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Henry Thornton - Economics: A discussion of economic, social and political issues PD Jonson (AKA Henry Thornton) - selected contributions Date 08/05/2011
Member rating 4.8/5
An economist analysis causes of inflation and macroeconomic fluctuations and advocates an independent central bank, tax reform, spending on R&D to promote productivity and competitiveness and reform of the financial system.
By PD Jonson (AKA Henry Thornton) Email / Print

Articles as PD Jonson


On The Edge of Chaos, June 1995
Biographical talk about Australia's financial system. 

Economics and economic policy

Our Current Inflationary Experience, January 1973
The rise of world inflation caused great confusion in Australia in the early 1970s, and this article dispelled that confusion.

Money, prices and output, July 1975
Theory and tests of Monetary and Keynesian economics of the open economy.

Reflections on central banking, July 1988
'... a degree of independence - certainly independence of thought and opinion - from normal political processes is also desirable, perhaps essential'.

Inflation: Its Costs, Its Causes and Its Cure, July 1990 
'Inflation is theft and it is now widely agreed that inflation is a major underlying cause of Australia's economic malaise'. 
Financial regulation and moral suasion, July 1994  (With Elizabeth Prior Jonson)
'Should society rely on black letter law or morality? The more we use the former, the more moral values will decline'. 

Letter to Prime Minister on Unemployment, January 1998
'I know that you agree that unemployment is a matter of great concern. Unless we can reduce unemployment substantially, it will be difficult, probably increasingly difficult, for governments to pursue economic policies that will continue to increase Australia's productivity and competitiveness'.

The Poverty Debate, January 2002
'Poverty is a terrible scourge of modern society. But what is the answer?' 

Aitken Hill Communique, March 2002  
Text of communique issued following the first national Australian Institute for Commercialisation national conference, March, 2002 

Hard heads, warm hearts, April 2002
Summarises the key themes at the 'Towards Opportunity and Prosperity' Conference held by the Melbourne Inststute and The Australian  

Paul Johnson on boom and bust, December 2004
'Do you detect analogies with our current situation gentle readers?  That is the question'.

Tax reform - the economic case, February 2006  
'The moral aspect to the tax [reform] story should not be ignored – after all it’s our money! But there are powerful economic arguments also'. 

The alchemy of growth, May 2008
How to boost Australia's sustainable growth

Six principles for economic policy at this time of crisis, February 2009
'1. Provide incentives for individuals to finance for themselves and their children the necessities of life, including adequate medical care, education, food and shelter.  Battler bailout should be limited to alleviating real hardship and should come in forms that encourage a culture of robust self-reliance, such as income-contingent loans'.

The Crash of 2008 and the challenges ahead, February 2010.
'We must all hope that  stimulus will be withdrawn at just the right speed; the ‘Goldilocks’ solution. But if not, the global economy may lapse into erratic behaviour, bouncing between an inflationary ceiling and a recessed floor, with authorities pulling policy levers that are not reliably connected to the outcomes that matter: jobs, growth and steady confidence'.

Writing as Henry Thornton

Democracy and Global Business, July 1999
'For most of recorded history various forms of totalitarian government have been the norm.

'Not always have these governments produced economic efficiency in the modern sense of the greatest output for the smallest input, and many were hopelessly inefficient'.

Six rules for building wealth, March 2000.
'Large scale financial success requires intense focus on making money, often in one narrow field'.

Educating Australians, April 2000
'The global economic battle is being fought partly in our schools and universities. A skilled and creative workforce is a vital ingredient of economic success, yet we have little systematic information about the success of our educational efforts'.

How can we help the poor?, July 2000
'Rising poverty is a fearsome thing and one that chills the blood of ordinary Australians. It signposts breakdown of community structures and raises fears that entrenched and widespread poverty will ultimately result in a greatly weakened society.' 

Asylum-seekers - the Burden of Proof, July 2002
'Do the ends justify the means with Australia's current methods of dealing with asylum seekers?'

Henry's RBA board advice (From June 2002 to sometime in 2005/06 jointly with Alex Erskine)

Interest rates in Australia - how high, how soon?, June 2002
'... I predict that the cash rate will be moved up to 6.25% in 6 separate 0.25% moves (anything bigger, like 0.5%, would be ‘unusual’), spread over the next 9 months. The faster the pace of increase, the sooner forecasts for the CPI will fall from the top of the target range, and the sooner rates can subsequently be reduced from their peak'.

Why we need to go it alone on interest rates, July 2003
'... the Western developed world is engaged in a significant reflation, of a kind not seen since the end of World War II. With the exception of Japan, interest rates in the rest of the world are substantially below normal and currencies are being devalued against commodities'.

Raise or we'll be crunched, September 2003
'The RBA Board seems petrified, frozen like a startled rabbit in the spotlight, and appears incapable of deciding to change interest rates for fear of destabilizing today's fragile financial and economic balance.'

Be brave: do it now or the clean-up job will be that much worse, April 2004
'We are resigned to the idea that this month the Reserve will again remain quiet in its tower at the top of Martin Place, hoping not to be noticed.  In our view, this will be another lost opportunity. But the RBA will have to be around to pick up the pieces when global interest rates begin to rise.  Its governor and board will be hoping fervently that this is after the next Federal election'.

RBA plays a dangerous game, November 2004
'Ian Macfarlane is engaged in a dangerous double play. He is either trying to allow time for inflated goods prices and wages to catch up with property prices, which is ok while it lasts but risks igniting new speculative excesses (including reigniting the property boom).  Or he is playing chicken with his opponents - be they in Treasury or amongst his political masters - and is hoping for some sensible fiscal action.   He is obviously unwilling to act pre-emptively to prevent what could be a serious mess. Our problem with that is that he is gambling with Australians’ welfare.

'It would be better if he took the Australian people into his confidence, told them they had been living beyond their means, and raised interest rates.  It is a case of better late than never'.

Bubble, bubble, toil and trouble ..., March 2005
'... in recognising the need for caution, we urge members of the “no hike” school to ask what happens if you are wrong.  If demand keeps bubbling too strongly in the absence of rate hikes, and wages and inflation break out, there will be a painful slowdown imposed by far higher market rates at some stage.  Far better to try to get ahead of the game and therefore (possibly) to head off this damaging scenario'.

How hubris turns to nemesis, August 2005
'Whether or not Australia can retain its “miracle economy” status as inflation builds and with a monster current account deficit is the big question and only time will tell.  Resource booms like the one we are now enjoying almost always end in tears.  We would have preferred that our central bank had played a far more cautious game, but instead must enjoy the boom while we can'.

The "nirvana" economy, February 2006
'Our criticism of Ian Macfarlane’s stewardship of the Reserve Bank is that it has left Australian industry far less competitive than it should be, and less wealthy because of the mediocre currency value of the Australian dollar as it moves to balance the external accounts with a massive CAD.  How an uncompetitive industrial structure copes with the surprises that shall be thrown up over the next few years will be the ultimate test of Macfarlane’s Reserve Bank'.

Too little, too late, August 2006
'“Too little, too late”.  That, surely, is the verdict on Ian Macfarlane’s Reserve.  Inflation globally is on the rise and global inflation is set to rise further.  In Australia the economy is benefiting from a major mining boom and this is helping to produce severe shortages of skilled labor, unsustainable growth of credit and rising inflation, which has already raised inflationary expectations.  All these facts are indicators of inflation yet to come'.

Brave RBA should raise rates, September 2007
'What should the Reserve Bank board decide today?  Put simply, it is to press as hard as it dares to keep Australia’s economy out-performing the mighty US economy.  Global inflation is on the rise.  If the Reserve dares to keep Australian monetary policy tight enough to contain domestic demand – now clearly running too strongly for comfort – it will be doing most Australians a good turn.

'I fear the RBA will not be brave enough.  I urge Glenn Stevens during his board meeting today to remember the “almost insatiable” demand for flat screen TVs'.

Dealing with the great recession/ potential great inflation

Unwinding asset and credit bubbles, March 2008
'There will be a vast de-leveraging of balance sheets.  Credit will shrink dramatically and when growth resumes it will be at a far slower rate. Failed financial institutions will be forced into mergers, as with the takeover at a firesale price of Bear Sterns by JP Morgan, or nationalised.... Asset values will decline substantially....'

Should the RBA abandon inflation targeting?, April 2008
'For the Reserve Bank governor Glenn Stevens to keep overall inflation "mild" when important particular prices -- food, petrol, rents -- are rising sharply he must keep monetary policy firm and rely on this to force down sharply the prices of other goods and services or indeed of assets'.

(A prominant public policy economist responded overnight: "I thought that your article in the Oz this morning was one of the most important and also analytically sound contributions on Australian macro-economic management in recent years. These are hugely difficult times. I have not yet arrived at your position on suspension of inflation targetting, because I don’t know what I would put in its place. But I agree that we face large risks in keeping the current system in place through the current commodity price extremes.)

Baseball bat economics, August 2008
'Central bankers for many years tried taking away the punchbowl just as the party warmed up.

'Now the Reserve at least has taken out the baseball bat to make sure the party-goer stays quiet until his liver recovers.  ('Too little, too late' leads inevitably to overkill.)

'Meanwhile, in the mighty USA, Ben Bernanke is forcing punch into the patient's thirsty throat'.

Unlocking credit markets, October 2008
'My judgment ... is that a 50 basis point cut is appropriate at this time.

'A 25 basis point cut would indicate that the Reserve is still concerned about Australia’s future inflation.

'A (very unlikely) cut of 75 or 100 basis points would suggest panic at the highest levels'.

Credit gridlock, October 2008
'Globally, credit gridlock seems far more worrying than gyrating equity markets.

'It seems that the failure to bail out Lehman Brothers marks a great turn for the worse in global credit markets.

'Trust in the financial system has been lost, even among insiders, and it will take a long time to rebuild'.

Financial world at decision point, October 2008
'The current financial crisis has revealed the astonishing fact that capitalism is not perfect.

Furthermore, progress is in fits and starts, with occasional but costly setbacks.'

The age of restraint, December 2008
'Henry ventures the judgment that the only way to do this is to change the habits of a century and think 'restraint' rather than consumerism and over-stimulated growth.'

A year of survival, January 2009
'This is a year for survival, and anyone who is more optimistic than this will risk their personal or corporate prosperity, or worse.'

Useful deficit spending, February 2009
'Henry, of course, is not privy to the details of this spending, but we can consider some principles that ought guide the government as is seeks to prop up economic activity'.

Six principles for economic policy at this time of crisis, February 2009
'1. Provide incentives for individuals to finance for themselves and their children the necessities of life, including adequate medical care, education, food and shelter.  Battler bailout should be limited to alleviating real hardship and should come in forms that encourage a culture of robust self-reliance, such as income-contingent loans'.

Time to stimulate supply, March 2009
'Australia has done more than it can sensibly afford to stimulate demand.  What is needed now are policies to stimulate supply'.

Time to deregulate labour, March 2009
'IR rollback is the surest way to ensure that Australia fully shares other nations' experience of serious and prolonged recession.

'The question is whether Australians want a mild recession or a serious recession'.

Aussie jobs roaring - is this due to WorkChoices?, January 2010.
'If Henry's prediction turns out to be correct, abandoning WorkChoices will be seen as a big economic policy mistake, and the voters will have no-one to call upon, except Mr. Howard himself, assuming he could be coaxed out of retirement.  (About as likely as Shane Warne coming back for the next Ashes series, I suspect.)'

Strangling the golden goose, March 2010
'Boom and bust have many benefits. The chief cost of the busts may be increasingly intrusive and restrictive regulation of business. This may eventually outweigh the net benefits, if indeed it has not already done so'.

Our fool's paradise, November 2010

What happens when the terms of trade turn down? Do we have the mother of property crashes?

In accord with a former critic, December 2010

Paul Keating stakes his claim to be Australia's Paul Volcker, and gains support from Henry.

The coming inflationary storm, January 2011

Global inflation is on the rise. In Australia domestic wage and price inflation is also on the rise, and will be augmented in the immediate by food price inflation due to the horrific floods in Northern Australia.

The RBA has a difficult and complex task before it, and may already have moved too little, too late to tighten australia's monetary policy.


Great Crises of Capitalism (Published March 2011)

Buried Treasure (Forthcoming)



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