Archive for the 'International' Category

15
Oct
08

A flat out special purpose vehicle

As a person with a general interest in economics but not a detailed understanding of its complexity and depth I was interested to observe the Tony Jones interview of economist WIll Hutton, located here.

An excerpt:

TONY JONES: Yes, well, you’ve written the most complete account that I’ve seen of how it went bust in the first place; how this credit derivative market developed and why so many financial managers put their trust in us. Tell us how it all started.

WILL HUTTON: Well, how long have you got? I think everyone watching will probably understand the idea of a bond, you know, you issue a bond, a company or Government issues a bond and you make 1,000 pounds in profits and you’ll pay a small fraction of those profits to servicing the bond.

Fine, we all understand that. It’s a very established principle. Securitisation did something different.

It said okay, let’s take part of your profit stream, it could be interest from payments on a port facility you own, it could be a football stadium, it could be some mortgage payments you’re receiving from some tenants.

Let’s take all those and let’s hypothecate them, to what was called in the jargon a special purpose vehicle, and then let’s flog it to investors all around the world.

And to give them some guarantee that this very risky piece of paper is worth the paper it’s written on, let’s take out an insurance contract called a credit default.

But it was more than a credit default, it was called a credit default swap because you would swap the insurance policy to another buyer if you chose.

Now what makes this so interesting is that if for any reason any of those mortgage payments don’t come in like you’re expecting; if the traffic in the port facility goes down a bit, if the revenues from that football stadium just contract a bit, suddenly, wow, there’s less money coming in to pay the interest on that bond.

And you start to … and the value of it starts to fall, and then you want to collect on the insurance policy but you’ve swapped the insurance policy to somebody else and they may in turn have swapped it to somebody else and somebody else and somebody else.

So nobody in the system knows what the value of these securities actually are really, where the losses are going to pop up and suddenly, over the last two, three, four weeks, the entire world system has just frozen in fear.

And people only … and banks will lend to each other just for the night or they’ll borrow from a Central Bank.

And you can’t lend working capital to a business or a 25-year mortgage if you, the bank, are just borrowing off the Central Bank or borrowing off another bank overnight you just can’t do it.
So credit has just stopped in its tracks and if something hadn’t happened, we would have confronted a worldwide meltdown, a worldwide depression.

An overview of media reports of economists suggests somewhere between a mild recession to a deep recession in the United States with permeating effects throughout the world.  Australia appears much safer to cope with this than many other countries.  Consistency across media does not always produce an accurate result.  The complexity of the issue, the lack of information and the lack of oversight and regulation is concerning.

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15
May
08

Pearson, Steele & Obama

In December last year I posted here in reference to a review of Shelby Steele’s book, A Bound Man

Noel Pearson’s essay in the Monthly offers an intriguing analysis of Steele’s insight into contemporary race relations in America.  There are several compelling paragraphs that refer to responsibility, opportunity, and how uplift occurs in dominant-minority populations.  After reading the essay I was disappointed at what I saw as deficiencies in Pearson’s core argument.

Pearson argues that Obama has not pursued strongly enough the radical centre that integrates core notions (or a contemporary understanding) of responsibility.  Pearson contends that Obama should ‘radically revise’ his account of such issues at the Democratic National Convention in August.   

Obama is being misrepresented.  My observations are that he has pursued the radical centre by offering a style of politics that is untested at the national level in the United States.  This necessarily involves merging notions of opportunity (that inevitably give rise to questions of race and equality) and responsibility.  Promoting notions of ‘black responsibility’ (as Pearson refers) is why Obama has been able to attract such strong support amongst the African-American Democratic base, many independents and a number of Republicans (this strategy is more difficult to pursuit for a non-African-American candidate). 

Pearson holds that ‘the main shortcoming of Obama’s philosophy is that he does not recognise, as Steele has, that the nature of black Americans struggle changed fundamentally after the civil rights victories of the ‘60s’.  A reading of a number of Obama’s work, whether it is his original Dreams of my Father or The Audacity of Hope, or a number of speeches would reveal that he does.   

Pearson goes on to say:

Shelby Steele writes in A Bound Man: ‘despite the fact that Obama clearly seems to accept the importance of individual responsibility in social reform…he offers no thinking on how to build incentives to responsibility into actual social policy.’  There is time enough for Obama to correct his analysis and to move beyond the critical shortcomings of his Philadelphia speech. 

Obama’s work contradicts this assertion.  In The Audacity of Hope, Obama explains that affirmative action policies post 1960s have not displaced the primacy of responsibility amongst the uplifting black middle class.  He notes the true feelings of resentment felt by those excluded from affirmative action.  Obama argues that because it is the responsibility-uplifting paradigm (combined with the removal of institutional racism) that has served to enlarge the black middle class it is the failed complimentary policy, affirmative action, which has compounded the dilemma. 

Continued over the fold.

Continue reading ‘Pearson, Steele & Obama’

27
Jan
08

Observations of Papua New Guinea

Recently I visited Alotau in PNG located in the Milne Bay province.  Alotau is a town of some 30’000 people (although the proximity of villages and high social mobility makes population estimates difficult).  The local people are incredibly friendly.  There are many positive aspects of PNG that are hard to explain on a blog.   

PNG unemployment is estimated in the 95%+ range.  There is no welfare safety net.  The minimum wage is around 60 kina a week (20 Australian dollars).  Despite this, the subsitence economy of traditional living is influential and still plays a key role in the lives of many people.  Many Australians have negative perceptions of PNG because of things that they have heard or things that have been confirmed.  In the town of Alotau these perceptions are simply untrue.  There are greater social challenges and greater issues of community safety in many Australian locations than there are in Alotau.  An initial glimpse of the above facts brings about negative feelings but this should not substitute the influence of the subsistence economy, the mannerisms and friendliness of people, the hard-work and determination on the part of most PNG citizens to lead productive and sharing lives. 

In PNG, Most locals move between the cash economy and the subsistence economy with relative ease.  Food is plentiful and is easy to grow.  Land ownership is based on traditional structures.  These are just some of the fleeting glimpses observant in PNG, and in the coming months I hope to provide more detail into my experiences.

On one occasion an uncle of Nathanael and Aaliyah, Tom, suggested that the social dysfunction experienced in Aboriginal communities is a result of them receiving money for nothing.  ‘But’, he said chewing on Boi (pronounced boo-eye), ‘sometimes I think that if we had that system here we wouldn’t have so many problems with crime and stealing in PNG’.  There are many problems in this regard, he explains, especially in central regions that serve as a hub for young people and others from the village looking for work.  As there are no jobs available, and without the means to provide for themselves or those around them, they resort to crimes that can often go unpunished.   

In another discussion with a ‘Highlander’ (a person from the Highlands located in the centre of PNG) I gained a glimpse of the extent of knowledge about Australia and its links.  Anita explained in pidgeon that I’m ‘mixed race Aboriginal’, or ‘trick-trick’ (not really indigenous and not really a ‘dim-dim’, an expression used in PNG).  He smiled and looked at me and said ‘your land has been taken away’.  He explained the importance of land to people in PNG and how it is centre to everything.  I replied that many people in Australia, including the media and some Aboriginal leaders, regarded many parts of the land to be ‘handed back’, but this didn’t appear to wash. 

In PNG the land title system reflects customary indigenous law.  Land-owners have absolute control including access (although major towns and regional centres are open to everyone).  Land-owners can divide the land and sell titles to the public.  If land is disrupted compensation is payable.  To the person we were talking to the fact that Aboriginal people remain in disadvantage confirmed the stories he heard about Aboriginal land being stolen.  It appeared that he couldn’t reconcile the fact of Australia’s economic development with the supposed statement that Aboriginal land had been returned, or ‘handed back’.

In Alotau the sand on the beach is black.  The beach meets flat land for only a short distance and then it builds upwards into mountanous ranges.  These ranges used to be volcano’s and I am told that is why the sand is black.  Such effects have also creates small boulders ranging from minute to the size of a watermelon.  These boulders are everywhere, and they are used for ‘moo-moos’ (traditional ovens). 

Continued over the fold.

Continue reading ‘Observations of Papua New Guinea’

07
Nov
07

Hans Blix interview with Fran Kelly

Here you can locate a fascinating interview with Hans Blix and Fran Kelly.

If there is one important political evolution of our time it is the management of globalisation, not just in market economic terms but in political nation-State and ethnic relationships.  And if we look at the periods that span time, we are at the end of colonisation (at least as a rule) and moving towards a more interdependant and cohesive framework (when looking through an optimistic lens).  And in this context we are by no means stable, but at least there is an opportunity to create a progressive move that might strengthen the interdependance. 

Hans Blix talks briefly about this and the idea of strengthening interdependance needs to be promoted more as a national interest.  His speech will be interesting and if I can locate a copy I will edit this post.

27
Sep
07

Modernising democracy and internationalism: a response to climate change

The possibilities of democracy presents an opportunity to address the greatest social, economic and environmental challenge we face: climate change.  And while rhetoric is easy and words are cheap, it is political leadership that remains the greatest driver of substantive reform. 

The idea works like this.  A referenda would be held to determine each Australian’s willingness to contribute to tackling climate change and the amount they wish to contribute.  This would be enforced at a national scale. 

An expansion over the fold. 

Continue reading ‘Modernising democracy and internationalism: a response to climate change’

19
Sep
07

UN Declaration and the Constitution

If the UN Declaration was passed at a different time, then it would have received far wider media coverage.

While I’m not suprised that this Gvt would polarise division by overstating the impact that signing the Declaration would have, I am suprised by the extent that our Constitution is mis-interpreted. 

Continue reading ‘UN Declaration and the Constitution’

15
Sep
07

UN Declaration and Aust Gvt response

The UN General Assembly recently adopted the UN Declaration on Rights of Indigenous Peoples

It is a non-binding document.  143 nation states voted in favour and 4 voted against: the United States, Australia, Canada and New Zealand.  11 countries abstained. 

The Declaration can be accessed here.   

My response is over the fold.

Continue reading ‘UN Declaration and Aust Gvt response’




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