The failure of financial services regulation

AustralianActuary Business

As we get into 2018, the financial services regulations continue to grow. Government, and by extension the agencies of government, intervene in the day to day running of financial services firms like never before. The core driving principle behind the relentless command and control approach is the desire of all governments, of all political colours, to assume power over all individuals and remove their self-reliance. This drive is endemic across all areas of government – the nanny state is a useful descriptor. It is not unique to Australia but happening throughout the western world.

The history of regulation of financial services in Australia has followed broad themes over the years since the second world war and the unsuccessful attempt by the Chifley led Labor Government to nationalise the banking sector. Since then, the broad themes have been solvency management, consumer disclosure, management scrutiny and consumer needs assessment. Continue reading →

Self steering, upwind – the easiest point of sail

AustralianActuary Sailing

Sailing close-hauled upwind is the point of sail most easily balanced.

This photo shows me upwind in a gentle breeze.

 

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The wheel is held up just a fraction to push the boat downwind and held there by shock cord. Meanwhile, the mainsail is close-hauled but then eased a fraction. The rudder is not steering enough to overcome the main wanting to push the boat up until the main approaches luffing. Then, as the main loses power, the rudder takes over until the main catches more wind and pushes her up again.

A continuous series of S bends results. The finer the trim, the shallower the S bends, For this to work, the main needs to luff just before the jib would, hence the main is eased a fraction.

This boat will sail indefinitely like this. Until it hits the shore. Don’t fall overboard – the boat will sail away from you.

To fix bad bank behaviour, the banks must be deregulated. Royal commissions are pointless.

AustralianActuary Business

The Royal Commission inquiry into the banks and other financial institutions of Australia was described by the Prime Minister, as he announced his decision to instigate it, as “regrettable”. He said it had become “inevitable”. He also said that Government policy remained policy “until it is changed.” Only the Government can initiate a Royal Commission. So how was it inevitable? If it is regrettable, then why hold it? Continue reading →

Actual vs expected

AustralianActuary Life

One of the actuarial profession’s valuable contributions to the management of long term financial risks in the field of life insurance has been the development of credible models of human mortality. The humble life table.  Over the years (going back several hundred), the techniques have resulted in this fundamental component of fair and equitable pricing and reserving for mortality risk. The table’s contribution to the welfare and advancement of people has been important. But have these techniques been forgotten or ignored by climate change zealots?

The actuary is pragmatic. Theoretical mathematical models of mortality have been developed but they have only ever been able of giving a guiding picture. Human mortality patterns do not slavishly follow a mathematical model. The established method of updating life tables has been to periodically collect data about deaths and recalculate the rates of mortality then re-graduate the raw results into a credible and smooth table. Continue reading →

Peak oil?

AustralianActuary Life

I have always been interested in cars. Ever since I was a youngster, I was climbing into, out of, on and around my parents’ cars. Going for a drive out into the country roads was a treat, and roads that wound their way through the glens of Antrim, between narrow hedgerows, or up to a high spot to look over the sea to Scotland were a favourite. I tinkered in the garage, held spanners and fetched things for the men. I was driving before I could see properly over the dashboard and before I could reach the pedals to fully depress the clutch without sliding down in the seat to reach it. I drove on backroads at night, when other car lights could be seen at some distance, giving enough time to quickly swap seats with an indulgent parent in case the passing car may contain a police officer. Police officers are not known for their humour or indulgence when having stopped a vehicle they peer in through the driver’s window to find a 10 year old.

At the time of the first oil shock of the mid 1970s, petrol prices skyrocketed, supplies reduced and there was much discussion about the world running out of oil. I worried that by the time I would be old enough to drive, there would be no oil left. My son is not old enough to have his driving license yet, even though he has been driving for over 7 years. He, too, enjoys drives in the hills especially in V8 engined cars with manual gearboxes. He worries about the future of driving. For him, the reasons are different.

Continue reading →

The unfairness of superannuation?

AustralianActuary Economics

Is it just me or have others noticed a plethora of voices claiming that superannuation is unfair? ‘We must make super fair’ is the typical tone of the claim. Usually, this is followed by some ideas for more regulation, compulsion, tax, affirmative action and so on. To date, I have not observed people complaining about lack of fairness coming to the obvious conclusion and easiest way of fixing a system they believe is broken: remove the compulsion to participate.

Continue reading →

The exposure of the climate druids

AustralianActuary Economics

If you look out the metaphorical window in 2017, you will see none of the catastrophes that have been forecast by the climate druids for the last 25 years. World agriculture production is at its highest ever. Poverty is at its lowest ever. Income inequality is at its lowest ever. The Australian great barrier reef has not died. Pacific islands have not drowned. The extent of Arctic sea ice remains stubbornly normal. Polar bear numbers are at their highest in over 50 years. Perth has not died. No Australian city has run out of water. Fifty million climate refugees are not roaming the world. Hurricane frequency has not increased, nor has hurricane severity. The sea level has not risen to swamp waterfront mansions.

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The graph is sourced from the Food and Agriculture Organisation of the United Nations, showing, in constant dollars, the value of food production across three major regions.

What has happened? The climate scare has been exposed as a scam. The public perception of scientists has been dented. Some druids have become laughing stocks. The rise in atmospheric levels of CO2 (from a very low base) has resulted in a greening of the planet. The earth is now greener and forested more thickly than it was 30 years ago. The time to dump Renewable Energy Targets, Paris accords, Emissions Trading Schemes, Carbon Taxes etc is long overdue.

Coal would fix our looming energy crisis

AustralianActuary Economics

There are over 600 coal-fired electricity generators being built in the world right now. Not one of those is in Australia. Our coal-fired generators are being decommissioned and demolished. Yet, Australian coal resources are huge.

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For reasons that are hard to fathom, Australian politicians appear to be deliberately antagonistic to coal-fired electricity generation. The playing field is not level – it is deliberately structured to make coal kick up-hill into the wind, so to speak. Solar and wind powered generators have the down-hill with-the-wind advantage afforded by taxpayer funded subsidies.

Why? Solar and wind are both unreliable. Hence the need for battery storage. Solar and wind combined with battery storage is incredibly expensive. The coal supply in Australia is plentiful; enough to last hundreds of years. Coal is a low cost, efficient and reliable source of electricity. Why is Government policy skewed against it?

Without stable, reliable and low cost electricity Australia will crumble into a backward, poverty stricken future. Take a look at those third world countries without electricity to see what I mean. There is no prospect of renewable energy sources providing the equivalent level of power reliability and efficiency as does coal. The only viable alternative to coal is nuclear. I have no preference as to which we rely on – only that energy policy is amended such that no one source of energy is penalised, no one source is favoured, and the Government gets out of the mix. If renewables are the future, as the chant goes, then they do not need Government policy enforcement.