Friday, 28 June 2013

Around the Traps 28/6/13

Time for Around the Traps again.

Kaiser Fong has produced a short statistics course on line for anyone interested

It has been a wet week in Sydanee so I expect to update this over the weekend as football will not be on.


US which has appropriated Canada




Brian Banisch (or Climate)

Andrew Gelman (or Statistics)

David Giles or (Econometrics)




Wednesday, 26 June 2013

Is Kevin Rudd a game changer?

Some people believe that by changing leaders from Julia Gillard to Kevin Rudd the political game has changed.
John Quiggin is certainly in this camp. However so is Mumble and his opinion is to be respected.( Kathryn Crosby is in this camp as well.)

I am not. I certainly think he will do better than Gillard who whilst good on policy was extraordinarily bad at simple politics. Swan was even worse and Gillard thought he was great!

Rudd is a very much better political operator and can sell policies he understands as his history shows BUT:

1) The ALP has been shown up to be divisive. I fully expect backgrounding from Factional heavies to keep on this theme. As was stated yesterday If Rudd wins or loses 'well' the factional overlords will lose power again. They do not want this and would rather lose bigtime and keep their power.

2) When you combine nominal GDP growth well below trend with people's expectations of rising prices that are way too high then it is not strange people think the economy has either slowed drastically or is in a recession now.

Either of those issues would sink the ALP, both of then makes it a rolled gold certainty!

Is the ALP doomed on September 14?

We have talked before about the chances of the ALP retaining Government in the election which will be held on September 14.

In Australian vernacular they have two chances. yours and buckleys!!

We have already seen from Kevin Bonham ( Just a link to his blog) that no government has ever come back from where this government is now.( his article was in Around the Traps some time ago).

If we observe Mark the Ballot ( again just a link to his blog but look though the various polling) we find ALP support rising when people realised they had been wood-ducked on just how great an impact the price on carbon would have on the economy.

Indeed the economic geniuses at Catallaxy had the ETS having a larger impact on the economy than the GST!Moreover when the first CPI was released with the ETS effects in it Sinclair Davidson claimed that Treasury has underestimated the impact. In fact they over-estimated the impact greatly. He, of course, never made a  mea culpa about his huge error.

The rise in the ALP vote and then decline happened when the political geniuses from Kevin Rudd's camp made certain noises about changing leadership. This was very very stupid.
Kevin Rudd was never going to bring on a leadership spill. He was always  going to wait and hopefully be given the leadership on his terms otherwise there would be turmoil.

Now this was never going to happen as Rudd was gotten rid of by the Factional power-brokers who saw their power slipping away to nothing.
They now would still rather see the ALP thrashed and retain their power than Rudd even give the ALP a respectable loss.

Hence this year has seen the ALP vote plummet because:

1) Nominal GDP growth has been below trend for some time and the implications were explained here,
2) The ALP has been fighting within itself. The electorate never likes a party that fights within itself. It is decidedly much harsher on the ALP in this area than the Liberals  as well.

It also must be said it doesn't matter if a government is good in policy terms as this one has been/is but extremely poor in political smarts as this one clearly has been/ is.
It simply doesn't deserve to win the next election!

And yes the ALP is doomed.


There is a leadership contest at 7 p.m. tonight. We will see if my hypothesis is correct.

Of course the Factional power brokers may not influence MP's as they look forward to the oncoming massacre!

Rudd wins 57-45. Wait for the Factional acolytes to start grumbling loudly  to show the ALP is still heavily divided and ensure a heavy defeat!!

Monday, 24 June 2013

Austerity is crap- Special Simon Wren-Lewis edition

Simon Wren-Lewis is angry, very angry. He simply cannot understand the-intellectual-bankruptcy-of-the-austerians.

What has got him going is the latest annual report from the Bank for International Settlements.

He is severely cheesed off they are ignoring all the evidence and still in a very shrilly way advocating policies that are making things worse not better. See Kruggers here as well.

Simon appears to be just finding out that these people are just like old fashioned communists.
Evidence never matters here. It is all about ideology or as Simon puts it faith.

In Australia we have had a long experience of people such as this. Catallaxy has been such a blog since Jason Soon gave up control. You either get articles which are stark raving mad or entirely misleading
(euphemism!) .

Simon doesn't get down to this but we must ask which of the two is the BIS?

I simply think they are mad since the evidence is entirely against their case but they keep on believing. Call it the Steve Kates disease!

Saturday, 22 June 2013

Stephen Stills

Stephen Stills was an amazing guitarist and vastly under-rated.

Just watch this and wonder how many others could play like this!

I should have added he has one amazing live album. Half acoustic, half electric and it is indeed fantastic!!

Thursday, 20 June 2013

Around the Traps 21/6/13

Time again for Around the Traps.
updates on Saturday and Sunday

There are quite a few commentaries of the Fed's action in the US section where I have attempted to put them all together. Look for Tim Duy's Fed comment and go from there.


US ( and Canada!)






Brian Banisch (climate)

Andrew Gelman (Statistics)

David Giles (Econometrics)


Wednesday, 19 June 2013

Nick Rowe explains fiscal policy using a New Keynesian model

Nick Rowe has a great article at his blog called Worthwhile Canadian Initiative on

He examines fiscal policy using a New Keynesian model.

Note his opening words "If it weren't for the Zero Lower Bound on nominal interest rates, there would be no macroeconomic role for fiscal policy in New Keynesian models. "

BUT note his last paragraph.
"Now suppose you had fiscal policy run by a bunch of nutters, who didn't understand macroeconomics at all. The nutters think that booms are a good time to be increasing government spending, "because we can afford it"; and recessions would be a good time to be decreasing government spending, "because we can't afford it". What would it look like? Might it look a lot like optimal New Keynesian fiscal policy?"

Hmm very interesting don't you think?

What do I think?  Nick has a link to a previous comment he made which is hard to disagree with.

 This of course shall be in Around the Traps tomorrow

The Socceroos are off to Brazil

The socceroos beat Iraq last night 1-0 and so finished second in their group.

This means we are in the world cup again.

The commentary is fantastic eh!

I am not optimistic about our chances in Brazil. Our squad is very old , although the game is played at a slower pace over there.  Osiek has been far too cautious in selection
We really should have have this place wrapped up well before this match.

BUT we are there


Saturday, 15 June 2013

Ten Years After

Ten Years After played the anthem of Woodstock. I'm going home.

Alvin Lee was undoubtedly the fastest guitarist who we have ever seen. not the best mind you.

I remember having an argument with Chris Shiel about Eric Clapton leaving the stage in a huff because Alvin Lee was too fast for him at some music festival in the 70's in the UK. He was a Clapton fan.

i have always had a softspot for Lee


Thursday, 13 June 2013

Around the Traps 14/6/13

time for Around the Traps

no Refereeing tomorrow so updating will occur on both Saturday and Sunday

Aussie, Aussie,Aussie,Oy,Oy,Oy

US including Canada




Brian Banisch (climate)



Andrew Gelman ( Statistics)

David Giles ( Econometrics)


Wednesday, 12 June 2013

Pricing your products Correctly

If you are a small to medium size business owner or know someone along those lines you might find this useful.

Activity Based costing (ABC) is a costing model that identifies the cost pools, or activity centres, in an organisation and assigns costs to products and services (cost drivers) based on the number of events or transactions involved in the process of providing a product or service.

There are costs that vary with the number of transactions. These are known as activity costs. As the diversity and complexity of the production process increases, additional support services tend to be required thus the greater number of goods and services produced, the greater number of transactions required to support them.

It works like this:
·         Identify a group of cost activities through which a product must pass before it is delivered to the customer
·         The total cost of operating each of the activities for a year must be estimated
·         The total number of hours that will be spent on each of the activities must be estimated
·         Based on this a ‘cost driver’ for each of the activities can be calculated
·         Assign a suitable cost driver to each of the activities and calculate an estimate for each cost driver unit.

Here is an example courtesy of the School of Business New York.
ACME Inc produces two products.
1.        Product A
·         1 hour direct labour ( direct labour cost for I1hour @ $20 / hour = $20)
·         demand = 100

2.        Product B
·         2 hours of direct labour ( direct labour cost for 2 hours  @ $20 / hour = $40)
·         demand = 950
Total overheads: $100,000
Total direct labour: $2,000 hours
$100,000/ 2,000 hours = $50/ hour
Thus Product A is $50 a unit and Product B $100/ unit on Traditional cost accounting (TCA)

Let us now look at what Activity based accounting gives us.

ACME inc


Cost drivers

Activity cost

Total used


No. of set-ups
Machining hours
No. of Receipts
No. of Deliveries
Engineering Hours

This then gives us Our Activity Data
Cost ($)
Product A
Product B



Total Cost



Thus we get Overhead costs:
·         Product A is $24,500/ 100 = $245
·         Product B is $75,500/ 950 = $79.47

Comparison of ABC versus TCA
Cost for Product A:
Overhead         TCA $50                      ABC $245
Direct cost                $20                           $20
Total                         $70                           $265

Cost for Product B:
Overhead         TCA $100                    ABC $79.47
Direct cost                $40                           $40
Total                         $140                         $119.47

Thus not only do we get a more accurate cost of the product we also get to know which customer is your best customer ie contributes more to net profit
By not pricing properly you do a lot of work for seemingly little reward.
As can be seen you need professional advice to do this however it is worth it both for your bank balance and your sanity!