All posts by JHH/JYE

The United States Election. November 2016 – 1

American Election. News Travels Fast.  (MATT)
THE AMERICAN ELECTION.   NEWS TRAVELS FAST.   (MATT)

The Situation.  The result of this election will reverberate with Western developed economies for some time to come. In one way the election result can be partly attributable to the Judaeo-Christian practice of capitalism.

Senator Clinton secured the East and West coast urbanised better educated and more fully employed states (41.7% popular vote) while Mr Trump prevailed in the less educated Central and Southern states with higher unemployment (41.5% popular vote). The Electoral votes were Trump 279 and Clinton 228. (nor.com, 9 Nov.)

This election result has resonance  for the UK Brexit where 51% of the Leave vote was centred round the disadvantaged industrial Midlands while the southern British literati were left spluttering into warm beer with 49% of the Remain vote.

The recent election in Australia produced a comparable knife edge result, whereby better educated and more fully employed urbanites, by the narrowest margin, prevailed over urban and regional centres suffering under employment and unemployment

Painful History.  Once again, history warns but never repeats itself identically. The Great Unrest (1910-14) in the United Kingdom is instructive. From the mid 1800s, the Industrial Revolution powered along.  A depression in the mid-1890s dented progress but then manufacturing growth continued into the first decade of the 20th century. To increase profits, the industrial elite reduced operating costs by cutting wages and replacing workers with more efficient machines. The working class revolted. there was mayhem on the streets until the First World War was declared when thousands of workers were sent to the trenches to be slaughtered. In passing, it is curious to note that the painful 1929 Crash and the turbulent later years were ended in 1939 by the Second World War when thousands of men were called up.

Fast Forward. One hundred years later there is a cracked mirror reflection of a comparable situation. The  boom years of the later 20th century were interrupted by the GFC hiccup and a hesitant recovery which evaporated around the turn of this century. For the past decade, blue collar workers and the middle class has been squeezed by stagnant wages, employer exploitation, declining living standards, unemployment and under-employment. Machines – robots – are fast replacing workers as in 1910. One situation has made this situation worse,  Western industrialists have established manufacturing companies in the Developing World which has meant unemployment for millions of Americans and others. Meanwhile, the wealth gap widens for Americans and Australians who are developing increasing contempt and distrust for the established political elite. This problem is facing the Western democracies; it is unsurprising Mr Trump has prevailed.

 

UnEmployed
Under Employed or Unemployed
(huffingtonpost.com)

A New Order?  Perhaps the Western brand of capitalism was only able to flourish utilising a low-cost working class in a world dominated by empire and colonies; a prerequisite was an inexhaustible supply of cheap raw material and a ready market with little manufacturing capacity.  This situation no longer exists, perhaps this is the Achilles Heel of Western commerce.

The more philosophical might ponder on today’s economic conditions where chronic under-employment and flash points around the globe resemble  the situations in 1914 and 1939.

 

 

The Plebiscite & Marriage Equality. October 2016-2

Australian Politician?
AN AUSTRALIAN POLITICIAN?
(fantasticpixcool.com)
This Promise will win Votes
THIS PROMISE WILL WIN VOTES!
(abc.net.au)

PREAMBLE  It must be rare in the annals of democracy that a political elite abrogates its right to govern the people. With those with whom I have discussed the plebiscite issue this constitutes a serious dereliction of parliamentary responsibility.

BACKGROUND  It appears likely the plebiscite was intended to protect Liberal party figures from a public affirmation of their faith and/or their opposition to marriage equality. The trumpeted upside was the  ‘people’ would decide. For a minority of Liberal conservatives the plebiscite would remove the embarrassment of a parliamentary debate and the possibility, that like the Disciple Peter, they would dishonour their faith before the ‘cock crowed twice’. (The Drum, 28January 2016)

Within the Australian electorate there is majority support for marriage reform as illustrated by a survey that showed Coalition 58%, Labor79% and Greens 97%. (SMH, 3 July 2016) Quoting this majority opinion the Australian Marriage Council has excoriated the plan to spend $160 million on a  plebiscite. In view of these survey results, it is inexplicable why a rump of Liberal parliamentarians oppose a parliamentary vote unless it is by reason of their faith or conservative dogma to the detriment of sectarian democracy.

BROKEN PROMISES  Much has been made by Government Ministers that an election promise of the Liberal party was a plebiscite. Honour is all unless there is a darker reason.

Below is an incomplete list of broken promises or identified untruthful statements attributed to Liberal party spokespersons since 2013. These are:–no cuts to disability pensions, monitoring Indigenous school attendance, no deals with the Greens to raise debt ceiling, funding cuts to ABC and SBS, no subsidies to coal or agriculture industries, cancellation of whaling/customs vessel, funding  to NGOs, tow back of asylum boats, ensuring open and accountable government and the list goes on. (Alan Austin, Independent Australia, 8 February 2016)

A recent broken promise and an example of smoke and mirrors are:– (The Australian, 9 May 2016)

  • changes to superannuation arrangements
  • a dissimulation to the South Australian electorate on submarine construction. Until 2019 at the earliest work will only involve design and planning not construction jobs.

There must be something special about this promise for a plebiscite. Either there is a desire to keep faith with the electorate – unlikely, review the above – or, the Australian people are witnessing a small number of conservative Liberal party members absolve themselves of their parliamentary responsibility because of faith in an imagined reality and/or dogma. Many of the above broken promises involve budget constraints or electoral ‘pork barreling’, strangely despite the worsening national debt, there is no desire to cancel an unnecessary $160 million plebiscite expenditure, admittedly only an incremental amount in the overall national debt.  This is not helping the trend in the light of a recent  warning by the Credit Rating Agency, Standard and Poor, who have placed Australia on a downgrade watch. (AFR, 7 July 2016)

REQUIEM  Australia aspires to be a modern open secular democracy. By not permitting a parliamentary debate and jeopardising the AAA credit rating, is it possible the religious inhibitions of a few are being forced onto the many?

Are we worthy of the anthem?

ADVANCE  AUSTRALIA  FAIR

 

The South China Sea & Australia. October 2016-1

Piracy on the South China Sea
Piracy on the South China Sea
(projectszi.org)
China in the South China Sea
China basking in the South China Sea
(adelaidenow.com.au)

Times they are a-changing.

The rapprochement (October 2016) between the Philippines President Duterte and Chinese President Xi Jinping, if consummated, will have immense ramifications. The apparent lack of resolve by the United States and Australia to curtail China’s creeping hegemony in the South China Sea may not be unrelated to Duterte’s decision.

In mid-October, the Australian Government (quietly) confirmed that the Australian navy will not conduct ‘freedom of navigation’ patrols within twelve miles of disputed territory. This policy was decided despite the findings of the International Tribunal (July 2016) that China is in violation of international law and, significantly, that 60% of Australian trade transits this waterway. Foreign Minister Bishop has declared that naval patrols in territory illegally claimed by China would ‘escalate tension’. (Wall Street Journal, 17 October 2016)

The reported attempt to de-escalate tension is at odds with a quote by Foreign Minister Bishop to the effect that ‘Australia will continue to exercise its international rights to Freedom of Navigation and Overflight. (Sky News Australia, 13 July 2016)

Chinese Whispers

Chinese officials and Chinese media have not been oblique in their warning  that Australia must ‘carefully talk and cautiously behave’. Does this constitute a threat to trade with China? The Chinese Global Times has warned ‘If Australia enters the South China Sea——-it will become a target for China to warn and strike. (Wall Street Journal, 17 October 2016)

Sitting on the Fence or not

The Australian dilemma has, in part, been created by the Obama Administration which is reported to have authorised only three naval patrols defined in appeasing jargon as one of ‘innocent passage’.

Since assuming office in early 2016, President Duterte must have been a bemused observer to the absence of strong pushback by the United States armed forces as Chinese hegemony cemented itself into the South China Sea.

With China an unchallenged rising power apparently facing down a ‘global power’,  President Duterte appears to have jumped off the fence to ‘change horses in mid-stream’. China’s difficult financial state and its inferior military power compared to America has apparently not deterred the President.

Pivot to Asia

Recent historical events prior to the Philippines closer ties with China, are germane to this situation. In 2015, the United States provided the Philippines Government with $80 million to upgrade military hardware. Early in 2016, the Philippine Supreme Court, under a ten year agreement, granted America leave to upgrade and construct military bases.. (Military Times, March 2016) It was agreed the work would proceed at a slow rate in order not to antagonise the Chinese. (New York Times, January 2015)

President Duterte agreed to the construction of five army and airforce bases, one sited close to Manila and not far distant from the contested Spratley Islands. In a recent development  (September 2016) President Duterte now requires American forces to withdraw from the Islamic southern Philippines and ?cancel construction of a proposed airforce base.

Through a Glass Darkly 

There are serious implications should a China-Philippine union be consummated. The American Administration fears a domino effect and that other Asian nations might follow suit perceiving a safer future with the Chinese dragon rather than with the American pivot. The concept of US military bases in the Philippines could become untenable. There would be an impact on the ANZUS Alliance. Depending on any domino effect, there could be a problem for Trans Pacific Partnership negotiations.

Thinking ahead, the US Chief of Navy Operations, Admiral Greenert, in Canberra, indicated America is considering a naval base in Australia. No doubt ADF plans to construct a $125 million logistics facility in Darwin will reinforce US navy aspirations. Would Darwin port become a sophisticated Chinese listening post? (ABC News.February 2015)

In summary, geopolitical trends in the South China Sea have been unidirectional for more than a decade. Only a major intervention can now change the course of future history.

The Australian Economy, Stupid. September 2016

Terms of Trade
Terms of Trade over 15 Years (ABS/Comsec}

PREAMBLE

  • A Pleasing set of Numbers (Hockey – September 2014)
  • A Terrific set of Numbers  (Hockey – June 2015)
  • The Best Growth Rate since 2012 ( Morrison – September 2016)
  • Then why oh why are:–
  • Australian living standards falling?
  • Young Australians unable to afford to buy a home?
  • Interest rates at 1,5%, the lowest ever?
  •  Salvation lies in consistent positive Terms of Trade.

What is the proper message we should hear from Australian Government Treasurers? Below is a potted summary of the Australian financial situation from mid-2014 to mid-2016. It will be shown that the above adjectives tend to disguise the situation. This is a call  aux armes citoyens to drive up our Terms of Trade and  to ensure we are not bamboozled by misleading commentaries from  our ruling elite.

The catalyst for this offering is Treasurer Morrison’s embrace of Australia’s mid-2016 accounts. To place his enthusiasm into context, we start with Treasurer Hockey in mid-2014.

DISCUSSION

In September, 2014 Mr Hockey indicated the National Accounts were “a pleasing set of numbers” which confirmed a consolidating economic momentum. As Mr Hockey was speaking, the Reserve Bank Governor, Mr Stevens, was warning of a dangerous bubble in the housing markets. It was ingenuous of Mr Hockey to indicate the GDP figure had risen by 0.5% in the June quarter but he had omitted to indicate that the real GDP had fallen by 0.3% due to the unfavourable Terms of Trade. The Reserve Bank of Australia considers the real GDP is a more meaningful measure of economic health. Treasurer Hockey knew this well. Was this deliberate omission or a senior ministerial moment? (SMH, September 2014)

Now forward to June 2015. The National Accounts for the the quarter ending June 2015 indicated GDP rose by 0.1% with an annual growth of 2.3%. (ABS) Treasurer Hockey enthused “a terrific set of numbers”. He indicated the Australian economy was among the fastest growing in the world. What Mr Hockey did not mention was that this period constituted the fifth quarterly drop in the Terms of Trade which was squeezing company profits, taxes and wages and that real net disposable incomes was now less than that in the September quarter 2008. (GFC) Australian living standards were falling for the first time in fifty years – and this is not a short-term trend. People are now spendings savings to make ends meet. This reduces domestic demand which knocks on to fewer job opportunities. (Financial Review, 3 June 2016)

Concurrent with Treasurer Hockey’s  upbeat comments the Boston Consulting Group, Sydney, opined that Australia’s low interest rates (then 1.75%) and Government spending was producing a potential spiralling national debt burden. Compounding this fragile transition away from resources investment, the non-dwelling construction activity declined by 4.9%. What is happening in the economy is that national productivity is falling as growth moves away  from low labour profitable  mining to low paid  intensive labour in  tourism and hospitality. These are issues lurking behind the Treasurer’s enthusiasm. (Financial Review, 3 June  2015)

Forward again to September 2016. Treasurer Morrison has commented with gusto on the National Accounts for the June quarter. We are told there is no sign of a downturn in the economy which has grown by 3.3% – the best growth since 2012. There was also fulsome comment that the growth rate is a tribute to hard working Australians. No where, apparently, was there reference to a need to encourage exports and thus improve the Terms of Trade. Mr Morrison noted that the Terms of Trade for July showed a $285 m reduction on the June figure (ABS 5368.0) due to slightly increased exports and decreased imports which might indicate  less disposable income was available for overseas goods.

  • Exports.  June $25,706m. July $26,425m
  • Imports. June $28.957m. July $28,835m

What was not made clear by the Treasurer was that the 3.3% GDP growth was boosted by pre-election Government spending and, curiously,  on increased expenditure on hepatitis C drugs. (SMH, 7 September 2016) Currently brakes on the economy are weak household spending, weak wages growth and a decline in the national hours worked. Irrespective of encouraging statements by the Treasurer, the historic low interest rate, now 1.5%,  and low inflation rate of 1.0% (RBA band 2 – 3 %) is indicative of a sluggish economy.

 

CONCLUSION

The tentative conclusion, is that statements by recent Australian Treasurers cannot be accepted at face value. Their statements must be evaluated within the wider picture of the Australian financial situation.  The driver for the future is a positive Terms of Trade that, initially, balances the  budget from this jobs and growth  and other benefits will follow.