qed’s blog

According to ABC news

“Future Fund head David Murray says the financial crisis means the Government will not have the money it wants to set up three new infrastructure funds.”

Not unexpected really…and in other news James Packer has jumped the good ship Consolidated Media, part owners of PBL. For those with bad memories, James sold off the family jewels to private equity, collected a bucketload of cash but retained an interest via CMH. The board of CMH has also declared it won’t be coffing up any more lucre to keep PBL affloat. Oh dear!

But in what is quite revealing in today’s financial environment is this bit from Crikey

“The new capital is wanted by the end of the year because PBL Media has an estimated $120-$130 million in interest and principal due to its banks by the end of the year. It paid around $100 million in interest at the end of September and has yet to learn from its banks if they think PBL Media is still within the terms of the covenants on its $4.2 billion in debt.

For the new money to be sought now means there are fears that it is close to breaking its covenants with the banks and a capital boost is needed to keep them happy. That debt is chewing up just under $40 million a month in interest. The company earned $463 million in the year to June and lost money in the second half of 2008. People are still losing their jobs at Nine and at ACP magazines as the cost cutting goes on.”

Now TV and Print media isn’t what it used to be in terms of a cash cow, which is precisely why Packer jnr sold it off. But the devil here is just how technology and a plunging exchange rate have dealt this group a heavy blow. Earning about half a billion aussie dollars a year is suddenly worth a lot less to overseas creditors. And the interest payments on the capital invested in this group looks like choking it to death.

But if you think about it, the events at PBL are a microcosm of what the Australian business landscape has become in recent times, which is why we have such appalling terms of trade and why we are in such deep shit now the floor has fallen under our currency. Of course currency traders also know this which only adds to the dollars woes. The so-called future funds of the government are the first casualties, they wont be the last.

But people like Eddie McGuire are ok, he should be able to cope with $4,000,000 in his pocket even if they are only aussie dollars. If he’s smart he probably will convert them to something else as soon as he can.

This is breathtaking…in an AP article in today’s Age on the US congressional hearing -

Greenspan said he had failed to predict a significant decline in home prices because the country had never experienced such a decline before.

Greenspan said that the current crisis had “turned out to be much broader than anything that I could have imagined”.

Yup, that’s right. He (and others of course) failed to predict something because it had never happened before. Yet you can be sure that if he was asked during his reign as Head of the US Reserve Bank if he thought such things could happen, his response would have something like “inconceivable”.

Remarkable isn’t it? Those of us who doubt the logic of the free market have always entertained the idea that such a collapse is not only possible but also probable yet those that deny the obvious shortcomings of a system predicated on greed are left with statements like those uttered by Mr Greenspan. It isn’t a failure of perception, it is a failure of imagination.

Doesn’t bode well for the coming crisis in the environment.

How many people out there in the real world understand just how dicey things have become in the short time of this current stock market collapse? The news of a huge landholding in NT going under the hammer is only the latest in a string of large rural properties up for sale. This is not just about the changing environment resulting from global warming although that is certainly a factor, nor is it just about development roadblocks courtesy of the local NT government. There has to be a suspicion that the collapse of the Australian dollar in the currency markets has a bearing as well.

Australia’s long recent history of expanding current account deficits has been a concern that most politicians have ignored. The orthodox mantra has been that Australia’s deficit is really about foreign investment in building a better Australia. The contradiction between economic indicators that suggest a sound, healthy domestic economy and a massive imbalance in terms of international trade has never been reconciled, simply because there is no reconcilliation. Our “healthy” economy is founded on debt. The great driver of the Australian economy is of course housing and naturally enough, the growing imbalance in international trade has fueled a noticeable domestic real estate bubble and a burgeoning growth in household debt.

Joining the dots shouldn’t be too dificult for most people. As the Aussie dollar slides down, we need to make much more money locally to pay for our indebtedness. A major run on our currency and a contraction of our economy will leave only the prospect of selling the farm to cover our arses. Not a particularly attractive scenario but one that is a bit close for comfort. Paul Sheehan in the Brisbane Times sums it up this way -
“During 17 years of unbroken economic expansion and a 10-year commodities boom, it took a lot of people, borrowing a lot of money, taking a lot of unproductive risk, to get to where we are today: a nation with excessive debt and excessive vulnerability to external circumstances barely within our control”

Ben Eltham’s article and one in a similar vein appearing in Crikey point out some of the very obvious implications for everyone else of the current stock market turmoil, outside the rather quaint picture mainstream news (particularly TV) is painting of stock holders big and small losing their money. In this picture we are assailed with technical reports about how big the fall has been or which government has been forced to act. These reports have been complimented by the human interest angle which seems to consist of reassuring interviews with financial experts (is there such a thing) or vox pops with worried small time investors.

Yet as others have correctly observed, and Ben’s article talks about this, the really big questions are not getting much of a run. Of course it probably doesn’t suit the agenda of a multinational news organisation to discuss how the globalisation of all markets has created an environment totally without rules and regulation, one that operates outside the reach of any national government policies. An examination of this situation would clearly show that the root cause of this latest fiasco is not the collapse of the so-called subprime market in the US but rather the complete capitulation of governments everywhere to the neocon notion that globalisation and deregulation are in everyone’s best interests, something that has not only led to the current global financial turmoil but also led to globalised media players.

Yet we have an equally big crisis on our hands, perhaps one that threatens to make the current little fracas almost inconsequential. The obsession of news makers with the collapse of capitalism has very neatly moved the topic of climate change completely off everyone’s agenda. The Australian government’s $10 billion financial stimulus clearly demonstrates not only how impotent national governments have become (and one could argue they have voluntarily surrendered) but also indicates just how how little they are prepared to do to address the carbon challenge. Although $10 billion is small change in the matter of global finance it could go some way to building long term national infrastructure that could help this country prepare for the inevitable consequences of global warming. That the government instead has chosen to spend its (our) money in a way that is intended to stimulate the economy also shows that when it comes to climate change and the economy, none in government are actually prepared to act in the long term interests of the country. Its all about short term expediency which is exactly the thinking that got us into this mess.

The other thing about this economic splurge is how it can easily be seen as a wasted opportunity. Giving away money to people might well be popular for a short time but the return on investment is pretty fickle. Chances are high that come the next election in 2010 the voters will have long forgotten this largesse and the world will be two years further down the track to catastrophic climate change. Decisive action now might actually produce a political payoff by 2010 but you would actually need some courage of your personal convictions as well as the support of likeminded individuals to go down that path. It would appear that Kev and his disciples prefer the advice of the Gerry Harveys of the world and still believe in spite of the obvious contradiction that the capitalist system will sort it all out.

As I post it looks like the Greens might win the balance of power in the ACT election. Collecting around 16% of the popular vote, this has translated to a member from each electorate for the Greens. This represents not only a victory for the Greens, but also quite rightly it also vindicates the Hare-Clarke electoral system. Although Katie Gallagher and Brendan Smyth on the ABC panel would like to put a favourable spin on it, what has clearly occurred in the election result is that a significant number of voters no longer want to have anything to do with the two major parties. Both parties represent established ways of thinking about things, clearly people have decided enough is enough.

In other equally “non” news, the NSW Labour government has received what looks like a 20% swing against it which would reduce the current Labour team to little more than a rump at the next election. Its a pity the Hare-Clarke proportional system has only been installed in the ACT! It won’t stop the poles from melting but it might give us a say in the colour of our money.

As a big maritime trading nation, we have a lot of containers in this country. Here’s a collection of shipping containers that people have turned into housing…

According to management (who tells it as it is without a word of a lie) the following changes are necessary to add content to ABC Online within the draconian budget limitations imposed by the miserable federal government. Thanks to Peter Pockley for the information.

Further to Glenys Stradijot’s message of earlier today, here are
details of the changes to RN for 2009. The trend to reduce the number
of specialist programs (all unique and of excellent quality), which
began with closure of the weekly environment program on RN a couple
of years ago, has been extended.

Peter Pockley
Science writer & broadcaster

A few people might discern a trend here, one of dumbing down content to appeal to the lowest common denominator regardless of the delivery medium. In fact the argument by management is totally spurious. Good programs are good programs irrespective of the mode of delivery. Interesting contentious reporting is not owned by any one medium. What management has clearly demonstrated (like their peers at Fairfax) is a complete disregard for the commitment and integrity of its journalists, presenters and producers in favour of some transparent ploy to get more money from the federal government. Its a bit rich of Mr Scott and his henchmen to claim (from the comfort of their palatial Ultimo headquarters - something that is after all just accommodation and facilities for the NSW and Sydney part of the ABC but occupies a large chunk of a Sydney CBD block) that these measures are necessary to bring more content online. That the proposed measure also continue the trend of sanatising the ABC (free of all those pesky dissenting voices) and homogenising the ABC content reveals another much darker agenda at work.

ABC Ultimo
Original estimate cost $130 million…
Source - http://commons.wikimedia.org/wiki/Image:Ultimo_ABC.JPG
Author - http://commons.wikimedia.org/wiki/User:J_Bar
License - http://creativecommons.org/licenses/by/3.0/

Footnote - I should observe that Radio National falls within Sue Howard’s sphere of influence, but they all seem to marching to the same drumbeat. Less actual content delivered in more ways doesn’t equate to more information and thanks to Stephen Crittenden whose blasphemous remarks led to this reprimand but did bring the matter to the public’s attention.

I think maybee…

Originally uploaded by Dave in Tejas

From an outside perspective this “crisis” reads better than a good book. We are told that the US financial system (its banks) are on the brink of collapse as a direct result of the financial shinanegans that were all part of the so-called sub-prime debacle. The argument is that the collapse of a few US banks will bring the world as we know it to a grinding halt, everyone will be out of a job, soup kitchens will be the order of the day and George Bush will look more stupid than he does already.

Here in Oz our elected leaders abandoned their major climate report to make stern faced appearances before the assembled media to reiterate Oz is ok but the US needs to get is house in order or the free world will collapse. All very serious stuff! However the news coming out of the US is not all that gloomy although there is plenty to think about. For starters, people power actually worked when the congress voted against the bill to shift the debt from private banks to the federal reserve. Then there seems to be plenty of opinion that any government intervention is undesirable because it either represents some form of socialism (the epitome of evil in the US) or it is glorified corporate welfare benefiting only the mates of George W.

What seems to be agreed is that no one knows how any of this will pan out. Non intervention will force the market to self correct which might be very scary or it might not. In the long term, this might be the shot in the arm the US needed, it certainly brings the focus back to internal US political concerns which makes a refreshing change from the diet of war and terrorism that the rest of the world has been force fed since 9/11. Above all else, the matter seems to have woken up the american people to what has been going on under their noses and this has to be a good thing.

I for one hope that this event marks the time when US starts leading again, this time by example.