Mr Market is never wrong

I am one of the strongest advocates of free markets among people that I know. When I hear of the left, the cronies, the globalists and the common or garden rent seeker claiming the need for state coercive intervention owing to ‘market failure’, my response is invariably “there is no such thing as market failure, but there are outcomes that you don’t like: don’t get those two confused.”

Really?

In this case, without proclaiming the market is wrong, I can’t see how it can be right. Ordinarily, higher interest rates will not curb inflation until the real interest rate is positive. So, we’ll see if Mr Market is merely sorting cards on the table and still making up his mind.

In the business pages

It’s sometimes refreshing to get a laugh out of the business press, especially when much news is rather gloomy. 

First up today is James Glynn (writing in the Australian) who attempts to defend the Reserve Bank of Australia. His headline says it is unfair to rage against the RBA. Long time readers of this blog will know that I have been a harsh critic of the RBA for many years, so I naturally expected this piece to start my day on a humorous note. James did not disappoint. 

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Corporate wokeism

Many people working in large corporations feel the same frustration as does Dr Jordan Peterson, well expressed in this monologue “Message to CEOs”. Corporate wokeism has been getting worse for a number of years and business leaders have been broadly weak and fearful in its face. Instead of pushing out the nonsense because it is damaging to customers and staff and therefore shareholders, they have en masse waved it through.

I am perhaps a little more optimistic than Dr Peterson is. I suspect that with hard economic times unfolding, corporate wokeism will become subserviant to corporate survival. The big business bottom line has been relatively easy to keep black for the last 10 years. But from here, red ink may be needed with increasing frequency. CEOs faced with the choice of being turfed out of their contract for missing financial targets vs giving more succour to diversity, equity and inclusion maniacs will see things more clearly. Ask yourself why wokeism has not infected small business. It’s because small business must focus on survival at all times.

Aren’t these guys meant to know better?

Way back in June 2020 when Guy Debelle was still employed by Australia’s Reserve Bank (RBA), he made a speech in response to market jitters over the unprecedented expansion of bank credit. He said it would not lead to inflation.

In November 2021, the RBA Governor Lowe said he wasn’t expecting inflation to hit the 2% to 3% pa target range until late 2023 and so there would be no interest rate increases in 2022 but maybe there would be in 2023.

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Market failure?

Oh dear. The Australian Energy Market Operator has suspended the market. The Operator says the market was “impossible to operate”. Does this constitute a market failure? It’s definitely a failure of something.

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I say it’s not a market failure. That’s because it’s not a real market. The authoritarian left often decries market failure as reason for Government intervention in all manner of ways. Well, here’s an example of a highly restricted and distorted pseudo market failure right in front of our eyes at a time when the energy supply is tottering on the verge of blackouts.

The reason for this failure is precisely due to years of Government intervention, mismanagement and lies. Goodness knows what happens from here, but mark June 2022 as the month in which the creaking facade masquerading as an energy system in Australia crumbled.

Energy production in Australia

Update from 17 June, 5:30 pm AEST: coal and gas are currently producing 78% of Australia’s electricity supply.

We need more renewables, obviously. Look at the contribution to Australia’s energy supply over the last 48 hours. After decades of subsidies to promote windmills, solar panels, hydro schemes and biofuels, the total output of renewable sources is woefully tiny. Not enough subsidies, I expect.

Source: Australian Energy Market Operator