured? By self reporting of course. By the emitters. Uh huh.

The only thing that appears to be close to the mark is that this scheme will be cost effective, it probably wont cost the coal fed power plants that contribute 70% of our total carbon a cent. But they will probably bump up their charges just in case. A government commitment to reducing carbon by 2050 is not even worth talking about, no more than say a government commitment to get rid of plastic shopping bags. The “cap and trade” scenario is likely to have only one outcome, more horse trading as permits to pollute are snapped up by investors to be sold to the desperate on demand. As far as reducing the carbon emissions are concerned, its all about protecting industries that need government protection.

Its worth noting as David Spratt did last night in launching his book “Code Red” (co-author Phillip Sutton) that the “Government’s 60% reduction target for 2050 is purely a political target and has “nothing” to do with scientific recommendations. It concedes atmospheric carbon dioxide concentrations will rise to a level — about 550 parts per million of carbon dioxide — that will cause at least a 3-degree rise in global temperatures. A 2-degree rise is predicted to trigger feedback effects leading to much more rapid melting of ice too difficult to model…What the Government doesn’t understand is that when it comes to climate you are not dealing with social or economic policy, but you’re actually dealing with the laws of physics and chemistry, and trying to negotiate with the laws of physics is a really dumb idea.”

Rudd fails the planet but then the planet clearly isn’t his concern.

This doesn’t look good. The so-called Future Fund is the government’s stash for paying out peoples retirement benefits and its source of funds has been government surpluses over recent times. In part these surpluses have come through the sale of government assets such as Telstra and through taxation revenue. In a sense superannuation is some form of guarranteed financial independence for people after they stop working which fits nicely with our current rampant capitalism. No mention of social security, just personal financial security…

However, even given the nature of the fund, you would think that contained within such a body is some consideration for protecting the financial asset they have control of. Apparently the fund usually invests in the stock market, an act of faith not unlike investing in racehorses, but for some inexplicable reason the management of the Future Fund decided to help out the liquidity problems currently being experienced by the local banks who were slightly affected by the sub-prime induced financial collapse. Also stepping into the breach was the local Reserve Bank (supposedly the one that is a measure of a nation’s financial reserves). All to prop up the local lending market which might otherwise have been forced to raise interest rates to some very unpopular levels. Given that these decisions most likely occurred whilst the previous government was at the helm, it suggests that there may well have been political implications at work behind such decisions.

All of that is interesting speculation. What is really interesting is what happens now? Apparently both parties, the Future Fund and the Reserve will want their money back at some stage and it seems likely that alternative sources of funding have all but dried up in the current international financial environment. This seems to suggest that banks will have no alternative but to lift their rates, possibly substantially, in order to maintain liquidity which has inherit risks to the rest of the economic health of the country. What isn’t clear in our so-called free market environment, is why government funds are being used in this way. Time and time again the champions of the free market advocate freedom from government intervention yet it seems the government is only too willing to prop the system up with commonwealth funds whenever it sees fit.

So rather than use commonwealth funds to say build national infrastructure, say for example an efficient railways, a state of the art broadband network, better research and education facilities or even a high quality health care system we are seeing instead government reserves propping up the very engines that drive a consumer society, for the sake of averting some short term political difficulties with the associated risk that the whole thing is only postponing the day of reckoning anyway.

Sunday’s newspaper reading over breakfast was meant to be a civilising moment, a chance to catch up on the latest cultural offerings and partake in some incisive analysis of the latest news. Sadly reading today’s news is a risky exercise, unless of course you happen to think as Murdoch does that the most important thing in Australia is a public apology by the Pope for the deviant behavior of his disciples.

The risk is that you might just discern some deep political malaise affecting a world confronting some rather crucial issues, things like climate change and declining resources. Throw into the mix the resurgence of violent extremism, the threat of another Middle East implosion and the seeming insurmountable problems of disease, poverty and malnutrition and it is easy to see why people seem content to get fixated over a hollywood celebrity’s birth event.

However there is some hope, and it would seem that our good friends across the ditch have the right idea. The Kiwis are pretty famous for punching well and truly above their weight, you only have to look at how often their national sports teams give their Aussie counterparts a regular thrashing or how often a NZ creative talent is unceremoniously adopted as an Aussie to see how much ability comes from the land of the long white cloud. So it is no surprise that I read today that Helen Clark’s government is busy nationalising key industries, in particular I was heartened to read they have just nationalised the rail and ferry network in that country.

It is interesting that here in Oz little coverage was given to the overly socialist actions of the NZ Labor government. Certainly the British press offers far more coverage than does the any indigenous aussie news outlet which seems quite paradoxical, after all the UK is on the other side of the planet with regard to NZ and Australia on the other hand is supposed to be a close friend and ally to the Kiwis. As far as Fairfax is concerned, The Brisbane Times has little gem meanwhile good ole aunty obviously thinks this story from almost 8 weeks ago would suffice.

The case for nationally owned assets that provide an essential service to all has always been difficult for the champions of capitalism to argue against. In part their argument has always rested on a claim, difficult to actually verify, that market forces will ultimately produce a service equal to a universal nationally provided service. The problem is that the very market forces that the capitalist espouse depend in large part on an unequal and unfair society, something that is fostered and encouraged by a free market idealogy. Ultimately we end up in situation where only the rich can afford anything of value while everyone else has to slave away for an increasingly smaller slice of the pie. Often this thinking is couched in terms of “reward for effort” or “encouraging initiative” when the reality is that all that is encouraged is a dog eat dog mentality that acts against the common good.

So the advocates of privatisation have had a field day up until now, whole slabs of commonwealth assets have be flogged off and we now have the rather dubious scenario of governments rolling in cash but still unable to implement any structural change for fear of offending key economic stakeholders. As our friends in New Zealand have rather astutely observed, having key public assets in public hands is ultimately a more secure long term option. That is not to say that private enterprise organisational skills could not achieve similar outcomes, rather it is simply an observation that certain services that sustain a society can only be provided by an entity that does not place as its highest priority always increasing profit returns to stockholders.

Only by acting together do we have any real chance of averting the doomsday scenarios that abound. Its not rocket science and it would seem at least the Kiwis have decided to do something other than play politics.

Seriously. When was the last time anyone went to a library? I heard a conversation recently about some caller to talkback radio who was inquiring about IF there was something like a video store where you could go and like borrow books. The mind boggles! And today I was re-reading my daily Crikey and in was a little news gem relating how parts of the Fairfax media conglomerate (Fin Review and Fairfax Business Media) have decided that they don’t need their own in-house library service, specifically opting out of paying their contribution for a group wide delivered service. Predictably this appears to be a piece of management inspired enlightenment as it is reported that “AFR bosses Michael Gill and Glenn Burge have decided that journalists can be “self-service researchers”" and then it is also noted that “Business Media reporters have accounted for twenty per cent of the work of the library.”

As is noted elsewhere this has interesting implications for material generated by journalists. But it seems to reflect some popular thinking, that the rise and rise of a universal database called Google has claimed yet another scalp. Of course if material isn’t available in on-line form then Google won’t help you and despite the understated charm of interfacing with the very stylish and attractive Google receptionist, I can’t help but think that losing the quaint little human interface to your very own library is something that deserves special consideration.

Yet in that sense the AFR is just jumping on the bandwagon, albeit one that they don’t appear to be actually contributing to. One of the things that makes it possible to use Google as a research tool is the availability of data. Worldwide a number of significant libraries have committed to digitising their assets and making them available to the general community. Despite the concerns of copyright owners, there seems to have been a bit of an avalanche of digitalisation in recent times, at my local university for example, entire collections have disappeared to be reborn as digital assets and of course even borrowing a book if you can find one, has been automated. You still can’t borrow the latest bestseller from Google, or even micro pay for it like iTunes but that would seem to be the next logical step. Why else would you bother trying to create eBook readers unless you could see a market?

So it appears that globally we are heading in the direction of an on-line only repository of information, the world wide electronic library. There are risks of course, in the past libraries although somewhat revered were not an entirely protected species. The odd burning or ransack was out of the question if things got a little out of hand, yet today’s modern electronic library has built into it a rather naive belief that the technology that supports it is immune to any major disruption. This is rather a simple concept but difficult for some to grasp so consider this; you can still see in some places the actual books made by people hundreds of years ago. That’s right, hundreds of years, and there is even remnants of ancient Egyptian papyrus in some museums. As a storage medium for information and ideas, books are hard to beat. The only thing that the modern age has come close to in terms of durability is the vinyl record used by the music industry which fell out of vogue when the digital age arrived.

The strength of the book as a method of information storage is that provided it is reasonably well made, and our modern paper technology is pretty good, then it requires nothing more that to be stored in a dry place. It will work without power, it doesn’t require a login to open up and all that it requires is someone with some basic literary skill to pass on the ideas and information it contains. Pretty simple huh? Of course they take up space once you start to collect the little beasts and getting back to the Fin Review, after a while you ending up employing people to look after your collection of printed material, people called librarians. But by and large, the system has stood the test of time. It is a brave act of faith to dump such a time honored method in favour of something that has only been with mankind for the last couple of decades.

Finally, borrowing from the IT world, you often hear the term redundancy employed by geeks talking about their wonderful systems. They have a spare of something running that is meant to provide you with some sort of guaranteed level of service, be it a storage system or a network connection or the physical processor. I think there is a very strong argument to maintain redundant systems of information storage just in case the world wide online system ever catches a cold.

And worse still it isn’t just on your TV. The spectacle of a society consuming itself out of existence is unfolding before our eyes as Catherine Deveny observes in The Age. Her opinion piece on the scary business of rampant consumerism is interesting but on a couple of points I thinks she is wide of the mark.

Her claim that we are just blindly following our animal instincts or as she puts it “we can’t help ourselves because we’re just mammals programmed to binge in times of plenty” is quite debatable. Whilst it might be true that in a primitive sense we have a tendency to eat when we can in order to survive, this tendency has evolved in concert with environmental issues that might have meant that such gluttony occurred on a irregular basis. Think aborigines and hunting. You might have a feast of kangaroo every now and then but there were a lot of times when you didn’t.

What does this tendency have to do with the current trend to consumer binging? Simply this, there is no associated mechanism to regulate our consumption, at least not one operating at the same time as the prevailing supply of consumerables. There is of course a mechanism that will ultimately bring our consumption back to earth, and that is the natural limit of the world to sustain 6 billion people and their associated greed.

On another level Catherine’s piece is also guilty of trivialising what is really a fundamental problem, and in so doing she avoids any critical analysis of what is driving this cult of gluttony. She seems to think it is all the fault of the people doing the buying, yet as she points out, people are following some basic instinct in this regard. Why do we feel compelled to buy our happiness? Or perhaps a more interesting question is what are we trying to achieve when we indulge in consumption. It seems that we are seeking some form of security, something that is constantly denied to us in a world where we have no power over the things that might make us actually feel more secure.

In this the mass media which the Age is part of, play a significant role. They feed us a diet of fear and loathing. The mass media is in fact the ideas manufacturing arm of big business and it is big business that really profits from consumer society, and since clearly the general population is impoverished by consumption, the real villains are not people in general but those that would and do exploit a known human condition for their own personal gain.

Which kind of brings me to the question of carbon. The G8’s little announcement regarding carbon emissions was pretty well summed up by Crikey. It is of course a pretty meaningless commitment since by 2050 the world will be deep in the pooh as a result of today’s emissions so a target for 2050 is a bad joke. However I reckon there is something that could be done about carbon and it could work. First, it has to be simple and it has to be universal, simple because we are talking about life and death and universal because the issue really does affect everyone. So what we do is impose a universal carbon tax on everyone and every faceless corporation, the same rate across the board and measure it on wealth. After all it can be argued that all of our wealth is derived from what the planet has provided so think of it as back rent. Then you put the money into building sustainable societies, which means unfortunately, giving up those things we currently have which clearly are not sustainable over any real measure of time. We can build environmental friendly and carbon neutral but bugger all of what we have now actually fits that bill. Worse still we will only get there if we pursue a radical agenda, we simply don’t have the time for softly softly.

It could be done. We have the technology now whether or not we have the will is another question entirely. More importantly is the attitude of the powerful vested interests that seem to have our politicians in a thrall, are they interested in doing something for our long term survival?

Kohler in today’s Crikey reckons Oz has gone into panic over Prof Garnaut’s little report. Tim Flannery agrees with the good prof’s prescription but one suspects that very few will come out to publicly back the measures. Simply put, the future of our economic system is rather severely constrained if carbon emissions are taken into consideration. Everyone with a vested interest in this system, which is almost everyone these days, is going to take a hit and not just once but on an ongoing basis. The problem is fundamental to our capitalist model.

Unfortunately for us now, today’s economies have been build on a high carbon polluting base. In the past this has been at no cost to the polluters, but there was a consequence which we are seeing now as climate change. At the root of the mantra of unlimited economic growth is a rather naive notion, that is that we can have continuous growth in a world of finite resources. Pollution is an example whereby the polluters gain some economic value out of a common asset, the ecological health of the planet. In terms of balance sheets, clean water and fresh air have no monetary value, hence no business has to deal with the cost of pollution except perhaps in the most extreme case (think Exxon) and even then there is a good argument to say that no amount of money will return the affected area to its original unpolluted state.

Gore, Garnaut and Flannery are just stating the obvious, something that in a sense is well known and has been for a long time. Changing a few light bulbs or ticking a green energy box on your money electricity bill is about 25 years too late. The challenge is rather difficult because we have avoided dealing with the fundamental issues for a long time, and thanks to the recent neo-conservative resurgence it could even be argued that we are even less able to deal with the problems than we might otherwise have been. The pleadings by vested interests to continue for business as usual will be especially difficult for government to deal with since governments around the globe have become much more wedded to the interests of big business. It is quite likely that if any concrete action is taken to deal with the problem of carbon, the burden will fall to those who are less able to pay. A cynic might suggest that the current crop of politicians will merely be the fall guys for a raft of very unpopular decisions that might reduce our carbon footprint but will do so in a way that lets the big end of town of the hook.

However unpopular such decisions might be, the unfortunate bottom line is that unless there is international consensus and unilateral action by all countries then in reality the world is faced with a very uncertain future. Try figuring that into a company ledger.

Josh Gordon has a little piece in the Age about the troubles facing an IT contractor that services government departments. It seems that all is not well with these guys and they might not be able to honour their service agreements which in turn means the government departments, paid for by taxpayers will have to pay more to find another service provider. Apparently “The contract can be traced back to the bungled $5 billion compulsory information technology outsourcing program introduced during the 1990s by the Howard government.”

Josh is being disingenuous. John Howards compulsory IT outsourcing project was a huge success, it managed to funnel $5 billion of taxpayers money directly into the private sector. As such it was typical of the neoconservatives idealogical approach, take money from the state and give it to private sector businesses. So everyone still pays the same taxes and arguably the work gets done but somewhere along the gravy train, some business presumably makes a profit.

Now this is not exactly in the spirit of a government service which is supposed to be delivered on a cost or subsidised cost basis, it is somewhat a tacit contract between government and taxpayers that government provided services are provided cheaply enough so that all can make use of such service if they choose and there is a strong argument that in areas where such services are essential they should be provided by government agency.

If such a service is provided by a profit making private enterprise then clearly it is not being provided at the cheapest possible cost. What’s more if the service is apparently cheaper than an inhouse service, which is often an argument advanced to support the outsourcing of IT work, then it is reasonably to ask how this is happening. Is the company providing the outsourced work employing monkeys or are they cutting corners?

All of this is below the surface of Josh’s story but it is quite important to the consideration that if a company contracted to provide an essential service to government defaults why does the burden of fixing the problem fall to those who have already paid whilst those who have profited from the situation hide behind bankruptcy. No doubt a few scapegoats will be found to hang out for public display, but the real villains are those that espouse such obviously flawed policies in the first place. It will be a significant test of the character of this government to see how they respond.