Warning signs

The Federal Labor Government in Australia appears on track to challenge the Whitlam government of the early 1970s as Australia’s worst ever. Socially and economically the signs are bad.

Here’s how current Treasurer Chalmers thinks:

Those who do not learn from history are condemned to repeat it. Every malaise Chalmers sees has been caused by Government intervention in the past. His solution? More Government intervention.

Australian energy production by fuel mix

For the 3 months to 25 January 2023, the Australian energy market operator reports the following supply sources.

Source: aemo.com.au

These three months are typically the best for sunshine and reasonable winds. Yet solar and wind generation are contributing only 20% of the country’s needs.

It seems to me that the only viable way to get the penetration of renewables up will be to shut down all coal and gas production. Then renewables would be close to 100%. An inconvenient side effect would be that we would have only a quarter of the energy that we have today.

Inflation in Australia

The latest data on consumer prices in Australia was released today by the ABS. It was for the December 2022 quarter. By itself, changes in the CPI for a prior quarter do not give any information about what is likely for the current or future quarters. Still, many commentators were out in force today predicting this or that about future prices. Alan Kohler, once but no longer respected journalist, said in July 2022 that inflation had peaked. He said it would reduce in September 2022 and again in December 2022. He was wrong.

The CPI is not an indicator of inflation. It is a symptom. It is not leading, it is lagging. Remember, when the word inflation was coined, it meant an increase in the money supply. Rising prices were always the result and gradually usage changed so that inflation came to mean rising prices, in common parlance.

I’ll have more to say in the next week or so about future inflation after the statistics for the December quarter’s producers’ prices and the money supply are released.

The doddering, the unhinged, the Messiahs and the frantically busy hotel manager at the WEF

The World Economic Forum (WEF) annual meeting in Davos, Switzerland has just wound up its 2023 meeting. What a joy it is to behold the WEF meetings. Because it is when the participants believe themselves to be among friends that they say what they really think, thus exposing themselves to scrutiny. In the eyes of many, Klaus Schwab, the founder of the WEF, is evil personified.

Klaus Schwab

I disagree. I think he is a doddering old fool. I think he is incapable of achieving anything other than an expensive gabfest each year.

Continue reading

The model is not reality

Just look at the state of mainstream media reporting, this from today’s Australian newspaper. Journalist Remy Varga should hang her head in shame.

A model is not reality. It is a supposition based on whatever methods and assumptions the modeller chooses. Change the assumptions and the result changes. Models do not prove anything. Yet here is Remy reporting as if she were part of the Pfizer public relations office. That modelling study is garbage. I know that even without reading it.

The age of inquisitive journalists is over.

Utter garbage brought to readers by NewsCorp

Oil price caps

Carlo Cipolla was an Italian economic historian. He wrote a book about the theory of human stupidity. His theory was based on five fundamental laws, one of which is that stupid people are defined as taking actions that hurt both themselves and others. I was reminded of his work when I heard about the latest announcement from the EU, G7 and Australia to impose a cap on the price of Russian sourced oil of US$60 per barrel.

Continue reading

The Laffer Curve arrives in UK

The new Truss executive in the UK is setting out to restore a little faith in conservative politics economics. First, removal of the fracking ban. Now a tax reduction package described by most commentators as the biggest cut in taxes for decades. That’s excellent news. Yes, it needs to be followed up by expenditure cuts since the real measure of tax in an economy is the level of Government expenditure rather than the tax take. But, a tax cut will help even in the absence of an expenditure cut.

The reasons are well known. Arthur Laffer is the US economist credited with the naming rights of the Laffer Curve. In simple terms, Art’s point was that at a zero rate of tax, the total tax take would be zero. Likewise for a tax rate of 100%. In other words, the tax rate that would maximize the tax take was between 0% and 100%. What’s more, at higher rates of tax, a tax rate reduction would actually increase the tax take. That can only happen if economic growth increases. President Reagan understood the concept and the Reagan tax cuts were a huge success.

Now, 40 years later, the Truss government is following the same path. Well done Liz, this is a great start.