Thursday, 29 December 2016

Around the Traps 30/12/16 New Year Edition

It is the last time in 2016 for Around the Traps.

Northern America
Andrew Gelman (mainly stats)
Genial Dave Giles (econometrics)
Dianne Coyle (quirky + book reviews)
Vox wonk

on holiday

Wednesday, 28 December 2016

Pseudoerasmas is a great blog

pseudoerasmas is a great blog for three reasons.

  1. He writes on economic history. This is a subject I like and believe most people should be aware of. As Satayana  said if people do not understand the past they will merely repeat them again or words to that effect.
  2. The people who comment make very intelligent contributions indeed sometimes the comments are as good as the posts. This reminds me of David Glasner's blog in this aspect
  3. He has a fantastic blog roll. Between the boxing day and New year test I will go through  all of them!
I only got onto to this blog this week as firstly Jim Rose and then Brad De Long highlighted posts from him.  Both posts are in tomorrows Around the Traps of course.


Tuesday, 27 December 2016

Nazi Political Economy

I got to this post courtesy of Jim Rose. Pseudoerasmas ( love that name) writes a post which clearly shows the Nazis were a right wing party not a left wing one.

A good post to read to boost the brain cells during the Christmas break.

Monday, 26 December 2016

The Gold Standard

David Glasner opens up on Cecchetti and Schoenholtz who do not understand the Gold Stanard.
David most certainly does. This is a lengthy article but highly enjoyable and educational.

Sunday, 25 December 2016

Why do we have hot lunches/dinners in Australia on Christmas day?

When I was growing up my standard question was why are we having a roast on a stinking hot day!

When I got married My wife was on the same wavelength.
So on Christmas day there is plenty of fruit to start with , Watermelon and Pineapple fantastic when it is bloody hot, then come the meal antipasto, smoked salmon and trout and plenty of different salads.
This goes well with Champers but also Moscato which is the only wine my wife drinks.

Hot dinners were a silly relic from England that should have been ditched given our climate. One of the great things Australia has gained from multiculturalism is the wide array of food we can both have and enjoy.

Christmas now can be quite enjoyable at meal time.

Thursday, 22 December 2016

Around the Traps 23/12/16 Christmas edition

It is Christmas again and stinking hot in the best country in the world.

Time for Around the Traps for some reading whilst enjoying the festivities.

Northern America

Andrew Gelman (mainly stats)
Genial Dave Giles (econometrics)
Dianne Coyle (quirky + book reviews)
Vox Wonk

Wednesday, 21 December 2016

Bayes' theorem began as a defense of Christianity

From the marvelous Mark Thoma's daily links. James Choi informs us that Fans of Bayes theorem ( such as Andrew Gelman , Dave Giles and John Quiggin to name but three wonderful bloggers who would know) should know that Bayes did this as a defence of Christianity.

Read the whole thing , it isn't large.


Tuesday, 20 December 2016

A short note on the happenings in Germany.

The attack in Germany shows both how easy it should have been to stop it and how hard it is to know about what is coming.

Firstly after France A truck should always be checked. A dead driver in it is a give away in a a whole range of ways.  This can only be put down to police not security incompetence.  ) Merkel will get hammered heavily on this just like Holland did)  

Secondly however it is a lone wolf attack ,as most attacks 'claimed 'by ISIS are. There was no planning. No-one should be able to murder a truck driver and then drive the said truck with the murdered driver in it to a spot to kill people anywhere in Europe.
Lone wolf attacks can be easy to detect because they are so stupid  as we have found thus far in Australia or very hard to detect as little communication is involved unlike Al Qaeda's attacks used to be.  

George Bush's illegal invasion of Iraq is having a lot of ongoing repercussions. He and the idiots who supported him  like John Howard should be held to account.              

Monday, 19 December 2016


MYEFO was released yesterday by the Government.

Both Greg Jericho and the Kouk have commented on it. As has John Edwards

I have a few thoughts on seeing it. Why has spending increased since the change of Government?  Whilst I doubt if the government has increased the structural deficit I doubt if it has decreased it since it gained office.

Too much can be made of this. We do know fiscal policy is powerful, possibly more powerful than monetary policy. Evidence since the GFC has made this abundantly clear. Indeed We have Wayne Swan's last budget to show for this here.

Thus any attempt to reduce the structural deficit in a significant way  whilst the economy is not strong is bound to be a negative to the economy as Wayne Swan found out. He also found out lower interest rates simply does not cut the mustard and thus is not an offset.
You need to target the Structural deficit with nominal GDP. As nominal GDP reaches its trend then you reduce the structural deficit.
A government which made it a policy to get back to trend nominal GDP and was successful would find the budget in balance a quite easy task.

The other thing people like to talk about are the ratings agencies and whether they will downgrade Australian government debt. One thing people need to realise here is that it is how is Australia is going RELATIVE to other Countries on a AAA rating.
If Australia was downgraded but Canada and Holland was not then it would be ludicrous.

I should have emphasised two three  things.
1) Firstly expenditure is way higher than what the Liberals inherited. It is either a weaker economy or deliberate spending ( i.e. a higher structural deficit).
2) The economy is the main game in town not the budget. When the economy gets back to normal conditions the budget will be in balance. This is because the cyclical factors outweigh the structural factors. It is very easy to cut then indeed it is beneficial.
3) the actual numbers are not the important ones they will go up it is the ratio to GDP that is important and they are declining ,not as much as previously 'projected' but still declining.

Sunday, 18 December 2016

Rising Power bills in Australia

Hugh Saddler writes an article I put in Around the Traps on Friday entitled rising-power-bills-signal-the-end-of-an-era-for-australias-electricity-grid.

I merely note his last comments.

"For most of this period, average wholesale prices in this oversupplied market have been well below the cost of new power stations. They are now expected to move gradually up towards that replacement cost level, when it will be economic to add more power stations to the market.
It is ironic that conservative voices who blame the RET for forcing coal-fired power stations to close are often the same voices who claim that higher electricity prices are forcing businesses to close and contributing to the cessation of demand growth.
If they had their way and there was no wind generation, and the Kurri Kurri and Point Henry aluminium smelters had not closed, then demand would have outstripped supply some years ago.
This would allow higher-cost power stations to be competitive, and wholesale prices would have already been at or above the levels projected by the AEMC in this report.
And what would have been the lowest-cost generation technology available (which hasn’t been competitive in the over-supplied market until now)? Based on the most recent data, probably wind."

Thursday, 15 December 2016

Around the Traps 16/12/16

It is time for Around the Traps again.

Northern America

Andrew Gelman (mainly stats)
Genial Dave Giles (econometrics)
Dianne Coyle (quirky + book reviews)
Vox Wonk

Wednesday, 14 December 2016

Trump could be playing with fire

Apropos yesterday's post on viewing the last Presidential election  Menzie Chinn looks at potential GDP in the USA and finds Trump does not have a lot of leeway to play with so to speak.

Even a mildly expansionary fiscal policy ( and remember Obama's fiscal policy at present is in fact contractionary) would mean an uptick in inflation as output cannot rise any much  further.
this means Trump will be fighting the Fed (who will not fight back).

It is further evidence the markets are wildly optimistic on what Trump will do.

However there is a strong caveat to all of this.

It is always wise to wait and see what politicians  actually do rather than listen to their talk.
Trump after all has shown himself to be a typical politician since his win. His policy stance was all over the place. Will it be so when he is in office if not what exactly will he ditch?

At this stage we simply do not know and therefore are making a lot of assumptions.

I am with Brad De Long and Simon Wren-Lewis (See yesterday's post) on Trump's fiscal policy but everyone should admit we are all in the dark. What if Trump actually changes his expenditure to what Clinton advocated?


I am further reminded markets would get very nervous when the Executive targets the Fed. Yes indeed I do think that is one thing markets can count on.

Tuesday, 13 December 2016

Simon Wren-Lewis on Trump

Simon Wren-Lewis writes about Trump's fiscal policy.

He essentially agrees with Bradford De Long and myself that the policy might not be as stimulatory as the markets think.

I might just add how ironic to see 'conservative' commentators supporting fiscal expansion. It goes like this. Let us take the USA. Republicans love fiscal expansion in office .See Reagan or Bush no-2 but revert to supporting classical economics in Opposition upbraiding Democrat p[residents for not doing enough to reduce the deficit ( which they supported).

they have no shame.

On a completely different point. What is wrong with Trump's eyes? He looked both terrible and weird in his fox news 'interview'.

Sunday, 11 December 2016

Politicalisation of the public service and a complete waste of money.

Ross Gittins has a grest article on how the Liberalas love to politicise the public service. He does not emphasize how this started with Howard. He sacked a lot of department heads. In one truly stand out case of incompetence they sacked the wrong person!

Neither Hawke nor Rudd did this.

What brought this to a head was some imbecile actually paid money to Tony Makin a fifth rate academic to write about Australia's policy in fighting the GFC.
I wrote about Makin's pathetic attempts previously.

There is no way Treasury would have authorized this given the demolition they did of Makin's Mineral council's paper. ( Another hint is where it is found as well.)

Somehow Makin did not even understand he said China's stimulus worked bit ours didn't.
He also didn't see the currency falling and then rising as commodity prices did the same thing. I am also wondering how come the MF theory only affected us and not the 18 other countries that had fiscal stimulus.

He also will probably forget the IMF and OECD have found fiscal multipliers were higher then previously assumed. Posen for example showed in Japn in the 90s when fiscal polisy was expansionary the economy rose when it was contractionary the economy fell. fiscal policy was infact quite potent.
Makin and his trumpian lot simply ignore the data and like the bourbons  learned nothing and forgotten nothing.

This was a complete and utter waste of money.

Malcolm Turnbull lacks guts!

Steve from Brisbane wrote about this on Friday.

What is mind blowing in all this is that an emissions intensity scheme is totally compatible with the Coalition's direct action policy.

It is not an ETS as it does not impose a price on carbon. The government gains no revenue.Why didn't Turnbull point this out to the ignorant.

The Chief Scientist supports the scheme, Australia's premier think thank supports the scheme. Industry supports the scheme yet Turnbull meekly succumbs to ignorant pressure.

As it is since the Coalition got rid of the ETS the previous Labor government had put on carbon emissions have risen as everyone knew they would.

If Turnbull cannot even explain this to anyone then he cannot do anything.


Turnbull stands for nothing. This is unfortunate. He stills thinks it was mediscare that brought the Liberal numbers down when it clearly wasn't as discusses before. He therefore cannot argue ,correctly, it was only a change of leadership that kept the Liberals in government.


Thursday, 8 December 2016

Around the Traps 9/12/16

It is time for Around the Traps again

Northern America
Andrew Gelman (mainly stats)
Genial Dave Giles (econometrics)
Dianne Coyle (quirky + book reviews)
Vox wonk